Lennar Multifamily Segment (Tables)

6 Months Ended

May 31, 2017

Segment Reporting [Abstract]

Schedule of Assets and Liabilities

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

(In thousands)	May 31, 2017		November 30, 2016
Assets:
Homebuilding East (1)	$	4,764,611	3,512,990
Homebuilding Central	2,032,627		1,993,403
Homebuilding West	4,684,956		4,318,924
Homebuilding Other	903,137		907,523
Rialto	1,364,421		1,276,210
Lennar Financial Services	1,444,294		1,754,672
Lennar Multifamily	653,229		526,131
Corporate and unallocated	907,230		1,071,928
Total assets	$	16,754,505	15,361,781
Lennar Homebuilding goodwill (2)	$	136,633	—
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 $136.6 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					Six Months Ended
	May 31,					May 31,
(In thousands)	2017			2016		2017		2016
Revenues:
Homebuilding East	$	1,194,890		954,298		1,962,616		1,613,352
Homebuilding Central	682,342			608,987		1,198,523		1,022,827
Homebuilding West	770,194			718,059		1,322,992		1,269,398
Homebuilding Other	238,315			169,541		420,304		331,789
Lennar Financial Services	208,363			175,940		356,406		299,896
Rialto	67,988			44,838		149,994		88,549
Lennar Multifamily	99,800			74,152		188,485		113,668
Total revenues (1)	$	3,261,892		2,745,815		5,599,320		4,739,479
Operating earnings (loss):
Homebuilding East (2)	$	153,707		142,938		97,998		227,644
Homebuilding Central	75,944			68,762		128,802		101,957
Homebuilding West	71,224			113,807		124,584		202,641
Homebuilding Other	31,705			17,189		52,534		31,092
Lennar Financial Services	43,727			44,088		64,391		59,019
Rialto	(6,462		)	(18,086	)	(7,305	)	(16,476	)
Lennar Multifamily	6,529			14,943		25,712		27,125
Total operating earnings	376,374			383,641		486,716		633,002
Corporate general and administrative expenses	66,774			55,802		127,473		103,470
Earnings before income taxes	$	309,600		327,839		359,243		529,532

(1) Total revenues were net of sales incentives of $174.5 million ($22,700 per home delivered) and $298.1 million ($22,700 per home delivered) for the three and six months ended May 31, 2017, respectively, compared to $146.1 million ($21,800 per home delivered) and $249.8 million ($21,700 per home delivered) for the three and six months ended May 31, 2016, respectively.

(2)

Homebuilding East operating earnings for the six months ended May 31, 2017 included a $140 million loss due to litigation (see Note 17).The assets and liabilities related to the Lennar Financial Services segment were as follows:

(In thousands)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	107,436	123,964
Restricted cash	13,311		17,053
Receivables, net (1)	213,550		409,528
Loans held-for-sale (2)	820,443		939,405
Loans held-for-investment, net	32,691		30,004
Investments held-to-maturity	54,824		41,991
Investments available-for-sale (3)	56,005		53,570
Goodwill (4)	59,838		39,838
Other (5)	86,196		99,319
	$	1,444,294	1,754,672
Liabilities:
Notes and other debts payable	$	792,623	1,077,228
Other (6)	245,040		241,055
	$	1,037,663	1,318,283

(1) Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of May 31, 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 May 31, 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 May 31, 2017 and November 30, 2016, other assets included mortgage loan commitments carried at fair value of $18.4 million and $7.4 million, respectively, and mortgage servicing rights carried at fair value of $27.4 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 May 31, 2017 and November 30, 2016, other liabilities included $58.4 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 $6.8 million as of May 31, 2017.The assets and liabilities related to the Rialto segment were as follows:

(In thousands)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	119,592	148,827
Restricted cash (1)	6,026		9,935
Receivables, net (2)	415,285		204,518
Loans held-for-sale (3)	106,615		126,947
Loans receivable, net	65,326		111,608
Real estate owned, net	160,452		243,703
Investments in unconsolidated entities	244,301		245,741
Investments held-to-maturity	112,452		71,260
Other	134,372		113,671
	$	1,364,421	1,276,210
Liabilities:
Notes and other debts payable (4)	$	781,845	622,335
Other	78,767		85,645
	$	860,612	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 May 31, 2017 and November 30, 2016, respectively.

(3) Loans held-for-sale related to unsold loans originated by RMF carried at fair value and loans in the FDIC Portfolios carried at lower of cost or market.

(4)

As of May 31, 2017 and November 30, 2016, notes and other debts payable primarily included $349.0 million and $348.7 million, respectively, related to Rialto's 7.00% senior notes due 2018, and $363.6 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)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	9,288	6,600
Receivables (1)	64,740		58,929
Land under development	171,066		139,713
Investments in unconsolidated entities	377,265		318,559
Other assets	30,870		2,330
	$	653,229	526,131
Liabilities:
Accounts payable and other liabilities	$	123,166	117,973

(1)

Receivables primarily related to general contractor services and management fee income receivables due from unconsolidated entities as of May 31, 2017 and November 30, 2016, respectively.

