Lennar Multifamily Segment

9 Months Ended

Aug. 31, 2016

Segment Reporting [Abstract]

Operating and Reporting Segments

(2)

Operating and Reporting Segments

The Company’s operating segments are aggregated into reportable segments, 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) Homebuilding Houston

(5) Lennar Financial Services

(6) Rialto

(7) Lennar Multifamily

In the first quarter of 2016, the Company made the decision to divide the Southeast Florida operating division into two operating segments to maximize operational efficiencies given the continued growth of the division. As a result of this change in management structure, the Company re-evaluated its reportable segments and determined that neither operating segment met the reportable criteria set forth in Accounting Standards Codification ("ASC") 280, Segment Reporting. The Company aggregated these operating segments into the Homebuilding East reportable segment as these divisions exhibit similar economic characteristics, geography and product type as the other divisions in Homebuilding East. All prior year segment information has been restated to conform with the 2016 presentation. The change in the reportable segments has no effect on the Company's condensed consolidated financial position, results of operations or cash flows for the periods presented.

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

Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s homebuilding segments primarily include the construction and sale of single-family attached and detached homes as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities. 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 other income (expense), net, less the cost of homes sold and land sold, selling, general and administrative expenses and other interest expense of the segment.

The Company’s reportable homebuilding segments and all other homebuilding operations not required to be reported separately have homebuilding divisions located in:

East: Florida, Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia

Central: Arizona, Colorado and Texas⁽¹⁾ 

West: California and Nevada

Houston: Houston, Texas

Other: Illinois, Minnesota, Oregon, Tennessee and Washington

(1)Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.

Operations of the Lennar Financial Services segment include primarily mortgage financing, title insurance and closing services for both buyers of the Company’s homes and others. The Lennar Financial Services segment sells substantially all of the loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Lennar Financial Services’ operating earnings consist of revenues generated primarily from mortgage financing, title insurance and closing services, less the cost of such services and certain selling, general and administrative expenses incurred by the segment. The Lennar Financial Services segment operates generally in the same states as the Company’s homebuilding operations as well as in other states.

Operations of the Rialto segment include raising, investing and managing third-party capital, originating and securitizing commercial mortgage loans as well as investing its own capital in real estate related mortgage loans, properties and related securities. Rialto utilizes its vertically-integrated investment and operating platform to underwrite, diligence, acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and real estate related securities as well as providing strategic real estate capital. Rialto’s operating earnings consist of revenues generated primarily from gains from securitization transactions and interest income from the Rialto Mortgage Finance (“RMF”) business, interest income associated with portfolios of real estate loans acquired and other portfolios of real estate loans and assets acquired, asset management, due diligence and underwriting fees derived from the real estate investment funds managed by the Rialto segment, fees for sub-advisory services, other income (expense), net and equity in earnings (loss) from unconsolidated entities, less the costs incurred by the segment for managing portfolios, costs related to RMF and other general and administrative expenses.

Operations of the Lennar Multifamily segment include revenues generated from the sales of land, revenue from construction activities and management fees generated from joint ventures and equity in earnings (loss) from unconsolidated entities, less the cost of sales of land, expenses related to construction activities and general and administrative expenses.

Each reportable segment follows the same accounting policies described in Note 1 – “Summary of Significant Accounting Policies” to the consolidated financial statements in the Company’s Form 10-K for the year ended November 30, 2015. 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.

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

(In thousands)	August 31, 2016		November 30, 2015
Assets:
Homebuilding East	$	3,621,564	3,140,604
Homebuilding Central	1,494,703		1,421,195
Homebuilding West	4,527,360		4,157,616
Homebuilding Houston	495,216		481,386
Homebuilding Other	825,798		858,000
Rialto	1,196,653		1,505,500
Lennar Financial Services	1,527,556		1,425,837
Lennar Multifamily	532,574		415,352
Corporate and unallocated	777,296		1,014,019
Total assets	$	14,998,720	14,419,509

