Wednesday, January 2, 2008

Lennar: Basement-Priced Sale

Lennar VP's Basement-Priced Sale

By Teresa Rivas | 2 January 2008

The worsening state of the housing sector hit home for one Lennar executive last week when he sold shares purchased in August at a $300,000 loss. On Thursday vice president and head of investor relations Marshall Ames sold 30,000 class A shares for $540,174, or $18.01 a share. On Aug. 16, when stock of the Miami-based home builder hit a low of $27.76, Ames had purchased 30,000 shares for $845,100, or $28.17. BUT— the stock has continued to fall and when Ames sold the 30,000 shares they were worth $304,926 less than the purchase price.

[ Normxxx Here:  I guess we can be sure HE didn't have any inside knowledge!  ]

He now owns 138,815 class A shares directly, with another 10,779 held indirectly by trusts. He owns 20,440 class B shares directly and 1,080 indirectly. He also owns 98,400 class A stock options and 6,040 class B shares to be issued upon the exercise of certain stock options. Class A shares carry one vote per share, while class B shares carry 10 votes per share. Ames does not own more than 1% of either class of Lennar stock outstanding.

Lennar did not return phone calls seeking comment on the sales. "I think the sales accurately reflect most investors' sentiment toward the home-building space right now," says Ben Silverman, director of Research at "Aside from being a buyer in August, it's also interesting because as head of investor relations he is in charge of speaking to the investment community. I certainly don't think anyone's willing to call a bottom to the home-building cycle just yet."

Lennar stock hit a 52-week low of $14 on Nov. 27, a quarter of its 52-week high of $56.54 on Feb. 2. It has since edged up slightly, gaining 39 cents to $17.89 on Monday after the National Association of Realtors reported sales of existing single-family homes rose a modest 0.4% in November from October. Like other residential construction companies, Lennar has been hurt by the subprime-mortgage crisis as credit for new buyers has dried up and land values have plummeted. Lennar's stock is off 66.6% year-to-date, outstripping the 56.5% loss seen by the Dow Jones Home Construction Index. Through its operations in California and Florida, Lennar has exposure to two of the hardest-hit markets.

Deutsche Bank analyst Nishu Sood downgraded Lennar to a Hold from a Buy rating on Dec. 7, citing the company's investment in highly-leveraged, off-balance-sheet joint ventures through which Lennar, like other home builders, used to buy and control land during the housing boom. On Dec. 3 Lennar announced that it sold 11,000 homesites in eight states to Morgan Stanley Real Estate for $525 million, or about 40 cents on the dollar, as part of a real-estate joint venture between the companies.

"Based on our analysis of a worst-case scenario, Lennar's joint-venture exposure considerably heightens its risk profile," wrote Sood in a research note. "We see little that could improve the situation as the housing downturn continues."



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