10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2007

Commission file number 1-11749

Lennar Corporation

(Exact name of registrant as specified in its charter)

Delaware	95-4337490
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

700 Northwest 107th Avenue, Miami, Florida 33172

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (305) 559-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Class A Common Stock, par value 10¢	New York Stock Exchange
Class B Common Stock, par value 10¢	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES  þ  NO  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES  ¨  NO  þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  þ  NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   þ Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  YES  ¨  NO  þ

The aggregate market value of the registrant’s Class A and Class B common stock held by non-affiliates of the registrant (124,300,318 Class A shares and 9,631,719 Class B shares) as of May 31, 2007, based on the closing sale price per share as reported by the New York Stock Exchange on such date, was $6,082,694,402.

As of December 31, 2007, the registrant had outstanding 128,616,340 shares of Class A common stock and 31,284,197 shares of Class B common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

Related Section	Documents
III	Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before March 29, 2008.

PART I

Item 1.    Business.

Overview of Lennar Corporation

We are one of the nation’s largest homebuilders and a provider of financial services. Our homebuilding operations include the construction and sale of single-family attached and detached homes, and to a lesser extent multi-level residential buildings, as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which we have investments. We have grouped our homebuilding activities into three reportable segments, which we refer to as Homebuilding East, Homebuilding Central and Homebuilding West. Information about homebuilding activities in states in which our homebuilding activities are not economically similar to those in other states in the same geographic area is grouped under “Homebuilding Other.” Our reportable homebuilding segments and Homebuilding Other have divisions located in the following states:

East: Florida, Maryland, New Jersey and Virginia

Central: Arizona, Colorado and Texas

West: California and Nevada

Other: Illinois, Minnesota, New York, North Carolina and South Carolina

We have one Financial Services reportable segment that provides mortgage financing, title insurance, closing services and other ancillary services (including high-speed Internet and cable television) for both buyers of our homes and others. Substantially all of the loans that we originate are sold in the secondary mortgage market on a servicing released, non-recourse basis; although, we remain liable for certain limited representations and warranties related to loan sales. Our Financial Services segment operates generally in the same states as our homebuilding operations, as well as in other states. For financial information about both our homebuilding and financial services operations, you should review Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is Item 7 of this Report, and our consolidated financial statements and the notes to our consolidated financial statements, which are included in Item 8 of this Report.

A Brief History of Our Company

1954:	We were founded as a local Miami homebuilder.
1969:	We began developing, owning and managing commercial and multi-family residential real estate.
1971:	We completed our initial public offering.
1972:	Our common stock was listed on the New York Stock Exchange. We also entered the Arizona homebuilding market.
1986:	We acquired Development Corporation of America in Florida.
1991:	We entered the Texas homebuilding market.
1992:	We expanded our commercial operations by acquiring, through a joint venture, a portfolio of loans, mortgages and properties from the Resolution Trust Corporation.
1995:	We entered the California homebuilding market through the acquisition of Bramalea California, Inc.
1996:	We expanded in California through the acquisition of Renaissance Homes, and significantly expanded operations in Texas with the acquisitions of the assets and operations of both Houston-based Village Builders and Friendswood Development Company, and acquired Regency Title.
1997:	We completed the spin-off of our commercial real estate investment business to LNR Property Corporation. We continued our expansion in California through homesite acquisitions and investments in unconsolidated entities. We also acquired Pacific Greystone Corporation, which further expanded our operations in California and Arizona and brought us into the Nevada homebuilding market.
1998:	We acquired the properties of two California homebuilders, ColRich Communities and Polygon Communities, acquired a Northern California homebuilder, Winncrest Homes, and acquired North American Title with operations in Arizona, California and Colorado.
1999:	We acquired Eagle Home Mortgage with operations in Nevada, Oregon and Washington and Southwest Land Title in Texas.

1

2000:	We acquired U.S. Home Corporation, which expanded our operations into New Jersey, Maryland, Virginia, Minnesota, Ohio and Colorado and strengthened our position in other states. We expanded our title operations in Texas through the acquisition of Texas Professional Title.
2002:	We acquired Patriot Homes, Sunstar Communities, Don Galloway Homes, Genesee Company, Barry Andrews Homes, Cambridge Homes, Pacific Century Homes, Concord Homes and Summit Homes, which expanded our operations into the Carolinas and the Chicago, Baltimore and Central Valley, California homebuilding markets and strengthened our position in several existing markets. We also acquired Sentinel Title with operations in Maryland and Washington, D.C.
2003:	We acquired Seppala Homes and Coleman Homes, which expanded our operations in South Carolina and California. We also acquired Mid America Title in Illinois.
2004:	We acquired The Newhall Land and Farming Company through an unconsolidated entity of which we and LNR Property Corporation currently each own 16%. We expanded into the San Antonio, Texas homebuilding market by acquiring the operations of Connell-Barron Homes and entered the Jacksonville, Florida homebuilding market by acquiring the operations of Classic American Homes. Through acquisitions, we also expanded our mortgage operations in Oregon and Washington. We expanded our title and closing operations into Minnesota through the acquisition of Title Protection, Inc.
2005:	We entered the metropolitan New York City and Boston markets by acquiring, directly and through a joint venture, rights to develop a portfolio of properties in New Jersey facing mid-town Manhattan and waterfront properties near Boston. We also entered the Reno, Nevada market and then expanded in Reno through the acquisition of Barker Coleman. We expanded our presence in Jacksonville through the acquisition of Admiral Homes.

2007 Business Developments

Throughout 2007, market conditions in the homebuilding industry continued to deteriorate. This market deterioration was driven primarily by a decline in consumer confidence and increased volatility in the mortgage market, resulting in high cancellation rates (30% and 29%, respectively, in 2007 and 2006) and lower net new orders (new orders were down 39% and 3%, respectively, in 2007 and 2006) for our company. The market has continued to become more and more competitive and we have responded to competitive market pressure to reduce prices through the use of incentives, price reductions and incentivized brokerage fees. The use of these sales incentives had a negative impact on our gross margins.

As a result, we evaluated our balance sheet for impairment on an asset-by-asset basis. Based on this assessment, during the years ended November 30, 2007 and 2006, we recorded $2.4 billion and $501.8 million, respectively, of inventory adjustments, which included $747.8 million and $280.5 million, respectively, in 2007 and 2006 of valuation adjustments to finished homes, construction in progress and land on which we intend to build homes, $1.2 billion and $69.1 million, respectively, in 2007 and 2006, of valuation adjustments to land we intend to sell to third parties and $530.0 million and $152.2 million, respectively, in 2007 and 2006, of write-offs of deposits and pre-acquisition costs. The $1.2 billion of valuation adjustments recorded in 2007 to land we intend to sell to third parties includes $740.4 million of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment of Long-lived Assets, (“SFAS 144”) valuation adjustments related to the portfolio of land we sold to our strategic land investment venture with Morgan Stanley Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., which was formed in November 2007. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report for further details on the aforementioned transaction and land investment venture.

Additionally, during the years ended November 30, 2007 and 2006, we recorded $496.4 million and $140.9 million, respectively, of adjustments to our investments in unconsolidated entities, which included $364.2 million and $126.4 million, respectively, in 2007 and 2006, of SFAS 144 valuation adjustments related to assets of our unconsolidated entities and $132.2 million and $14.5 million, respectively, in 2007 and 2006, of valuation adjustments to our investments in unconsolidated entities in accordance with Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock (“APB 18”).

The valuation adjustments recorded were calculated based on current market conditions and current assumptions made by management, which may differ materially from actual results if market conditions change.

2

In February 2007, our LandSource joint venture admitted MW Housing Partners as a new strategic partner. As part of the transaction, the joint venture obtained $1.6 billion of non-recourse financing, which consisted of a $200 million five-year Revolving Credit Facility, a $1.1 billion six-year Term Loan B Facility and a $244 million seven-year Second Lien Term Facility. The transaction resulted in a cash distribution to us of $707.6 million. Our resulting ownership of LandSource is 16%. As a result of the recapitalization, we recognized a pretax gain of $175.9 million in 2007 and could potentially recognize additional profits in future years, in addition to profits from our continuing ownership interest.

For a number of years, we created and participated in joint ventures that acquired and developed land for our homebuilding operations, for sale to third parties or for use in their own homebuilding operations. Through these joint ventures, we reduced the amount we had to invest in order to assure access to potential future homesites, thereby mitigating risks associated with land acquisitions, and, in some instances, we obtained access to land to which we could not otherwise have obtained access or could not have obtained access on as favorable terms. Although these ventures served their initial intended purpose of risk mitigation, as the homebuilding market deteriorated in 2006 and 2007 and asset impairments resulted in loss of equity, some of our joint venture partners became financially unable or unwilling to fulfill their obligations. As a result, during 2007, we re-evaluated all of our joint venture arrangements, with particular focus on those ventures with recourse indebtedness, and began to reduce the number of joint ventures in which we were participating and the recourse indebtedness of those joint ventures. By November 30, 2007, we had reduced the number of joint ventures in which we were participating to approximately 210 joint ventures with net recourse exposure of $794.9 million, compared with approximately 260 joint ventures with net recourse exposure of $1.1 billion at November 30, 2006. In order to receive more favorable terms in the amendment of our credit agreement in January 2008, we included as part of the amendment an agreement to execute our business strategy of reducing the recourse indebtedness of joint ventures in which we participate by $300 million during our 2008 fiscal year and by an additional $200 million (for a total of $500 million) by the end of fiscal 2009. This reduction will increase the amount available for borrowing under the borrowing base provisions of the amendment.

Homebuilding Operations

Overview

We primarily sell single-family attached and detached homes, and to a lesser extent, multi-level residential buildings, in communities targeted to first-time, move-up and active adult homebuyers. The average sales price of a Lennar home was $297,000 in fiscal 2007, compared to $315,000 in fiscal 2006. We operate primarily under the Lennar brand name.

Through our own efforts and unconsolidated entities in which we have investments, we are involved in all phases of planning and building in our residential communities including land acquisition, site planning, preparation and improvement of land and design, construction and marketing of homes. We view unconsolidated entities as a means to both expand our market opportunities and manage our risks. For additional information about our investments in and relationships with unconsolidated entities, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.

Management and Operating Structure

We balance a local operating structure with centralized corporate level management. Decisions related to our overall strategy, acquisitions of land and businesses, risk management, financing, cash management and information systems are centralized at the corporate level. Our local operating structure consists of divisions, which are managed by individuals who generally have significant experience in the homebuilding industry and, in most instances, in their particular markets. They are responsible for operating decisions regarding land identification, entitlement and development, the management of inventory levels for our current volume levels, community development, home design, construction and marketing our homes.

Diversified Program of Property Acquisition

We generally acquire land for development and for the construction of homes that we sell to homebuyers. Land is subject to specified underwriting criteria and is acquired through our diversified program of property acquisition consisting of the following:

• Acquiring land directly from individual land owners/developers or homebuilders;

• Acquiring local or regional homebuilders that own, or have options to purchase, land in strategic markets;

3

• Acquiring land through option contracts, which generally enables us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the option; and

• Acquiring parcels of land through joint ventures, primarily to reduce and share our risk, among other factors, by limiting the amount of our capital invested in land, while increasing our access to potential future homesites and allowing us to participate in strategic ventures.

At November 30, 2007, we owned 62,801 homesites and had access through option contracts to an additional 85,870 homesites, of which 22,877 were through option contracts with third parties and 62,993 were through option contracts with unconsolidated entities in which we have investments. At November 30, 2006, we owned 92,325 homesites and had access through option contracts to an additional 189,279 homesites, of which 94,758 were through option contracts with third parties and 94,521 were through option contracts with unconsolidated entities in which we have investments.

Construction and Development

We generally supervise and control the development of land and the design and building of our residential communities with a relatively small labor force. We hire subcontractors for site improvements and virtually all of the work involved in the construction of homes. Generally, arrangements with our subcontractors provide that our subcontractors will complete specified work in accordance with price schedules and applicable building codes and laws. The price schedules may be subject to change to meet changes in labor and material costs or for other reasons. We believe that the sources and availability of raw materials to our subcontractors are adequate for our current and planned levels of operation. We generally do not own heavy construction equipment. We finance construction and land development activities primarily with cash generated from operations and public debt issuances, as well as cash borrowed under our revolving credit facility.

Marketing

We offer a diversified line of homes for first-time, move-up and active adult homebuyers. With homes priced from the $100,000’s to above $1,000,000 and available in a variety of environments ranging from urban infill communities to golf course communities, we are focused on providing homes for a wide spectrum of buyers. Our marketing program simplifies the homebuying experience by including desirable features as standard items. This marketing program enables us to differentiate our homes from those of our competitors by creating value through standard upgrades and competitive pricing, while reducing construction and overhead costs through a simplified manufacturing process, product standardization and volume purchasing. We sell our homes primarily from models that we have designed and constructed.

We employ sales associates who are paid salaries, commissions or both to complete on-site sales of homes. We also sell homes through independent brokers. We advertise our communities in newspapers, radio advertisements and other local and regional publications, on billboards and on the Internet, including our website, www.lennar.com. In addition, we advertise our active adult communities in areas where prospective active adult homebuyers live.

We have participated in charitable down-payment assistance programs for a small percentage of our homebuyers. Through these programs, we make a donation to a non-profit organization that provides financial assistance to a homebuyer who would not otherwise have sufficient funds for a down payment.

Quality Service

We strive to continually improve homeowner customer satisfaction throughout the pre-sale, sale, construction, closing and post-closing periods. Through the participation of sales associates, on-site construction supervisors and customer care associates, all working in a team effort, we strive to create a quality homebuying experience for our customers, which we believe leads to enhanced customer retention and referrals.

The quality of our homes is substantially affected by the efforts of on-site management and others engaged in the construction process, by the materials we use in particular homes or by other similar factors. Currently, most management team members’ bonus plans are, in part, contingent upon achieving certain customer satisfaction standards.

4

We warrant our new homes against defective materials and workmanship for a minimum period of one year after the date of closing. Although we subcontract virtually all segments of construction to others and our contracts call for the subcontractors to repair or replace any deficient items related to their trades, we are primarily responsible to the homebuyers for the correction of any deficiencies.

Deliveries

The table below indicates the number of deliveries for each of our homebuilding segments and Homebuilding Other during our last three fiscal years:

	2007	2006	2005
East	9,840	14,859	11,220
Central	11,400	17,069	15,448
West	8,739	13,333	11,731
Other	3,304	4,307	3,960
Total	33,283	49,568	42,359

Of the total home deliveries listed above, 1,701, 2,536 and 1,477, respectively, represent deliveries from unconsolidated entities for the years ended November 30, 2007, 2006 and 2005.

Backlog

Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales contracts if they fail to qualify for financing or under certain other circumstances. We experienced a cancellation rate of 30% in 2007, compared to 29% and 17%, respectively, in 2006 and 2005. Because we experienced a significant increase in our cancellation rate during 2007 and 2006, we focused significant effort on reselling these homes, which, in many instances, included the use of higher sales incentives, to avoid the build up of excess inventory. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners, except for our multi-level residential buildings under construction for which revenue was recognized under percentage-of-completion accounting.

The table below indicates the backlog dollar value for each of our homebuilding segments and Homebuilding Other as of the end of our last three fiscal years:

	2007		2006	2005
	(In thousands)
East	$	587,100	1,460,213	2,774,396
Central		195,684	850,472	1,210,257
West		408,280	1,328,617	2,374,646
Other		193,073	341,126	524,939
Total	$	1,384,137	3,980,428	6,884,238

Of the dollar value of homes in backlog listed above, $182,664, $478,707 and $590,129, respectively, represent the backlog dollar value from unconsolidated entities at November 30, 2007, 2006 and 2005.

Financial Services Operations

Mortgage Financing

We provide a full spectrum of conforming conventional, jumbo, FHA-insured and VA-guaranteed residential mortgage loan products to our homebuyers and others through our financial services subsidiaries, Universal American Mortgage Company, LLC and Eagle Home Mortgage, LLC, located generally in the same states as our homebuilding operations as well as other states. In 2007, our financial services subsidiaries provided loans to 73% of our homebuyers who obtained mortgage financing in areas where we offered services. Because of the availability of mortgage loans from our financial services subsidiaries, as well as independent mortgage lenders, we believe most creditworthy purchasers of our homes have access to financing.

However, during 2007, the mortgage market experienced increased concern over rising default rates and tightening lending standards, which resulted in a significant decline in the availability of sub-prime loans (loans to persons with a FICO score under 620) and Alt A loans (loans to persons with less conventional documentation

5

of their incomes or net worths and FICO score of 620 or higher). Consequently, there may be fewer buyers who qualify for financing on new and existing home purchases in the market. During both the fourth quarter of 2007 and the year ended November 30, 2007, approximately 2% of the loans our Financial Services segment made to our homebuyers were sub-prime loans. During the fourth quarter of 2007 and the year ended November 30, 2007, approximately 6% and 29%, respectively, of the loans our Financial Services segment made to our homebuyers were Alt A loans. The tightening of lending standards could lead to a further deterioration in the overall homebuilding market due to stricter credit standards, higher down payment requirements and additional documentation requirements. This deterioration could have an adverse impact on the number of homes we sell. In addition, to the extent that homeowners have used sub-prime or Alt A mortgages to finance the purchase of their homes and are later unable to refinance or maintain those loans, additional foreclosures and an oversupply of inventory may result. This could contribute to additional deterioration in the market and have an adverse impact on demand and the number of homes we sell.

During 2007, we originated approximately 30,900 mortgage loans totaling $7.7 billion, compared to 41,800 mortgage loans totaling $10.5 billion during 2006. Substantially all of the loans we originate are sold in the secondary mortgage market on a servicing released, non-recourse basis; although, we remain liable for certain limited representations. Therefore, we have little direct exposure related to the residential mortgages we sell.

We have a corporate risk management policy under which we hedge our interest rate risk on rate-locked loan commitments and loans held-for-sale to mitigate exposure to interest rate fluctuations. We finance our mortgage loan activities with borrowings under our financial services subsidiaries’ conduit and warehouse facilities or from our general corporate funds. However, the conduit facility matures in June 2008 ($600 million) and the warehouse facility matures in April 2008 ($425 million). Given our reduced volume of deliveries, our financing requirements have decreased. Therefore, we are working with several other lenders in case these facilities are not renewed.

Title Insurance and Closing Services

We provide title insurance and closing services as well as other ancillary services to our homebuyers and others. We provided title and closing services for approximately 136,300 real estate transactions, and issued approximately 146,200 title insurance policies through our underwriter, North American Title Insurance Company. Title and closing services are provided by agency subsidiaries in Arizona, California, Colorado, District of Columbia, Florida, Illinois, Maryland, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Texas, Virginia and Wisconsin.

Communication Services

Lennar Communications provides cable television and high-speed Internet services to residents of our communities and others and oversees our interests and activities in relationships with providers of advanced communication services. At December 31, 2007, we had approximately 8,900 subscribers in Sacramento, California and Texas.

Seasonality

We have historically experienced variability in our results of operations from quarter-to-quarter due to the seasonal nature of the homebuilding business. Due to deteriorating market conditions, we are currently focusing our efforts, in all quarters, on inventory management in order to deliver inventory and generate cash.

Competition

The residential homebuilding industry is highly competitive. We compete for homebuyers in each of the market regions where we operate with numerous national, regional and local homebuilders, as well as with resales of existing homes and with the rental housing market. We compete for homebuyers on the basis of a number of interrelated factors including location, price, reputation, amenities, design, quality and financing. In addition to competition for homebuyers, we also compete with other homebuilders for desirable properties, raw materials and reliable, skilled labor. We compete for land buyers with third parties in our efforts to sell land to homebuilders and others. We believe we are competitive in the market regions where we operate primarily due to our:

• Balance sheet, where we continue to focus on inventory management and liquidity;

• Access to land, particularly in land-constrained markets; and

• Pricing to current market conditions through sales incentives offered to homebuyers.

6

Our financial services operations compete with other mortgage lenders, including national, regional and local mortgage bankers and brokers, banks, savings and loan associations and other financial institutions, in the origination and sale of mortgage loans. Principal competitive factors include interest rates and other features of mortgage loan products available to the consumer. We compete with other title insurance agencies and underwriters for closing services and title insurance. Principal competitive factors include service and price. We compete with other communication service providers in the sale of high-speed Internet and cable television services. Principal competitive factors include price, quality, service and availability.

Regulation

Homes and residential communities that we build must comply with state and local laws and regulations relating to, among other things, zoning, construction permits or entitlements, construction material requirements, density requirements, and requirements relating to building design and property elevation, building codes and handling of waste. These include laws requiring the use of construction materials that reduce the need for energy-consuming heating and cooling systems. These laws and regulations are subject to frequent change and often increase construction costs. In some instances, we must comply with laws that require commitments from us to provide roads and other offsite infrastructure to be in place prior to the commencement of new construction. These laws and regulations are usually administered by counties and municipalities and may result in fees and assessments or building moratoriums. In addition, certain new development projects are subject to assessments for schools, parks, streets and highways and other public improvements, the costs of which can be substantial.

The residential homebuilding industry is also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. These environmental laws include such areas as storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. Environmental laws and existing conditions may result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas.

In recent years, several cities and counties in which we have developments have submitted to voters “slow growth” initiatives and other ballot measures that could impact the affordability and availability of land suitable for residential development within those localities. Although many of these initiatives have been defeated, we believe that if similar initiatives were approved, residential construction by us and others within certain cities or counties could be seriously impacted.

In order to make it possible for some of our homebuyers to obtain FHA-insured or VA-guaranteed mortgages, we must construct the homes they buy in compliance with regulations promulgated by those agencies.

Various states have statutory disclosure requirements relating to the marketing and sale of new homes. These disclosure requirements vary widely from state-to-state. In addition, some states require that each new home be registered with the state at or before the time title is transferred to a buyer (e.g., the Texas Residential Construction Commission Act).

In some states, we are required to be registered as a licensed contractor and comply with applicable rules and regulations. In various states, our new home consultants are required to be registered as licensed real estate agents and to adhere to the laws governing the practices of real estate agents.

Our mortgage and title subsidiaries must comply with applicable real estate laws and regulations. The subsidiaries are licensed in the states in which they do business and must comply with laws and regulations in those states. These laws and regulations include provisions regarding capitalization, operating procedures, investments, lending and privacy disclosures, forms of policies and premiums.

Our cable subsidiary is generally required to both secure a franchise agreement with each locality in which it operates and to satisfy requirements of the Federal Communications Commission in the ordinary conduct of its business.

A subsidiary of The Newhall Land and Farming Company, of which we currently, indirectly own 16%, provides water to a portion of Los Angeles County, California. This subsidiary is subject to extensive regulation by the California Public Utilities Commission.

7

Employees

At January 11, 2008, we employed 6,934 individuals of whom 4,506 were involved in our homebuilding operations and 2,428 were involved in our financial services operations, compared to November 30, 2006, when we employed 13,000 individuals of whom 9,359 were involved in our homebuilding operations and 3,641 were involved in our financial services operations. We do not have collective bargaining agreements relating to any of our employees. However, we subcontract many phases of our homebuilding operations and some of the subcontractors we use have employees who are represented by labor unions.

Relationship with LNR Property Corporation

In 1997, we transferred our commercial real estate investment and management business to LNR Property Corporation (“LNR”), and spun-off LNR to our stockholders. As a result, LNR became a publicly-traded company, and the family of Stuart A. Miller, our President, Chief Executive Officer and a Director, which had voting control of us, became the controlling shareholder of LNR.

Since the spin-off, we have entered into a number of joint ventures and other transactions with LNR. Many of the joint ventures were formed to acquire and develop land, part of which was subsequently sold to us or other homebuilders for residential building and part of which was subsequently sold to LNR for commercial development. For a number of years after the spin-off, LNR was controlled by Mr. Miller and his family; thus, all significant transactions we or our subsidiaries engaged in with LNR or entities in which it had an interest were reviewed and approved by the Independent Directors Committee of our Board of Directors.

In January 2004, a company of which we and LNR each owned 50% acquired The Newhall Land and Farming Company (“Newhall”) for approximately $1 billion, including $200 million we contributed and $200 million that LNR contributed (the remainder came from borrowings and sales of properties to LNR). Subsequently, we and LNR each transferred our interests in most of our joint ventures to the jointly-owned company that had acquired Newhall, and that company was renamed LandSource Communities Development LLC (“LandSource”). At November 30, 2007, Newhall owned approximately 35,000 acres in California.

In February 2005, LNR was acquired by a privately-owned entity. Although Mr. Miller’s family acquired a 20.4% financial interest in that privately-owned entity, this interest is non-voting and neither Mr. Miller nor anybody else in his family is an officer or director, or otherwise is involved in the management, of LNR or its parent. Nonetheless, because the Miller family has a 20.4% financial, non-voting, interest in LNR’s parent, significant transactions with LNR or entities in which it has an interest are still reviewed and approved by the Independent Directors Committee of our Board of Directors.

In February 2007, LandSource admitted MW Housing Partners as a new strategic partner. As part of the transaction, the joint venture obtained $1.6 billion of non-recourse financing, which consisted of a $200 million five-year Revolving Credit Facility, a $1.1 billion six-year Term Loan B Facility and a $244 million seven-year Second Lien Term Facility. The transaction resulted in a cash distribution to us of $707.6 million. Our resulting ownership of LandSource is 16%. As a result of the recapitalization, we recognized a pretax gain of $175.9 million in 2007 and could potentially recognize additional profits in future years, in addition to profits from our continuing ownership interest.

NYSE Certification

We submitted our 2006 Annual CEO Certification to the New York Stock Exchange on April 11, 2007. The certification was not qualified in any respect.

Available Information

Our corporate website is www.lennar.com. We make available on our website, free of charge, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports, as soon as reasonably practicable after we electronically file these documents with, or furnish them to, the Securities and Exchange Commission. Information on our website is not part of this document.

Our website also includes printable versions of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and the charters for each of our Audit, Compensation and Nominating and Corporate

8

Governance Committees of our Board of Directors. Each of these documents is also available in print to any stockholder who requests a copy by addressing a request to:

Lennar Corporation

Attention: Office of the General Counsel

700 Northwest 107^th Avenue

Miami, Florida 33172

Item 1A.    Risk Factors.

The following risks may cause a material adverse effect upon our business, financial condition, results of operations, cash flows, strategies and prospects.

Homebuilding Market and Economic Risks

The homebuilding industry is in the midst of a significant downturn. A continuing decline in demand for new homes coupled with an increase in the inventory of available new homes and alternatives to new homes could adversely affect our sales volume and pricing even more than has occurred to date.

The homebuilding industry is in the midst of a significant downturn. As a result, we have experienced a significant decline in demand for newly built homes in almost all of our markets. Homebuilders’ inventories of unsold new homes have increased as a result of increased cancellation rates on pending contracts as new homebuyers sometimes find it more advantageous to forfeit a deposit than to complete the purchase of the home. In addition, an oversupply of alternatives to new homes, such as rental properties and used homes, has depressed prices and reduced margins. This combination of lower demand and higher inventories affects both the number of homes we can sell and the prices at which we can sell them. For example, in 2007 we experienced a significant decline in our sales results, significant reductions in our margins as a result of higher levels of sales incentives and price concessions, and a higher than normal cancellation rate. We have no basis for predicting how long demand and supply will remain out of balance in markets where we operate or whether, even if demand and supply come back in balance, sales volumes or pricing will return to prior levels.

Demand for new homes is sensitive to economic conditions over which we have no control, such as the availability of mortgage financing.

Demand for homes is sensitive to changes in economic conditions such as the level of employment, consumer confidence, consumer income, the availability of financing and interest rate levels. During 2007, the mortgage lending industry experienced significant instability. As a result of increased default rates, particularly (but not entirely) with regard to sub-prime and other non-conforming loans, many lenders have reduced their willingness to make, and tightened their credit requirements with regard to, residential mortgage loans. Fewer loan products and stricter loan qualification standards have made it more difficult for some borrowers to finance the purchase of our homes. Although our finance company subsidiaries offer mortgage loans to potential buyers of most of the homes we build, we may no longer be able to offer financing terms that are attractive to our potential buyers. Unavailability of mortgage financing at acceptable rates reduces demand for the homes we build, including in some instances causing potential buyers to cancel contracts they have signed.

Increasing interest rates could cause defaults for homebuyers who financed homes using non-traditional financing products, which could increase the number of homes available for resale.

During the period of high demand in the homebuilding industry prior to 2006, many homebuyers financed their purchases using non-traditional adjustable rate or interest only mortgages or other mortgages, including sub-prime mortgages, that involved at least during initial years, monthly payments that were significantly lower than those required by conventional fixed rate mortgages. As a result, new homes became more affordable. However, as monthly payments for these homes increase either as a result of increasing adjustable interest rates or as a result of principal payments coming due, some of these homebuyers could default on their payments and have their homes foreclosed, which would increase the inventory of homes available for resale. Foreclosure sales and other distress sales may result in further declines in market prices for homes. In an environment of declining prices, many homebuyers may delay purchases of homes in anticipation of lower prices in the future. In addition, as lenders perceive deterioration in credit quality among homebuyers, lenders have been eliminating some of the available non-traditional and sub-prime financing products and increasing the qualifications needed for mortgages or adjusting their terms to address increased credit risk. In general, to the extent mortgage rates increase or lenders make it more difficult for prospective buyers to finance home purchases, it becomes more difficult or costly for customers to purchase our homes, which has an adverse affect on our sales volume.

9

Land prices can be extremely volatile and our business requires that we invest in land positions well in advance of sales of finished homes on land we have acquired. We have had to take significant write-downs of the carrying values of the land we own and in investments in unconsolidated entities, and a continuing decline in land values could result in additional write-downs.

Some of the land we currently own was purchased at high prices. Also, we obtained options to purchase land at prices that no longer are attractive, and in connection with those options we made non-refundable deposits and, in some instances, agreed to incur pre-acquisition land development costs. When demand fell, we were required to take substantial write-downs of the carrying value of our land inventory and we elected not to exercise high price options, even though that required us to forfeit deposits and write-off pre-acquisition land development costs.

Additionally, as a result of these market conditions, we recorded significant valuation adjustments relating to our investments in unconsolidated entities. A majority of the valuation adjustments related to SFAS 144 valuation adjustments on assets of our unconsolidated entities. Furthermore, we recorded valuation adjustments to our investments in unconsolidated entities in accordance with APB 18.

The combination of land value write-downs and forfeitures in addition to valuation adjustments relating to our investments in unconsolidated entities had a material negative effect on our operating results for fiscal 2006 and 2007, resulting in a loss for fiscal 2007. If market conditions continue to deteriorate, some of our assets may be subject to further write-downs in the future, decreasing the assets reflected on our balance sheet and adversely affecting our stockholders’ equity.

Inflation can adversely affect us, particularly in a period of declining home sale prices.

Inflation can have a long-term impact on us because increasing costs of land, materials and labor require us to attempt to increase the sale prices of homes in order to maintain satisfactory margins. Although an excess of supply over demand for new homes, such as the one we are currently experiencing, requires that we reduce prices, rather than increasing them, it does not necessarily result in reductions, or prevent increases, in the costs of materials and labor. Under those circumstances, the effect of cost increases is to reduce the margins on the homes we sell. That makes it more difficult for us to recover the full cost of previously purchased land, and has contributed to the significant reductions in the value of our land inventory.

We face significant competition in our efforts to sell homes.

The homebuilding industry is highly competitive. We compete in each of our markets with numerous national, regional and local homebuilders. This competition with other homebuilders could reduce the number of homes we deliver or cause us to accept reduced margins in order to maintain sales volume.

We also compete with the resale of existing homes, including foreclosed homes, sales by housing speculators and available rental housing. As demand for homes has slowed, competition, including competition with homes purchased for speculation rather than as places to live, has created increased downward pressure on the prices at which we are able to sell homes, as well as upon the number of homes we can sell.

Operational Risks

Homebuilding is subject to warranty and liability claims in the ordinary course of business that can be significant.

As a homebuilder, we are subject to home warranty and construction defect claims arising in the ordinary course of business. We are also subject to liability claims arising in the course of construction activities. We record warranty and other reserves for the homes we sell based on historical experience in our markets and our judgment of the qualitative risks associated with the types of homes we built. We have, and many of our subcontractors have, general liability, property, errors and omissions, workers compensation and other business insurance. These insurance policies protect us against a portion of our risk of loss from claims, subject to certain self-insured retentions, deductibles and other coverage limits. However, because of the uncertainties inherent in these matters, we cannot provide assurance that our insurance coverage or our subcontractors’ insurance and financial resources will be adequate to address all warranty, construction defect and liability claims in the future. Additionally, the coverage offered and the availability of general liability insurance for construction defects are currently limited and costly. As a result, an increasing number of our subcontractors are unable to obtain insurance, and we have in many cases waived our customary insurance requirements. There can be no assurance that coverage will not be further restricted and become even more costly.

10

Natural disasters and severe weather conditions could delay deliveries, increase costs and decrease demand for new homes in affected areas.

Many of our homebuilding operations are conducted in areas that are subject to natural disasters and severe weather. The occurrence of natural disasters or severe weather conditions can delay new home deliveries, increase costs by damaging inventories and negatively impact the demand for new homes in affected areas. Furthermore, if our insurance does not fully cover business interruptions or losses resulting from these events, our results of operations, liquidity or capital resources could be adversely affected.

Supply shortages and other risks related to the demand for skilled labor and building materials could increase costs and delay deliveries.

Increased costs or shortages of skilled labor and/or lumber, framing, concrete, steel and other building materials could cause increases in construction costs and construction delays. We generally are unable to pass on increases in construction costs to customers who have already entered into sales contracts, as those sales contracts generally fix the price of the homes at the time the contracts are signed, which may be well in advance of the construction of the home. Sustained increases in construction costs may, over time, erode our margins, particularly if pricing competition restricts our ability to pass on any additional costs of materials or labor, thereby decreasing our margins.

Reduced numbers of home sales force us to absorb additional costs.

We incur many costs even before we begin to build homes in a community. These include costs of preparing land and installing roads, sewage and other utilities, as well as taxes and other costs related to ownership of the land on which we plan to build homes. Reducing the rate at which we build homes extends the length of time it takes us to recover these costs. Also, we frequently acquire options to purchase land and make deposits that will be forfeited if we do not exercise the options within specified periods. Because of current market conditions, we have had to terminate a number of these options, resulting in significant forfeitures of deposits we made with regard to the options.

If our financial performance further declines, we may not be able to maintain compliance with the covenants in our credit facilities and senior debt securities.

Our credit facility imposes certain restrictions on our operations. The most significant restrictions relate to debt incurrence, sales of assets, cash distributions and investments by us and certain of our subsidiaries. In addition, our credit facility requires compliance with certain financial covenants, including a minimum adjusted consolidated tangible net worth requirement and a maximum permitted leverage ratio. Also, because we currently do not have investment grade debt ratings, we can only borrow up to specified percentages of the book values of various types of our assets, referred to in the credit agreement as our borrowing base. Our operating results and the asset write-downs we recorded during fiscal 2007 caused our tangible net worth to be below the minimum required by the credit agreement and caused our borrowing base to be below the level necessary for us to borrow the full amount we expect to need for our operations. In January 2008, we completed an amendment to the credit facility that modified the minimum adjusted consolidated tangible net worth requirement and restructured the borrowing base, effective as of November 30, 2007. Under this amendment, the commitment was reduced to $1.5 billion. The amendment limits the amount of permissible joint venture recourse obligations, requiring that those obligations be reduced quarterly through the end of our 2009 fiscal year. Failure to reduce such obligations in accordance with the agreed-upon schedule would constitute a violation of the terms of the amended credit facility.

While $1.5 billion of borrowing capacity should be sufficient in the current depressed market, if markets strengthen, we might have to seek increased borrowing capacity.

While we currently are in compliance with the financial covenants in the amended credit agreement, if we had to record significant impairments in the future, they could cause us to fail to comply even with the amended credit agreement debt covenants. In addition, if we default in the payment or performance of certain obligations relating to the debt of unconsolidated entities above a specified threshold amount, we would be in default under the amended credit agreement. Either of those events would give the lenders the right to cause any amounts we owe under that credit facility to become immediately due. If we were unable to repay the borrowings when they became due, that could entitle the holders of $2.2 billion of debt securities we have sold into the capital markets to cause the sums evidenced by those debt securities to become due immediately. We would not be able to repay those amounts without selling substantial assets, which we might have to do at prices well below the fair values, and the carrying values, of the assets.

11

Failure to comply with the minimum adjusted consolidated tangible net worth requirement in our credit facility is also a default under the $600 million conduit facility of our Financial Services segment. If recording significant impairments in the future caused us not to comply with the minimum adjusted consolidated tangible net worth covenant in our credit facility, the lender under the $600 million conduit facility would have the right to terminate that conduit facility and cause any amounts we owe under the conduit facility to become due immediately. If we were unable to pay those borrowings when they become due, that could entitle holders of the debt securities we have sold into the capital markets to cause the sums evidenced by those debt securities to become due immediately.

We may be unable to obtain suitable financing and bonding for the development of our communities.

Our business depends upon our ability to obtain financing for the development of our residential communities and to provide bonds to ensure the completion of our projects. We currently use our credit facility to provide some of the financing we need. In addition, we have from time-to-time raised funds by selling debt securities into public and private capital markets. As is noted above, a recent amendment to our credit agreement reduced the commitment from $3.1 billion to $1.5 billion. The willingness of lenders to make funds available to us has been affected both by factors relating to us as a borrower, and by a decrease in the willingness of banks and other lenders to lend to homebuilders generally. If we were unable to finance the development of our communities through our credit facility or other debt, or if we were unable to provide required surety bonds for our projects, our business operations and revenues could suffer materially.

Our ability to continue to grow our business and operations in a profitable manner depends to a significant extent upon our ability to access capital on favorable terms.

Our ability to access capital on favorable terms has been an important factor in growing our business and operations in a profitable manner. Recently, each of the principal credit rating agencies lowered our credit rating, which will make it more difficult and costly for us to access the debt capital markets for funds we may require in order to implement our business plans and achieve our growth objectives. If we are subject to a further downgrade, it would exacerbate such difficulties.

The credit facilities of our Financial Services segment will expire in 2008.

Our Financial Services segment has a conduit and warehouse facility totaling $1.0 billion, recently reduced from $1.1 billion in order to obtain a waiver of a financial covenant. It uses those facilities to finance its lending activities until it accumulates sufficient mortgage loans to be able to sell them into the capital markets. The lines of credit consist of a conduit facility, that matures in June 2008 ($600 million) and a warehouse facility that matures in April 2008 ($425 million). In the past, we have been able to obtain renewals of these facilities at the times of their maturities. If we are unable to renew or replace these facilities when they mature in April and June 2008, it could seriously impede the activities of our Financial Services segment. The risk of inability to renew or replace these facilities may be more significant if, as currently is the case, capital market participants are reluctant to purchase securities backed by residential mortgages.

Our competitive position could suffer if we were unable to take advantage of acquisition opportunities.

Our growth strategy depends in part on our ability to identify and purchase suitable acquisition candidates, as well as our ability to successfully integrate acquired operations into our business. Given current market conditions, executing this strategy by identifying opportunities to purchase at favorable prices companies that are having problems contending with the current difficult homebuilding environment may be particularly important. Not properly executing this strategy could put us at a disadvantage in our efforts to compete with other major homebuilders who are able to take advantage of such favorable acquisition opportunities.

We may not be able to utilize all of our deferred tax assets.

We currently believe that we are likely to have sufficient taxable income in the future to realize the benefit of all of our deferred tax assets (consisting primarily of valuation adjustments, reserves and accruals that are not currently deductible for tax purposes, as well as operating loss carryforwards from losses we incurred during fiscal 2007). However, some or all of these deferred tax assets could expire unused if we are unable to generate sufficient taxable income in the future to take advantage of them or we enter into transactions that limit our right to use them. If it became more likely than not that deferred tax assets would expire unused, we would have to create a valuation allowance to reflect this fact, which could materially increase our income tax expense, and therefore adversely affect our results of operations and tangible net worth in the period in which it is recorded.

12

We might have difficulty integrating acquired companies into our operations.

The integration of operations of acquired companies with our operations, including the consolidation of systems, procedures, personnel and facilities, the relocation of staff, and the achievement of anticipated cost savings, economies of scale and other business efficiencies, presents significant challenges to our management, particularly if several acquisitions occur at the same time.

We conduct certain of our operations through unconsolidated joint ventures with independent third parties in which we do not have a controlling interest and we can be adversely impacted by joint venture partners’ failure to fulfill their obligations.

For a number of years, we created and participated in joint ventures that acquired and developed land for our homebuilding operations, for sale to third parties or for use in their own homebuilding operations. Through these joint ventures, we reduced the amount we had to invest in order to assure access to potential future homesites, and, in some instances, we obtained access to land to which we could not otherwise have obtained access or could not have obtained access on as favorable terms. However, as the homebuilding market deteriorated in 2006 and 2007, many of our joint venture partners became financially unable or unwilling to fulfill their obligations.

Most joint ventures borrowed money to help finance their activities, and although recourse on the loans was generally limited to the joint ventures and their properties, frequently we and our joint venture partners were required to provide maintenance guarantees (guarantees that the values of the joint ventures’ assets would be at least specified percentages of their borrowings) or limited repayment guarantees.

Our joint venture strategy depends in large part on the ability of our joint venture partners to perform their obligations under our agreements with them. If a joint venture partner does not perform its obligations, we may be required to make significant financial expenditures or otherwise undertake the performance of obligations not satisfied by our partner at significant cost to us. Also, when we have guaranteed joint venture obligations, we have been given the right to be reimbursed by our joint venture partners for any amounts by which we pay more than our pro rata share of the joint ventures’ obligations. However, particularly if our joint venture partners are having financial problems, we may have difficulty collecting the sums they owe us, and therefore, we may be required to pay a disproportionately large portion of the guaranteed amounts. In addition, because we lack a controlling interest in these joint ventures, we are usually unable to require that they sell assets, return invested capital or take any other action without the consent of at least one of our joint venture partners. As a result, without joint venture partner consent, we may be unable to liquidate our joint venture investments to generate cash. Even if we are able to liquidate joint venture investments, the amounts received upon liquidation may be insufficient to cover the costs we have incurred in satisfying joint venture obligations.

During 2007, we began to reduce the number of joint ventures in which we participate and the recourse indebtedness of such joint ventures. However, the risks to us from joint ventures in which we are a participant are likely to continue at least as long as the value of residential properties continues to decline.

The unconsolidated entities in which we have investments may not be able to modify the terms of their debt arrangements.

Some of the unconsolidated entities’ debt arrangements contain certain financial covenants. Additionally, certain joint venture loan agreements have minimum number of homesite takedown requirements in which the joint ventures are required to sell a minimum amount of homesites over a stated amount of time. Due to the deterioration of the homebuilding market, we are generally in the process of repaying, refinancing, renegotiating or extending our joint venture loans. This action may be required, for example, in the case of an expired maturity date or a failure to comply with the loan’s covenants. There can be no assurance that we will be able to successfully finance, refinance, renegotiate or extend, on terms we deem acceptable, all of the joint venture loans that we are currently in the process of negotiating. If we were unsuccessful in these efforts, we could be required to repay one or more of these loans.

We could be adversely impacted by the loss of key management personnel.

Our future success depends, to a significant degree, on the efforts of our senior management. Our operations could be adversely affected if key members of senior management cease to be active in our company. As a result of a decline in our stock price, previous retention mechanisms, such as equity awards, have diminished in value.

13

If our ability to resell mortgages to investors is impaired, we may be required to broker loans or fund them ourselves.

We sell substantially all of the loans we originate within a short period in the secondary mortgage market on a servicing released, non-recourse basis; although, we remain liable for certain limited representations and warranties related to loan sales. If there is a decline in the secondary mortgage market, our ability to sell mortgages could be adversely impacted and we could be required to fund our commitments to our buyers with our own financial resources or require our buyers to find other sources of financing.

Our Financial Services segment could be adversely affected by reduced demand for our homes.

A majority of the mortgage loans made by our Financial Services segment are made to buyers of homes we build. Therefore, a decrease in the demand for our homes adversely affects the financial results of this segment of our business.

We may not be able to acquire land suitable for residential homebuilding at reasonable prices, which could increase our costs and reduce our revenues, earnings and margins.

Our long-term ability to build homes depends upon our acquiring land suitable for residential building at reasonable prices in locations where we want to build. For a number of years, we experienced an increase in competition for suitable land as a result of land constraints in many of our markets. That increased the price we had to pay to acquire land. Then, when demand for new homes began to drop beginning in 2006, we started to reduce our land inventory to bring it in line with the reduced rate at which we were absorbing land into our operations. While the current low demand for new single family homes is making it possible to purchase land at prices far below those we were required to pay prior to 2006, in the long term, competition for suitable land is likely to increase again, and as available land is developed, the cost of acquiring additional suitable land could rise, and in some areas suitable land may not be available at reasonable prices. Any land shortages or any decrease in the supply of suitable land at reasonable prices could limit our ability to develop new communities or result in increased land costs that we are not able to pass through to our customers. This could adversely impact our revenues, earnings and margins.

Regulatory Risks

Federal laws and regulations that adversely affect liquidity in the secondary mortgage market could hurt our business.

Recent federal laws and regulations could have the effect of curtailing the activities of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). These organizations provide significant liquidity to the secondary mortgage market. Any curtailment of their activities could increase mortgage interest rates and increase the effective cost of our homes, which could reduce demand for our homes and adversely affect our results of operations.

Government entities in regions where we operate have adopted or may adopt, slow or no growth initiatives, which could adversely affect our ability to build or timely build in these areas.

Some state and local governments in areas where we operate have approved, and others where we operate may approve, various slow growth or no growth homebuilding initiatives and other ballot measures that could negatively impact the availability of land and building opportunities within those jurisdictions. Approval of slow growth, no growth or similar initiatives (including the effect of these initiatives on existing entitlements and zoning) could adversely affect our ability to build or timely build and sell homes in the affected markets and/or create additional administrative and regulatory requirements and costs, which, in turn, could have an adverse effect on our future revenues and earnings.

Compliance with federal, state and local regulations related to our business could create substantial costs both in time and money, and some regulations could prohibit or restrict some homebuilding ventures.

We are subject to extensive and complex laws and regulations that affect the land development and homebuilding process, including laws and regulations related to zoning, permitted land uses, levels of density, building design, elevation of properties, water and waste disposal and use of open spaces. In addition, we are subject to laws and regulations related to workers’ health and safety. We also are subject to a variety of local, state and federal laws and regulations concerning the protection of health and the environment. In some of the markets where we operate, we are required to pay environmental impact fees, use energy-saving construction

14

materials and give commitments to municipalities to provide certain infrastructure such as roads and sewage systems. We generally are required to obtain permits, entitlements and approvals from local authorities to commence and carry out residential development or home construction. Such permits, entitlements and approvals may, from time-to-time, be opposed or challenged by local governments, neighboring property owners or other interested parties, adding delays, costs and risks of non-approval to the process. Our obligation to comply with the laws and regulations under which we operate, and our obligation to ensure that our employees, subcontractors and other agents comply with these laws and regulations, could result in delays in construction and land development, cause us to incur substantial costs and prohibit or restrict land development and homebuilding activity in certain areas in which we operate.

Tax law changes could make home ownership more expensive or less attractive.

Significant expenses of owning a home, including mortgage interest expense and real estate taxes, generally are deductible expenses for the purpose of calculating an individual’s federal, and in some cases state, taxable income, subject to various limitations under current tax law and policy. If the government were to make changes to income tax laws that eliminate or substantially reduce these income tax deductions, then the after-tax cost of owning a new home would increase substantially. This could adversely impact demand for, and/or sales prices of, new homes.

Other Risks

We have a stockholder who can exercise significant influence over matters that are brought to a vote of our stockholders.

Stuart A. Miller, our President, Chief Executive Officer and a Director, has voting control, through personal holdings and family-owned entities, of Class A and Class B common stock that enables Mr. Miller to cast approximately 49% of the votes that may be cast by the holders of our outstanding Class A and Class B common stock combined. That effectively gives Mr. Miller the power to control the election of our directors and the approval of matters that are presented to our stockholders. Mr. Miller’s voting power might discourage someone from acquiring us or from making a significant equity investment in us, even if we needed the investment to meet our obligations and to operate our business. Also, because of his voting power, Mr. Miller may be able to authorize actions in matters that are contrary to our other stockholders’ desires.

Item 1B.    Unresolved Staff Comments.

Not applicable.

15

Executive Officers of Lennar Corporation

The following individuals are our executive officers as of January 29, 2008:

Name	Position	Age
Stuart A. Miller	President and Chief Executive Officer	50
Jonathan M. Jaffe	Vice President and Chief Operating Officer	48
Richard Beckwitt	Executive Vice President	48
Bruce E. Gross	Vice President and Chief Financial Officer	49
Diane J. Bessette	Vice President and Controller	47
Mark Sustana	Secretary and General Counsel	46

Mr. Miller has served as our President and Chief Executive Officer since 1997 and is one of our Directors. Before 1997, Mr. Miller held various executive positions with us.

Mr. Jaffe has served as Vice President since 1994 and has served as our Chief Operating Officer since December 2004. Before that time, Mr. Jaffe served as a Regional President in our Homebuilding operations. Additionally, prior to his appointment as Chief Operating Officer, Mr. Jaffe was one of our Directors from 1997 through June 2004.

Mr. Beckwitt has served as our Executive Vice President since March 2006. In this position, Mr. Beckwitt is involved in all operational aspects of our company. Mr. Beckwitt served on the Board of Directors of D.R. Horton, Inc. from 1993 to November 2003. From 1993 to March 2000, he held various executive officer positions at D.R. Horton, including President of the company.

Mr. Gross has served as Vice President and our Chief Financial Officer since 1997. Before that, Mr. Gross was Senior Vice President, Controller and Treasurer of Pacific Greystone Corporation.

Ms. Bessette joined us in 1995 and has served as our Controller since 1997. She was appointed a Vice President in 2000.

Mr. Sustana has served as our Secretary and General Counsel since 2005. Before joining Lennar, Mr. Sustana held various legal positions at GenTek, Inc., a manufacturer of communication products, industrial components and performance chemicals.

Item 2.    Properties.

We lease and maintain our executive offices in an office complex in Miami, Florida. Our homebuilding and financial services offices are located in the markets where we conduct business, primarily in leased space. We believe that our existing facilities are adequate for our current and planned levels of operation.

Because of the nature of our homebuilding operations, significant amounts of property are held as inventory in the ordinary course of our homebuilding business. We discuss these properties in the discussion of our homebuilding operations in Item 1 of this Report.

Item 3.    Legal Proceedings.

We are party to various claims and lawsuits which arise in the ordinary course of business. Although the specific allegations in the lawsuits differ, they most commonly involve claims that we failed to construct homes in particular communities in accordance with plans and specifications or applicable construction codes and seek reimbursement for sums allegedly needed to remedy the alleged deficiencies, assert contract issues or relate to personal injuries. Lawsuits of these types are common within the homebuilding industry. We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business, financial position, results of operations or cash flows. From time-to-time, we also receive notices from environmental agencies regarding alleged violations of environmental laws. We typically settle these matters before they reach litigation for amounts that are not material to us.

Item 4.    Submission of Matters to a Vote of Security Holders.

Not applicable.

16

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Class A and Class B common stock are listed on the New York Stock Exchange under the symbols “LEN” and “LEN.B,” respectively. The following table shows the high and low sales prices for our Class A and Class B common stock for the periods indicated, as reported by the NYSE, and cash dividends declared per share:

	Class A Common Stock High/Low Prices				Cash Dividends Per Class A Share
Fiscal Quarter	2007		2006		2007		2006
First	$	56.54 – 48.33	$	66.44 – 55.23	16	¢	16	¢
Second	$	49.90 – 40.65	$	62.38 – 47.30	16	¢	16	¢
Third	$	45.90 – 26.92	$	49.10 – 38.66	16	¢	16	¢
Fourth	$	28.96 – 14.00	$	53.00 – 41.79	16	¢	16	¢
	Class B Common Stock High/Low Prices				Cash Dividends Per Class B Share
Fiscal Quarter	2007		2006		2007		2006
First	$	52.42 – 45.27	$	61.26 – 50.99	16	¢	16	¢
Second	$	46.44 – 38.35	$	57.55 – 43.71	16	¢	16	¢
Third	$	42.53 – 25.61	$	45.09 – 35.93	16	¢	16	¢
Fourth	$	27.39 – 13.00	$	48.97 – 39.25	16	¢	16	¢

As of December 31, 2007, the last reported sale price of our Class A common stock was $17.89 and the last reported sale price of our Class B common stock was $16.60. As of December 31, 2007, there were approximately 1,100 and 800 holders of record, respectively, of our Class A and Class B common stock.

On January 28, 2008, our Board of Directors declared a quarterly cash dividend of $0.16 per share for both our Class A and Class B common stock, which is payable on February 19, 2008 to holders of record at the close of business on February 8, 2008. We regularly pay quarterly dividends as set forth in the table above. We regularly evaluate with our Board of Directors the decision to declare a dividend and the amount of the dividend.

In June 2001, our Board of Directors authorized a stock repurchase program to permit future purchases of up to 20 million shares of our outstanding common stock. During the three months ended November 30, 2007, there were no shares repurchased under this program.

The information required by Item 201(d) of Regulation S-K is provided under Item 12 of this document.

17

Performance Graph

The following graph compares the five-year cumulative total return of our Class A common stock with the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index. The graph assumes $100 invested on November 30, 2002 in our Class A common stock, the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index, and the reinvestment of all dividends. Because of our dividend of Class B common stock in April 2003, our returns for the fiscal years ended November 30, 2007, 2006, 2005, 2004 and 2003 are based on the sales price of one share of our Class A common stock and one-tenth of the sale price of one share of our Class B common stock.

	2002		2003	2004	2005	2006	2007
Lennar Corporation	$	100	203	188	244	225	68
Dow Jones U.S. Home Construction Index	$	100	195	222	299	238	100
Dow Jones U.S. Total Market Index	$	100	118	133	147	168	181

18

Item 6. Selected Financial Data.

The following table sets forth our selected consolidated financial and operating information as of or for each of the years ended November 30, 2003 through 2007. The information presented below is based upon our historical financial statements, except for the results of operations of a subsidiary of the Financial Services segment’s title company that was sold in May 2005, which have been classified as discontinued operations. Share and per share amounts have been retroactively adjusted to reflect the effect of our January 2004 two-for-one stock split.

