10-K 1 len-20171130x10k.htm 10-K Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2017
Commission file number 1-11749
 
lennarlogo.jpg
Lennar Corporation
(Exact name of registrant as specified in its charter)
Delaware
 
95-4337490
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
700 Northwest 107th Avenue, Miami, Florida 33172
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (305) 559-4000
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Class A Common Stock, par value 10¢
 
New York Stock Exchange
Class B Common Stock, par value 10¢
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý NO ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ý NO ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
 
 
 
Emerging growth company ¨
 
(Do not check if a smaller reporting company)            
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  YES ¨ NO ý
The aggregate market value of the registrant’s Class A and Class B common stock held by non-affiliates of the registrant (198,632,273 shares of Class A common stock and 9,739,513 shares of Class B common stock) as of May 31, 2017, based on the closing sale price per share as reported by the New York Stock Exchange on such date, was $10,595,353,196.
As of December 31, 2017, the registrant had outstanding 203,952,285 shares of Class A common stock and 36,007,774 shares of Class B common stock.
 
DOCUMENTS INCORPORATED BY REFERENCE:
Related Section
Documents
III
Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before March 30, 2018.




LENNAR CORPORATION
 
 
 
 
 
 
 
FORM 10-K
 
 
For the fiscal year ended November 30, 2017
 
 
 
 
 
 
 
Part I
 
 
 
 
Item 1.
 
 
Item 1A.
 
 
Item 1B.
 
 
Item 2.
 
 
Item 3.
 
 
Item 4.
 
 
 
 
 
 
 
Part II
 
 
 
 
Item 5.
 
 
Item 6.
 
 
Item 7.
 
 
Item 7A.
 
 
Item 8.
 
 
Item 9.
 
 
Item 9A.
 
 
Item 9B.
 
 
 
 
 
 
 
Part III
 
 
 
 
Item 10.
 
 
Item 11.
 
 
Item 12.
 
 
Item 13.
 
 
Item 14.
 
 
 
 
 
 
 
Part IV
 
 
 
 
Item 15.
 
 
Item 16.
 
 
 
 
 
 
 
Signatures
 
 
 
 
 
 
Financial Statement Schedule
 




PART I

Item 1.
Business
Overview of Lennar Corporation
We are one of the nation’s largest homebuilders, a provider of real estate related financial services, a commercial real estate, investment management and finance company through our Rialto segment and a developer of multifamily rental properties in select U.S. markets primarily through unconsolidated entities.
Our homebuilding operations are the most substantial part of our business, comprising $11.2 billion in revenues, or approximately 89% of consolidated revenues, in fiscal 2017. On October 29, 2017, we entered into an agreement (the "Merger Agreement") pursuant to which CalAtlantic Group, Inc. (“CalAtlantic”), another of the nation’s largest homebuilders, will be merged with and into a subsidiary of Lennar (the "Merger"). That transaction, which is subject to approval by both our stockholders and CalAtlantic’s stockholders, will make us the largest homebuilder in the United States based on revenues.
As of November 30, 2017, our reportable homebuilding segments and Homebuilding Other had divisions located in:
East: Florida(1), Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia
Central: Arizona, Colorado and Texas
West: California and Nevada
Other: Illinois, Minnesota, Oregon, Tennessee and Washington
(1) Florida includes information related to WCI Communities, Inc. ("WCI") from the date of acquisition (February 10, 2017) to November 30, 2017.
Our other reportable segments are Lennar Financial Services, Rialto and Lennar Multifamily. For financial information about our Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily operations, review Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is Item 7 of this Report, and our consolidated financial statements and the notes to our consolidated financial statements, which are included in Item 8 of this Report.
A Brief History of Our Company
We are a national homebuilder that operates in various states with deliveries of 29,394 new homes in 2017. Our company was founded as a local Miami homebuilder in 1954. We completed our initial public offering in 1971 and listed our common stock on the New York Stock Exchange in 1972. During the 1980s and 1990s, we entered and expanded operations in a number of homebuilding markets, including California, Florida and Texas, through both organic growth and acquisitions, such as Pacific Greystone Corporation in 1997. In 1997, we completed the spin-off of our then commercial real estate business, LNR Property Corporation. In 2000, we acquired U.S. Home Corporation, which expanded our operations into New Jersey, Maryland, Virginia, Minnesota and Colorado and strengthened our position in other states. From 2002 through 2005, we acquired several regional homebuilders, which brought us into new markets and strengthened our position in several existing markets. Through the most recent economic downturn, we strengthened and expanded our competitive position through strategic purchases of land at favorable prices. From 2010 through 2013, we expanded our homebuilding operations into the Georgia, Oregon, Washington and Tennessee markets. In 2017, we acquired WCI for $642.6 million in cash. WCI is a homebuilder of luxury single and multifamily homes, including a small percentage of luxury high-rise tower units, with operations in Florida. WCI's homes, tower units and communities are primarily targeted to move-up, active adult and second-home buyers.
We are currently focused on maintaining moderate growth in community count and homes sales, reducing selling, general and administrative expenses by using innovative strategies to reduce customer acquisition costs, as well as on our soft-pivot land strategy, shortening the average time between when we acquire land and when we expect to begin building homes on it.
In addition to focusing on growing our core operating platforms, Lennar Homebuilding and Lennar Financial Services, we have also been focusing on maximizing the value of our other businesses, including Rialto, Lennar Multifamily and Five Point Holdings, LLC ("FivePoint") (included as one of our Lennar Homebuilding unconsolidated entities), which is developing three very large multi-use planned developments in California.
CalAtlantic Merger
On October 29, 2017, we entered into an agreement pursuant to which CalAtlantic will be merged with and into a subsidiary of ours. CalAtlantic builds homes across the homebuilding spectrum, from entry level to luxury, in over 43 metropolitan statistical areas spanning 19 states. Although CalAtlantic also provides mortgage, title and escrow services, for the years ended December 31, 2016, 2015 and 2014, homebuilding revenue (consisting of home and land sales revenues) accounted for over 98% of CalAtlantic’s consolidated total revenue. We will issue an estimated 83.8 million shares of Class A common stock and 1.7 million shares of Class B common stock, and will make cash payments to CalAtlantic stockholders totaling $1.16

