8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The

Securities Exchange Act of 1934

February 10, 2010

Date of Report (Date of earliest event reported)

LENNAR CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	1-11749	95-4337490
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

700 Northwest 107^th Avenue, Miami, Florida 33172

(Address of principal executive offices) (Zip Code)

(305) 559-4000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01. Regulation FD Disclosure.

Lennar Corporation will be making upcoming presentations to investors that include the slides that are furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is furnished as part of this Current Report on Form 8-K.

Exhibit No.	Description of Document
99.1	Presentation slides.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 10, 2010	Lennar Corporation
	By:	/s/ Bruce E. Gross
	Name:	Bruce E. Gross
	Title:	Vice President and Chief Financial Officer

3

Exhibit Index

Exhibit No.	Description of Document
99.1	Presentation slides.

EX-99.1

Strategic Overview

February 2010

Exhibit 99.1

This presentation includes "forward-looking statements," as that term is defined in the

Private Securities Litigation Reform Act of 1995. These forward-looking statements include

statements regarding our business, financial condition, results of operations, cash flows,

strategies and prospects.  You can identify forward-looking statements by the fact that these

statements do not relate strictly to historical or current matters.  Rather, forward-looking

statements

relate

to

anticipated

or

expected

events,

activities,

trends or results.  Because

forward-looking

statements

relate

to

matters

that

have

not

yet

occurred,

these statements

are

inherently

subject

to

risks

and

uncertainties.

Many

factors

could cause our actual

activities or results to differ materially from the activities and results anticipated in forward-

looking

statements.

These

factors

include

those

described

under

the caption “Risk Factors”

in our most recent Annual Report on Form 10-K filed with the Securities and Exchange

Commission.  We do not undertake any obligation to update forward-looking statements,

except as required by federal securities laws.

Disclaimer Statement

2

Business Overview

3

Business Overview

Housing Market Is Stabilizing

The housing market has continued its road back to recovery

as more confident homebuyers have taken advantage of

increased affordability.

While high unemployment and foreclosures will continue to

present challenges, consumer sentiment has significantly

improved as homebuyers have recognized that the

residential housing market is stabilizing.

The current administration recognizes the importance of

stability in the housing market; the extension and

expansion of the homebuyer tax credit will continue to

support housing’s road to recovery.

4

Business Overview

Operating Focus

Stabilize

Balance Sheet

Invest in

New Strategic

Opportunities

Rebuild 

Profitability in

Core Business

“Moving from defense to offense”

Investing through Rialto to capitalize on distressed

opportunities

Creating value through the cycle

Reduced construction costs per square foot from peak  

by over 25%

Reduced number of floor plans from peak by 63%

Reduced avg. floor plan size from peak by 300 sq. ft.

Q4’09 sales incentives are at the lowest level since Q3’06

Ample liquidity –

cash balance of $1.3B at Q4’09 

.

(excludes NOL carryback refund of approximately $320M,

expected in early 2010)

Extended debt maturities with senior notes issued in April ’09

Reduced maximum JV recourse debt exposure by 84% since

.

peak

5

Stabilize Balance Sheet

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

75%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$1,100

Stabilize Balance Sheet

Strong Cash Flow Generation and Low Leverage

HB Debt / Total Capital

Goal 35% -

45%

Operating Cash Flow

(Dollars in Millions)

(1)

Includes $647M deferred tax asset reserve

(1)

6

7

Stabilize Balance Sheet

Senior Notes Maturities

$250

$245

$350

$250

$500

$250

$400

Oct-10

Oct-11

2012

Mar-13

Sep-14

May-15

Apr-16

Jun-17

As of November 30, 2009

6.50%

Senior

Notes

5.95%

Senior

Notes

5.50%

Senior

Notes

5.60%

Senior

Notes

5.13%

Senior

Notes

5.95%

Senior

Notes

12.25%

Senior

Notes

(Dollars in Millions)

Senior Notes maturities

extend over 8 years

Weighted average

interest rate of 6.9%

8

Stabilize Balance Sheet

2009 Capital Market Transactions

Issued $400 million of senior unsecured notes

due in 2017.