	At or for the Years Ended November 30,
	2007			2006	2005	2004 (1)	2003 (1)
	(Dollars in thousands, except per share amounts)
Results of Operations:
Revenues:
Homebuilding	$	9,730,252		15,623,040	13,304,599	10,000,632	8,348,645
Financial services	$	456,529		643,622	562,372	500,336	556,581
Total revenues	$	10,186,781		16,266,662	13,866,971	10,500,968	8,905,226
Operating earnings (loss) from continuing operations:
Homebuilding (2)	$	(2,913,999	)	986,153	2,277,091	1,548,488	1,164,089
Financial services	$	6,120		149,803	104,768	110,731	153,719
Corporate general and administrative expenses	$	173,202		193,307	187,257	141,722	111,488
Loss on redemption of 9.95% senior notes	$	—		—	34,908	—	—
Earnings (loss) from continuing operations before provision (benefit) for income taxes	$	(3,081,081	)	942,649	2,159,694	1,517,497	1,206,320
Earnings from discontinued operations before provision for income taxes (3)	$	—		—	17,261	1,570	734
Earnings (loss) from continuing operations	$	(1,941,081	)	593,869	1,344,410	944,642	750,934
Earnings from discontinued operations	$	—		—	10,745	977	457
Net earnings (loss)	$	(1,941,081	)	593,869	1,355,155	945,619	751,391
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	(12.31	)	3.69	8.17	5.70	4.65
Earnings from discontinued operations	$	—		—	0.06	—	—
Net earnings (loss)	$	(12.31	)	3.69	8.23	5.70	4.65
Cash dividends declared per share—Class A common stock	$	0.64		0.64	0.573	0.513	0.144
Cash dividends declared per share—Class B common stock	$	0.64		0.64	0.573	0.513	0.143
Financial Position:
Total assets (4)	$	9,102,747		12,408,266	12,541,225	9,165,280	6,775,432
Debt:
Homebuilding	$	2,295,436		2,613,503	2,592,772	2,021,014	1,552,217
Financial services	$	541,437		1,149,231	1,269,782	896,934	734,657
Stockholders’ equity	$	3,822,119		5,701,372	5,251,411	4,052,972	3,263,774
Shares outstanding (000s)		159,887		158,155	157,559	156,230	157,836
Stockholders’ equity per share	$	23.91		36.05	33.33	25.94	20.68
Homebuilding Data (including unconsolidated entities):
Number of homes delivered		33,283		49,568	42,359	36,204	32,180
New orders		25,753		42,212	43,405	37,667	33,523
Backlog of home sales contracts		4,009		11,608	18,565	15,546	13,905
Backlog dollar value	$	1,384,137		3,980,428	6,884,238	5,055,273	3,887,300

19

(1) In May 2005, we sold a subsidiary of our Financial Services segment’s title company. As a result of the sale, the subsidiary’s results of operations have been reclassified as discontinued operations to conform with the 2005 presentation.

(2) Homebuilding operating earnings (loss) from continuing operations include $2.4 billion, $501.8 million and $20.5 million, respectively, of valuation adjustments for the years ended November 30, 2007, 2006 and 2005. In addition, it includes $364.2 million and $126.4 million, respectively, of valuation adjustments related to assets of our investments in unconsolidated entities for the years ended November 30, 2007 and 2006, and $132.2 million and $14.5 million, respectively of APB 18 valuation adjustments to our investments in unconsolidated entities for the years ended November 30, 2007 and 2006. There were no other material valuation adjustments for the years ended November 30, 2005, 2004 and 2003.

(3) Earnings from discontinued operations before provision for income taxes includes a gain of $15.8 million for the year ended November 30, 2005 related to the sale of a subsidiary of the Financial Services segment’s title company.

(4) As of November 30, 2004 and 2003, the Financial Services segment had assets of discontinued operations of $1.0 million and $1.3 million, respectively, related to a subsidiary of the segment’s title company that was sold in May 2005.

20

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Financial Data” and our audited consolidated financial statements and accompanying notes included elsewhere in this Report.

Special Note Regarding Forward-Looking Statements

Some of the statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Annual Report on Form 10-K, are “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption “Risk Factors” in Item 1A of this Report. We do not undertake any obligation to update forward-looking statements, except as required by Federal securities laws.

Outlook

The housing market has continued to deteriorate throughout 2007. Consumer confidence in housing has declined, while there has been increased volatility in the mortgage market, creating higher cancellation rates and lower net new orders. The market has continued to become more and more competitive and there continues to be a great deal of downward pricing through the use of incentives, price reductions and incentivized brokerage fees. These conditions could lead to increased supply of homes for sale in the market due to additional foreclosures, further exacerbating competitive market pressures. As we enter 2008, we do not currently have visibility as to when these deteriorating market conditions will subside.

Our response to, and primary focus in, this environment continues to be to reduce home starts and adjust pricing to meet current market conditions in order to keep inventories low and our balance sheet positioned for the future. In addition, we have also decreased land purchases where possible. The net effect has been a continued deterioration of our margins and accordingly, higher valuation adjustments to our inventory and our share of inventory at unconsolidated entities, as well as write-offs of option deposits and pre-acquisition costs.

We also have, and continue to, reduce overhead to be “right-sized” for anticipated lower volume levels. While it has been challenging to stay ahead of rapidly adjusting market conditions and resulting revenue reductions, we have reduced our workforce to date by approximately 50% from our peak in 2006.

During 2007, we re-evaluated all of our joint venture arrangements, with particular focus on those ventures with recourse indebtedness. We began to reduce the number of joint ventures in which we were participating, and the recourse indebtedness of these joint ventures. As of November 30, 2007, we had reduced the number of joint ventures in which we were participating to approximately 210 joint ventures with net recourse indebtedness exposure to us of $794.9 million, compared with 260 joint ventures with net recourse indebtedness exposure to us of $1.1 billion at November 30, 2006. In 2008, we plan to continue this trend of reducing the number of joint ventures and net recourse indebtedness exposure related to joint ventures.

If the market does not begin to stabilize and there is further deterioration in market conditions, this may lead to an increase in the supply of new and existing homes as a result of decreased absorption levels and increased foreclosures. The decrease in sales absorption may lead to higher sales incentives and reduced gross margins, which may lead to additional valuation adjustments in the future. Additionally, market conditions may cause us to re-evaluate our strategy regarding certain assets that could result in additional valuation adjustments related to our inventory and write-offs of deposits and pre-acquisition costs as a result of the abandonment of option contracts. If market conditions continue to deteriorate, we may need to reassess the value of the underlying collateral and/or renegotiate the terms of land seller notes receivable, which may result in additional write-offs in the future.

With respect to the loans we originate on the homes we deliver, although we remain liable for certain limited representations, substantially all of the loans we originate are sold in the secondary mortgage market, on a servicing released, non-recourse basis. Therefore, we have little direct exposure with the residential mortgages we sell.

During 2007, the mortgage market experienced increased volatility. This volatility has led to changes in the secondary mortgage market with respect to loans. As demand in the secondary mortgage market changes with

21

respect to loans for sub-prime (loans to persons with a FICO score under 620) and Alt A borrowers (loans to persons with less conventional documentation of their incomes or net worths and FICO score of 620 or higher), there may be fewer buyers who qualify for financing on new and existing home purchases in the market. During both the fourth quarter of 2007 and the year ended November 30, 2007, approximately 2% of the loans our Financial Services segment made to our homebuyers were sub-prime loans. During the fourth quarter of 2007 and the year ended November 30, 2007, approximately 6% and 29%, respectively, of the loans our Financial Services segment made to our homebuyers were Alt A loans. The tightening of lending standards could lead to a further deterioration in the overall homebuilding market due to stricter credit standards, higher down payment requirements and additional credit verification requirements. This deterioration could have an adverse impact on the number of homes we sell. In addition, to the extent that homeowners have used sub-prime or Alt A mortgages to finance the purchase of their homes and are later unable to refinance or maintain those loans, additional foreclosures and an oversupply of inventory may result in the market. This may also contribute to additional deterioration in the market and have an adverse impact on demand and the number of homes we sell.

Results of Operations

Overview

Our net loss in 2007 was $1.9 billion, or $12.31 per basic and diluted share, compared to net earnings of $593.9 million, or $3.69 per diluted share ($3.76 per basic share), in 2006. The decrease in net earnings was attributable to weak market conditions that have persisted during 2007 and have impacted all of our operations. The losses in 2007 also resulted in a net operating loss (“NOL”) for income tax purposes. As a result, we filed NOL carryback claims and received tax refunds of $852 million subsequent to our fiscal year-end.

The following table sets forth financial and operational information for the years indicated related to our continuing operations. The results of operations of the homebuilders we acquired during these years were not material to our consolidated financial statements and are included in the tables since the respective dates of the acquisitions.

	Years Ended November 30,
	2007			2006		2005
	(Dollars in thousands, except average sales price)
Homebuilding revenues:
Sales of homes	$	9,462,940		14,854,874		12,711,789
Sales of land		267,312		768,166		592,810
Total homebuilding revenues		9,730,252		15,623,040		13,304,599
Homebuilding costs and expenses:
Cost of homes sold		8,892,268		12,114,433		9,410,343
Cost of land sold		1,928,451		798,165		391,984
Selling, general and administrative		1,368,358		1,764,967		1,412,917
Total homebuilding costs and expenses		12,189,077		14,677,565		11,215,244
Gain on recapitalization of unconsolidated entity		175,879		—		—
Goodwill impairments		190,198		—		—
Equity in earnings (loss) from unconsolidated entities		(362,899	)	(12,536	)	133,814
Management fees and other income (expense), net		(76,029	)	66,629		98,952
Minority interest expense, net		1,927		13,415		45,030
Homebuilding operating earnings (loss)		(2,913,999	)	986,153		2,277,091
Financial services revenues		456,529		643,622		562,372
Financial services costs and expenses		450,409		493,819		457,604
Financial services operating earnings		6,120		149,803		104,768
Total operating earnings (loss)		(2,907,879	)	1,135,956		2,381,859
Corporate general and administrative expenses		173,202		193,307		187,257
Loss on redemption of 9.95% senior notes		—		—		34,908
Earnings (loss) from continuing operations before provision (benefit) for income taxes	$	(3,081,081	)	942,649		2,159,694
Gross margin on home sales		6.0	%	18.4	%	26.0	%
SG&A expenses as a % of revenues from home sales		14.5	%	11.9	%	11.1	%
Operating margin as a % of revenues from home sales		(8.4	)%	6.6	%	14.9	%
Gross margin on home sales excluding valuation adjustments (1)		13.9	%	20.3	%	26.0	%
Operating margin as a % of revenues from home sales excluding valuation adjustments (1)		(0.5	)%	8.5	%	14.9	%
Average sales price	$	297,000		315,000		311,000

22

(1) Gross margins on home sales excluding valuation adjustments and operating margin as a percentage of revenues from home sales excluding valuation adjustments are non-GAAP financial measures disclosed by certain of our competitors and have been presented because we find it useful in evaluating our performance and believe that it helps readers of our financial statements compare our operations with those of our competitors.

2007 versus 2006

Revenues from home sales decreased 36% in the year ended November 30, 2007 to $9.5 billion from $14.9 billion in 2006. Revenues were lower primarily due to a 33% decrease in the number of home deliveries and a 6% decrease in the average sales price of homes delivered in 2007. New home deliveries, excluding unconsolidated entities, decreased to 31,582 homes in the year ended November 30, 2007 from 47,032 homes last year. In the year ended November 30, 2007, new home deliveries were lower in each of our homebuilding segments and Homebuilding Other, compared to 2006. The average sales price of homes delivered decreased to $297,000 in the year ended November 30, 2007 from $315,000 in 2006, primarily due to higher sales incentives offered to homebuyers ($48,000 per home delivered in 2007, compared to $32,000 per home delivered in 2006).

Gross margins on home sales excluding inventory valuation adjustments were $1.3 billion, or 13.9%, in the year ended November 30, 2007, compared to $3.0 billion, or 20.3%, in 2006. Gross margin percentage on home sales decreased compared to last year in all of our homebuilding segments primarily due to higher sales incentives offered to homebuyers. Gross margins on home sales were $570.7 million, or 6.0%, in the year ended November 30, 2007, which included $747.8 million of SFAS 144 inventory valuation adjustments, compared to gross margins on home sales of $2.7 billion, or 18.4%, in the year ended November 30, 2006, which included $280.5 million of SFAS 144 inventory valuation adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments is a non-GAAP financial measure disclosed by certain of our competitors and has been presented because we find it useful in evaluating its performance and believe that it helps readers of our financial statements compare our operations with those of our competitors.

Homebuilding interest expense (primarily included in cost of homes sold and cost of land sold) was $203.7 million in 2007, compared to $241.1 million in 2006. The decrease in interest expense was due to lower interest costs resulting from lower average debt during 2007, as well as decreased deliveries during 2007, compared to 2006. Our homebuilding debt to total capital ratio as of November 30, 2007 was 37.5%, compared to 31.4% as of November 30, 2006.

Selling, general and administrative expenses were reduced by $396.6 million, or 22%, in the year ended November 30, 2007, compared to the same period last year, primarily due to reductions in associate headcount and variable selling expenses. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 14.5% in the year ended November 30, 2007, from 11.9% in 2006. The 260 basis point increase was primarily due to lower revenues.

Loss on land sales totaled $1.7 billion in the year ended November 30, 2007, which included $740.4 million of SFAS 144 valuation adjustments on the inventory acquired by the Morgan Stanley land investment venture discussed below, $426.9 million of SFAS 144 valuation adjustments and $530.0 million of write-offs of deposits and pre-acquisition costs related to 36,900 homesites under option that we do not intend to purchase. In the year ended November 30, 2006, loss on land sales totaled $30.0 million, which included $69.1 million of SFAS 144 valuation adjustments and $152.2 million of write-offs of deposits and pre-acquisition costs related to 24,200 homesites that were under option.

In November 2007, we and Morgan Stanley Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., formed a strategic land investment venture to acquire, develop, manage and sell residential real estate. We acquired a 20% ownership interest and 50% voting rights in the land investment venture. Concurrent with the formation of the land investment venture, we sold a diversified portfolio of our land to the venture for $525 million. The properties acquired by the new entity consist of approximately 11,000 homesites in 32 communities located throughout the country. The properties sold by us had a net book value of approximately $1.3 billion. As part of the transaction, we entered into option agreements and obtained rights of first offer providing us the opportunity to purchase certain finished homesites. The exercise price of the options is based on a fixed percentage of the future home price. We have no obligation to exercise these options and cannot acquire a majority of the entity’s assets. We are managing the land investment venture’s operations and receive fees for our services. We will also receive disproportionate distributions if the investment venture exceeds certain financial targets.

23

Due to our continuing involvement, the transaction did not qualify as a sale under GAAP; thus, the inventory remained on our balance sheet in consolidated inventory not owned as of November 30, 2007. Additionally, the $445 million of net cash received from the transaction was recorded in liabilities related to consolidated inventory not owned in the consolidated balance sheet and classified as cash flows from financing activities in the consolidated statement of cash flows. In connection with the transaction, we recorded a SFAS 144 valuation adjustment of $740.4 million on the inventory sold to the land investment venture.

Equity in loss from unconsolidated entities was $362.9 million in the year ended November 30, 2007, which included $364.2 million of SFAS 144 valuation adjustments related to the assets of our investments in unconsolidated entities, compared to equity in loss from unconsolidated entities of $12.5 million in the year ended November 30, 2006, which included $126.4 million of SFAS 144 valuation adjustments related to the assets of our investments in unconsolidated entities last year.

During the year ended November 30, 2007, we recorded goodwill impairments of $190.2 million related to our homebuilding operations.

Management fees and other expense, net, totaled $76.0 million in the year ended November 30, 2007, which included $132.2 million of APB 18 valuation adjustments to our investments in unconsolidated entities, compared to management fees and other income, net, of $66.6 million in the year ended November 30, 2006, net of $14.5 million of APB 18 valuation adjustments to our investments in unconsolidated entities.

Minority interest expense, net was $1.9 million and $13.4 million, respectively, in the years ended November 30, 2007 and 2006.

Sales of land, equity in loss from unconsolidated entities, management fees and other income (expense), net and minority interest expense, net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by us and unconsolidated entities in which we have investments.

In February 2007, our LandSource joint venture admitted MW Housing Partners as a new strategic partner. As part of the transaction, the joint venture obtained $1.6 billion of non-recourse financing, which consisted of a $200 million five-year Revolving Credit Facility, a $1.1 billion six-year Term Loan B Facility and a $244 million seven-year Second Lien Term Facility. The transaction resulted in a cash distribution to us of $707.6 million, but reduced our resulting ownership of LandSource to 16%. If LandSource reaches certain financial targets, we will have a disproportionate share of the entity’s future positive net cash flow. As a result of the recapitalization, we recognized a pretax gain of $175.9 million in 2007 and could potentially recognize additional profits in future years, in addition to profits from our continuing ownership interest.

Operating earnings for the Financial Services segment were $6.1 million in the year ended November 30, 2007, compared to $149.8 million last year. The decrease was primarily due to a decline in profitability from both the segment’s mortgage and title operations and $28.4 million of partial write-offs of land seller notes receivable. The decline in profitability was due to the overall weakness in the housing market, which led to a decrease in volume and transactions for the mortgage and title operations compared to last year.

Corporate general and administrative expenses were reduced by $20.1 million, or 10%, in the year ended November 30, 2007, compared to the same period last year. As a percentage of total revenues, corporate general and administrative expenses increased to 1.7% in the year ended November 30, 2007, compared to 1.2% in the same period last year, primarily due to lower revenues.

At November 30, 2007, we owned 62,801 homesites and had access to an additional 85,870 homesites through either option contracts with third parties or agreements with unconsolidated entities in which we have investments. At November 30, 2007, 5% of the homesites we owned were subject to home purchase contracts. Our backlog of sales contracts was 4,009 homes ($1.4 billion) at November 30, 2007, compared to 11,608 homes ($4.0 billion) at November 30, 2006. The lower backlog was attributable to weak market conditions that persisted during 2007, which resulted in lower new orders in 2007, compared to 2006.

2006 versus 2005

Revenues from home sales increased 17% in the year ended November 30, 2006 to $14.9 billion from $12.7 billion in 2005. Revenues were higher primarily due to a 15% increase in the number of home deliveries in 2006. New home deliveries, excluding unconsolidated entities, increased to 47,032 homes in the year ended November 30, 2006 from 40,882 homes in 2005. In the year ended November 30, 2006, new home deliveries

24

were higher in each of our homebuilding segments and Homebuilding Other, compared to 2005. The average sales price of homes delivered increased to $315,000 in the year ended November 30, 2006 from $311,000 in 2005 despite higher sales incentives offered to homebuyers ($32,000 per home delivered in 2006, compared to $9,000 per home delivered in 2005).

Despite the full year increases, there was a significant slowdown in new home sales throughout the country as the year progressed. As a result, during the fourth quarter of the year, revenues from home sales declined by 14%, new home deliveries declined by 4%, excluding unconsolidated entities, and the average sales price declined by 11%, compared with the same period of the prior year. The decline in average sales price resulted from our use of higher sales incentives.

Gross margins on home sales excluding inventory valuation adjustments were $3.0 billion, or 20.3%, in the year ended November 30, 2006, compared to $3.3 billion, or 26.0%, in 2005. Gross margin percentage on home sales decreased compared to last year in all of our homebuilding segments and Homebuilding Other primarily due to higher sales incentives offered to homebuyers. Gross margins on home sales including inventory valuation adjustments were $2.7 billion, or 18.4%, in the year ended November 30, 2006 due to $280.5 million of inventory valuation adjustments.

Homebuilding interest expense (primarily included in cost of homes sold and cost of land sold) was $241.1 million in 2006, compared to $187.2 million in 2005. The increase in interest expense was due to higher interest costs resulting from higher average debt during 2006, as well as increased deliveries during 2006, compared to 2005. Our homebuilding debt to total capital ratio as of November 30, 2006 was 31.4%, compared to 33.1% as of November 30, 2005.

Selling, general and administrative expenses as a percentage of revenues from home sales were 11.9% and 11.1%, respectively, for the years ended November 30, 2006 and 2005. The 80 basis point increase was primarily due to increases in broker commissions and advertising expenses, partially offset by lower incentive compensation expenses. Management fees of $37.4 million received during the year ended November 30, 2005 from unconsolidated entities in which we had investments, which were previously recorded as a reduction of selling, general and administrative expenses, have been reclassified to management fees and other income, net in order to conform to the 2006 presentation.

Loss on land sales totaled $30.0 million in the year ended November 30, 2006, net of $152.2 million of write-offs of deposits and pre-acquisition costs related to 24,200 homesites under option that we do not intend to purchase and $69.1 million of inventory valuation adjustments, compared to gross profit from land sales of $200.8 million in 2005.

Equity in earnings (loss) from unconsolidated entities was ($12.5) million in the year ended November 30, 2006, which included $126.4 million of valuation adjustments to our investments in unconsolidated entities, compared to equity in earnings from unconsolidated entities of $133.8 million in 2005.

Management fees and other income, net, totaled $66.6 million in the year ended November 30, 2006, compared to $99.0 million in 2005. Minority interest expense, net was $13.4 million and $45.0 million, respectively, in the years ended November 30, 2006 and 2005.

Sales of land, equity in earnings (loss) from unconsolidated entities, management fees and other income, net and minority interest expense, net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by us and unconsolidated entities in which we have investments.

Operating earnings from continuing operations for the Financial Services segment were $149.8 million in the year ended November 30, 2006, compared to $104.8 million in 2005. The increase was primarily due to a $17.7 million pretax gain generated from monetizing the segment’s personal lines insurance policies, as well as increased profitability from the segment’s mortgage operations as a result of increased volume and profit per loan. The segment’s mortgage capture rate (i.e., the percentage of our homebuyers, excluding cash settlements, who obtained mortgage financing from us in areas where we offered services) was 66% in both the years ended November 30, 2006 and 2005.

Corporate general and administrative expenses as a percentage of total revenues were 1.2% in the year ended November 30, 2006, compared to 1.4% in the same period in 2005.

25

At November 30, 2006, we owned 92,325 homesites and had access to an additional 189,279 homesites through either option contracts with third parties or agreements with unconsolidated entities in which we have investments. At November 30, 2006, 10% of the homesites we owned were subject to home purchase contracts. Our backlog of sales contracts was 11,608 homes ($4.0 billion) at November 30, 2006, compared to 18,565 homes ($6.9 billion) at November 30, 2005. As a result of pricing our homes to market through the use of higher sales incentives, building out our inventory and delivering our backlog in an effort to maintain an “inventory neutral” position, our backlog declined in 2006. The lower backlog was also attributable to the depressed market conditions during 2006, which resulted in lower new orders in 2006, compared to 2005. At November 30, 2006, our inventory balance was consistent with the balance at November 30, 2005.

Homebuilding Segments

Our Homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennar brand name. In addition, our homebuilding operations also purchase, develop and sell land to third parties. In certain circumstances, we diversify our operations through strategic alliances and minimize our risks by investing with third parties in joint ventures.

We have grouped our homebuilding activities into three reportable segments, which we refer to as Homebuilding East, Homebuilding Central and Homebuilding West. Information about homebuilding activities in states in which our homebuilding activities are not economically similar to those in other states in the same geographic area is grouped under “Homebuilding Other.” References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to homebuilding segments are to those reportable segments.

At November 30, 2007, our reportable homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in the following states: East: Florida, Maryland, New Jersey and Virginia. Central: Arizona, Colorado and Texas. West: California and Nevada. Other: Illinois, Minnesota, New York, North Carolina and South Carolina.

The following tables set forth selected financial and operational information related to our homebuilding operations for the years indicated:

Selected Financial and Operational Data

	Years Ended November 30,
	2007		2006	2005
	(In thousands)
Revenues:
East:
Sales of homes	$	2,691,198	4,642,582	3,430,903
Sales of land		63,452	129,297	68,080
Total East		2,754,650	4,771,879	3,498,983
Central:
Sales of homes		2,364,270	3,545,174	3,186,870
Sales of land		79,819	104,047	188,023
Total Central		2,444,089	3,649,221	3,374,893
West:
Sales of homes		3,460,667	5,466,437	5,030,190
Sales of land		83,045	503,075	272,577
Total West		3,543,712	5,969,512	5,302,767
Other:
Sales of homes		946,805	1,200,681	1,063,826
Sales of land		40,996	31,747	64,130
Total Other		987,801	1,232,428	1,127,956
Total homebuilding revenues	$	9,730,252	15,623,040	13,304,599

26

	Years Ended November 30,
	2007			2006		2005
	(In thousands)
Operating earnings (loss):
East:
Sales of homes	$	(366,153	)	305,397		602,000
Sales of land		(400,830	)	(63,729	)	24,112
Goodwill impairments		(46,274	)	—		—
Equity in earnings (loss) from unconsolidated entities		(58,069	)	(14,947	)	2,213
Management fees and other income (expense), net		(20,910	)	14,335		13,839
Minority interest expense, net		(923	)	(4,402	)	(900	)
Total East		(893,159	)	236,654		641,264
Central:
Sales of homes		(34,285	)	191,692		287,113
Sales of land		(141,179	)	5,111		45,623
Goodwill impairments		(31,293	)	—		—
Equity in earnings (loss) from unconsolidated entities		(26,130	)	7,763		15,103
Management fees and other income (expense), net		(15,956	)	10,131		21,005
Minority interest income (expense), net		(63	)	689		(368	)
Total Central		(248,906	)	215,386		368,476
West:
Sales of homes		(347,018	)	532,456		956,470
Sales of land		(950,316	)	84,749		132,713
Gain on recapitalization of unconsolidated entity		175,879		—		—
Goodwill impairments		(43,955	)	—		—
Equity in earnings (loss) from unconsolidated entities		(274,267	)	(6,449	)	109,995
Management fees and other income (expense), net		(38,404	)	38,918		58,733
Minority interest expense, net		(723	)	(9,757	)	(43,762	)
Total West		(1,478,804	)	639,917		1,214,149
Other:
Sales of homes		(50,230	)	(54,071	)	42,946
Sales of land		(168,814	)	(56,130	)	(1,622	)
Goodwill impairments		(68,676	)	—		—
Equity in earnings (loss) from unconsolidated entities		(4,433	)	1,097		6,503
Management fees and other income (expense), net		(759	)	3,245		5,375
Minority interest income (expense), net		(218	)	55		—
Total Other		(293,130	)	(105,804	)	53,202
Total homebuilding operating earnings (loss)	$	(2,913,999	)	986,153		2,277,091

27

Summary of Homebuilding Data

	At or for the Years Ended November 30,
	2007		2006	2005
Deliveries
East		9,840	14,859	11,220
Central		11,400	17,069	15,448
West		8,739	13,333	11,731
Other		3,304	4,307	3,960
Total		33,283	49,568	42,359
Of the total home deliveries listed above, 1,701, 2,536 and 1,477, respectively, represent deliveries from unconsolidated entities for the years ended November 30, 2007, 2006 and 2005.
New Orders
East		7,492	11,290	11,096
Central		8,676	16,120	15,926
West		6,765	11,119	12,179
Other		2,820	3,683	4,204
Total		25,753	42,212	43,405
Of the new orders listed above, 1,091, 1,921 and 1,254, respectively, represent new orders from unconsolidated entities for the years ended November 30, 2007, 2006 and 2005.
Backlog—Homes
East		1,797	4,139	7,581
Central		874	3,598	4,547
West		942	2,991	4,883
Other		396	880	1,554
Total		4,009	11,608	18,565
Of the homes in backlog listed above, 364, 1,089 and 1,359, respectively, represent homes in backlog from unconsolidated entities at November 30, 2007, 2006 and 2005.
Backlog Dollar Value (In thousands)
East	$	587,100	1,460,213	2,774,396
Central		195,684	850,472	1,210,257
West		408,280	1,328,617	2,374,646
Other		193,073	341,126	524,939
Total	$	1,384,137	3,980,428	6,884,238

Of the dollar value of homes in backlog listed above, $182,664, $478,707 and $590,129, respectively, represent the backlog dollar value from unconsolidated entities at November 30, 2007, 2006 and 2005.

Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales if they fail to qualify for financing or under certain other circumstances. We experienced a cancellation rate of 30% (34%, 30%, 29% and 20%, respectively, in our Homebuilding East, Central and West segments and Homebuilding Other) in 2007, compared to 29% (32%, 27%, 30% and 22%, respectively, in our Homebuilding East, Central and West segments and Homebuilding Other) in 2006 and 17% (15%, 19%, 17% and 14%, respectively, in our Homebuilding East, Central and West segments and Homebuilding Other) in 2005. During the fourth quarter of 2007, our cancellation rate was 33%. Although we experienced a higher than normal cancellation rate during 2007, we remained focused on reselling these homes, which, in many instances, included the use of higher sales incentives (discussed below as a percentage of revenues from home sales) to avoid the build up of excess inventory. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners, except for our multi-level residential buildings under construction for which revenue was recognized under percentage-of-completion accounting.

28

2007 versus 2006

East: Homebuilding revenues decreased in 2007, compared to 2006, primarily due to a decrease in the number of home deliveries in Florida and a decrease in the average sales price of homes delivered in all of the states in this segment. Gross margins on home sales excluding SFAS 144 valuation adjustments were $368.0 million, or 13.7%, in 2007, compared to $1.0 billion, or 22.0%, in 2006. Gross margins decreased compared to last year primarily due to higher sales incentives offered to homebuyers (16.9% in 2007, compared to 11.4% in 2006). Gross margins on home sales were $89.0 million, or 3.3% in 2007 including SFAS 144 valuation adjustments of $279.1 million, compared to gross margins on home sales of $865.0 million, or 18.6%, in 2006 including $155.7 million of SFAS 144 valuation adjustments.

Loss on land sales was $400.8 million in 2007 (including $119.6 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $307.5 million of SFAS 144 valuation adjustments), compared to loss on land sales of $63.7 million in 2006 (including $80.5 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $24.7 million of SFAS 144 valuation adjustments).

Central: Homebuilding revenues decreased in 2007, compared to 2006, primarily due to a decrease in the number of home deliveries in all of the states in this segment, and a decrease in the average sales price of homes delivered in Arizona and Colorado. Gross margins on home sales excluding inventory valuation adjustments were $367.8 million, or 15.6%, in 2007, compared to $631.5 million, or 17.8%, in 2006. Gross margins decreased compared to last year primarily due to higher sales incentives offered to homebuyers (11.3% in 2007, compared to 9.1% in 2006). Gross margins on home sales were $273.6 million, or 11.6% in 2007 including SFAS 144 valuation adjustments of $94.2 million, compared to gross margins on home sales of $604.4 million, or 17.1%, in 2006 including $27.1 million of SFAS 144 valuation adjustments primarily in Arizona and Colorado.

Loss on land sales was $141.2 million in 2007 (including $57.1 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $80.9 million of SFAS 144 valuation adjustments), compared to gross profit on land sales of $5.1 million in 2006 (net of $3.0 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $17.3 million of SFAS 144 valuation adjustments).

West: Homebuilding revenues decreased in 2007, compared to 2006, primarily due to a decrease in the number of home deliveries and average sales price of homes delivered in all of the states in this segment. Gross margins on home sales excluding inventory valuation adjustments were $451.0 million, or 13.0%, in 2007, compared to $1.2 billion, or 22.4%, in 2006. Gross margin percentage on home sales decreased compared to last year primarily due to higher sales incentives offered to homebuyers (14.3% in 2007, compared to 7.5% in 2006). Gross margins on home sales were $119.1 million, or 3.4% in 2007 including SFAS 144 valuation adjustments of $331.8 million, compared to gross margins on home sales of $1.1 billion, or 20.9%, in 2006 including $80.2 million of SFAS 144 valuation adjustments in all states.

Loss on land sales was $950.3 million in 2007 (including $310.8 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $648.6 million of SFAS 144 valuation adjustments), compared to gross profit on land sales of $84.7 million in 2006 (net of $44.0 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase).

Other: Homebuilding revenues decreased in 2007, compared to 2006, primarily due to a decrease in the number of home deliveries in all of the states in this segment, and a decrease in the average sales price of homes delivered in Illinois. Gross margins from home sales excluding inventory valuation adjustments were $131.7 million, or 13.9%, in 2007, compared to $143.9 million, or 12.0%, in 2006. Gross margin percentage on home sales increased compared to last year primarily due to the decrease in homebuilding revenues despite higher sales incentives offered to homebuyers (9.1% in 2007, compared to 7.8% in 2006). Gross margins on home sales were $88.9 million, or 9.4% in 2007 including SFAS 144 valuation adjustments of $42.8 million, compared to gross margins on home sales of $126.5 million, or 10.5%, in 2006 including $17.4 million of SFAS 144 valuation adjustments primarily in Arizona and Colorado.

Loss on land sales was $168.8 million in 2007 (including $42.4 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $130.3 million of SFAS 144 valuation adjustments), compared to loss on land sales of $56.1 million in 2006 (including $24.8 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $27.1 million of SFAS 144 valuation adjustments).

29

2006 versus 2005

East: Homebuilding revenues increased in 2006, compared to 2005, primarily due to an increase in the number of home deliveries in Florida and an increase in the average sales price of homes delivered in Florida and New Jersey. Gross margins on home sales excluding inventory valuation adjustments were $1.0 billion, or 22.0%, in 2006, compared to $976.9 million, or 28.5%, in 2005. Gross margin percentage on home sales decreased compared to last year primarily due to higher sales incentives offered to homebuyers (11.4% in 2006, compared to 1.8% in 2005), particularly during the second half of the year. Gross margins on home sales including inventory valuation adjustments were $865.0 million, or 18.6%, in 2006 due to a total of $155.7 million of inventory valuation adjustments in all states.

Loss on land sales was $63.7 million in 2006 (including $80.5 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $24.7 million of SFAS 144 valuation adjustments), compared to gross profit on land sales of $24.1 million in 2005 (including $3.3 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $0.5 million of SFAS 144 valuation adjustments).

Central: Homebuilding revenues increased in 2006, compared to 2005, primarily due to an increase in the number of home deliveries in Arizona and Texas, and an increase in the average sales price of homes delivered in Arizona and Colorado. Gross margins on home sales excluding inventory valuation adjustments were $631.5 million, or 17.8%, in 2006, compared to $657.7 million, or 20.6%, in 2005. Gross margin percentage on home sales decreased compared to last year primarily due to higher sales incentives offered to homebuyers (9.1% in 2006, compared to 5.3% in 2005), particularly during the second half of the year. Gross margins on home sales including inventory valuation adjustments were $604.4 million, or 17.1%, in 2006 due to $27.1 million of inventory valuation adjustments primarily in Arizona and Colorado.

Gross profit on land sales were $5.1 million in 2006 (net of $3.0 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $17.3 million of SFAS 144 valuation adjustments), compared to gross profit on land sales of $45.6 million in 2005 (net of $0.3 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase).

West: Homebuilding revenues increased in 2006, compared to 2005, primarily due to an increase in the number of home deliveries in all of the states in this segment and an increase in the average sales price of homes delivered in Nevada, due to higher deliveries in Reno. Gross margins on home sales excluding inventory valuation adjustments were $1.2 billion, or 22.4%, in 2006, compared to $1.5 billion, or 29.3%, in 2005. Gross margin percentage on home sales decreased compared to 2005 primarily due to higher sales incentives offered to homebuyers (7.5% in 2006, compared to 1.5% in 2005), particularly during the second half of the year. Gross margins on home sales including inventory valuation adjustments were $1.1 billion, or 20.9%, in 2006 due to a total of $80.2 million of inventory valuation adjustments in all states.

Gross profits on land sales were $84.7 million in 2006 (net of $44.0 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase), compared to gross profit on land sales of $132.7 million in 2005 (net of $10.1 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase).

Other: Homebuilding revenues increased in 2006, compared to 2005, primarily due to an increase in the number of home deliveries in the Carolinas, Minnesota and New York, and an increase in the average sales price of homes delivered in the Carolinas and New York. Gross margins from home sales excluding inventory valuation adjustments were $143.9 million, or 12.0%, in 2006, compared to $191.8 million, or 18.0%, in 2005. Gross margins on home sales decreased compared to 2005 primarily due to higher sales incentives offered to homebuyers (7.8% in 2006, compared to 4.7% in 2005), particularly during the second half of the year. Gross margins on home sales including inventory valuation adjustments were $126.5 million, or 10.5%, in 2006 due to $17.4 million of inventory valuation adjustments primarily in Illinois and Minnesota.

Loss on land sales was $56.1 million in 2006 (including $24.8 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $27.1 million of SFAS 144 valuation adjustments), compared to loss on land sales of $1.6 million in 2005 (including $1.4 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $4.9 million of SFAS 144 valuation adjustments).

30

Financial Services Segment

We have one Financial Services reportable segment that provides mortgage financing, title insurance, closing services and other ancillary services (including high-speed Internet and cable television) for both buyers of our homes and others. Substantially all of the loans the Financial Services segment originates are sold in the secondary mortgage market on a servicing released, non-recourse basis; although, we remain liable for certain limited representations. The following table sets forth selected financial and operational information relating to our Financial Services segment. The results of operations of companies we acquired during these years are included in the table since the respective dates of the acquisitions.

	Years Ended November 30,
	2007			2006		2005
	(Dollars in thousands)
Revenues	$	456,529		643,622		562,372
Costs and expenses		450,409		493,819		457,604
Operating earnings from continuing operations	$	6,120		149,803		104,768
Dollar value of mortgages originated	$	7,740,000		10,480,000		9,509,000
Number of mortgages originated		30,900		41,800		42,300
Mortgage capture rate of Lennar homebuyers		73	%	66	%	66	%
Number of title and closing service transactions		136,300		161,300		187,700
Number of title policies issued		146,200		195,700		193,900

Financial Condition and Capital Resources

At November 30, 2007, we had cash related to our homebuilding and financial services operations of $795.2 million, compared to $778.3 million at November 30, 2006.

We finance our land acquisition and development activities, construction activities, financial services activities and general operating needs primarily with cash generated from our operations and public debt issuances, as well as cash borrowed under our revolving credit facility and our warehouse lines of credit.

Operating Cash Flow Activities

During 2007 and 2006, cash flows provided by operating activities amounted to $444.5 million and $552.5 million, respectively. During 2007, cash flows provided by operating activities resulted from a decrease in our inventory as a result of reduced land purchases, a reduction in construction in progress resulting from lower new home starts and write-offs and valuation adjustments pertaining to the respective inventory. In order to reduce our inventory levels in 2007, we focused our efforts on adjusting pricing to meet market conditions, as we pulled back production and curtailed land purchases where possible in order to keep our balance sheet positioned for future opportunities. Cash flows provided by operating activities also consisted of distributions of earnings from unconsolidated entities, our equity in loss from unconsolidated entities including our share of valuation adjustments related to assets of the unconsolidated entities and a decrease in our receivables including a decrease in financial services receivable and loans held-for-sale resulting from a decline in our new home deliveries during the year. Cash flows provided by operating activities were partially offset by our net loss, deferred income tax benefit, an increase in other assets primarily due to our income tax receivable and a decrease in accounts payable and other liabilities primarily due to a decrease in our land purchases.

During 2006, cash flows provided by operating activities consisted primarily of net earnings, distributions of earnings from unconsolidated entities and the change in inventories including inventory write-offs and valuation adjustments, partially offset by a deferred income tax benefit and a decrease in accounts payable and other liabilities.

Investing Cash Flow Activities

Cash flows provided by investing activities totaled $307.0 million in the year ended November 30, 2007, compared to cash used in investing activities of $404.4 million in 2006. During the year ended November 30, 2007, we contributed $608.0 million of cash to unconsolidated entities, compared to $729.3 million in 2006. Our investing activities also included distributions of capital from unconsolidated entities during the year ended

31

November 30, 2007 and 2006 of $542.3 million and $321.6 million, respectively. During 2007, we received distributions of $354.6 million in excess of our investment in the LandSource joint venture due to its recapitalization in 2007.

We are always looking at the possibility of acquiring homebuilders and other companies. However, at November 30, 2007, we had no agreements or understandings regarding any significant transactions.

Financing Cash Flow Activities

During 2007, we sold a diversified portfolio of land to our land investment joint venture with Morgan Stanley Real Estate Fund II, L.P. for $525 million. As part of the transaction, we entered into option agreements and obtained rights of first offer, providing us the opportunity to purchase certain finished homesites. Due to our continuing involvement, the transaction did not qualify as a sale under GAAP; thus, the inventory remained on our balance sheet as of November 30, 2007. As a result of the transaction, we received $445 million of cash (net of our deposit on the homesites under option and our invested contribution to the land investment venture).

Homebuilding debt to total capital and net homebuilding debt to total capital are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our homebuilding operations. Management believes providing a measure of leverage of our homebuilding operations enables readers of our financial statements to better understand our financial position and performance and we find it useful in evaluating our performance. Homebuilding debt to total capital and net homebuilding debt to total capital are calculated as follows:

	November 30,
	2007			2006
	(Dollars in thousands)
Homebuilding debt	$	2,295,436		2,613,503
Stockholders’ equity		3,822,119		5,701,372
Total capital	$	6,117,555		8,314,875
Homebuilding debt to total capital		37.5	%	31.4	%
Homebuilding debt	$	2,295,436		2,613,503
Less: Homebuilding cash		642,467		661,662
Net homebuilding debt	$	1,652,969		1,951,841
Net homebuilding debt to total capital (1)		30.2	%	25.5	%

(1) Net homebuilding debt to total capital consists of net homebuilding debt (homebuilding debt less homebuilding cash) divided by total capital (net homebuilding debt plus stockholders’ equity).

Homebuilding debt to total capital and net homebuilding debt to total capital at November 30, 2007 were higher than prior year due to the decrease in stockholders’ equity primarily as a result of inventory valuation adjustments, write-offs of option deposits and pre-acquisition costs, SFAS 144 valuation adjustments related to assets of unconsolidated entities, APB 18 valuation adjustments to investments in unconsolidated entities, goodwill impairments and financial services write-offs of notes receivable, all of which are non-cash items.

In addition to the use of capital in our homebuilding and financial services operations, we actively evaluate various other uses of capital, which fit into our homebuilding and financial services strategies and appear to meet our profitability and return on capital goals. This may include acquisitions of, or investments in, other entities, the payment of dividends or repurchases of our outstanding common stock or debt. These activities may be funded through any combination of our credit facilities, cash generated from operations, sales of assets or the issuance of public debt, common stock or preferred stock.

32

The following table summarizes our homebuilding senior notes and other debts payable:

	November 30,
	2007		2006
	(Dollars in thousands)
7 5/8% senior notes due 2009	$	279,491	277,830
5.125% senior notes due 2010		299,825	299,766
5.95% senior notes due 2011		249,516	249,415
5.95% senior notes due 2013		346,268	345,719
5.50% senior notes due 2014		247,806	247,559
5.60% senior notes due 2015		501,804	501,957
6.50% senior notes due 2016		249,708	249,683
Senior floating-rate notes due 2009		—	300,000
Mortgage notes on land and other debt		121,018	141,574
	$	2,295,436	2,613,503

Our average debt outstanding was $3.1 billion in 2007, compared to $4.0 billion in 2006. The average rate for interest incurred was 5.8% in 2007, compared to 5.7% in 2006. Interest incurred related to homebuilding debt for the year ended November 30, 2007 was $199.1 million, compared to $232.1 million in 2006. The majority of our short-term financing needs, including financings for land acquisition and development activities and general operating needs, are met with cash generated from operations and funds available under our senior unsecured revolving credit facility (the “Credit Facility”).

The Credit Facility, as amended, consists of a $1.5 billion revolving credit facility maturing in July 2011. However, our borrowings under the Credit Facility cannot exceed a borrowing base, consisting of specified percentages of various types of our assets. The Credit Facility is guaranteed by substantially all of our subsidiaries other than finance company subsidiaries (which include mortgage and title insurance agency subsidiaries). Interest rates on outstanding borrowings are LIBOR-based, with margins determined based on changes in our credit ratings, or an alternate base rate, as described in the credit agreement. During the years ended November 30, 2007 and 2006, the average daily borrowings under the Credit Facility were $143.2 million and $447.4 million, respectively. At November 30, 2007, we had no outstanding balance under the Credit Facility. In addition, at November 30, 2007 and 2006, $443.5 million and $496.9 million, respectively, of our total letters of credit outstanding discussed below, were collateralized against certain borrowings available under the Credit Facility.

As amended, our Credit Facility requires that recourse indebtedness of joint ventures in which we participate be reduced by $300 million during our 2008 fiscal year and by an additional $200 million (for a total of $500 million) by the end of fiscal 2009.

At November 30, 2007 and 2006, we had both financial and performance letters of credit outstanding in the amount of $814.4 million and $1.4 billion, respectively. Our financial letters of credit outstanding were $424.2 million and $727.6 million, respectively, as of November 30, 2007 and 2006. These letters of credit are posted with either regulatory bodies to guarantee our performance of certain development and construction activities or in lieu of cash deposits on option contracts.

In September 2007, we terminated our structured letter of credit facility (the “LC Facility”) reducing the commitment amount to zero. Outstanding letters of credit issued under the LC Facility were transferred to other existing facilities or matured prior to the LC Facility’s termination.

In June 2007, we redeemed our $300 million senior floating-rate notes due 2009. The redemption price was $300.0 million, or 100% of the principal amount of the senior floating-rate notes due 2009 outstanding, plus accrued and unpaid interest as of the redemption date.

In November 2006, we redeemed our $200 million senior floating-rate notes due 2007. The redemption price was $200.0 million, or 100% of the principal amount of the senior floating-rate notes due 2007 outstanding, plus accrued and unpaid interest as of the redemption date.

In April 2006, substantially all of our outstanding 5.125% zero-coupon convertible senior subordinated notes due 2021, (the “Convertible Notes”) were converted by the noteholders into 4.9 million Class A common shares. The Convertible Notes were convertible at a rate of 14.2 shares of our Class A common stock per $1,000 principal amount at maturity. Convertible Notes not converted by the noteholders were not material and were

33

redeemed by us on April 4, 2006. The redemption price was $468.10 per $1,000 principal amount at maturity, which represented the original issue price plus accrued original issue discount to the redemption date.

In April 2006, we issued $250 million of 5.95% senior notes due 2011 and $250 million of 6.50% senior notes due 2016 (collectively, the “New Senior Notes”) at prices of 99.766% and 99.873%, respectively, in a private placement under SEC Rule 144A. Proceeds from the offering of the New Senior Notes, after initial purchaser’s discount and expenses, were $248.7 million and $248.9 million, respectively. We added the proceeds to our working capital to be used for general corporate purposes. Interest on the New Senior Notes is due semi-annually. The New Senior Notes are unsecured and unsubordinated, and substantially all of our subsidiaries other than finance company subsidiaries guarantee the New Senior Notes. In October 2006, we completed an exchange offer of the New Senior Notes for substantially identical notes registered under the Securities Act of 1933 (the “Exchange Notes”), with substantially all of the New Senior Notes being exchanged for the Exchange Notes. At November 30, 2007 and 2006, the carrying value of the Exchange Notes was $499.2 million and $499.1 million, respectively.

In March 2006, we initiated a commercial paper program (the “Program”) under which we issued short-term unsecured notes in an aggregate amount not to exceed $2.0 billion. This Program allowed us to obtain more favorable short-term borrowing rates than we would obtain otherwise. The Program is exempt from the registration requirements of the Securities Act of 1933. Issuances under the Program were guaranteed by all of our wholly-owned subsidiaries that are also guarantors of our Credit Facility. The average daily borrowings under the Program in 2007 were $528.8 million, compared to average daily borrowings of $553.3 million from its inception in March 2006 through November 30, 2006.

We also had an arrangement with a financial institution whereby we entered into short-term, unsecured, fixed-rate notes from time-to-time. During the years ended November 30, 2007 and 2006, the average daily borrowings under these notes were $36.8 million and $379.0 million, respectively.

In October 2007, Moody’s Investors Service (“Moody’s”) issued a downgrade of our senior debt, lowering the rating to “Ba1,” and changed the rating of our commercial paper to “not prime.” In November 2007, Standard & Poor’s (“S&P”) issued a downgrade of our senior debt, lowering the rating to “BB+” and removed the rating of our commercial paper. As a result of these rating actions, our senior debt is no longer rated as investment grade by Moody’s and S&P, although it retains an investment grade rating from Fitch. As a result of our current ratings, we no longer have access to the markets for commercial paper, nor unsecured, fixed-rate notes.

In September 2005, we sold $300 million of 5.125% senior notes due 2010 (the “5.125% Senior Notes”) at a price of 99.905% in a private placement. Proceeds from the offering, after initial purchaser’s discount and expenses, were $298.2 million. We added the proceeds to our working capital to be used for general corporate purposes. Interest on the 5.125% Senior Notes is due semi-annually. The 5.125% Senior Notes are unsecured and unsubordinated. Substantially all of our subsidiaries other than finance company subsidiaries guaranteed the 5.125% Senior Notes. In 2006, we exchanged the 5.125% Senior Notes for registered notes. The registered notes have substantially identical terms as the 5.125% Senior Notes, except that the registered notes do not include transfer restrictions that are applicable to the 5.125% Senior Notes. At both November 30, 2007 and 2006, the carrying value of the 5.125% Senior Notes was $299.8 million.

In April 2005, we sold $300 million of 5.60% Senior Notes due 2015 (the “Senior Notes”) at a price of 99.771%. Proceeds from the offering, after initial purchaser’s discount and expenses, were $297.5 million. In July 2005, we sold $200 million of 5.60% Senior Notes due 2015 at a price of 101.407%. The Senior Notes were the same issue as the Senior Notes we sold in April 2005. Proceeds from the offering, after initial purchaser’s discount and expenses, were $203.9 million. We added the proceeds of both offerings to our working capital to be used for general corporate purposes. Interest on the Senior Notes is due semi-annually. The Senior Notes are unsecured and unsubordinated. Substantially all of our subsidiaries other than finance company subsidiaries guaranteed the Senior Notes. The Senior Notes were subsequently exchanged for identical Senior Notes that had been registered under the Securities Act of 1933. At November 30, 2007 and 2006, the carrying value of the Senior Notes sold in April and July 2005 was $501.8 million and $502.0 million, respectively.

In May 2005, we redeemed all of our outstanding 9.95% Senior Notes due 2010 (the “Notes”). The redemption price was $337.7 million, or 104.975% of the principal amount of the Notes outstanding, plus accrued and unpaid interest as of the redemption date. The redemption of the Notes resulted in a $34.9 million pretax loss.

34

Substantially all of our wholly-owned subsidiaries, other than finance company subsidiaries, have guaranteed all our Senior Notes (the “Guaranteed Notes”). The guarantees are full and unconditional and the guarantor subsidiaries are 100% directly and indirectly owned by Lennar Corporation. The principal reason our wholly-owned subsidiaries, other than finance company subsidiaries, guaranteed the Guaranteed Notes is so holders of the Guaranteed Notes will have rights at least as great with regard to our subsidiaries as any other holders of a material amount of our unsecured debt. Therefore, the guarantees of the Guaranteed Notes will remain in effect while the guarantor subsidiaries guarantee a material amount of the debt of Lennar Corporation, as a separate entity, to others. At any time, however, when a guarantor subsidiary is no longer guaranteeing at least $75 million of Lennar Corporation’s debt other than the Guaranteed Notes, either directly or by guaranteeing other subsidiaries’ obligations as guarantors of Lennar Corporation’s debt, the guarantor subsidiaries’ guarantee of the Guaranteed Notes will be suspended. Currently, the only debt the guarantor subsidiaries are guaranteeing other than the Guaranteed Notes is Lennar Corporation’s principal revolving bank credit line (currently the Credit Facility). Therefore, if, the guarantor subsidiaries cease guaranteeing Lennar Corporation’s obligations under its principal revolving bank credit line and are not guarantors of any new debt, the guarantor subsidiaries’ guarantees of the Guaranteed Notes will be suspended until such time, if any, as they again are guaranteeing at least $75 million of Lennar Corporation’s debt other than the Guaranteed Notes.

If the guarantor subsidiaries are guaranteeing a revolving credit line totaling at least $75 million, we will treat the guarantees of the Guaranteed Notes as remaining in effect even during periods when Lennar Corporation’s borrowings under the revolving credit line is less than $75 million. Because it is possible that our banks will permit some or all of the guarantor subsidiaries to stop guaranteeing our revolving credit line, it is possible that, at some time or times in the future, the Guaranteed Notes will no longer be guaranteed by the guarantor subsidiaries.

At November 30, 2007, our Financial Services segment had a conduit and warehouse facility totaling $1.0 billion, recently reduced from $1.1 billion in order to obtain a waiver of a financial covenant, compared to $1.4 billion at November 30, 2006. It uses those facilities to finance its lending activities until it accumulates sufficient mortgage loans to be able to sell them into the capital markets. Borrowings under the lines of credit were $505.4 million and $1.1 billion, respectively, at November 30, 2007 and 2006 and were collateralized by mortgage loans and receivables on loans sold but not yet funded by the investor with outstanding principal balances of $540.9 million and $1.3 billion, respectively, at November 30, 2007 and 2006. There are several interest rate-pricing options, which fluctuate with market rates. The effective interest rate on the facilities at November 30, 2007 and 2006 was 5.5% and 6.1%, respectively. The lines of credit consist of a conduit facility, which matures in June 2008 ($600 million) and a warehouse facility which matures in April 2008 ($425 million). In the past, we have been able to obtain renewals of these facilities at the times of their maturities; however, given our reduced volume of deliveries, our financing requirements have decreased. Therefore, we are working with several other lenders in case these facilities are not renewed. At November 30, 2007 and 2006, we had advances under a different conduit funding agreement amounting to $11.8 million and $1.7 million, respectively, which had an effective interest rate of 5.8% and 6.2%, respectively at November 30, 2007 and 2006. We also had a $25 million revolving line of credit that matures in May 2008, at which time we expect the line of credit to be renewed. The line of credit is collateralized by certain assets of the Financial Services segment and stock of certain title subsidiaries. Borrowings under the line of credit were $24.0 million and $23.7 million, respectively, at November 30, 2007 and 2006 and had an effective interest rate of 5.7% and 6.3%, respectively, at November 30, 2007 and 2006.

We had various interest rate swap agreements, which effectively converted variable interest rates to fixed interest rates on $200 million of outstanding debt related to our homebuilding operations. In June 2007, we redeemed the variable rate debt that was being hedged by the various interest rate swap agreements. Our last remaining interest rate swap was terminated in June 2007. The net effect on our operating results was that interest on the variable-rate debt being hedged was recorded based on fixed interest rates. Counterparties to these agreements were major financial institutions. At November 30, 2007, there were no interest rate swaps outstanding. At November 30, 2006, the fair value of the interest rate swaps was a $2.1 million liability. Our Financial Services segment, in the normal course of business, uses derivative financial instruments to reduce its exposure to fluctuations in interest rates. The Financial Services segment enters into forward commitments and, to a lesser extent, option contracts to protect the value of loans held-for-sale from increases in market interest rates. We do not anticipate that we will suffer credit losses from counterparty non-performance.

In January 2008, we completed an amendment to the Credit Facility that modified the minimum adjusted consolidated tangible net worth requirement and restructured the borrowing base. Therefore, effective November 30, 2007, we were in compliance with the financial covenants in our debt arrangements. However, the commitment was reduced to $1.5 billion and we are required to reduce the recourse debt of joint ventures in

35

which we have investments by $300 million during our 2008 fiscal year and an additional $200 million (for a total of $500 million) by the end of fiscal 2009. If market conditions continue to deteriorate, we might have to request of our lenders additional waivers or amendments to our Credit Facility. There is no assurance that our lenders would agree to such an amendment or waiver.

