MIAMI—Lennar Corporation just inked a $1.1 billion venture with a slew of investors. Lennar Multifamily Venture (LMV) is an equity fund between Lennar Multifamily Communities and global sovereign and institutional investors targeting investments in class A multifamily development assets in 25 top metropolitan markets in the United States.

The business plan: to provide better risk-adjusted returns through a "develop-to-core" strategy—developing multifamily communities and then holding those communities in a portfolio long term for cash flow. LMV will focus on the top growth and gateway multifamily markets in the United States, which it identifies through strong long-term demand fundamentals and constrained supply.

"This venture fund reinforces Lennar's strategy and commitment to diversify beyond homebuilding and become a major player in the multifamily market,” Steven Lear, Bilzin Sumberg Corporate Practice Group Leader and attorney for Lennar, tells GlobeSt.com. “Whereas in the past, the company would work on stand-alone multifamily deals, this platform allows Lennar to continue its growth in multifamily by capitalizing on multiple opportunities throughout the country through a single investment and financing vehicle."

LMV will leverage Lennar's construction expertise to build multifamily communities at an attractive cost basis. The multifamily development strategy calls for a combination of garden, mid-rise and high-rise properties.

With this first close, LMV will have approximately $1.1 billion in equity commitments. That includes a $504 million co-investment commitment by Lennar. The venture is targeting 50% leverage and will have a three-year investment period and an eight-year term. It will be seeded with 19 undeveloped multifamily assets that were previously purchased or under contract by LMC, totaling 6,120 apartments with a total projected development cost of approximately $2.1 billion.

LMV represents the next stage of Lennar Multifamily Communities' strategy, having previously structured 28 single asset joint ventures with 18 different institutional partners utilizing a merchant-build approach. The assets from these existing ventures are not part of the new fund and will be sold over the next three years as the communities are leased and stabilized.

“While our core homebuilding machine continues to be the primary driver of our earnings, our complementary ancillary businesses are really starting to define themselves,” says Stuart Miller, CEO of Lennar. “Last week we announced that we signed a contribution agreement to position Five Point for a potential IPO. This week LMC takes a major step forward with the first close of the 'develop-to-core' Venture fund.”