XML 42 R32.htm IDEA: XBRL DOCUMENT v3.5.0.2
Rialto Segment (Tables)
 9 Months Ended
Aug. 31, 2016
Segment Reporting [Abstract]  
Schedule of Assets and Liabilities 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. 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.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.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
Schedule of Other Income (Expense) 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, Net by Type 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
Nonaccrual Loans 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
Allowance for Credit Losses on Financing Receivables 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
Changes In Real Estate Owned 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.
Schedule of Line of Credit Facilities 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.nants 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
Equity Method Investments 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)
August 31,
2016
 
November 30,
2015
Non-recourse bank debt and other debt (partner’s share of several recourse)
$
48,792

 
50,411

Non-recourse land seller debt and other debt
323,995

 
324,000

Non-recourse debt with completion guarantees
137,152

 
146,760

Non-recourse debt without completion guarantees
306,929

 
260,734

Non-recourse debt to the Company
816,868

 
781,905

The Company’s maximum recourse exposure (1)
48,628

 
10,981

Total debt
$
865,496

 
792,886

The Company’s maximum recourse exposure as a % of total JV debt
6
%
 
1
%
(1)
The increase in the Company's maximum recourse exposure was primarily related to the Company providing a repayment guarantee on an unconsolidated entity's debt.Balance Sheets
(In thousands)
August 31,
2016
 
November 30,
2015
Assets:
 
 
 
Cash and cash equivalents
$
369,203

 
248,980

Inventories
3,798,070

 
3,059,054

Other assets
1,354,826

 
465,404

 
$
5,522,099

 
3,773,438

Liabilities and equity:
 
 
 
Accounts payable and other liabilities
$
854,568

 
288,192

Debt
865,496

 
792,886

Equity
3,802,035

 
2,692,360

 
$
5,522,099

 
3,773,438

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
 
Nine Months Ended
 
August 31,
 
August 31,
(In thousands)
2016
 
2015
 
2016
 
2015
Revenues
$
43,889

 
141,599

 
352,251

 
765,346

Costs and expenses
110,649

 
127,678

 
409,219

 
580,696

Other income
—

 
46,400

 
—

 
49,343

Net earnings (loss) of unconsolidated entities
$
(66,760
)
 
60,321

 
(56,968
)
 
233,993

Lennar Homebuilding equity in earnings (loss) from unconsolidated entities
$
(18,034
)
 
13,300

 
(24,667
)
 
48,693

ance 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.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:
BalThe 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

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.The Company’s recorded investments in unconsolidated entities were as follows:
(In thousands)
August 31,
2016
 
November 30,
2015
Lennar Homebuilding
$
796,499

 
741,551

Rialto
$
241,680

 
224,869

Lennar Multifamily
$
304,032

 
250,876