Changes in Capital Structure

In June 2001, our Board of Directors authorized a stock repurchase program to permit the purchase of up to 20 million shares of our outstanding common stock. During 2007, there were no material share repurchases of common stock under the stock repurchase program. During 2006, we repurchased a total of 6.2 million shares of our outstanding common stock under our stock repurchase program for an aggregate purchase price including commissions of $320.1 million, or $51.59 per share. As of November 30, 2007, 6.2 million shares of common stock can be repurchased in the future under the program.

Treasury stock increased by 0.8 million Class A common shares during the year ended November 30, 2007, primarily related to forfeitures of restricted stock. In addition to the common shares purchased under our stock repurchase program during the years ended November 30, 2006 and 2005, we also repurchased approximately 0.1 million and 0.2 million Class A common shares, respectively, related to the vesting of restricted stock and distribution of common stock from our deferred compensation plan.

In 2007 and 2006, we paid dividends with regard to our Class A and Class B common stock at the rate of $0.64 per share per year (payable quarterly). In September 2005, our Board of Directors voted to increase the annual dividend rate with regard to our Class A and Class B common stock to $0.64 per share per year (payable quarterly) from $0.55 per share per year (payable quarterly).

Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity.

Off-Balance Sheet Arrangements

Investments in Unconsolidated Entities

At November 30, 2007, we had equity investments in approximately 210 unconsolidated entities, compared to approximately 260 unconsolidated entities at November 30, 2006. Due to current market conditions, we are focused on continuing to reduce the number of unconsolidated entities that we have investments in. Our investments in unconsolidated entities by type of venture were as follows:

	November 30,
	2007		2006
	(In thousands)
Land development	$	738,481	1,163,671
Homebuilding		195,790	283,507
Total investment	$	934,271	1,447,178

During 2007, as homebuilding market conditions deteriorated, we recorded $364.2 million of valuation adjustments related to the assets of our investments in unconsolidated entities for the year ended November 30, 2007, compared to $126.4 million for the year ended November 30, 2006. In addition, we recorded $132.2 million and $14.5 million, respectively, of APB 18 valuation adjustments to our investments in unconsolidated entities for the years ended November 30, 2007 and 2006. After the valuation adjustments, as of November 30, 2007, we believe that our investment in joint ventures (“JVs”) is fully recoverable. We will continue to monitor our investments and the recoverability of assets owned by the JVs.

We strategically invest in unconsolidated entities that acquire and develop land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers. Through these entities, we primarily seek to reduce and share our risk by limiting the amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures. The use of these entities also, in some instances, enables us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner. Our partners in these JVs are land owners/developers, other homebuilders and financial or strategic partners. JVs with land owners/developers give us access to homesites owned or controlled by our partner. JVs

36

with other homebuilders provide us with the ability to bid jointly with our partner for large land parcels. JVs with financial partners allow us to combine our homebuilding expertise with access to our partners’ capital. JVs with strategic partners allow us to combine our homebuilding expertise with the specific expertise (e.g. commercial or infill experience) of our partner.

Although the strategic purposes of our JVs and the nature of our JV partners vary, the JVs are generally designed to acquire, develop and/or sell specific assets during a limited life-time. The JVs are typically structured through non-corporate entities in which control is shared with our venture partners. Each JV is unique in terms of its funding requirements and liquidity needs. We and the other JV participants typically make pro-rata cash contributions to the JV. In many cases, our risk is limited to our equity contribution and potential future capital contributions. The capital contributions usually coincide in time with the acquisition of properties by the JV. Additionally, most JVs obtain third-party debt to fund a portion of the acquisition, development and construction costs of their communities. The JV agreements usually permit, but do not require, the JVs to make additional capital calls in the future. However, capital calls relating to the repayment of joint venture debt under payment or maintenance guarantees generally is required.

Under the terms of our JV agreements, we generally have the right to share in earnings and distributions of the entities on a pro-rata basis based on our ownership percentage. Some JV agreements provide for a different allocation of profit and cash distributions if and when the cumulative results of the JV exceed specified targets (such as a specified internal rate of return). Our equity in earnings (loss) from unconsolidated entities excludes our pro-rata share of JVs’ earnings resulting from land sales to our homebuilding divisions. Instead, we account for those earnings as a reduction of our costs of purchasing the land from the JVs. This in effect defers recognition of our share of the JVs’ earnings related to these sales until we deliver a home and title passes to a third-party homebuyer.

In some instances, we are designated as the manager of the unconsolidated entity and receive fees for such services. In addition, we often enter into option contracts to acquire properties from our JVs, generally for market prices at specified dates in the future. Option contracts generally require us to make deposits using cash or irrevocable letters of credit toward the exercise price. These option deposits generally approximate 10% of the exercise price.

We regularly monitor the results of our unconsolidated JVs and any trends that may affect their future liquidity or results of operations. JVs in which we have investments are subject to a variety of financial and non-financial debt covenants related primarily to equity maintenance, fair value of collateral and minimum homesite takedown or sale requirements. We monitor the performance of JVs in which we have investments on a regular basis to assess compliance with debt covenants. For those JVs not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment.

Our arrangements with JVs generally do not restrict our activities or those of the other participants. However, in certain instances, we agree not to engage in some types of activities that may be viewed as competitive with the activities of these ventures in the localities where the JVs do business.

As discussed above, the JVs in which we invest generally supplement equity contributions with third-party debt to finance their activities. In many instances, the debt financing is non-recourse, thus neither we nor the other equity partners are a party to the debt instruments. In other cases, we and the other partners agree to provide credit support in the form of repayment or maintenance guarantees.

Material contractual obligations of our unconsolidated JVs primarily relate to the debt obligations described above. The JVs generally do not enter into lease commitments because the entities are managed either by us, or another of the JV participants, who supply the necessary facilities and employee services in exchange for market-based management fees. However, they do enter into management contracts with the participants who manage them. Some JVs also enter into agreements with developers, which may be us or other JV participants, to develop raw land into finished homesites or to build homes.

The JVs often enter into option agreements with buyers, which may include us or other JV participants, to deliver homesites or parcels in the future at market prices. Option deposits are recorded by the JVs as liabilities until the exercise dates at which time the deposit and remaining exercise proceeds are recorded as revenue. Any forfeited deposit is recognized as revenue at the time of forfeiture. Our unconsolidated JVs generally do not enter into off-balance sheet arrangements.

As described above, the liquidity needs of JVs in which we have investments vary on an entity-by-entity basis depending on each entity’s purpose and the stage in its life cycle. During formation and development

37

activities, the entities generally require cash, which is provided through a combination of equity contributions and debt financing, to fund acquisition and development of properties. As the properties are completed and sold, cash generated is available to repay debt and for distribution to the JV’s members. Thus, the amount of cash available for a JV to distribute at any given time is a function of the scope of the JV’s activities and the stage in the JV’s life cycle.

We track our share of cumulative earnings and cumulative distributions of our JVs. For purposes of classifying distributions received from JVs in our statements of cash flows, cumulative distributions are treated as returns on capital to the extent of cumulative earnings and included in our consolidated statements of cash flows as operating activities. Cumulative distributions in excess of our share of cumulative earnings are treated as returns of capital and included in our consolidated statements of cash flows as investing activities.

At November 30, 2007, the unconsolidated entities in which we had investments had total assets of $9.1 billion and total liabilities of $6.3 billion, which included $5.1 billion of debt. These unconsolidated entities usually finance their activities with a combination of partner equity and debt financing. As of November 30, 2007, our equity in these unconsolidated entities represented 34% of the entities’ total equity. Indebtedness of an unconsolidated entity is secured by its own assets. There is no cross collateralization of debt to different unconsolidated entities; however, some unconsolidated entities own multiple properties and other assets.

In connection with a loan to an unconsolidated entity, we and our partners often guarantee to a lender either jointly and severally or on a several basis, any, or all of the following: (i) the completion of the development, in whole or in part, (ii) indemnification of the lender from environmental issues, (iii) indemnification of the lender from “bad boy acts” of the unconsolidated entity (or full recourse liability in the event of unauthorized transfer or bankruptcy) and (iv) that the loan to value and/or loan to cost will not exceed a certain percentage (maintenance or remargining guarantee) or that a percentage of the outstanding loan will be repaid (repayment guarantee).

In connection with loans to an unconsolidated entity where there is a joint and several guarantee, we often have a reimbursement agreement with our partner. The reimbursement agreement provides that neither party is responsible for more than its proportionate share of the guarantee. However, if our joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share, up to our maximum exposure, which is the full amount covered by the joint and several guarantee.

The summary of our net recourse exposure related to our unconsolidated entities was as follows:

	November 30,
	2007			2006
	(In thousands)
Sole recourse debt	$	—		18,920
Several recourse debt—repayment		123,022		163,508
Several recourse debt—maintenance		355,513		560,823
Joint and several recourse debt—repayment		263,364		64,473
Joint and several recourse debt—maintenance		291,727		956,682
Lennar’s maximum recourse exposure		1,033,626		1,764,406
Less joint and several reimbursement agreements with Lennar’s partners		(238,692	)	(661,486	)
Lennar’s net recourse exposure	$	794,934		1,102,920

The maintenance amounts above are our maximum exposure to loss from maintenance guarantees, which assumes that the fair value of the underlying collateral is zero because it does not take into account the underlying value of the collateral.

As amended, our Credit Facility requires us to reduce the recourse debt of joint ventures in which we have investments by $300 million during our 2008 fiscal year and by an additional $200 million (for a total of $500 million) by the end of fiscal 2009.

In addition, we and/or our partners occasionally grant liens on our respective interests in an unconsolidated entity in order to help secure a loan to that entity. When we and/or our partners provide guarantees, the unconsolidated entity generally receives more favorable terms from its lenders than would otherwise be available to it. In a repayment guarantee, we and our venture partners guarantee repayment of a portion or all of the debt in the event of a default before the lender would have to exercise its rights against the collateral. The maintenance guarantees only apply if the value of the collateral (generally land and improvements) is less than a specified

38

percentage of the loan balance. If we are required to make a payment under a maintenance guarantee to bring the value of the collateral above the specified percentage of the loan balance, the payment may constitute a capital contribution or loan to the unconsolidated entity and increase our share of any funds the unconsolidated entity distributes. During the year ended November 30, 2007, amounts paid under our maintenance guarantees were $84.1 million. During the year ended November 30, 2006, we did not make any material payments under maintenance guarantees. In accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, as of November 30, 2007, the fair values of the maintenance guarantees and repayment guarantees were not material. We believe that as of November 30, 2007, if there was an occurrence of a triggering event or condition under a guarantee, the collateral should be sufficient to repay a significant portion of the obligation or in certain circumstances, partners may be requested to contribute additional capital into the venture.

In many of the loans to unconsolidated entities, we and another entity or entities generally related to our subsidiary’s joint venture partner(s), have been required to give guarantees of completion to the lenders. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. If the construction was to be done in phases, very often the guarantee is to complete only the phases as to which construction has already commenced and for which loan proceeds were used. Under many of the completion guarantees, the guarantors are permitted, under certain circumstances, to use undisbursed loan proceeds to satisfy the completion of obligations, and in many of those cases, pay interest only on those funds, with no repayment of the principal of such funds required.

The total debt of the unconsolidated entities was as follows:

	November 30,
	2007		2006
	(In thousands)
Lennar’s net recourse exposure	$	794,934	1,102,920
Reimbursement agreements from partners		238,692	661,486
Partner several recourse		465,641	930,177
Non-recourse land seller debt or other debt		202,048	259,191
Non-recourse debt with completion guarantees		1,432,880	948,438
Non-recourse debt without completion guarantees		1,982,475	1,099,413
Total debt	$	5,116,670	5,001,625

Some of the unconsolidated entities’ debt arrangements contain certain financial covenants. As market conditions deteriorated in the year ended November 30, 2007, we closely monitored these covenants and the unconsolidated entities’ ability to comply with them. In these difficult market conditions, some of the unconsolidated entities may have to request of their lenders waivers or amendments to debt agreements so that the unconsolidated entities would remain in compliance with such covenants. Additionally, we may have to extend or refinance the debt of our unconsolidated entities if the operations of the unconsolidated entities are not on track to meet their projected cash flows.

Summarized financial information on a combined 100% basis related to unconsolidated entities in which we had investments that are accounted for by the equity method was as follows:

Balance Sheets	November 30,
	2007		2006
	(In thousands)
Assets:
Cash	$	301,468	276,501
Inventories		7,941,835	8,955,567
Other assets		827,208	868,073
	$	9,070,511	10,100,141
Liabilities and equity:
Accounts payable and other liabilities	$	1,214,374	1,387,745
Debt		5,116,670	5,001,625
Equity of:
Lennar		934,271	1,447,178
Others		1,805,196	2,263,593
	$	9,070,511	10,100,141

39

Debt to total capital of our unconsolidated entities is calculated as follows:

	November 30,
	2007			2006
	(Dollars in thousands)
Debt	$	5,116,670		5,001,625
Equity		2,739,467		3,710,771
Total capital	$	7,856,137		8,712,396
Debt to total capital of our unconsolidated entities		65.1	%	57.4	%

As of November 30, 2007, debt-to-total capital of our unconsolidated entities, excluding our LandSource joint venture, was 61.1%, compared to 59.2% at November 30, 2006.

Statements of Operations and Selected Information	Years Ended November 30,
	2007			2006		2005
	(Dollars in thousands)
Revenues	$	2,060,279		2,651,932		2,676,628
Costs and expenses:		3,075,696		2,588,196		2,020,470
Net earnings (loss) of unconsolidated entities	$	(1,015,417	)	63,736		656,158
Our share of net earnings (loss) (1)	$	(353,946	)	24,918		241,631
Our share of net earnings (loss)—recognized (1)	$	(362,899	)	(12,536	)	133,814
Our cumulative share of net earnings—deferred at November 30	$	34,731		99,360		151,182
Our investments in unconsolidated entities	$	934,271		1,447,178		1,282,686
Equity of the unconsolidated entities	$	2,739,467		3,710,771		3,334,549
Our investment % in the unconsolidated entities		34.1	%	39.0	%	38.5	%

(1) For the years ended November 30, 2007 and 2006, our share of net earnings (loss) recognized from unconsolidated entities includes $364.2 million and $126.4 million, respectively, of our share of SFAS 144 valuation adjustments related to assets of the unconsolidated entities. There were no SFAS 144 valuation adjustments related to assets of the unconsolidated entities for the year ended November 30, 2005.

In February 2007, our LandSource joint venture admitted MW Housing Partners as a new strategic partner. As part of the transaction, the joint venture obtained $1.6 billion of non-recourse financing, which consisted of a $200 million five-year Revolving Credit Facility, a $1.1 billion six-year Term Loan B Facility and a $244 million seven-year Second Lien Term Facility. The transaction resulted in a cash distribution to us of $707.6 million. As a result, our ownership in LandSource was reduced to 16%. As a result of the recapitalization, we recognized a pretax financial statement gain of $175.9 million during the year ended November 30, 2007 and could potentially recognize additional profits in future years, in addition to profits from our continuing ownership interest. During the year ended November 30, 2007, we recognized $24.7 million of profit deferred at the time of the recapitalization of the LandSource joint venture in management fees and other income (expense), net.

Option Contracts

In our homebuilding operations, we have access to land through option contracts, which generally enables us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the option.

A majority of our option contracts require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land. These option deposits generally approximate 10% of the exercise price. Our option contracts sometimes include price escalators, which adjust the purchase price of the land to its approximate fair value at time of the acquisition or is based on market value at the time of takedown. The exercise periods of our option contracts generally range from one-to-ten years.

Our investments in option contracts are recorded at cost unless those investments are determined to be impaired, in which case our investments are written down to fair value. We review option contracts for impairment during each reporting period in accordance with SFAS 144. The most significant indicator of impairment is a decline in the fair value of the optioned property such that the purchase and development of the optioned property would no longer meet our targeted return on investment. Such declines could be caused by a

40

variety of factors including increased competition, decreases in demand or changes in local regulations that adversely impact the cost of development. Changes in any of these factors would cause us to re-evaluate the likelihood of exercising our land options.

Some option contracts contain a predetermined take-down schedule for the optioned land parcels. However, in almost all instances, we are not required to purchase land in accordance with those take-down schedules. In substantially all instances, we have the right and ability to not exercise our option and forfeit our deposit without further penalty, other than termination of the option and loss of any unapplied portion of our deposit and pre-acquisition costs. Therefore, in substantially all instances, we do not consider the take-down price to be a firm contractual obligation.

When we intend not to exercise an option, we write-off any deposit and pre-acquisition costs associated with the option contract. For the years ended November 30, 2007 and 2006, we wrote-off $530.0 million and $152.2 million, respectively, of option deposits and pre-acquisition costs related to 36,900 homesites and 24,200 homesites, respectively, under option that we do not intend to purchase.

The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties (“optioned”) or unconsolidated joint ventures in which we have investments (“JVs”) (i.e., controlled homesites) for each of our homebuilding segments and Homebuilding Other at November 30, 2007 and 2006:

November 30, 2007	Controlled Homesites			Owned Homesites	Total Homesites
	Optioned	JVs	Total
East	14,888	14,091	28,979	24,014	52,993
Central	5,783	16,373	22,156	14,919	37,075
West	1,243	30,800	32,043	15,300	47,343
Other	963	1,729	2,692	8,568	11,260
Total homesites	22,877	62,993	85,870	62,801	148,671
November 30, 2006	Controlled Homesites			Owned Homesites	Total Homesites
	Optioned	JVs	Total
East	42,733	17,898	60,631	36,169	96,800
Central	27,435	30,815	58,250	21,887	80,137
West	17,959	43,789	61,748	22,390	84,138
Other	6,631	2,019	8,650	11,879	20,529
Total homesites	94,758	94,521	189,279	92,325	281,604

We evaluated all option contracts for land when entered into or upon a reconsideration event to determine whether we are the primary beneficiary of certain of these option contracts. Although we do not have legal title to the optioned land, under FIN 46(R), if we are deemed to be the primary beneficiary, we are required to consolidate the land under option at the purchase price of the optioned land. During the years ended November 30, 2007 and 2006, the effect of the consolidation entries associated with these option contracts was an increase of $345.3 million and $548.7 million, respectively, to consolidated inventory not owned with a corresponding increase to liabilities related to consolidated inventory not owned in our consolidated balance sheets as of November 30, 2007 and 2006. In addition, in 2007, we reclassified $525.0 million from inventory to consolidated inventory not owned as a result of the land transaction with Morgan Stanley Real Estate Fund II, L.P. This increase was partially offset by the exercising of our options to acquire land under certain contracts previously consolidated under FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, (“FIN 46R”) and deconsolidation of certain option contracts, resulting in a net increase in consolidated inventory not owned of $447.3 million. To reflect the purchase price of the inventory consolidated under FIN 46R, we reclassified $65.6 million of related option deposits from land under development to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2007. The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and our cash deposits.

At November 30, 2007 and 2006, our exposure to loss related to our option contracts with third parties and unconsolidated entities consisted of our non-refundable deposits and pre-acquisition costs totaling $317.1 million and $785.9 million, respectively, and $193.3 million and $553.4 million, respectively, of letters of credit posted in lieu of cash deposits.

41

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations at November 30, 2007:

Contractual Obligations			Payments Due by Period
	Total		Less than 1 year	1 to 3 years	3 to 5 years	More than 5 years
	(In thousands)
Homebuilding—Senior notes and other debts payable	$	2,295,436	90,229	610,105	249,516	1,345,586
Financial services—Notes and other debts payable		541,437	541,306	95	25	11
Interest commitments under interest bearing debt*		682,886	136,619	222,109	170,123	154,035
Operating leases		201,213	71,053	78,673	37,924	13,563
Total contractual cash obligations	$	3,720,972	839,207	910,982	457,588	1,513,195

* Interest commitments on variable interest-bearing debt are determined based on the interest rate as of November 30, 2007.

We are subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate in the routine conduct of our business. Option contracts for the purchase of land generally enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our option. This reduces our financial risk associated with land holdings. At November 30, 2007, we had access to 85,870 homesites through option contracts with third parties and unconsolidated entities in which we have investments. At November 30, 2007, we had $317.1 million of non-refundable option deposits and pre-acquisition costs related to certain of these homesites and $193.3 million of letters of credit posted in lieu of cash deposits under certain option contracts.

At November 30, 2007, we had letters of credit outstanding in the amount of $814.4 million (including the $193.3 million of letters of credit discussed above). These letters of credit are generally posted either with regulatory bodies to guarantee our performance of certain development and construction activities or in lieu of cash deposits on option contracts. Additionally, we had outstanding performance and surety bonds related to site improvements at various projects of $1.6 billion. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all of the development and construction activities are completed. We do not believe there will be any draws upon these bonds, but if there were any, we do not believe they would have a material effect on our consolidated financial statements.

Our Financial Services segment had a pipeline of loan applications in process of $1.2 billion at November 30, 2007. Loans in process for which interest rates were committed to the borrowers and builder commitments for loan programs totaled $209.7 million as of November 30, 2007. Substantially all of these commitments were for periods of 60 days or less. Since a portion of these commitments is expected to expire without being exercised by the borrowers or because borrowers may not meet certain criteria at the time of closing, the total commitments do not necessarily represent future cash requirements.

Our Financial Services segment uses mandatory mortgage-backed securities (“MBS”) forward commitments, option contracts and investor commitments to hedge our mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk is managed by entering into MBS forward commitments, option contracts with investment banks, federally regulated bank affiliates and loan sales transactions with permanent investors meeting our credit standards. Our risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At November 30, 2007, we had open commitments amounting to $281.0 million to sell MBS with varying settlement dates through January 2008.

The following sections discuss economic conditions, market and financing risk, seasonality and interest rates and changing prices that may have an impact on our business:

Economic Conditions

Throughout 2007, market conditions in the homebuilding industry continued to deteriorate. This market deterioration was driven primarily by a decline in consumer confidence and increased volatility in the mortgage market, resulting in higher than normal cancellation rates (30% and 29%, respectively, in 2007 and 2006) and

42

lower net new orders (new orders were down 39% and 3%, respectively, in 2007 and 2006) for our company. Therefore, we made greater use of sales incentives ($48,000 per home delivered in 2007, compared to $32,000 per home delivered in 2006) to generate sales, which resulted in lower inventory levels. A continued decline in the prices for new homes could adversely affect our revenues and margins, as well as the carrying value of our inventory and other investments.

Market and Financing Risk

We finance our contributions to JVs, land acquisition and development activities, construction activities, financial services activities and general operating needs primarily with cash generated from operations and public debt issuances, as well as cash borrowed under our revolving credit facility and borrowings under our warehouse lines of credit. We also purchase land under option agreements, which enables us to control homesites until we have determined whether to exercise the option. The financial risks of adverse market conditions associated with land holdings are managed by what we believe to be prudent underwriting of land purchases in areas we view as desirable growth markets, careful management of the land development process and, until 2007, limitation of risks by using partners to share the costs of purchasing and developing land, as well as obtaining access to land through option contracts.

Seasonality

We have historically experienced variability in our results of operations from quarter-to-quarter due to the seasonal nature of the homebuilding business. Due to deteriorating market conditions, we are currently focusing our efforts, in all quarters, on inventory management in order to deliver inventory and generate cash.

Interest Rates and Changing Prices

Inflation can have a long-term impact on us because increasing costs of land, materials and labor result in a need to increase the sales prices of homes. In addition, inflation is often accompanied by higher interest rates, which can have a negative impact on housing demand and the costs of financing land development activities and housing construction. Rising interest rates, as well as increased materials and labor costs, may reduce gross margins. An increase in material and labor costs, along with a decrease in home sales price in 2007 compared to the appreciation in homes sales prices in previous years, have contributed to lower gross margins and significant inventory valuation adjustments. In recent years, the increases in these costs have followed the general rate of inflation and hence have not had a significant adverse impact on us. In addition, deflation can impact the value of real estate and make it difficult for us to recover our land costs. Therefore, either inflation or deflation could adversely impact our future results of operations.

New Accounting Pronouncements

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109, (“FIN 48”). FIN 48 provides interpretive guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for us on December 1, 2007. The adoption of FIN 48 is expected to result in a charge of approximately $30 million to our retained earnings as of December 1, 2007.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for our financial assets and liabilities on December 1, 2007. The FASB has proposed a deferral of the provisions of SFAS 157 relating to nonfinancial assets and liabilities that would delay implementation by us until December 1, 2008. SFAS 157 is not expected to materially affect how we determine fair value, but may result in certain additional disclosures.

In November 2006, the FASB issued Emerging Issues Task Force Issue No. 06-8, Applicability of the Assessment of a Buyer’s Continuing Investment under FASB Statement No. 66 for Sales of Condominiums, (“EITF 06-8”). EITF 06-8 establishes that a company should evaluate the adequacy of the buyer’s continuing investment in determining whether to recognize profit under the percentage-of-completion method. EITF 06-8 is effective for our fiscal year beginning December 1, 2007. The adoption of EITF 06-8 is not expected to be material to our consolidated financial statements.

In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities–Including an amendment of FASB Statement No. 115, (“SFAS 159”). SFAS 159 permits companies to

43

measure many financial instruments and certain other items at fair value. SFAS 159 is effective for us on December 1, 2007. We did not elect the fair value option for any of our existing financial instruments on the effective date and have not determined whether or not we will elect this option for any eligible financial instruments we acquire in the future.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. SFAS 160 is effective for our fiscal year beginning December 1, 2009. We will evaluate the impact the adoption of SFAS 160 will have on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. SFAS 141R expands on required disclosures to improve the statement users’ abilities to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for our fiscal year beginning December 1, 2009. We do not expect the adoption of SFAS 141R to have a material effect on our consolidated financial statements.

Critical Accounting Policies and Estimates

Our accounting policies are more fully described in Note 1 of the notes to our consolidated financial statements included in Item 8 of this document. As discussed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such differences may be material to our consolidated financial statements. Listed below are those policies and estimates that we believe are critical and require the use of significant judgment in their application.

Homebuilding Operations

Revenue Recognition

Revenues from sales of homes are recognized when sales are closed and title passes to the new homeowner, the new homeowner’s initial and continuing investment is adequate to demonstrate a commitment to pay for the home, the new homeowner’s receivable is not subject to future subordination and we do not have a substantial continuing involvement with the new home in accordance with SFAS No. 66, Accounting for Sales of Real Estate, (“SFAS 66”). Revenues from sales of land are recognized when a significant down payment is received, the earnings process is complete, title passes and collectibility of the receivable is reasonably assured. We believe that the accounting policy related to revenue recognition is a critical accounting policy because of the significance of revenue.

Inventories

Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction. We review inventories for impairment during each reporting period on a community by community basis. SFAS 144 requires that if the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment charge should be recorded to write down the carrying amount of such asset to its fair value.

In conducting our review for indicators of impairment on a community level, we evaluate, among other things, the margins on homes that have been delivered, margins under sales contracts in backlog, projected

44

margins with regard to future home sales over the life of the community, projected margins with regard to future land sales, and the fair value of the land itself. We pay particular attention to communities in which inventory is moving at a slower than anticipated absorption pace and communities whose average sales price and/or margins are trending downward and are anticipated to continue to trend downward. From this review we identify communities whose carrying values exceed their undiscounted cash flows.

We estimate the fair value of our communities using a discounted cash flow model. These projected cash flows for each community are significantly impacted by estimates related to market supply and demand, product type by community, homesite sizes, sales pace, sales prices, sales incentives, construction costs, sales and marketing expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors for that particular community. The determination of fair value also requires discounting the estimated cash flows at a rate commensurate with the inherent risks associated with the assets and related estimated cash flow streams. The discount rate used in determining each asset’s fair value depends on the community’s projected life and development stage. We generally use discount rates ranging from 15% to 20% depending on the perceived risks associated with the community’s cash flow streams relative to its inventory. For example, construction in progress inventory which is closer to completion will generally require a lower discount rate than land under development in communities consisting of multiple phases spanning several years of development.

We estimate fair values of inventory evaluated for impairment under SFAS 144 based on current market conditions and current assumptions made by management, which may differ materially from actual results if market conditions change. For example, further market deterioration may lead to us incurring additional impairment charges on previously impaired inventory, as well as on inventory not currently impaired but for which indicators of impairment may arise if further market deterioration occurs.

We also have access to land inventory through option contracts, which generally enables us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our option. A majority of our option contracts require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land. Our option contracts are recorded at cost. In determining whether to walk-away from an option contract, we evaluate the option primarily based upon the expected cash flows from the property that is the subject of the option. If we intend to walk-away from an option contract, we record a charge to earnings in the period such decision is made for the deposit amount and related pre-acquisition costs associated with the option contract.

We believe that the accounting related to inventory valuation and impairment is a critical accounting policy because: (1) assumptions inherent in the valuation of our inventory are highly subjective and susceptible to change and (2) the impact of recognizing impairments on our inventory could be material to our consolidated financial statements. Our evaluation of inventory impairment, as discussed above, includes many assumptions. The critical assumptions include the timing of the home sales within a community, management projections of selling prices and costs and the discount rate applied to estimate the fair value of the homesites within a community on the balance sheet date. Our assumptions on the timing of home sales are critical because the homebuilding industry has historically been cyclical and sensitive to changes in economic conditions such as interest rates, credit availability, unemployment levels and consumer sentiment. Changes in these economic conditions could materially affect the projected sales price, costs to develop the homesites and/or absorption rate in a community. Our assumptions on discount rates are critical because the selection of a discount rate affects the estimated fair value of the homesites within a community. A higher discount rate reduces the estimated fair value of the homesites within the community, while a lower discount rate increases the estimated fair value of the homesites within a community. Because of changes in economic and market conditions and assumptions and estimates required of management in valuing inventory during changing market conditions, actual results could differ materially from management’s assumptions and may require material inventory impairment charges to be recorded in the future.

During the years ended November 30, 2007, 2006 and 2005, we recorded $2.4 billion, $501.8 million and $20.5 million, respectively, of inventory adjustments, which included $747.8 million and $280.5 million, respectively, in 2007 and 2006, of valuation adjustments to finished homes, construction in progress and land on which we intend to build homes (no adjustments in 2005), $1.2 billion, $69.1 million and $5.4 million, respectively, in 2007, 2006 and 2005, of valuation adjustments to land we intend to sell to third parties and $530.0 million, $152.2 million and $15.1 million, respectively, in 2007, 2006 and 2005 of write-offs of deposits and pre-acquisition costs. The $1.2 billion of valuation adjustments recorded in 2007 to land we intend to sell to third parties includes $740.4 million of SFAS 144 valuation adjustments related to the portfolio of land we sold to our strategic land investment venture with Morgan Stanley Real Estate Fund II, L.P., an affiliate of Morgan

45

Stanley & Co., Inc., which was formed in November 2007. The valuation adjustments were calculated based on current market conditions and current assumptions made by management, which may differ materially from actual results if market conditions change. See Note 4 of the notes to our consolidated financial statements included in Item 8 of this document for details related to valuation adjustments and write-offs by reportable segment and homebuilding other.

Warranty Costs

Although we subcontract virtually all aspects of construction to others and our contracts call for the subcontractors to repair or replace any deficient items related to their trades, we are primarily responsible to correct any deficiencies. Additionally, in some instances, we may be held responsible for the actions of or losses incurred by subcontractors. Warranty reserves are established at an amount estimated to be adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Reserves are determined based upon historical data and trends with respect to similar product types and geographical areas. We believe the accounting estimate related to the reserve for warranty costs is a critical accounting estimate because the estimate requires a large degree of judgment.

At November 30, 2007, the reserve for warranty costs was $164.8 million. While we believe that the reserve for warranty costs is adequate, there can be no assurances that historical data and trends will accurately predict our actual warranty costs. Additionally, there can be no assurances that future economic or financial developments might not lead to a significant change in the reserve.

Investments in Unconsolidated Entities

We frequently invest in entities that acquire and develop land for sale to us in connection with our homebuilding operations or for sale to third parties. Our partners generally are unrelated homebuilders, land owners/developers and financial or other strategic partners.

Most of the unconsolidated entities through which we acquire and develop land are accounted for by the equity method of accounting because we are not the primary beneficiary, as defined under FIN 46R, and we have a significant, but less than controlling, interest in the entities. We record our investments in these entities in our consolidated balance sheets as “Investments in Unconsolidated Entities” and our pro-rata share of the entities’ earnings or losses in our consolidated statements of operations as “Equity in Earnings (Loss) from Unconsolidated Entities,” as described in Note 6 of the notes to our consolidated financial statements. Advances to these entities are included in the investment balance.

Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling interest in, an unconsolidated entity. Factors considered in determining whether we have significant influence or we have control include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and continuing involvement. The accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the judgment required in determining whether we are the primary beneficiary or have control or significant influence.

As of November 30, 2007, we believe that the equity method of accounting is appropriate for our investments in unconsolidated entities where we are not the primary beneficiary and we do not have a controlling interest, but rather share control with our partners. At November 30, 2007, the unconsolidated entities in which we had investments had total assets of $9.1 billion and total liabilities of $6.3 billion.

We evaluate our investments in unconsolidated entities for impairment during each reporting period in accordance with APB 18. A series of operating losses of an investee or other factors may indicate that a decrease in the value of our investment in the unconsolidated entity has occurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying value over its estimated fair value.

The evaluation of our investment in unconsolidated entities includes two critical assumptions: (1) projected future distributions from the unconsolidated entities and (2) discount rates applied to the future distributions.

Our assumptions on the projected future distributions from the unconsolidated entities are dependent on market conditions. Specifically, distributions are dependent on cash to be generated from the sale of inventory by the unconsolidated entities. Such inventory is also reviewed for potential impairment by the unconsolidated

46

entities in accordance with SFAS 144. The unconsolidated entities generally use discount rates ranging from 15% to 20% in their SFAS 144 reviews for impairment. If a valuation adjustment is recorded by an unconsolidated entity in accordance with SFAS 144, our proportionate share of it is reflected in our equity in earnings (loss) from unconsolidated entities with a corresponding decrease to our investment in unconsolidated entities. In certain instances, we may be required to record additional losses relating to our investment in unconsolidated entities under APB 18; such losses are included in management fees and other income (expense), net. We believe our assumptions on the projected future distributions from the unconsolidated entities are critical because the operating results of the unconsolidated entities from which the projected distributions are derived are dependent on the status of the homebuilding industry, which has historically been cyclical and sensitive to changes in economic conditions such as interest rates, credit availability, unemployment levels and consumer sentiment. Changes in these economic conditions could materially affect the projected operational results of the unconsolidated entities from which the distributions are derived.

We believe our assumptions on discount rates are also critical accounting policies because the selection of the discount rates also affects the estimated fair value of our investment in unconsolidated entities. A higher discount rate reduces the estimated fair value of our investment in unconsolidated entities, while a lower discount rate increases the estimated fair value of its investment in unconsolidated entities. Because of changes in economic conditions, actual results could differ materially from management’s assumptions and may require material valuation adjustments to our investments in unconsolidated entities to be recorded in the future.

During the years ended November 30, 2007 and 2006, we recorded $496.4 million and $140.9 million, respectively, of adjustments to our investments in unconsolidated entities, which included $364.2 million and $126.4 million, respectively, in 2007 and 2006, of SFAS 144 valuation adjustments related to assets of the unconsolidated investments and $132.2 million and $14.5 million, respectively, in 2007 and 2006, of valuation adjustments to investments in unconsolidated entities in accordance with APB 18. We did not record any adjustments to our investments in unconsolidated entities related to SFAS 144 valuation adjustments or APB 18 during 2005. These valuation adjustments were calculated based on current market conditions and assumptions made by management, which may differ materially from actual results if market conditions change. See Note 4 of the notes to our consolidated financial statements included in Item 8 of this document for details related to valuation adjustments and write-offs by reportable segment and homebuilding other.

Financial Services Operations

Revenue Recognition

Loan origination revenues, net of direct origination costs, and gains and losses from the sale of loans and loan servicing rights are recognized when the loans are sold and shipped to an investor. Premiums from title insurance policies are recognized as revenue on the effective dates of the policies. Escrow fees are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. Interest income on loans held-for-sale and loans held-for-investment is recognized as earned over the terms of the mortgage loans based on the contractual interest rates. In all circumstances, we do not recognize revenue until the earnings process is complete and collectibility of the receivable is reasonably assured. We believe that the accounting policy related to revenue recognition is a critical accounting policy because of the significance of revenue.

Allowance for Loan and Other Losses

We provide an allowance for loan losses by taking into consideration various factors such as past loan loss experience, present economic conditions and other factors considered relevant by management. Anticipated changes in economic conditions, which may influence the level of the allowance, are considered in the evaluation by management when the likelihood of the changes can be reasonably determined. This analysis is based on judgments and estimates and may change in response to economic developments or other conditions that may influence borrowers’ financial conditions or prospects. At November 30, 2007, the allowance for loan losses was $11.1 million, compared to $1.8 million at November 30, 2006. While we believe that the 2007 year-end allowance is adequate, particularly in view of the fact that we usually sell the loans in the secondary mortgage market on a non-recourse basis within 60 days after we originate them, remaining liable for certain representations and warranties, there can be no assurances that further deterioration in the housing market, future economic or financial developments, including general interest rate increases or a slowdown in the economy, might not lead to increased provisions to the allowance or a higher occurrence of loan charge-offs. This allowance requires management’s judgment and estimate. For these reasons, we believe that the accounting estimate related to the allowance for loan losses is a critical accounting estimate.

47

We provide an allowance for estimated title and escrow losses based upon management’s evaluation of claims presented and estimates for any incurred but not reported claims. The allowance is established at a level that management estimates to be sufficient to satisfy those claims where a loss is determined to be probable and the amount of such loss can be reasonably estimated. The allowance for title and escrow losses for both known and incurred but not reported claims is considered by management to be adequate for such purposes.

Homebuilding and Financial Services Operations

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Evaluating goodwill for impairment involves the determination of the fair value of our reporting units in which we have recorded goodwill. A reporting unit is a component of an operating segment for which discrete financial information is available and reviewed by management on a regular basis. Inherent in the determination of fair value of our reporting units are certain estimates and judgments, including the interpretation of current economic indicators and market valuations as well as our strategic plans with regard to our operations. To the extent additional information arises or our strategies change, it is possible that our conclusion regarding goodwill impairment could change, which could have a material effect on our financial position and results of operations. For these reasons, we believe that the accounting estimate related to goodwill impairment is a critical accounting estimate.

We review goodwill annually (or whenever indicators of impairment exist) for impairment in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, (“SFAS 142”). The continued deterioration in market conditions as a result of tightening mortgage credit standards and other factors led to SFAS 144 and APB 18 impairments and a significant decline in our market capitalization; thus, we reviewed goodwill for impairment in both our third and fourth quarters of 2007. During the third quarter of 2007, we recorded a goodwill impairment charge of $16.5 million related to our homebuilding operations. Our third quarter goodwill impairment charge related primarily to specific acquisitions made during the peak homebuilding years (2003 to 2005) in Homebuilding Other and the Homebuilding Central reportable segment. To the extent goodwill resulted from acquisitions during the peak homebuilding years, it increased the likelihood of a goodwill impairment charge at those reporting units due to the premium values we paid for the respective land positions of such acquired companies. Conversely, to the extent that goodwill resulted from acquisitions prior to the peak homebuilding years, it decreased the likelihood of a goodwill impairment charge in those divisions because there could be significant declines in values without reducing the fair values of the companies below what they were when the companies were acquired. In addition, both Homebuilding Other and the Homebuilding Central reportable segment have generally underperformed in comparison to the Homebuilding East and Homebuilding West reportable segments.

We also performed our annual impairment test of goodwill in the fourth quarter of 2007 and wrote-off the remaining recorded goodwill of $173.7 million related to our homebuilding operations. The goodwill impairment related to our homebuilding operations in the fourth quarter was due to a significant decline in the estimated fair value of our reporting units subsequent to our third quarter, which resulted from significant deterioration in market conditions and a decrease in our stock price during that period. Our Financial Services’ segment goodwill has not been impaired. We did not record impairment charges during the years ended November 30, 2006 and 2005. As of November 30, 2007 and 2006, there were no material identifiable intangible assets, other than goodwill.

We use an equally weighted combination of the income and market approaches to determine the fair value of our reporting units when performing our impairment test of goodwill in accordance with SFAS 142.

The income approach establishes fair value by methods which discount or capitalize earnings and/or cash flow by a discount or capitalization rate that reflects market rate of return expectations, market conditions and the risk of the relative investment. We use a discounted cash flow method when applying the income approach. This analysis includes operating income, interest expense, taxes, incremental working capital and long-term debt, as well as other factors. The projections used in the analysis are for a five-year period and represent what we consider to be normalized earnings.

The market approach establishes fair value by comparing our company to other publicly traded guideline companies or by analysis of actual transactions of similar businesses or assets sold. Two methods are commonly considered under the market approach. The market comparison method is based on the stock prices of guideline publicly traded companies that are in the same industry as the company being valued, while the comparative transaction method is based on the actual sale of similar companies. We use the market comparison method when

48

applying the market approach, due to the availability of information relative to our company’s guideline companies and the lack of recent sales of similar companies. Using the market comparison method, we performed qualitative and quantitative analysis on each of our guideline companies, including evaluating their market capitalization, to assess their strengths and weaknesses and compared them to our company. After assessing the risk differences, we estimated the guideline company multiples to properly reflect the risk profile of our company. After review of the guideline companies as compared to our company and completing an analysis based on both the equity method of valuation and the invested capital method of valuation, we concluded that the invested capital method of valuation was a reasonable basis for estimating our company’s fair value. One of the primary factors in our determination to use the invested capital method of valuation was the fact that our capital structure appeared to have less debt as a percentage of capital than the guideline companies selected.

In determining the fair value of our reporting units under the income approach, our expected cash flows are affected by various assumptions. The most significant assumptions affecting our expected cash flows are the discount rate, projected revenue growth rate and operating profit margin.

There are also various assumptions used under the market approach that affect the valuation of our reporting units. The most significant assumptions are the market multiples and control premium. In estimating the fair value of our company under the market approach, we used two key multiples: 1) market value of invested capital to book value of capital and 2) market value of invested capital to revenues. A control premium represents the value an investor would pay above minority interest transaction prices in order to obtain a controlling interest in the respective company.

As noted above, we use an equally weighted combination of the income and market approach to determine the fair value of our reporting units. We assign an equal weight to the respective methods as they are both acceptable valuation approaches in determining the fair value of a business, and they both attempt to consider the entire value of a business from either an income stream or comparable market value.

At November 30, 2007 and 2006, goodwill was $61.2 million and $257.8 million, respectively. Our goodwill of $61.2 million at November 30, 2007 relates to our Financial Services segment. We wrote-off our entire homebuilding goodwill and only have $61.2 million of goodwill remaining on our balance sheet related to our Financial Services segment, whose fair value using an equally weighted combination of the income and market approach exceeded the carrying value of the segment’s net assets by approximately $225 million as of November 30, 2007. Therefore, the impact of a change in our significant underlying assumptions +/- 1% would not result in a materially different fair value.

Valuation of Deferred Tax Assets

We record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.

SFAS 109, Accounting for Income Taxes, (“SFAS 109”) requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets are assessed periodically based on the SFAS 109 more-likely-than-not realization threshold criterion. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused, and tax planning alternatives.

Our analysis of the need for a valuation allowance recognizes that while we have incurred a cumulative loss over our evaluation period, a substantial loss was incurred in the current year. However, a substantial portion of the current loss was the result of the difficult current market conditions that led to the impairments of certain tangible assets as well as goodwill. Consideration has also been given to the lengthy period over which these net deferred tax assets can be realized, and our history of not having Federal tax loss carryforwards expire unused.

49

We believe that the accounting estimate for the valuation of deferred tax assets is a critical accounting estimate because judgment is required in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes. Changes in existing tax laws or rates could affect actual tax results and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time. Our accounting for deferred tax consequences represents our best estimate of future events. Although it is possible there will be changes that are not anticipated in our current estimates, we believe it is unlikely such changes would have a material period-to-period impact on our financial position or results of operations.

At November 30, 2007 and 2006, our net deferred tax asset was $746.9 million and $307.2 million, respectively. Based on our assessment, it appears more likely than not that the net deferred tax asset will be realized through future taxable earnings. If results are less than projected and there is no objectively verifiable evidence to support the realization of our deferred tax asset, a substantial valuation allowance may be required to reduce the deferred tax assets. However, currently no valuation allowance has been established for our deferred tax assets. We will continue to assess the need for a valuation allowance in the future.

Share-Based Payments

We have share-based awards outstanding under four different plans which provide for the granting of stock options and stock appreciation rights and awards of restricted common stock (“nonvested shares”) to key officers, employees and directors. The exercise prices of stock options and stock appreciation rights may not be less than the market value of the common stock on the date of the grant. No options granted under the plans may be exercisable until at least six months after the date of the grant. Thereafter, exercises are permitted in installments determined when options are granted. Each stock option and stock appreciation right will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant.

Prior to December 1, 2005, we accounted for stock option awards granted under our share-based payment plans in accordance with the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, (“APB 25”) and related Interpretations, as permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, (“SFAS 123”). Share-based employee compensation expense was not recognized in our consolidated statements of operations prior to December 1, 2005, as all stock option awards granted under the plans had an exercise price equal to or greater than the market value of the common stock on the date of the grant. Effective December 1, 2005, we adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment, (“SFAS 123R”) using the modified-prospective-transition method. Under this transition method, compensation expense recognized during 2006 included: (a) compensation expense for all share-based awards granted prior to, but not yet vested as of, December 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense for all share-based awards granted subsequent to December 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the modified-prospective-transition method, results for prior periods have not been restated. The impact of SFAS 123R on diluted earnings (loss) per share for the years ended November 30, 2007 and 2006 was $0.08 per share and $0.11 per share, respectively.

We believe that the accounting estimate for share based payments is a critical accounting estimate because the calculation of share-based employee compensation expense involves estimates that require management’s judgments. These estimates include the fair value of each of our stock option awards, which are estimated on the date of grant using a Black-Scholes option-pricing model as discussed in Note 16 of the notes to our consolidated financial statements included under Item 8 of this document. The fair value of our stock option awards, which are subject to graded vesting, is expensed on a straight-line basis over the vesting life of the options. Expected volatility is based on an average of (1) historical volatility of our stock and (2) implied volatility from traded options on our stock. The risk-free rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted with a maturity equal to the expected term of the stock option award granted. We use historical data to estimate stock option exercises and forfeitures within our valuation model. The expected life of stock option awards granted is derived from historical exercise experience under our share-based payment plans and represents the period of time that stock option awards granted are expected to be outstanding.

Prior to the adoption of SFAS 123R, we presented all tax benefits related to deductions resulting from the exercise of stock options as cash flows from operating activities in the consolidated statements of cash flows. SFAS 123R requires that cash flows resulting from tax benefits related to tax deductions in excess of the compensation expense recognized for those options (excess tax benefits) be classified as financing cash flows.

50

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks related to fluctuations in interest rates on our investments, debt obligations, loans held-for-sale and loans held-for-investment. We utilize forward commitments and option contracts to mitigate the risks associated with our mortgage loan portfolio.

The table on the following page provides information at November 30, 2007 about our significant financial instruments that are sensitive to changes in interest rates. For loans held-for-sale, loans held-for-investment and investments held-to-maturity, senior notes and other debts payable and notes and other debts payable, the table presents principal cash flows and related weighted average effective interest rates by expected maturity dates and estimated fair values at November 30, 2007. Weighted average variable interest rates are based on the variable interest rates at November 30, 2007.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and Notes 1 and 18 of the notes to consolidated financial statements in Item 8 for a further discussion of these items and our strategy of mitigating our interest rate risk.

51

Information Regarding Interest Rate Sensitivity

Principal (Notional) Amount by

Expected Maturity and Average Interest Rate

November 30, 2007

	Years Ending November 30,											Thereafter		Total		Fair Value at November 30, 2007
	2008			2009		2010		2011		2012
	(Dollars in millions)
ASSETS
Financial services:
Loans held-for-sale, net:
Fixed rate	$	—		—		—		—		—		281.5		281.5		281.5
Average interest rate		—		—		—		—		—		6.1	%	6.1	%	—
Variable rate	$	—		—		—		—		—		12.0		12.0		12.0
Average interest rate		—		—		—		—		—		6.4	%	6.4	%	—
Loans held-for-investment and investments held-to-maturity:
Fixed rate	$	162.7		5.5		4.5		0.5		0.6		17.9		191.7		192.4
Average interest rate		1.8	%	9.3	%	6.9	%	9.8	%	9.8	%	9.4	%	2.9	%	—
Variable rate	$	—		0.1		0.1		0.1		0.1		6.9		7.3		6.8
Average interest rate		—		8.0	%	8.0	%	8.0	%	8.0	%	8.0	%	8.0	%	—
LIABILITIES
Homebuilding:
Senior notes and other debts payable:
Fixed rate	$	32.5		281.6		299.8		249.5		—		1,345.6		2,209.0		1,819.1
Average interest rate		2.3	%	7.6	%	5.1	%	6.0	%	—		5.8	%	5.9	%	—
Variable rate	$	57.7		22.9		5.8		—		—		—		86.4		86.4
Average interest rate		7.3	%	8.0	%	8.0	%	—		—		—		7.6	%	—
Financial services:
Notes and other debts payable:
Variable rate	$	541.3		0.1		—		—		—		—		541.4		541.4
Average interest rate		5.5	%	6.9	%	—		—		—		—		5.5	%	—

52

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of November 30, 2007. The effectiveness of our internal control over financial reporting as of November 30, 2007 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lennar Corporation

We have audited the internal control over financial reporting of Lennar Corporation and subsidiaries (the “Company”) as of November 30, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of November 30, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended November 30, 2007 of the Company and our report dated January 29, 2008 expressed an unqualified opinion on those financial statements.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

January 29, 2008

54

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lennar Corporation

We have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries (the “Company”) as of November 30, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended November 30, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Lennar Corporation and subsidiaries as of November 30, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2007, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of November 30, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 29, 2008 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

January 29, 2008

55

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2007 and 2006

	2007			2006
	(In thousands, except per share amounts)
ASSETS
Homebuilding:
Cash	$	642,467		661,662
Restricted cash		35,429		24,796
Receivables, net		207,691		159,043
Inventories:
Finished homes and construction in progress		2,180,670		4,447,748
Land under development		1,500,075		3,011,408
Consolidated inventory not owned		819,658		372,327
Total inventories		4,500,403		7,831,483
Investments in unconsolidated entities		934,271		1,447,178
Goodwill		—		196,638
Other assets		1,744,677		474,090
		8,064,938		10,794,890
Financial services		1,037,809		1,613,376
Total assets	$	9,102,747		12,408,266
LIABILITIES AND STOCKHOLDERS’ EQUITY
Homebuilding:
Accounts payable	$	376,134		751,496
Liabilities related to consolidated inventory not owned		719,081		333,723
Senior notes and other debts payable		2,295,436		2,613,503
Other liabilities		1,129,791		1,590,564
		4,520,442		5,289,286
Financial services		731,658		1,362,215
Total liabilities		5,252,100		6,651,501
Minority interest		28,528		55,393
Stockholders’ equity:
Preferred stock		—		—
Class A common stock of $0.10 par value per share Authorized: 2007 and 2006—300,000 shares Issued: 2007—139,309 shares; 2006—136,886 shares		13,931		13,689
Class B common stock of $0.10 par value per share Authorized: 2007 and 2006—90,000 shares Issued: 2007—32,962 shares; 2006—32,874 shares		3,296		3,287
Additional paid-in capital		1,920,386		1,753,695
Retained earnings		2,496,933		4,539,137
Deferred compensation plan; 2007—36 Class A common shares and 4 Class B common shares; 2006—172 Class A common shares and 17 Class B common shares		(332	)	(1,586	)
Deferred compensation liability		332		1,586
Treasury stock, at cost; 2007—10,705 Class A common shares and 1,679 Class B common shares; 2006—9,951 Class A common shares and 1,653 Class B common shares		(610,366	)	(606,395	)
Accumulated other comprehensive loss		(2,061	)	(2,041	)
Total stockholders’ equity		3,822,119		5,701,372
Total liabilities and stockholders’ equity	$	9,102,747		12,408,266

See accompanying notes to consolidated financial statements.

56

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended November 30, 2007, 2006 and 2005

	2007			2006		2005
	(Dollars in thousands, except per share amounts)
Revenues:
Homebuilding	$	9,730,252		15,623,040		13,304,599
Financial services		456,529		643,622		562,372
Total revenues		10,186,781		16,266,662		13,866,971
Costs and expenses:
Homebuilding (1)		12,189,077		14,677,565		11,215,244
Financial services		450,409		493,819		457,604
Corporate general and administrative		173,202		193,307		187,257
Total costs and expenses		12,812,688		15,364,691		11,860,105
Gain on recapitalization of unconsolidated entity		175,879		—		—
Goodwill impairments		190,198		—		—
Equity in earnings (loss) from unconsolidated entities (2)		(362,899	)	(12,536	)	133,814
Management fees and other income (expense), net (3)		(76,029	)	66,629		98,952
Minority interest expense, net		1,927		13,415		45,030
Loss on redemption of 9.95% senior notes		—		—		34,908
Earnings (loss) from continuing operations before provision (benefit) for income taxes		(3,081,081	)	942,649		2,159,694
Provision (benefit) for income taxes		(1,140,000	)	348,780		815,284
Net earnings (loss) from continuing operations		(1,941,081	)	593,869		1,344,410
Discontinued operations:
Earnings from discontinued operations before provision for income taxes		—		—		17,261
Provision for income taxes		—		—		6,516
Net earnings from discontinued operations		—		—		10,745
Net earnings (loss)	$	(1,941,081	)	593,869		1,355,155
Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	(12.31	)	3.76		8.65
Earnings from discontinued operations		—		—		0.07
Net earnings (loss)	$	(12.31	)	3.76		8.72
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	(12.31	)	3.69		8.17
Earnings from discontinued operations		—		—		0.06
Net earnings (loss)	$	(12.31	)	3.69		8.23

(1) Homebuilding costs and expenses include $2.4 billion, $501.8 million and $20.5 million, respectively, of valuation adjustments for the years ended November 30, 2007, 2006 and 2005.

(2) Equity in earnings (loss) from unconsolidated entities includes $364.2 million and $126.4 million, respectively, of SFAS 144 valuation adjustments related to assets of the Company’s investments in unconsolidated entities for the years ended November 30, 2007 and 2006. There were no SFAS 144 valuation adjustments related to assets of the Company’s investment in unconsolidated entities for the year ended November 30, 2005.

(3) Management fees and other income (expense), net includes $132.2 million and $14.5 million, respectively, of APB 18 valuation adjustments to the Company’s investments in unconsolidated entities for the years ended November 30, 2007 and 2006. There were no APB 18 valuation adjustments to the Company’s investments in unconsolidated entities for the year ended November 30, 2005.

See accompanying notes to consolidated financial statements.

