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MIAMI-Lennar Corp. and Morgan Stanley Real Estate have formed what is described in a statement from Lennar as “a strategic land investment venture.” Simultaneous with its formation, the venture has acquired a diversified portfolio from the locally based national homebuilder for $525 million.

The portfolio encompasses approximately 11,000 homesites in 32 Lennar communities located throughout the US, plus a mix of raw land and partially and fully developed homesites in active and future communities in California, Colorado, Florida, Illinois, Maryland, Massachusetts, Nevada and New Jersey. As of Sept. 30, the company says the properties had a net book value of $1.3 billion. Citigroup Global Markets Realty Corp. was sole lead arranger for non-recourse acquisition funding of the venture.

Lennar acquired a 20% ownership interest and 50% voting rights in the JV, which was formed to acquire, develop, manage and sell residential real estate. It will manage the venture’s operations and receive fees for its services. Under the agreement, Lennar will also receive disproportionate distributions should the venture exceed financial targets. In addition, Lennar obtained option agreements and rights of first offer that provide it with the opportunity to purchase certain unspecified homesites from the venture at market prices at the time it exercises the options.

“The combined expertise and resources provided by the Lennar/Morgan Stanley team will allow us to maximize the value of this portfolio and provide a footprint to capitalize on inefficiencies in today’s residential real estate market,” says Stuart Miller, Lennar’s president and CEO, in a statement. “This transaction provides us with increase liquidity and flexibility at an opportune time.”

A spokeswoman for Morgan Stanley tells GlobeSt.com, “we’re not commenting beyond what’s in the press release.” A Lennar spokesman also declined comment.

Like other homebuilders, Lennar has suffered the blows of a crumbling housing market. Its revenues were down 44% in this year’s third quarter; deliveries were down 41%, new orders dropped 48% and the cancellation rate for the quarter was 32%. During a third-quarter conference call, Miller said the company’s work force had been cut by 35% and he expected continued reductions.

Shares of LEN gained 7.2% at the close of trading on the NYSE on Nov. 30, the day the venture was announced. The stock’s 52-week trading range spans from $56.54 a share on this Feb. 2 to $14 a share on this Nov. 27.

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