Builder's retreat sparks land grab

Builder Lennar Corp., which reported a $513.9 million loss in the third quarter compared with net earnings of $206.7 million in third-quarter 2006, has sold about 11,000 home sites for $525 million that had been valued at $1.3 billion as of Sept. 30, the Wall Street Journal reports.

That represents about a 59.6 percent loss in value, though Lennar will maintain a 20 percent ownership stake and have the option to buy back certain home sites, the Wall Street Journal article states. A real estate arm of Morgan Stanley is the buyer and will hold an 80 percent stake in the land venture, which reportedly closed on Friday. Several weeks ago, builder D.R. Horton Inc. sold about 7,000 acres in the Phoenix area for $70 million.

Real estate consultant John Burns, who consulted with Morgan Stanley on the Lennar deal, said in the article, "This sends a strong message that somebody is willing to part with land at a significant loss." The  article suggests that the Lennar deal could signal a land grab as builders rush to reduce inventory, cut production and flee overbuilt markets.

Lennar's home orders dropped about 48 percent and deliveries fell 41 percent in the third quarter compared to third-quarter 2006, and the company reported a cancellation rate of 32 percent. The company was working to cut costs through staff reductions and other measures, according to the company's third-quarter earnings announcement.

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