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billion, as a result of the transaction. The transaction is subject to approval by our stockholders and by CalAtlantic’s stockholders at meetings scheduled to be held on February 12, 2018. As of and for the year ended December 31, 2017, CalAtlantic had:
•
14,602 home deliveries at an average sales price of $450,000
•
Net new orders of 15,205 at an average sales price of $459,000
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565 average active selling communities
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Backlog of 6,420 homes and backlog dollar value of $3.2 billion
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67,961 homesites owned and controlled as of September 30, 2017
Homebuilding Operations
Overview
Our homebuilding operations 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 unconsolidated entities in which we have investments. New home deliveries, including deliveries from unconsolidated entities, were 29,394 in fiscal 2017, compared to 26,563 in fiscal 2016 and 24,292 in fiscal 2015. We primarily sell single-family attached and detached homes in communities targeted to first-time homebuyers, move-up homebuyers, active adult homebuyers and luxury homebuyers (with the acquisition of WCI). The average sales price of a Lennar home varies depending on product and geographic location. For fiscal 2017, the average sales price, excluding deliveries from unconsolidated entities, was $376,000, compared to $361,000 in fiscal 2016 and $344,000 in fiscal 2015.
We operate primarily under the Lennar brand name. Our homebuilding mission is focused on the profitable development of residential communities. Key elements of our strategy include:
•
Strong Operating Margins - We believe our operating leverage combined with our attractive land purchases position us for strong operating margins.
•
Everything’s Included® Approach - We are focused on distinguishing our products, including through our Everything’s Included® approach, which maximizes our purchasing power and enables us to include luxury features as standard items in our homes.
•
Innovative Homebuilding - We are constantly innovating the homes we build to create products that better meet our customers' needs and desires. Our Next Gen® home, or a home within a home, provides a unique new home solution for multi-generational households as homebuyers often need to accommodate children and parents to share the cost of their mortgage and other living expenses. In fiscal 2017, we delivered 1,475 Next Gen® homes representing an increase of 21% from the prior year and 5% of total home deliveries, excluding unconsolidated entities. The average sales price of the Next Gen® homes delivered in fiscal 2017 was $508,000, which is 35% above the average sales price of total home deliveries, excluding unconsolidated entities.
•
Flexible Operating Structure - Our local operating structure gives us the flexibility to make operating decisions based on local homebuilding conditions and customer preferences, while our centralized management structure provides oversight for our homebuilding operations.
•
Digital Marketing - We are increasingly advertising homes through digital channels, which is significantly increasing the efficiency of our marketing efforts.
Diversified Program of Property Acquisition
We generally acquire land for development and for the construction of homes that we sell to homebuyers. Land purchases are subject to specified underwriting criteria and are made through our diversified program of property acquisition, which may consist of:
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Acquiring land directly from individual land owners/developers or homebuilders;
•
Acquiring local or regional homebuilders that own, or have options to purchase, land in strategic markets;
•
Acquiring land through option contracts, which generally enables us to control portions of properties owned by third parties (including land funds) and unconsolidated entities in which we have investments until we have determined whether to exercise the options;
•
Acquiring parcels of land through joint ventures or partnerships, which among other benefits, limits the amount of our capital invested in land while increasing our access to potential future homesites and allowing us to participate in strategic ventures;
•
Acquiring land in conjunction with Lennar Multifamily; and
•
Acquiring assets from banks and opportunity funds, often through relationships established by our Rialto segment.