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)	May 31, 2017			November 30, 2016
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	73,239		48,945
Non-recourse land seller debt and other debt (1)	1,997			323,995
Non-recourse debt with completion guarantees	305,420			147,100
Non-recourse debt without completion guarantees	327,877			320,372
Non-recourse debt to the Company	708,533			840,412
The Company’s maximum recourse exposure (2)	80,468			52,438
Debt issuance costs	(5,662		)	(4,186	)
Total debt	$	783,339		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 May 31, 2017 and November 30, 2016, the Company's maximum recourse exposure was primarily related to the Company providing repayment guarantees on three unconsolidated entities' debt and one unconsolidated entity's debt, respectively.Balance Sheets

(In thousands)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	393,507	221,334
Inventories	3,979,975		3,889,795
Other assets	961,126		1,334,116
	$	5,334,608	5,445,245
Liabilities and equity:
Accounts payable and other liabilities	$	651,791	791,245
Debt (1)	783,339		888,664
Equity	3,899,478		3,765,336
	$	5,334,608	5,445,245

(1)

Debt presented above is net of debt issuance costs of $5.7 million and $4.2 million, as of May 31, 2017 and November 30, 2016, respectively. 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					Six Months Ended
	May 31,					May 31,
(In thousands)	2017			2016		2017		2016
Revenues	$	132,587		208,636		178,723		308,362
Costs and expenses	190,845			201,370		269,911		298,570
Other income	6,117			—		6,117		—
Net earnings (loss) of unconsolidated entities	$	(52,141	)	7,266		(85,071	)	9,792
Lennar Homebuilding equity in loss from unconsolidated entities	$	(21,506	)	(9,633	)	(33,040	)	(6,633	)

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

								May 31, 2017		May 31, 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	$	48,519	58,116
Rialto Real Estate Fund II, LP	2012	1,305,000		1,305,000		100,000		100,000		84,862		96,192
Rialto Mezzanine Partners Fund, LP	2013	300,000		300,000		33,799		33,799		21,188		23,643
Rialto Capital CMBS Funds	2014	119,174		119,174		52,474		52,474		50,948		50,519
Rialto Real Estate Fund III	2015	1,887,000		362,242		140,000		25,318		25,520		9,093
Rialto Credit Partnership, LP	2016	220,000		121,225		19,999		11,020		11,182		5,794
Other investments										2,082		2,384
										$	244,301	245,741

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)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	77,047	230,229
Loans receivable	434,771		406,812
Real estate owned	360,337		439,191
Investment securities	1,543,517		1,379,155
Investments in partnerships	415,316		398,535
Other assets	190,885		29,036
	$	3,021,873	2,882,958
Liabilities and equity:
Accounts payable and other liabilities	$	44,989	36,131
Notes payable (1)	617,587		532,264
Equity	2,359,297		2,314,563
	$	3,021,873	2,882,958

(1)

Notes payable are net of debt issuance costs of $4.1 million and $2.9 million, as of May 31, 2017 and November 30, 2016, respectively. Statements of Operations

	Three Months Ended			Six Months Ended
	May 31,			May 31,
(In thousands)	2017		2016	2017	2016
Revenues	$	61,030	51,240	118,186	95,536
Costs and expenses	29,000		20,704	57,001	41,603
Other income, net (1)	9,321		26,710	9,648	11,548
Net earnings of unconsolidated entities	$	41,351	57,246	70,833	65,481
Rialto equity in earnings from unconsolidated entities	$	5,730	6,864	6,452	8,361

(1)

Other income, 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)	May 31, 2017		November 30, 2016
Assets:
Cash and cash equivalents	$	44,765	43,658
Operating properties and equipment	2,658,080		2,210,627
Other assets	38,160		33,703
	$	2,741,005	2,287,988
Liabilities and equity:
Accounts payable and other liabilities	$	223,061	196,617
Notes payable (1)	727,070		577,085
Equity	1,790,874		1,514,286
	$	2,741,005	2,287,988

(1) Notes payable are net of debt issuance costs of $17.1 million and $12.3 million, as of May 31, 2017 and November 30, 2016, respectively.

Statements of Operations

	Three Months Ended			Six Months Ended
	May 31,			May 31,
(In thousands)	2017		2016	2017	2016
Revenues	$	13,975	9,649	25,592	17,963
Costs and expenses	24,477		14,058	46,823	25,730
Other income, net	28,190		30,272	78,729	70,394
Net earnings of unconsolidated entities	$	17,688	25,863	57,498	62,627
Lennar Multifamily equity in earnings from unconsolidated entities (1)	$	9,427	14,008	32,574	33,694

(1)

During three and six months ended May 31, 2017, the Lennar Multifamily segment sold one and three operating properties, respectively, through its unconsolidated entities resulting in the segment's $11.4 million and $37.4 million share of gains, respectively. During the three and six months ended May 31, 2016, the Lennar Multifamily segment sold one and two operating properties, respectively, through its unconsolidated entities resulting in the segment's $15.4 million and $35.8 million share of gains, respectively.The Company’s recorded investments in unconsolidated entities were as follows:

(In thousands)	May 31, 2017		November 30, 2016
Lennar Homebuilding	$	995,400	811,723
Rialto	$	244,301	245,741
Lennar Multifamily	$	377,265	318,559