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Lennar’s Luxury Arm Eyes Record $4.5B Multifamily Portfolio Sale

Amid a cooling multifamily market, one of the nation’s largest homebuilders wants to sell a massive multifamily portfolio valued at around $4.5 billion.

Lennar's Luxury Arm Eyes Record $4.5B Multifamily Portfolio Sale

Amid a cooling multifamily market, one of the nation’s largest homebuilders wants to sell a massive multifamily portfolio valued at around $4.5 billion.

Together with

Good morning. Lennar's multifamily branch is poised to market one of the largest portfolio sales with its $4.5B listing of 11,373 apartments across multiple states. Hunt Realty is pouring $5B into redeveloping the heart of downtown Dallas. Plus, catch up on the latest trading headlines over the weekend.

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Market Snapshot

S&P 500
GSPC
4,719.19
Pct Chg:
-0.36%
FTSE NAREIT
FNER
753.99
Pct Chg:
-1.39%
10Y Treasury
TNX
3.907%
Pct Chg:
-0.021%
SOFR
1-month
5.33%
Pct Chg:
0.0%

*Data as of 12/15/2023 market close.

MULTIFAMILY MOVES

Lennar's Luxury Arm to List Over 11k Apartments Eyes Record $4.5B Multifamily Portfolio Sale

Amid a cooling multifamily market, one of the nation’s largest homebuilders wants to sell a massive multifamily portfolio valued at around $4.5 billion.

For sale: Miami-based Lennar Corporation (LEN) is set to market a massive portfolio through its luxury subsidiary Quarterra, featuring over 11,000 apartments valued at approximately $4.5 billion. The portfolio, potentially reaching up to $396,000 per unit, is spread across 38 properties in 15 states, with a significant presence in California and Washington. JLL has been tapped to manage the sale, considering the segmentation of the portfolio into smaller parcels to facilitate a more efficient sales process.

Cooling market: The decision to sell comes amid a broader downturn in the multifamily market and oversupply concerns in the high-end market. Nationwide, multifamily sales have experienced a 62% drop in volume in the first three quarters of 2023 compared to the previous year. Lennar's multifamily segment reported a revenue of $141M in Q4 2023, a decrease from $179M in the same quarter of the previous year and a $12M operating loss.

Homebuilding holding up: In contrast, Lennar's homebuilding sector fared well in Q4, delivering 23,795 homes and generating $1.4 billion in earnings as per the Q4 2023 earnings report. Since its inception in 1954, the company has constructed over 1 million homes nationwide, as stated on its website.

➥ THE TAKEAWAY

Why it matters: Should the portfolio sell as a whole, it would be one of the largest multifamily transactions in two years, a notable event given the current climate of high interest rates and economic uncertainty. This sale could set a precedent for the multifamily market, indicating investor confidence or caution in the face of broader economic challenges. The news comes just over a year after the company sold about 5,000 homes to rental landlords.

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TRENDING HEADLINES

  • Patience is a virtue: The U.S. property investment market shows promise with stable interest rates and potential cuts, subdued inflation, and positive signals from the Fed, but recovery will require patience.

  • Hotel strikes: Hotel workers in LA and Orange County, represented by Unite Here Local 11, are preparing for a potential strike to push contracted hotels to sign new agreements with the union.

  • Back to work: According to a VTS report on office trends, nearly 50% of North American companies expect employees in the office five days a week, while 52% have adopted a hybrid model post-pandemic.

  • Anti-Warehouse: The surge in e-commerce and consumer demand for delivered goods during and after the pandemic led to a rapid expansion of warehouses. Now, communities are pushing back on construction.

  • Moving in: Alexandria Real Estate Equities leased ~100k square feet at its San Carlos mega campus in the San Francisco Bay Area to CARGO Therapeutics, which will occupy the life science space in early 2024.

  • Atlantic Yards: On the 20th anniversary of a developer's ambitious $2.5 billion Brooklyn project, initially envisioned to rival the fame of the Brooklyn Bridge since 1883, the day passed without celebration; instead, the lender initiated foreclosure proceedings.

  • Tee it up: Despite the onset of winter in New England, three Connecticut golf courses are up for sale, aligning with a renewed interest in golf post-COVID-19, drawing attention from real estate professionals.

  • Winning bid: The FDIC has awarded two Blackstone affiliates a stake in Signature Bank's $17B commercial real estate loan pool in partnership with Rialto Capital and the Canada Pension Plan Investment Board.

  • Sun Belt vacancy: The U.S. national apartment vacancy rate increased from 4.7% to 7.2% over the past two years, with Jacksonville, Florida, experiencing the most significant rise among the top 10 U.S. markets, a trend driven by supply outstripping demand for eight straight quarters.

NEW DEVELOPMENT

Hunt Realty Announces Monumental $5B Reunion Tower Area Makeover in Downtown Dallas

Hunt Realty Investments is embarking on an ambitious $5 billion redevelopment project in downtown Dallas. The investment aims to revitalize the area surrounding the iconic Reunion Tower and the city landscape.

The blueprint: The project encompasses a massive overhaul of a 20-acre area surrounding Reunion Tower. Hunt Realty plans to construct 3,000 apartments, a sizeable hotel offering 600 to 1,000 rooms, 150,000 square feet of retail space, and up to 2 million square feet designated for office use. A key feature of this development is the inclusion of a 3 to 4-acre park. The company intends to allocate up to 1,500 apartments as affordable housing options. This development is expected to bring an influx of around 5,000 residents to the downtown area.

Development strategy: Details on the project's financing have not been disclosed. However, it appears that Dallas' $3 billion plan to revamp its aging convention center has been a catalyst for Hunt Realty to proceed with this development. The initial phase of construction is poised to focus on supporting the convention center, featuring a mix of hotel, retail, dining, and entertainment facilities, along with the first installment of affordable housing. Architectural renderings reveal plans for several high-rises and a connection between Interstate 35 and Houston Street.

➥ THE TAKEAWAY

Zooming out: The project signifies more than just an urban redevelopment; it's a historical shift for downtown Dallas. Hunt has held these undeveloped tracts for decades, demonstrating a long-term vision now coming to fruition. The project also includes plans to revamp the historic Union Station, highlighting a blend of modern development with historical preservation. This initiative promises to reshape the downtown Dallas skyline and revitalize the urban core.

CHART OF THE DAY

Source: Axios / Hines / Moody’s

The United States faces a significant housing shortage, with a deficit of approximately 3.2 million homes. This shortfall, which represents about 2.5% of the total U.S. housing inventory as of 2022, is a major contributing factor to the sustained high prices in the housing market. This chart underscores a critical issue: the supply of homes is not keeping pace with the growing number of households, impacting affordability and availability in the housing market.

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