57

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended November 30, 2007, 2006 and 2005

	2007			2006		2005
	(Dollars in thousands)
Class A common stock:
Beginning balance	$	13,689		13,025		12,372
Conversion of convertible senior subordinated notes to Class A common shares		—		488		409
Employee stock and director plans		242		176		244
Balance at November 30,		13,931		13,689		13,025
Class B common stock:
Beginning balance		3,287		3,278		3,260
Employee stock plans		9		9		18
Balance at November 30,		3,296		3,287		3,278
Additional paid-in capital:
Beginning balance		1,753,695		1,486,988		1,275,216
Conversion of convertible senior subordinated notes to Class A common shares, including tax benefit		95,978		157,406		127,869
Employee stock and director plans		47,235		82,342		37,807
Tax benefit from employee stock plans and vesting of restricted stock		5,171		15,705		39,180
Amortization of restricted stock and performance-based stock options		18,307		11,254		6,916
Balance at November 30,		1,920,386		1,753,695		1,486,988
Retained earnings:
Beginning balance		4,539,137		4,046,563		2,780,637
Net earnings		(1,941,081	)	593,869		1,355,155
Cash dividends—Class A common stock		(80,984	)	(80,860	)	(70,495	)
Cash dividends—Class B common stock		(20,139	)	(20,435	)	(18,734	)
Balance at November 30,		2,496,933		4,539,137		4,046,563
Deferred compensation plan:
Beginning balance		(1,586	)	(4,047	)	(6,410	)
Deferred compensation activity		1,254		2,461		2,363
Balance at November 30,	$	(332	)	(1,586	)	(4,047	)

See accompanying notes to consolidated financial statements.

58

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—(Continued)

Years Ended November 30, 2007, 2006 and 2005

	2007			2006		2005
	(Dollars in thousands)
Deferred compensation liability:
Beginning balance	$	1,586		4,047		6,410
Deferred compensation activity		(1,254	)	(2,461	)	(2,363	)
Balance at November 30,		332		1,586		4,047
Treasury stock, at cost:
Beginning balance		(606,395	)	(293,222	)	(3,938	)
Employee stock plans		(3,971	)	(3,125	)	(14,385	)
Purchases of treasury stock		—		(320,104	)	(274,899	)
Reissuance of treasury stock		—		10,056		—
Balance at November 30,		(610,366	)	(606,395	)	(293,222	)
Accumulated other comprehensive loss:
Beginning balance		(2,041	)	(5,221	)	(14,575	)
Unrealized gains arising during period on interest rate swaps, net of tax		1,002		2,853		10,049
Unrealized loss on Company’s portion of unconsolidated entity’s interest rate swap liability, net of tax		(2,061	)	—		—
Unrealized gains arising during period on available-for-sale investment securities, net of tax		—		7		185
Reclassification adjustment for loss included in net loss for interest rate swaps, net of tax		338		—		—
Reclassification adjustment for gains included in net earnings for available-for-sale investment securities, net of tax		—		(245	)	—
Change to the Company’s portion of unconsolidated entity’s minimum pension liability, net of tax		701		565		(880	)
Balance at November 30,		(2,061	)	(2,041	)	(5,221	)
Total stockholders’ equity	$	3,822,119		5,701,372		5,251,411
Comprehensive income (loss)	$	(1,941,101	)	597,049		1,364,509

See accompanying notes to consolidated financial statements.

59

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended November 30, 2007, 2006 and 2005

	2007			2006		2005
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings (loss) from continuing operations	$	(1,941,081	)	593,869		1,344,410
Adjustments to reconcile net earnings (loss) from continuing operations to net cash provided by operating activities:
Depreciation and amortization		54,303		45,431		58,253
Amortization of discount/premium on debt, net		2,461		4,580		14,389
Gain on recapitalization of unconsolidated entity		(175,879	)	—		—
Gain on sale of personal lines insurance policies		—		(17,714	)	—
Equity in (earnings) loss from unconsolidated entities, including $364.2 million and $126.4 million, respectively, of the Company’s share of SFAS 144 valuation adjustments related to assets of unconsolidated entities in 2007 and 2006		362,899		12,536		(133,814	)
Distribution of earnings from unconsolidated entities		106,883		174,979		221,131
Minority interest expense, net		1,927		13,415		45,030
Share-based compensation expense		35,478		36,632		6,916
Tax benefits from share-based awards		5,171		15,705		39,180
Excess tax benefits from share-based awards		(4,590	)	(7,103	)	—
Deferred income tax provision (benefit)		(438,817	)	(198,005	)	10,220
Loss on redemption of 9.95% senior notes		—		—		34,908
Valuation adjustments and write-offs of option deposits and pre-acquisition costs and goodwill		2,767,522		501,786		20,542
Changes in assets and liabilities, net of effect from acquisitions:
Increase in restricted cash		(10,633	)	(2,115	)	(11,129	)
(Increase) decrease in receivables		339,125		47,843		(221,275	)
(Increase) decrease in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs		666,228		(371,268	)	(1,708,033	)
(Increase) decrease in other assets		(833,016	)	9,253		(30,150	)
(Increase) decrease in financial services loans held-for-sale		190,254		78,922		(114,657	)
Increase (decrease) in accounts payable and other liabilities		(683,722	)	(386,211	)	741,690
Net earnings from discontinued operations		—		—		10,745
Adjustment to reconcile net earnings from discontinued operations to net cash provided by operating activities (including gain on sale of discontinued operations of ($15,816) in 2005)		—		—		(16,510	)
Net cash provided by operating activities		444,513		552,535		311,846
Cash flows from investing activities:
Net (additions) disposals to operating properties and equipment		81		(26,783	)	(21,747	)
Contributions to unconsolidated entities		(607,957	)	(729,304	)	(919,817	)
Distributions of capital from unconsolidated entities		542,346		321,610		466,800
Distributions in excess of investment in unconsolidated entity		354,644		—		—
(Increase) decrease in financial services loans held-for-investment		18,130		70,970		(117,359	)
Purchases of investment securities		(107,791	)	(108,626	)	(37,350	)
Proceeds from sales and maturities of investment securities		107,530		82,492		36,078
Proceeds from sale of business		—		—		17,000
Proceeds from sale of personal lines insurance policies		—		18,500		—
Acquisitions, net of cash acquired		—		(33,213	)	(416,049	)
Net cash provided by (used in) investing activities		306,983		(404,354	)	(992,444	)
Cash flows from financing activities:
Net borrowings (repayments) under financial services debt		(607,794	)	(120,858	)	372,849
Net proceeds from 5.125% senior notes		—		—		298,215
Net proceeds from 5.60% senior notes		—		—		501,460
Net proceeds from 5.95% senior notes		—		248,665		—
Net proceeds from 6.50% senior notes		—		248,933		—

See accompanying notes to consolidated financial statements.

60

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

Years Ended November 30, 2007, 2006 and 2005

	2007			2006		2005
	(Dollars in thousands)
Redemption of senior floating-rate notes due 2007		—		(200,000	)	—
Redemption of senior floating-rate notes due 2009		(300,000	)	—		—
Redemption of 9.95% senior notes		—		—		(337,731	)
Proceeds from other borrowings		32,178		2,489		53,198
Principal payments on other borrowings		(188,544	)	(150,793	)	(190,240	)
Net proceeds from sale of land to an unconsolidated land investment venture		445,000		—		—
Net payments related to minority interests		(36,545	)	(71,351	)	(33,181	)
Excess tax benefits from share-based awards		4,590		7,103		—
Common stock:
Issuances		21,588		31,131		38,069
Repurchases		(3,971	)	(323,229	)	(289,284	)
Dividends		(101,123	)	(101,295	)	(89,229	)
Net cash provided by (used in) financing activities		(734,621	)	(429,205	)	324,126
Net increase (decrease) in cash	$	16,875		(281,024	)	(356,472	)
Cash at beginning of year		778,319		1,059,343		1,415,815
Cash at end of year	$	795,194		778,319		1,059,343
Summary of cash:
Homebuilding	$	642,467		661,662		909,557
Financial services		152,727		116,657		149,786
	$	795,194		778,319		1,059,343
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	$	32,731		28,731		15,844
Cash paid for income taxes, net	$	214,848		915,743		571,498
Supplemental disclosures of non-cash investing and financing activities:
Conversion of debt to equity, including tax benefit	$	95,978		157,894		128,278
Purchases of inventories financed by sellers	$	10,253		36,810		159,078
Non-cash contributions to unconsolidated entities	$	73,822		39,491		—
Non-cash distributions from unconsolidated entities	$	14,036		25,329		74,498
Issuance of common stock for employee compensation	$	7,391		38,150		—
Consolidation/deconsolidation of previously unconsolidated/ consolidated entities, net:
Receivables	$	4,093		(232	)	20,100
Inventories	$	238,060		188,191		153,005
Investments in unconsolidated entities	$	(69,767	)	(38,354	)	(26,103	)
Other assets	$	1,625		6,563		6,423
Other debts payable	$	(173,239	)	(81,455	)	(81,006	)
Other liabilities	$	6,981		(40,588	)	(49,401	)
Minority interest	$	(7,753	)	(34,125	)	(23,018	)
Acquisitions:
Fair value of assets acquired	$	—		23,843		409,262
Goodwill recorded		—		10,518		13,781
Fair value of liabilities assumed		—		(1,148	)	(6,994	)
Cash paid	$	—		33,213		416,049

See accompanying notes to consolidated financial statements.

61

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of Lennar Corporation and all subsidiaries, partnerships and other entities in which Lennar Corporation has a controlling interest and variable interest entities (see Note 19) in which Lennar Corporation is deemed the primary beneficiary (the “Company”). The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Share-Based Payments

The Company has share-based awards outstanding under four different plans which provide for the granting of stock options and stock appreciation rights and awards of restricted common stock (“nonvested shares”) to key officers, employees and directors. The exercise prices of stock options and stock appreciation rights may not be less than the market value of the common stock on the date of the grant. No options granted under the plans may be exercisable until at least six months after the date of the grant. Thereafter, exercises are permitted in installments determined when options are granted. Each stock option and stock appreciation right will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant.

Prior to December 1, 2005, the Company accounted for stock option awards granted under the plans in accordance with the recognition and measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, (“APB 25”) and related Interpretations, as permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, (“SFAS 123”). Share-based employee compensation expense was not recognized in the Company’s consolidated statements of operations prior to December 1, 2005, as all stock option awards granted under the plans had an exercise price equal to or greater than the market value of the common stock on the date of the grant. Effective December 1, 2005, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment, (“SFAS 123R”) using the modified-prospective-transition method. Under this transition method, compensation expense recognized during the year ended November 30, 2006 included: (a) compensation expense for all share-based awards granted prior to, but not yet vested as of, December 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense for all share-based awards granted subsequent to December 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the modified-prospective-transition method, results for prior periods have not been restated.

As a result of SFAS 123R, the charge to earnings (loss) before provision (benefit) for income taxes for the years ended November 30, 2007 and 2006 was $17.2 million and $25.6 million, respectively. The impact of SFAS 123R on net earnings (loss) for the years ended November 30, 2007 and 2006 was $12.6 million and $18.5 million, respectively. The impact of SFAS 123R on basic earnings (loss) per share for the years ended November 30, 2007 and 2006 was $0.08 per share and $0.12 per share, respectively. The impact of SFAS 123R on diluted earnings (loss) per share for the years ended November 30, 2007 and 2006 was $0.08 per share and $0.11 per share, respectively. See Note 16 for details related to share-based payments.

Revenue Recognition

Revenues from sales of homes are recognized when the sales are closed and title passes to the new homeowner, the new homeowner’s initial and continuing investment is adequate to demonstrate a commitment to pay for the home, the new homeowner’s receivable is not subject to future subordination and the Company does

62

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

not have a substantial continuing involvement with the new home in accordance with SFAS No. 66, Accounting for Sales of Real Estate (“SFAS 66”). Revenues from sales of land are recognized when a significant down payment is received, the earnings process is complete, title passes and the collectibility of the receivable is reasonably assured.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $120.4 million, $155.5 million and $82.3 million for the years ended November 30, 2007, 2006 and 2005, respectively.

Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Due to the short maturity period of the cash equivalents, the carrying amounts of these instruments approximate their fair values. Cash as of November 30, 2007 and 2006 included $23.3 million and $135.9 million, respectively, of cash held in escrow for approximately three days.

Restricted Cash

Restricted cash consists of customer deposits on home sales held in restricted accounts until title transfers to the homebuyer, as required by the state and local governments in which the homes were sold.

Inventories

Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction. Construction overhead and selling expenses are expensed as incurred. Homes held-for-sale are classified as inventories until delivered. Land, land development, amenities and other costs are accumulated by specific area and allocated to homes within the respective areas. The Company reviews inventories for impairment during each reporting period on a community by community basis. SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, (“SFAS 144”) requires that if the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment charge should be recorded to write down the carrying amount of such asset to its fair value.

In conducting its review for indicators of impairment on a community level, the Company evaluates, among other things, the margins on homes that have been delivered, margins under sales contracts in backlog, projected margins with regard to future home sales over the life of the community, projected margins with regard to future land sales and the fair value of the land itself. The Company pays particular attention to communities in which inventory is moving at a slower than anticipated absorption pace and communities whose average sales price and/or margins are trending downward and are anticipated to continue to trend downward. From this review the Company identifies communities whose carrying values exceed their undiscounted cash flows.

The Company estimates the fair value of its communities using a discounted cash flow model. The projected cash flows for each community are significantly impacted by estimates related to market supply and demand, product type by community, homesite sizes, sales pace, sales prices, sales incentives, construction costs, sales and marketing expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors for that particular community. The determination of fair value also requires discounting the estimated cash flows at a rate commensurate with the inherent risks associated with the assets and related estimated cash flow streams. The discount rate used in determining each asset’s fair value depends on the community’s projected life and development stage. The Company generally uses discount rates ranging from 15% to 20%, depending on the perceived risks associated with the community’s cash flow streams relative to its inventory. For example, construction in progress inventory, which is closer to completion, will generally require a lower discount rate than land under development in communities consisting of multiple phases spanning several years of development.

63

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company estimates fair values of inventory evaluated for impairment under SFAS 144 based on current market conditions and current assumptions made by management, which may differ materially from actual results if market conditions change. For example, further market deterioration may lead to the Company incurring additional impairment charges on previously impaired inventory, as well as on inventory not currently impaired but for which indicators of impairment may arise if further market deterioration occurs.

The Company also has access to land inventory through option contracts, which generally enables the Company to control portions of properties owned by third parties and unconsolidated entities (including land funds) until it has determined whether to exercise its option. A majority of the Company’s option contracts require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land. The Company’s option contracts are recorded at cost. In determining whether to walk-away from an option contract, the Company evaluates the option primarily based upon its expected cash flows from the property under option. If the Company intends to walk-away from an option contract, it records a charge to earnings (loss) in the period such decision is made for the deposit amount and related pre-acquisition costs associated with the option contract.

During the years ended November 30, 2007, 2006 and 2005, the Company recorded $2.4 billion, $501.8 million and $20.5 million, respectively, of inventory adjustments, which included $747.8 million and $280.5 million, respectively, in 2007 and 2006 of valuation adjustments to finished homes, construction in progress and land on which the Company intends to build homes (no adjustments in 2005), $1.2 billion, $69.1 million and $5.4 million, respectively, in 2007, 2006 and 2005 of valuation adjustments to land the Company intends to sell to third parties and $530.0 million, $152.2 million and $15.1 million, respectively, in 2007, 2006 and 2005 of write-offs of deposits and pre-acquisition costs. The $1.2 billion of valuation adjustments recorded in 2007 to land the Company intends to sell to third parties includes $740.4 million of SFAS 144 valuation adjustments related to the portfolio of land the Company sold to its strategic land investment venture with Morgan Stanley Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., which was formed in November 2007. The valuation adjustments were calculated based on current market conditions and current assumptions made by management, which may differ materially from actual results if market conditions change. See Note 4 for details of valuation adjustments and write-offs by reportable segment and Homebuilding Other.

Investments in Unconsolidated Entities

The Company evaluates its investments in unconsolidated entities for impairment during each reporting period in accordance with APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock (“APB 18”). A series of operating losses of an investee or other factors may indicate that a decrease in value of the Company’s investment in the unconsolidated entity has occurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying value over its estimated fair value.

The evaluation of the Company’s investment in unconsolidated entities includes two critical assumptions: (1) projected future distributions from the unconsolidated entities and (2) discount rates applied to the future distributions.

The Company’s assumptions on the projected future distributions from the unconsolidated entities are dependent on market conditions. Specifically, distributions are dependent on cash to be generated from the sale of inventory by the unconsolidated entities. Such inventory is also reviewed for potential impairment by the unconsolidated entities in accordance with SFAS 144. The unconsolidated entities generally use discount rates ranging from 15% to 20% in their SFAS 144 reviews for impairment. If a valuation adjustment is recorded by an unconsolidated entity in accordance with SFAS 144, the Company’s proportionate share is reflected in the Company’s equity in earnings (loss) from unconsolidated entities with a corresponding decrease to its investment in unconsolidated entities. In certain instances, the Company may be required to record additional losses relating to its investment in unconsolidated entities under APB 18, if the Company’s investment in the unconsolidated entity, or a portion thereof, is deemed to be unrecoverable through its disposition. These losses are included in management fees and other income (expense), net.

During the years ended November 30, 2007, and 2006, the Company recorded $496.4 million and $140.9 million, respectively, of adjustments to its investments in unconsolidated entities, which included $364.2 million and $126.4 million, respectively, in 2007 and 2006 of SFAS 144 valuation adjustments related to the assets of the

64

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Company’s unconsolidated entities and $132.2 million and $14.5 million, respectively, in 2007, and 2006 of valuation adjustments to investments in unconsolidated entities in accordance with APB 18. The Company did not record any adjustments to its investments in unconsolidated entities related to SFAS 144 or APB 18 during 2005. These valuation adjustments were calculated based on current market conditions and assumptions made by management, which may differ materially from actual results if market conditions change. See Note 4 for details of valuation adjustments and write-offs by reportable segment and Homebuilding Other.

The Company tracks its share of cumulative earnings and cumulative distributions of its joint ventures (“JVs”). For purposes of classifying distributions received from JVs in the Company’s statements of cash flows, cumulative distributions are treated as returns on capital to the extent of cumulative earnings and included in the Company’s consolidated statements of cash flows as operating activities. Cumulative distributions in excess of the Company’s share of cumulative earnings are treated as returns of capital and included in the Company’s consolidated statements of cash flows as investing activities.

Interest and Real Estate Taxes

Interest and real estate taxes attributable to land and homes are capitalized as inventories while they are being actively developed. Interest related to homebuilding and land, including interest costs relieved from inventories, is included in cost of homes sold and cost of land sold. Interest expense related to the financial services operations is included in its costs and expenses.

During 2007, 2006 and 2005, interest incurred by the Company’s homebuilding operations related to homebuilding debt was $199.1 million, $232.1 million and $172.9 million, respectively; interest capitalized into inventories was $196.7 million, $226.3 million and $171.1 million, respectively; and interest expense primarily included in cost of homes sold and cost of land sold was $203.7 million, $241.1 million and $187.2 million, respectively.

Operating Properties and Equipment

Operating properties and equipment are recorded at cost and are included in other assets in the consolidated balance sheets. The assets are depreciated over their estimated useful lives using the straight-line method. At the time operating properties and equipment are disposed of, the asset and related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to earnings. The estimated useful life for operating properties is thirty years, for furniture, fixtures and equipment is two to ten years and for leasehold improvements is five years or the life of the lease, whichever is shorter.

Investment Securities

Investment securities are classified as available-for-sale unless they are classified as trading or held-to-maturity. Securities classified as trading are carried at fair value and unrealized holding gains and losses are recorded in earnings. Securities classified as held-to-maturity are carried at amortized cost because they are purchased with the intent and ability to hold to maturity. Available-for-sale securities are recorded at fair value. Any unrealized holding gains or losses on available-for-sale securities are reported as accumulated other comprehensive gain or loss, which is a separate component of stockholders’ equity, net of tax, until realized.

At November 30, 2007 and 2006, investment securities classified as held-to-maturity totaled $61.5 million and $59.6 million, respectively, and were included in the assets of the Financial Services segment. The held-to-maturity securities consist mainly of certificates of deposit and U.S. treasury securities. At November 30, 2007, the Company had no investment securities classified as trading or available-for-sale, compared to $8.5 million of trading securities at November 30, 2006, which were included in other assets of the Homebuilding operations. The trading securities were comprised mainly of marketable equity mutual funds designated to approximate the Company’s liabilities under its deferred compensation plan.

Derivative Financial Instruments

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, (“SFAS 133”), as amended and interpreted, establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or

65

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income or loss and recognized in the statement of operations when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment.

The Company’s policy is to designate at a derivative’s inception the specific assets, liabilities, or future commitments being hedged and monitor the derivative to determine if it remains an effective hedge. The effectiveness of a derivative as a hedge is based on high correlation between changes in its value and changes in the value of the underlying hedged item. The Company recognizes gains or losses for amounts received or paid when the underlying transaction settles. The Company does not enter into or hold derivatives for trading or speculative purposes.

The Company had various interest rate swap agreements, which effectively converted variable interest rates to fixed interest rates on $200.0 million of outstanding debt related to its homebuilding operations. In June 2007, the Company redeemed the variable rate debt that was being hedged by the various interest rate swap agreements. The Company’s last remaining interest rate swap was terminated in June 2007. The swap agreements had been designated as cash flow hedges and, accordingly, were reflected at their fair value in other liabilities in the consolidated balance sheet at November 30, 2006. The related loss was deferred, net of tax, in stockholders’ equity as accumulated other comprehensive loss. The Company accounted for its interest rate swaps using the shortcut method, as described in SFAS 133. Amounts to be received or paid as a result of the swap agreements were recognized as adjustments to interest incurred on the related debt instruments. There was no ineffectiveness related to the interest rate swaps and therefore no portion of the accumulated other comprehensive loss was reclassified into earnings. The net effect on the Company’s operating results was that interest on the variable-rate debt hedged was recorded based on fixed interest rates.

The Financial Services segment, in the normal course of business, uses derivative financial instruments to reduce its exposure to fluctuations in mortgage-related interest rates. The segment uses mortgage-backed securities (“MBS”) forward commitments, option contracts and investor commitments to protect the value of fixed rate-locked loan commitments and loans held-for-sale from fluctuations in mortgage-related interest rates. These derivative financial instruments are designated as fair value hedges, and, accordingly, for all qualifying and highly effective fair value hedges, the changes in the fair value of the derivative and the loss or gain on the hedged asset related to the risk being hedged are recorded in earnings.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations. Evaluating goodwill for impairment involves the determination of the fair value of the Company’s reporting units in which the Company has recorded goodwill. A reporting unit is a component of an operating segment for which discrete financial information is available and reviewed by the Company’s management on a regular basis. Inherent in the determination of fair value of the Company’s reporting units are certain estimates and judgments, including the interpretation of current economic indicators and market valuations as well as the Company’s strategic plans with regard to its operations. To the extent additional information arises or the Company’s strategies change, it is possible that the Company’s conclusion regarding goodwill impairment could change, which could have a significant effect on the Company’s financial position and results of operations.

At November 30, 2007 and 2006, goodwill was $61.2 million and $257.8 million, respectively. The goodwill balance at November 30, 2007 relates to the Financial Services segment and is included in the assets of that segment. At November 30, 2006, the goodwill balance of $257.8 million was comprised of $196.6 million related to the Company’s Homebuilding segments and Homebuilding Other and $61.2 million related to the Company’s Financial Services segment. During fiscal 2007, the Company wrote-off its remaining homebuilding goodwill. Prior to the $190.2 million write-off of homebuilding goodwill, the Company recorded an adjustment to goodwill of $6.4 million due to a change in estimate related to tax liabilities associated with a prior acquisition. During fiscal 2006, the Company’s goodwill had a net increase of $4.7 million primarily due to an acquisition by the Financial Services segment and payment of contingent consideration related to prior period acquisitions. During fiscal 2005, the Company’s goodwill increased $13.8 million due to 2005 acquisitions and payment of contingent consideration related to prior period acquisitions.

66

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company reviews goodwill annually (or whenever indicators of impairment exist) for impairment in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. Continued deterioration in market conditions as a result of tightening mortgage credit standards and other factors led to SFAS 144 and APB 18 impairments and a significant decline in the Company’s market capitalization; thus, the Company reviewed goodwill for impairment in both its third and fourth quarters of 2007. During the third quarter of 2007, the Company recorded a goodwill impairment charge of $16.5 million related to its homebuilding operations. The third quarter goodwill, impairment charge related primarily to specific acquisitions made during the peak homebuilding years (2003 to 2005) in Homebuilding Other and the Company’s Homebuilding Central reportable segment. To the extent goodwill resulted from acquisitions during the peak homebuilding years, it increased the likelihood of a goodwill impairment charge due to the premium values the Company paid for the respective land positions of such acquired companies. Conversely, to the extent that goodwill resulted from acquisitions prior to the peak homebuilding years, it decreased the likelihood of a goodwill impairment charge because there could be significant declines in values without reducing the fair values of the companies acquired below what they were when the companies were acquired. In addition, both Homebuilding Other and the Company’s Homebuilding Central reportable segment have generally underperformed in comparison to the Homebuilding East and Homebuilding West reportable segments.

The Company performed its annual impairment test of goodwill in the fourth quarter and took an additional goodwill impairment charge of $173.7 million in all of the Company’s homebuilding segments and Homebuilding Other during its fourth quarter. The Company’s Financial Services segment goodwill was not impaired. The goodwill impairment related to the Company’s homebuilding operations in the fourth quarter was due to a significant decline in the estimated fair value of its homebuilding reporting units subsequent to its third quarter, which resulted from significant deterioration in market conditions and a decrease in the Company’s stock price during that period. No impairment was recorded during the years ended November 30, 2006 and 2005. As of November 30, 2007 and 2006, there were no material identifiable intangible assets, other than goodwill.

Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes, (“SFAS 109”). The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.

SFAS 109 requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets are assessed periodically by the Company based on the SFAS 109 more-likely-than-not realization threshold criterion. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with operating loss and tax credit carryforwards not expiring unused, and tax planning alternatives.

The Company’s analysis of the need for a valuation allowance recognizes that while the Company has not incurred a cumulative loss over its evaluation period, a substantial loss was incurred in the current year. However, a substantial portion of the current loss was the result of the difficult current market conditions that led to the impairments of certain tangible assets as well as goodwill. Consideration has also been given to the lengthy period over which these net deferred tax assets can be realized, and the Company’s history of not having Federal tax loss carryforwards expire unused.

At November 30, 2007 and 2006, the Company’s net deferred tax asset was $746.9 million and $307.2 million, respectively. Based on the Company’s assessment, it appears more likely than not that the net deferred tax asset will be realized through future taxable earnings to be generated by the Company. If future results are less than projected and there is no objectively verifiable evidence to support the realization of the Company’s deferred tax asset, a substantial valuation allowance may be required to reduce the deferred tax assets. However,

67

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

currently no valuation allowance has been established for the Company’s net deferred tax asset. The Company will continue to assess the need for a valuation allowance in the future.

Product Warranty

Warranty and similar reserves for homes are established at an amount estimated to be adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Reserves are determined based on historical data and trends with respect to similar product types and geographical areas. The Company regularly monitors the warranty reserve and makes adjustments to its pre-existing warranties in order to reflect changes in trends and historical data as information becomes available. Warranty reserves are included in other liabilities in the consolidated balance sheets. The activity in the Company’s warranty reserve was as follows:

	November 30,
	2007			2006
	(In thousands)
Warranty reserve, beginning of year	$	172,571		144,916
Warranties issued during the period		102,384		170,020
Adjustments to pre-existing warranties from changes in estimates		51,816		25,487
Payments		(161,930	)	(167,852	)
Warranty reserve, end of year	$	164,841		172,571

Self-Insurance

Certain insurable risks such as general liability, medical and workers’ compensation are self-insured by the Company up to certain limits. Undiscounted accruals for claims under the Company’s self-insurance program are based on claims filed and estimates for claims incurred but not yet reported.

Minority Interest

The Company has consolidated certain joint ventures because the Company either was determined to be the primary beneficiary pursuant to Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R) (“FIN 46R”), Consolidation of Variable Interest Entities, or has a controlling interest in these joint ventures. Therefore, the entities’ financial statements are consolidated in the Company’s consolidated financial statements and the other partners’ equity is recorded as minority interest. At November 30, 2007 and 2006, minority interest was $28.5 million and $55.4 million, respectively. Minority interest expense, net was $1.9 million, $13.4 million and $45.0 million, respectively, for the years ended November 30, 2007, 2006 and 2005.

Earnings (loss) per Share

Earnings (loss) per share is accounted for in accordance with SFAS No. 128, Earnings per Share, which requires a dual presentation of basic and diluted earnings per share on the face of the consolidated statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

Financial Services

Loan origination revenues, net of direct origination costs and gains and losses from the sale of loans and loan servicing rights are recognized when the loans are sold and shipped to an investor. Premiums from title insurance policies are recognized as revenue on the effective dates of the policies. Escrow fees are recognized at the time the related real estate transactions are completed, usually upon the close of escrow.

Loans held-for-sale by the Financial Services segment that are designated as hedged assets are carried at fair value because the effect of changes in fair value are reflected in the carrying amount of the loans and in earnings. Premiums and discounts recorded on these loans are presented as an adjustment to the carrying amount of the

68

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

loans and are not amortized. Interest income on loans held-for-sale is recognized as earned over the term of the mortgage loans based on the contractual interest rates.

When the segment sells loans in the secondary mortgage market, a gain or loss is recognized to the extent that the sales proceeds exceed, or are less than, the book value of the loans. Substantially all of these loans are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis; although, the Company remains liable for certain limited representations and warranties related to loan sales. Loan origination fees, net of direct origination costs, are deferred and recognized as a component of the gain or loss when loans are sold.

Loans for which the segment has the positive intent and ability to hold to maturity consist of mortgage loans carried at cost, net of unamortized discounts. Discounts are amortized over the estimated lives of the loans using the interest method. Interest income on loans held-for-investment is recognized as earned over the term of the mortgage loans based on the contractual interest rates.

The segment also provides an allowance for loan losses. The provision recorded and the adequacy of the related allowance is determined by the Company’s management’s continuing evaluation of the loan portfolio in light of past loan loss experience, credit worthiness and nature of underlying collateral, present economic conditions and other factors considered relevant by the Company’s management. Anticipated changes in economic factors, which may influence the level of the allowance, are considered in the evaluation by the Company’s management when the likelihood of the changes can be reasonably determined. While the Company’s management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary as a result of future economic and other conditions that may be beyond management’s control.

New Accounting Pronouncements

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of SFAS 109, (“FIN 48”). FIN 48 provides interpretive guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for the Company on December 1, 2007. The adoption of FIN 48 is expected to result in a charge of approximately $30 million to the Company’s retained earnings as of December 1, 2007.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for the Company’s financial assets and liabilities on December 1, 2007. The FASB has proposed a deferral of the provisions of SFAS 157 relating to nonfinancial assets and liabilities that would delay implementation by the Company until December 1, 2008. SFAS 157 is not expected to materially affect how the Company determines fair value, but may result in certain additional disclosures.

In November 2006, the FASB issued Emerging Issues Task Force Issue No. 06-8, Applicability of the Assessment of a Buyers Continuing Investment under FASB Statement No. 66, Accounting for Sales of Real Estate, for Sales of Condominiums, (“EITF 06-8”). EITF 06-8 establishes that a company should evaluate the adequacy of the buyer’s continuing investment in determining whether to recognize profit under the percentage-of-completion method. EITF 06-8 is effective for the Company’s fiscal year beginning December 1, 2007. The effect of this EITF is not expected to be material to the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115, (“SFAS 159”). SFAS 159 permits companies to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for the Company on December 1, 2007. The Company did not elect the fair value option for any of its existing financial instruments on the effective date and has not determined whether or not it will elect this option for any eligible financial instruments it acquires in the future.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the

69

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

noncontrolling interest be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. SFAS 160 is effective for the Company’s fiscal year beginning December 1, 2009. The Company will evaluate the impact the adoption of SFAS 160 will have on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. SFAS 141R expands on required disclosures to improve the statement users’ abilities to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for the Company’s fiscal year beginning December 1, 2009. The Company does not expect the adoption of SFAS 141R to have a material effect on its consolidated financial statements.

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the 2007 presentation. These reclassifications had no impact on the Company’s results of operations.

2.    Discontinued Operations

In May 2005, the Company sold North American Exchange Company (“NAEC”), a subsidiary of the Financial Services segment’s title company, which generated a $15.8 million pretax gain. NAEC’s revenues were $3.3 million for the year ended November 30, 2005.

3.    Acquisitions

During 2007 and 2006, the Company did not have any material acquisitions. During 2005, the Company expanded its presence through homebuilding acquisitions in all of its homebuilding segments and Homebuilding Other. In connection with these acquisitions and contingent consideration related to prior period acquisitions, the Company paid $416.0 million. The results of operations of these acquisitions are included in the Company’s results of operations since their respective acquisition dates. The pro forma effect of these acquisitions on the results of operations is not presented as the effect is not material. Total goodwill associated with these acquisitions and contingent consideration related to acquisitions prior to 2005 was $13.8 million.

4.    Operating and Reporting Segments

The Company’s operating segments are aggregated into reportable segments in accordance with SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information (“SFAS 131”), based primarily upon similar economic characteristics, geography and product type. The Company’s reportable segments consist of:

(1) Homebuilding East

(2) Homebuilding Central

(3) Homebuilding West

(4) Financial Services

Information about homebuilding activities in which our homebuilding activities are not economically similar to other states in the same geographic area is grouped under “Homebuilding Other,” which is not considered a reportable segment in accordance with SFAS 131.

70

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Operations of the Company’s homebuilding segments primarily include the construction and sale of single-family attached and detached homes, and to a lesser extent, multi-level residential buildings, as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities. The Company’s reportable homebuilding segments, and all other homebuilding operations not required to be reported separately, have divisions located in the following states:

East: Florida, Maryland, New Jersey and Virginia

Central: Arizona, Colorado and Texas

West: California and Nevada

Other: Illinois, Minnesota, New York, North Carolina and South Carolina

Operations of the Financial Services segment include mortgage financing, title insurance, closing services and other ancillary services (including high-speed Internet and cable television) for both buyers of the Company’s homes and others. Substantially all of the loans the Financial Services segment originates are sold in the secondary mortgage market on a servicing released, non-recourse basis; although, the Company remains liable for certain limited representations and warranties related to loan sales. The Financial Services segment operates generally in the same states as the Company’s homebuilding operations, as well as other states.

Evaluation of segment performance is based primarily on operating earnings (loss) from continuing operations before provision (benefit) for income taxes. Operating earnings (loss) for the homebuilding segments consist of revenues generated from the sales of homes and land, equity in earnings (loss) from unconsolidated entities and management fees and other income (expense), net, less the cost of homes and land sold, selling, general and administrative expenses and minority interest income (expense), net. Homebuilding operating loss for the year ended November 30, 2007 includes a $175.9 million pretax financial statement gain on the recapitalization of an unconsolidated entity, which is included in the Company’s Homebuilding West segment. In addition, homebuilding operating loss for the year ended November 30, 2007 includes SFAS 144 valuation adjustments to finished homes, construction in progress (“CIP”) and land on which the Company intends to build homes, SFAS 144 valuation adjustments to land the Company intends to sell to third parties, write-offs of option deposits and pre-acquisition costs related to land under option that the Company does not intend to purchase, SFAS 144 valuation adjustments related to assets of unconsolidated entities that are recorded in equity in earnings (loss) from unconsolidated entities, ABP 18 valuation adjustments to investments in unconsolidated entities that are recorded in management fees and other income (expense), net and goodwill impairments. Operating earnings for the Financial Services segment consist of revenues generated from mortgage financing, title insurance and other ancillary services (including high-speed Internet and cable television) less the cost of such services and certain selling, general and administrative expenses incurred by the Financial Services segment. Financial Services operating earnings for the year ended November 30, 2007 includes write-offs of certain notes receivable.

Each reportable segment follows the same accounting policies described in Note 1 – “Summary of Significant Accounting Policies” to the consolidated financial statements. Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented.

71

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Financial information relating to the Company’s operations was as follows:

	November 30,
	2007		2006
	(In thousands)
Assets:
Homebuilding East	$	1,630,086	3,326,371
Homebuilding Central		1,077,021	1,651,848
Homebuilding West		2,477,661	3,972,562
Homebuilding Other		708,266	1,164,304
Financial Services		1,037,809	1,613,376
Corporate and unallocated		2,171,904	679,805
Total assets	$	9,102,747	12,408,266
Investments in unconsolidated entities:
Homebuilding East	$	166,839	241,490
Homebuilding Central		211,613	180,768
Homebuilding West		515,548	974,404
Homebuilding Other		40,271	50,516
Total investments in unconsolidated entities	$	934,271	1,447,178
Goodwill:
Homebuilding East	$	—	49,135
Homebuilding Central		—	31,587
Homebuilding West		—	46,640
Homebuilding Other		—	69,276
Financial Services		61,222	61,205
Total goodwill	$	61,222	257,843

	Years Ended November 30,
	2007			2006		2005
	(In thousands)
Revenues:
Homebuilding East	$	2,754,650		4,771,879		3,498,983
Homebuilding Central		2,444,089		3,649,221		3,374,893
Homebuilding West		3,543,712		5,969,512		5,302,767
Homebuilding Other		987,801		1,232,428		1,127,956
Financial Services		456,529		643,622		562,372
Total revenues (1)	$	10,186,781		16,266,662		13,866,971
Operating earnings (loss):
Homebuilding East	$	(893,159	)	236,654		641,264
Homebuilding Central		(248,906	)	215,386		368,476
Homebuilding West (2)		(1,478,804	)	639,917		1,214,149
Homebuilding Other		(293,130	)	(105,804	)	53,202
Financial Services (3)		6,120		149,803		104,768
Total operating earnings (loss)		(2,907,879	)	1,135,956		2,381,859
Corporate and unallocated (4)		(173,202	)	(193,307	)	(222,165	)
Earnings (loss) from continuing operations before provision (benefit) for income taxes	$	(3,081,081	)	942,649		2,159,694

(1) Total revenues are net of sales incentives of $1.5 billion ($48,000 per home delivered) for the year ended November 30, 2007, $1.5 billion ($32,000 per home delivered) for the year ended November 30, 2006 and $368.8 million ($9,000 per home delivered) for the year ended November 30, 2005.

(2) Includes a $175.9 million pretax financial statement gain on the recapitalization of an unconsolidated entity for the year ended November 30, 2007.

(3) Includes a $17.7 million pretax gain for the year ended November 30, 2006 from monetizing the Financial Services segment’s personal lines insurance policies.

(4) Corporate and unallocated includes corporate general and administrative expenses and a $34.9 million loss on the redemption of 9.95% senior notes in 2005.

72

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Valuation Adjustments and Write-offs

Homebuilding operating earnings (loss) for the years ended November 30, 2007, 2006 and 2005 include SFAS 144 valuation adjustments to finished homes, CIP and land on which the Company intends to build homes, SFAS 144 valuation adjustments to land the Company intends to sell to third parties, write-offs of deposits and pre-acquisition costs related to land under option that the Company does not intend to purchase, SFAS 144 valuation adjustments related to assets of unconsolidated entities that are reflected in equity in earnings (loss) from unconsolidated entities, valuation adjustments in accordance with APB 18 to the Company’s investments in unconsolidated entities that are recorded in management fees and other income (expense), net, and goodwill impairments. Financial Services operating earnings for the years ended November 30, 2007 and 2006 include write-offs of certain notes receivable.

Valuation adjustments and write-offs relating to the Company’s operations were as follows:

	Years Ended November 30,
	2007		2006	2005
	(In thousands)
SFAS 144 valuation adjustments to finished homes, CIP and land on which the Company intends to build homes:
East	$	279,064	155,749	—
Central		94,190	27,138	—
West		331,827	80,207	—
Other		42,762	17,375	—
Total		747,843	280,469	—
SFAS 144 valuation adjustments to land the Company intends to sell to third parties:
East		307,534	24,702	520
Central		80,863	17,318	—
West		648,628	—	—
Other		130,269	27,057	4,908
Total		1,167,294	69,077	5,428
Write-offs of option deposits and pre-acquisition costs:
East		119,645	80,483	3,302
Central		57,117	2,951	305
West		310,795	44,000	10,142
Other		42,424	24,806	1,365
Total		529,981	152,240	15,114
Company’s share of SFAS 144 valuation adjustments related to assets of unconsolidated entities:
East		55,157	25,484	—
Central		29,585	—	—
West		273,679	92,776	—
Other		5,741	8,177	—
Total		364,162	126,437	—
APB 18 valuation adjustments to investments in unconsolidated entities:
East		42,200	—	—
Central		14,552	—	—
West		68,883	12,165	—
Other		6,571	2,305	—
Total		132,206	14,470	—
Goodwill impairments:
East		46,274	—	—
Central		31,293	—	—
West		43,955	—	—
Other		68,676	—	—
Total		190,198	—	—
Financial Services write-offs of notes receivable		28,426	2,713	—
Total valuation adjustments and write-offs of option deposits and pre-acquisition costs, goodwill and financial services notes receivable	$	3,160,110	645,406	20,542

73

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The housing market continued to deteriorate throughout 2007. This deterioration in market conditions combined with reduced credit availability in the financial markets resulted in an increase in the supply of new and existing homes for sale, as well as intensified competitive pressures to sell those homes. These competitive market conditions, together with a deceleration in sales pace, have resulted in an increase in sales incentives, leading to increased valuation adjustments and write-offs of option deposits and pre-acquisition costs related to land under option that the Company does not intend to purchase in 2007, compared to 2006 and 2005. Valuation adjustments and write-offs of option deposits and pre-acquisition costs and goodwill increased to $3.2 billion in the year ended November 30, 2007, compared to $645.4 million and $20.5 million, respectively, in the years ended November 30, 2006 and 2005.

The $1.2 billion of valuation adjustments recorded in 2007 to land the Company intends to sell to third parties includes $740.4 million of SFAS 144 valuation adjustments related to the portfolio of land the Company sold to its strategic land investment venture with Morgan Stanley Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., which was formed in November 2007. The strategic land investment is a venture to acquire, develop, manage and sell residential real estate. The Company acquired a 20% ownership interest and 50% voting rights in the investment venture. Concurrent with the formation of the land investment venture, the Company sold a diversified portfolio of its land to the venture for $525 million. The properties acquired by the new entity consist of approximately 11,000 homesites in 32 communities located throughout the country. The properties the Company sold had a net book value of approximately $1.3 billion. As part of the transaction, the Company entered into option agreements and obtained rights of first offer providing the Company the opportunity to purchase certain finished homesites. The exercise price of the options is based on a fixed percentage of the future home price. The Company has no obligation to exercise these options and cannot acquire a majority of the entity’s assets. The Company is managing the land investment venture’s operations and receives fees for its services. The Company will also receive disproportionate distributions if the investment venture exceeds certain financial targets.

Due to the Company’s continuing involvement, the transaction did not qualify as a sale under GAAP; thus, the inventory remained on the Company’s consolidated balance sheet in consolidated inventory not owned as of November 30, 2007. Additionally, the $445 million of cash received net of the Company’s deposit on the homesites under option and the Company’s contribution to the land investment venture from the transaction was recorded in liabilities related to consolidated inventory not owned in the consolidated balance sheet. As noted above, in connection with the transaction, the Company recorded a SFAS 144 valuation adjustment of $740.4 million on the inventory sold to the investment venture.

Further deterioration in the homebuilding market may cause additional pricing pressures and slower absorption, which may lead to additional valuation adjustments in the future. In addition, market conditions may cause the Company to re-evaluate its strategy regarding certain assets that could result in further valuation adjustments and/or additional write-offs of option deposits and pre-acquisition costs due to the abandonment of those option contracts.

In addition, during the years ended November 30, 2007 and 2006, the Company’s Financial Services segment wrote-off $28.4 million and $2.7 million, respectively, of land seller notes receivable. If market conditions continue to deteriorate, the Financial Services segment may need to reassess the value of the underlying collateral and/or renegotiate the terms of its land seller notes receivable, which may result in additional write-offs in the future.

74

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Years Ended November 30,
	2007			2006		2005
	(In thousands)
Homebuilding interest expense:
Homebuilding East	$	62,150		62,326		35,231
Homebuilding Central		44,589		45,608		41,203
Homebuilding West		73,579		108,687		91,954
Homebuilding Other		23,382		24,445		18,766
Total homebuilding interest expense	$	203,700		241,066		187,154
Financial Services interest income, net	$	37,553		64,524		33,989
Depreciation and amortization:
Homebuilding East	$	10,505		7,051		5,241
Homebuilding Central		4,620		4,821		4,271
Homebuilding West		24,211		19,373		19,623
Homebuilding Other		4,994		3,950		3,353
Financial Services		10,143		8,594		10,346
Corporate and unallocated		18,137		12,698		22,335
Total depreciation and amortization	$	72,610		56,487		65,169
Net additions (disposals) to operating properties and equipment:
Homebuilding East	$	(5,391	)	5,073		1,097
Homebuilding Central		1,588		2,245		1,017
Homebuilding West		(2,182	)	4,556		3,540
Homebuilding Other		348		2,704		556
Financial Services		4,206		6,244		10,008
Corporate and unallocated		1,350		5,961		5,529
Total net additions (disposals) to operating properties and equipment	$	(81	)	26,783		21,747
Equity in earnings (loss) from unconsolidated entities:
Homebuilding East	$	(58,069	)	(14,947	)	2,213
Homebuilding Central		(26,130	)	7,763		15,103
Homebuilding West		(274,267	)	(6,449	)	109,995
Homebuilding Other		(4,433	)	1,097		6,503
Total equity in earnings (loss) from unconsolidated entities	$	(362,899	)	(12,536	)	133,814

During 2007, 2006 and 2005, interest included in the homebuilding segments’ and Homebuilding Other’s cost of homes sold was $168.4 million, $207.5 million and $168.8 million, respectively. During 2007, 2006 and 2005, interest included in the homebuilding segments’ and Homebuilding Other’s cost of land sold was $9.4 million, $12.4 million and $16.5 million, respectively. All other interest related to the homebuilding segments and Homebuilding Other is included in management fees and other income (expense), net.

5.    Receivables

	November 30,
	2007			2006
	(In thousands)
Accounts receivable	$	166,017		123,211
Mortgages and notes receivable		59,877		37,473
		225,894		160,684
Allowance for doubtful accounts		(18,203	)	(1,641	)
	$	207,691		159,043

75

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounts receivable result primarily from the sale of land. The Company performs ongoing credit evaluations of its customers. The Company generally does not require collateral for accounts receivable. Mortgages and notes receivable are generally collateralized by the property sold to the buyer. Allowances are maintained for potential credit losses based on historical experience, present economic conditions and other factors considered relevant by the Company.

6.    Investments in Unconsolidated Entities

Summarized condensed financial information on a combined 100% basis related to unconsolidated entities in which the Company has investments that are accounted for by the equity method was as follows:

	November 30,
	2007		2006
	(In thousands)
Assets:
Cash	$	301,468	276,501
Inventories		7,941,835	8,955,567
Other assets		827,208	868,073
	$	9,070,511	10,100,141
Liabilities and equity:
Accounts payable and other liabilities	$	1,214,374	1,387,745
Notes and mortgages payable		5,116,670	5,001,625
Equity of:
The Company		934,271	1,447,178
Others		1,805,196	2,263,593
	$	9,070,511	10,100,141

	Years Ended November 30,
	2007			2006		2005
	(In thousands)
Revenues	$	2,060,279		2,651,932		2,676,628
Costs and expenses		3,075,696		2,588,196		2,020,470
Net earnings (loss) of unconsolidated entities	$	(1,015,417	)	63,736		656,158
Company’s share of net earnings (loss)—recognized (1)	$	(362,899	)	(12,536	)	133,814

(1) For the year ended November 30, 2007, the Company’s share of net loss recognized from unconsolidated entities includes $364.2 million of its share of SFAS 144 valuation adjustments related to assets of unconsolidated entities, compared to $126.4 million for the year ended November 30, 2006 and no valuation adjustments for the year ended November 30, 2005.

The Company’s partners generally are unrelated homebuilders, land owners/developers and financial or other strategic partners. The unconsolidated entities follow accounting principles, which are in all material respects the same as those used by the Company. The Company shares in the profits and losses of these unconsolidated entities generally in accordance with its ownership interests. In many instances, the Company is appointed as the day-to-day manager of the unconsolidated entities and receives management fees and/or reimbursement of expenses for performing this function. During the years ended November 30, 2007, 2006 and 2005, the Company received management fees and reimbursement of expenses from the unconsolidated entities totaling $52.1 million, $72.8 million and $58.6 million, respectively.

The Company and/or its partners sometimes obtain options or enter into other arrangements under which the Company can purchase portions of the land held by the unconsolidated entities. Option prices are generally negotiated prices that approximate fair value when the Company receives the options. During the years ended November 30, 2007, 2006 and 2005, $977.5 million, $742.5 million and $431.2 million, respectively, of the unconsolidated entities’ revenues were from land sales to the Company. The Company does not include in its equity in earnings (loss) from unconsolidated entities its pro rata share of unconsolidated entities’ earnings

76

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

resulting from land sales to its homebuilding divisions. Instead, the Company accounts for those earnings as a reduction of the cost of purchasing the land from the unconsolidated entities. This in effect defers recognition of the Company’s share of the unconsolidated entities’ earnings related to these sales until the Company delivers a home and title passes to a third-party homebuyer.

The unconsolidated entities in which the Company has investments usually finance their activities with a combination of partner equity and debt financing. As of November 30, 2007, the Company’s equity in these unconsolidated entities represented 34% of the entities’ total equity.

Indebtedness of an unconsolidated entity is secured by its own assets. There is no cross collateralization of debt to different unconsolidated entities; however, some unconsolidated entities own multiple properties and other assets. In connection with a loan to an unconsolidated entity, the Company and its partners often guarantee to a lender either jointly and severally or on a several basis, any, or all of the following: (i) the completion of the development, in whole or in part, (ii) indemnification of the lender from environmental issues, (iii) indemnification of the lender from “bad boy acts” of the unconsolidated entity (or full recourse liability in the event of unauthorized transfer or bankruptcy) and (iv) that the loan to value and/or loan to cost will not exceed a certain percentage (maintenance or remargining guarantee) or that a percentage of the outstanding loan will be repaid (repayment guarantee).

In connection with loans to an unconsolidated entity where there is a joint and several guarantee, the Company often has a reimbursement agreement with its partner. The reimbursement agreement provides that neither party is responsible for more than its proportionate share of the guarantee. However, if the Company’s joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, the Company may be liable for more than its proportionate share, up to its maximum recourse exposure, which is the full amount covered by the joint and several guarantee.

The Company’s summary of its net recourse exposure related to its unconsolidated entities was as follows:

	November 30,
	2007			2006
	(In thousands)
Sole recourse debt	$	—		18,920
Several recourse debt—repayment		123,022		163,508
Several recourse debt—maintenance		355,513		560,823
Joint and several recourse debt—repayment		263,364		64,473
Joint and several recourse debt—maintenance		291,727		956,682
The Company’s maximum recourse exposure		1,033,626		1,764,406
Less joint and several reimbursement agreements with the Company’s partners		(238,692	)	(661,486	)
The Company’s net recourse exposure	$	794,934		1,102,920

The maintenance amounts above are the Company’s maximum exposure to loss from maintenance guarantees, which assumes that the fair value of the underlying collateral is zero because it does not take into account the underlying value of the collateral.

As amended, the Company’s Credit Facility requires the Company to reduce the recourse debt of joint ventures in which it has investments by $300 million during the Company’s 2008 fiscal year and by an additional $200 million (for a total of $500 million) by the end of fiscal 2009 (See Note 9).

In addition, the Company and/or its partners occasionally grant liens on their interests in an unconsolidated entity in order to help secure a loan to that entity. When the Company and/or its partners provide guarantees, the unconsolidated entity generally receives more favorable terms from its lenders than would otherwise be available to it. In a repayment guarantee, the Company and its venture partners guarantee repayment of a portion or all of the debt in the event of a default, without the lender having to exercise its rights against the collateral. The maintenance guarantees only apply if the value or the collateral (generally land and improvements) is less than a specified percentage of the loan balance. If the Company is required to make a payment under a maintenance

77

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

guarantee to bring the value of the collateral above the specified percentage of the loan balance, the payment would constitute a capital contribution or loan to the unconsolidated entity and increase the Company’s share of any funds the unconsolidated entity distributes. During the year ended November 30, 2007, amounts paid under the Company’s maintenance guarantees were $84.1 million. During 2006, amounts paid under the Company’s maintenance guarantees were not material. In accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, as of November 30, 2007, the fair values of the maintenance guarantees and repayment guarantees were not material. The Company believes that as of November 30, 2007, if there was an occurrence of a triggering event or condition under a guarantee, the collateral should be sufficient to repay a significant portion of the obligation or in certain circumstances partners may be requested to contribute additional capital into the venture.

In many of the loans to unconsolidated entities, the Company and another entity or entities generally related to the Company’s subsidiary’s joint venture partner(s), have been required to give guarantees of completion to the lenders. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. If the construction was to be done in phases, very often the guarantee is to complete only the phases as to which construction has already commenced and for which loan proceeds were used. Under many of the completion guarantees, the guarantors are permitted, under certain circumstances, to use undisbursed loan proceeds to satisfy the completion obligations, and in many of those cases, pay interest only on those funds, with no repayment of the principal of such funds required.

The total debt of the unconsolidated entities was as follows:

	November 30,
	2007		2006
	(In thousands)
The Company’s net recourse exposure	$	794,934	1,102,920
Reimbursement agreements from partners		238,692	661,486
Partner several recourse		465,641	930,177
Non-recourse land seller debt or other debt		202,048	259,191
Non-recourse debt with completion guarantee		1,432,880	948,438
Non-recourse debt without completion guarantee		1,982,475	1,099,413
Total debt	$	5,116,670	5,001,625

In November 2003, the Company and LNR Property Corporation (“LNR”) each contributed its 50% interests in certain of its jointly-owned unconsolidated entities that had significant assets to a new limited liability company named LandSource Communities Development LLC (“LandSource”) in exchange for 50% interests in LandSource. In addition, in July 2003, the Company and LNR formed, and obtained at that time 50% interests in, NWHL Investment, LLC (“NWHL”), which in January 2004 purchased The Newhall Land and Farming Company (“Newhall”) for a total of approximately $1 billion, including $200 million the Company contributed and $200 million that LNR contributed (the remainder came from borrowings and sales of properties to LNR).

In November 2004, LandSource was merged into NWHL. NWHL was renamed LandSource Communities Development LLC (“Merged LandSource”) upon completion of the merger. The Company and LNR may use Merged LandSource for future joint ventures.