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2016			2015		2016		2015
Revenues:
Homebuilding East	$	1,002,584		913,184		2,615,936		2,362,102
Homebuilding Central	422,504			322,242		1,117,034		835,259
Homebuilding West	671,122			639,593		1,940,520		1,649,727
Homebuilding Houston	199,800			204,948		528,097		525,852
Homebuilding Other	200,959			152,351		532,748		416,848
Lennar Financial Services	191,444			168,748		491,340		463,460
Rialto	63,885			51,554		152,434		160,682
Lennar Multifamily	81,596			39,078		195,264		114,511
Total revenues (1)	$	2,833,894		2,491,698		7,573,373		6,528,441
Operating earnings (loss):
Homebuilding East (2)	$	161,789		147,055		389,433		365,154
Homebuilding Central	44,627			32,152		110,629		77,919
Homebuilding West (3)	92,308			114,499		294,949		299,324
Homebuilding Houston	23,132			26,665		59,087		66,418
Homebuilding Other	23,026			13,341		54,118		25,330
Lennar Financial Services	53,248			39,437		112,267		94,017
Rialto	(57		)	6,993		(16,533	)	16,682
Lennar Multifamily	2,649			(2,990	)	29,774		(17,378	)
Total operating earnings	400,722			377,152		1,033,724		927,466
Corporate general and administrative expenses	61,164			56,494		164,634		150,355
Earnings before income taxes	$	339,558		320,658		869,090		777,111

(1) Total revenues were net of sales incentives of $152.3 million ($22,500 per home delivered) and $402.2 million ($22,000 per home delivered) for the three and nine months ended August 31, 2016, respectively, compared to $130.6 million ($20,700 per home delivered) and $353.1 million ($21,300 per home delivered) for the three and nine months ended August 31, 2015, respectively.

(2) For both the three and nine months ended August 31, 2016, operating earnings included a gain of $8.7 million on the sale of a clubhouse.

(3)

For the three and nine months ended August 31, 2016, operating earnings included the Company's share of costs associated with the FivePoint combination and the Company's share of net operating losses associated with the new FivePoint unconsolidated entity, partially offset by $17.4 million of management fee income related to a Lennar Homebuilding strategic joint venture for the three months ended August 31, 2016 and $30.1 million of management fee income and a profit participation related to Lennar Homebuilding's strategic joint ventures for the nine months ended August 31, 2016. For the three and nine months ended August 31, 2015, operating earnings included $21.5 million and $64.5 million, respectively, of equity in earnings from one of the Company's unconsolidated entities. For additional details refer to Note 3. (7)

Lennar Financial Services Segment

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

(In thousands)	August 31, 2016		November 30, 2015
Assets:
Cash and cash equivalents	$	110,164	106,777
Restricted cash	13,910		13,961
Receivables, net (1)	374,769		242,808
Loans held-for-sale (2)	800,139		843,252
Loans held-for-investment, net	29,704		30,998
Investments held-to-maturity	34,746		40,174
Investments available-for-sale (3)	51,535		42,827
Goodwill	39,838		38,854
Other (4)	72,751		66,186
	$	1,527,556	1,425,837
Liabilities:
Notes and other debts payable	$	913,040	858,300
Other (5)	227,175		225,678
	$	1,140,215	1,083,978

(1) Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of August 31, 2016 and November 30, 2015, respectively.

(2) Loans held-for-sale related to unsold loans carried at fair value.

(3) Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income.

(4) As of August 31, 2016 and November 30, 2015, other assets included mortgage loan commitments carried at fair value of $20.7 million and $13.1 million, respectively, and mortgage servicing rights carried at fair value of $18.4 million and $16.8 million, respectively. In addition, other assets also included forward contracts carried at fair value of $0.5 million as of November 30, 2015.

(5) As of August 31, 2016 and November 30, 2015, other liabilities included $58.4 million and $65.0 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. Other liabilities also included forward contracts carried at fair value of $2.0 million as of August 31, 2016.

At August 31, 2016, the Lennar Financial Services segment warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures October 2016 (1)	$	300,000
364-day warehouse repurchase facility that matures October 2016 (2)	450,000
364-day warehouse repurchase facility that matures June 2017	600,000
Total	$	1,350,000

(1) Subsequent to August 31, 2016, the warehouse repurchase facility maturity date was extended to September 2017.

(2) Maximum aggregate commitment includes an uncommitted amount of $250 million.

The Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature. Borrowings under the facilities and their prior year predecessors were $912.7 million and $858.3 million at August 31, 2016 and November 30, 2015, respectively, and were collateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $960.4 million and $916.9 million at August 31, 2016 and November 30, 2015, respectively. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the mortgage loans held-for-sale to investors and by collecting on receivables on loans sold but not yet paid. Without the facilities, the Lennar Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.

Substantially, all of the loans the Lennar Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Over the last several years there has been an industry-wide effort by purchasers to defray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan sale agreements.

Mortgage investors could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors. The Company establishes accruals for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements. While the Company believes that it has adequately reserved for known losses and projected repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations, additional recourse expense may be incurred. Loan origination liabilities are included in Lennar Financial Services’ liabilities in the Company's condensed consolidated balance sheets.

The activity in the Company’s loan origination liabilities was as follows:

	Three Months Ended				Nine Months Ended
	August 31,				August 31,
(In thousands)	2016			2015	2016		2015
Loan origination liabilities, beginning of period	$	20,994		13,660	19,492		11,818
Provision for losses	1,288			1,147	3,186		3,174
Adjustments to pre-existing provisions for losses from changes in estimates	1,224			—	1,224		—
Payments/settlements	(17		)	—	(413	)	(185	)
Loan origination liabilities, end of period	$	23,489		14,807	23,489		14,807

(8)

Rialto Segment

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

(In thousands)	August 31, 2016		November 30, 2015
Assets:
Cash and cash equivalents	$	133,103	150,219
Restricted cash (1)	6,499		15,061
Receivables, net (2)	—		154,948
Loans held-for-sale (3)	228,931		316,275
Loans receivable, net	145,813		164,826
Real estate owned - held-for-sale	170,524		183,052
Real estate owned - held-and-used, net	111,619		153,717
Investments in unconsolidated entities	241,680		224,869
Investments held-to-maturity	60,928		25,625
Other	97,556		116,908
	$	1,196,653	1,505,500
Liabilities:
Notes and other debts payable	$	576,448	771,728
Other	56,114		94,496
	$	632,562	866,224

(1) Restricted cash primarily consists of upfront deposits and application fees RMF receives before originating loans and is recognized as income once the loan has been originated as well as cash held in escrow by the Company’s loan servicer provider on behalf of customers and lenders and is disbursed in accordance with agreements between the transacting parties.

(2) Receivables, net primarily relate to loans sold but not settled as of November 30, 2015.

(3) Loans held-for-sale relate to unsold loans originated by RMF carried at fair value.

Rialto costs and expenses included loan impairments of $4.3 million and $11.1 million for the three and nine months ended August 31, 2016, respectively, and $4.5 million and $7.3 million for the three and nine months ended August 31, 2015, respectively, primarily associated with the segment's FDIC loans portfolio (before noncontrolling interests). For the three and nine months ended August 31, 2016 Rialto operating loss included a net loss attributable to noncontrolling interests of $6.0 million and $10.6 million, respectively. For the three and nine months ended August 31, 2015, Rialto operating earnings included a net loss attributable to the noncontrolling interests of $2.0 million and $4.5 million, respectively.

The following is a detail of Rialto other income (expense), net:

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2016			2015		2016		2015
Realized gains on REO sales, net	$	4,337		6,178		13,575		13,852
Unrealized losses on transfer of loans receivable to REO and impairments, net	(6,617		)	(3,124	)	(12,166	)	(7,892	)
REO and other expenses	(13,006		)	(14,714	)	(39,964	)	(43,123	)
Rental and other income (1)	7,674			12,832		10,667		37,191
Rialto other income (expense), net	$	(7,612	)	1,172		(27,888	)	28

(1) Rental and other income for the nine months ended August 31, 2016, included a $16.0 million write-off of uncollectible receivables related to a hospital, which was acquired through the resolution of one of Rialto's loans from a 2010 portfolio. The hospital is managed by a third-party management company.

