Lennar: land inventory value plummets in Miami ... By Geniusofdespair & Gimleteye

Lennar is one of Miami's largest corporate citizens (and measured by value, the nation's third largest production homebuilder). The company has a major stake in zoning changes to move the Urban Development Boundary that separates environmentally sensitive lands near the Everglades from areas that receive public subsidies through infrastructure investment.

Last week allegations that Miami's largest corporate production homebuilder engaged in systematic fraud through land development partnerships shocked investors. According to Bloomberg, "Lennar fell $2.27 to $9.15 at 4 p.m. in New York Stock Exchange composite trading. The shares fell 51 percent last year. Credit-default swaps linked to Lennar bonds climbed 95 basis points to 640 basis points, according to broker Phoenix Partners Group. That means it would cost $640,000 a year for five years to protect $10 million of Lennar bonds. A basis point is equal to .01 percentage point."

I'm not sure how to compare Lennar's difficulty in obtaining low cost insurance measures to either its difficulties or others with whom it competes. From Eyeonmiami's research: if Lennar owns land outside the UDB in Miami-Dade, its value is plummeting. The heart of the Ponzi-scheme allegation is Lennar's use of real property to leverage for other partnerships and with other partners.

According to property records, there is one 49 acre parcel for sale outside the Miami-Dade Urban Development Boundary now listed for sale at $1.7 million or $34,694 an acre. A Costa Rican speculator bought the 49 acre property in 1989 for $975,000 for almost $20,000 an acre. If the speculator sells it for his asking price today of $34.6K per acre, his average return on investment in 3.8 percent per year. It should be noted that the county has the acreage assessed for $3,008,145.

Nearby South Florida's top lobbyists turned developers purchased Krome Gold Ranches (Rodney Barreto, Agustin Herran, Armando Guerra) at the peak of the market in December 2005 for $44,608,600 for 466 acres, or, $95,726 an acre. A far cry from $34K.

Just east of this property are 125 acres owned by Neighborhood Planning Company (Armando Guerra, Agustin Herran, Ramon Rasco, Carlos Garcia and Sergio Pino), bought in July 2005 for $15,000,000, or, $120,000 an acre.


Krome Investments, LLC (Sergio Pino and Armando Guerra), in the same area, bought 59 acres in December 2005 for $6,621,440 or $112,227 an acre.

This property is near Lennar's proposed Parkland 1000 acre development, where land speculators invested outside the UDB in anticipation of paving farmland and platted subdivisions to the Everglades. The bulk of Parkland property was purchased by Ed Easton as trustee for Krome Gold Land Trust; approximately 614 acres were purchased in late 2004 for nearly $65,000,000 according to County Property Appraiser records. Easton and others, including Sergio Pino, appear to have paid over $100,000 per acre for land that is in an area where the selling price today is a third of the purchase price then.

This "A Team" persists despite the fiercest headwinds in a century and ample evidence that the model of suburban sprawl is finished; depending on debt and mortgage schemes that caused a national economic crisis.

The Miami speculators and developers who own land far above market price often partner with Lennar, on both sides of the wholesale transactions of lots or houses (sometimes cutting in county commissioners like Joe Martinez. See our posts on 'Martinez' and 'Parkland' in the archive section.) Lennar and its land aggregators, Rosen and Latterner, had planned to massively expand suburban sprawl in South Florida during the boom. Its first plan, pushed forward in 2002, was for a new suburb in Florida City outside the UDB and virtually at the edge of Biscayne National Park. The ease with which company lobbyists persuaded county commissioners to allow Florida City to annex the land in question (thus, depriving opponents of a focused battle on the basis of county regulations) predicted smooth sailing for corporate lobbyists and engineers whose business models is based on arguing at state and federal levels, too, that existing regulations adequately protect the environment. (In one of the more bizarre moments of Florida environmental history, environmental activists opposing the Florida City development witnessed the death of a panther, Florida's signature endangered species, on a darkened road near the development site.) In fact, environmental regulations to mitigate the effects of sprawl were the FIRST indicators neutered during the biggest real estate asset bubble in Florida's history.



Lennar had the backing of the unreformable majority of the county commission to move its Florida City plan forward until the markets began to crash. Although the company dropped its 1000 acre plan for Florida City in 2007, it retained and focused its energy on a second front: Parkland is a major development of regional impact that Lennar continues to advance through the permitting process and a partnership whose details have not been disclosed, but include a who's who of Miami development and lobbyist interests.

But will the project be financially viable, any time soon? In “Build Them, and They Will Come” (May 21, 2005), an editorial published in The Miami Herald, Willy Bermello--former president of the Latin Builders Association-- confidently predicted: “... real estate continues to still be a safe harbor for investors, whether it be equity or the purchase of a condo in South Florida, where doubling of your investment in less than two years is commonplace. If you have euros or British pounds, then you buy with a built-in 30 percent to 40 percent discount. Miami deserves its place next to Shanghai and Dubai. More important, it deserves our confidence. The bubble is not latex but stainless steel.”

Miami deserves its place next to Moscow, where stock market prices declined more than 70 percent in 2008.

Are we worried that federal dollars through Obama's fiscal stimulus plan will be used to bail out the speculators who control the county commission? You bet. Moving the UDB sets in motion a whole suite of investments in infrastructure to benefit the supply chain of real estate development whose model depends on large scale consumption of farmland and open space at the edge of cities. There is no demand, today, in the ocean of foreclosures in the western suburbs. Still, production homebuilders and Lennar CEO Stuart Miller are pleading to Congress for bailouts.

When civic activists and volunteers complained at endless public hearings about where unsustainable development was leading us, they were blasted as being elitist.

Do they get bailed out, for being 'right', or, do you only get bailed out for being wrong?