21.

Subsequent Events

As discussed above in Note 10. Investments in Unconsolidated Joint Ventures, effective June 10, 2011, each of the Company, the Administrative Agent, several of the lenders to South Edge and the other Participating Members of South Edge became party to a consensual agreement regarding the Plan. This agreement and the Plan are described further above in Note. 15. Legal Matters. Based on the agreement and the Plan, the Company’s consolidated financial statements at May 31, 2011 reflect a net payment obligation of $226.4 million, representing the Company’s estimate of the probable amount that it would pay to the Administrative Agent (on behalf of the South Edge lenders) related to the Springing Guaranty and to pay for certain fees, expenses and charges and for certain allowed general unsecured claims in the South Edge bankruptcy case. This estimate updates the Company’s estimate of its probable net payment obligation at February 28, 2011. Based on this updated estimate of its probable net payment obligation, and after taking into account accruals the Company had previously established with respect to South Edge and factoring in an offset for the estimated fair value of the South Edge land the Company expects to acquire as a result of satisfying the payment obligation, the Company recorded a loss on loan guaranty of $14.6 million in the quarter ended May 31, 2011. This loss on loan guaranty was in addition to the $22.8 million loss on loan guaranty the Company recorded in the first quarter of 2011 based on its estimate of its probable net payment obligation at February 28, 2011. The Company also recognized a pretax, noncash joint venture impairment charge of $53.7 million in the first quarter of 2011 to write off its investment in South Edge.

As discussed above in Note 3. Segment Information, effective June 27, 2011, KBA Mortgage ceased accepting loan applications, and it ceased offering mortgage banking services to the Company’s homebuyers after June 30, 2011. As a result, the Company anticipates that income generated in its financial services segment from its equity in income of the unconsolidated mortgage banking joint venture (i.e., KBA Mortgage), which the Company reported in the three-month and six-month periods ended May 31, 2011 and 2010, will decline substantially in the quarter ending August 31, 2011 and that no such income will be generated in subsequent periods. The Company’s marketing services agreement with MetLife Home Loans, effective June 27, 2011, does not provide the Company with any ownership, joint venture or other interests in or with MetLife Home Loans or MetLife Bank, N.A. or with respect to the revenues or income that may be generated from MetLife Home Loans’ providing mortgage banking services to, or originating residential consumer mortgage loans for, the Company’s homebuyers. MetLife Home Loans and MetLife Bank, N.A. are not affiliates of the Company or any of its subsidiaries. Therefore, unlike the Company’s prior participation in KBA Mortgage, the Company’s marketing services agreement with MetLife Home Loans will not result in any income for the Company based on an equity interest. The Company will be compensated solely for the fair market value of the services it provides. The Company’s homebuyers are under no obligation to use MetLife Home Loans and may select any lender of their choice to obtain mortgage financing for the purchase of a home.