Loans Receivable

The following table represents loans receivable, net by type:

(In thousands)	August 31, 2016		November 30, 2015
Nonaccrual loans: FDIC and Bank Portfolios	$	62,092	88,694
Accrual loans	83,721		76,132
Loans receivable, net	$	145,813	164,826

The nonaccrual loan portfolios consist primarily of loans acquired at a discount. In 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies ("LLCs") in partnership with the FDIC (“FDIC Portfolios”). The LLCs met the accounting definition of VIEs and since the Company was determined to be the primary beneficiary, the Company consolidated the LLCs. The Company was determined to be the primary beneficiary because it has the power to direct the activities of the LLCs that most significantly impact the LLCs' performance through Rialto's management and servicer contracts. At August 31, 2016, these consolidated LLCs had total combined assets and liabilities of $251.5 million and $12.1 million, respectively. At November 30, 2015, these consolidated LLCs had total combined assets and liabilities of $355.2 million and $11.3 million, respectively.

In addition in 2010, Rialto acquired 400 distressed residential and commercial real estate loans (“Bank Portfolios”) and over 300 REO properties from three financial institutions.

Based on the nature of these loans, the portfolios are managed by assessing the risks related to the likelihood of collection of payments from borrowers and guarantors, as well as monitoring the value of the underlying collateral. As of August 31, 2016 and November 30, 2015, management classified all loans receivable within the FDIC Portfolios and Bank Portfolios as nonaccrual loans as forecasted principal and interest cannot be reasonably estimated, and therefore, accounts for these assets in accordance with ASC 310-10, Receivables.

As of August 31, 2016, accrual loans included $83.7 million of floating and fixed rate commercial property loans maturing between October 2017 and August 2018.

The following tables represent nonaccrual loans in the FDIC Portfolios and Bank Portfolios accounted for under ASC 310-10 aggregated by collateral type:

August 31, 2016

			Recorded Investment
(In thousands)	Unpaid Principal Balance		With Allowance	Without Allowance	Total  Recorded Investment
Land	$	96,220	44,752	124	44,876
Single family homes	18,283		2,166	4,984	7,150
Commercial properties	11,448		1,372	508	1,880
Other	56,443		278	7,908	8,186
Loans receivable	$	182,394	48,568	13,524	62,092

November 30, 2015

			Recorded Investment
(In thousands)	Unpaid Principal  Balance		With Allowance	Without Allowance	Total  Recorded Investment
Land	$	145,417	59,740	1,165	60,905
Single family homes	39,659		8,344	3,459	11,803
Commercial properties	13,458		1,368	1,085	2,453
Other	78,279		—	13,533	13,533
Loans receivable	$	276,813	69,452	19,242	88,694

The average recorded investment in impaired loans was approximately $75 million and $112 million for the nine months ended August 31, 2016 and 2015, respectively.

In order to assess the risk associated with each risk category, management evaluates the forecasted cash flows and the value of the underlying collateral securing the loans receivable on a quarterly basis or when an event occurs that suggests a decline in the collateral’s fair value.

Allowance for Loan Losses

The allowance for loan losses is a valuation reserve established through provisions for loan losses charged against Rialto’s operating earnings. For nonaccrual loans, the risk relates to a decline in the value of the collateral securing the outstanding obligation. If the recorded investment in the nonaccrual loan exceeds its fair value, an impairment is recognized through an allowance for loan losses. The activity in the Company's allowance rollforward related to nonaccrual loans was as follows:

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2016			2015		2016		2015
Allowance on nonaccrual loans, beginning of the period	$	29,186		40,593		35,625		58,326
Provision for loan losses	4,330			4,497		11,051		7,306
Charge-offs	(6,924		)	(6,707	)	(20,084	)	(27,249	)
Allowance on nonaccrual loans, end of the period	$	26,592		38,383		26,592		38,383

For accrual loans an allowance is calculated based on a review of individual loans considered impaired. The analysis of impaired losses may be based on the present value of expected future cash flows discounted at the effective loan rate, an observable market price or the fair value of the underlying collateral on collateral dependent loans. In determining the collectability of certain loans, management also considers the fair value of any underlying collateral. Based on Rialto's segment assessment, no allowance for loan losses were recorded for its accrual loans as of August 31, 2016 and November 30, 2015.