Retired $448 million of senior notes and other

debt.

Raised $225 million of equity under the $275

million equity draw down program to provide

additional financial flexibility and capital for

new opportunities.

9

$3.2

$5.4

$2.0

$1.5

Stabilize Balance Sheet

Aggressive Inventory Reduction

(Dollars in Billions)

$8.6*

$3.5*

Peak 2006

Q4 2009

*Excludes consolidated inventory not owned

Inventory

59%

Land, Land Under

Development and

Option Deposits

Construction

in Progress

and Finished

Homesites

10

Homesites Owned and

Controlled

Stabilize Balance Sheet

Aggressive Inventory Management

345,000

104,000

Peak 2006

Q4 2009

70%

Peak 2006

Q4 2009

Change

Owned

106,000

83,000

-22%

Optioned

134,000

7,000

-95%

Controlled-JVs

105,000

14,000

-87%

Total

345,000

104,000

-70%

11

270

214

116

62

Peak

2006

Q4 2007

Q4 2008

Q4 2009

Number

of

Joint

Ventures

Joint Venture Detail

JVs with recourse debt

22

JVs with non-recourse debt

17

JVs without debt

23

JV total

62

Stabilize Balance Sheet

Joint Venture Reduction Strategy Near Completion

77%

We project to dissolve approximately 20 additional JVs by the end of 2010.

The remaining JVs will be long-term strategic and performing JVs with no

reason to dissolve.

12

$1,764

$288

Peak 2006

Q4 2009

Stabilize Balance Sheet

Significant Reduction in JV Recourse Debt Exposure

Maximum

JV

Recourse

Debt

Exposure

(Dollars in Millions)

84%

JVs with Recourse Debt

At 11/30/09

Assets

$1.3B

Equity

$0.5B

13

Rebuild Profitability in Core Business

14

Rebuild Profitability in Core Business

Division Operating Focus

Operating strategy for each homebuilding division:

.

Carefully manage asset base

.

Reposition product to target first-time and

value-focused homebuyers

.

Reduce construction costs by re-bidding and

re-tooling product

.

Reduce S,G&A expenses by restructuring

operations

Each homebuilding division is focused on generating

positive cash flow and operating at profitable levels

3%

-5%

0%

0%

2%

13%

13%

15%

17%

12%

12%

9%

2%

2%

-1%

0%

-3%

-1%

1%

2%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Q1

'05

Q2

'05

Q3

'05

Q4

'05

Q1

'06

Q2

'06

Q3

'06

Q4

'06

Q1

'07

Q2

'07

Q3

'07

Q4

'07

Q1

'08

Q2

'08

Q3

'08

Q4

'08

Q1

'09

Q2

'09

Q3

'09

Q4

'09

(Pre-impairment Operating Margin%)

Rebuild Profitability in Core Business

Focus on Increasing Operating Margins

15

17%

14%

14%

16%

18%

25%

25%

26%

27%

25%

24%

20%

14%

16%

14%

14%

12%

17%

16%

18%

0%

5%

10%

15%

20%

25%

30%

Q1

'05

Q2

'05

Q3

'05

Q4

'05

Q1

'06

Q2

'06

Q3

'06

Q4

'06

Q1

'07

Q2

'07

Q3

'07

Q4

'07

Q1

'08

Q2

'08

Q3

'08

Q4

'08

Q1

'09

Q2

'09

Q3

'09

Q4

'09

(Pre-impairment GM%)

Rebuild Profitability in Core Business

Focus on Rebuilding Gross Margins

16

17

S,G&A Expenses

Associate

Headcount

Rebuild Profitability in Core Business

Focus on S,G&A Reduction

$484

$135

Peak 2006

Q4 2009

3,873

14,045

Peak 2006

Q4 2009

(Dollars in Millions)

72%

72%

Number of homebuilding divisions has been reduced from 124 to 26. Each

division’s S,G&A has been right-sized to today’s production levels and each

division can handle additional volume with little additional overhead.

