Lennar sells majority stake in multifamily business, signaling strategic shift

Lennar announced on Tuesday that TPG Real Estate has acquired a majority stake in Quarterra, Lennar’s multifamily vertical. Lennar will maintain a minority interest, but the deal signals a strategic recalibration as the builder’s multifamily business struggled with a sizeable net loss last year.

In fiscal 2025, Lennar’s multifamily business experienced an operating loss of roughly $75 million, according to earnings reports released by the company. After breaking even in Q1, the builder’s multifamily vertical posted losses in three consecutive quarters, including a $44 million operating loss in Q4. 

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

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

However, executives previously considered a spin-off of the venture, similar to what the company did with Millrose in 2025. On an earnings call in December 2022, Executive Chairman and CEO Stuart Miller said:

“While I remain confident and enthusiastic that Quarterra will be spun and Lennar will become a ‘pure play’ homebuilder as promised, it will not happen by year‑end.” 

More than three years later, the spin-off never materialized, in part due to unfavorable market conditions and recent weakening in rent growth. Now, however, the Quarterra deal, along with last year’s Millrose spin-off, takes Lennar closer to a “pure play” homebuilder.

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

The road ahead for Lennar

Multifamily, with high construction costs and weak rent growth in many markets, has been a drag on Lennar’s corporate earnings recently. Multifamily contributes minimally to Lennar’s overall business, accounting for about 1.5% of total revenues 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, offloading a major portion of the Quarterra enterprise allows the company to redouble its focus on its core homebuilding business. 

Multifamily, like single-family enterprises have recognized over years of prior efforts, is a distinct business that requires more capital, ongoing management, and a set of distinct skill sets.

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

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

The builder is looking to get its groove back in 2026, but is also facing a myriad of challenges:

• Affordability constraints: Lennar, with an average home price of $386,000 in Q4 2025, is one of the most affordable public builders, with a strong focus on first-time and entry-level 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 pressures: Lennar’s volume-first approach has hit a snag amid declining demand and affordability concerns. While 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 for than 500 basis points from 22.1% to 17.% year-over-year in Q4 2025.

TBD Takeaway

The deal with TPG, in combination with the recent Millrose spin-off, is another step towards Lennar’s goal of becoming a “pure-play” homebuilder. While the builder isn’t abandoning multifamily entirely, the deal will likely free up capital and will reduce exposure to an ancillary vertical that in recent quarters has only been a drag on profitability and margins. 

Lennar appears to be narrowing its focus to what it does best, rather than attempting to be everything to everyone. The message to the broader homebuilding industry is clear: the future of housing will be led by companies that understand their identity and focus on their core strengths with operational clarity.