Welcome Lennar Homes to the multifamily family. Or not.
Whether the single-family behemoth's foray into the multifamily, for-rent space actually comes as good news to incumbent players, the fact is, it's happening. Lennar Multifamily is, and will be—and very likely, given this organization's DNA, will be coming to a neighborhood (perhaps annoyingly) near you.
Interestingly, while the Lennar Multifamily central nervous system is in Charlotte, N.C.—under the leadership of former Crescent Resources head of multifamily Todd Farrell—two of Lennar's initial for-rent communities will be in Chicagoland.
Of even greater interest, just as Lennar gets set to start marketing two Class A for-rent properties—one, we hear, is a mid-rise project in Glenview, north of Chicago, and one may be a garden apartment project in Naperville, to the west of the downtown Loop—it's also planning to take its single-family operations out of the market altogether.
Now, when a home building company plans to "exit" a market, it doesn't blast the information out in any public way, because that would defeat its purpose to try to continue to sell homes in its active communities.
Our folks checked in with Lennar investor relations on the question of a Chicago market exit, and we were told, "I haven't heard anything about our plans" to vacate the market.
Fact is, we probably asked the wrong question. Had we been more specific and asked, "Are there plans to wind down single-family operations and sell the remaining land assets in the six active townhome and single-family detached communities belting the Windy City," we may have gotten a more helpful answer.
The thing is, Lennar is boldly moving ahead with a strategic diversification—into the multifamily for-rent space—because this strategy dovetails with the company's conviction that it has excellent real estate investment skill sets, a great land intelligence team and discipline set, and operational proficiencies in commercial downtown and infill construction that it can leverage in its multifamily play.
In some respects, the magnitude of Lennar's strategy in multifamily can only be an area of conjecture, since the organization hasn't spoken extensively of its plans in any public way. What we do know is that while Lennar is pushing its home building operations hard in its home building geographical footprint, and it's looking to put land investment opportunism fully into play as it tries to drive single-family, for-sale volume, it's also made some big strategic moves—especially with its Rialto distressed real estate investment group—that acknowledge a long slog ahead before single-family is operating at close to normal capacity.
So, for multifamily players, make no mistake, Lennar Multifamily may seem like it's a start-up, but it's not an upstart by any means.