The Real Deal Miami

Lennar to sell Rialto to Stone Point Capital for $340M

Selling investment and asset management division may be part of Lennar's strategy to become a more pure-play homebuilder
By Keith Larsen | October 29, 2018 05:53PM

Stuart Miller (Credit: iStock)

Lennar Corp. will sell its Rialto Investment and Asset Management to the private equity firm Stone Point Capital for $340 million.

Miami-based Lennar announced the news on Monday in a release and said the sale is expected to close Nov. 30. The Wall Street Journal reported earlier this month that the homebuilder was in talks to sell its Rialto division to Greenwich, Connecticut-based Stone Point Capital.

Lennar created Rialto after the recession to purchase distressed real estate assets, but as real estate prices have risen, buying opportunities have become more limited.  The company had signaled it was looking to sell off the division for months.

Rialto reported $49.5 million in revenue in the third quarter, down from $57.8 million in the third quarter of 2017. In the most recent quarter, Rialto represented less than 1 percent of Lennar’s total revenue.

The move could also be part of the company’s strategy to become a more pure-play homebuilder, meaning that it would focus solely on the homebuilding segment of its business.

Lennar said it will still retain one segment of Rialto — its Rialto Mortgage Finance business, which it expects to incorporate into its Financial Services business at the beginning of the 2019 fiscal year. Lennar will also retain interests in various Rialto funds, as well as investments in other legacy Rialto assets.

Lennar reported earnings of $453.2 million in the third quarter or $1.37 per share, beating analysts expectations of $1.19. The homebuilding industry as a whole has struggled amid rising supply and labor costs, which are putting pressure on its margins. Lennar, however, has still managed to report strong profitability, and earlier this year acquired CalAtlantic to become the largest homebuilder in the country, in a deal worth $9.3 billion.