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At November 30, 2017, we owned 141,126 homesites and had access through option contracts to an additional 37,527 homesites, of which 32,082 homesites were through option contracts with third parties and 5,445 homesites were through option contracts with unconsolidated entities in which we have investments. At November 30, 2016, we owned 125,879 homesites and had access through option contracts to an additional 33,166 homesites, of which 26,650 homesites were through option contracts with third parties and 6,516 homesites were through option contracts with unconsolidated entities in which we have investments.
Construction and Development
Through our own efforts and those of unconsolidated entities in which Lennar Homebuilding has investments, we are involved in all phases of planning and building in our residential communities, including land acquisition, site planning, preparation and improvement of land and design, construction and marketing of homes. We use independent subcontractors for most aspects of home construction. At November 30, 2017, we were actively building and marketing homes in 765 communities, including four communities being constructed by unconsolidated entities.
We generally supervise and control the development of land and the design and building of our residential communities with a relatively small labor force. We hire subcontractors for site improvements and virtually all of the work involved in the construction of homes. Arrangements with our subcontractors generally provide that our subcontractors will complete specified work in accordance with price schedules and in compliance with applicable building codes and laws. The price schedules may be subject to change to meet changes in labor and material costs or for other reasons. We believe that the sources and availability of raw materials to our subcontractors are adequate for our current and planned levels of operation. We generally do not own heavy construction equipment. We finance construction and land development activities primarily with cash generated from operations and debt issuances.
For additional information about our investments in and relationships with unconsolidated entities, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.
Marketing
We offer a diversified line of homes for first-time, move-up, active adult, luxury and multi-generational homebuyers in a variety of locations ranging from urban infill communities to suburban golf course communities. Our Everything’s Included® marketing program simplifies the home buying experience by including the most desirable features as standard items. This marketing program enables us to differentiate our homes from those of our competitors by creating value through standard features and competitive pricing, while reducing construction and overhead costs through a simplified construction process, product standardization and volume purchasing. In addition, our advances in including solar powered technology and home automation in certain of the homes we sell, enhance our brand and improve our ability to generate traffic and sales.
We sell our homes primarily from models that we have designed and constructed. We employ new home consultants who are paid salaries, commissions or both to conduct on-site sales of our homes. We also sell homes through independent realtors.
Most recently our marketing strategy has shifted to increase advertising through digital channels including paid search, display advertising, social media and e-mail marketing, all of which drive traffic to our website, www.lennar.com. This has allowed us to attract more qualified and knowledgeable homebuyers and has helped us reduce our selling, general and administrative expenses as a percentage of home sales revenues. However, we also continue to advertise through more traditional media, including newspapers, radio advertisements and other local and regional publications and on billboards where appropriate. We tailor our marketing strategy and message based on the community being advertised and the customers being targeted, such as advertising our active adult communities in areas where prospective active adult homebuyers live or will potentially want to purchase.
Quality Service
We continually strive to improve homeowner customer satisfaction throughout the pre-sale, sale, construction, closing and post-closing periods. We strive to create a quality home buying experience for our customers through the participation of sales associates, on-site construction supervisors and customer care associates, all working in a team effort, which we believe leads to enhanced customer retention and referrals. The quality of our homes is substantially affected by the efforts of on-site management and others engaged in the construction process, by the materials we use in particular homes and by other similar factors.
We warrant our new homes against defective materials and workmanship for a minimum period of one year after the date of closing. Although we subcontract virtually all segments of construction to others and our contracts call for the subcontractors to repair or replace any deficient items related to their trades, we are primarily responsible to the homebuyers for the correction of any deficiencies.