In February 2007, the Company’s Merged LandSource joint venture admitted MW Housing Partners as a new strategic partner. As part of the transaction, the joint venture obtained $1.6 billion of non-recourse financing, which consisted of a $200 million five-year Revolving Credit Facility, a $1.1 billion six-year Term Loan B Facility and a $244 million seven-year Second Lien Term Facility. The transaction resulted in a cash distribution from LandSource to the Company of $707.6 million. As a result, the Company’s ownership in Merged LandSource was reduced to 16%. As a result of the recapitalization, the Company recognized a pretax financial statement gain of $175.9 million during the year ended November 30, 2007 and could potentially recognize additional profits in future years, in addition to profits from its continuing ownership interest. During the year ended November 30, 2007, the Company recognized $24.7 million of profit deferred at the time of the recapitalization of the Merged LandSource joint venture in management fees and other income (expense), net. Of the $707.6 million received by the Company in the recapitalization of Merged LandSource, $76.6 million

78

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

represented distributions of the Company’s share of cumulative earnings from Merged LandSource, $276.4 million represented distributions of the Company’s invested capital in Merged LandSource and $354.6 million represented distributions in excess of the Company’s invested capital in Merged LandSource.

The consolidated assets and liabilities of Merged LandSource were $2.0 billion and $1.7 billion, respectively, at November 30, 2007, compared to $1.5 billion and $888.8 million, respectively, at November 30, 2006. The Company’s investment in Merged LandSource was $15.2 million and $329.1 million, respectively, at November 30, 2007 and 2006. The decrease in the Company’s investment in Merged LandSource was both a result of the decrease of the Company’s ownership percentage and losses in Merged LandSource in 2007.

7.    Operating Properties and Equipment

	November 30,
	2007			2006
	(In thousands)
Operating properties	$	6,683		13,120
Leasehold improvements		33,544		33,896
Furniture, fixtures and equipment		36,682		45,922
		76,909		92,938
Accumulated depreciation and amortization		(52,991	)	(50,061	)
	$	23,918		42,877

Operating properties and equipment are included in other assets in the consolidated balance sheets.

8.    Other Assets

	November 30,
	2007		2006
	(In thousands)
Income tax receivable	$	881,525	—
Deferred tax asset, net		741,598	300,197
Other		121,554	173,893
	$	1,744,677	474,090

The Company incurred a net operating loss (“NOL”) for income tax purposes, which is expected to expire at various times through 2028. As a result, the Company filed NOL carryback claims and received tax refunds of $852 million subsequent to November 30, 2007.

9.    Senior Notes and Other Debts Payable

	November 30,
	2007		2006
	(Dollars in thousands)
7 5/8% senior notes due 2009	$	279,491	277,830
5.125% senior notes due 2010		299,825	299,766
5.95% senior notes due 2011		249,516	249,415
5.95% senior notes due 2013		346,268	345,719
5.50% senior notes due 2014		247,806	247,559
5.60% senior notes due 2015		501,804	501,957
6.50% senior notes due 2016		249,708	249,683
Senior floating-rate notes due 2009		—	300,000
Mortgage notes on land and other debt		121,018	141,574
	$	2,295,436	2,613,503

79

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s senior unsecured revolving credit facility (the “Credit Facility”), as amended, consists of a $1.5 billion revolving credit facility that matures in July 2011. However, the Company’s borrowings under the Credit Facility cannot exceed a borrowing base, consisting of specified percentages of various types of its assets. The Credit Facility is guaranteed by substantially all of the Company’s subsidiaries other than finance company subsidiaries (which include mortgage and title insurance agency subsidiaries). Interest rates on outstanding borrowings are LIBOR-based, with margins determined based on changes in the Company’s credit ratings, or an alternate base rate, as described in the credit agreement. At both November 30, 2007 and 2006, the Company had no outstanding balance under the Credit Facility. However, at November 30, 2007 and 2006, $443.5 million and $496.9 million, respectively, of the Company’s total letters of credit outstanding discussed below, were collateralized against certain borrowings available under the Credit Facility.

As amended, the Credit Facility requires that recourse indebtedness of joint ventures in which the Company has investments be reduced by $300 million during the Company’s 2008 fiscal year and an additional $200 million (for a total of $500 million) by the end of fiscal 2009.

At November 30, 2007 and 2006, the Company had both financial and performance letters of credit outstanding in the amount of $814.4 million and $1.4 billion, respectively. The Company’s financial letters of credit outstanding were $424.2 million and $727.6 million, respectively, at November 30, 2007 and 2006. These letters of credit are posted with either regulatory bodies to guarantee the Company’s performance of certain development and construction activities or in lieu of cash deposits on option contracts.

In September 2007, the Company terminated its structured letter of credit facility (the “LC Facility”) reducing the commitment amount to zero. Outstanding letters of credit issued under the LC Facility were transferred to other existing facilities or matured prior to the LC Facility’s termination.

In June 2007, the Company redeemed its $300 million senior floating-rate notes due 2009. The redemption price was $300.0 million, or 100% of the principal amount of the senior floating-rate notes due 2009 outstanding, plus accrued and unpaid interest as of the redemption date.

In November 2006, the Company redeemed its $200 million senior floating-rate notes due 2007. The redemption price was $200.0 million, or 100% of the principal amount of the senior floating-rate notes due 2007 outstanding, plus accrued and unpaid interest as of the redemption date.

In April 2006, substantially all the outstanding 5.125% zero-coupon convertible senior subordinated notes due 2021 (the “Convertible Notes”) were converted by the noteholders into 4.9 million Class A common shares. The Convertible Notes were convertible at a rate of 14.2 shares of the Company’s Class A common stock per $1,000 principal amount at maturity. Convertible Notes not converted by the noteholders were not material and were redeemed by the Company on April 4, 2006. The redemption price was $468.10 per $1,000 principal amount at maturity, which represented the original issue price plus accrued original issue discount to the redemption date.

In April 2006, the Company issued $250 million of 5.95% senior notes due 2011 and $250 million of 6.50% senior notes due 2016 (collectively, the “New Senior Notes”) at prices of 99.766% and 99.873%, respectively, in a private placement under SEC Rule 144A. Proceeds from the offering of the New Senior Notes, after initial purchaser’s discount and expenses, were $248.7 million and $248.9 million, respectively. The Company added the proceeds to its working capital to be used for general corporate purposes. Interest on the New Senior Notes is due semi-annually. The New Senior Notes are unsecured and unsubordinated, and substantially all of the Company’s subsidiaries other than finance company subsidiaries guarantee the New Senior Notes. In October 2006, the Company completed an exchange of the New Senior Notes for substantially identical notes registered under the Securities Act of 1933 (the “Exchange Notes”), with substantially all of the New Senior Notes being exchanged for Exchange Notes. At November 30, 2007 and 2006, the carrying value of the Exchange Notes was $499.2 million and $499.1 million, respectively.

In March 2006, the Company initiated a commercial paper program (the “Program”) under which the Company issued short-term unsecured notes in an aggregate amount not to exceed $2.0 billion. This Program allowed the Company to obtain more favorable short-term borrowing rates than it would obtain otherwise. The

80

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Program is exempt from the registration requirements of the Securities Act of 1933. Issuances under the Program were guaranteed by all of the Company’s wholly-owned subsidiaries that are also guarantors of its Credit Facility.

The Company also had an arrangement with a financial institution whereby it entered into short-term, unsecured, fixed-rate notes from time-to-time.

In October 2007, Moody’s Investors Service (“Moody’s”) issued a downgrade of the Company’s senior debt, lowering the rating to “Ba1,” and changed the rating of the Company’s commercial paper to “not prime.” In November 2007, Standard & Poor’s (“S&P”) issued a downgrade of the Company’s senior debt, lowering the rating to “BB+” and removed the rating of the Company’s commercial paper. As a result of these rating actions, the Company’s senior debt is no longer rated as investment grade by Moody’s and S&P, although it retains an investment grade rating from Fitch. As a result of the Company’s current ratings, it no longer has access to the markets for commercial paper, nor unsecured, fixed-rate notes.

In September 2005, the Company sold $300 million of 5.125% senior notes due 2010 (the “5.125% Senior Notes”) at a price of 99.905% in a private placement. Proceeds from the offering, after initial purchaser’s discount and expenses, were $298.2 million. The Company added the proceeds to the Company’s working capital to be used for general corporate purposes. Interest on the 5.125% Senior Notes is due semi-annually. The 5.125% Senior Notes are unsecured and unsubordinated. Substantially all of the Company’s subsidiaries other than finance company subsidiaries guaranteed the 5.125% Senior Notes. In 2006, the Company exchanged the 5.125% Senior Notes for registered notes. The registered notes have substantially identical terms as the 5.125% Senior Notes, except that the registered notes do not include transfer restrictions that are applicable to the 5.125% Senior Notes. At both November 30, 2007 and 2006, the carrying value of the 5.125% Senior Notes was $299.8 million.

In April 2005, the Company sold $300 million of 5.60% Senior Notes due 2015 (the “Senior Notes”) at a price of 99.771%. Proceeds from the offering, after initial purchaser’s discount and expenses, were $297.5 million. In July 2005, the Company sold $200 million of 5.60% Senior Notes due 2015 at a price of 101.407%. The Senior Notes were the same issue as the Senior Notes the Company sold in April 2005. Proceeds from the offering, after initial purchaser’s discount and expenses, were $203.9 million. The Company added the proceeds of both offerings to its working capital to be used for general corporate purposes. Interest on the Senior Notes is due semi-annually. The Senior Notes are unsecured and unsubordinated. Substantially all of the Company’s subsidiaries other than finance company subsidiaries guaranteed the Senior Notes. The Senior Notes were subsequently exchanged for identical Senior Notes that had been registered under the Securities Act of 1933. At November 30, 2007 and 2006, the carrying value of the Senior Notes sold in April and July 2005 was $501.8 million and $502.0 million, respectively.

In May 2005, the Company redeemed all of its outstanding 9.95% senior notes due 2010 (the “Notes”). The redemption price was $337.7 million, or 104.975% of the principal amount of the Notes outstanding, plus accrued and unpaid interest as of the redemption date. The redemption of the Notes resulted in a $34.9 million pretax loss.

In August 2004, the Company sold $250 million of 5.50% senior notes due 2014 (the “5.50% Senior Notes”) at a price of 98.842% in a private placement. Proceeds from the offering, after initial purchaser’s discount and expenses, were $245.5 million. The Company used the proceeds to repay borrowings under its Credit Facility. Interest on the 5.50% Senior Notes is due semi-annually. The 5.50% Senior Notes are unsecured and unsubordinated. Substantially all of the Company’s subsidiaries, other than finance company subsidiaries, guaranteed the 5.50% Senior Notes. At November 30, 2007 and 2006, the carrying value of the 5.50% Senior Notes was $247.8 million and $247.6 million, respectively.

In February 2003, the Company issued $350 million of 5.95% senior notes due 2013 at a price of 98.287%. Substantially all of the Company’s subsidiaries, other than finance company subsidiaries, guaranteed the 5.95% senior notes. At November 30, 2007 and 2006, the carrying value of the 5.95% senior notes was $346.3 million and $345.7 million, respectively.

In February 1999, the Company issued $282 million of 7 5/8% senior notes due 2009. Substantially all of the Company’s subsidiaries, other than finance company subsidiaries, guaranteed the 7 5/8% senior notes. At November 30, 2007 and 2006, the carrying value of the 7 5/8% senior notes was $279.5 million and $277.8 million, respectively.

81

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At November 30, 2007, the Company had mortgage notes on land and other debt bearing interest at rates up to 10.0% with an average interest rate of 2.9%. The notes are due through 2017 and are collateralized by land. At November 30, 2007 and 2006, the carrying value of the mortgage notes on land and other debt was $121.0 million and $141.6 million, respectively.

The minimum aggregate principal maturities of senior notes and other debts payable during the five years subsequent to November 30, 2007 and thereafter are as follows:

	Debt Maturities
	(In thousands)
2008	$	90,229
2009		304,496
2010		305,609
2011		249,516
2012		—
Thereafter		1,345,586

In January 2008, the Company completed an amendment to its Credit Facility that modified the tangible net worth requirement and restructured the borrowing base. Therefore, effective November 30, 2007, the Company was in compliance with the financial covenants in its debt arrangements. However, the commitment was reduced to $1.5 billion and the Company is required to reduce the recourse debt of joint ventures in which it has investments by $300 million during the Company’s 2008 fiscal year and by an additional $200 million (for a total of $500 million) by the end of fiscal 2009.

10.     Other Liabilities

	November 30,
	2007		2006
	(In thousands)
Deferred income	$	253,769	238,676
Product warranty		164,841	172,571
Accrued compensation		127,934	302,038
Income taxes currently payable		—	40,259
Other		583,247	837,020
	$	1,129,791	1,590,564

11.    Financial Services Segment

The assets and liabilities related to the Financial Services segment were as follows:

	November 30,
	2007		2006
	(In thousands)
Assets:
Cash	$	152,727	116,657
Receivables, net		280,526	633,004
Loans held-for-sale, net		293,499	483,704
Loans held-for-investment, net		137,544	189,638
Investments held-to-maturity		61,518	59,571
Goodwill		61,222	61,205
Other		50,773	69,597
	$	1,037,809	1,613,376
Liabilities:
Notes and other debts payable	$	541,437	1,149,231
Other		190,221	212,984
	$	731,658	1,362,215

82

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At November 30, 2007, the Financial Services segment had a conduit and warehouse facility totaling $1.0 billion, recently reduced from $1.1 billion in order to obtain a waiver of a financial covenant. It uses those facilities to finance its lending activities until it accumulates sufficient mortgage loans to be able to sell them into the capital markets. Borrowings under the lines of credit were $505.4 million and $1.1 billion, respectively at November 30, 2007 and 2006 and were collateralized by mortgage loans and receivables on loans sold but not yet funded by the investor with outstanding principal balances of $540.9 million and $1.3 billion, respectively, at November 30, 2007 and 2006. There are several interest rate-pricing options, which fluctuate with market rates. The effective interest rate on the facilities at November 30, 2007 and 2006 was 5.5% and 6.1%, respectively. The lines of credit consist of a conduit facility, which matures in June 2008 ($600 million) and a warehouse facility that matures in April 2008 ($425 million). In the past, the Company has been able to obtain renewals of these facilities at the times of their maturities; however, given the Company’s reduced volume of deliveries, its financing requirements have decreased. Therefore, the Company is working with several other lenders in case these facilities are not renewed.

At November 30, 2007 and 2006, the Financial Services segment had advances under a different conduit funding agreement amounting to $11.8 million and $1.7 million, respectively. Borrowings under this agreement are collateralized by mortgage loans and had an effective interest rate of 5.8% and 6.2%, respectively, at November 30, 2007 and 2006. The segment also had a $25 million revolving line of credit that matures in May 2008, at which time the segment expects the line of credit to be renewed. The line of credit is collateralized by certain assets of the segment and stock of certain title subsidiaries. Borrowings under the line of credit were $24.0 million and $23.7 million at November 30, 2007 and 2006, respectively, and had an effective interest rate of 5.7% and 6.3%, respectively, at November 30, 2007 and 2006. As of November 30, 2007, the Company’s Financial Services segment was in compliance with the financial covenants in its debt arrangements.

12.    Income Taxes

The provision (benefit) for income taxes consisted of the following:

From continuing operations

	Years Ended November 30,
	2007			2006		2005
	(In thousands)
Current:
Federal	$	(715,311	)	484,731		717,109
State		14,128		62,054		87,955
		(701,183	)	546,785		805,064
Deferred:
Federal		(282,263	)	(173,616	)	9,232
State		(156,554	)	(24,389	)	988
		(438,817	)	(198,005	)	10,220
	$	(1,140,000	)	348,780		815,284

83

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

From discontinued operations

	Years Ended November 30,
	2007		2006	2005
	(In thousands)
Current:
Federal	$	—	—	5,791
State		—	—	731
		—	—	6,522
Deferred:
Federal		—	—	(5	)
State		—	—	(1	)
		—	—	(6	)
	$	—	—	6,516

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax asset are as follows:

	November 30,
	2007		2006
	(In thousands)
Deferred tax assets:
Inventory valuation adjustments	$	380,491	208,433
Reserves and accruals		160,071	227,045
Net operating loss carryforward		126,649	29,965
Capitalized expenses		84,261	139,695
Investments in unconsolidated entities		33,699	18,456
Goodwill		30,011	—
Other		19,594	35,262
Total deferred tax assets		834,776	658,856
Deferred tax liabilities:
Completed contract reporting differences		54,732	235,742
Section 461(f) deductions		—	34,960
Other		33,186	80,954
Total deferred tax liabilities		87,918	351,656
Net deferred tax asset	$	746,858	307,200

The Homebuilding Division’s net deferred tax asset amounting to $741.6 million and $300.2 million at November 30, 2007 and 2006, respectively, is included in other assets in the consolidated balance sheets.

At November 30, 2007 and 2006, the Financial Services segment had a net deferred tax asset of $5.3 million and $7.0 million, respectively, which is included in the assets of the Financial Services Division.

Prior to the goodwill impairments in 2007, goodwill was included as a deferred tax liability in “Other” in the table above. As a result of the goodwill impairments, the tax basis of goodwill is in excess of its book value. Accordingly, goodwill is now classified as a deferred tax asset in the table above.

SFAS 109 requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the SFAS 109 more-likely-than-not realization threshold criterion. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets.

84

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards not expiring unused and tax planning alternatives.

The Company’s analysis of the need for a valuation allowance recognizes that while the Company has not incurred a cumulative loss over its evaluation period, a substantial loss was incurred in 2007. However, a substantial portion of this loss was the result of the difficult current market conditions that led to the impairments of certain tangible assets as well as goodwill. Consideration has also been given to the lengthy period over which these net deferred tax assets can be realized, and the Company’s history of not having loss carryforwards expire unused.

If future events change the outcome of the Company’s projected return to profitability, a substantial valuation allowance may be required to reduce the deferred tax assets. However, currently no valuation allowance has been established for the Company’s deferred tax assets as the Company believes such assets will more likely than not be realized. The Company will continue to assess the need for a valuation allowance in the future.

The American Jobs Creation Act of 2004 provides a tax deduction on qualified domestic production activities under Internal Revenue Code Section 199. The tax benefit resulting from this deduction is reflected in the effective tax rate for the year ended November 30, 2006. However, the Company did not recognize any benefit for the year ended November 30, 2007 as a result of its pretax loss. In addition, a portion of the November 30, 2006 tax benefit was reduced due to the carry back of the Company’s current pretax loss.

The Company completed its examination by the Internal Revenue Service (“IRS”) for years ended through 2004. The results of such examination did not have an adverse effect on the Company’s consolidated financial statements as of and for the year ended November 30, 2007. The Company is currently under exam for its 2005, 2006 and 2007 fiscal years. The Company is also subject to various income tax examinations in the states in which it does business. During 2007, the Company completed a number of state examinations without any material effect on its fiscal year 2007 net loss.

A reconciliation of the statutory rate and the effective tax rate follows:

	Percentage of Pretax Income (Loss)
	2007		2006		2005
Statutory rate	35.00	%	35.00	%	35.00	%
State income taxes, net of federal income tax benefit	3.00		2.75		2.75
Internal Revenue Code Section 199 impact	(0.30	)	(0.75	)	—
Goodwill impairments and other	(0.70	)	—		—
Effective rate	37.00	%	37.00	%	37.75	%

85

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.    Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share for the years ended November 30, 2007, 2006 and 2005 were calculated as follows:

	2007			2006	2005
	(In thousands, except per share amounts)
Numerator—Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	(1,941,081	)	593,869	1,344,410
Earnings from discontinued operations		—		—	10,745
Numerator for basic earnings (loss) per share—net earnings (loss)	$	(1,941,081	)	593,869	1,355,155
Numerator—Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	(1,941,081	)	593,869	1,344,410
Interest on 5.125% zero-coupon convertible senior subordinated notes due 2021, net of tax		—		1,565	7,699
Numerator for diluted earnings (loss) per share from continuing operations		(1,941,081	)	595,434	1,352,109
Numerator for diluted earnings per share from discontinued operations		—		—	10,745
Numerator for diluted earnings (loss) per share—net earnings (loss)	$	(1,941,081	)	595,434	1,362,854
Denominator:
Denominator for basic earnings (loss) per share—weighted average shares		157,718		158,040	155,398
Effect of dilutive securities:
Employee stock options and nonvested shares		—		1,865	2,598
5.125% zero-coupon convertible senior subordinated notes due 2021		—		1,466	7,526
Denominator for diluted earnings (loss) per share—adjusted weighted average shares and assumed conversions		157,718		161,371	165,522
Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	(12.31	)	3.76	8.65
Earnings from discontinued operations		—		—	0.07
Net earnings (loss)	$	(12.31	)	3.76	8.72
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	(12.31	)	3.69	8.17
Earnings from discontinued operations		—		—	0.06
Net earnings (loss)	$	(12.31	)	3.69	8.23

Options to purchase 4.9 million shares and 3.1 million shares, respectively, in total of Class A and Class B common stock were outstanding and anti-dilutive for the years ended November 30, 2007 and 2006. For the year ended November 30, 2005, anti-dilutive options outstanding were not material.

In 2001, the Company issued 5.125% zero-coupon convertible senior subordinated notes due 2021, (“Convertible Notes”). The indenture relating to the Convertible Notes provided that the Convertible Notes were convertible into the Company’s Class A common stock during limited periods after the market price of the Company’s Class A common stock exceeds 110% of the accreted conversion price at the rate of 14.2 Class A common shares per $1,000 face amount of notes at maturity, which would total 9.0 million shares. For this purpose, the “market price” is the average closing price of the Company’s Class A common stock over the last twenty trading days of a fiscal quarter.

In April 2006, substantially all of the Company’s outstanding Convertible Notes were converted by the noteholders into 4.9 million Class A common shares. Convertible Notes not converted by the noteholders were not material and were redeemed by the Company on April 4, 2006. During the year ended November 30, 2005, $288.7 million face value of Convertible Notes were converted to 4.1 million shares of the Company’s Class A

86

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

common stock. The weighted average amount of shares issued upon conversion is included in the calculation of basic earnings per share from the date of conversion. The calculation of diluted earnings per share included 1.5 million shares and 7.5 million shares, respectively, for the years ended November 30, 2006 and 2005, related to the dilutive effect of the Convertible Notes prior to conversion.

14.    Comprehensive Income (Loss)

Comprehensive income (loss) represents changes in stockholders’ equity from non-owner sources. The components of comprehensive income (loss) were as follows:

	Years Ended November 30,
	2007			2006		2005
	(In thousands)
Net earnings (loss)	$	(1,941,081	)	593,869		1,355,155
Unrealized gains arising during period on interest rate swaps, net of tax		1,002		2,853		10,049
Unrealized loss on Company’s portion of unconsolidated entity’s interest rate swap liability, net of tax		(2,061	)	—		—
Unrealized gains arising during period on available-for-sale investment securities, net of tax		—		7		185
Reclassification adjustment for loss included in net loss for interest rate swaps, net of tax		338		—		—
Reclassification adjustment for gains included in net earnings for available-for-sale investment securities, net of tax		—		(245	)	—
Change to the Company’s portion of unconsolidated entity’s minimum pension liability, net of tax		701		565		(880	)
Comprehensive income (loss)	$	(1,941,101	)	597,049		1,364,509

The Company’s effective tax rate was 37.00% in both 2007 and 2006, and 37.75% in 2005.

Accumulated other comprehensive income (loss) consisted of the following at November 30, 2007 and 2006:

	November 30,
	2007			2006
	(In thousands)
Unrealized loss on interest rate swaps, net of tax	$	—		(1,340	)
Unrealized loss on Company’s portion of unconsolidated entity’s interest rate swap liability, net of tax		(2,061	)	—
Unrealized loss on Company’s portion of unconsolidated entity’s minimum pension liability, net of tax		—		(701	)
Accumulated other comprehensive loss	$	(2,061	)	(2,041	)

15.    Capital Stock

Preferred Stock

The Company is authorized to issue 500,000 shares of preferred stock with a par value of $10 per share and 100 million shares of participating preferred stock with a par value of $0.10 per share. No shares of preferred stock or participating preferred stock have been issued as of November 30, 2007.

Common Stock

During 2007, 2006 and 2005, Class A and Class B common stockholders received per share annual dividends of $0.64, $0.64 and $0.57 per share per year (payable quarterly). In September 2005, the Company’s Board of Directors voted to increase the annual dividend rate with regard to the Company’s Class A and Class B common stock to $0.64 per share per year (payable quarterly) from $0.55 per share per year (payable quarterly).

87

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The only significant difference between the Class A common stock and Class B common stock is that Class A common stock entitles holders to one vote per share and the Class B common stock entitles holders to ten votes per share.

As of November 30, 2007, Stuart A. Miller, the Company’s President, Chief Executive Officer and a Director, directly owned, or controlled through family-owned entities, shares of Class A and Class B common stock, which represented approximately 49% voting power of the Company’s stock.

In June 2001, the Company’s Board of Directors authorized a stock repurchase program to permit the purchase of up to 20 million shares of its outstanding common stock. During 2007, there were no material share repurchases of common stock under the stock repurchase program. During 2006, the Company repurchased a total of 6.2 million shares of the outstanding common stock under the stock repurchase program for an aggregate purchase price including commissions of $320.1 million, or $51.59 per share. As of November 30, 2007, 6.2 million shares of common stock can be repurchased in the future under the program.

Treasury stock increased by 0.8 million Class A common shares during the year ended November 30, 2007, primarily related to forfeitures of restricted stock. In addition to the common shares purchased under the Company’s stock repurchase program during the years ended November 30, 2006 and 2005, the Company repurchased approximately 0.1 million and 0.2 million Class A common shares, respectively, related to the vesting of restricted stock and distributions of common stock from the Company’s deferred compensation plan.

Restrictions on Payment of Dividends

Other than to maintain compliance with certain covenants contained in the Credit Facility, there are no restrictions on the payment of dividends on common stock by the Company. There are no agreements which restrict the payment of dividends by subsidiaries of the Company other than to maintain the financial ratios and net worth requirements under the Financial Services segment’s warehouse lines of credit.

401(k) Plan

Under the Company’s 401(k) Plan (the “Plan”), contributions made by employees can be invested in a variety of mutual funds or proprietary funds provided by the Plan trustee. The Company may also make contributions for the benefit of employees. The Company records as compensation expense its contribution to the 401(k) Plan. This amount was $15.2 million in 2007, $19.0 million in 2006 and $12.0 million in 2005.

16.    Share-Based Payments

The Company has share-based awards outstanding under four different plans which provide for the granting of stock options and stock appreciation rights and awards of restricted common stock (“nonvested shares”) to key officers, employees and directors. These awards are primarily issued in the form of new shares. The exercise prices of stock options and stock appreciation rights may not be less than the market value of the common stock on the date of the grant. No options granted under the plans may be exercisable until at least six months after the date of the grant. Thereafter, exercises are permitted in installments determined when options are granted. Each stock option and stock appreciation right will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant.

Prior to December 1, 2005, the Company accounted for stock option awards granted under the plans in accordance with the recognition and measurement provisions of APB 25 and related Interpretations, as permitted by SFAS 123. Share-based employee compensation expense was not recognized in the Company’s consolidated statements of operations prior to December 1, 2005, as all stock option awards granted under the plans had an exercise price equal to or greater than the market value of the common stock on the date of the grant. Effective December 1, 2005, the Company adopted the provisions of SFAS 123R using the modified-prospective-transition method. Under this transition method, compensation expense recognized during the year ended November 30, 2006 included: (a) compensation expense for all share-based awards granted prior to, but not yet vested as of, December 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense for all share-based awards granted subsequent to December 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the modified-prospective-transition method, results for prior periods have not been restated.

88

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As a result of SFAS 123R, the charge to earnings (loss) before provision (benefit) for income taxes for the years ended November 30, 2007 and 2006 was $17.2 million and $25.6 million, respectively. The impact of SFAS 123R on net earnings (loss) for the years ended November 30, 2007 and 2006 was $12.6 million and $18.5 million, respectively. The impact of SFAS 123R on basic earnings (loss) per share for the years ended November 30, 2007 and 2006 was $0.08 per share and $0.12 per share, respectively. The impact of SFAS 123R on diluted earnings (loss) per share for the years ended November 30, 2007 and 2006 was $0.08 per share and $0.11 per share, respectively.

Prior to the adoption of SFAS 123R, the Company presented all tax benefits related to deductions resulting from the exercise of stock options as cash flows from operating activities in the consolidated statements of cash flows. SFAS 123R requires that cash flows resulting from tax benefits related to tax deductions in excess of the compensation expense recognized for those options (excess tax benefits) be classified as financing cash flows. As a result, the Company classified $4.6 million and $7.1 million, respectively, of excess tax benefits as financing cash inflows for the years ended November 30, 2007 and 2006.

The following table illustrates the effect on net earnings and earnings per share for the year ended November 30, 2005, if the Company had applied the fair value recognition provisions of SFAS 123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, to stock options awards granted under the Company’s share-based payment plans. For purposes of this pro forma disclosure, the value of the stock option awards is estimated using a Black-Scholes option-pricing model and amortized to expense over the options’ vesting periods.

	Year Ended November 30, 2005
	(In thousands, except per share amounts)
Net earnings, as reported	$	1,355,155
Add: Total stock-based employee compensation expense included in reported net earnings, net of tax		3,999
Deduct: Total stock-based employee compensation expense determined under fair market value based method for all awards, net of tax		(16,912	)
Pro forma net earnings	$	1,342,242
Earnings per share:
Basic—as reported	$	8.72
Basic—pro forma	$	8.64
Diluted—as reported	$	8.23
Diluted—pro forma	$	8.16

Compensation expense related to the Company’s share-based awards for the years ended November 30, 2007 and 2006 was $35.5 million and $36.6 million, respectively, of which $17.2 million and $25.6 million, respectively, related to stock options and $18.3 million and $11.0 million, respectively, related to nonvested shares. During the year ended November 30, 2005, compensation expense related to the Company’s share-based awards was $6.9 million, which primarily related to nonvested shares. The total income tax benefit recognized in the consolidated statements of operations for share-based awards during the year ended November 30, 2007 and 2006 was $11.3 million and $11.2 million, respectively, of which $4.5 million and $7.1 million, respectively, related to stock options and $6.8 million and $4.1 million, respectively, related to nonvested shares. During the year ended November 30, 2005, the income tax benefit recognized in the consolidated statement of operations for share-based awards was $2.6 million, all of which related to nonvested shares.

Cash received from stock options exercised during the years ended November 30, 2007, 2006 and 2005 was $21.6 million, $31.1 million and $38.1 million, respectively. The tax deductions related to stock options exercised during the years ended November 30, 2007, 2006 and 2005 were $8.3 million, $12.1 million and $23.2 million, respectively.

89

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The fair value of each of the Company’s stock option awards is estimated on the date of grant using a Black-Scholes option-pricing model that uses the assumptions noted in the table below. The fair value of the Company’s stock option awards, which are subject to graded vesting, is expensed on a straight-line basis over the vesting life of the stock options. Expected volatility is based on an average of (1) historical volatility of the Company’s stock and (2) implied volatility from traded options on the Company’s stock. The risk-free rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted with a maturity equal to the expected term of the stock option award granted. The Company uses historical data to estimate stock option exercises and forfeitures within its valuation model. The expected life of stock option awards granted is derived from historical exercise experience under the Company’s share-based payment plans and represents the period of time that stock option awards granted are expected to be outstanding.

The fair value of these options was determined at the date of the grant using the Black-Scholes option-pricing model. The significant weighted average assumptions for the years ended November 30, 2007, 2006 and 2005 were as follows:

	2007	2006	2005
Dividend yield	1.3% - 2.7%	1.1%	1.0%
Volatility rate	30% - 34%	31% - 34%	27% - 34%
Risk-free interest rate	4.1% - 5.0%	4.1% - 5.0%	3.8% - 4.6%
Expected option life (years)	2.0 - 5.0	2.0 - 5.0	2.0 - 5.0

A summary of the Company’s stock option activity for the year ended November 30, 2007 was as follows:

	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (In thousands)
Outstanding at November 30, 2006	7,200,712		$	42.93
Grants	1,105,500		$	48.49
Forfeited or expired	(940,783	)	$	50.70
Exercises	(1,027,264	)	$	20.70
Outstanding at November 30, 2007	6,338,165		$	46.35	2.2 years	$	2,433
Vested and expected to vest in the future at November 30, 2007	6,163,121		$	46.15	2.2 years	$	2,433
Exercisable at November 30, 2007	2,952,901		$	37.90	1.3 years	$	2,180
Available for grant at November 30, 2007	9,702,205

The weighted average fair value of options granted during the years ended November 30, 2007, 2006 and 2005 was $12.89, $17.27 and $16.02, respectively. The total intrinsic value of options exercised during the years ended November 30, 2007, 2006 and 2005 was $22.3 million, $36.1 million and $70.2 million, respectively.

The fair value of nonvested shares is determined based on the trading price of the Company’s common stock on the grant date. The weighted average fair value of nonvested shares granted during the years ended November 30, 2007, 2006 and 2005 was $49.52, $57.09 and $61.93, respectively. A summary of the Company’s nonvested shares activity for the year ended November 30, 2007 was as follows:

	Shares		Weighted Average Grant Date Fair Value
Nonvested restricted shares at November 30, 2006	1,261,768		$	59.40
Grants	1,477,050		$	49.52
Vested	(348,045	)	$	62.72
Forfeited	(690,182	)	$	52.77
Nonvested restricted shares at November 30, 2007	1,700,591		$	52.83

90

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At November 30, 2007, there was $80.0 million of unrecognized compensation expense related to unvested share-based awards granted under the Company’s share-based payment plans, of which $27.5 million relates to stock options and $52.5 million relates to nonvested shares. The unrecognized expense related to nonvested shares is expected to be recognized over a weighted-average period of 2.7 years. During the years ended November 30, 2007, 2006 and 2005, 0.3 million nonvested shares, 0.1 million nonvested shares and 0.5 million nonvested shares, respectively, vested. The tax impact related to nonvested share activity during 2007, 2006 and 2005 were ($3.1) million, $3.7 million and $16.0 million, respectively.

17.    Deferred Compensation Plan

In June 2002, the Company adopted the Lennar Corporation Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”) that allowed a selected group of members of management to defer a portion of their salaries and bonuses and up to 100% of their restricted stock. All participant contributions to the Deferred Compensation Plan are vested. Salaries and bonuses that are deferred under the Deferred Compensation Plan are credited with earnings or losses based on investment decisions made by the participants. The cash contributions to the Deferred Compensation Plan are invested by the Company in various investment securities that were classified as trading.

Restricted stock is deferred under the Deferred Compensation Plan by surrendering the restricted stock in exchange for the right to receive in the future a number of shares equal to the number of restricted shares that are surrendered. The surrender is reflected as a reduction in stockholders’ equity equal to the fair value of the restricted stock when it was issued, with an offsetting increase in stockholders’ equity to reflect a deferral of the compensation expense related to the surrendered restricted stock. Changes in the fair value of the shares that will be issued in the future are not reflected in the consolidated financial statements.

As of November 30, 2007, approximately 36,000 Class A common shares and 3,600 Class B common shares of restricted stock had been surrendered in exchange for rights under the Deferred Compensation Plan, resulting in a reduction in stockholders’ equity of $0.3 million fully offset by an increase in stockholders’ equity to reflect the deferral of compensation in that amount. Shares that the Company is obligated to issue in the future under the Deferred Compensation Plan are treated as outstanding shares in both the Company’s basic and diluted earnings (loss) per share calculations for the years ended November 30, 2007, 2006 and 2005. In January 2008, the Compensation Committee of the Company’s Board of Directors approved the termination of the Deferred Compensation Plan and the payout of $1.8 million in total in cash and shares of common stock to its participants.

91

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18.    Financial Instruments

The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at November 30, 2007 and 2006, using available market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies might have a material effect on the estimated fair value amounts. The table excludes cash, restricted cash, receivables and accounts payable, which had fair values approximating their carrying values due to the short maturities of these instruments.

	November 30,
	2007					2006
	Carrying Amount			Fair Value		Carrying Amount		Fair Value
	(In thousands)
ASSETS
Homebuilding:
Investments—trading	$	—		—		8,544		8,544
Financial services:
Loans held-for-sale, net	$	293,499		293,499		483,704		483,704
Loans held-for-investment, net		137,544		137,564		189,638		187,672
Investments—held-to-maturity		61,518		61,572		59,571		59,546
LIABILITIES
Homebuilding:
Senior notes and other debts payable	$	2,295,436		1,905,502		2,613,503		2,626,235
Financial services:
Notes and other debts payable	$	541,437		541,437		1,149,231		1,149,231
OTHER FINANCIAL INSTRUMENTS
Homebuilding liabilities:
Interest rate swaps	$	—		—		2,128		2,128
Financial services liabilities:
Commitments to originate loans	$	1,259		1,259		626		626
Forward commitments to sell loans and option contracts		(4,301	)	(4,301	)	(3,444	)	(3,444	)

The following methods and assumptions are used by the Company in estimating fair values:

Homebuilding—For senior notes and other debts payable, the fair value of fixed-rate borrowings is based on quoted market prices. Variable-rate borrowings are tied to market indices and therefore approximate fair value. The fair value for interest rate swaps was based on dealer quotations and generally represented an estimate of the amount the Company would have paid or received to terminate the agreement at the reporting date.

Financial services—The fair values are based on quoted market prices, if available. The fair values for instruments that do not have quoted market prices are estimated by the Company on the basis of discounted cash flows or other financial information.

The Homebuilding operations utilized interest rate swap agreements to manage interest costs and hedge against risks associated with changing interest rates. Counterparties to these agreements were major financial institutions. A majority of the Homebuilding operations’ variable interest rate borrowings are based on the LIBOR index. At November 30, 2007, the Homebuilding operations had no interest rate swap agreements outstanding. At November 30, 2006, the Homebuilding operations had three interest rate swap agreements outstanding with a total notional amount of $200 million, which were expected to mature at various dates through fiscal 2008; however, the Company’s last remaining interest rate swap was terminated in June 2007. The effect of interest rate swap agreements on interest incurred and on the average interest rate was an increase of $1.4 million and no impact on the average interest rate, respectively, for the year ended November 30, 2007, an increase of $3.8 million and 0.10%, respectively, for the year ended November 30, 2006 and an increase of $11.0 million and 0.40%, respectively, for the year ended November 30, 2005.

92

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Financial Services segment had a pipeline of loan applications in process of $1.2 billion at November 30, 2007. Loans in process for which interest rates were committed to the borrowers totaled approximately $209.7 million as of November 30, 2007. Substantially all of these commitments were for periods of 60 days or less. Since a portion of these commitments is expected to expire without being exercised by the borrowers, the total commitments do not necessarily represent future cash requirements.

The Financial Services segment uses mandatory mortgage-backed securities (“MBS”) forward commitments, option contracts and investor commitments to hedge its mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk is managed by entering into MBS forward commitments, option contracts with investment banks, federally regulated bank affiliates and loan sales transactions with permanent investors meeting the segment’s credit standards. The segment’s risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At November 30, 2007, the segment had open commitments amounting to $281.0 million to sell MBS with varying settlement dates through January 2008.

19.    Consolidation of Variable Interest Entities

The Company follows FIN 46R, which requires the consolidation of certain entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity.

Unconsolidated Entities

At November 30, 2007, the Company had investments in and advances to unconsolidated entities established to acquire and develop land for sale to the Company in connection with its homebuilding operations, for sale to third parties or for the construction of homes for sale to third-party homebuyers. The Company evaluated all agreements under FIN 46R during 2007 that were entered into or had reconsideration events and it consolidated entities that at November 30, 2007 had total combined assets and liabilities of $139.6 million and $97.0 million, respectively.

At November 30, 2007 and 2006, the Company’s recorded investment in unconsolidated entities was $934.3 million and $1.4 billion, respectively. The Company’s estimated maximum exposure to loss with regard to unconsolidated entities was primarily its recorded investments in these entities and the exposure under the guarantees discussed in Note 6.

Option Contracts

In the Company’s homebuilding operations, the Company has access to land through option contracts, which generally enables it to control portions of properties owned by third parties (including land funds) and unconsolidated entities until the Company has determined whether to exercise the option.

A majority of the Company’s option contracts require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land. The Company’s option contracts sometimes include price escalators, which adjust the purchase price of the land to its approximate fair value at the time of acquisition, or is based on the market value at the time of takedown. The exercise periods of the Company’s option contracts generally range from one to ten years.

The Company’s investments in option contracts are recorded at cost unless those investments are determined to be impaired, in which case the Company’s investments are written down to fair value. The Company reviews option contracts for impairment during each reporting period. The most significant indicator of impairment is a decline in the fair value of the optioned property such that the purchase and development of the optioned property would no longer meet the Company’s targeted return on investment. Such declines could be caused by a variety of factors including increased competition, decreases in demand or changes in local regulations that adversely impact the cost of development. Changes in any of these factors would cause the Company to re-evaluate the likelihood of exercising its land options.

93

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Some option contracts contain a predetermined take-down schedule for the optioned land parcels. However, in almost all instances, the Company is not required to purchase land in accordance with those take-down schedules. In substantially all instances, the Company has the right and ability to not exercise its option and forfeit its deposit without further penalty, other than termination of the option and loss of any unapplied portion of its deposit and pre-acquisition costs. Therefore, in substantially all instances, the Company does not consider the take-down price to be a firm contractual obligation.

When the Company does not intend to exercise an option, it writes-off any unapplied deposit and pre-acquisition costs associated with the option contract. For the years ended November 30, 2007, 2006 and 2005, the Company wrote-off $530.0 million, $152.2 million and $15.1 million, respectively, of option deposits and pre-acquisition costs related to land under option that it does not intend to purchase.

The table below indicates the number of homesites owned and homesites to which the Company had access through option contracts with third parties (“optioned”) or unconsolidated joint ventures in which the Company has investments (“JVs”) (i.e., controlled homesites) for each of its homebuilding segments and Homebuilding Other at November 30, 2007 and 2006:

	Controlled Homesites
November 30, 2007	Optioned	JVs	Total	Owned Homesites	Total Homesites
East	14,888	14,091	28,979	24,014	52,993
Central	5,783	16,373	22,156	14,919	37,075
West	1,243	30,800	32,043	15,300	47,343
Other	963	1,729	2,692	8,568	11,260
Total homesites	22,877	62,993	85,870	62,801	148,671
	Controlled Homesites
November 30, 2006	Optioned	JVs	Total	Owned Homesites	Total Homesites
East	42,733	17,898	60,631	36,169	96,800
Central	27,435	30,815	58,250	21,887	80,137
West	17,959	43,789	61,748	22,390	84,138
Other	6,631	2,019	8,650	11,879	20,529
Total homesites	94,758	94,521	189,279	92,325	281,604

The Company evaluated all option contracts for land when entered into or upon a reconsideration event and determined it was the primary beneficiary of certain of these option contracts. Although the Company does not have legal title to the optioned land, under FIN 46R, the Company, if it is deemed to be the primary beneficiary, is required to consolidate the land under option at the purchase price of the optioned land. During 2007 and 2006, the effect of the consolidation of these option contracts was an increase of $345.3 million and $548.7 million, respectively, to consolidated inventory not owned with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying consolidated balance sheets as of November 30, 2007 and 2006. In addition, in 2007, the Company reclassified $525.0 million from inventory to consolidated inventory not owned as a result of the land transaction with Morgan Stanley Real Estate Fund II, L.P. detailed in Note 4. This increase was offset primarily by the Company exercising its options to acquire land under certain contracts previously consolidated under FIN 46R and the deconsolidation of certain option contracts, resulting in a net increase in consolidated inventory not owned of $447.3 million. To reflect the purchase price of the inventory consolidated under FIN 46R, the Company reclassified $65.6 million of related option deposits from land under development to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2007. The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and the Company’s cash deposits.

94

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s exposure to loss related to its option contracts with third parties and unconsolidated entities consisted of its non-refundable option deposits and advanced costs totaling $317.1 million and $785.9 million, respectively, at November 30, 2007 and 2006. Additionally, the Company posted $193.3 million of letters of credit in lieu of cash deposits under certain option contracts as of November 30, 2007.

20.    Commitments and Contingent Liabilities

The Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, the disposition of these matters will not have a material adverse effect on the Company’s consolidated financial statements.

The Company is subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate, which it does in the routine conduct of its business. Option contracts generally enable the Company to control portions of properties owned by third parties (including land funds) and unconsolidated entities until the Company determines whether to exercise the option. The use of option contracts allows the Company to reduce the financial risks associated with long-term land holdings. At November 30, 2007, the Company had access to acquire 85,870 homesites through option contracts with third parties and agreements with unconsolidated entities in which the Company had investments. At November 30, 2007, the Company had $317.1 million of non-refundable option deposits and advanced costs related to certain of these homesites, which were included in inventories in the consolidated balance sheet.

At November 30, 2007 and 2006, the Company had $6.8 million and $124.5 million, respectively, of reserves recorded in accordance with SFAS No. 5, Accounting for Contingencies, for income tax filing positions and related interest based on the Company’s evaluation that uncertainty exists. This reserve is included in other liabilities in the consolidated balance sheets and has been adjusted to reflect the completion of various tax examinations.

The Company has entered into agreements to lease certain office facilities and equipment under operating leases. Future minimum payments under the non-cancelable leases in effect at November 30, 2007 are as follows:

	Lease Payments
	(In thousands)
2008	$	71,053
2009		45,575
2010		33,098
2011		22,948
2012		14,976
Thereafter		13,563

Rental expense for the years ended November 30, 2007, 2006 and 2005 was $150.1 million, $140.6 million and $116.0 million, respectively.

The Company is committed, under various letters of credit, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit under these arrangements totaled $814.4 million at November 30, 2007. The Company also had outstanding performance and surety bonds related to site improvements at various projects with estimated costs to complete of $1.6 billion. The Company does not believe there will be any draws upon these bonds that would have a material effect on its consolidated financial statements.

95

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

21.    Supplemental Financial Information

The Company’s obligations to pay principal, premium, if any, and interest under its Credit Facility, 7 5/8% senior notes due 2009, 5.125% senior notes due 2010, 5.95% senior notes due 2011, 5.95% senior notes due 2013, 5.50% senior notes due 2014, 5.60% senior notes due 2015 and 6.50% senior notes due 2016 are guaranteed by substantially all of the Company’s subsidiaries other than finance company subsidiaries. The guarantees are full and unconditional and the guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation. The guarantees are joint and several, subject to limitations as to each guarantor designed to eliminate fraudulent conveyance concerns. The Company has determined that separate, full financial statements of the guarantors would not be material to investors and, accordingly, supplemental financial information for the guarantors is presented as follows:

Consolidating Balance Sheet

November 30, 2007

	Lennar Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
	(In thousands)
ASSETS
Homebuilding:
Cash, restricted cash and receivables, net	$	499,272	380,226		6,089		—		885,587
Inventories		—	4,359,217		141,186		—		4,500,403
Investments in unconsolidated entities		—	920,105		14,166		—		934,271
Other assets		1,660,426	83,252		999		—		1,744,677
Investments in subsidiaries		4,835,490	448,755		—		(5,284,245	)	—
		6,995,188	6,191,555		162,440		(5,284,245	)	8,064,938
Financial services		—	14,899		1,022,910				1,037,809
Total assets	$	6,995,188	6,206,454		1,185,350		(5,284,245	)	9,102,747
LIABILITIES AND STOCKHOLDERS’ EQUITY
Homebuilding:
Accounts payable and other liabilities	$	206,725	1,255,810		43,390		—		1,505,925
Liabilities related to consolidated inventory not owned		—	719,081		—		—		719,081
Senior notes and other debts payable		2,174,418	24,903		96,115		—		2,295,436
Intercompany		791,926	(629,134	)	(162,792	)			—
		3,173,069	1,370,660		(23,287	)			4,520,442
Financial services		—	304		731,354		—		731,658
Total liabilities		3,173,069	1,370,964		708,067				5,252,100
Minority interest		—	—		28,528		—		28,528
Stockholders’ equity		3,822,119	4,835,490		448,755		(5,284,245	)	3,822,119
Total liabilities and stockholders’ equity	$	6,995,188	6,206,454		1,185,350		(5,284,245	)	9,102,747

96

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Balance Sheet

November 30, 2006

	Lennar Corporation			Guarantor Subsidiaries	Non-Guarantor Subsidiaries		Eliminations		Total
	(In thousands)
ASSETS
Homebuilding:
Cash, restricted cash and receivables, net	$	422,373		395,261	27,867		—		845,501
Inventories		—		7,523,554	307,929		—		7,831,483
Investments in unconsolidated entities		—		1,435,346	11,832		—		1,447,178
Goodwill		—		196,638	—		—		196,638
Other assets		360,708		104,200	9,182		—		474,090
Investments in subsidiaries		7,839,517		486,461	—		(8,325,978	)	—
		8,622,598		10,141,460	356,810		(8,325,978	)	10,794,890
Financial services		—		25,108	1,588,268		—		1,613,376
Total assets	$	8,622,598		10,166,568	1,945,078		(8,325,978	)	12,408,266
LIABILITIES AND STOCKHOLDERS’ EQUITY
Homebuilding:
Accounts payable and other liabilities	$	605,834		1,644,304	91,922		—		2,342,060
Liabilities related to consolidated inventory not owned		—		333,723	—		—		333,723
Senior notes and other debts payable		2,471,928		53,720	87,855		—		2,613,503
Intercompany		(156,536	)	288,570	(132,034	)	—		—
		2,921,226		2,320,317	47,743		—		5,289,286
Financial services		—		6,734	1,355,481		—		1,362,215
Total liabilities		2,921,226		2,327,051	1,403,224		—		6,651,501
Minority interest		—		—	55,393		—		55,393
Stockholders’ equity		5,701,372		7,839,517	486,461		(8,325,978	)	5,701,372
Total liabilities and stockholders’ equity	$	8,622,598		10,166,568	1,945,078		(8,325,978	)	12,408,266

97

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Operations

Year Ended November 30, 2007

	Lennar Corporation			Guarantor Subsidiaries		Non-Guarantor Subsidiaries	Eliminations		Total
	(In thousands)
Revenues:
Homebuilding	$	—		9,710,626		19,626	—		9,730,252
Financial services		—		9,125		503,266	(55,862	)	456,529
Total revenues		—		9,719,751		522,892	(55,862	)	10,186,781
Costs and expenses:
Homebuilding		—		12,165,338		64,943	(41,204	)	12,189,077
Financial services		—		22,063		451,804	(23,458	)	450,409
Corporate general and administrative		173,202		—		—	—		173,202
Total costs and expenses		173,202		12,187,401		516,747	(64,662	)	12,812,688
Gain on recapitalization of unconsolidated entity		—		175,879		—	—		175,879
Goodwill impairments		—		190,198		—	—		190,198
Equity in loss from unconsolidated entities		—		362,899		—	—		362,899
Management fees and other income (expense), net		8,800		(76,029	)	—	(8,800	)	(76,029	)
Minority interest expense, net		—		—		1,927	—		1,927
Earnings (loss) before provision (benefit) for income taxes		(164,402	)	(2,920,897	)	4,218	—		(3,081,081	)
Provision (benefit) for income taxes		(60,829	)	(1,080,732	)	1,561	—		(1,140,000	)
Equity in earnings (loss) from subsidiaries		(1,837,508	)	2,657		—	1,834,851		—
Net earnings (loss)	$	(1,941,081	)	(1,837,508	)	2,657	1,834,851		(1,941,081	)

Consolidating Statement of Operations

Year Ended November 30, 2006

	Lennar Corporation			Guarantor Subsidiaries		Non-Guarantor Subsidiaries	Eliminations		Total
	(In thousands)
Revenues:
Homebuilding	$	—		15,314,843		308,197	—		15,623,040
Financial services		—		9,497		687,091	(52,966	)	643,622
Total revenues		—		15,324,340		995,288	(52,966	)	16,266,662
Costs and expenses:
Homebuilding		—		14,431,385		255,720	(9,540	)	14,677,565
Financial services		—		28,310		523,959	(58,450	)	493,819
Corporate general and administrative		193,307		—		—	—		193,307
Total costs and expenses		193,307		14,459,695		779,679	(67,990	)	15,364,691
Equity in loss from unconsolidated entities		—		(12,536	)	—	—		(12,536	)
Management fees and other income, net		15,024		62,387		4,242	(15,024	)	66,629
Minority interest expense, net		—		—		13,415	—		13,415
Earnings (loss) before provision (benefit) for income taxes		(178,283	)	914,496		206,436	—		942,649
Provision (benefit) for income taxes		(65,965	)	338,364		76,381	—		348,780
Equity in earnings from subsidiaries		706,187		130,055		—	(836,242	)	—
Net earnings	$	593,869		706,187		130,055	(836,242	)	593,869

98

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Operations

Year Ended November 30, 2005

	Lennar Corporation			Guarantor Subsidiaries	Non-Guarantor Subsidiaries	Eliminations		Total
	(Dollars in thousands)
Revenues:
Homebuilding	$	—		12,908,793	395,806	—		13,304,599
Financial services		—		9,109	586,424	(33,161	)	562,372
Total revenues		—		12,917,902	982,230	(33,161	)	13,866,971
Costs and expenses:
Homebuilding		—		10,922,398	297,221	(4,375	)	11,215,244
Financial services		—		11,915	471,728	(26,039	)	457,604
Corporate general and administrative		187,257		—	—	—		187,257
Total costs and expenses		187,257		10,934,313	768,949	(30,414	)	11,860,105
Equity in earnings from unconsolidated entities		—		133,814	—	—		133,814
Management fees and other income (expense), net		(2,747	)	97,588	1,364	2,747		98,952
Minority interest expense, net		—		—	45,030	—		45,030
Loss on redemption of 9.95% senior notes		34,908		—	—	—		34,908
Earnings (loss) from continuing operations before provision (benefit) for income taxes		(224,912	)	2,214,991	169,615	—		2,159,694
Provision (benefit) for income taxes		(84,904	)	836,159	64,029	—		815,284
Earnings (loss) from continuing operations		(140,008	)	1,378,832	105,586	—		1,344,410
Earnings from discontinued operations, net of tax		—		—	10,745	—		10,745
Equity in earnings from subsidiaries		1,495,163		116,331	—	(1,611,494	)	—
Net earnings	$	1,355,155		1,495,163	116,331	(1,611,494	)	1,355,155

99

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows

Year Ended November 30, 2007

	Lennar Corporation			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings (loss)	$	(1,941,081	)	(1,837,508	)	2,657		1,834,851		(1,941,081	)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities		(1,915,832	)	5,305,931		830,346		(1,834,851	)	2,385,594
Net cash provided by (used in) operating activities		(3,856,913	)	3,468,423		833,003		—		444,513
Cash flows from investing activities:
Increase in investments in unconsolidated entities, net		—		(75,382	)	—		—		(75,382	)
Distributions in excess on investment in unconsolidated entity		—		354,644		—		—		354,644
Other		(1,355	)	(6,582	)	35,658		—		27,721
Net cash provided by (used in) investing activities		(1,355	)	272,680		35,658		—		306,983
Cash flows from financing activities:
Net repayments under financial services debt		—		—		(607,794	)	—		(607,794	)
Net proceeds from sale of land to an unconsolidated land investment venture		—		445,000		—		—		445,000
Redemption of senior floating-rate notes due 2009		(300,000	)	—		—		—		(300,000	)
Net repayments under other borrowings		—		(66,209	)	(90,157	)	—		(156,366	)
Net payments related to minority interests		—		—		(36,545	)	—		(36,545	)
Excess tax benefits from share-based awards		4,590		—		—		—		4,590
Common stock:
Issuances		21,588		—		—		—		21,588
Repurchases		(3,971	)	—		—		—		(3,971	)
Dividends		(101,123	)	—		—		—		(101,123	)
Intercompany		4,313,723		(4,198,614	)	(115,109	)	—		—
Net cash provided by (used in) financing activities		3,934,807		(3,819,823	)	(849,605	)	—		(734,621	)
Net increase (decrease) in cash		76,539		(78,720	)	19,056		—		16,875
Cash at beginning of year		420,845		218,453		139,021		—		778,319
Cash at end of year	$	497,384		139,733		158,077		—		795,194

100

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows

Year Ended November 30, 2006

	Lennar Corporation			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings from continuing operations	$	593,869		706,187		130,055		(836,242	)	593,869
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities		(623,428	)	(766,872	)	512,724		836,242		(41,334	)
Net cash provided by (used in) operating activities		(29,559	)	(60,685	)	642,779		—		552,535
Cash flows from investing activities:
Increase in investments in unconsolidated entities, net		—		(407,694	)	—		—		(407,694	)
Acquisitions, net of cash acquired		—		(30,329	)	(2,884	)	—		(33,213	)
Other		(5,927	)	(4,651	)	47,131		—		36,553
Net cash provided by (used in) investing activities		(5,927	)	(442,674	)	44,247		—		(404,354	)
Cash flows from financing activities:
Net repayments under financial services debt		—		—		(120,858	)	—		(120,858	)
Net proceeds from 5.95% senior notes		248,665		—		—		—		248,665
Net proceeds from 6.50% senior notes		248,933		—		—		—		248,933
Redemption of senior floating-rate notes due 2007		(200,000	)	—		—		—		(200,000	)
Net repayments under other borrowings		(2,336	)	(138,161	)	(7,807	)	—		(148,304	)
Net payments related to minority interests		—		—		(71,351	)	—		(71,351	)
Excess tax benefits from share-based awards		7,103		—		—		—		7,103
Common stock:
Issuances		31,131		—		—		—		31,131
Repurchases		(323,229	)	—		—		—		(323,229	)
Dividends		(101,295	)	—		—		—		(101,295	)
Intercompany		145,892		364,892		(510,784	)	—		—
Net cash provided by (used in) financing activities		54,864		226,731		(710,800	)	—		(429,205	)
Net increase (decrease) in cash		19,378		(276,628	)	(23,774	)	—		(281,024	)
Cash at beginning of year		401,467		495,081		162,795		—		1,059,343
Cash at end of year	$	420,845		218,453		139,021		—		778,319

101

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows

Year Ended November 30, 2005

	Lennar Corporation			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings from continuing operations	$	1,355,155		1,495,163		105,586		(1,611,494	)	1,344,410
Net earnings from discontinued operations		—		—		10,745		—		10,745
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities		(1,091,091	)	(1,336,838	)	(226,874	)	1,611,494		(1,043,309	)
Net cash provided by (used in) operating activities		264,064		158,325		(110,543	)	—		311,846
Cash flows from investing activities:
Increase in investments in unconsolidated entities, net		—		(453,017	)	—		—		(453,017	)
Acquisitions, net of cash acquired		—		(414,079	)	(1,970	)	—		(416,049	)
Other		(5,463	)	(11,022	)	(106,893	)	—		(123,378	)
Net cash used in investing activities		(5,463	)	(878,118	)	(108,863	)	—		(992,444	)
Cash flows from financing activities:
Net borrowings under financial services short-term debt		—		—		372,849		—		372,849
Net proceeds from 5.125% senior notes		298,215		—		—		—		298,215
Net proceeds from 5.60% senior notes		501,460		—		—		—		501,460
Redemption of 9.95% senior notes		(337,731	)	—		—		—		(337,731	)
Net repayments under other borrowings		—		(75,209	)	(61,833	)	—		(137,042	)
Net payments related to minority interests		—		—		(33,181	)	—		(33,181	)
Common stock:
Issuances		38,069		—		—		—		38,069
Repurchases		(289,284	)	—		—		—		(289,284	)
Dividends		(89,229	)	—		—		—		(89,229	)
Intercompany		(1,090,578	)	1,146,903		(56,325	)	—		—
Net cash provided by (used in) financing activities		(969,078	)	1,071,694		221,510		—		324,126
Net increase (decrease) in cash		(710,477	)	351,901		2,104		—		(356,472	)
Cash at beginning of year		1,111,944		143,180		160,691		—		1,415,815
Cash at end of year	$	401,467		495,081		162,795		—		1,059,343

102

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

22.    Quarterly Data (unaudited)

	First		Second		Third		Fourth
	(In thousands, except per share amounts)
2007
Revenues	$	2,792,080	2,875,943		2,341,853		2,176,905
Gross profit from sales of homes	$	360,896	193,205		997		15,574
Earnings (loss) before provision (benefit) for income taxes	$	108,925	(383,272	)	(837,643	)	(1,969,091	)
Net earnings (loss)	$	68,623	(244,205	)	(513,852	)	(1,251,647	)
Earnings (loss) per share:
Basic	$	0.44	(1.55	)	(3.25	)	(7.92	)
Diluted	$	0.43	(1.55	)	(3.25	)	(7.92	)
2006
Revenues	$	3,240,659	4,577,503		4,182,435		4,266,065
Gross profit from sales of homes	$	727,923	946,508		729,198		336,812
Earnings (loss) before provision (benefit) for income taxes	$	409,606	515,472		328,055		(310,484	)
Net earnings (loss)	$	258,052	324,747		206,675		(195,605	)
Earnings (loss) per share:
Basic	$	1.64	2.04		1.31		(1.24	)
Diluted	$	1.58	2.00		1.30		(1.24	)

Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters may not agree with per share amounts for the year.