Real Estate Owned

The acquisition of properties acquired through, or in lieu of, loan foreclosure are reported within the condensed consolidated balance sheets as REO held-and-used, net and REO held-for-sale. When a property is determined to be held-and-used, net, the asset is recorded at fair value and depreciated over its useful life using the straight line method. When certain criteria set forth in ASC 360, Property, Plant and Equipment, are met, the property is classified as held-for-sale. When a real estate asset is classified as held-for-sale, the property is recorded at the lower of its cost basis or fair value less estimated costs to sell. The fair value of REO held-for-sale is determined in part by placing reliance on third-party appraisals of the properties and/or internally prepared analyses of recent offers or prices on comparable properties in the proximate vicinity.

The following tables represent the activity in REO:

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2016			2015		2016		2015
REO - held-for-sale, beginning of period	$	180,547		195,386		183,052		190,535
Improvements	575			1,023		2,170		4,318
Sales	(18,889		)	(26,575	)	(52,840	)	(74,713	)
Impairments and unrealized losses	(6,669		)	(3,127	)	(15,016	)	(7,499	)
Transfers from held-and-used, net (1)	14,960			19,031		53,158		73,097
REO - held-for-sale, end of period	$	170,524		185,738		170,524		185,738

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2016			2015		2016		2015
REO - held-and-used, net, beginning of period	$	125,406		213,748		153,717		255,795
Additions	1,013			1,367		12,316		15,710
Improvements	706			309		828		1,737
Impairments	(23		)	(7	)	(826	)	(1,420	)
Depreciation	(523		)	(520	)	(1,258	)	(1,895	)
Transfers to held-for-sale (1)	(14,960		)	(19,031	)	(53,158	)	(73,097	)
Other	—			—		—		(964	)
REO - held-and-used, net, end of period	$	111,619		195,866		111,619		195,866

(1) During the three and nine months ended August 31, 2016 and 2015, the Rialto segment transferred certain properties from REO held-and-used, net to REO held-for-sale as a result of changes in the disposition strategy of the real estate assets.

For the three and nine months ended August 31, 2016, the Company recorded net gains (losses) of ($0.4) million and $1.6 million, respectively, from acquisitions of REO through foreclosure. For the three and nine months ended August 31, 2015, the Company recorded net losses of $0.3 million and $0.1 million, respectively, from acquisitions of REO through foreclosure. These net gains (losses) are recorded in Rialto other income (expense), net.

Rialto Mortgage Finance - loans held-for-sale

During the nine months ended August 31, 2016, RMF originated loans with a total principal balance of $1.2 billion of which $1.2 billion were recorded as loans held-for-sale and $55.7 million were recorded as accrual loans within loans receivable, net, and sold $1.3 billion of loans into seven separate securitizations. During the nine months ended August 31, 2015, RMF originated loans with a total principal balance of $2.0 billion and sold $1.6 billion of loans into eight separate securitizations. As of November 30, 2015, $151.8 million of the originated loans were sold into a securitization trust but not settled and thus were included as receivables, net.

Notes and Other Debts Payable

The Rialto segment has $350 million aggregate principal amount of 7.00% senior notes due 2018 ("7.00% Senior Notes"). Interest on the 7.00% Senior Notes is due semi-annually. At August 31, 2016 and November 30, 2015, the carrying amount, net of debt issuance costs, of the 7.00% Senior Notes was $348.5 million and $347.9 million, respectively. Under the indenture, Rialto is subject to certain covenants limiting, among other things, Rialto’s ability to incur indebtedness, to make investments, to make distributions to or enter into transactions with Lennar or to create liens, subject to certain exceptions and qualifications. Rialto also has quarterly and annual reporting requirements, similar to an SEC registrant, to holders of the 7.00% Senior Notes. The Company believes Rialto was in compliance with its debt covenants at August 31, 2016.

At August 31, 2016, Rialto warehouse facilities were as follows:

(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures October 2016 (one year extension) (1) (2)	$	400,000
364-day warehouse repurchase facility that matures January 2017 (1)	250,000
Warehouse repurchase facility that matures December 2017 (1) (3)	100,000
Warehouse repurchase facility that matures August 2018 (two - one year extensions) (4)	100,000
Total	$	850,000

(1) RMF uses these facilities to finance its loan origination and securitization activities.

