The Rialto Investments segment of Lennar Corp., Miami, which purchases problem assets, saw its operating earnings increase in the company's second fiscal quarter (which ended May 31) over the same period last year but the homebuilder's financial services unit saw operating earnings decline due to decreased volume in the mortgage and title businesses.
Issues with the company's homebuilding business, its primary operations, caused net income to decline to $14 million from $40 million for the second quarter 2010 (which included an $11 million benefit for income taxes).
Rialto had operating earnings of $23 million (including $13 million of net earnings attributable to noncontrolling interests), up from $15 million one year prior (including $10 million of net earnings attributable to noncontrolling interests).
Revenues were $43 million, consisting mostly of interest income from Rialto's portfolio of real estate loans. Net other income of $15 million came from gains from acquisition of real estate owned through foreclosure and a $5 million gain on the sale of investment securities.
But Rialto also reported a $3 million loss from unconsolidated entities relating to its investment in the AllianceBernstein LP fund formed under the federal government's Public-Private Investment Program.
Lennar CEO Stuart Miller said in the company's earnings release that the parent company's strong balance sheet would allow it to continue to pursue "distressed opportunities for our Rialto business."
As for Lennar Financial Services, operating earnings fell to $2.5 million from $14 million one year prior. Besides the reduction in mortgage and title business, this segment recorded $5 million of proceeds from the sale of a cable system.