18

Invest in New Strategic Opportunities

19

Invest in New Strategic Opportunities

“Moving from Defense to Offense”

Finished Homesites

Examples of recent purchases of well-located homesites that are immediately

ready for production, expected to generate significantly above average gross

margins, with minimal incremental overhead:

Baltimore, MD

39 homesites

@ $60K

Raleigh, NC

31 homesites

@ $35K

Charlotte, NC

32 homesites

@ $30K

Goose Creek, SC

48 homesites

@ $16K

Charleston, SC   

48 homesites

@ $18K

Homestead, FL

107 homesites

@ $3K

San Antonio, TX

59 homesites

@ $13K

San Francisco, CA  

33 homesites

@ $139K

San Bernardino, CA  

38 homesites

@ $28K

Corona, CA

80 homesites

@ $89K

20

Invest in New Strategic Opportunities

“Moving from Defense to Offense”

Lennar options homesites Starwood acquired in TOUSA auction

Option to purchase 1,408 finished homesites in 38 communities

.

located

in

Jacksonville,

Tampa,

Orlando,

and

SE

Florida

-

over a

.

24 month period

Right

of

first

offer

on

an

additional

1,348

homesites

–

after

.

the initial 24 month period

Flexible takedown schedule, with low upfront option deposit,

.

produces high IRR opportunity

Deliveries to begin in late 2010

Gross margins are projected to exceed 20%, while leveraging

.

S,G&A in existing divisions

Starwood is responsible for costs related to finishing homesites

21

Invest in New Strategic Opportunities

“Moving from Defense to Offense”

Newhall Land Development

Re-emerged as a long-term strategic JV with Lennar as a 15%

equity owner, in one of the nation’s most constrained, best 

positioned locations for homebuilding

JV is structured for success:

No bank debt

Over $100M of cash

No Lennar guarantees

Investment is low risk with very high return potential

22

Rialto Capital

Strategic Opportunity

What is Rialto?

Management team led by Jeff Krasnoff (former CEO of LNR Property

Corporation) with

30 years of “down-cycle skills”

Started in late 2007 to help recreate some of what we accomplished together in the

past

•

Create additional income streams from investments and fees for managing

investments

•

Generate new opportunities for Lennar and other investors

•

Potential to create an asset manager/operator that can be a leader in its field

•

Three main areas we are focused on today

Legacy

securities

–

(RMBS

and

CMBS)

–

PPIP

Distressed

portfolios

of

commercial

and

residential

loans

–

beginning

with

FDIC portfolios

Building long-term relationships

with capital sources and creating new

sources of income 

Rialto Capital Strategic Opportunity

“Moving from Defense to Offense”

23

Rialto and Lennar have a long history of identifying opportunities, particularly in troubled

markets, and responding with innovative strategies that have yielded strong results

Rialto Capital Strategic Opportunity

Rialto and Lennar

24

Rialto Team and Lennar –

Long History of Innovation and Strong Results

1986

1984

1982

1970s

1954

1990

1988

1994

1992

1998

1996

2002

2000

2006

2004

2008

Early 1980s Recession

Bank / S&L Failures

S&L / Real Estate Led Recession

Evolution of

CMBS

Market

Asian

Financial

Crisis,

Russian Debt

Default &

LTCM Bailout

Evolution

of European

Real Estate

CMBS /

Structured

Finance

Market

U.S. Residential Dislocation

and Financial Crisis

Lennar,

founded

in

1954,

has

taken advantage of many real

estate cycles since its formation

as a homebuilder and land

acquirer / developer

Mr. Krasnoff’s relationship

with Lennar (as outside

advisor) begins 1977

Lennar was one of the first to issue

builder

bonds

to fill home mortgage

void left by failing savings & loans

Mr. Krasnoff and Mr.

