Lennar Eyes Lenders for $7.7B Plan

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Company Name

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7.79%

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5.99%

5.55%

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Analyst Blog

by Zacks Equity Research

August 03, 2010 | Comments : 0 Recommended this article: (0)

LEN C

Lennar Corporation (LEN - Analyst Report) has started negotiations with lenders such as AFL-CIO Housing Investment Trust and Citibank (C - Analyst Report) on financing the initial construction of the 700-acre residential and commercial project at the Hunters Point Naval Shipyard in San Francisco. The project, initially centered on the southeast shoreline of San Francisco Bay, will stretch to the west up to Candlestick Park.

Lennar had caught hold of the shipyard site way back in 1999 but the final approval was given only recently. As planned, the $7.7 billion project would include about 10,500 new homes, 885,000 square feet of retail space, 2 million square feet of commercial space and 750,000 square feet of open space. In addition, it includes plans for a new football stadium and a green technology research hub.

The entire project, which will be developed as an eco-friendly urban model over a span of 20 years, is expected to be started by the end of this year. With a view to target all income classes, 32% of the homes have been reserved for low and middle income residents.

Lennar Corporation, one of the largest homebuilders in the country, recorded net earnings of $39.7 million in the second quarter ended May 31, 2010. Earnings per share of 21 cents exceeded the Zacks Consensus Estimate of a loss of 1 cent per share. Revenues witnessed a decline of 9% to $815 million from the year-ago amount.

The fall in revenues was attributed to the expiration of federal tax credit worth $8,000 in April, which in turn led to a drop in the demand for homes. But the recent extension of the tax credit till September 30, 2010 is expected to revamp demand.

Moreover, the gradual recovery of the economy from the downturn may also generate some positive results by boosting confidence among buyers as they will start feeling secure in their jobs.

All these are keeping the hopes of the homebuilders alive and even encouraging them to undertake big investments. Lennar Corporation is no exception. Apart from the shipyard project, Lennar’s another major project in the surrounding areas include the redevelopment of the U.S. Navy’s former Mare Island facility in Vallejo to a residential area involving 3,600 planned homes and other facilities.

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Lennar Eyes Lenders for $7.7B Plan

by Zacks Equity Research