Lennar: Building Homes for the 20th Century

On Saturday, I attended a grand opening at a Lennar (LEN) site in the desirable locale of Jupiter, Florida. A very large development of several hundred acres was being shown to the public for the first time. Even Radio Disney was present (the kids brought the parents - good marketing ploy). A catered lunch was provided and the well-trained and readily accessible Lennar staff was both in the model home and in the blazing heat at high noon ready to pitch the homes to be built. I spoke with four different sales representatives to get a sense of the development's presence.

Six home plans were offered with four being 4000 square feet or larger. Pricing was from the mid-$300g's for the basic 3000 sq. ft. home up to $600's for the Ford-Excursion type 5300 square foot behemoth.

Therein lies my questions for the sales force. What is Lennar thinking? McMansions, no green packages for conservation, stale floor plans, Home Owner headaches and higher fees ($270/month) for the usual pool, clubhouse and landscaping perks. I thought I was in a time warp.

Turns out, I was not far off in my thinking. The development had been in the planning stages for years since Lennar acquired the land within earshot of I-95. The Jupiter city government had demanded its stamp of approval on every aspect of the development, including exterior designs and colors, which it approved in 2004 (at the height of the real estate boom). Nothing in Lennar's master plan had been changed since, as it would have meant having the city entity in charge of these matters to review the entire project. Lennar has decided to just go ahead with the dated build-out idea.

Lennar has invested millions in land, all the infrastructure including water and sewer, a well-trained sales force and then drops the ball by offering product that is dated, inefficient and priced to perfection for 2004. What could this company be thinking?

If this large development is indicative of the company as a whole, lump LEN with Ford (F) and General Motors (GM). Scratch that - both auto companies may actually be thinking more creatively than Lennar.

Trading at $12.63 per share, LEN is the nation's second largest home builder. The company is actually in a better financial position than many of its competitors at this time. Lennar does take a longer term view with projects, building in 42 metropolitan area locations for diversity. Cash flow at this time is not an issue, although losses are substantial, especially with cross-ventures.

To sum up, Lennar puts out a great sales force, brings in the kids for Disney and has a nice lunch buffet. It may have worked in the 20th century, but I was shocked at how little this company has not learned about the changing homescape. Selling homes that are the equivalent of SUVs in a Prius environment? Maybe my observations are off base, but personally I'll wait until Lennar takes a brief ride forward in the Star Trek time machine before I consider the purchase of this security.

Comments

[jimsep]

You are absolutely correct. All these public homebuilders would be doing this country a big favor right now if they simply stopped projects of this nature, regrouped and re-strategized for a while and let the market absorb the excess supply of unsold homes.

[[e-mail]]

This country has no need for all these Homebuilding-Monoliths !
All the indepent homebuilders that build 40 - 80 units per year
can fill the need !
If there is a slowdown , 20 Units less per builder is not a:
NATIONAL CRISIS !

[[e-mail]]

@Thomas smicklas :
"Lennar has invested millions"
Gee Weez
Look at all the degrees this board has!!!!!!
Now just look at all the degrees of your board of directors
of your favorite cos!
Will A - B remain American ??

[The Jackal]

LEN is cooked......based on my models I predict they will file BK this fall.