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Rialto Segment (Tables)

3 Months Ended

Feb. 28, 2017

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



(In thousands)	February 28, 2017		November 30, 2016
Assets:
Homebuilding East (1)	$	4,791,376	3,512,990
Homebuilding Central	2,070,652		1,993,403
Homebuilding West	4,606,982		4,318,924
Homebuilding Other	900,876		907,523
Rialto	1,228,874		1,276,210
Lennar Financial Services	1,231,708		1,754,672
Lennar Multifamily	610,161		526,131
Corporate and unallocated	789,484		1,071,928
Total assets	$	16,230,113	15,361,781
Lennar Homebuilding goodwill (2)	$	143,298	—
Rialto goodwill	$	5,396	5,396
Lennar Financial Services goodwill (2)	$	59,838	39,838


(1)	Homebuilding East segment includes the provisional fair values of homebuilding assets acquired as part of the WCI acquisition.


(2)	In connection with the WCI acquisition, the Company allocated $143.3 million of goodwill to the Lennar Homebuilding East reportable segment and $20.0 million to the Lennar Financial Services segment. These amounts are provisional pending completion of the fair value analysis of acquired assets and liabilities.



	Three Months Ended
	February 28,			February 29,
(In thousands)	2017			2016
Revenues:
Homebuilding East	$	767,726		659,054
Homebuilding Central	516,181			413,840
Homebuilding West	552,798			551,339
Homebuilding Other	181,989			162,248
Lennar Financial Services	148,043			123,956
Rialto	82,006			43,711
Lennar Multifamily	88,685			39,516
Total revenues (1)	$	2,337,428		1,993,664
Operating earnings (loss):
Homebuilding East (2)		($55,709	)	84,706
Homebuilding Central	52,858			33,195
Homebuilding West	53,360			88,834
Homebuilding Other	20,829			13,903
Lennar Financial Services	20,664			14,931
Rialto	(843		)	1,610
Lennar Multifamily	19,183			12,182
Total operating earnings	110,342			249,361
Corporate general and administrative expenses	60,699			47,668
Earnings before income taxes	$	49,643		201,693


(1)	Total revenues were net of sales incentives of $123.5 million ($22,700 per home delivered) for the three months ended February 28, 2017, compared to $103.7 million ($21,600 per home delivered) for the three months ended February 29, 2016.

(2)

Homebuilding East operating loss for the three months ended February 28, 2017 included a $140 million loss on litigation accrual (see Note 17).The assets and liabilities related to the Lennar Financial Services segment were as follows:



(In thousands)	February 28, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	119,308	123,964
Restricted cash	10,380		17,053
Receivables, net (1)	141,941		409,528
Loans held-for-sale (2)	682,029		939,405
Loans held-for-investment, net	32,180		30,004
Investments held-to-maturity	48,104		41,991
Investments available-for-sale (3)	55,841		53,570
Goodwill (4)	59,838		39,838
Other (5)	82,087		99,319
	$	1,231,708	1,754,672
Liabilities:
Notes and other debts payable	$	560,275	1,077,228
Other (6)	228,064		241,055
	$	788,339	1,318,283


(1)	Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of February 28, 2017 and November 30, 2016, 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 (loss).


(4)	As of February 28, 2017, goodwill included $20.0 million of goodwill related to the WCI acquisition. The amount provided herein is provisional, pending completion of the fair value analysis of WCI's acquired assets and liabilities assumed. See Note 2.


(5)	As of February 28, 2017 and November 30, 2016, other assets included mortgage loan commitments carried at fair value of $13.7 million and $7.4 million, respectively, and mortgage servicing rights carried at fair value of $26.5 million and $23.9 million, respectively. In addition, other assets also included forward contracts carried at fair value of $26.5 million as of November 30, 2016.

(6)

As of February 28, 2017 and November 30, 2016, other liabilities included $57.5 million and $57.4 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 $1.7 million as of February 28, 2017.The assets and liabilities related to the Rialto segment were as follows:



(In thousands)	February 28, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	162,513	148,827
Restricted cash (1)	5,630		9,935
Receivables, net (2)	209,025		204,518
Loans held-for-sale (3)	44,939		126,947
Loans receivable, net	106,476		111,608
Real estate owned, net	208,793		243,703
Investments in unconsolidated entities	235,066		245,741
Investments held-to-maturity	112,216		71,260
Other	144,216		113,671
	$	1,228,874	1,276,210
Liabilities:
Notes and other debts payable (4)	$	626,042	622,335
Other	54,078		85,645
	$	680,120	707,980


(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 related to loans sold but not settled as of February 28, 2017 and November 30, 2016.


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

(4)

As of February 28, 2017 and November 30, 2016, notes and other debts payable primarily included $348.9 million and $348.7 million, respectively, related to Rialto's 7.00% senior notes due 2018, and $197.1 million and 223.5 million, respectively, related to Rialto's warehouse repurchase facilities.

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



(In thousands)	February 28, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	6,423	6,600
Receivables (1)	64,388		58,929
Land under development	161,317		139,713
Investments in unconsolidated entities	346,767		318,559
Other assets	31,266		2,330
	$	610,161	526,131
Liabilities:
Accounts payable and other liabilities	$	105,560	117,973

(1)

Receivables primarily related to general contractor services and management fee income receivables due from unconsolidated entities as of February 28, 2017 and November 30, 2016, respectively.