Miller co-found LNR

Property Corporation

Lennar’s Asset Management Division

(led by Mr. Krasnoff and the

predecessor organization to LNR)

honed skills working with banks and

savings & loans to turn around

troubled assets

Early pioneer in the development

of

the

CMBS

market

and first

buyers of non-investment grade

mortgages coupled with special

servicing

Producing over half of Lennar

earnings, LNR spun off as a

separate NYSE-listed company

Formation of Lennar Land

Partners

Became industry leading

buyer and special servicer

of non-investment grade

CMBS (thru 2007). Worked

out billions of dollars of

non-performing loans

Entered the European

market

to take advantage

of significant transition from

public to private ownership

of real estate assets

Raised $1.125 billion LNR Commercial

Property Investment and $700 million

LNR

European

Investors

Funds

to take

advantage of skills in commercial property

development in US and securities and

structured debt in Europe

Mr. Krasnoff founded

Rialto

to take advantage of

turmoil in today’s residential

market

Lennar and Rialto Closed

innovative Morgan

Stanley / Lennar / Rialto

$525 million land venture

One of the first to invest in

and

workout

large portfolios

of distressed real estate

assets (>$5 billion of non-

performing loans)

One of the first to enter Japan

to

workout

large portfolios of

distressed real estate assets

(>$8 billion of non-performing

loans)

Early pioneer of commercial

CDOs and B-notes

LNR / Lennar acquired one

of the largest public land

companies (Newhall Land

and Farming)

that led to

the creation of LandSource

LNR’s $4.2 billion

“go-private”

transaction

Lennar acquired  interest

in Clayton Holdings, a

loan servicer

Legacy Securities PPIP Fund with

Rialto as sub-advisor closed after 

being

selected

by

US

Treasury

–

Potential capacity subject to final

closing of $4.4 billion dedicated to

CMBS and RMBS

Rialto Capital Strategic Opportunity

LNR Property Corporation

25

LNR

Property

Corporation

–

From

Spin-off

to

Private

Company

Spin-off Date

October 31, 1997

Partner(s)

Public Shareholders

Closing Date

Feb 3, 2005

Investment (Net asset BV at spin-off)

$549mm

Realized Value (equity value)

$2.2bn

Pretax “Profit”

$1.7bn

Gross Multiple

1,2

4.2x

IRR

1,2

24%

Spin-off Summary

Take-Private Summary

LNR’s businesses grew to over half of Lennar’s total earnings by

1997 and to allow both it and Lennar to continue to grow more

effectively, LNR was spun off on October 31, 1997 with Stuart

Miller as its Chairman and Jeff Krasnoff as its President

LNR completed a run of seven successful years as a public

company

and

was

profitable

every

quarter

Public

vehicle

enabled

investors

to

participate

in

opportunistic

real

estate strategies built around the core competencies of adding

value to properties, loans and securities

¹

Assumes no margin leverage on purchased shares.

²

Based

on

initial

book

value

of

net

assets

contributed

of

$15.19

per

share.

Opening

stock

price

was

$25.75

with

a

stock

trading

range

of

$12.50

-

$29.88

in

the

first

year

of

trading.

If

using the opening stock price of $25.75, the results would be a 2.5x multiple with a 14.3% IRR.

Announced in August of 2004, LNR was one of the first major real

estate company take-private transactions with affiliates of

Cerberus Capital in a $4.2 billion transaction

Mr. Krasnoff remained as LNR’s President and CEO after the

privatization until July 2007, when he left and formed Rialto

At LNR

oversaw the management team’s monetization of

properties, raising of two funds totaling $1.8 billion, refinancing of

acquisition debt, expansion of the servicing platform into Europe

and continued growth of its CMBS platform

Investment Highlights

Stock Performance

$15.19

initial book

value

$63.10

sale value

Rialto Capital Strategic Opportunity

The Rialto Team

26

Rialto’s dedicated management team is comprised of specialists in turnarounds,

workouts, capital markets, land / homebuilding and commercial properties

Thekla B. Salzman

Chief Financial Officer

(Miami)

25 yrs. Experience

(19 yrs. with Mr. Krasnoff)

Eric Feder

Loan Workout

(Miami)

19 yrs. Experience

(2 yrs. with Mr. Krasnoff)

Anthony Seijas

REO & Servicing

(Miami)

18 yrs. Experience

(13 yrs. with Mr. Krasnoff)

Bill Landis

Chief Investment Officer

(New York)

20 yrs. Experience

(4 yrs. with Mr. Krasnoff)

Steven I. Engel

Senior Workout Advisor

(New York)

30 yrs. Experience

(22 yrs. with Mr. Krasnoff)