103

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer participated in an evaluation by our management of the effectiveness of our disclosure controls and procedures as of the end of our fiscal quarter that ended on November 30, 2007. Based on their participation in that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of November 30, 2007 to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

Our CEO and CFO also participated in an evaluation by our management of any changes in our internal control over financial reporting that occurred during the quarter ended November 30, 2007. That evaluation did not identify any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm obtained from Deloitte & Touche LLP are included elsewhere in this document.

Item 9B.    Other Information.

Not applicable.

104

PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

The information required by this item for executive officers is set forth under the heading “Executive Officers of Lennar Corporation” in Part I. The other information called for by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 29, 2008 (120 days after the end of our fiscal year).

Item 11.    Executive Compensation.

The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 29, 2008 (120 days after the end of our fiscal year).

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 29, 2008 (120 days after the end of our fiscal year), except for the information required by Item 201(d) of Regulation S-K, which is provided below.

The following table summarizes our equity compensation plans as of November 30, 2007:

Plan category	Number of shares to be issued upon exercise of outstanding options, warrants and rights (a)(1)	Weighted- average exercise price of outstanding options, warrants and rights (b)		Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) (c)(2)
Equity compensation plans approved by stockholders	6,338,165	$	46.35	9,702,205
Equity compensation plans not approved by stockholders	—		—	—
Total	6,338,165	$	46.35	9,702,205

(1) This amount includes approximately 143,000 shares of Class B common stock that may be issued under our equity compensation plans.

(2) Both Class A and Class B common stock may be issued.

Item 13.    Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 29, 2008 (120 days after the end of our fiscal year).

Item 14.    Principal Accounting Fees and Services.

The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 29, 2008 (120 days after the end of our fiscal year).

105

PART IV

Item 15.    Exhibits and Financial Statement Schedules.

(a) Documents filed as part of this Report.

1. The following financial statements are contained in Item 8:

Financial Statements	Page in this Report
Report of Independent Registered Public Accounting Firm	55
Consolidated Balance Sheets as of November 30, 2007 and 2006	56
Consolidated Statements of Operations for the Years Ended November 30, 2007, 2006 and 2005	57
Consolidated Statements of Stockholders’ Equity for the Years Ended November 30, 2007, 2006 and 2005	58
Consolidated Statements of Cash Flows for the Years Ended November 30, 2007, 2006 and 2005	60
Notes to Consolidated Financial Statements	62

2. The following financial statement schedule is included in this Report:

Financial Statement Schedule	Page in this Report
Report of Independent Registered Public Accounting Firm	110
Schedule II—Valuation and Qualifying Accounts	111

Information required by other schedules has either been incorporated in the consolidated financial statements and accompanying notes or is not applicable to us.

3. The following exhibits are filed with this Report or incorporated by reference:

  2.1 Separation and Distribution Agreement, dated June 10, 1997, between Lennar and LNR Property Corporation—Incorporated by reference to Exhibit 10.1 of the Registration Statement on Form 10 of LNR Property Corporation filed with the Commission on July 31, 1997.

  3.1 Amended and Restated Certificate of Incorporation, dated April 28, 1998—Incorporated by reference to Exhibit 3(a) of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2004.

  3.2 Certificate of Amendment to Certificate of Incorporation, dated April 9, 1999—Incorporated by reference to Exhibit 3(a) of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 1999.

  3.3 Certificate of Amendment to Certificate of Incorporation, dated April 8, 2003—Incorporated by reference to Annex IV of the Company’s Proxy Statement on Schedule 14A dated March 10, 2003.

  3.4 Bylaws of the Company, as amended through June 28, 2005—Incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2005.

  4.1 Indenture, dated as of December 31, 1997, between Lennar and Bank One Trust Company, N.A., as trustee—Incorporated by reference to Exhibit 4 of the Company’s Registration Statement on Form S-3, Registration No. 333-45527, filed with the Commission on February 3, 1998.

  4.2 Second Supplemental Indenture, dated as of February 19, 1999, between Lennar and Bank One Trust Company, N.A., as trustee (relating to Lennar’s 7 ⁵/8% Senior Notes due 2009) —Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, dated February 19, 1999.

  4.3 Third Supplemental Indenture, dated May 3, 2000, between Lennar and Bank One Trust Company, N.A., as successor trustee (relating to Lennar’s 7 ⁵/8% Senior Notes due 2009) —Incorporated by reference to Exhibit 4(d) of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2000.

106

  4.4 Sixth Supplemental Indenture, dated February 5, 2003, between Lennar and Bank One Trust Company, N.A., as trustee (relating to 5.950% Senior Notes due 2013)—Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, dated January 31, 2003.

  4.5 Indenture, dated August 12, 2004, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s 5.50% Senior Notes due 2014)—Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4, Registration No. 333-121130, filed with the Commission on December 10, 2004.

  4.6 Indenture, dated April 28, 2005, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s 5.60% Senior Notes due 2015)—Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4, Registration No. 333-127839, filed with the Commission on August 25, 2005.

  4.7 Indenture, dated September 15, 2005, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s 5.125% Senior Notes due 2010)—Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4, Registration No. 333-130923, filed with the Commission on January 9, 2006.

  4.8 Indenture, dated April 26, 2006, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s 5.95% Senior Notes due 2011)—Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated April 26, 2006.

  4.9 Indenture, dated April 26, 2006, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s 6.50% Senior Notes due 2016)—Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated April 26, 2006.

10.1* Amended and Restated Lennar Corporation 1997 Stock Option Plan—Incorporated by reference to Exhibit 10(a) of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 1997.

10.2* Lennar Corporation 2000 Stock Option and Restricted Stock Plan—Incorporated by reference to Exhibit 10 of the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2001.

10.3* Lennar Corporation 2003 Stock Option and Restricted Stock Plan—Incorporated by reference to Annex VI of the Company’s Proxy Statement on Schedule 14A dated March 10, 2003.

10.4* Lennar Corporation 2007 Equity Incentive Plan—Incorporated by reference to Exhibit A of the Company’s Proxy Statement on Schedule 14A dated February 28, 2007.

10.5* Lennar Corporation 2007 Incentive Compensation Plan—Incorporated by reference to Exhibit B of the Company’s Proxy Statement on Schedule 14A dated February 28, 2007.

10.6* Lennar Corporation Employee Stock Ownership Plan and Trust—Incorporated by reference to the Company’s Registration Statement on Form S-8, Registration No. 2-89104.

10.7* Amendment dated December 13, 1989 to Lennar Corporation Employee Stock Ownership Plan—Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 1990.

10.8* Lennar Corporation Employee Stock Ownership/401(k) Trust Agreement dated December 13, 1989—Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 1990.

10.9* Amendment dated April 18, 1990 to Lennar Corporation Employee Stock Ownership/401(k) Plan—Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 1990.

10.10* Lennar Corporation Nonqualified Deferred Compensation Plan—Incorporated by reference to Exhibit 10 of the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2002.

10.11 Credit Agreement dated July 21, 2006 among Lennar, the lenders named therein and JPMorgan Chase Bank, N.A., as Administrative Agent—Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated July 21, 2006.

107

10.12 First Amendment to Credit Agreement dated August 21, 2007 among Lennar, the lenders named therein and JPMorgan Chase Bank, N.A., as Administrative Agent—Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated August 21, 2007.

10.13 Second Amendment to Credit Agreement dated January 23, 2008 among Lennar, the lenders named therein and JPMorgan Chase Bank, N.A., as Administrative Agent—Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, dated January 23, 2008.

10.14 Amended and Restated Loan Agreement dated September 25, 2006 between UAMC Capital, LLC, the lenders named therein and Calyon New York Branch, as Administrative Agent—Incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2006.

10.15 First Omnibus Amendment dated as of June 29, 2007 to Amended and Restated Loan Agreement dated September 25, 2006 between UAMC Capital, LLC, the lenders named therein and Calyon New York Branch, as Administrative Agent—Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2007.

10.16 Second Omnibus Amendment dated as of August 20, 2007 to Amended and Restated Loan Agreement dated September 25, 2006 between UAMC Capital, LLC, the lenders named therein and Calyon New York Branch, as Administrative Agent—Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2007.

10.17 Third Omnibus Amendment and Waiver dated as of January 23, 2008 to Amended and Restated Loan Agreement dated September 25, 2006 between UAMC Capital, LLC, the lenders named therein and Calyon New York Branch, as Administrative Agent.

10.18* Aircraft Time-Sharing Agreement, dated August 17, 2005, between U.S. Home Corporation and Stuart Miller—Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated August 17, 2005.

10.19* Amendment No. 1 to Aircraft Time-Sharing Agreement, dated September 1, 2005, between U.S. Home Corporation and Stuart Miller—Incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2005.

10.20 Third Amended and Restated Warehousing Credit and Security Agreement dated April 30, 2006, by and among, Universal American Mortgage Company, LLC, the other Borrowers named in the agreement, the Lender Parties named in the agreement and Residential Funding Corporation—Incorporated by reference to Exhibit 10.18 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2006.

10.21 Master Issuing and Paying Agency Agreement, dated March 29, 2006, between Lennar Corporation and JPMorgan Chase Bank, N.A.—Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated March 29, 2006.

10.22 Contribution and Formation Agreement, dated as of December 28, 2006, by and among LandSource Communities Development, LLC, the Existing Members named in the agreement and MW Housing Partners III, L.P.—Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2007.

10.23 Membership Interest Purchase Agreement, dated as of November 30, 2007, by and among Lennar, Lennar Homes of California, Inc., the Sellers named in the agreement and MS Rialto Residential Holdings, LLC.

21 List of subsidiaries.

23 Consent of Independent Registered Public Accounting Firm.

31.1 Rule 13a-14a/15d-14(a) Certification of Stuart A. Miller.

31.2 Rule 13a-14a/15d-14(a) Certification of Bruce E. Gross.

32 Section 1350 Certifications of Stuart A. Miller and Bruce E. Gross.

* Management contract or compensatory plan or arrangement.

108

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

LENNAR CORPORATION

/s/                        STUART A. MILLER

Stuart A. Miller

President, Chief Executive Officer and Director

Date: January 29, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Principal Executive Officer:
Stuart A. Miller	/s/	STUART A. MILLER
President, Chief Executive Officer and Director	Date:	January 29, 2008

Principal Financial Officer:
Bruce E. Gross	/s/	BRUCE E. GROSS
Vice President and Chief Financial Officer	Date:	January 29, 2008

Principal Accounting Officer:
Diane J. Bessette	/s/	DIANE J. BESSETTE
Vice President and Controller	Date:	January 29, 2008

Directors:
Irving Bolotin	/s/	IRVING BOLOTIN
	Date:	January 29, 2008

Steven L. Gerard	/s/	STEVEN L. GERARD
	Date:	January 29, 2008

Sherrill W. Hudson	/s/	SHERRILL W. HUDSON
	Date:	January 29, 2008

R. Kirk Landon	/s/	R. KIRK LANDON
	Date:	January 29, 2008

Sidney Lapidus	/s/	SIDNEY LAPIDUS
	Date:	January 29, 2008

Donna Shalala	/s/	DONNA SHALALA
	Date:	January 29, 2008

Jeffrey Sonnenfeld	/s/	JEFFREY SONNENFELD
	Date:	January 29, 2008

109

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lennar Corporation

We have audited the consolidated financial statements of Lennar Corporation and subsidiaries (the “Company”) as of November 30, 2007 and 2006, and for each of the three years in the period ended November 30, 2007, and the Company’s internal control over financial reporting as of November 30, 2007, and have issued our reports thereon dated January 29, 2008; such reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

January 29, 2008

110

LENNAR CORPORATION AND SUBSIDIARIES

Schedule II—Valuation and Qualifying Accounts

Years Ended November 30, 2007, 2006 and 2005

Description	Beginning balance		Additions		Deductions		Ending balance
			Charged to costs and expenses	Charged to other accounts
	(In thousands)
Year ended November 30, 2007
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable	$	3,782	18,260	—	(3,292	)	18,750
Allowance for loan losses	$	1,810	31,596	4,310	(26,571	)	11,145
Year ended November 30, 2006
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable	$	2,782	2,190	154	(1,344	)	3,782
Allowance for loan losses	$	1,180	2,390	158	(1,918	)	1,810
Year ended November 30, 2005
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable	$	1,784	1,803	—	(805	)	2,782
Allowance for loan losses	$	1,407	269	32	(528	)	1,180

111

Exhibit Index

Exhibit Number	Description
10.17	Third Omnibus Amendment and Waiver dated as of January 23, 2008 to Amended and Restated Loan Agreement dated September 25, 2006 between UAMC Capital, LLC, the lenders named therein and Calyon New York Branch, as Administrative Agent.
10.23	Membership Interest Purchase Agreement, dated as of November 30, 2007, by and among Lennar, Lennar Homes of California, Inc., the Sellers named in the agreement and MS Rialto Residential Holdings, LLC.
21	List of subsidiaries.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Rule 13a-14a/15d-14(a) Certification of Stuart A. Miller.
31.2	Rule 13a-14a/15d-14(a) Certification of Bruce E. Gross.
32	Section 1350 Certifications of Stuart A. Miller and Bruce E. Gross.

EX-10.17

Exhibit 10.17

THIRD OMNIBUS AMENDMENT AND WAIVER

This THIRD OMNIBUS AMENDMENT AND WAIVER (this “Amendment and Waiver”), dated as of January 23, 2008 is entered into by and among CALYON NEW YORK BRANCH (together with its successors and assigns, “Calyon New York”), as the administrative agent (the “Administrative Agent”), as a bank and as a managing agent, ATLANTIC ASSET SECURITIZATION LLC, as an issuer (together with its successors and assigns, “Atlantic”), LA FAYETTE ASSET SECURITIZATION LLC, as an issuer (together with its successors and assigns, “La Fayette”), JS SILOED TRUST (together with its successors and assigns, “JUSI Trust”), as successor in interest to JUPITER SECURITIZATION COMPANY LLC (“Jupiter”), as an issuer, GRESHAM RECEIVABLES (NO. 6) LIMITED, as an issuer (“Gresham”), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as a bank and as a managing agent (together with its successors and assigns, “JPMorgan Chase”), LLOYDS TSB BANK PLC, as a bank and a managing agent (together with its successors and assigns, “Lloyds”), RESIDENTIAL FUNDING COMPANY LLC, formerly known as Residential Funding Corporation, as the collateral agent (together with its successors and assigns, the “Collateral Agent”), UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC, as the servicer (together with its successors and assigns, the “Servicer”) and a seller (“UAMC”), UAMC CAPITAL, LLC, as the borrower and the buyer (together with its successors and assigns, respectively, the “Borrower” and the “Buyer”), UNIVERSAL AMERICAN MORTGAGE COMPANY OF CALIFORNIA, as a seller (together with its successors and assigns, “UAMCC”), EAGLE HOME MORTGAGE, LLC (together with its successors and assigns, “EHM”), as a seller and as subservicer (the “Subservicer”), and EAGLE HOME MORTGAGE OF CALIFORNIA, INC., as a seller (together with its successors and assigns, “EHMC” and together with EHM, UAMC and UAMCC, collectively, the “Sellers”). Capitalized terms used and not otherwise defined herein are used as defined in the related Operative Documents (as defined below).

RECITALS

WHEREAS, the Sellers, and the Buyer, entered into that certain Master Repurchase Agreement, dated as of May 23, 2003, as amended by the Amended and Restated Addendum to the Master Repurchase Agreement dated as of September 25, 2006, as amended by the First Omnibus Amendment (the “First Omnibus Amendment”) dated as of June 29, 2007 and the Second Omnibus Amendment (the “Second Omnibus Amendment”) dated as of August 20, 2007, by and among Administrative Agent, Atlantic, Gresham, JUSI Trust, La Fayette, JPMorgan Chase, the Servicer, the Subservicer, the Collateral Agent, the Borrower and the Sellers (as the same may be amended, restated, supplemented or modified from time to time, the “Repurchase Agreement”);

WHEREAS, the Borrower, the Administrative Agent, the Collateral Agent, the Subservicer and the Servicer entered into that certain Amended and Restated Collateral Agency Agreement, dated as of September 25, 2006, as amended by the First Omnibus Amendment and the Second Omnibus Amendment (as the same may be amended, restated, supplemented or modified from time to time, the “Collateral Agency Agreement”);

WHEREAS, the Borrower, Atlantic, La Fayette, Gresham, Jupiter, Calyon New York, Lloyds, JPMorgan Chase, the Subservicer and the Servicer have entered into that certain Amended and Restated Loan Agreement, dated as of September 25, 2006, as amended by the First Amendment to Loan Agreement and Waiver dated as of June 15, 2007, the First Omnibus Amendment and the Second Omnibus Amendment (as the same may be amended, restated, supplemented or modified from time to time, the “Loan Agreement” and, collectively with the Repurchase Agreement and the Collateral Agency Agreement, the “Operative Documents”); and

WHEREAS, the parties hereto desire to amend the Operative Documents as hereinafter set forth.

NOW, THEREFORE, the parties agree as follows:

Section 1. Amendments to the Loan Agreement.

(a) Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of Advance Rate in its entirety and replaced with the following:

“Advance Rate” means (A) for any date prior to January 25, 2008 (i) with respect to a Conforming Loan, ninety-eight percent (98%); (ii) with respect to an Alt-A Loan, ninety-seven percent (97%) or, if an Alt-A FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, ninety-five percent (95%); (iii) with respect to a Jumbo Loan (other than a Super Jumbo Loan), ninety-seven percent (97%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety-five percent (95%); (iv) with respect to a Subprime Loan or Second-Lien Loan, ninety-five percent (95%); (v) with respect to a Super Jumbo Loan, ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety percent (90%); and (vi) with respect to Uncovered Mortgage Loans, ninety-five percent (95%) and (B) for any date on or after January 25, 2008 (i) with respect to a Conforming Loan, ninety-five percent (95%); (ii) with respect to an Alt-A Loan, ninety-five percent (95%) or, if an Alt-A FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, ninety-five percent (95%); (iii) with respect to a Jumbo Loan (other than a Super Jumbo Loan), ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety-five percent (95%); (iv) with respect to a Subprime Loan or Second-Lien Loan, ninety-five percent (95%); (v) with respect to a Super Jumbo Loan, ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety percent (90%); and (vi) with respect to Uncovered Mortgage Loans, ninety-five percent (95%).

2

(b) Section 1.1 of the Loan Agreement is hereby amended by deleting from the definition Maximum Facility Amount “$700,000,000” and replacing it with $600,000,000”.

(c) Section 2.1(d) of the Loan Agreement is hereby amended by adding “(i)” to the beginning of such provision, deleting the period at the end of such provision and replacing it with a semicolon and adding the following subclause (ii) to the end of such provision:

(ii) If the Performance Guarantor ceases to have the Required Ratings, the Borrower shall immediately notify the Administrative Agent and the Managing Agents and the Administrative Agent on behalf of the Managing Agents may, and shall at the direction of the Majority Banks, do any one or both of the following: (1) declare the entire unpaid balance of the Obligations immediately due and payable, whereupon it shall be due and payable 10 Business Days after notification by the Administrative Agent to the Borrower; and (2) declare the Drawdown Termination Date to have occurred, terminate the Bank Commitments and reduce the Maximum Facility Amount to zero which shall be effective upon notification by the Administrative Agent to the Borrower.

(d) Section 8.1(ee) is hereby deleted in its entirety and replaced with the following: “[Reserved]”.

(e) Schedule I of the Loan Agreement is hereby deleted in its entirety and replaced with Schedule I attached hereto as Appendix A.

Section 2. Amendments to the Repurchase Agreement.

Section 1.01 of the Repurchase Agreement is hereby amended by deleting the definition of Advance Rate in its entirety and replaced with the following:

“Advance Rate” means (A) for any date prior to January 25, 2008 (i) with respect to a Conforming Loan, ninety-eight percent (98%); (ii) with respect to an Alt-A Loan, ninety-seven percent (97%) or, if an Alt-A FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, ninety-five percent (95%); (iii) with respect to a Jumbo Loan (other than a Super Jumbo Loan), ninety-seven percent (97%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety-five percent (95%); (iv) with respect to a Subprime Loan or Second-Lien Loan, ninety-five percent (95%); (v) with respect to a Super Jumbo Loan, ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety percent (90%); and (vi) with respect to Uncovered Mortgage Loans, ninety-five percent (95%) and (B) for any date on or after January 25, 2008 (i) with respect to a Conforming Loan, ninety-five percent (95%); (ii) with respect to an Alt-A Loan, ninety-five percent (95%) or, if an Alt-A FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the

3

Administrative Agent, ninety-five percent (95%); (iii) with respect to a Jumbo Loan (other than a Super Jumbo Loan), ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety-five percent (95%); (iv) with respect to a Subprime Loan or Second-Lien Loan, ninety-five percent (95%); (v) with respect to a Super Jumbo Loan, ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety percent (90%); and (vi) with respect to Uncovered Mortgage Loans, ninety-five percent (95%).

Section 3. Amendments to the Collateral Agency Agreement.

(a) Exhibit D-1 of the Collateral Agency Agreement is hereby amended by deleting the definition of Advance Rate in its entirety and replaced with the following:

“Advance Rate” means (A) for any date prior to January 25, 2008 (i) with respect to a Conforming Loan, ninety-eight percent (98%); (ii) with respect to an Alt-A Loan, ninety-seven percent (97%) or, if an Alt-A FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, ninety-five percent (95%); (iii) with respect to a Jumbo Loan (other than a Super Jumbo Loan), ninety-seven percent (97%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety-five percent (95%); (iv) with respect to a Subprime Loan or Second-Lien Loan, ninety-five percent (95%); (v) with respect to a Super Jumbo Loan, ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety percent (90%); and (vi) with respect to Uncovered Mortgage Loans, ninety-five percent (95%) and (B) for any date on or after January 25, 2008 (i) with respect to a Conforming Loan, ninety-five percent (95%); (ii) with respect to an Alt-A Loan, ninety-five percent (95%) or, if an Alt-A FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, ninety-five percent (95%); (iii) with respect to a Jumbo Loan (other than a Super Jumbo Loan), ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety-five percent (95%); (iv) with respect to a Subprime Loan or Second-Lien Loan, ninety-five percent (95%); (v) with respect to a Super Jumbo Loan, ninety-five percent (95%) or, if a Jumbo FICO Score Trigger Event has occurred and is continuing, as reported to the Collateral Agent by the Administrative Agent, then ninety percent (90%); and (vi) with respect to Uncovered Mortgage Loans, ninety-five percent (95%).

4

(b) Exhibit D-1 of the Collateral Agency Agreement is hereby amended by deleting from the definition Maximum Facility Amount “$700,000,000” and replacing it with $600,000,000”.

Section 4. Waiver.

The Administrative Agent, the Issuers, the Banks, the Managing Agents, the Borrower, the Buyer, the Sellers, the Subservicer and the Servicer, each as applicable, hereby agree to waive, effective as of November 30, 2007 through the date which is thirty calendar days from the date of this Amendment and Waiver (such date which is thirty days from the date of this Amendment and Waiver, the “Waiver Expiration Date”), the following:

(a) compliance with Section 8.1(cc) of the Loan Agreement;

(b) compliance with Section 8.1(e) of the Loan Agreement but only insofar as such Section relates to any potential acceleration of indebtedness pursuant to Section 9.02 of the Lennar Revolver arising in connection with any breach or potential breach of Section 7.01 of the Lennar Revolver;

(c) compliance with Section 7.01(a)(v) of the Repurchase Agreement but only insofar as such Section relates to any potential acceleration of indebtedness pursuant to Section 9.02 of the Lennar Revolver arising in connection with any breach or potential breach of Section 7.01 of the Lennar Revolver; and

(d) compliance with Section 7.01(a)(x) of the Repurchase Agreement but only insofar as such Section relates to breaches or potential breaches of the Loan Agreement that are waived pursuant to Sections 4(a) and (b) of this Amendment and Waiver.

Section 5. Conditional Amendment.

If the Transaction Documents are not further amended to the reasonable satisfaction of all Banks, all acting with good faith effort, on or before the Waiver Expiration Date, the following shall occur:

(a) The definition of “Advance Rate,” each time such definition appears in the Transaction Documents, shall be deleted in its entirety and replaced with the following (the “Amended Advance Rate”):

“Advance Rate” means seventy-five percent (75%) with respect to all Mortage Loans.

(b) The Amended Advance Rate shall be immediately effective as of the Waiver Expiration Date.

(c) For the avoidance of doubt, any prepayments that become due and owing pursuant to Section 2.5(b) of the Loan Agreement as a result of the change of the Advance Rate to the Amended Advance Rate shall be paid in accordance with Section 2.5(b) of the Loan Agreement.

5

(d) All rights and remedies available to the Lenders and parties to the Transaction Docments shall remain in full force and effect from and after the Waiver Expiration Date.

Section 6. Operative Documents in Full Force and Effect as Amended.

Except as specifically amended hereby or waived hereby, all of the provisions of the Operative Documents and all of the provisions of all other documentation required to be delivered with respect thereto shall remain in full force and effect from and after the date hereof.

Section 7. Miscellaneous.

(a) This Amendment and Waiver may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall not constitute a novation of any Operative Document, but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and conditions of each Operative Document, as amended by this Amendment and Waiver, as though such terms and conditions were set forth herein.

(b) The descriptive headings of the various sections of this Amendment and Waiver are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

(c) This Amendment and Waiver may not be amended or otherwise modified except as provided in each respective Operative Agreement.

(d) This Amendment and Waiver and the rights and obligations of the parties under this Amendment and Waiver shall be governed by, and construed in accordance with, the laws of the state of New York (without giving effect to the conflict of laws principles thereof, other than Section 5-1401 of the New York General Obligations Law, which shall apply hereto).

6

IN WITNESS WHEREOF, the parties have agreed to and caused this Amendment and Waiver to be executed by their respective officers thereunto duly authorized, as of the date first above written.

ADMINISTRATIVE AGENT,
BANK AND MANAGING AGENT
AGREED:	CALYON NEW YORK BRANCH
	By:	/s/ Kostantina Kourmpetis
	Name:	Kostantina Kourmpetis
	Title:	Managing Director
	By:	/s/ Richard McBride
	Name:	Richard McBride
	Title:	Director

ISSUER
AGREED:	ATLANTIC ASSET SECURITIZATION LLC
	By:	Calyon New York Branch,
		as Attorney-in-Fact
	By:	/s/ Kostantina Kourmpetis
	Name:	Kostantina Kourmpetis
	Title:	Managing Director
	By:	/s/ Richard McBride
	Name:	Richard McBride
	Title:	Director

ISSUER
AGREED:	LA FAYETTE ASSET SECURITIZATION LLC
	By:	Calyon New York Branch,
		as Attorney-in-Fact
	By:	/s/ Kostantina Kourmpetis
	Name:	Kostantina Kourmpetis
	Title:	Managing Director
	By:	/s/ Richard McBride
	Name:	Richard McBride
	Title:	Director

(Signature Page One to Third Omnibus Amendment and Waiver)

SERVICER AND SELLER
AGREED:	UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC
	By:	/s/ Robert S. Greaton
	Name:	Robert S. Greaton
	Title:	Vice President

SELLER
AGREED:	UNIVERSAL AMERICAN MORTGAGE COMPANY OF CALIFORNIA
	By:	/s/ Robert S. Greaton
	Name:	Robert S. Greaton
	Title:	Vice President

SELLER AND SUBSERVICER
AGREED:	EAGLE HOME MORTGAGE, LLC
	By:	/s/ Robert S. Greaton
	Name:	Robert S. Greaton
	Title:	CFO

SELLER
AGREED:	EAGLE HOME MORTGAGE OF CALIFORNIA, INC.
	By:	/s/ Robert S. Greaton
	Name:	Robert S. Greaton
	Title:	Vice President

BORROWER AND BUYER
AGREED:	UAMC CAPITAL, LLC
	By:	/s/ Robert S. Greaton
	Name:	Robert S. Greaton
	Title:	Vice President

(Signature Page Two to Third Omnibus Amendment and Waiver)

ISSUER
AGREED:	JS SILOED TRUST
	By:	JPMorgan Chase Bank, N.A. as its Administrative Trustee
		By:	/s/ Julie C. Kraft
		Name:	Julie C. Kraft
		Title:	Vice President

MANAGING AGENT AND BANK
AGREED:	JPMORGAN CHASE BANK, N.A.
	By:	/s/ Julie C. Kraft
	Name:	Julie C. Kraft
	Title:	Vice President

(Signature Page Three to Third Omnibus Amendment and Waiver)

ISSUER
AGREED:	GRESHAM RECEIVABLES (NO. 6) LIMITED
	By:	/s/ S. M. Hollywood
	Name:	S. M. Hollywood
	Title:	Director
MANAGING AGENT AND BANK
AGREED:	LLOYDS TSB BANK PLC
	By:	/s/ Edward Leng
	Name:	Edward Leng
	Title:	Director

(Signature Page Four to Third Omnibus Amendment and Waiver)

COLLATERAL AGENT
AGREED:	RESIDENTIAL FUNDING COMPANY LLC
	By:	/s/ Susan H. Snyder
	Name:	Susan H. Snyder
	Title:	Director

(Signature Page Five to Third Omnibus Amendment and Waiver)

EX-10.23

Exhibit 10.23

MEMBERSHIP INTEREST PURCHASE AGREEMENT

Among

Lennar Corporation

and

Lennar Homes of California, Inc.

Lennar Colorado, LLC

U.S. Home Corporation

Lennar Homes, LLC

Lennar Reno, LLC

Lennar Renaissance, Inc.

US Home/KB North Douglas, LLC

Raintree Village, L.L.C.

Raintree Village II, L.L.C.

Lennar Hingham Holdings, LLC

Greystone Nevada, LLC

Fox Ridge Associates, LLC

And

MS RIALTO RESIDENTIAL HOLDINGS, LLC

Dated as of November 30, 2007

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	2

1.1	Definitions	2
1.2	Certain Interpretation Matters	8

ARTICLE II PURCHASE AND SALE OF INTERESTS 9

2.1	Mutual Closing Obligations	9
2.2	Purchase Price	9
2.3	Closing	12
2.4	Sellers’ Representative	12
2.5	Allocation	12

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS 13

3.1	Organization and Qualification	13
3.2	Capitalization; Ownership; Restructuring	13
3.3	Authorization; Enforceability	14
3.4	No Conflict or Violation	15
3.5	Governmental Consents and Approvals	15
3.6	Litigation	15
3.7	Compliance with Laws	15
3.8	Properties	16
3.9	Contracts	17
3.10	Title to Assets	18
3.11	Environmental Matters	18
3.12	Taxes	19
3.13	Employee Benefit Plans	19
3.14	Liabilities	19
3.15	Absence of Changes	20
3.16	Solvency	20
3.17	Intent	21

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER 21

4.1	Organization	21
4.2	Capitalization; Ownership	21
4.3	Authorization; Enforceability	21
4.4	No Conflict or Violation	21
4.5	Consents and Approvals	22
4.6	Absence of Proceeding	22
4.7	Investment Intent	22

ARTICLE V CERTAIN COVENANTS 22

5.1	Inspection Rights of Purchaser	22
5.2	Title to Properties	23
5.3	Surveys	25
5.4	Sellers’ Security Instruments	25

i

TABLE OF CONTENTS

(continued)

		Page
5.5	Assignment of Contracts; Obtaining Consents	25
5.6	Environmental Matters	27
5.7	Determination of Costs Within Purchase Price Computation	28
5.8	True-Sale Opinion	28

ARTICLE VI ADDITIONAL COVENANTS 28

6.1	No Public Announcement	28
6.2	Further Assurances	29
6.3	Land Transferred in Error	29
6.4	Use of Sale Offices	29
6.5	Use of Name	29

ARTICLE VII DELIVERIES AT CLOSING 30

7.1	Seller Deliveries	30
7.2	Purchaser Deliveries	31
7.3	Mutual Deliveries	31

ARTICLE VIII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION 31

8.1	Survival of Covenants, Representations and Warranties	31
8.2	Indemnification by Purchaser	31
8.3	Indemnification by Sellers	31
8.4	Method of Asserting Third Party Claims	32
8.5	Assignment of Claims	33
8.6	Indemnification Limitations	33
8.7	Exclusive Remedy; Additional Indemnification Issues	34

ARTICLE IX TAX MATTERS 35

9.1	Liability and Indemnification for Taxes	35
9.2	Tax Returns	35
9.3	Tax Indemnification Procedures; Contest Provisions	36
9.4	Confidentiality of Tax Information	36
9.5	Tax Sharing Agreements	37
9.6	Intended Tax Treatment	37

ARTICLE X OFAC CERTIFICATE AND INDEMNIFICATION 37

10.1	OFAC Representation	37
10.2	Purchaser’s Assurances	37
10.3	Anti-Money Laundering	37
10.4	Compliance	38

ARTICLE XI GENERAL PROVISIONS 39

11.1	Expenses	39
11.2	Notices	39

ii

TABLE OF CONTENTS

(continued)

		Page
11.3	Severability	40
11.4	Counterparts	40
11.5	Assignment; Successors and Assigns	40
11.6	No Third Party Beneficiaries	41
11.7	Descriptive Headings	41
11.8	Reasonable Consent Required	41
11.9	Waivers	41
11.10	Governing Law; Jurisdiction; Waiver of Jury Trial	41
11.11	Enforcement	42
11.12	Entire Agreement; Amendments	42
11.13	Construction; Joint Drafting	42
11.14	Legal Fees	42
11.15	Confidentiality	42
11.16	Time of the Essence	43
11.17	Electronically Transmitted Signatures	44
11.18	No Brokers, Finders, etc	44
11.19	Guaranty	44

Exhibits and Schedules

Exhibit “A”	List of Subsidiaries
Exhibit “B”	Legal Descriptions of Land
Exhibit “C”	List of Projects
Exhibit “D”	Purchase Price Calculation Formulae
Exhibit “E”	Development Plans
Exhibit “F”	Community Summaries
Exhibit “G”	Development Budgets
Exhibit “H”	Cash Flow Projections

iii

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is effective as of November 30, 2007 (the “Effective Date”), by and among LENNAR CORPORATION, a Delaware corporation (“Lennar”), and LENNAR HOMES OF CALIFORNIA, INC., a California corporation (“LHC”), LENNAR COLORADO, LLC., a Colorado limited liability company, U.S. HOME CORPORATION, a Delaware corporation, LENNAR HOMES, LLC, a Florida limited liability company, LENNAR RENO, LLC, a Nevada limited liability company, LENNAR RENAISSANCE, INC., a California corporation, US HOME/KB NORTH DOUGLAS, LLC, a Delaware limited liability company, RAINTREE VILLAGE L.L.C., an Illinois limited liability company, RAINTREE VILLAGE II, L.L.C., an Illinois limited liability company, LENNAR HINGHAM HOLDINGS, LLC, a Delaware limited liability company, GREYSTONE NEVADA, LLC, a Nevada limited liability company, and FOX RIDGE ASSOCIATES, LLC, a New Jersey limited liability company (each, including LHC, a “Seller”; collectively, the “Sellers”), and MS RIALTO RESIDENTIAL HOLDINGS, LLC, a Delaware limited liability company (“Purchaser”); each of Purchaser, on the one hand, and Sellers and Lennar, on the other hand, a “Party”; collectively, the “Parties”).

RECITALS:

WHEREAS, each of the Sellers is the sole owner of all right, title and interest in all of the equity ownership interests (each ownership interest, including such Seller’s share of (and right to receive, as applicable) capital, profits, losses, distributions and management/voting rights, subject to such duties and obligations as may apply to such Seller under its Organizational Documents and applicable Law, an “Interest”; collectively, the “Interests”) in one or more of the entities set forth on Exhibit “A” hereto (each, a “Subsidiary”; collectively, the “Subsidiaries”); and

WHEREAS, each of the Subsidiaries owns certain real property and certain associated assets conveyed to it by a Seller in connection with the transactions contemplated hereby; and

WHEREAS, each Seller desires to convey to Purchaser (or an Affiliate of Purchaser) and Purchaser desires to acquire from each Seller all of the Interests owned by such Seller on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, Lennar owns a direct or indirect interest in the Sellers and is joining in the execution and delivery of this Agreement to guaranty the obligations of Sellers hereunder.

1

NOW, THEREFORE, in consideration of the premises and the covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound hereby, do hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions.

(a) The following terms shall have the respective meanings specified or referred to below:

“Adverse Claim” means a lien, security interest, financing statement, charge or encumbrance, or other right or claim in, of or on any Person’s assets or properties in favor of any other Person.

“Affiliate” means, with respect to any Person, (a) any other Person directly or indirectly Controlling, Controlled by or under common Control with such Person, or (b) any other Person beneficially owning 50% or more of the outstanding voting interests of such Person, or (c) any officer, director, general partner, manager or managing member (if such Person is a limited liability company) of such Person, or (d) any other Person that is an officer, director, general partner, manager or managing member (if such Person is a limited liability company) or beneficial owner of 50% or more of the voting interests of any other Person described in clauses (a) through (c) of this definition; provided, however, that for purposes of this Agreement, Purchaser shall not be deemed an Affiliate of any Seller or Lennar.

“Approvals” means all discretionary approvals, consents, certificates, licenses, permits and other authorizations from each Governmental Authority having or asserting jurisdiction as are necessary for the (a) ownership, use and operation of the existing improvements located at the Properties, (b) the development of the Properties and the Projects in accordance with the Development Plans, and (c) the marketing and sale of residential lots to builders, individual homebuyers and other Persons.

“Assets” means, collectively, the (a) Properties; provided, however, that in no event shall any Property include any land on which a residence has been constructed or any vertical construction of a residence has commenced; (b) the Obtained Approvals; (c) all rights to prepaid expenditures and deposits related to the Projects, including utilities and connection fees and (d) any other tangible or intangible personal property transferred or assigned to the Subsidiaries pursuant to the respective Contribution Agreement.

“Benefit Plans” has the meaning given in ERISA Section 3(3), together with plans or arrangements that would be so defined if they were not (a) otherwise exempt from ERISA by that or another section, (b) maintained outside the United States, or (c) individually negotiated or applicable only to one person; and also includes each compensatory plan or arrangement with any employee, officer, director or independent contractor, including any incentive or equity plan or arrangement.

“Business Day” means any day that is not a Saturday, Sunday or a day on which the Federal Reserve Bank in New York is closed for business.

2

“Capital Stock” means common stock, preferred stock, partnership interests, limited liability company interests, beneficial interests in any trust or other equity ownership interests entitling the holder thereof to vote with respect to matters involving the issuer thereof or to share in its profits.

“Cash Flow Projections” means the projected cash flows for each Project for which the Sellers have a Development Plan prepared by Seller and used in arriving at the Purchase Price, as attached as “Exhibit “H.”

“Claim” means any claim, demand, cause of action, chose in action, right of recovery or right of set-off of whatever kind or description against any Person.

“Closing” shall mean the settlement of the mutual obligations of Purchaser and Sellers with respect to the conveyance of the Interests to Purchaser and the performance of their respective obligations hereunder to be performed at or prior to Closing.

“Closing Date” means November 30, 2007 or such other date as may be agreed to by the Parties.

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Community Summary” or “Community Summaries” means the information set forth on Exhibit “F” regarding the Projects.

“Contract” means, whether or not capitalized, with respect to any Person, any agreement, commitment, contract, indenture, loan, note, mortgage, instrument, lease or undertaking of any kind or character, oral or written, to which such Person is a party or that is binding on such Person or its Capital Stock, assets, properties or business.

“Contribution Agreement” means the respective Contribution Agreement And Assignment And Assumption, between each Seller and the respective Subsidiary (except Gateway Commons, LLC).

“Control” (including its correlative meanings “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an Entity, whether through the ownership of Capital Stock, by contract or otherwise.

“Development Budget” means the development budget for each Project as set forth on Exhibit “G.”

“Development Plans” means the development plans for each Project as set forth on Exhibit “E.”

“Encumbrance” means any lien (statutory or otherwise), mortgage, deed of trust, pledge, lease, hypothecation, assignment, charge, security interest, option to purchase, easement, restrictive covenant, right of first refusal, deposit arrangement, preemptive right, conversion, put, call or other adverse claim or right, restriction on transfer, encroachment, conditional sale or other title retention agreement, or any other encumbrance, whether voluntarily incurred or arising by operation of Law.

3

“Entity” means any partnership (including any limited partnership, limited liability limited partnership and limited liability partnership), corporation, limited liability company, trust, joint venture, association, joint stock company, trustee, estate, unincorporated organization, real estate investment trust, business trust, Governmental Authority or other legal entity.

“Environmental Law” means any applicable federal, state, local or foreign statute, Law, in effect and, in each case, as amended as of or prior to the Closing Date relating to or concerning the protection of the environment, natural resources, human health, or environmental quality including those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any Hazardous Materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls or radiation (including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9106 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), and the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), as each has been amended and regulations promulgated pursuant thereto).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such accounting profession, in effect from time to time, consistently applied.

“Governmental Authority” means any court, government (federal, state, local, foreign or multinational), department, commission, board, bureau, agency, official or other regulatory, administrative, authority or political subdivision thereof.

“Governmental Order” means any order, writ, injunction, decree, award, judgment or ruling entered by or with any Governmental Authority.

“Hazardous Materials” means any substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including without limitation polychlorinated biphenyls, petroleum, radioactive materials and urea formaldehyde.

“Income Tax” or “Income Taxes” means all taxes (including estimated income taxes and franchise taxes), charges, fees, levies or other assessments imposed by any Taxing Authority and based on or measured with respect to income or profits, including any interest, penalties or additions attributable thereto.

4

“Knowledge of Sellers,” “Sellers’ Knowledge” and words of similar import mean the current actual knowledge of Jonathan Jaffe, Richard Beckwitt, Jeffrey Krasnoff, Emile K. Haddad, Mark Sustana, Edward Giermann, Christopher Marlin, Bruce Gross, Richard Leigh, Gregory H. McWilliams, Jr., Mike Levesque, David Bourne, Charles H. Hathaway, Craig M. Johnson, Fred B. Rothman, Frederick W. Kunkle, Jr., Jeffrey G. Roos, Marc I. Chasman, Ric J. Rojas and Sam B. Crimaldi, as representatives of each of the Sellers, and shall not be construed, by imputation or otherwise, to refer to the knowledge of any Affiliate or Representative of any of the Sellers, or to any other officer, agent, manager, representative or employee of any of the Sellers or any Affiliate thereof or to impose upon such individuals any duty to investigate the matter to which such actual knowledge or absence thereof pertains.

“Land” means those parcels of real property set forth on Exhibit “B.”

“Law” means any code, law ordinance, regulation, reporting or licensing requirement, rule or statute applicable to a Person or its assets, liabilities or business, including those promulgated, interpreted or enforced by any Governmental Authority.

“Liabilities” means any assessment, cause of action, complaint, suit, proceeding, or investigation by or before any Governmental Authority, arbitration or mediation tribunal, and any direct or indirect liability, indebtedness, guaranty, claim, loss, damage, deficiency, cost, expense or obligation, either accrued, absolute, contingent, mature, unmature or otherwise and whether known or unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured.

“Material Adverse Effect” means any change, event, effect, fact or circumstance that is or is reasonably likely to be material and adverse to the business, financial condition or results of operations of any Seller or to the Sellers taken as a whole, or to the ownership, use, value and/or development of any individual Property or to the Properties taken as a whole, provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (a) changes in the economy of the United States of general scope or which affect the market area or industry of any Seller Entity, (b) changes in GAAP, (c) changes in applicable Law, and/or (d) actions and omissions of any Party taken with the prior informed written consent of the other Parties in contemplation of or in connection with the transactions contemplated hereby.

“Organizational Documents” means, with respect to any Entity, its certificate or articles of incorporation, certificate or articles of limited partnership or organization and bylaws, charter, operating agreement, shareholder agreements, regulations, partnership agreement, trust agreement and similar organizational charter or agreement and all other organizational documents, in each case, as amended and/or restated as of the Closing Date.

“Permitted Encumbrance” means, with respect to any Person and its assets or properties, (a) survey exceptions, use, zoning or planning restrictions, easements, irregularities, licenses, rights of way, declarations, reservations, provisions, covenants, conditions, waivers or other title matters or Encumbrances which (i) are necessary or desirable to obtain any Approvals or for the development of

5

the Projects in accordance with the Community Summaries, (ii) do not affect the marketability of title to the Properties based upon applicable title standards in effect in the state in which the applicable Property is located, (iii) do not, individually or in the aggregate, materially impair the ownership, use, value, or intended development of any parcel constituting any Property, (iv) appear in any of the Title Commitments not objected to by Purchaser as provided in Section 5.2(b) or (v) are Property Rights Contracts or Collateral Rights Contracts; (b) Encumbrances securing the performance of bids, tenders, leases, contracts (other than for the repayment of debt), statutory obligations, surety, customs and appeal bonds and other obligations of like nature, incurred as an incident to and in the ordinary course of business; (c) Encumbrances imposed by Law, such as carriers’, warehousemen’s, mechanics’, materialmen’s, landlords’, laborers’, suppliers’ and vendors’ liens, incurred in the ordinary course of business and securing obligations which are not yet due or which are being contested in good faith by appropriate proceedings but subject to any proration provided herein; (d) Permitted Tax Liens; (e) any extensions, renewals and replacements of any of the foregoing; (f) all pre-printed exclusions from coverage under a standard policy of owner’s title insurance as promulgated by the American Land Title Association, to the extent not otherwise addressed in items (a) through (e) above; and (g) all pre-printed defects and exceptions listed as standard exceptions on Schedule B of a standard policy of owner’s title insurance as promulgated by the American Land Title Association, to the extent not otherwise addressed in items (a) through (f) above.

“Permitted Tax Liens” means (a) liens securing the payment of Taxes other than Income Taxes which are either not delinquent or being contested in good faith by appropriate proceedings for which Purchaser has received proration credit pursuant to Section 2.2(d), and (b) liens for current Taxes not yet payable.

“Person” means any individual or any Entity.

“Project” means each, and “Projects” means two or more, of the design, construction, renovation, marketing and sale of the Properties as described in Exhibit “C.”

“Property” means the Land and the improvements currently located thereon in any particular community.

“Properties” means, collectively, all of the Land and the improvements in any two or more communities.

“Purchase Price” means the consideration to be paid by Purchaser to Sellers for the Interests determined and paid in accordance with the provisions of Section 2.2.

“Representative” means, with respect to any Person, any officer, director, owner, employee, principal, attorney, agent or other authorized representative of such Person.

“Seller Entity” means each of, and “Seller Entities” means, collectively, the Sellers and the Subsidiaries.

“Straddle Period” means any taxable year or period beginning before and ending after the Closing Date.

6

“Tax” or “Taxes” means any federal, state, local or foreign net or gross income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax, governmental fee or like assessment or charge of any kind whatsoever (whether computed on a separate, or consolidated, unitary or combined basis, or in any manner), including any interest, penalty or additions thereto and any amount imposed by any Governmental Authority or arising under any Tax Law or agreement, including any joint venture or partnership agreement.

“Tax Return” means any return, report or similar statement or form required to be filed with respect to any Tax (including any attached schedules and related or supporting information), including any information return, claim for refund, amended return or declaration of estimated Tax.

“Taxing Authority” means any United States federal, state or local or any foreign governmental, regulatory or administrative authority, agency or commission exercising Tax regulatory authority.

“Title Commitments” means, collectively, the A.L.T.A. Commitments issued by Title Company and relating to the Property.

Each of the following terms is defined in the Section of this Agreement set forth opposite such term:

Agreement	Preamble
Anti-Money Laundering	10.3
Assigned Contracts	3.9
Claim Notice	8.4
Collateral Rights Contracts	3.8(b)
Confidential Information	11.15(a)
Consents	5.5
Cost Sharing Arrangement	3.8(f)
Disclosure Schedules	1.3(d)
Effective Date	Preamble
Environmental Cure Period	5.6(b)
Environmental Reports	5.6(a)
Existing Environmental Reports	3.11(c)
Expiration Date	8.1(a)
Financial Institution	10.1
Indemnified Loss	8.2
Indemnified Losses	8.2
Indemnified Party	8.3
Indemnifying Party	8.4
Intended Property	6.2
Interest	Recitals
Interests	Recitals
Lennar	Preamble
LHC	Preamble
Neutral Accountant	2.2(b)
New Environmental Reports	5.6(a)
Notice Period	8.4
Obtained Approvals	3.8(a)
OFAC	10.1
Option	3.8(b)

7

Parties	Preamble
Party	Preamble
Patriot Act	10.3
Post-Closing Proration True-Up	2.2(d)
Potential Contributer	8.5
Preclosing Tax Period	9.1(a)
Property Rights Contracts	3.8(b)
Purchase Price	2.2(a)
Purchase Price Computation	2.2(a)
Purchase Price Objections Statement	2.2(b)
Purchaser	Preamble
Purchaser Indemnified Parties	8.3
Purchaser’s Environmental Objection Notice	5.6(b)
Purchaser’s Title Objection Notice	5.2(b)
Recognized Environmental Conditions	3.11(d)
Restructuring	3.2(c)
Securities Act	4.7
Seller	Preamble
Seller Indemnified Parties	8.2
Sellers	Preamble
Sellers’ Indemnification Cap	8.6(a)
Sellers’ Indemnification Basket	8.6(b
Sellers’ Representative	2.4
Sellers’ Security Instruments	5.4
Specially Designated Nationals and Blocked Persons	10.1
Subsidiaries	Recitals
Subsidiary	Recitals
Survey	5.3
Tax Claim	9.3(a)
Title Company	5.2(a)
Title Cure Period	5.2(b)(ii)
Title Policies	5.2(a)
Title Review Commencement Date	5.2(b)
Transfer Taxes	9.1(c)
U.S. Person	10.1

1.2 Certain Interpretation Matters.

(a) Definitions contained in this Agreement apply to singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. Words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires. The terms “hereof,” “herein,” “hereby” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement. The terms “includes” and the word “including” and words of similar import shall be deemed to be followed by the words “without limitation.” Each Exhibit, Article, Section and paragraph reference is to the Exhibits, Articles, Sections and paragraphs to this Agreement, and each Schedule reference is to the Disclosure Schedules, unless otherwise specified. The term “dollars” or “$” means United States Dollars. Accounting terms used but not otherwise defined in this Agreement shall have the meaning given them by GAAP.