(2) Subsequent to August 31, 2016, the warehouse repurchase facility maturity date was extended to April 2017, with the option for an additional six month extension, and the maximum aggregate commitment was increased to $500 million.

(3) Subsequent to August 31, 2016, the warehouse repurchase facility was amended and the maximum aggregate commitment was increased to $200 million.

(4) In 2015, Rialto entered into a separate repurchase facility to finance the origination of floating rate accrual loans. Loans financed under this facility are held as accrual loans within loans receivable, net. As of both August 31, 2016 and November 30, 2015, borrowings under this facility were $36.3 million.

Borrowings under the facilities that finance RMF's loan originations and securitization activities were $106.6 million and $317.1 million as of August 31, 2016 and November 30, 2015, respectively, and were secured by a 75% interest in the originated commercial loans financed. The facilities require immediate repayment of the 75% interest in the secured commercial loans when the loans are sold in a securitization and the proceeds are collected. These warehouse repurchase facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature.

In 2010, Rialto paid $310 million for the Bank Portfolios and for over 300 REO properties, of which $124 million was financed through a 5-year senior unsecured note provided by one of the selling institutions for which the maturity was subsequently extended. The remaining balance is due in December 2016. As of both August 31, 2016 and November 30, 2015, the outstanding amount related to the 5-year senior unsecured note was $30.3 million.

In May 2014, the Rialto segment issued $73.8 million principal amount of notes through a structured note offering (the “Structured Notes”) collateralized by certain assets originally acquired in the Bank Portfolios transaction at a price of 100%, with an annual coupon rate of 2.85%. Proceeds from the offering, after payment of expenses and hold backs for a cash reserve, were $69.1 million. In November 2014, the Rialto segment issued an additional $20.8 million of the Structured Notes at a price of 99.5%, with an annual coupon rate of 5.0%. Proceeds from the offering, after payment of expenses, were $20.7 million. The estimated final payment date of the Structured Notes is November 15, 2017. As of August 31, 2016 and November 30, 2015, the outstanding amount, net of debt issuance costs, related to the Structured Notes was $27.9 million and $31.3 million, respectively.

Investments

All of Rialto's investments in funds have the attributes of an investment company in accordance with ASC 946, Financial Services – Investment Companies, as amended by ASU 2013-08, Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, the attributes of which are different from the attributes that would cause a company to be an investment company for purposes of the Investment Company Act of 1940. As a result, the assets and liabilities of the funds in which Rialto has investments in are recorded at fair value with increases/decreases in fair value recorded in their respective statements of operations and the Company’s share is recorded in Rialto equity in earnings from unconsolidated entities in the Company's statement of operations.

The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and other investments:

								August 31, 2016		August 31, 2016		November 30, 2015
(Dollars in thousands)	Inception Year	Equity Commitments		Equity Commitments Called		Commitment to Fund by the Company		Funds Contributed by the Company		Investment
Rialto Real Estate Fund, LP	2010	$	700,006	$	700,006	$	75,000	$	75,000	$	62,659	68,570
Rialto Real Estate Fund II, LP	2012	1,305,000		1,305,000		100,000		100,000		96,863		99,947
Rialto Mezzanine Partners Fund, LP	2013	300,000		300,000		33,799		33,799		26,310		32,344
Rialto Capital CMBS Funds	2014	111,753		111,753		47,057		47,057		47,270		23,233
Rialto Real Estate Fund III	2015	949,578		—		100,000		—		1,559		—
Rialto Credit Partnership, LP	2016	220,000		51,150		19,999		4,650		4,637		—
Other investments										2,382		775
										$	241,680	224,869

Rialto's share of earnings (loss) from unconsolidated entities was as follows:

	Three Months Ended				Nine Months Ended
	August 31,				August 31,
(In thousands)	2016			2015	2016		2015
Rialto Real Estate Fund, LP	$	1,127		4,158	3,397		7,948
Rialto Real Estate Fund II, LP	2,672			2,354	4,420		5,533
Rialto Mezzanine Partners Fund, LP	703			637	2,128		1,563
Rialto Capital CMBS Funds	1,471			429	3,051		2,506
Rialto Real Estate Fund III	4			—	1,387		—
Rialto Credit Partnership, LP	(1		)	—	(13	)	—
Other investments	—			12	(33	)	32
Rialto equity in earnings from unconsolidated entities	$	5,976		7,590	14,337		17,582