Jeff Krasnoff

Chief Executive Officer

30+ yrs. Experience

(Former President and CEO

of LNR)

Controller

Treasurer

Legal

Lennar Resources Outsourced

Services

provided:

accounting, finance,

legal counsel, human resources and IT

Asset Management Teams

Doug Doughty

Investor Relations

13 yrs. Experience

(2 yrs. with Mr. Krasnoff)

Services

provided:

deal

sourcing,

market

intelligence,

underwriting, development and construction and sales (value

creation)

Lennar Division Presidents

and Field Associates

“Price-enablement”

has begun

$0.95

$0.40

Price under which

selling assets

creates insolvency

“Bid-ask”

spread

creating “price-

disabled”

seller

$0.95

$0.40

Seller is

“price-enabled”

Rialto pricing*

(Accepted)

Seller’s book value

(Original par = $1)

“Marked-to-market”

Rialto pricing*

(Turned down as too low)

$0.80

Price-Enabling

Events

Government Seizures

Equity Infusion

“Good / Bad”

Bank

Tax Incentives

Recapitalization

Bankruptcy

Price-Enabling

Events

Government Seizures

Equity Infusion

“Good / Bad”

Bank

Tax Incentives

Recapitalization

Bankruptcy

Book value becomes

less important

(May be under new control or

difference may be “bridged”

by infusion of capital or other

incentives)

* Pricing assumptions based on current economic conditions with a continued decline in home values.

Recent government events have provided the catalyst for the creation of “Price Enabled”

sellers and the conditions for clearing distressed assets at commercially reasonable prices

Rialto Capital Strategic Opportunity

The Time is Now

27

Additional Loss

Seller is Willing to

Take vs. Book Value

New

investment

and

co-investment

opportunities

such

as

PPIP

and

distressed loan portfolios

New fee streams

and incentive/carried interest as part of Rialto managing

investments for others

Potential

for

strategic

investments

with

crossover

Rialto

investors

Opportunity

to

participate

in

the

creation

of

an

asset

management/operating

company

(similar to what became

LNR)

New

land

and

community

opportunities

coming

out

of

distressed

bank

portfolios

•

Potential to be a buyer of homesites that may be contained in portfolios

•

Exposure to assets within portfolios, even if Rialto is not the winning bidder

Fee

opportunities

for

the

management

and

development

of

foreclosed

properties or other real estate

Rialto Capital Strategic Opportunity

What Does It Mean for Lennar?

28

Private Capital

$1.1 Billion

UST Capital     

$1.1 Billion

Senior Treasury Loan

$2.2 Billion

Lennar has committed $75 million to this

investment

Legacy RMBS & CMBS securities rated

AAA prior to 1/1/09

Senior Secured Debt from US Treasury

(UST) at Libor +100 bps

10-year maturity; subject to available

cash-flow amortization schedule;         

pre-payable at anytime

Adds 700-800 bps to unlevered yields on

a hold-to-maturity and 1100 to 1300 bps

on a Year 3 to Year 5 sale at pricing

comparable to original acquisition

Preferred return to partners of 8% before

any debt amortization

US Treasury has implemented the PPIP program to co-invest with private

capital to help clean up legacy securities held at financial institutions; Rialto is

a sub-advisor for one of the 8 approved PPIP managers.

AllianceBernstein

PPIP

team

(with

Rialto

as

sub-advisor)

has

raised

its

$1.1

billion

from

a

variety

of

sources

around

the

world

and

has

requested

additional

capacity

from

UST

Rialto Capital Strategic Opportunity

The PPIP –

Capital Structure

29

Leverage

1×

Investment Portfolio

A Portfolio

of Securities…

…Backed by

Collateral…

…That Consists

of Real Estate

Rialto Capital Strategic Opportunity

PPIP Investments in AAA Securities

30

Rialto Capital Strategic Opportunity

PPIP -

Focus on Top of the RMBS and CMBS Structure

Typical RMBS Capital Structure

Typical CMBS Capital Structure

14.5%

7.3%

30.0%

20.0%

11.6%

Super Senior

Subordinated

Junior Mezzanine

Losses

Principal

Repayments

Losses

Principal

Repayments

Subordinated

Super Duper

AM

AJ

31

Acquisition Dates

1991-1996

Partner(s)

