Lennar to spin-off some non-core units, form a rental housing venture

Lennar Corp said on Wednesday it plans to spin-off all or parts of its non-core businesses to become a pure-play homebuilder and financial services company, while also creating a joint venture to provide single family homes for rent.

The move sent the U.S. homebuilder’s shares up by nearly 11% in afternoon trading on the New York Stock Exchange.

Lennar’s focus on its core homebuilding business comes as housing has been one of the persistent bright spots throughout the coronavirus-driven recession and mortgage rates are hovering near historic lows of around 3%, boosting buyer affordability.

“We (are focusing) on driving higher returns with less noise in our numbers from lumpy profits,” Lennar Chairman Stuart Miller said, adding that this would “increase visibility for the capital markets” into its core operation.

The expected size of Lennar’s spun-off enterprise would be between $3 billion and $5 billion in asset base, with no debt, and could include Lennar’s commercial mortgage business, the company said on a post-earnings call.

Lennar’s rental venture, called Upward America Venture, will buy single family homes for rent in high growth markets in the United States, and is backed by private equity firm Centerbridge Partners as the lead investor.

Centerbridge as well as asset manager Allianz Real Estate and some other institutional investors have committed a total equity of $1.25 billion for Lennar’s rental venture that will have an access to the company’s pipeline of over 300,000 owned and controlled homesites.

Lennar on Tuesday beat quarterly profit estimates helped by robust home sales.

The company’s stock has nearly tripled in the past 12 months.