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 29,		February 28,
(In thousands)	2016		2015
Revenues	$	99,726	442,957
Costs and expenses	97,200		298,879
Other income	—		2,943
Net earnings of unconsolidated entities	$	2,526	147,021
Lennar Homebuilding equity in earnings from unconsolidated entities	$	3,000	28,899

For the three months ended February 29, 2016, net earnings of unconsolidated entities included sales of approximately 220 homesites by El Toro to third parties for $62.1 million that resulted in $20.7 million of gross profit. This transaction resulted primarily in the recognition of $6.0 million of Lennar Homebuilding equity in earnings. For the three months ended February 28, 2015, net earnings of unconsolidated entities included sales of approximately 900 homesites by El Toro for $412.2 million that resulted in $145.5 million of gross profit, of which (1) approximately 300 homesites were sold to Lennar for $126.4 million that resulted in $44.6 million of gross profit of which the Company's portion was deferred, and (2) approximately 600 homesites were sold to third parties. These transactions resulted primarily in the recognition of $31.3 million of Lennar homebuilding equity in earnings for the three months ended February 28, 2015.

Balance Sheets



(In thousands)	February 29, 2016		November 30, 2015
Assets:
Cash and cash equivalents	$	242,573	248,980
Inventories	3,126,810		3,059,054
Other assets	501,077		465,404
	$	3,870,460	3,773,438
Liabilities and equity:
Accounts payable and other liabilities	$	279,893	288,192
Debt	836,483		792,886
Equity	2,754,084		2,692,360
	$	3,870,460	3,773,438

As of February 29, 2016 and November 30, 2015, the Company’s recorded investments in Lennar Homebuilding unconsolidated entities were $771.4 million and $741.6 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of February 29, 2016 and November 30, 2015 was $873.3 million and $839.5 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, contributing non-monetary assets to an unconsolidated entity with a higher fair value than book value and deferring equity in earnings on land sales.

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 29, 2016			November 30, 2015
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	50,098		50,411
Non-recourse land seller debt and other debt	323,995			324,000
Non-recourse debt with completion guarantees	148,781			146,760
Non-recourse debt without completion guarantees	303,080			260,734
Non-recourse debt to the Company	825,954			781,905
The Company’s maximum recourse exposure	10,529			10,981
Total debt	$	836,483		792,886
The Company’s maximum recourse exposure as a % of total JV debt	1		%	1	%

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 29, 2016 and November 30, 2015, the Company did not have any maintenance guarantees or joint and several repayment 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 29, 2016 and November 30, 2015, the fair values of the repayment guarantees and completion guarantees were not material. The Company believes that as of February 29, 2016, 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 11).