MSREF

Lehman

Disposition Dates

Various

Lennar

Total

Investment ownership 15-50%

$165mm

$684mm

Realized Value

$420mm

$1.4bn

Pretax “Profit”

$255mm

$716mm

Gross Multiple

2.6x

2.1x

IRR

62%

NA

Transaction Background

Compelling

Return

Profile

-

Early

1990s

Distressed

Real

Estate

Portfolios

Opportunity to capitalize on the real estate recession and S&L

crisis of the late 1980s / early 1990s

Principals

capitalized

on

hands-on

residential

and

commercial

development and management expertise to establish one of the

first for-profit workout operations

Responsible for underwriting, acquiring and handling the workout

and asset management for over $5 billion of distressed assets

from 1991 to 1996

Operation founded by principals around this business eventually

became

independent

public

company

-

LNR

Property

Corporation

Formerly the largest S&L in FL and oldest in U.S. Acquired a $1

billion portfolio consisting of 1,100 assets from the RTC investing

$17.5 million for 25% of the equity with Morgan Stanley RE Fund

in its very first investment

Transaction Examples

Transaction Results

(1991-1992)

Purchased an initial 10% interest for $30 million in a $2 billion

portfolio consisting of 570 assets in 35 states with Lehman

Brothers. Believed to be largest NPL portfolio sale in early 1990s.

(1993)

Investment Highlights

1

Figures reflect LNR’s returns; investor returns are not available.

AmeriFirst

investment

yielded

a

133%

IRR

and

a

6.9x

multiple

¹

Westinghouse

investment

yielded

a

58%

IRR

and

a

4.5x

multiple

¹

Workouts included collecting full and discounted payoffs of

mortgage loans, converting NPLs to performing loans, securitizing

loans, foreclosures with subsequent leasing and sales of

properties

Utilizing securitization as one of its key resolution strategies,

principals became CMBS pioneers and transformed due diligence

and workout platforms into one of the most regarded non-

investment grade securities investment and special servicing

businesses

Rialto Capital Strategic Opportunity

Parallels to the Prior Cycle

32

1990s: That Was Then…

From 1984 to 1992, 1,452 banks

and S&L’s were taken over

Bulk of this action taken after RTC

was formed in 1989

RTC finished its job and was

merged into FDIC in 1995

2008-2010: This Is Now

Total assets held by failed banks

was $266bn

Number of

Banks

Assets

Resolution

RTC/FDIC clearing process cleaned

the system and allowed for banks

to lend again

Institutional Risk Analytics rates 2,200 Banks “F”, forecasting over 1,000 will

be seized

during

this

cycle.

The

2,200

represent

$4.4

trillion

in

assets

1990s vs. Current Cycle

Rialto Capital Strategic Opportunity

Bank Seizures

33

From January 2008 to 2010 YTD,

approximately 180 banks have

been seized

FDIC currently has over 500 banks

on the watch list

Total assets held by failed banks

was approximately $250bn

(excludes $307bn for Washington

Mutual)

FDIC has begun the process of

clearing these assets through its

Structured Loan Sales program

Rialto Capital Strategic Opportunity

FDIC Portfolio Ownership Structure

34

FDIC Debt:

$627M

(2)

FDIC Structure

FDIC contributes loans into an LLC and sells a

40% equity interest in the assets

FDIC provides

50%

nonrecourse

financing

in

the form of purchase money notes at 0%

interest

rate

–

all

cash

flows

go

to

repay

notes

until fully defeased

An additional $22M funded for working capital

reserves (plus $32M funded by the FDIC),

which will be used to fund day-to-day

expenses of managing the portfolio

$10M guarantee for performance only in effect

until termination of the venture

Each 10 cents of resolution value over our 40

cent purchase

price

creates

approximately

$122 million of profit

Total UPB:

$3.05 Bn

(1)

Lennar/Rialto

Equity: $243M

Total Purchase

Price:

$1.22 Bn

(40% of UPB)