Schedule of Line of Credit Facilities

At February 28, 2017, the Lennar Financial Services segment warehouse facilities were as follows:



(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures June 2017	$	400,000
364-day warehouse repurchase facility that matures September 2017	300,000
364-day warehouse repurchase facility that matures December 2017 (1)	400,000
Total	$	1,100,000

(1)

Maximum aggregate commitment includes an uncommitted amount of $250 million.At February 28, 2017, Rialto warehouse facilities were as follows:



(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures April 2017 (1)	$	500,000
Warehouse repurchase facility that matures December 2017	200,000
364-day warehouse repurchase facility that matures January 2018	250,000
Total - Loan origination and securitization business (RMF)	$	950,000
Warehouse repurchase facility that matures August 2018 (two - one year extensions) (2)	100,000
Total	$	1,050,000


(1)	Rialto has the option of a six month extension of the warehouse repurchase facility.

(2)

Rialto uses this warehouse repurchase facility to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans receivable, net. Borrowings under this facility were $43.3 million as of both February 28, 2017 and November 30, 2016.

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)	February 28, 2017			November 30, 2016
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	72,162		48,945
Non-recourse land seller debt and other debt (1)	3,995			323,995
Non-recourse debt with completion guarantees	298,319			147,100
Non-recourse debt without completion guarantees	325,115			320,372
Non-recourse debt to the Company	699,591			840,412
The Company’s maximum recourse exposure (2)	77,119			52,438
Debt issuance costs	(6,123		)	(4,186	)
Total debt	$	770,587		888,664
The Company’s maximum recourse exposure as a % of total JV debt	10		%	6	%


(1)	Non-recourse land seller debt and other debt as of November 30, 2016 included a $320 million non-recourse note related to a transaction between one of the Company's unconsolidated entities and another unconsolidated joint venture, which was settled in December 2016.

(2)

As of February 28, 2017, the Company's maximum recourse exposure was primarily related to the Company providing repayment guarantees on three unconsolidated entities' debt.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,			February 29,
(In thousands)	2017			2016
Revenues	$	46,136		99,726
Costs and expenses	79,066			97,200
Net earnings (loss) of unconsolidated entities	$	(32,930	)	2,526
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities	$	(11,534	)	3,000

Balance Sheets



(In thousands)	February 28, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	436,872	221,334
Inventories	3,977,388		3,889,795
Other assets	982,702		1,334,116
	$	5,396,962	5,445,245
Liabilities and equity:
Accounts payable and other liabilities	$	711,107	791,245
Debt (1)	770,587		888,664
Equity	3,915,268		3,765,336
	$	5,396,962	5,445,245

(1)

Debt presented above is net of debt issuance costs of $6.1 million and $4.2 million, as of February 28, 2017 and November 30, 2016, respectively. 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)	February 28, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	150,154	230,229
Loans receivable	418,802		406,812
Real estate owned	393,601		439,191
Investment securities	1,405,256		1,379,155
Investments in partnerships	430,844		398,535
Other assets	47,090		29,036
	$	2,845,747	2,882,958
Liabilities and equity:
Accounts payable and other liabilities	$	51,959	36,131
Notes payable (1)	557,712		532,264
Equity	2,236,076		2,314,563
	$	2,845,747	2,882,958

(1)

Notes payable presented above are net of debt issuance costs of $2.9 million, as of both February 28, 2017 and November 30, 2016. The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and other investments:



								February 28, 2017		February 28, 2017		November 30, 2016
(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	$	49,445	58,116
Rialto Real Estate Fund II, LP	2012	1,305,000		1,305,000		100,000		100,000		90,837		96,192
Rialto Mezzanine Partners Fund, LP	2013	300,000		300,000		33,799		33,799		22,655		23,643
Rialto Capital CMBS Funds	2014	119,174		119,174		52,474		52,474		50,222		50,519
Rialto Real Estate Fund III	2015	1,625,605		182,909		100,000		9,805		11,559		9,093
Rialto Credit Partnership, LP	2016	220,000		88,730		19,999		8,066		8,243		5,794
Other investments										2,105		2,384
										$	235,066	245,741

Statements of Operations



	Three Months Ended
	February 28,		February 29,
(In thousands)	2017		2016
Revenues	$	57,156	44,296
Costs and expenses	28,001		20,899
Other income (expense), net (1)	327		(15,162	)
Net earnings of unconsolidated entities	$	29,482	8,235
Rialto equity in earnings from unconsolidated entities	$	722	1,497

(1)

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

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)	February 28, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	57,975	43,658
Operating properties and equipment	2,415,610		2,210,627
Other assets	30,808		33,703
	$	2,504,393	2,287,988
Liabilities and equity:
Accounts payable and other liabilities	$	206,376	196,617
Notes payable (1)	649,034		577,085
Equity	1,648,983		1,514,286
	$	2,504,393	2,287,988


(1)	Notes payable presented above are net of debt issuance costs of $16.5 million and $12.3 million, as of February 28, 2017 and November 30, 2016, respectively.

Statements of Operations



	Three Months Ended
	February 28,		February 29,
(In thousands)	2017		2016
Revenues	$	11,617	8,314
Costs and expenses	22,346		11,672
Other income, net	50,539		40,122
Net earnings of unconsolidated entities	$	39,810	36,764
Lennar Multifamily equity in earnings from unconsolidated entities (1)	$	23,147	19,686

(1)

For the three months ended February 28, 2017, Lennar Multifamily equity in earnings from unconsolidated entities included the segment's $26.0 million share of gains as a result of the sale of two operating properties by its unconsolidated entities. For the three months ended February 29, 2016, Lennar Multifamily equity in earnings from unconsolidated entities included the segment's $20.4 million share of gain as a result of a sale of an operating property by one of its unconsolidated entities.The Company’s recorded investments in unconsolidated entities were as follows:



(In thousands)	February 28, 2017		November 30, 2016
Lennar Homebuilding	$	910,084	811,723
Rialto	$	235,066	245,741
Lennar Multifamily	$	346,767	318,559