(b) When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

8

(c) The Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement.

(d) Concurrently with the execution and delivery of this Agreement, Sellers have delivered to Purchaser Schedules (collectively, “Disclosure Schedules”). The Disclosure Schedules set forth, among other things, items the disclosure of which is necessary or appropriate either (i) in response to an express informational requirement contained in or requested by a provision hereof or (ii) as an exception to one or more representations or warranties or covenants contained in this Agreement; provided, however, that the inclusion of an item in a Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by the disclosing party that such item (or any undisclosed item or information of comparable or greater significance) represents a material exception or fact, event or circumstance with respect to any Seller Entity (on the one hand) or Purchaser (on the other hand). Any matter disclosed in a Disclosure Schedule, regardless of the enumerated reference and regardless of whether a specific representation or warranty contained in this Agreement specifically provides for exceptions to be listed on a schedule, shall be considered disclosed for all Disclosure Schedules and for all matters to which its relevance relates and is reasonably apparent from the language of the disclosure (without reference to any facts or provisions in any document other than the Disclosure Schedules, whether or not incorporated by reference).

ARTICLE II

PURCHASE AND SALE OF INTERESTS

2.1 Mutual Closing Obligations. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing Sellers shall sell, convey, transfer, assign and deliver to Purchaser and Purchaser shall acquire from Sellers, all right, title and interest of Sellers in and to the Interests free and clear of all Encumbrances.

2.2 Purchase Price.

(a) In consideration of the transfer of the Interests by Sellers and the consummation of the transactions contemplated herein, Purchaser shall pay and deliver to Sellers aggregate consideration (the “Purchase Price”) in an amount on a per Property basis calculated in accordance with the formulae set forth in Exhibit “D” (the “Purchase Price Computation”). The Parties agree that the Purchase Price shall equal an aggregate amount of Five Hundred Twenty-Five Million Dollars ($525,000,000.00), which amount shall be subject to adjustments as provided in this Section 2.2. The Purchase Price shall be paid to Sellers at the Closing by wire transfer of immediately available funds (in accordance with the wire instructions attached hereto as Schedule 2.2(a)).

(b) Adjustments. The Parties acknowledge that the Purchase Price is calculated in accordance with the Purchase Price Computation based on estimated and projected financial data and the number of estimated unsold developed and projected to be developed homesites for which Approvals have been received as of the Closing Date. Within sixty (60) days after the Closing Date,

9

Sellers shall recalculate the Purchase Price Computation including actual historic financial results as of the Closing Date and the number of actual unsold developed homesites and such projected to be developed homesites as of the Closing Date; and Sellers shall deliver same to Purchaser along with information and documentation reasonably sufficient to support the calculation and determination of the Purchase Price and a written statement that such recalculation has been prepared in good faith and in accordance with the requirements of this Agreement. Purchaser and its auditors shall be permitted to review Sellers’ financial books and records, including any working papers related to the Purchase Price Computation. If Purchaser has any objections to Sellers’ calculation of the amount of Purchase Price, Purchaser shall deliver to Sellers a statement, along with its revised calculation of the amount of Purchase Price, setting forth its objections thereto and documentation reasonably sufficient to support such revised calculation (a “Purchase Price Objections Statement”). If a Purchase Price Objections Statement is not so delivered within sixty (60) days after Sellers’ delivery of the statement showing its calculation of the amount of Purchase Price, Sellers’ calculation of the amount of Purchase Price shall be final, binding and non-appealable by the Purchaser. Sellers and Purchaser shall negotiate in good faith to resolve any such timely objections, but if they do not reach a final resolution within thirty (30) days after the delivery of the Purchase Price Objections Statement, the Parties shall submit such dispute to an audit partner of Ernst & Young (the “Neutral Accountant”); provided, however, that if the Neutral Accountant is unable or unwilling to serve, an audit partner may be chosen from such other nationally recognized independent certified public accounting firms as the Parties may mutually agree, or as the American Arbitration Association shall select. Any further submissions to the Neutral Accountant by any Party must be in writing with a copy delivered to the other Party. The Neutral Accountant shall consider only those items and amounts which are identified in the Purchase Price Objections Statement as being items which Sellers and Purchaser are unable to resolve. The Neutral Accountant shall, in its sole discretion, have the power to conduct in-person hearings and review of relevant books and records of the Seller Entities during normal business hours upon two (2) days prior written notice, such review to be conducted in a manner that does not unreasonably interfere with the conduct of Sellers’ or Purchaser’s businesses. Such hearings and review, if required, will take place in Miami, Florida. The Sellers and Purchaser shall use their reasonable best efforts to cause the Neutral Accountant to resolve all disagreements as soon as practicable. The resolution of the dispute by the Neutral Accountant shall be final, binding and non-appealable on the parties hereto. The costs and expenses of the Neutral Accountant shall be borne as follows: If the determination of the trued-up Purchase Price by the Neutral Accountant is not more than two percent (2%) greater than the amount of the Purchase Price that is last agreed to in writing by the Sellers (and being challenged by Purchaser through the engagement of the Neutral Accountant), Purchaser shall pay all of such costs and expenses; otherwise Seller shall pay all of such costs and expenses. If the trued-up Purchase Price as determined pursuant to this Section 2.2(b) is greater than the Purchase Price as set forth in Section 2.2(a), Purchaser shall pay Sellers by wire transfer of immediately available funds such difference within ten (10) Business Days after the Purchase Price is finally trued-up; and if the trued-up Purchase Price as determined pursuant to this Section 2.2(b) is less than the Purchase Price as set forth in Section 2.2(a), Sellers shall pay Purchaser by wire transfer of immediately available funds such difference within ten (10) Business Days after the Purchase Price is finally trued-up.

10

(c) Proration True Up. Ad valorem real estate and personal property Taxes and assessments concerning the Assets shall be prorated based on the current year’s gross tax amount. If any special assessments are payable in installments, only the installment payable as of the Closing shall be prorated, and all subsequent installments will be the obligation of the Subsidiaries. The Parties shall, to the extent reasonably known or estimatable, make such proration payments at Closing and then adjust such amounts as part of the Post-Closing Proration True-Up. If Closing occurs at a date when the current year’s Taxes are not fixed, but the current year’s assessment is available, then Taxes will be prorated based upon such assessment and the prior year’s millage rate. If the current year’s assessment is not available, then Taxes will be prorated based on the gross amount of the prior year’s Taxes; provided, however that any Tax prorations based upon the prior year’s Taxes may, at the request of either Party, be subsequently readjusted upon receipt of the actual Tax bill(s) covering the Property and the Parties shall make all necessary adjustments by appropriate payments between themselves following Closing within sixty (60) days after such amounts are determined.

(d) In addition, within sixty (60) days following Closing, the following items shall be apportioned and prorated as of the Closing Date and the Parties shall pay each other accordingly (the “Post-Closing Proration True-Up”)”;

(i) income and operating expenses under any Assigned Contracts;

(ii) utilities;

(iii) charges imposed by homeowner/property owner associations and other quasi governmental organizations and amounts owed under Cost Sharing Arrangements;

(iv) obligations (including Taxes) secured by an Encumbrance being contested by any Seller Entity prior to Closing (which shall be credited to Purchaser); and

(v) such other items as are customarily apportioned in similar transactions.

(e) In addition, within such 60-day period following Closing as part of the Post-Closing Proration True Up, Purchaser and Sellers shall determine:

(i) those deposits held by Sellers as of the Closing Date that represent certain amounts received by Sellers prior to the Closing Date related to sales of portions of the Properties occurring on or after the Closing Date and that shall be credited to Purchaser (or the Subsidiaries) at Closing; and

(ii) those deposits held by Sellers as of the Closing Date that represent certain amounts that Sellers had on deposit with various Governmental Authorities, utilities and other third parties as of the Closing Date and that shall have been assigned to Purchaser (or the Subsidiaries) (provided that such deposit has not been returned to Sellers prior to Closing) and credited (whether or not such deposit is returned) to Sellers (or the Subsidiaries) at Closing. For purposes of this Section 2.2(e), the term “deposits” shall include interest earned thereon.

11

(f) In addition, within such 60-day period following Closing as part of the Post-Closing Proration True Up, Purchaser and Sellers shall determine all impact fees, credits and other rights of reimbursement for infrastructure costs incurred by Sellers to the extent same specifically pertain to the Properties, which shall constitute part of the Properties conveyed by Sellers to the Subsidiaries and shall be assigned or credited to Purchaser (or such Subsidiaries) to the extent such fees, credits or reimbursements are payable on or after the Closing Date, regardless of when the related infrastructure costs were incurred.

(g) Any amounts due pursuant to the Post-Closing Proration True-Up shall bear interest from the Closing Date until the date paid at the same interest rate as the applicable interest rates on principal for the same period under that certain Loan Agreement between Purchaser and its Affiliates, as Borrower, and CitiGroup Global Markets Realty Corp., as Lender, of even date herewith.

2.3 Closing. Subject to the terms and conditions set forth herein, the consummation of the purchase and sale of the Interests, as well as the other transactions contemplated herein, shall take place on the Closing Date and be effective as of 11:59 p.m., Eastern time, at the offices of Bilzin Sumberg Baena Price & Axelrod LLP located at 200 South Biscayne Boulevard, Suite 2500, Miami, Florida, unless another time and/or place is agreed to in writing by the Parties.

2.4 Sellers’ Representative. Each of the Sellers appoints LHC as the representative of the Sellers hereunder (the “Sellers’ Representative”). Each of the Sellers shall act in a uniform manner under this Agreement through the acts of the Sellers’ Representative on their behalf and the Sellers’ Representative hereby has the authority to provide to Purchaser, on behalf of all of the Sellers, all notices, approvals, consents and other actions required hereunder by any or all of the Sellers and to accept, on behalf of any or all of the Sellers, all notices from Purchaser and/or its employees, officers, agents and representatives. In addition, each of the Sellers hereby authorizes all payments to the Sellers pursuant to this Agreement, including all disbursements of the Purchase Price, to be payable to the central account described in wire instructions or as otherwise provided in writing to Purchaser for disbursement by Sellers’ Representative. Sellers’ Representative shall be solely liable for disbursement of the Purchase Price among the Sellers, the obtaining of all required consents and approvals of the Sellers hereunder and the provision of all notices received by the Sellers’ Representative on behalf of the Sellers. Sellers hereby indemnify and hold harmless Purchaser and its Affiliates and their respective Representatives from and against any Claims arising out the acts or omissions of the Sellers’ Representative in carrying out its duties hereunder, including the allocation and disbursement of any such payments among and to the Sellers. Except as expressly otherwise provided herein, all references in this Agreement to payments, providing notices, consents or approvals, delivering documents and all other similar actions, either by the Purchaser to, or to the Purchaser from “Sellers” shall mean to or from (as the case may be) Sellers’ Representative on behalf of Sellers.

2.5 Allocation. The Sellers and Purchaser hereby agree that the Purchase Price and all portions and payments thereof shall be allocated to each of the Sellers and the Interests in the manner set forth in Schedule 2.5. Purchaser and its direct and indirect owners and each Seller and its direct and indirect owners each shall report the purchase and sale of the Interests for all Tax purposes in a manner consistent with such allocation and with the provisions of Article IX of this Agreement in compliance with Section 1060 of the Code (and the principles thereof), including filing all forms required under the Code. Within twenty (20) Business Days after the

12

final determination of the Purchase Price pursuant to Section 2.2, Sellers shall provide to Purchaser, for Purchaser’s approval (which will not be unreasonably withheld), a revised Schedule 2.5 (consistent with the methodology set forth in the original Schedule 2.5), allocating the Purchase Price information in Schedule 2.5 among each of the Seller’s Interests after taking into account any post-Closing adjustments to the Purchase Price.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

Except as disclosed in Sellers’ Disclosure Schedules, each Seller hereby represents and warrants the following to Purchaser as of the Closing Date:

3.1 Organization and Qualification. Each of Lennar and the Seller Entities is duly organized, validly existing and in good standing under the Laws of the state of its formation. Each of the Seller Entities has all requisite power and authority to own, lease, operate and develop its properties and assets (including, with respect to the Subsidiaries, the Assets) and to carry on its business as it is presently being conducted. None of the Seller Entities is in violation of, in conflict with, or in default under any of its Organizational Documents. Each of the Seller Entities is (or in the case of the Subsidiaries promptly after Closing will be) duly qualified or licensed to do business and in good standing in each jurisdiction in which the nature of their business or the ownership of their properties makes such qualification or licensing necessary.

3.2 Capitalization; Ownership; Restructuring.

(a) Sellers. All of the issued and outstanding Capital Stock in each Seller is owned directly or indirectly by Lennar, except as set forth in Schedule 3.2(a). No other equity interests or other securities of any Seller, and no securities or other interests directly or indirectly convertible into any such equity interests or securities, are issued, allotted or outstanding, nor is any Seller under any contractual or other obligation to issue or allot such equity interest or securities.

(b) Subsidiaries.

(i) The equity capitalization of each of the Subsidiaries is set forth in Schedule 3.2(b). Except for the Interests, no Capital Stock of any of the Subsidiaries, and no securities or other interests directly or indirectly convertible into, exchangeable for or evidencing the right to purchase any Capital Stock of any of the Subsidiaries, is issued, allotted or outstanding, nor is any Subsidiary under any contractual or other obligation to issue or allot such Capital Stock. All of the Interests are held beneficially and of record by Sellers, as set forth in Schedule 3.2(b), free and clear of all Encumbrances. All of the Interests were duly authorized and issued by the Subsidiaries.

(ii) Except for this Agreement and transactions contemplated hereby, there are no outstanding (A) agreements, arrangements, warrants, options, puts, calls, rights, options, subscriptions or other commitments to which any Seller Entity or any of its Affiliates is a party or by which any of them or any of their respective properties or assets is bound, relating to the sale, purchase,

13

redemption, issuance or voting of any Capital Stock in any of the Subsidiaries; or (B) securities or other instruments directly or indirectly convertible into, exchangeable for or evidencing the right to purchase any Capital Stock in any Subsidiary.

(iii) Sellers are not in default under any of the Organizational Documents for any Subsidiary. Sellers have provided to Purchaser true and correct copies of the Organizational Documents of each Subsidiary.

(c) Restructuring. Prior to the Closing Date, the Sellers formed each of the Subsidiaries, except Gateway Commons, LLC, and conveyed to such newly-formed Subsidiaries by special or limited warranty deed, contribution agreement and assignment and assumption and other instruments of assignment, the forms of which were provided to and approved by Purchaser, all of their right, title and interest in and to the Assets (collectively, the “Restructuring”). Pursuant to the Restructuring, the Sellers retained all Contracts relating to the Projects, which will be assigned to the Subsidiaries after the Closing Date to the extent provided in Section 5.5. The Parties further agree that the following assets were not conveyed by the Sellers to the Subsidiaries: (i) cash, (ii) accounts or notes receivable, (iii) the Sellers’ Security Instruments, (iv) intellectual property or (v) goodwill associated with Lennar or its Affiliates.

3.3 Authorization; Enforceability. (a) Each of Lennar and the Sellers has all requisite power to execute and deliver this Agreement and the other agreements and instruments contemplated hereby and to perform its obligations hereunder and thereunder and, subject to the conditions set forth herein to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the other agreements and instruments contemplated hereby have been duly authorized by all requisite action on behalf of Lennar and each Seller. Without limiting the generality of the foregoing, each of the owners that is not an Affiliate of Lennar that owns an interest in any Seller, as set forth on Schedule 3.2(a), has to the extent required, prior to the execution of this Agreement, provided its consent to the conveyance of the applicable Properties to the Sellers in which it owns an interest pursuant to the Restructuring, to the execution of this Agreement and the performance of the transactions contemplated hereby by such Seller in which it has a membership interest. This Agreement has been duly executed and delivered by Lennar and each Seller and, assuming the due authorization, execution and delivery of this Agreement by Purchaser, constitutes the valid and binding obligation of Lennar and the Sellers, enforceable against each of them, in accordance with its terms subject to (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights and remedies generally, and (ii) the effect of general equitable principles, regardless of whether asserted in a proceeding in equity or at Law.

(b) Each of the Sellers had all requisite power to execute and deliver the agreements and instruments entered into to implement the Restructuring and to perform its obligations thereunder, and the execution, delivery and performance of all such agreements and instruments was duly authorized by all requisite action on behalf of each Seller. Each of the agreements and instruments entered into to implement the Restructuring was duly executed and delivered by each Seller and constitutes the valid and binding obligation of Sellers, enforceable against each of them, in accordance with its terms subject to (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights and remedies generally, and (ii) the effect of general equitable principles, regardless of whether asserted in a proceeding in equity or at Law.

14

3.4 No Conflict or Violation. Except as set forth in Schedule 3.4, the execution, delivery and performance by Lennar and each of the Sellers of its obligations under this Agreement and the other agreements and instruments contemplated hereby and the consummation of the transactions contemplated hereby and thereby and the execution, delivery and performance by each of the Sellers of its obligations under the agreements and instruments entered into to implement the Restructuring and the consummation of the transactions contemplated thereby, do not and will not: (a) conflict with, violate or breach any provision of its Organizational Documents; (b) violate, or result in a material default or breach under, or require any consent, approval or authorization under, any Contract which is not terminable upon sixty (60) days written notice without payment of penalty or interest or which provides for receipts or payments of less than $100,000.00; or (c) contravene or violate in any material respect any material Law applicable to it or any of their respective Assets, or any Governmental Order to which Lennar or any of the Seller Entities is a party or by which any of them or any of their respective Assets is bound.

3.5 Governmental Consents and Approvals. Except as set forth in Schedule 3.5, the execution, delivery and performance by Lennar and the Sellers of this Agreement and the other instruments contemplated hereby and the consummation by Lennar and the Sellers of the transactions contemplated hereby and thereby and the execution, delivery and performance by each of the Sellers of its obligations under the agreements and instruments entered into to implement the Restructuring and the consummation of the transactions contemplated thereby, do not and will not require any approval, consent, authorization or act of, or the making by Lennar and the Seller Entities of any declaration, filing or registration with, or notification to, any Governmental Authority.

3.6 Litigation. Except as set forth in Schedule 3.6, there are no pending, or to the Knowledge of Sellers, threatened, judicial, municipal or administrative proceedings affecting any Subsidiaries, or any of the Assets, or in which any Seller Entity or any of its Affiliates, is or, to Sellers’ Knowledge, will be a party by reason of any Seller’s ownership of the Interests or any Subsidiary’s ownership or any Sellers’ prior ownership of the Assets or any portion thereof. No Governmental Orders, attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, are pending, or, to the Knowledge of Sellers, threatened, against any Seller relating to or against (i) the Properties, (ii) its or their ownership of the Interests in the Subsidiaries, or (iii) any Subsidiary, nor to Sellers’ Knowledge, are any of such proceedings contemplated to be taken by any Seller Entity. There are no judgments, orders, decrees or injunctions imposed on or affecting any of the Seller relating to or against (i) the Properties, (ii) its or their ownership of the Interests in the Subsidiaries, or (iii) any Subsidiary.

3.7 Compliance with Laws. Except as set forth in Schedule 3.7, the Seller Entities are and have been in compliance with all applicable Laws and Governmental Orders and Obtained Approvals with respect to the Properties. Except as set forth in Schedule 3.7, no written notices have been received by, and, to the Knowledge of Sellers, no Claims have been filed against, any Seller Entity alleging a violation of any such Laws, Governmental Orders or Obtained Approvals. The Properties are in compliance in all material respects with all applicable Laws, Governmental Orders, authorizations and Obtained Approvals.

15

3.8 Properties.

(a) Approvals. The material Approvals that have been obtained by the Seller Entities as of the Closing Date are set forth in Schedule 3.8(a) (the “Obtained Approvals”). The Obtained Approvals are in full force and effect. The Seller Entities and the Subsidiaries have all Approvals necessary for their ownership of the Properties. No Obtained Approvals are terminable as a result of the Restructuring or the transactions contemplated by this Agreement. Except as set forth in Schedule 3.8(a), no Seller Entity is in material violation of the provisions of any of the Obtained Approvals. Schedule 3.8(a) sets forth, to Sellers’ Knowledge, the material Approvals that need to be obtained in order to develop and construct the Projects but that have not yet been obtained as of the Closing Date. Sellers have no Knowledge that such unobtained Approvals will not be obtained in due course, assuming Purchaser diligently pursues their attainment, but shall have no liability to Purchaser under this Agreement if any of such unobtained Approvals are not actually obtained or if the costs that must be incurred to satisfy all conditions to obtain such Approvals should exceed any budgeted or projected amounts.

(b) Options. Except as set forth in Schedule 3.8(b), Subsidiaries have sole possession of the Properties and, except for Purchaser, no Seller Entity has granted or agreed to grant to any Person, and no Subsidiary is a party to, any option, contract, right of first refusal, right of first offer, charitable housing agreement, profit participation, anti-speculation option, joint venture or similar agreement or any other agreement or understanding with respect to a purchase or sale of the Properties or any portion thereof or any interest therein or pursuant to which any sales proceeds relating to any Project are required to be paid to any other Person (each, an “Option”). For so long as a Subsidiary or its Affiliates own a Property, Sellers shall be solely responsible for all payments that are required to be made after the Closing Date with respect to such Property pursuant to any profit participation, anti-speculation option or similar agreement that requires a payment be made to a third-party based upon the sale of all or a portion (including homesites) of any Property (“Property Rights Contracts”), and this sentence is deemed a covenant for purposes of Article VIII. Any option, right of first refusal, right of first offer, charitable housing agreement, or similar agreement that runs with or burdens the Property or which requires such assignment and assumption with the transfer of the underlying Property (together with Cost Sharing Arrangements, “Collateral Rights Contracts”) shall remain obligations of the Subsidiaries and Sellers shall have no liability relating thereto that has not been waived by the applicable Option Party. There are no parties in possession of any portion of the Properties as lessees, tenants at sufferance, trespassers, licensees or otherwise.

(c) Condemnation. Except as set forth in Schedule 3.8(c), no written notices of any condemnation proceedings by a Governmental Authority having the power of eminent domain to condemn any part of any of the Properties have been received by any of the Seller Entities, or, to the Knowledge of Sellers, are any such proceedings threatened.

(d) Homesites. Except as set forth in Schedule 3.8(d), the number of homesites for those Properties that have Obtained Approvals to develop such homesites and the estimated and projected number of homesites for those Properties for which such Approvals have not yet been obtained (assuming such Approvals are obtained) are set forth in Schedule 3.8(d); provided, however,

16

no representation or warranty is made with regard to, and Sellers shall not be liable for, any changes to such number of homesites resulting from any changes to any Obtained Approvals or from obtaining any Approvals after the Closing Date. Notwithstanding anything to the contrary in this Agreement, the sole remedy for any breach of the representations and warranties made in this Section 3.8(d) shall be by adjustment of the Purchase Price pursuant to the provisions of, and within the timeframes contained in, Section 2.2(b).

(e) Community Summaries. The information contained in the Community Summaries relating to number of original homesites, number of remaining homesites, status of homesites as finished or semi-finished and book balance at September 30, 2007 are true and correct in all material respects; provided, however, Sellers shall have no liability under this Agreement if any development costs exceeds any budgeted or projected amounts.

(f) Cost-Sharing Arrangements. Except as set forth in Schedule 3.8(f), there are no material contracts, agreements or arrangements (a “Cost Sharing Arrangement”) with any third Party other than with a condominium or homeowners’ association to jointly share costs related to the Properties or the Projects.

(g) Associations. Except as set forth in Schedule 3.8(g), there are no material unpaid sums due and payable by Sellers or any Subsidiary under the Organizational Documents governing any condominium or homeowners’ association (each an “Association Document”), other than amounts in the ordinary course of business or being contested in good faith with adequate reserves maintained therefor, and none of Sellers or the Subsidiaries is in material default under any of the Association Documents.

(h) Access Rights. Except as set forth in Schedule 3.8(h), each parcel of Land either abuts and has actual vehicular and pedestrian access to and from a public right of way or has an insurable appurtenant easement for vehicular or pedestrian access over and across adjacent land which provides such access to and from the Land and a public right of way; provided, however, that for any Project that is comprised of more than one parcel, it shall not be considered a breach if not all of such parcels are benefited with such access rights so long as the parcels that are not directly benefited with such access rights can indirectly obtain the benefit of such access rights over one or more contiguous parcels included in the Property.

(i) Development Budgets and Cash Flow Projections. True and correct copies of the Development Budgets and Cash Flow Projections as they exist as of the date hereof are attached as Exhibit “G” and Exhibit “H,” respectively. Notwithstanding that they are attached as Exhibits, Sellers make no representation or warranty whatsoever regarding the Development Budgets or the Cash Flow Projections, including any representation or warranty that they represent achievable goals or that any assumptions upon which they are based are true, accurate or reasonable.

3.9 Contracts. All Contracts that are or will be assigned to the Subsidiaries pursuant to Section 5.5 (the “Assigned Contracts”) have been entered into in connection with the ownership, use, operation and development of the Property and the construction of the Project and, unless otherwise disclosed to Purchaser in writing prior to such assignment, in the ordinary course of business. Except as

17

set forth in Schedule 3.9, with respect to each Assigned Contract, no Seller Entity, or, to the Knowledge of Sellers, any other Person which is a party to any Assigned Contract, is in material breach of or material default under such Assigned Contract. Each Assigned Contract is in full force and effect and is a legal, valid, binding and enforceable obligation of a Seller or Subsidiary, and, to the Knowledge of Sellers, each of the other parties thereto in accordance with their respective terms, subject to (a) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights and remedies generally, and (b) the effect of general, equitable principles, regardless of whether asserted in a proceeding in equity or at law.

3.10 Title to Assets. The Subsidiaries have (a) in the case of the Properties, good and marketable fee simple title free and clear of all Encumbrances except Permitted Encumbrances; (b) in the case of any other Asset, legal ownership; (c) in the case of property held under lease, a valid leasehold interest in; or, (d) in the case of property held under other contract or agreement, a valid right to use, all of the real and personal property (i) owned by it or (ii) used or held for use by it in connection with the ownership, use, operation and development of the Properties. The Assets are owned by Subsidiaries free and clear of all Encumbrances (other than Permitted Encumbrances). Notwithstanding the foregoing, the representations and warranties in this Section 3.10 with respect to the Properties or any Assets insured by the Title Policies, shall be deemed to be deleted from this Agreement and have no further force or effect effective upon the issuance of the Title Policies in accordance with the terms and conditions of this Agreement.

3.11 Environmental Matters. Except as described in Schedule 3.11:

(a) (i) There have been no violations of Environmental Laws at the Properties as a result of the acts or omissions of any Seller Entity and, to the Knowledge of Sellers, any other Person, and (ii) to the Knowledge of Sellers, there are no wetlands (as the term is defined in Section 404 of the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1254, and applicable state laws) at any Property that would reasonably be expected to materially and adversely affect any ongoing or currently planned development.

(b) There are no pending, or, to the Knowledge of Sellers, threatened, Claims against any of the Subsidiaries (or, to the Knowledge of Sellers, against any Person whose liability for any Claim any of the Subsidiaries has retained or assumed either contractually or by operation of Law) under the Environmental Laws. None of the Seller Entities has received written notice that the Property is subject to any private or governmental lien or judicial or administrative notice of violation, action or inquiry, investigation or claim relating to Hazardous Materials. The Subsidiaries have not entered into or agreed to any consent decree or order or is a party to, and no Property is subject to, any judgment, decree or judicial or administrative order relating to compliance with Environmental Laws or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and, to the Knowledge of Sellers, no investigation, litigation or other proceeding is pending or threatened in writing with respect thereto.

(c) Schedule 3.11(c) lists all Phase I and Phase II environmental site assessments, conducted by Sellers and any of their Affiliates on any portion of the Property (“Existing Environmental Reports”), and true and complete copies of all such Existing Environmental Reports have been delivered or made available to the Purchaser.

18

(d) None of the Properties have any “Recognized Environmental Conditions” as that term is defined by ASTM Standard E 1527-05.

(e) Notwithstanding anything to the contrary herein, but subject to Section 5.6, this Section 3.11 shall constitute the sole representations and warranties in this Agreement relating to compliance with Environmental Laws and/or in connection with Hazardous Materials. Notwithstanding anything to the contrary in this Agreement, including Article VIII, the remedy for any breach of the representations and warranties contained in this Section 3.11, shall be governed solely by the provisions of Section 5.6.

3.12 Taxes.

(a) All ad valorem taxes assessed or payable with respect to the Properties have been paid, except for the 2007 ad valorem taxes and assessments, or in the case of any Property located in the State of Illinois, 2006 ad valorem taxes and assessments, all of which are not yet due and payable. None of the Seller Entities has received any written notice of any other special assessments, levies or taxes imposed or to be imposed affecting any portion of the Properties or of any action regarding the potential formation of any other district or authority empowered to so assess a tax or levy.

(b) No foreign, federal, state, or local Tax audits or administrative or judicial Tax proceedings are pending or being conducted with respect to Sellers or Subsidiaries and there is no Claim for Taxes by any authority presently outstanding.

(c) There are no liens for Taxes (other than Permitted Tax Liens) upon any assets or properties of Subsidiaries.

(d) Each Subsidiary has been treated at all times during its existence and will be treated, through the date of Closing as an entity that is disregarded as separate from its owner for US tax purposes.

(e) Notwithstanding anything to the contrary herein, Section 3.12 shall constitute the sole representations and warranties in this Agreement relating to Tax matters.

(f) No Seller Entity is a “foreign person,” “foreign trust” or “foreign corporation” within the meaning of Section 1445 of the Code.

3.13 Employee Benefit Plans. No Subsidiary has any employees or provides any benefits to persons through any Benefit Plans, and no Subsidiary has any liability under any Benefit Plan (including any contingent liability) to any current or former Subsidiary employee, officer, director or independent contractor.

3.14 Liabilities. None of the Subsidiaries is liable for or subject to any Liabilities of any kind or nature whatsoever that would be required to be reflected in financial statements prepared in accordance with GAAP, except for the following in connection with the Assets (which have been assumed by the Subsidiaries from the Sellers):

(a) all trade account payables related to the Assets and incurred by any Seller in the ordinary course of business that remain unpaid as of the Closing Date;

19

(b) all Liabilities of each Seller arising under the Assigned Contracts to be paid or performed after the Closing Date;

(c) all Liabilities of each Seller as declarant or developer or under any condominium or homeowners association to be paid or performed after the Closing Date;

(d) all Liabilities of each Seller incurred in the ordinary course of business in connection with the ownership and development of the Properties;

(e) all Liabilities of each Seller Entity under all Security Instruments to be paid or performed after the Closing Date;

(f) all Liabilities under Property Rights Contracts and Collateral Rights Contracts;

(g) those Liabilities that are the subject of any other representation and warranty under Article III of this Agreement and disclosed in Sellers Disclosure Schedule; and

(h) those Liabilities to be paid or performed after the Closing Date in connection with or arising out of the Approvals, including any impact fee, charge, cost, contribution, mitigation or other consideration to obtain or maintain any Approval.

3.15 Absence of Changes. At all times since September 30, 2007, except for the Restructuring and otherwise in connection with the entry into the Agreement, Seller Entities have operated the Properties in the ordinary course of business and there has not been any event which would reasonably be expected to have a Material Adverse Effect.

3.16 Solvency. Each of the Sellers was solvent and able to meet its financial obligations as they became due at the time of the conveyance of its Properties to the applicable Subsidiary pursuant to the Restructuring, and each of the Seller Entities will be solvent at the Closing and will not be rendered insolvent or unable to meet its financial obligations as they become due as a result of the transactions contemplated by this Agreement. None of the officers or directors of any Seller or Lennar has any direct or indirect financial interest in any of the transactions contemplated by the Restructuring or this Agreement, or any such interest was fully disclosed to the board or other governing body before its approval and any such director with such interest abstained from voting on the transactions; provided, however, that the immediately foregoing provision excludes any direct or indirect financial interest in any of the transactions contemplated by the Restructuring or this Agreement arising out of such officer’s or director’s (a) ownership, directly or indirectly, of any equity interest(s) in any Seller or Lennar or (b) existing compensatory arrangements, in any form, from any Seller or Lennar.

20

3.17 Intent. The Parties intend that the conveyance to Purchaser of all of the Interests shall constitute an absolute sale, conveying good title to the Interests free and clear of any Adverse Claim from Sellers to Purchaser, and that the Interests conveyed to Purchaser shall not be part of the Sellers’ respective estates in the event of the insolvency of any Seller or a conservatorship, receivership or similar event with respect to any Seller.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Sellers that the statements contained in this Article IV are correct and complete as of the Closing Date.

4.1 Organization. Purchaser is duly organized, validly existing and in good standing as a limited liability company under the Laws of the State of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted. Purchaser is not in violation of, in conflict with, or in default under any of its Organizational Documents.

4.2 Capitalization; Ownership. The equity capitalization of Purchaser (including the identity of each direct or indirect equity holder and the other membership or ownership interests held thereby) is set forth in Schedule 4.2.

4.3 Authorization; Enforceability. Purchaser has all requisite power and authority to execute and deliver this Agreement and the other instruments contemplated hereby and to perform its obligations hereunder and thereunder and, subject to the conditions set forth herein, to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the other instruments contemplated hereby by Purchaser, has been duly authorized by all requisite limited liability company action on behalf of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery of this Agreement by Sellers, constitutes a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws relating to or affecting creditors’ rights and remedies generally and the effect of general equitable principles, regardless of whether asserted in a proceeding in equity or at Law.

4.4 No Conflict or Violation. The execution, delivery and performance by Purchaser of its obligations under this Agreement and the other agreements and instruments contemplated hereby and the consummation of any of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with, violate or breach any provision of its Organizational Documents or of its direct and indirect owners; (b) violate, or result in a material default or breach under, or require any consent, approval or authorization under, any material Contract to which Purchaser or any of its Affiliates is a party; or (c) contravene or violate in any material respect any material Law applicable to Purchaser or any of its assets or properties, or any Governmental Order to which Purchaser is a party or by which it or any of its respective assets or properties is bound.

21

4.5 Consents and Approvals. The execution, delivery and performance by Purchaser of this Agreement or any of the other instruments contemplated hereby, the consummation by Purchaser of the transactions contemplated hereby and thereby and compliance by Purchaser with, or fulfillment by Purchaser of, the terms, conditions and provisions hereof and thereof do not and will not require the approval, consent, authorization or act of, or the making Purchaser of any declaration, filing or registration with, any Person or Governmental Authority.

4.6 Absence of Proceeding. There is no action, suit, proceeding or investigation pending or, to the knowledge of Purchaser, threatened that would adversely affect or restrict the ability of Purchaser to consummate the transactions contemplated by this Agreement. Purchaser is not a party to or in default under any outstanding Governmental Orders that would materially adversely affect the ability of Purchaser to consummate the transactions contemplated by this Agreement.

4.7 Investment Intent. Purchaser has such knowledge and experience in financial matters that it is capable of evaluating the merits and risks of its purchase of the Interests. Purchaser confirms that Seller Entities have provided Purchaser the opportunity to ask questions of the officers and management employees of Sellers and their Affiliates and to acquire additional information about the business and financial condition of the Seller Entities. Purchaser is acquiring the Interests for investment and not with a view toward, or for sale in connection with, any distribution thereof, or with any present intention of distributing or selling the Interests. Without conceding that the Interests constitute securities, Purchaser acknowledges that the Interests have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities or “blue sky” Laws of any state, and agrees that the Interests may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act, except pursuant to an exemption from such registration available under the Securities Act, and without compliance with state and foreign securities Laws in each case, to the extent applicable.

ARTICLE V

CERTAIN COVENANTS

5.1 Inspection Rights of Purchaser.

(a) Purchaser acknowledges that, except for the representations of Sellers expressly stated herein and in the documents to be executed by Sellers at the Closing, Purchaser has not relied upon any statements, representations or warranties by any of the Seller Entities or any of their Affiliates or Representatives. Except for the representations of Sellers expressly stated herein and in the documents executed by Sellers to implement the Restructuring or to be executed by any of the Sellers at the Closing, neither Seller Entities nor any of their respective Affiliates or Representatives makes any representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by Seller Entities or their Affiliates or Representatives to Purchaser in connection with the transactions contemplated hereby. Purchaser acknowledges and agrees that all materials, data and information delivered by any of the Seller Entities or their Affiliates or Representatives to Purchaser in connection with the transactions contemplated hereby are provided to Purchaser as a convenience only and that any reliance on or use of such materials, data or

22

information by Purchaser shall be at the sole risk of Purchaser, except as otherwise expressly stated herein. Except for the representations of Sellers expressly stated herein and in the documents executed by Sellers to implement the Restructuring or to be executed by any of the Sellers at the Closing, none of the Sellers nor any of their Affiliates or Representatives shall have any liability to Purchaser for any inaccuracy in or omission from any report or reports delivered by any of the Seller Entities or their respective Affiliates or Representatives to Purchaser.

(b) Purchaser has not conducted any surveys, studies, tests, engineering, structural and other investigations and environmental assessments of the Properties prior to the Closing Date. Purchaser represents and warrants that it has taken no action prior to the Closing Date which permitted the imposition of a contractor’s or mechanicmen’s lien against any Property or portion thereof, and Purchaser, by execution of this Agreement, hereby indemnifies and holds harmless Seller Entities from and against any and all liability, cost or expense (including reasonable counsel fees and court costs) imposed upon or asserted against any Seller Entity, as a result of any activity on any Property or portion thereof by Purchaser or its consultants or Representatives.

(c) Purchaser agrees that, except as specifically provided in this Agreement and the documents delivered by Sellers at Closing in compliance with the provisions of this Agreement, the Interests shall be sold and that Purchaser shall accept possession of the Interests on the Closing Date strictly on an “AS IS, WHERE IS” AND “WITH ALL FAULTS, LIABILITIES, AND DEFECTS, LATENT OR OTHERWISE, KNOWN OR UNKNOWN” basis, with no right of set-off or reduction in the Purchase Price, and that, such sale shall be without representation or warranty of any kind, express or implied, including any warranty of income potential, operating expenses, uses, merchantability or fitness for a particular purpose, and Sellers hereby disclaim and renounce any such representation or warranty, except to the extent specifically provided in this Agreement and the documents delivered by Sellers at Closing. Purchaser specifically acknowledges that, except for the representations and warranties of Sellers expressly contained herein and in the documents to be executed by them at the Closing, Purchaser is not relying on any representations or warranties of any kind whatsoever, express or implied, from any of the Seller Entities, any Affiliate or Representative of any of the Seller Entities or any broker or other agent as to any matters concerning any Seller Entities or the Assets.

5.2 Title to Properties.

(a) Purchaser has obtained the Title Commitments from North American Title Group or its Affiliates (the “Title Company”), which Title Commitments have been or will subsequently be brought forward and dated to the date of Closing, together with copies of documents and all exceptions to title to the Properties as indicated therein. Purchaser and Sellers shall each be responsible for the payment of fifty percent (50%) of the premium for the Title Commitments, the owner’s title policies issued pursuant thereto (“Title Policies”) (including any endorsements thereto requested by Purchaser at the time of issuance of the Title Policies) and any title insurance policies simultaneously issued with the Title Policies for a mortgagee in connection with any financing for the acquisition of the Interests (provided the insured value thereunder does not exceed the Purchase Price). Purchaser and Seller agree that Commonwealth Land Title Insurance Company or Lawyers Title Insurance Corporation shall provide co-insurance for 50% of the title insurance. Purchaser shall direct the placement of co-insurance.

23

(b) Purchaser has not had the opportunity to review the Title Commitments prior to Closing. Within sixty (60) days after the later of (x) Closing or (y) delivery of all Title Commitments and copies of all documents and all exceptions to title referenced in the applicable Title Commitment (the “Title Review Commencement Date”), Purchaser shall notify Seller in writing (“Purchaser’s Title Objection Notice”) of any defects to title with respect to the Properties for the period prior to Closing which are not Permitted Encumbrances. Purchaser shall routinely notify Seller of the non-receipt of any documents or exceptions which are delaying the Purchaser’s Title Review Commitment Date. If Purchaser fails to timely deliver Purchaser’s Title Objection Notice with respect to any Property, Purchaser shall be deemed to have accepted all matters in the Title Commitment for such Property, and same shall be deemed to be Permitted Encumbrances. Upon timely receipt of Purchaser’s Title Objection Notice, Sellers shall undertake to remedy all defects therein by the following:

(i) If the Properties or any part thereof shall be subject to any monetary lien created by any action or inaction by any of the Seller Entities prior to Closing that is not a Permitted Encumbrance, Sellers shall pay the same or make other arrangements reasonably satisfactory to Purchaser and Title Company to remove such lien as an exception to title.

(ii) If any other title defects shall be listed in Purchaser’s Title Objection Notice, other than a Permitted Encumbrance, Sellers shall use commercially reasonable efforts to cure the title defects to the reasonable satisfaction of Purchaser and Title Company, and Sellers shall have ninety (90) days after Purchaser’s Title Objection Notice to cure same (the “Title Cure Period”); provided, however, that if the defect is not cured in such ninety (90) day period but is capable of being cured, and so long as Sellers reasonably pursue the cure thereof, the Title Cure Period shall be extended for such additional period as shall be necessary to cure such default. Purchaser shall cooperate with Sellers in all respects, at no cost to Purchaser, to assist Sellers in curing any title defects, inasmuch as Sellers will have no ownership interest in the Properties or Subsidiaries after Closing.

(c) If the applicable Seller is unable to remedy such defects within the Title Cure Period, Purchaser shall have the option, exercisable by written notice to Sellers of exercising any remedy available to Purchaser under Article VIII (regarding a breach of the representations and warranties in Section 3.10).

(d) To the extent with respect to any Property, Purchaser does not timely give a Purchaser’s Title Objection Notice or Sellers cure to Purchaser’s reasonable satisfaction any title defect that Sellers are obligated to cure, the representations and warranties of Seller with respect to title to such Property (or any other Assets insured by such Title Policy) as set forth in Section 3.10 shall be deemed to be deleted from this Agreement effective as of the date of such cure or non-delivery.

(e) Sellers shall deliver such standard title related affidavits (which shall be to their Knowledge) and indemnities (which shall be limited to the acts of the Sellers) as are reasonably requested by the Title Company in order to issue the Title Policies and any endorsements reasonably requested by Purchaser or its lender (including a non-imputation endorsement) consistent with the intent of the Parties and the terms of this Agreement.

24

5.3 Surveys. Within sixty (60) days after the Title Review Commencement Date, Purchaser may obtain, with respect to each Property, a new or an update of existing ALTA survey of the Properties (the “Survey”). Purchaser may deliver objections to survey matters related to the Properties to the extent same are not Permitted Encumbrances within sixty (60) days after the Title Review Commencement Date, and Sellers shall respond to such objections in the same manner as Sellers shall respond to title objections pursuant to Section 5.2. The Cost of any new or updated Surveys obtained by Purchaser shall be borne fifty percent (50%) by Sellers and fifty percent (50%) by Purchaser.

5.4 Sellers’ Security Instruments. Purchaser shall use its commercially reasonable efforts to, as soon as practicable after Closing, but in no event more than twelve (12) months after the Closing Date, substitute all letters of credit, bonds, indemnifications, guarantees or other security in substitution for, and release, terminate and/or return (as the case may be) all letters of credit, bonds, indemnifications, guarantees or other security posted by any Seller or any Affiliate thereof in connection with the development of any of the Properties (collectively, the “Sellers’ Security Instruments”), including to guarantee completion of public improvements, in each case satisfactory to the beneficiary of such security. Schedule 5.4 sets forth to the Sellers’ Knowledge, a true and correct list of all material Sellers’ Security Instruments outstanding on the Closing Date. Schedule 5.4 shall be updated, supplemented, modified and amended within ninety (90) days from Closing. Purchaser shall cause the Subsidiaries to indemnify, defend and hold harmless each Seller and any of its Affiliates for any and all Indemnified Losses it might sustain upon any attempt by any Party to realize, draw upon or otherwise obtain the rights to any security that is the subject of any Sellers Security Instrument; provided, however, that if, at the end of such 12-month period, Purchaser has not caused the Subsidiaries to obtain the release, termination and/or return of all of the Sellers’ Security Instruments, then, within fifteen (15) days after written request of Sellers, as security for Purchaser’s indemnification obligations set forth in this Section 5.4, Purchaser shall cause a financial institution, acceptable to Sellers in their reasonable discretion, to issue an irrevocable letter of credit, in form and substance acceptable to Sellers in their reasonable discretion, in an amount not less than the total aggregate amount that could be realized by the beneficiaries on all such Sellers’ Security Instruments that have not been released, returned or terminated.

5.5 Assignment of Contracts; Obtaining Consents. As soon as practical, but not more than ninety (90) days after Closing, Sellers and Purchaser shall review all Contracts and agree upon those Contracts that shall be assigned by Sellers to the Subsidiaries. The Parties agree that they intend to have Sellers assign all Contracts that Sellers entered into in the ordinary course of business in connection with the ownership and development of the Property and the Project; and in all events any Collateral Rights Contracts and Property Rights Contracts shall be assigned, but the Sellers shall be solely obligated to make any payments with regard to any Property Rights Contracts. In no event will Sellers assign or the Subsidiaries be obligated to assume (absent mutual agreement of the Parties) any of the following types of Contracts:

(i) any Contract under which Seller has incurred, assumed or guaranteed any indebtedness for borrowed money or any material capitalized lease obligation;

25

(ii) any Contract that by its terms materially limits the freedom of any Subsidiary or any direct or indirect parent, or any of their officers, to compete in, or conduct any line of business or in any geographic area;

(iii) any employment or consulting agreement;

(iv) any Contract requiring any Subsidiary to purchase of any real property;

(v) any Contract with Lennar or an Affiliate;

(vi) any property management, brokerage or leasing agreement; and

(vii) any Contract described in Section 3.8(b); except for Property Rights Contracts and Collateral Rights Contracts that are described above as Contracts that will be assigned and assumed in all events;

and, unless otherwise agreed by the Parties, Sellers shall assign to the Subsidiaries and the Subsidiaries shall assume all such Contracts that have commercially reasonable terms. Seller shall be solely responsible for the payment of any costs incurred to assign the Contracts or obtain consents for same. Seller shall be solely responsible for the costs to terminate any Contracts that are not Assigned Contracts. Anything in this Agreement to the contrary notwithstanding, no Seller shall assign, transfer or convey to a Subsidiary any of its rights and obligations in and to any material Contract or Approval or any Property, and no Seller shall assign, transfer or convey any Interest to Purchaser, without first obtaining all necessary and material approvals, consents or waivers (collectively, “Consents”), unless Sellers and Purchaser mutually agree to such assignment, transfer or conveyance without such Consents. As to any Contract, Approval, Property or Interest for which the Purchaser and Sellers have not so mutually agreed, the Sellers shall (i) use diligent, commercially reasonable efforts at Sellers’ cost to obtain the Consent of any such third party as soon as practicable; (ii) cooperate with Purchaser in any reasonable and lawful arrangements designed to provide all of the intended benefits to Purchaser; and Purchaser agrees that, subject to Purchaser’s rights hereunder, including Sellers’ indemnification for breaches of covenants, representations and warranties, the Subsidiaries shall perform and be solely liable for all of Sellers’ obligations that arise following the Closing; and (iii) enforce at the request of Purchaser and at the expense and for the account of Purchaser, any rights of the Sellers against such issuer thereof or the other party or parties thereto (including the right to elect to terminate any such Contract or Approval in accordance with the terms thereof upon the written request of Purchaser). Purchaser agrees that, following the Closing, the Subsidiaries shall be solely liable for the payment of all expenses, and the performance of all of Sellers’ obligations, relating to any Contracts that are assigned to the Subsidiaries in accordance with this Agreement. Effective upon the obtaining of any Consent in connection with any such assignment, transfer or conveyance of any such Contract, Approval, Property or Interest, such Contract, Approval or Property shall be assigned, transferred and conveyed by the applicable Seller to the applicable Subsidiary or such Interest shall be assigned to the Purchaser (as the case may be).

26

5.6 Environmental Matters.

(a) Purchaser may obtain new Phase I environmental assessments and, if necessary, Phase II environmental site assessments or such further environmental investigations as may be reasonably required under the circumstances (“New Environmental Reports” and together with the Existing Environmental Reports, the “Environmental Reports”), on the Properties or any property formerly owned by any Subsidiaries.

(b) Purchaser has not had the opportunity to completely review the Existing Environmental Reports listed on Schedule 3.11 and will not have the opportunity to review the New Environmental Reports prior to Closing. Within ninety (90) days after Closing, Purchaser shall notify Seller in writing (“Purchaser’s Environmental Objection Notice”) of any Recognized Environmental Conditions noted in any Environmental Reports. If Purchaser fails to timely deliver Purchaser’s Environmental Objection Notice with respect to any Property, Purchaser shall be deemed to have accepted all matters disclosed in the Environmental Reports for such Property. Upon timely receipt of Purchaser’s Environmental Objection Notice, Sellers shall undertake to remove or remediate any Recognized Environmental Conditions listed in Purchaser’s Environmental Objection Notice in the manner and to the extent set forth in Section 5.6(c), and Sellers shall have ninety (90) days after Purchaser’s Environmental Objection Notice to cure same (the “Environmental Cure Period”); provided, however, that if such Recognized Environmental Condition is not capable of cure within such ninety (90) day period but is capable of being cured, and so long as Sellers reasonably pursue the cure thereof, the Environmental Cure Period shall be extended for such additional period as shall be necessary to cure such Recognized Environmental Condition. Purchaser shall cooperate with Sellers in all respects, at no cost to Purchaser, to assist Sellers in curing any Recognized Environmental Conditions.

(c) As to any Recognized Environmental Condition for which Sellers have been given a timely Purchaser’s Environmental Objection Notice, Sellers shall have the sole power and authority to direct and control all discussions and negotiations with the applicable Governmental Authorities and, subject to the written approval of Purchaser, which shall not be unreasonably withheld or delayed, (the Parties agree that Purchaser will not be deemed to have acted unreasonably if it fails to approve any Seller proposal containing deed restrictions or natural attenuation that, in either case, materially and adversely effect the intended purposes of the Property as contemplated by the Community Summaries), to determine with such Governmental Authorities the acceptable levels, methods and means of remediation and/or removal of such Recognized Environmental Condition necessary in connection with the Property’s intended use consistent with the Community Summary for such Property. Such Recognized Environmental Condition shall be deemed remedied and/or removed for all purposes, and Sellers shall have no further obligations pursuant to this Section 5.6 or liability pursuant to Article VIII with respect to such Property, upon the issuance of a No Action Letter or similar finding by the applicable Governmental Authorities. Sellers shall be solely liable for the costs of all such discussions, negotiations, remediation, removal and other expenses related to obtaining such No Action Letter or similar finding; provided, however, that to the extent that any such costs and expenses have been included in underlying cash flows that are part of the Purchase Price Computation, as determined in accordance with Section 5.7. Purchaser shall solely be liable for the direct payment of such costs and expense, or shall promptly on demand reimburse Sellers for any such amounts paid by Sellers or their Affiliates.

27

(d) In the event that, at any time after the Closing Date, Purchaser discovers that any Recognized Environmental Condition existed as of the Closing Date that was not listed on Schedule 3.11, or any other breach of Section 3.11, the provisions of this Section 5.6 shall apply as Purchaser’s sole remedy. In such event, Purchaser shall provide Sellers with a Purchaser’s Environmental Objection Notice and Sellers shall have the Environmental Cure Period to remediate or remove such Recognized Environmental Condition, in accordance with provisions of Section 5.6(c), before Purchaser shall have the right to seek indemnification subject to and in accordance with Article VIII.

(e) If, and only if, the applicable Seller is unable to remediate or remove such Recognized Environmental Condition within the Environmental Cure Period in accordance with Section 5.6(c), Sellers shall, subject to and in accordance with Article VIII, indemnify and hold harmless Purchaser and its Affiliates and their respective Representatives from and against any Indemnified Losses in connection with any such Recognized Environmental Condition regarding a breach of the representations and warranties in Section 3.11.

5.7 Determination of Costs Within Purchase Price Computation. Within sixty (60) days following Closing, the Sellers shall deliver to Purchaser its calculation and itemization, along with documentation reasonably sufficient to confirm such calculation and itemization of the costs and expenses related to the matters described in Section 3.11 or Section 5.6 that have been included in the underlying cash flows that are part of the Purchase Price Computation. The Purchaser shall review and approve such calculation and itemization in its good faith, reasonable discretion. During such sixty (60) day period, the parties shall also endeavor in good faith to mutually agree in the same manner which other costs and expenses, if any, included in the underlying Cash Flows Projections that are part of the Purchase Price Computation could reasonably be related to a matter which could be the subject of an indemnification claim by Purchaser pursuant to Section 8.3; provided, however, no such other cost or expense less than $25,000 shall be included. For purposes of this Agreement, amounts shall be treated as included in the Purchase Price Computation only if and to the extent specifically approved and agreed by Purchaser in accordance with this Section 5.7.

5.8 True-Sale Opinion. Lennar and Sellers covenant and agree to cause its independent legal counsel to issue within a reasonable time following the Closing what is commonly referred to as a “True Sale Opinion” in form and substance customary for this type of transaction.

ARTICLE VI

ADDITIONAL COVENANTS

6.1 No Public Announcement. No Party, nor any Affiliate thereof, shall make any public announcement or press release concerning the transactions contemplated by this Agreement without the prior written approval of the other Party (which consent shall not be unreasonably withheld or delayed), except as may be required by Law or rule or regulation of any stock exchange.

28

6.2 Further Assurances. At any time or from time to time after the Closing, each of the Parties shall, at the request of other Party and at no additional cost or expense, execute and deliver any further instruments or documents and take all such further action as such requesting Party may reasonably request in order to evidence or effect the consummation of the transactions contemplated hereby, including those contemplated by the Restructuring. The Properties which were assigned and conveyed pursuant to the Restructuring and this Agreement are intended to include all of Sellers’ right, title and interest in and to any real property, structures, utility lines and infrastructure owned by Sellers but specifically excludes any real property that has a residence constructed thereon or real property upon which vertical construction has commenced (the “Intended Property”). If Purchaser determines that not all of the Intended Property has been conveyed to the applicable Subsidiary (including, Intended Property which, by reason of mapping, must be reconveyed), the applicable Seller shall convey to the appropriate Subsidiary all of such Seller’s right, title and interest in and to the Intended Property that was not conveyed to the applicable Subsidiary pursuant to the Restructuring. In such case, the representations and warranties provided herein shall be modified to include the Intended Property in the definition of “Property” and Purchaser and Seller shall share any costs and expenses and take such action as if the Intended Property had been included in the definition of Property as of the Closing Date; and any such amounts, including any adjustments to the Purchase Price of the Property under the appropriate Purchase Price Computations as reasonably agreed by the Parties, shall be paid to the applicable Seller and constitute a Purchase Price adjustment; provided any time periods for performance hereunder under Article V with respect to such newly covered Property, shall run from the day of the transfer to the end of the applicable period such that Purchaser shall have the full time period to complete its review of such Property.

