Acquisition gains offset shrinking mortgage margins at Lennar
Builder Lennar Corp.'s purchase of CalAtlantic's financial services operations boosted its mortgage segment's earnings by 9.9% year-over-year in the third quarter as the acquisition offset declines in per-loan profits and refinancing.
Earnings produced by Lennar's financial services segment, which includes its mortgage and title operations, totaled $56.6 million for the period. Overall, net earnings attributable to Lennar were up 81.9% from a year ago at $453.2 million.
"Our homebuilding business had a strong third quarter with new orders and deliveries both up 11% over last year, on a pro forma basis for the acquisition of CalAtlantic," Rick Beckwitt, CEO of Lennar, said in the company's earnings release.
"Our homebuilding gross margin was 21.9% when adjusted to eliminate the effects of the write-up of CalAtlantic's backlog and construction in progress in purchase accounting. Our SG&A of 8.6% marked an all-time, third-quarter low which shows our continued focus on leveraging our size and scale as well as utilizing our enhanced technologies to reduce costs," he said.
"Complementing our homebuilding business, our financial services operating earnings increased to $56.6 million from $49.1 million last year," Beckwitt added.
Operating earnings in the company's Rialto commercial real estate segment increased during the quarter, rising to $10.7 million from a $3.2 million loss a year ago.
The gain primarily stemmed from a decrease in real estate owned impairments that followed the liquidation of Federal Deposit Insurance Corp. and bank portfolios and expense reductions.
Partly offsetting the gain were decreases in incentive and interest income, as well as a decline in Rialto Mortgage Finance's securitization earnings due to a lower average net margin.
The company's multifamily segment and its joint ventures took a $3.9 million operating loss as expenses exceeded revenue. It was able to partially offset the loss with property sale gain.
A year ago, Lennar multifamily generated a $9.1 million operating gain from two property sales despite a rise in expenses.