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Lennar Multifamily Segment (Tables)

9 Months Ended

Aug. 31, 2016

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

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