During the three and nine months ended August 31, 2016, Rialto received $2.1 million and $9.5 million, respectively, of advance distributions with regard to Rialto's carried interests in its real estate funds in order to cover income tax obligations resulting from allocations of taxable income to Rialto's carried interests in these funds. During the three and nine months ended August 31, 2015, Rialto received $5.0 million and $16.2 million of such advanced distributions. These advance distributions are not subject to clawbacks and are included in Rialto's revenues.

During 2015, Rialto adopted a Carried Interest Incentive Plan (the "Plan"), under which participating employees in the aggregate may receive up to 40% of the equity units of a limited liability company (a "Carried Interest Entity") that is entitled to distributions made by a fund or other investment vehicle (a "Fund") managed by a subsidiary of Rialto. As such, those employees receiving equity units in the Carried Interest Entity may benefit from distributions made by a Fund to the extent the Carried Interest Entity makes distributions to its equity holders. The units issued to employees are equity awards and are subject to vesting schedules and forfeiture or repurchase provisions in the case of a termination of employment.

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

Balance Sheets

(In thousands)	August 31, 2016		November 30, 2015
Assets:
Cash and cash equivalents	$	159,683	188,147
Loans receivable	396,543		473,997
Real estate owned	566,012		506,609
Investment securities	1,284,583		1,092,476
Investments in partnerships	413,836		429,979
Other assets	41,282		30,340
	$	2,861,939	2,721,548
Liabilities and equity:
Accounts payable and other liabilities	$	27,605	29,462
Notes payable	562,935		374,498
Equity	2,271,399		2,317,588
	$	2,861,939	2,721,548

Statements of Operations

	Three Months Ended			Nine Months Ended
	August 31,			August 31,
(In thousands)	2016		2015	2016	2015
Revenues	$	51,485	41,278	147,021	122,336
Costs and expenses	24,472		24,937	66,075	73,024
Other income, net (1)	28,947		60,106	40,495	121,457
Net earnings of unconsolidated entities	$	55,960	76,447	121,441	170,769
Rialto equity in earnings from unconsolidated entities	$	5,976	7,590	14,337	17,582

(1) Other income, net, included realized and unrealized gains (losses) on investments.

At August 31, 2016 and November 30, 2015, the carrying value of Rialto's non-investment grade commercial mortgage-backed securities (“CMBS”) was $60.9 million and $25.6 million, respectively. These securities were purchased at discount rates ranging from 39% to 55% with coupon rates ranging from 2.2% to 4.0%, stated and assumed final distribution dates between November 2020 and March 2026, and stated maturity dates between November 2048 and March 2059. The Rialto segment reviews changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on its CMBS. Based on the Rialto segment’s assessment, no impairment charges were recorded during either the three and nine months ended August 31, 2016 or 2015. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.

In December 2014, the Rialto segment invested $18 million in a private commercial real estate services company. The investment was carried at cost at both August 31, 2016 and November 30, 2015 and is included in Rialto's other assets.(9)

Lennar Multifamily Segment

The Company is actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. The Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.

The assets and liabilities related to the Lennar Multifamily segment were as follows:

(In thousands)	August 31, 2016		November 30, 2015
Assets:
Cash and cash equivalents	$	5,120	8,041
Land under development	148,241		115,982
Consolidated inventory not owned	18,500		5,508
Investments in unconsolidated entities	304,032		250,876
Other assets	56,681		34,945
	$	532,574	415,352
Liabilities:
Accounts payable and other liabilities	$	95,346	62,943
Liabilities related to consolidated inventory not owned	11,850		4,007
	$	107,196	66,950

The unconsolidated entities in which the Lennar Multifamily segment has investments usually finance their activities with a combination of partner equity and debt financing. In connection with many of the loans to Lennar Multifamily unconsolidated entities, the Company (or entities related to them) has been required to give guarantees of completion and cost over-runs to the lenders and partners. 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. Additionally, the Company guarantees the construction costs of the project as construction cost over-runs would be paid by the Company. Generally, these payments would be increases to the Company's investment in the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds. As of both August 31, 2016 and November 30, 2015, the fair value of the completion guarantees was immaterial. Additionally, as of August 31, 2016 and November 30, 2015, the Lennar Multifamily segment had $36.8 million and $37.9 million, respectively, of letters of credit outstanding primarily for credit enhancements for the bank debt of certain of its unconsolidated entities and deposits on land purchase contracts. These letters of credit outstanding are included in the disclosure in Note 11 related to the Company's performance and financial letters of credit. As of August 31, 2016 and November 30, 2015, Lennar Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $628.2 million and $466.7 million, respectively.

