After years of talking about investing in distressed real estate in the downturn, Lennar Corp. has pulled the trigger, announcing late Wednesday Feb. 10 that it is investing in a company that has partnered with the FDIC to work out distressed real estate loans.

Lennar announced Wednesday that it spent approximately $243 million (not including working capital and transaction costs) to buy 40% of a company created to hold two portfolios with 5,500 distressed residential and commercial real estate loans from 22 banks in receivership. The loans have unpaid balances totalling $3.05 billion.

The FDIC retains the remaining 60% equity interest and will be providing a $627 million of non-recourse, no-interest financing for seven years for the project.

Rialto Capital Advisors, a Lennar subsidiary created by Lennar more than a year ago with the directive of investing in distressed land, will manage and work out the portfolios day-to-day.

It's a move Lennar CEO Stuart Miller has talked about for several years, but it's not a new task for the company.

"Acquiring and working out distressed real estate loans was a large and extremely profitable part of our business during the last major real estate down cycle in the early 1990s," Miller said in the announcement. "We are pleased to return to this business and honored to partner with the FDIC to manage, work through and add value to these portfolios of real estate loans."

"We take great pride in understanding market cycles and identifying the opportune point of entry. As we have noted on our quarterly conference calls, we have been carefully preparing to invest in this space for the last two years. Our strong cash position and proven track record in this area enables us to capitalize on this market cycle and create long-term value for our shareholders. We expect these transactions will be accretive to 2010 earnings."

"We have been assembling and incubating the Rialto management team with Lennar since late 2007," said Jeffrey Krasnoff, CEO of Rialto. "Many of our team have worked together and with Lennar for several decades."

Lennar executives did not immediately return Big Builder's call asking for more details about how the deal, including financial arrangements to share costs and profits.