Lennar Homebuilding Investments in Unconsolidated Entities

Summarized condensed financial information on a combined 100% basis related to Lennar Homebuilding’s unconsolidated entities that are accounted for by the equity method was as follows:

Statements of Operations



	Three Months Ended
	February 28,
(In thousands)	2015		2014
Revenues	$	442,957	143,694
Costs and expenses	298,879		145,639
Other income	2,943		—
Net earnings (loss) of unconsolidated entities (1)	$	147,021	(1,945	)
Lennar Homebuilding equity in earnings from unconsolidated entities (2)	$	28,899	4,990


(1)	For the three months ended February 28, 2015, net earnings of unconsolidated entities included the sale of approximately 300 homesites to Lennar by Heritage Fields El Toro, one of the Company's unconsolidated entities, for $126.4 million, resulting in $44.6 million of gross profit of which the Company's portion was deferred.

(2)

For the three months ended February 28, 2015, Lennar Homebuilding equity in earnings from unconsolidated entities included $31.3 million of equity in earnings primarily related to the sale of approximately 600 homesites to third parties by Heritage Fields El Toro, one of the Company's unconsolidated entities. For the three months ended February 28, 2014, Lennar Homebuilding equity in earnings from unconsolidated entities included $4.5 million of equity in earnings primarily as a result of a third-party land sale by one unconsolidated entity.

Balance Sheets



(In thousands)	February 28, 2015		November 30, 2014
Assets:
Cash and cash equivalents	$	229,004	243,597
Inventories	2,739,595		2,889,267
Other assets	145,833		155,470
	$	3,114,432	3,288,334
Liabilities and equity:
Accounts payable and other liabilities	$	287,794	271,638
Debt	487,387		737,755
Equity	2,339,251		2,278,941
	$	3,114,432	3,288,334

As of February 28, 2015 and November 30, 2014, the Company’s recorded investments in Lennar Homebuilding unconsolidated entities were $684.1 million and $656.8 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of February 28, 2015 and November 30, 2014 was $745.9 million and $722.6 million, respectively. The basis difference is primarily as a result of the Company buying an interest in a partner's equity in a Lennar Homebuilding unconsolidated entity at a discount to book value and contributing non-monetary assets to an unconsolidated entity with a higher fair value than book value.

The Lennar Homebuilding unconsolidated entities in which the Company has investments usually finance their activities with a combination of partner equity and debt financing. In some instances, the Company and its partners have guaranteed debt of certain unconsolidated entities.

The total debt of the Lennar Homebuilding unconsolidated entities in which the Company has investments, including Lennar's maximum recourse exposure, were as follows:



(Dollars in thousands)	February 28, 2015			November 30, 2014
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	55,767		56,573
Non-recourse land seller debt or other debt	4,022			4,022
Non-recourse debt with completion guarantees (1)	180,032			442,854
Non-recourse debt without completion guarantees	224,796			209,825
Non-recourse debt to the Company	464,617			713,274
The Company’s maximum recourse exposure	22,770			24,481
Total debt	$	487,387		737,755
The Company’s maximum recourse exposure as a % of total JV debt	5		%	3	%


(1)	The decrease in non-recourse debt with completion guarantees was primarily related to a debt paydown by Heritage Fields El Toro, one of the Company's unconsolidated entities, as a result of land sales.

In most instances in which the Company has guaranteed debt of a Lennar Homebuilding unconsolidated entity, the Company’s partners have also guaranteed that debt and are required to contribute their share of the guarantee payments. Historically, the Company has had repayment guarantees and/or maintenance guarantees. In a repayment guarantee, the Company and its venture partners guarantee repayment of a portion or all of the debt in the event of default before the lender would have to exercise its rights against the collateral. In the event of default, if the Company’s 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 maintenance guarantees only apply if the value of the collateral (generally land and improvements) is less than a specified percentage of the loan balance. As of both February 28, 2015 and November 30, 2014, the Company did not have any maintenance or joint and several guarantees related to its Lennar Homebuilding unconsolidated entities.

In connection with many of the loans to Lennar Homebuilding unconsolidated entities, the Company and its joint venture partners (or entities related to them) 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 is to be done in phases, the guarantee generally is limited to completing only the phases as to which construction has already commenced and for which loan proceeds were used.

If the Company is required to make a payment under any guarantee, the payment would constitute a capital contribution or loan to the Lennar Homebuilding unconsolidated entity and increase the Company’s investment in the unconsolidated entity and its share of any funds the unconsolidated entity distributes.

As of both February 28, 2015 and November 30, 2014, the fair values of the repayment guarantees and completion guarantees were not material. The Company believes that as of February 28, 2015, in the event it becomes legally obligated to perform under a guarantee of the obligation of a Lennar Homebuilding unconsolidated entity due to a triggering event under a guarantee, most of the time the collateral should be sufficient to repay at least a significant portion of the obligation or the Company and its partners would contribute additional capital into the venture. In certain instances, the Company has placed performance letters of credit and surety bonds with municipalities for its joint ventures (see Note 12).