6.3 Land Transferred in Error. In the event that any Property has been included in the Assets that is not Intended Property, conveyed pending resolution of mapping issues or otherwise conveyed in error, including any Property upon which any residence has been constructed or any vertical construction or a residence has commenced as of the Closing Date, such Property shall promptly be transferred back to the Seller that originally owned such Property (or in the case of Gateway Commons, LLC, to US Home Corporation), and any portion of the Purchase Price allocable to such Property shall be refunded to Purchaser simultaneously with such transfer of such Property to Seller.

6.4 Use of Sale Offices. As to any sales office located on any Property that is not to be developed pursuant to the Development Plans, at Purchaser’s written request, the respective Seller will lease such sales office on a triple-net, “Where Is, As Is” “With All Faults, Liabilities, and Defects, Latent or Otherwise, Known or Unknown” basis to Purchaser for the purpose of using such sales office itself, or allowing a builder so use the sales office, for the sale of homesites on the Property. The term of the lease shall be no longer than the projected time that all homesites on the Property will be sold as contemplated by the Development Plans. The parties agree to negotiate in good faith the commercially reasonable rental payment under such lease.

6.5 Use of Name. Sellers hereby grant to Purchaser, solely for the purpose of developing the Properties in accordance with the Development Plans, selling homesites thereon and identifying the community so built, the royalty free, non-exclusive license to continue to use name (other than any part of any such name that contains the name of any Seller or any Affiliate of any Seller) that is

29

currently used at such Property for such purposes; provided, however, that Sellers make no representation or warranty, expressed or implied, regarding such names or the rights to use such names, including any representation or warranty concerning Sellers’ ownership of such names or whether the use of such names infringes on the rights of any other Party. Notwithstanding anything in this Agreement to the contrary, Sellers shall have no liability whatsoever for any damages, injuries, losses, debts, penalties, fines, awards, judgments, fees, liabilities, costs or expenses resulting from or arising out of such names or the use thereof. The license granted pursuant to this Section 6.5 shall not be assignable without the express written consent of Sellers, provided, however, that Sellers will grant a similar license for the respective name to a purchaser in connection with a sale of five or more parcels at the respective Property on terms and conditions reasonably acceptable to Sellers.

ARTICLE VII

DELIVERIES AT CLOSING

7.1 Seller Deliveries. At Closing, Sellers shall deliver to Purchaser:

(a) an assignment of the Interests free and clear of all Encumbrances pursuant to assignment agreements in form and content as reasonably acceptable to the Parties;

(b) certificates, dated the Closing Date and executed by Sellers attaching good standing (or substantially equivalent) certificates for each Subsidiary from their respective jurisdictions of formation and each jurisdiction in which such Entity is qualified to do business, in each case dated as of a recent date prior to the Closing Date;

(c) a certificate, dated the Closing Date and executed by Sellers, attaching certified copies of the resolutions duly adopted by Sellers authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby;

(d) a FIRPTA Affidavit for each Seller, if applicable, in form and substance satisfactory to Purchaser, confirming that each Seller is not a foreign entity subject to federal withholding requirements;

(e) copies of the consents described in Section 3.3, if any;

(f) evidence including such bills of sale, deeds, transfer declarations and other assignment documents evidencing the Restructuring;

(g) a certificate, dated as of the Closing Date and executed by the applicable Sellers, attaching the original LLC Agreements for the Subsidiaries; and

(h) a waiver of the anti-speculation option executed by Newhall Land and Farming Company in recordable form.

30

7.2 Purchaser Deliveries. At Closing Purchaser shall deliver to Sellers:

(a) a certificate, dated the Closing Date and executed by Purchaser, attaching certified copies of the resolutions duly adopted by Purchaser authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby; and

(b) payment of the Purchase Price amount set forth in Section 2.2(a).

7.3 Mutual Deliveries. To the extent that a form of any document, instrument, agreement or certificate to be delivered hereunder is not attached as an exhibit hereto, such document, instrument, agreement or certificate shall be in form and substance, and shall be executed and delivered in a manner, reasonably satisfactory to the Parties.

ARTICLE VIII

SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION

8.1 Survival of Covenants, Representations and Warranties.

(a) All of the representations and warranties set forth in this Agreement or in any certificate, document or other instrument delivered in connection herewith or contemplated hereby shall survive until March 31, 2009 (the “Expiration Date”). Neither Party shall have any liability to the other Party for a breach of any representation or warranty unless written notice containing a description of the specific nature of such breach shall have been given by the non-breaching Party to the breaching Party prior to the Expiration Date. All covenants set forth in this Agreement shall survive the Closing.

8.2 Indemnification by Purchaser. Purchaser shall indemnify, defend and hold harmless Sellers and their Affiliates and agents (“Seller Indemnified Parties”) against and in respect of all damages, injuries, losses, debts, penalties, fines, awards, judgments, fees, liabilities, costs and expenses (including reasonable attorneys’, paralegals’, accountants’ and other professionals’ fees, costs and expenses incurred in investigating, preparing and/or defending any Claims covered hereby) (each, an “Indemnified Loss”; collectively, “Indemnified Losses”) sustained and/or incurred arising out of, in connection with and/or relating to any breaches of Purchaser covenants, representations and warranties set forth in this Agreement and/or in any certificate, agreement and/or other document and/or instrument executed and/or delivered in connection herewith.

8.3 Indemnification by Sellers. Subject to the specific provisions regarding liability and indemnification set forth in Sections 3.8(b) (subject to 5.5(vii)), 3.8(d) (subject to the terms therein) and 3.11 (subject to Section 5.6), Sellers, jointly and severally, shall indemnify, defend and hold harmless Purchaser and its Affiliates and agents (“Purchaser Indemnified Parties” and, together with Seller Indemnified Parties, an “Indemnified Party”) against and in respect of all Indemnified Losses sustained and/or incurred arising out of, in connection with and/or relating to (a) any breaches of any of Sellers’ covenants, representations and warranties set forth in this Agreement and/or in any certificate, agreement and/or other document and/or instrument executed and/or delivered in connection herewith and (b) any litigation described or required to be described in Schedule 3.5, except for any litigation regarding the obtaining of any Approvals. In addition, Sellers, jointly and severally, shall indemnify, defend and hold harmless any Purchaser Indemnified Party for Indemnified Losses arising from any matter pertaining to Gateway Commons, LLC that is not related to the Property owned, or the Projects regarding, such Entity.

31

8.4 Method of Asserting Third Party Claims. All Claims for indemnification by an Indemnified Party hereunder arising out of a Claim of a Third Party shall be asserted and resolved as set forth in this Section 8.4. In the event that any written Claim or demand for which Purchaser or Sellers, as the case may be (an “Indemnifying Party”), may be liable to any Indemnified Party hereunder is asserted against or sought to be collected from any Indemnified Party by a third party, such Indemnified Party shall promptly following such Indemnified Party’s receipt of such Claim or demand, notify in writing the Indemnifying Party of the nature of such Claim or demand and the amount or the estimated amount thereof to the extent then feasible (which estimate shall not be conclusive of the final amount of such Claim or demand) (the “Claim Notice”); provided, however, that the failure of an Indemnified Party to promptly notify the Indemnifying Party will not relieve the Indemnifying Party from any liability for indemnification pursuant to this Agreement or otherwise, unless the failure materially prejudices the rights or obligations of the Indemnifying Party. The Indemnifying Party will have thirty (30) days following the date of receipt of the Claim Notice to notify the Indemnified Party in writing of any objection that it has to the validity or amount of the Indemnified Loss. The failure of the Indemnifying Party to object within such 30-day period shall be deemed an acceptance of liability hereunder for the Indemnified Loss. Any timely objection to an Indemnified Loss that cannot be resolved by the Parties shall be determined by a court or arbitrator of competent jurisdiction. The Indemnifying Party shall have thirty (30) days after the provision of the Claim Notice (the “Notice Period”), to notify the Indemnified Party whether or not it desires to defend the Indemnified Party against such Claim or demand and shall during the Notice Period and thereafter be provided by the Indemnified Party with such information relating to the Claim or demand with counsel reasonably satisfactory to the Indemnified Party as the Indemnifying Party shall request. All costs and expenses incurred by the Indemnifying Party in defending such Claim or demand shall be borne by the Indemnifying Party. Except as hereinafter provided, in the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against such Claim or demand, the Indemnifying Party shall have the sole power to direct and control such defense. If the Indemnifying Party so elects to assume the defense of such Claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by the Indemnified Party. If any Indemnified Party desires to participate in, but not control, any such defense it may do so at its sole cost and expense. The Indemnified Party shall not settle, compromise or discharge a Claim or demand for which it is indemnified by an Indemnifying Party or admit to any liability with respect to such Claim or demand without the prior written consent of the Indemnifying Party, in its sole and absolute discretion. The Indemnifying Party shall not, without the written consent of the Indemnified Party, settle, compromise or offer to settle or compromise any such Claim or demand on a basis (i) which would result in any admission or imposition of culpability or liability by or on the Indemnified Party and/or the imposition of a consent order, an injunction or decree which would restrict the future activity or conduct of the Indemnified Party or any Subsidiary or other Affiliate thereof or (ii) does not provide a full release to the Indemnified Party. To the extent the Indemnifying Party shall assume the defense of any third party Claim or demand, the Indemnified Party will provide the Indemnifying Party and its counsel access to all relevant business records and other documents, and shall use commercially

32

reasonable efforts to assist and cooperate, and to cause the employees and counsel of the Indemnified Party to assist and cooperate, in defense of such Claim. If the Indemnifying Party elects not to defend the Indemnified Party or does not timely assume the defense thereof, the Indemnified Party shall have the right and the obligation to vigorously defend the Claim or demand, at the sole expense of the Indemnifying Party, by appropriate proceedings and shall have the sole power to direct and control such defense. In any event, the Indemnifying Party shall have the right to participate in the defense or settlement of any third party Claim or demand for which the Indemnifying Party may be liable hereunder at its own expense.

8.5 Assignment of Claims. If the Indemnified Party receives any payment from an Indemnifying Party in respect of any Indemnified Losses and the Indemnified Party could have recovered all or a part of such Indemnified Losses from a third party (including any insurance) (a “Potential Contributer”) based on the underlying Claim or demand asserted against the Indemnified Party, the Indemnified Party shall assign such of its rights to proceed against the Potential Contributer as are necessary to permit the Indemnifying Party to recover from the Potential Contributer the amount of such payment.

8.6 Indemnification Limitations. The rights and obligations of the Parties set forth in this Article VIII shall be subject to the following limitations:

(a) The maximum aggregate amount that Sellers will be required to pay for indemnification arising under Section 8.3 in respect of all Claims by any Purchaser Indemnified Parties relating to the breach of any representation or warranty shall be fifteen percent (15%) of the Purchase Price (the “Sellers’ Indemnification Cap”) and no Seller shall have liability (for indemnification or otherwise) with respect to the matters described in Section 8.3 relating to the breach of any representation or warranty in excess of the Sellers’ Indemnification Cap; provided, however, that if the Claim for indemnification arises from or in connection with any breach of Sections 3.2(b), 3.3, 3.10, 3.14 or 11.18 or Article X or fraud by any Seller in any representation or warranty in this Agreement or in any other documents or instruments entered into in connection herewith or pursuant hereto, or as a result of a breach of covenant, then the Sellers’ Indemnification Cap shall not apply and the maximum aggregate amount that a Seller will be required to pay for such claim shall not be subject to any limit.

(b) Notwithstanding the foregoing, no Seller shall be required to pay any amount with respect to any Claim for indemnification relating to the breach of any representation or warranty, and no Seller shall have liability (for indemnification or otherwise) with respect to the matters described herein unless and until the total, cumulative amount with respect to all Claims for which indemnification required hereunder has exceeded one-half of one percent (0.5%) of the Purchase Price (the “Sellers’ Indemnification Basket”), after which the Seller’s liability will be for the amount in excess of the Sellers’ Indemnification Basket; provided, however, that the Seller’ Indemnification Basket will not apply to any indemnification Claims arising from or in connection with breach of Sections 3.1, 3.2(b), 3.3, 3.4(a), 3.8(b), 3.8(d) (subject to the terms therein), 3.10, 3.11 3.13 3.14 or Article X or any fraud by any Sellers in any representation or warranty in this Agreement or in any actual documents or instruments entered into in connection herewith or pursuant hereto.

33

8.7 Exclusive Remedy; Additional Indemnification Issues.

(a) The indemnification provided in this Article VIII shall constitute the sole and exclusive remedy and right of any Party for any breach or default under this Agreement or any document or instrument entered into in connection herewith or pursuant hereto, regardless of whether any claims or causes of action asserted with respect to such matters are brought in contract, tort or any other legal theory whatsoever or at Law or in equity; it being understood and agreed that, except solely and only in the case of actual fraud by and as to a specific Party, the indemnification provisions in this Article VIII are in derogation of and replace in all respects as the sole and exclusive remedy and right any statutory, equitable or common Law remedy and rights any Party may have for breach or default of any representation, warranty, covenant or agreement.

(b) No Indemnified Party shall seek or be entitled to punitive or special, consequential damages or damages for lost profits in any claim for indemnification, nor shall it accept payment of any award or judgment for such indemnification to the extent that such award or judgment includes such party’s punitive, special or consequential damages or damages for lost profits. Each party entitled to indemnification pursuant to this Agreement shall take all reasonable steps to mitigate all losses, costs, expenses and damages after becoming aware of any event which could reasonably be expected to give rise to any losses, costs, expenses and damages that are indemnifiable or recoverable hereunder or in connection herewith.

(c) Any amounts payable under this Agreement shall be calculated net of (i) any proceeds received or receivable from insurance policies covering the damage, loss, liability or expense that is the subject to the claim for indemnity and (ii) any proceeds received or receivable from third parties, including, without limitation, through indemnification.

(d) Notwithstanding anything to the contrary in this Agreement, Indemnified Losses shall not include any amount to the extent that it was included in the Purchase Price Computation as determined pursuant to Section 5.7.

(e) Notwithstanding anything in this Article VIII to the contrary, prior to any Indemnifying Party being required to make a payment hereunder to an Indemnified Party, the Indemnifying Party shall have a period of thirty (30) days after it receives written notice from the Indemnified Party of such a breach to cure such breach and/or to mitigate damages resulting from any such breach which by its nature is capable of cure and/or mitigation. Such thirty 30-day period shall be extended an additional sixty (60) days if the Indemnifying Party is continuing to make commercially reasonable efforts to so cure and/or mitigate at the end of the initial 30-day period and it is reasonable to believe that the breach can be cured or mitigated by the end of the additional 60-day period.

34

ARTICLE IX

TAX MATTERS

9.1 Liability and Indemnification for Taxes. Notwithstanding anything to the contrary in Article VIII, Article IX shall govern all claims for indemnification in connection with all Tax matters.

(a) Sellers shall indemnify Purchaser and hold it harmless from and against any loss, claim, liability, expense, or other damage attributable to all Taxes (or the non-payment thereof) of Sellers or Subsidiaries, or with respect to the Properties for (i) all Taxable Periods ending on or before the Closing Date (other than ad valorem Taxes assessed against the Properties for any Taxable period that includes (but does not end on) the Closing Date (“Preclosing Tax Period”) and (ii) all portions of a Straddle Period ending at the end of the Closing Date.

(b) Whenever it is necessary to determine the liability of Subsidiaries or its members for the Taxes, items of income, profit and loss shall be apportioned between the Preclosing Tax Period and the period following the Closing (or within the Straddle Period) based, on a “closing of the books basis” by assuming that the books of Subsidiaries were closed at the close of the Closing Date.

(c) Notwithstanding anything to the contrary in this Agreement, all transfer, documentary, sales, use, registration and other such Taxes due in connection with Sellers transferring the Properties to the Subsidiaries pursuant to the Restructuring and transferring the Interests to Purchaser (collectively, “Transfer Taxes”), if any, and any penalties, interest and additions to such Transfer Taxes shall be paid fifty percent (50%) by each of Sellers, on the one hand, and Purchaser, on the other hand. The term Transfer Taxes is not intended to include all Taxes, and specifically excludes, income taxes, capital gain taxes and similar taxes due in connection with any profits made by any principal or Entity in connection with said sale of any of the Interests, employment taxes, and ad valorem taxes. The Parties shall cooperate in the timely making of all filings, returns, reports and forms as may be required in connection therewith. The Parties believe that, while there are Transfer Taxes due on the transfer of the Property in the Restructuring, there are no Transfer Taxes due on the transfer of the Interest with respect to any Subsidiary which holds Property located in New Jersey. Notwithstanding the forgoing, in the event that an obligation to pay such Transfer Taxes is ever asserted by the State of New Jersey, Sellers shall be solely liable, and shall indemnify Purchaser pursuant to the provisions of this Article IX for any Indemnified Losses resulting from the failure to pay Transfer Taxes on the transfer of such Interests. There shall be no Sellers’ Indemnification Cap or Sellers’ Indemnification Basket with regard to such indemnification.

(d) This Article IX shall survive the Closing without limitation.

9.2 Tax Returns. Sellers shall file or cause to be filed when due all Tax Returns, if any, that are required to be filed by or with respect to Subsidiaries for taxable years or periods ending on or before the Closing Date, and shall remit or cause to be remitted any Taxes due in respect of such Tax Returns for Taxes.

35

9.3 Tax Indemnification Procedures; Contest Provisions.

(a) Each Party shall promptly notify the other Party in writing upon receipt by such Party or any of their respective Affiliates or Representatives of notice of any pending or threatened federal, state, local or foreign Tax audits, examinations, Claims or assessments (a “Tax Claim”) for which such Party is entitled to seek, or is seeking or intends to seek, indemnification; provided, however, that the failure to give such notice shall not affect the indemnification provided hereunder except to the extent that the failure to give such notice materially prejudices the indemnifying party.

(b) (i) Seller shall have the right, at their own expense, to control and to represent the interests of Subsidiaries in and with respect to any Tax Claim for any Preclosing Tax Period for which it is solely liable under Section 9.1(a), and to employ counsel of their own choice for such purpose; provided that, Sellers shall have the sole right to control and conduct the Tax Claim only if (A) Sellers notify Purchaser in writing after Purchaser has given notice of the Tax Claim or Sellers are otherwise notified of such Tax Claim that Sellers will indemnify the Purchaser Subsidiaries from and against any loss, claim, liability, expense, other damages, and Taxes in accordance with Section 9.1(a) such party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Tax Claim (whether or not otherwise required hereunder and with no reservation of rights), (B) the Tax Claim involves only money damages, and does not relate to or arise in connection with any criminal proceeding, action, indictment, allegation or investigation and (C) such Tax Claim does not materially affect Purchaser or Subsidiaries with respect to taxable years or periods or portions thereof beginning or ending after the Closing Date; provided, however, that Sellers shall keep Purchaser informed of any material developments in such Tax Claim. Sellers shall have the sole right to settle, either administratively or after the commencement of litigation, any proceeding relating to such Tax Claims which it is in sole control of.

(ii) Except as otherwise provided by Section 9.3(b)(i), Purchaser shall have the sole right to control all Tax Claims relating to Subsidiaries; provided, however, that Purchaser shall consult in good faith with Sellers with respect to the contest of a Straddle Period Tax Claim for which Sellers are liable under Section 9.1(a), shall permit Sellers to review all material written submissions with respect to such Preclosing Tax Period Tax Claim, and shall afford Seller or counsel of its own choosing the right to participate, at their expense, in the prosecution or defense of such Preclosing Tax Period Tax Claim; and provided further, that Purchaser shall not settle any such Preclosing Tax Period Tax Claim without prior written consent of Sellers, which consent shall not be unreasonably withheld or delayed.

9.4 Confidentiality of Tax Information. Unless otherwise required by Law, each Party shall, and shall cause its Representatives to, keep confidential any non-public Tax information, records, and documents disclosed by the other Party, or to which such Party has received or been granted access, pursuant to this Article IX will not use such Tax information for any purpose other than making the determinations and taking such other actions contemplated by this Article IX. Notwithstanding any provision of this Agreement to the contrary, the parties hereto (and each of their respective affiliates, employees, representatives, or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated hereby and all materials of any kind relating to such tax treatment and tax structure.

36

9.5 Tax Sharing Agreements. Any Tax sharing agreements or similar agreements with respect to or involving Subsidiaries, if any, shall be terminated as of the Closing Date and, after the Closing Date, Purchaser and Subsidiaries shall not be bound thereby or have any liability thereunder.

9.6 Intended Tax Treatment. The Parties agree that the purchases of the Properties contemplated in this Agreement shall be treated as taxable purchases for U.S. federal and state tax purposes to the maximum permissible extent and that no portion of the cash paid by the Purchaser is intended to or shall constitute reimbursements of pre-formation capital expenditures within the meaning of Treas. Reg. Section 1.707-4(d).

ARTICLE X

OFAC CERTIFICATE AND INDEMNIFICATION

10.1 OFAC Representation. Sellers and Purchaser hereby represent, warrant and certify to and for the benefit of the other Party that such Party is not now and has never been nor shall it be at any time prior to the mutual execution and delivery of this Agreement any Person with whom a United States citizen, Entity organized under the Laws of the United States or its territories or Entity having its principal place of business within the United States or any of its territories (collectively, a “U.S. Person”), is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under United States Law, regulation, executive orders and lists published by the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) (including those executive orders and lists published by OFAC with respect to Persons that have been designated by executive order or by the sanction regulations of OFAC as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC (“Specially Designated Nationals and Blocked Persons”)) or otherwise. Neither Party nor any Person who owns an interest in such Party is now or has ever been, nor shall be at any time prior to the mutual execution and delivery of this Agreement, a Person with whom a U.S. Person, including a “financial institution” as defined in 31 U.S.C. § 5312 (a)(z), as periodically amended (“Financial Institution”), is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under United States Law, regulation, executive orders and lists published by the OFAC (including those executive orders and lists published by OFAC with respect to Specially Designated Nationals and Blocked Persons) or otherwise.

10.2 Purchaser’s Assurances. Purchaser represents, warrants and certifies to and for the benefit of Seller Entities that it has taken, such measures as are required by applicable Law to assure that the funds used to pay all or any portion of the Purchase Price shall be advanced: (i) from transactions that do not violate United States Law nor, to the extent such funds originate outside the United States, do not violate the Laws of the jurisdiction in which they originated; and (ii) from permissible sources under United States Law and, to the extent such funds originate outside the United States, under the Laws of the jurisdiction in which they originated.

10.3 Anti-Money Laundering. Sellers represent, warrant and certify to and for the benefit of the Purchaser that no Seller Entity nor any Affiliate of any Seller Entity: (i) is under investigation by any governmental authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist-related activities, any crimes which in the United States would be predicate

37

crimes to money laundering, or any violation of any Anti-Money Laundering Laws (as hereinafter defined); (ii) has been assessed civil or criminal penalties under any Anti-Money Laundering Laws; or (iii) has had any of its funds seized or forfeited in any action under any Anti Money Laundering Laws. Purchaser represents, warrants and certifies to and for the benefit of Seller Entities that neither Purchaser nor any Affiliate of Purchaser: (i) is under investigation by any governmental authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist-related activities, any crimes which in the United States would be predicate crimes to money laundering, or any violation of any Anti-Money Laundering Laws (as hereinafter defined); (ii) has been assessed civil or criminal penalties under any Anti-Money Laundering Laws; or (iii) has had any of its funds seized or forfeited in any action under any Anti Money Laundering Laws. As used herein, the term “Anti-Money Laundering Laws” shall mean all applicable Laws, regulations and sanctions, state and federal, criminal and civil, that: (w) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (x) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the interests of the United States; (y) require identification and documentation of the parties with whom a Financial Institution conducts business; or (z) are designed to disrupt the flow of funds to terrorist organizations. Such Laws, regulations and sanctions shall be deemed to include, without limitation, the USA PATRIOT Act of 2001, Pub. L. No. 107-56 (the “Patriot Act”), the Bank Secrecy Act of 1970, as amended, 31 U.S.C. § 5311 et seq., the Trading with the Enemy Act, 50 U.S.C. App. § 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., and the sanction regulations promulgated pursuant thereto by the OFAC, as well as Laws relating to prevention and detection of money laundering in 18 U.S.C. §§ 1956 and 1957.

10.4 Compliance.

(a) Each of the Parties represents, warrants and certifies to and for the benefit of the other Party that it is in compliance in all material respects with any and all applicable provisions of the Patriot Act.

(b) For a period of two (2) years after the Closing Date or any earlier termination of this Agreement, Sellers agree to cooperate with Purchaser, and to cause each, in providing such additional information and documentation respecting each Entity’s legal or beneficial ownership, policies, procedures (to the extent required by applicable Laws) and sources of funds as Purchaser deems reasonably necessary or prudent to enable compliance with Anti-Money Laundering Laws now in existence or hereafter enacted or amended. Sellers hereby agree to defend, indemnify and hold harmless Purchaser from and against any and all claims, damages, costs, fines, penalties, losses, risks, liabilities and expenses (including, without limitation, attorneys’ fees and costs) arising from or related to a breach of any of the foregoing representations, warranties, certifications and agreements.

(c) For a period of two (2) years after the Closing Date or any earlier termination of this Agreement, Purchaser agrees to cooperate with Sellers in providing such additional information and documentation respecting Purchaser’s legal or beneficial ownership, policies, procedures (to the extent required by applicable Laws) and sources of funds as Sellers deems reasonably necessary or prudent to enable compliance with Anti-Money Laundering Laws now in existence or hereafter enacted or amended.

38

Purchaser hereby agrees to defend, indemnify and hold harmless Sellers from and against any and all claims, damages, costs, fines, penalties, losses, risks, liabilities and expenses (including, without limitation, attorneys’ fees and costs) arising from or related to a breach of any of the foregoing representations, warranties, certifications and agreements.

ARTICLE XI

GENERAL PROVISIONS

11.1 Expenses. Except as otherwise provided herein, including Section 9.1, Sellers, on the one hand, and Purchaser, on the other hand, shall pay all of their own costs and expenses incident to their negotiation and preparation of this Agreement and to their performance and compliance with all terms, agreements, covenants and conditions contained herein on their part to be performed or complied with, including the fees, expenses and disbursements of their counsel and accountants, whether or not the Closing shall have occurred.

11.2 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made (i) upon delivery, if hand delivered; (ii) one (1) Business Day after being sent by prepaid overnight courier with guaranteed delivery, with a record of receipt; or (iii) upon transmission with confirmed delivery if sent by cable, telegram, email, facsimile or telecopy, to the Parties at the following addresses (or at such other addresses as shall be specified by the Parties by like notice):

(a) if to Sellers:

Lennar Corporation

25 Enterprise Drive, Suite 500

Aliso Viejo, CA 92656

Attention: Jonathan Jaffe

Facsimile No.: (949) 349-0782

Email: Jon.Jaffe@lennar.com

With a copy to:

Lennar Corporation

700 N.W. 107th Avenue

Miami, FL 33172

Attention: General Counsel

Facsimile No: 305-229-6650

Email: Mark.Sustana@lennar.com

39

With a copy to:

Bilzin Sumberg Baena Price & Axelrod LLP

200 South Biscayne Boulevard

Suite 2200

Miami, Florida 33131

Attention: Brian L. Bilzin

Facsimile No.: (305) 351-2200

Email: BBilzin@bilzin.com

(b) if to Purchaser:

c/o Morgan Stanley Real Estate Funding II, L.P.

1585 Broadway, 37^th Floor

New York, New York 10036

Attn: Michael Franco

Facsimile No: (212) 507-4175

Email: michael.franco@morganstanley.com

With copies to:

Jones Day

2727 North Harwood Street

Dallas, Texas 75201

Attn: David J. Lowery

Facsimile No: (214) 969-5100

Email: djlowery@jonesday.com

11.3 Severability. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable Law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein unless the deletion of such provisions or provisions would result in such a material change as to cause completion of the transactions contemplated hereby to be unreasonable.

11.4 Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been executed and delivered by each of the Parties.

11.5 Assignment; Successors and Assigns. Neither this Agreement nor any of the rights, interest or obligations hereunder shall be assigned by any of the Parties without the prior written consent of the other Party. Any purported assignment not in compliance with this Section 11.5 shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors or assigns, heirs, legatees, distributees, executors, administrators and guardians.

40

11.6 No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person (including without limitation any Purchaser Indemnified Party that is not a Party to this Agreement) any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.

11.7 Descriptive Headings. Titles and headings to Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

11.8 Reasonable Consent Required. Where any provision of this Agreement requires a Party to obtain the consent, approval or other acquiescence of any other Party, such consent, approval or other acquiescence shall not be unreasonably conditioned, withheld or delayed by such other Party, except as otherwise provided in this Agreement.

11.9 Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party or Parties entitled to the benefit thereof. The failure of any Party to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any Party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

11.10 Governing Law; Jurisdiction; Waiver of Jury Trial.

(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE LAWS THAT MIGHT BE APPLICABLE UNDER CONFLICTS OF LAWS PRINCIPLES.

(b) Other than as explicitly set forth herein each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Delaware state court, or Federal court of the United States of America, sitting in Wilmington, Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware state court or, to the extent permitted by Law, in such Federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware state or Federal court, and (iv) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware state or Federal court. Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each Party irrevocably consents to service of process in the manner provided for notices in Section 11.2. Nothing in this Agreement will affect the right of any Party to this Agreement to serve process in any other manner permitted by Law.

41

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.10(c).

11.11 Enforcement. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to specifically enforce the terms and provisions of this Agreement, in addition to any other remedy to which any Party is entitled at Law or in equity.

11.12 Entire Agreement; Amendments. This Agreement, including the Schedules and Exhibits annexed hereto, contains the entire understanding of the Parties with regard to the subject matter contained herein. This Agreement may only be amended, modified or supplemented by written agreement of the Parties.

11.13 Construction; Joint Drafting. The Parties acknowledge that they have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed consistent with the joint drafting hereof by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

11.14 Legal Fees. The prevailing party in any action or proceeding arising from this Agreement or the transactions contemplated herein shall be reimbursed by the non-prevailing party for its reasonable legal fees and reasonable costs and expenses.

11.15 Confidentiality.

(a) The terms and conditions of this Agreement and of any other Contract required to be entered into pursuant hereto (collectively, the “Confidential Information”) are confidential and proprietary information. The Parties acknowledge that the disclosure of Confidential Information would cause irreparable harm to the Parties. Accordingly, each Party represents that it has not

42

and agrees that it will not and will direct its direct and indirect owners, partners, directors, officers, agents, lenders, accountants, attorneys, advisors and Affiliates to whom Confidential Information is disclosed (and, if it so directs, the disclosure to such Persons shall not be a violation of this Section) not to disclose to any Person, including the issuance of any press release regarding, any Confidential Information or confirm any statement made by third Persons regarding Confidential Information until either or both of the Parties, as the case may be, have publicly disclosed the Confidential Information pursuant to authorization by the Parties; provided, however, that any Party (or its Affiliates) may disclose such Confidential Information to its lenders, in the course of its (or its Affiliates’) normal reporting practices to its (or their) direct or indirect owners, if required by Law or rule of any stock exchange (including pursuant to a registration statement or other document filed with a Governmental Authority under applicable Law) or if necessary for it to perform any of its duties or obligations hereunder.

(b) Subject to the provisions of subsection (a), above, each Party agrees not to disclose any Confidential Information to any Person (other than a Person (including a Representative, Affiliate or lender) agreeing to maintain all Confidential Information in strict confidence or a judge, magistrate, referee, arbitrator or mediator in any action, suit or proceeding relating to or arising out of this Agreement or otherwise), and to keep confidential all documents (including responses to discovery requests) containing any Confidential Information. Each Party hereby consents in advance to any motion for any protective order brought by any other Party represented as being intended by the movant to implement the purposes of this Section; provided that, if a Party receives a request to disclose any Confidential Information under the terms of a valid and effective order issued by a court or governmental agency and the order was not sought by or on behalf of or consented to by such Party then such Party may disclose the Confidential Information to the extent required if the Party as promptly as practicable (i) notifies the other Party of the existence, terms and circumstances of the order, (ii) consults in good faith with the other Party on the advisability of taking legally available steps to resist or to narrow the order, and (iii) if disclosure of the Confidential Information is required, exercises its diligent efforts to cooperate with the other Party in its efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded to the portion of the disclosed Confidential Information that the other Party designates. The cost (including attorneys’ fees and expenses) of obtaining a protective order covering Confidential Information designated by such other Party will be borne by such other Party.

(c) For the avoidance of doubt, notwithstanding any provision of this Agreement to the contrary, the Parties hereto (and each of their respective affiliates, employees, representatives, or other agents) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated hereby and all materials of any kind relating to such tax treatment and tax structure. No Tax advisor of any of the parties hereto has imposed a confidentiality restriction on any of the parties relating to any Tax planning or Tax strategy relating to the transactions covered by this Agreement and none of the Parties hereto has entered into a transaction described in United States Treasury Regulation Section 1.6011-4(b)(4) relating to the transactions covered by this Agreement.

11.16 Time of the Essence. Time is of the essence of this Agreement and all covenants and deadlines hereunder. Without limiting the foregoing, Purchaser and Sellers Entities hereby confirm their intention and agreement that time shall be of the essence of

43

each and every provision of this Agreement, notwithstanding any subsequent modification or extension of any date or time period that is provided for under this Agreement. The agreement of Purchaser and Sellers that time is of the essence of each and every provision of this Agreement shall not be waived or modified by any conduct of the Parties, and the agreement of Purchaser and Sellers that time is of the essence of each and every provision of this Agreement may only be modified or waived by the express written agreement of Purchaser and Sellers that time shall not be of the essence with respect to a particular date or time period, or any modification or extension thereof, which is provided under this Agreement.

11.17 Electronically Transmitted Signatures. Signatures to this Agreement, any amendment hereof and any notice given hereunder, transmitted electronically submitted (whether by telecopy or email) shall be valid and effective to bind the party so signing. Each Party agrees to promptly deliver an executed original of this Agreement (and any amendment hereto) with its actual signature to the other Party, but a failure to do so shall not affect the enforceability of this Agreement (or any amendment hereto), it being expressly agreed that each Party to this Agreement shall be bound by its own electronically submitted signature (whether by email or facsimile) and shall accept the electronically submitted signature (whether by email or facsimile) of the other Party.

11.18 No Brokers, Finders, etc. Each Party hereby represents to the other that no other broker(s) or agent(s) were or are involved in this transaction or the negotiations leading up to this transaction and no Party has incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or investment bankers’ fees or any similar charges in connection with this Agreement or any transactions contemplated hereby. Purchaser and Sellers agree to hold the other harmless and indemnify the other from and against any and all damages, costs or expenses (including, but not limited to, reasonable attorneys’ fees and disbursements) suffered by the other as a result of any claims by any other broker claimed to have acted on behalf of such Party. Notwithstanding Section 8.1(a), the representations and warranties as well as the indemnification and other agreements in this Section 11.18 shall survive Closing.

11.19 Guaranty. Lennar joins in the execution and delivery of this Agreement to guaranty for the benefit of Purchaser all of the representations, warranties, covenants and obligations of the Sellers hereunder and under any agreement or instrument delivered pursuant hereto.

IN WITNESS WHEREOF, the Parties have caused this Membership Interest Purchase Agreement to be executed to be effective as of the day and year first above written.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

44

RAINTREE VILLAGE L.L.C., an Illinois limited liability company
By:	Lennar Chicago, Inc., an Illinois corporation, its sole member
	By:	/s/ Erik R. Higgins
	Name:	Erik R. Higgins
	Title:	Vice President

LENNAR HINGHAM HOLDINGS, LLC, a Delaware limited liability company
By:	Lennar Hingham JV, LLC, a Delaware limited liability company, its sole member
	By:	Lennar Massachusetts Properties, Inc., a Delaware corporation, its sole member
		By:	/s/ Emile K. Haddad
		Name:	Emile K. Haddad
		Title:	Vice President

LENNAR COLORADO, LLC, a Colorado limited liability company
By:	/s/ Erik R. Higgins
Name:	Erik R. Higgins
Title:	Vice President

FOX RIDGE ASSOCIATES, LLC, a New Jersey limited liability company
By:	U.S. Home Corporation, a Delaware corporation, its sole member
	By:	/s/ Emile K. Haddad
	Name:	Emile K. Haddad
	Title:	Vice President

RAINTREE VILLAGE II L.L.C., an Illinois limited liability company
By:	Lennar Communities of Chicago, L.L.C., an Illinois limited liability company, its sole member
	By:	Lennar Chicago, Inc., an Illinois corporation, its sole member
		By:	/s/ Erik R. Higgins
		Name:	Erik R. Higgins
		Title:	Vice President

U.S. HOME CORPORATION, a Delaware corporation
By:	/s/ Emile K. Haddad
Name:	Emile K. Haddad
Title:	Vice President

U.S. HOME/KB NORTH DOUGLAS, LLC, a Delaware limited liability company
By:	Lennar Renaissance, Inc., a California corporation, its sole member
	By:	/s/ Emile K. Haddad
	Name:	Emile K. Haddad
	Title:	Vice President

LENNAR RENO, LLC, a Nevada limited liability company
By:	/s/ Emile K. Haddad
Name:	Emile K. Haddad
Title:	Vice President

LENNAR HOMES, LLC, a Florida limited liability company
By:	/s/ Emile K. Haddad
Name:	Emile K. Haddad
Title:	Vice President

GREYSTONE NEVADA, LLC, a Nevada limited liability company
By:	Lennar Pacific Properties Management, Inc., a Delaware corporation, its sole member
	By:	/s/ Emile K. Haddad
	Name:	Emile K. Haddad
	Title:	Vice President

LENNAR HOMES OF CALIFORNIA INC., a California corporation
By:	/s/ Emile K. Haddad
Name:	Emile K. Haddad
Title:	Vice President

LENNAR RENAISSANCE, INC., a California corporation
By:	/s/ Emile K. Haddad
Name:	Emile K. Haddad
Title:	Vice President

LENNAR CORPORATION, a Delaware Corporation
By:	/s/ Jonathan M. Jaffe
Name:	Jonathan M. Jaffe
Title:	Vice President

MS RIALTO RESIDENTIAL HOLDINGS, LLC, a Delaware limited liability company
By:	MSR Holding Company, LLC, a Delaware limited liability company, its sole member
	By:	/s/ Michael Quinn
	Name:	Michael Quinn
	Title:	Authorized Person

EX-21

Exhibit 21

Company Name	State of Organization	DBAs
Alabama Property Ventures, LLC	Alabama
American Southwest Financial Group, LLC	Arizona
Aquaterra Utilities, Inc.	Florida
Asbury Woods, LLC	Illinois
Avalon Sienna III, LLC	Illinois
Bramalea California, Inc.	California
Builders LP, Inc.	Delaware
Cambria, LLC	Illinois
Cary Woods, LLC	Illinois
CBM Management, Inc.	New Jersey
Cedar Branch Associates, LP	New Jersey
Chaparral Properties, LLC	Florida
Cherrytree II LLC	Maryland
Colonial Heritage, LLC	Virginia
Colony Escrow, Inc.	Washington
Columbia Station, LLC	Illinois
Concord at Bridlewood, LLC	Illinois
Concord at Cornerstone Lakes, LLC	Illinois
Concord at Meadowbrook, LLC	Illinois
Concord at Ravenna, LLC	Illinois
Concord at the Glen, LLC	Illinois
Concord City Centre, LLC	Illinois
ConnectionTime Holding, LLC	Delaware
ConnectionTime, LLC	Delaware
Coto de Caza, Ltd.	California
Coventry, LLC	Illinois
Darcy-Joliet, LLC	Illinois
DCA Financial, LLC	Florida
Eagle Home Mortgage Holdings, LLC	Delaware
Eagle Home Mortgage of California, Inc.	California
Eagle Home Mortgage, LLC	Delaware
Edgewater Reinsurance, Ltd.	Turks & Caicos Islands
Enclave Land, LLC	Illinois
Epperson Ranch, LLC	Florida
F&R QVI Home Investments USA, LLC	Delaware
Fidelity Guaranty and Acceptance Corp.	Delaware
Fortress Mortgage, Inc.	Delaware
Fortress Pennsylvania Realty, Inc.	Pennsylvania
Fox Ridge Associates, LLC	New Jersey
Fox-Maple Associates, LLC	New Jersey
Garco Investments, LLC	Florida
Gateway Commons, LLC	Maryland
Genesee Communities I, Inc.	Colorado

Genesee Communities II, LLC	Colorado	Fortress Genesee III, LLC
Genesee Communities III, Inc.	Colorado
Genesee Communities IV, LLC	Colorado
Genesee Communities IX, LLC	Colorado
Genesee Communities V, LLC	Colorado
Genesee Communities VI, LLC	Colorado
Genesee Communities VII, LLC	Colorado
Genesee Communities VIII, LLC	Colorado
Greystone Construction, Inc.	Arizona
Greystone Homes of Nevada, Inc.	Delaware
Greystone Homes, Inc.	Delaware
Greystone Nevada, LLC	Delaware	Lennar Homes
Greywall Club, LLC	Illinois
Haverton, LLC	Illinois
Heathcote Commons LLC	Virginia
Hidden Palms, LLC	Florida
Highland Dunes Developers, LLLP	Florida
Home Buyer’s Advantage Realty, Inc.	Texas
Home Integrity Insurance Company	Arizona
Homecraft Corporation	Texas
Homeward Development Corporation	Florida
HTC Golf Club, LLC	Delaware
Imperial Desert Holdings, Inc.	California
Imperial Desert Homes, LLC	California
Independence Legal Services, LLC	New Jersey
J. Lyons Enterprises, Inc.	New Jersey
Johns Creek Phase II, LLC	Florida
Lakelands at Easton, L.L.C.	Maryland
Landmark Homes, Inc.	North Carolina	Woodland of South Carolina, Inc.
LCD Asante, LLC	Delaware
Legends Club, LLC	Florida
Legends Golf Club, LLC	Florida
LEN—Playa Vista, LLC	Delaware
LENH I, LLC	Florida
Lennar Aircraft I, LLC	Delaware
Lennar Arizona Construction, Inc.	Arizona
Lennar Arizona, Inc.	Arizona
Lennar Associates Management Holding Company	Florida
Lennar Associates Management, LLC	Delaware
Lennar Carolinas, LLC	Delaware
Lennar Central Park, LLC	Delaware
Lennar Central Region Sweep, Inc.	Nevada
Lennar Charitable Housing Foundation	California
Lennar Chicago, Inc.	Illinois	Lennar

Lennar Colorado, LLC	Colorado	Blackstone Country Club
Lennar Communities Development, Inc.	Delaware
Lennar Communities Nevada, LLC	Nevada
Lennar Communities of Chicago L.L.C.	Illinois
Lennar Communities, Inc.	California
Lennar Construction, Inc.	Arizona
Lennar Coto Holdings, LLC	California
Lennar Developers, Inc.	Florida
Lennar Family of Builders—Alabama Limited Partnership	Delaware
Lennar Family of Builders GP, Inc.	Delaware
Lennar Family of Builders Limited Partnership	Delaware
Lennar Financial Services, LLC	Florida
Lennar Fresno, Inc.	California
Lennar Funding, LLC	Delaware
Lennar Georgia, Inc.	Georgia
Lennar Gulf Coast, LLC	Delaware
Lennar Hingham Holdings, LLC	Delaware
Lennar Hingham JV, LLC	Delaware
Lennar Homes Holding, LLC	Delaware
Lennar Homes of Arizona, Inc.	Arizona
Lennar Homes of California, Inc.	California
Lennar Homes of Texas Land and Construction, Ltd.	Texas
Lennar Homes of Texas Sales and Marketing, Ltd.	Texas	Lennar Homes
		Lennar Homes of Texas
		Kingswood Sales Associates
		Village Builders
		Houston Village Builders, Inc.
		Friendswood Land Development Company
		Friendswood Development Company
		Bay Oaks Sales Associates
		Lennar Homes of Texas, Inc.
		NuHome Designs
		NuHome of Texas
		Lennar Homes of Texas, Inc.
Lennar Homes, LLC	Florida	Baywinds Land Trust D/B/A Club Vineyards, Dade County
		Doral Park
		Doral Park Joint Venture
		Oak Creek North Community Association, Inc.
		The Breakers at Lennar’s Pembroke Isles

		Doral Park Country Club
		Coco Pointe
		The Point at Lennar’s Pembroke Isles
		The Royal Club
		The Palace, Kings Point Theatre of the Performing Arts
		Club Pembroke Isles
		Walnut Creek
		Lennars The Palms @ Pembroke Isles
		Walnut Creek Club
		Lennar Century 8th Street Developers
		Lennar-Century 8th Street Developers
		Classic American Homes
		Your Hometown Builder
		Classic American Homes, Inc.
		Lennar Communities, North Florida Division
		Classic American
		Verona Trace Club, Inc.
		Copper Creek Club, Inc.
		Bent Creek Club, Inc.
		Lake Osborne Trailer Ranch
		Tripson Estates Club, Inc.
		Club Carriage Pointe
		Club Tuscany Village
		U.S. HOME
		Club Silver Palms
		Verona Trace Club, Inc.
		Club Malibu Bay
		Admiral Homes
		Classic American Homes
Lennar Houston Land, LLC	Texas
Lennar Illinois Trading Company, LLC	Illinois
Lennar Imperial Holdings Limited Partnership	Delaware
Lennar Insurance Services, Inc.	Florida
Lennar Land Partners Sub II, Inc.	Nevada
Lennar Land Partners Sub, Inc.	Delaware
Lennar Massachusetts Properties, Inc.	Delaware
Lennar Nevada, Inc.	Nevada
Lennar New Jersey Properties, Inc.	Delaware
Lennar New York, LLC	New York
Lennar Northeast Properties LLC	New Jersey

Lennar Northeast Properties, Inc.	Nevada
Lennar Pacific Properties Management, Inc.	Delaware
Lennar Pacific Properties, Inc.	Delaware
Lennar Pacific, Inc.	Delaware
Lennar PNW, Inc.	Washington
Lennar Port Imperial South Building 10, LLC (Roseland)	New Jersey
Lennar Port Imperial South Building 12, LLC	New Jersey
Lennar Port Imperial South, LLC	Delaware
Lennar Reflections, LLC	Delaware
Lennar Renaissance, Inc.	California
Lennar Reno, LLC	Nevada	Barker-Coleman Communities
		Lennar Homes
		Lennar Communities
Lennar Riverside West Urban Renewal Company, L.L.C.	New Jersey
Lennar Riverside West, LLC	Delaware
Lennar Sacramento, Inc.	California
Lennar Sales Corp.	California
Lennar San Jose Holdings, Inc.	California
Lennar Seaport Partners, LLC	Delaware
Lennar Southland I, Inc.	California
Lennar Southwest Holding Corp.	Nevada
Lennar Texas Holding Company	Texas
Lennar Trading Company, LP	Texas
Lennar-Lantana Boatyard, Inc.	Florida
Lennar.Com, Inc.	Florida
Leomas Landing, LLC	Florida
LFB Engineered Systems, Inc.	California
LFS Holding Company, LLC	Delaware
LH Eastwind, LLC	Florida
LH Highway 27, LLP	Delaware
LHI Renaissance, LLC	Florida	Club Oasis
Lori Gardens Associates III, LLC	New Jersey
Lorton Station, LLC	Virginia
Madrona Village Mews, LLC	Illinois
Madrona Village, LLC	Illinois
Mid-County Utilities, Inc.	Maryland
Mission Viejo 12S Venture, LP	California
Mission Viejo Holdings, Inc.	California
MS Rialto Mission Lakes CA, LLC	Delaware
MS Rialto Heritage Todd Creek CO, LLC	Delaware
MS Rialto Colonial Heritage VA, LLC	Delaware
MS Rialto Heritage Royale FL, LLC	Delaware
MS Rialto Coberly North CA, LLC	Delaware
MS Rialto Ashe Road Development CA, LLC	Delaware

MS Rialto Lynn Annexe CA, LLC	Delaware
MS Rialto Greenbriar Stonebridge NJ, LLC	Delaware
MS Rialto Parkview Meadows CA, LLC	Delaware
MS Rialto Creekside Crossing IL, LLC	Delaware
MS Rialto Las Calinas FL, LLC	Delaware
MS Rialto Palisades NY, LLC	Delaware
MS Rialto Longboat Estates MD, LLC	Delaware
MS Rialto Creek Run NJ, LLC	Delaware
MS Rialto Creekside Crossing II IL, LLC	Delaware
Montgomery Crossings, LLC	Illinois
New Home Brokerage, Inc.	Florida
NGMC Finance Company IV, LLC	Florida
North American Advantage Insurance Services, LLC	Texas
North American Asset Development Corporation	California
North American Services, LLC	California
North American Title Alliance, LLC	Florida
North American Title Company (AZ)	Arizona
North American Title Company (FL)	Florida	North American Title company
North American Title Company (IL)	Illinois
North American Title Company (MD)	Maryland
North American Title Company (MN)	Minnesota
North American Title Company (NV)	Nevada
North American Title Company (TX)	Texas	Southwest Land Title Company
North American Title Company of Colorado	Colorado
North American Title Company, Inc. (CA)	California
North American Title Florida Alliance, LLC	Florida
North American Title Group, Inc. (FL)	Florida
North American Title Insurance Company	California
North Brook Holdings, LLC	Florida
Northbridge, LLC	Illinois
Northeastern Properties LP, Inc.	Nevada
NuHome Designs, LLC	Texas
Oak Stone, LLC	Florida
Paparone Construction Co.	New Jersey
Parc Chestnut, LLC	Illinois
Perris Green Valley Associates, a California limited partnership	California
PL Roseville Holdings, LLC	Delaware
Prestonfield, LLC	Illinois
Raintree Village II, LLC	Illinois
Raintree Village, LLC	Illinois
Rancho Summit, LLC	California
Reflections Urban Renewal Company, LLC	New Jersey
Rivendell Joint Venture	Florida

Rivenhome Corporation	Florida
Riverwalk at Waterside Island, LLC	Florida
Rutenberg Homes of Texas, Inc.	Texas
Rutenberg Homes, Inc. (Florida)	Florida
Rye Hill Company, LLC	New York
S. Florida Construction II, LLC	Florida
S. Florida Construction III, LLC	Florida
S. Florida Construction, LLC	Florida
San Felipe Indemnity Co., Ltd.	Bermuda
Santa Ana Transit Village, LLC	California
Seminole/70th, LLC	Florida
Siena at Old Orchard, LLC	Illinois
Sonoma, LLC	Illinois
Spanish Springs Development, LLC	Nevada
State Home Acceptance Corporation	Florida
Stoney Corporation	Florida
Stoneybrook Golf Club, Inc.	Florida
Stoneybrook Joint Venture	Florida
Strategic Cable Technologies, L.P.	Texas
Strategic Holdings, Inc.	Nevada	Lennar Communications Ventures
Strategic Technologies Communications of California, Inc.	California
Strategic Technologies, Inc.	Florida	Strategic Cable Technologies - Texas, Inc.
Summerfield Venture L.L.C.	Illinois
Summerwood, LLC	Maryland
Summit Enclave, LLC	Illinois
Summit Glen, LLC	Illinois
Texas-Wide General Agency, Inc.	Texas
The Courts of Indian Creek, LLC	Illinois
The Fortress Group, Inc.	Delaware
The Homeward Foundation	Texas
Trade Services Investments, Inc.	California
Two SR, L.P.	Texas
U.S. Home Corporation	Delaware	Lennar
		Lennar Corporation

		Patriot Homes
‘U.S. Home of Arizona Construction Co.	Arizona
U.S. Home Realty, Inc.	Texas
U.S. Home/KB North Douglas, LLC	Delaware
U.S. Insurors, Inc.	Florida
U.S.H. Los Prados, Inc.	Nevada
U.S.H. Realty, Inc.	Maryland
UAMC Asset Corp. II	Nevada
UAMC Capital, LLC	Delaware
UAMC Holding Company, LLC	Delaware
UAMC Holdings II	Nevada
Universal American Insurance Agency, Inc. (FL)	Florida
Universal American Insurance Agency, Inc. (Texas)	Texas
Universal American Mortgage Company of California	California
Universal American Mortgage Company, LLC	Florida	Universal American Mortgage Company
		UAMC
USH (West Lake), Inc.	New Jersey
USH Equity Corporation	Nevada
USH Funding Corp.	Texas
USH Millennium Ventures Corp.	Florida
USH Woodbridge, Inc.	Texas
Waterleaf, LLC	Florida
WCP, LLC	South Carolina
West Van Buren, LLC	Illinois
Westchase, Inc.	Nevada
Winands Ventures, LLC	Maryland

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-117090 on Form S-3, Post-Effective Amendment No.1 to Registration Statement No. 333-70212 on Form S-8/A, Registration Statement No. 333-105019 on Form S-8, Registration Statement No. 333-129205 on Form S-4, Registration Statement No. 333-130923 on Form S-4, Registration Statement No. 333-136750 on Form S-4 and Registration Statement No. 333-136752 on Form S-4 of our reports dated January 29, 2008, relating to the financial statements and financial statement schedule of Lennar Corporation and subsidiaries, and the effectiveness of Lennar Corporation’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Lennar Corporation for the year ended November 30, 2007.

/s/ DELOITTE & TOUCHE LLP

Miami, Florida

January 29, 2008

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER’S CERTIFICATION

I, Stuart A. Miller, certify that:

1. I have reviewed this annual report on Form 10-K of Lennar Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    STUART A. MILLER        

Name: Stuart A. Miller

Title: President and Chief Executive Officer

Date: January 29, 2008

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER’S CERTIFICATION

I, Bruce E. Gross, certify that:

1. I have reviewed this annual report on Form 10-K of Lennar Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    BRUCE E. GROSS

Name: Bruce E. Gross

Title: Vice President and Chief Financial Officer

Date: January 29, 2008

EX-32

Exhibit 32

Officers’ Section 1350 Certifications

Each of the undersigned officers of Lennar Corporation, a Delaware corporation (the “Company”), hereby certifies that (i) the Company’s Annual Report on Form 10-K for the year ended November 30, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Company’s Annual Report on Form 10-K for the year ended November 30, 2007 fairly presents, in all material respects, the financial condition and results of operations of the Company, at and for the periods indicated.

/s/    STUART A. MILLER

Name: Stuart A. Miller

Title: President and Chief Executive Officer

/s/    BRUCE E. GROSS

Name: Bruce E. Gross

Title: Vice President and Chief Financial Officer

Date: January 29, 2008