|Lennar's New Homes Fetch 60% Less as U.S. Market Slump Deepens
By Bob Ivry
Jan. 10 (Bloomberg) -- Lennar Corp.'s November sale of
11,000 properties in eight states set a price that may mark the
bottom for the U.S. housing market: 40 cents on the dollar.
That's how much Morgan Stanley Real Estate paid for an 80
percent stake in the 32 communities, 60 percent less than the
price at which the properties were valued just two months
earlier. That's also what some investors say they would pay for
distressed land, condominiums, homes and whole developments,
whether it's now or later this year.
``If you're an opportunistic buyer with enough cash and
credit, it will be one of the best opportunities for acquiring
property in our lifetime,'' said Jack McCabe, whose McCabe
Research & Consulting LLC in Deerfield Beach, Florida, advises
hedge funds and other investors on real estate sales.
As the U.S. housing slump drags into its third year,
sellers will start cutting prices as much as it takes to find
buyers, said Marcel Arsenault, a self-described ``vulture
investor.'' Properties will be available to buyers with the
financial strength to ride out the slide. Now that a price has
been set, all that's left is the waiting.
Arsenault, based in Broomfield, Colorado, bought real
estate during the savings-and-loan collapse of the early 1990s.
He said he has put together a $200 million fund he expects to
expand to $800 million this year to buy distressed condos.
`Eroding by the Minute'
``We're watching Denver, Phoenix, Austin and Tucson, but
South Florida is our principal focus,'' said Arsenault, 60. ``If
you're a vulture, Florida has more carrion. This stuff is lying
on the ground. It's lost life. Some of the stuff in Phoenix is
still breathing. Perhaps not for long.''
Arsenault said he and his three partners may buy a block of
about 50 new, unsold condominiums in Orlando, Florida. They have
a price in mind and they're willing to wait until they get it:
40 cents on the dollar.
``There's a risk to buying too early in the downturn, but
buying too expensive is our biggest pitfall,'' he said.
Companies such as Miami-based Lennar, the biggest U.S.
homebuilder by revenue, need to generate cash to make up for
slowing home sales, especially this time of year, said Vicki
Bryan, a Friendswood, Texas-based senior high-yield debt analyst
for Gimme Credit LLC.
``They sold land at 40 cents on the dollar and they're
happy to get it,'' Bryan said. ``The value of land is eroding by