Lennar is selling majority stakes in multifamily businesses, signaling a strategic change

Lennar announced this on Tuesday TPG Real Estate has acquired a majority stake QuarterLennar’s multifamily vertical. Lennar will retain a minority stake, but the deal signals a strategic recalibration as the builder’s multifamily business suffered a significant net loss last year.

Lennar’s multifamily business suffered an operating loss of about $75 million in fiscal 2025, according to earnings reports released by the company. After breaking even in the first quarter, the builder’s multifamily business posted losses in three straight quarters, including a $44 million operating loss in the fourth quarter.

Lennar isn’t abandoning multifamily properties completelyAndsuch as Toll Brothers, which sold Toll Brothers Apartment Living to Kennedy Wilson Holdings last year in a deal now valued at $380 million. However, Lennar’s move to reduce investment exposure to the multifamily segment will allow the company to reallocate capital to its more profitable core residential construction business.

Lennar executives haven’t discussed their Quarterra strategy much publicly in recent years, and company representatives did not elaborate on the strategic vision behind the deal when approached for comment.

However, executives previously considered a spinoff of the company, similar to what the company did with Millrose in 2025. During a December 2022 earnings call, Executive Chairman and CEO Stuart Miller said:

“While I remain confident and excited that Quarterra will be established and Lennar will become a ‘pure play’ homebuilder as promised, this will not happen by the end of the year.”

More than three years later, the spin-off never materialized, partly due to unfavorable market conditions and the recent slowdown in rental growth. But now the Quarterra deal, along with last year’s Millrose spin-off, brings Lennar closer to a ‘pure play’ housebuilder.

Under the deal, TPG will make an additional $1 billion commitment to Quarterra, along with additional capital to finance future development projects. Lennar, with a minority stake, will still develop multifamily communities, but with the backing of TPG’s capital, a key asset in a capital-intensive business.

The road ahead for Lennar

Multifamily, with high construction costs and weak rental growth in many markets, has hurt Lennar’s bottom line lately. Multifamily properties contribute minimally to Lennar’s total business, accounting for approximately 1.5% of total revenue in 2024 and less than 1.0% in 2025.

A deal with TPG frees up capital for Lennar at a time when margins are shrinking. Perhaps more importantly, transferring a large part of the Quarterra business will allow the company to redouble its focus on its core residential construction business.

Multifamily businesses, as single-family businesses have recognized over the years, are a separate business that requires more capital, ongoing management and a set of specific skills.

That difference partly explains why Toll Brothers chose to get out of multifamily, and given strong demand, it was likely an attractive time for Lennar to reduce its exposure to Quarterra.

Strategically, Lennar has tried for years to wear many hats, including owning land properties and pursuing a variety of uses such as multifamily and commercial real estate development. More recently, Lennar has begun to return its focus to its core competency: building entry-level single-family residential communities and following a “pure play” land-light model.

The builder wants to find its feet again in 2026, but is also confronted with numerous challenges:

• Affordability restrictions: Lennar, with a median home price of $386,000 in the fourth quarter of 2025, is one of the most affordable public builders, with a strong focus on first-time and first-time buyers. This is a buyer segment that has struggled in recent quarters, prompting Lennar to keep sales incentives high at about 14% of sales price.
• Demand pressure: Lennar’s volume-first approach has hit a snag with declining demand and affordability concerns. Although the builder expects deliveries to grow 3% in 2026, that is much lower than the 10% growth rate in 2023.
• Shrinking margins: Lennar’s gross profit margin fell more than 500 basis points from 22.1% to 17.% year-over-year in the fourth quarter of 2025.

Takeaway meal to be determined

The deal with TPG, coupled with the recent spin-off of Millrose, is another step toward Lennar’s goal of becoming a ‘pure-play’ homebuilder. While the builder isn’t abandoning multifamily properties entirely, the deal will likely free up capital and reduce exposure to a side sector that has only hurt profitability and margins in recent quarters.

Lennar seems to limit his focus to what he is good at, rather than trying to be everything to everyone. The message to the wider housebuilding sector is clear: the future of housebuilding will be led by companies that understand their identity and focus on their core strengths with operational clarity.

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