In many instances, the Lennar Multifamily segment is appointed as the construction, development and property manager for certain of its Lennar Multifamily unconsolidated entities and receives fees for performing this function. During the three and nine months ended August 31, 2016, the Lennar Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $10.0 million and $27.4 million, respectively. During the three and nine months ended August 31, 2015, the Lennar Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $4.6 million and $13.0 million, respectively.

The Lennar Multifamily segment also provides general contractor services for construction of some of the rental properties owned by unconsolidated entities in which the Company has an investment. During the three and nine months ended August 31, 2016, the Lennar Multifamily segment provided general contractor services totaling $71.6 million and $156.5 million, respectively, which were partially offset by costs related to those services of $69.1 million and $151.4 million, respectively. During the three and nine months ended August 31, 2015, the Lennar Multifamily segment provided general contractor services totaling $34.5 million and $101.6 million, respectively, which were partially offset by costs related to those services of $33.9 million and $99.0 million, respectively.

In 2015, the Lennar Multifamily segment completed the initial closing of the Lennar Multifamily Venture (the "Venture") for the development, construction and property management of class-A multifamily assets with $1.1 billion of commitments. During the nine months ended August 31, 2016, the Venture received an additional $850 million of equity commitments, increasing its total equity commitments to approximately $2 billion, including a $504 million co-investment commitment by Lennar comprised of cash, undeveloped land and preacquisition costs. During the nine months ended August 31, 2016, $432.4 million in equity commitments were called, of which the Company contributed its portion of $147.6 million. During the nine months ended August 31, 2016, the Company received net distributions of $90.5 million as a return of capital from the Venture. As of August 31, 2016, $707.9 million of the approximately $2 billion in equity commitments had been called, of which the

Company has contributed $182.8 million representing its pro-rata portion of the called equity, resulting in a remaining equity commitment of $321.2 million. As of August 31, 2016 and November 30, 2015, the carrying value of the Company's investment in the Venture was $170.9 million and $122.5 million, respectively. Subsequent to August 31, 2016, the Venture received an additional $250 million of equity commitments, increasing its total equity commitments to $2.2 billion.

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

Balance Sheets

(In thousands)	August 31, 2016		November 30, 2015
Assets:
Cash and cash equivalents	$	106,007	39,579
Operating properties and equipment	2,007,129		1,398,244
Other assets	49,728		25,925
	$	2,162,864	1,463,748
Liabilities and equity:
Accounts payable and other liabilities	$	187,715	179,551
Notes payable	628,237		466,724
Equity	1,346,912		817,473
	$	2,162,864	1,463,748

Statements of Operations

	Three Months Ended			Nine Months Ended
	August 31,			August 31,
(In thousands)	2016		2015	2016	2015
Revenues	$	13,796	4,067	31,759	9,236
Costs and expenses	24,611		7,174	50,341	15,249
Other income, net	20,335		13,330	90,729	13,330
Net earnings of unconsolidated entities	$	9,520	10,223	72,147	7,317
Lennar Multifamily equity in earnings from unconsolidated entities (1)	$	5,060	5,004	38,754	4,404

(1)

For the three and nine months ended August 31, 2016, Lennar Multifamily equity in earnings from unconsolidated entities included the segment's $8.0 million and $43.8 million, respectively, share of gains as a result of the sale of one and three operating properties, respectively, by its unconsolidated entities. For both the three and nine months ended August 31, 2015, Lennar Multifamily equity in earnings from unconsolidated entities included the segment's $5.7 million share of a gain as a result of the sale of an operating property by one of its unconsolidated entities.