Sources

Uses

FDIC Equity:

$365M

Total KBW and Pentalpha Portfolios

1)

UPB before accrued interest, late charges and property protection advances

2)

Includes an $18 million FDIC guarantee fee, which is not included in the purchase price of the portfolio of loans

Rialto Capital Strategic Opportunity

FDIC Portfolios

35

FDIC Portfolios –

Resi and Commercial AD&C*

Unpaid Principal Balance:

# of Loans:

Average Balance:

Geography:

$3.05bn

¹

~5,500

$555K

GA –

33%

NV –

19%

AZ –

11%

FL –

9%

Non-Performing:

Collateral:

90%

Residential:

Partially Dev. Land: 25%

Dwellings: 24%

Raw Land:  10%

Finished Homesites: 9%

Commercial:

Retail: 8%

Office/Industrial: 7%

Other: 6%

Portfolio is comprised primarily of full recourse AD&C loans to

developers and homebuilders, with many small loans to individual

borrowers

*Acquisition, development and construction

1 Excludes accrued interest, default interest, late charges and property protection advances

Purchase Price:

$1.22bn

Equity:

$243M

CA –

7%

WA –

3% 

OR –

3%

TX –

2%

Due Diligence/Underwriting Strategy

Extensive due diligence process over the past four

months,

with

over

30

underwriters

working

in

tandem with local Lennar personnel and other third

party firms

Process

included

detailed

file

reviews

of

loan

documents, site visits, market reviews, comparable

sales, residual analyses, development costs,

alternate property uses, independent appraisals,

outstanding liens (including property taxes), borrower

evaluations,

etc.

Each loan evaluated (e.g., foreclosure, deed-in-lieu,

short sale, discounted payoff, restructure, etc.) and

estimated the likely timing and costs involved

Once completed, all underwritings were reviewed

through a number of ‘ round tables’, wherein each

asset was presented by the underwriter to the broader

Rialto

team

–

adjustments

were

made

accordingly

Cash flows from this work were rolled up into a model

taking into cash flow waterfalls as outlined by the

FDIC

and discounted back at appropriate return levels

to determine the appropriate bid prices

Example of Creating Value by Monetizing Assets

Rialto Capital Strategic Opportunity

FDIC Portfolios –

Investment Process

36

Solution

Discounted

Payoff

Foreclose +

Liquidate

Value Add

Multiple (examples)

~1.3x

–

2.0x

~1.75-2.5x

~2.0x

–

3.0x

IRR (examples)

30%+

~25%

~20-25%

Comments

Borrower pays off loan at

discount to par and greater

than 1.0x multiple of

purchase price; simplest

workout option

Go through foreclosure

process; take back asset. 

Sell to a builder/developer/

investor often as is or in

bulk.  May hold until

market conditions improve.

Develop, redevelop and/or

lease and then sell

improved property

$60K

$20K

Discounted

Payoff

Foreclose

+ Liquidate

Value Add

Timeline

Shorter-Term

Longer-Term

Original

Purchase

Price

$50K

$40K

37

Rialto Capital Strategic Opportunity

Conclusion

Right Team, Right Time, Right Opportunity

Cycle-tested team with significant workout experience (e.g., condos in 1980s, RTC in the

early 1990s, Japanese loan workouts in late 1990s, Europe in the early 2000s)

Part of team selected by US Treasury as one of 8 PPIP fund managers. Recently

completed $1.1B capital raise. Lennar committed to invest $75 million.

Comprehensive GP platform – combines the down-cycle turnaround skills of the Rialto

management team directly with the deep operational infrastructure of Lennar and Clayton

Investment strategy requires local market knowledge and a large organization to process

deal flow (Lennar has approximately 4,000 professionals throughout its national footprint,

Clayton has up to 1,400+ loan / asset specialists)

Few firms have capabilities to underwrite certain targeted deal flow (ADC, CDD, etc.),

likely resulting in less competition for acquisitions

Strong deal sourcing capabilities by leveraging the Rialto and Lennar networks

Lennar’s strategic investments in PPIP and FDIC portfolios are accretive transactions

helping to rebuild profitability