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Local Operating Structure and Centralized Management
We balance a local operating structure with centralized corporate level management. Our local operating structure consists of homebuilding divisions across the country, which are generally managed by a division president, a controller and personnel focused on land entitlement, acquisition and development, sales, construction, customer service and purchasing. This local operating structure gives our division presidents and their teams, who generally have significant experience in the homebuilding industry, and in most instances, in their particular markets, the flexibility to make local operating decisions, including land identification, entitlement and development, the management of inventory levels for our current sales volume, community development, home design, construction and marketing of our homes. We centralize at the corporate level decisions related to our overall strategy, acquisitions of land and businesses, risk management, financing, cash management and information systems.
Backlog
Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by deposits. In some instances, purchasers are permitted to cancel sales contracts if they fail to qualify for financing or under certain other circumstances. We experienced a cancellation rate of 15% in 2017, compared to 16% and 16% in 2016 and 2015, respectively. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.
The backlog dollar value including unconsolidated entities at November 30, 2017 was $3.6 billion, compared to $2.9 billion at November 30, 2016 and $2.5 billion at November 30, 2015. We expect that substantially all homes currently in backlog will be delivered in fiscal year 2018.
Lennar Homebuilding Investments in Unconsolidated Entities
We create and participate in joint ventures that acquire and develop land for our homebuilding operations, for sale to third parties or for use in their own homebuilding operations. Through these joint ventures, we reduce the amount we invest in potential future homesites, thereby mitigating certain risks associated with land acquisitions, and, in some instances, we obtain access to land to which we could not otherwise have obtained access or could not have obtained access on as favorable terms. As of both November 30, 2017 and 2016, we had 38 Lennar Homebuilding unconsolidated joint ventures in which we were participating, and our maximum recourse debt exposure related to Lennar Homebuilding unconsolidated joint ventures was $69.2 million and $52.4 million, respectively.
Homebuilding Ancillary Businesses
We have ancillary business activities that are related to our homebuilding business, but are not components of our core homebuilding operations.
FivePoint - In May 2016, we, through our wholly-owned subsidiaries, contributed, or obtained the right to contribute, our investments in three strategic joint ventures which own the Newhall Ranch, Great Park Neighborhoods, and the San Francisco Shipyard and Candlestick Point (the "Shipyard Venture") master planned mixed-use developments in California previously managed by FivePoint Communities, in exchange for an investment in FivePoint, which is currently included within our Lennar Homebuilding unconsolidated entities. A portion of the assets in the Shipyard Venture was retained by us and our Shipyard Venture partner. In May 2017, FivePoint completed its initial public offering ("IPO"). Concurrent with the IPO, we invested an additional $100 million in FivePoint in a private placement. As of November 30, 2017, we owned approximately 40% of FivePoint and the carrying amount of our investment was $359.2 million.
Sunstreet - Our solar business is focused on providing homeowners through solar purchases or lease programs, high-efficiency solar power systems that generate much of a home's annual expected energy needs. In fiscal 2017, Sunstreet expanded its operations into South Carolina and reentered the Nevada market. In addition to these states, Sunstreet also operates in California, Colorado, Delaware, Florida, Maryland, Oregon,Texas and Washington. During the year ended November 30, 2017, we monetized $200 million of future lease payments related to solar systems.
Lennar Financial Services Operations
Mortgage Financing
We offer conforming conventional, FHA-insured and VA-guaranteed residential mortgage loan products and other home mortgage products to buyers of our homes and others through our financial services subsidiary, Eagle Home Mortgage, LLC, from locations in most of the states in which we have homebuilding operations, as well as some other states. In 2017, our financial services subsidiaries provided loans to 80% of our homebuyers who obtained mortgage financing in areas where we offered services. Because of the availability of mortgage loans from our financial services subsidiaries, as well as from independent mortgage lenders, we believe almost all credit worthy potential purchasers of our homes have access to financing.

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During 2017, we originated approximately 31,600 residential mortgage loans totaling $9.0 billion, compared to 33,500 residential mortgage loans totaling $9.3 billion during 2016. Substantially all of the residential mortgage loans we originate are sold 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, we retain potential liability for possible claims by purchasers that we breached certain limited industry-standard representations and warranties in the loan sale agreements. Several claims of this type have been asserted against us. We do not believe that the ultimate resolution of these claims will have a material adverse effect on our business or financial position.
We finance our mortgage loan activities with borrowings under our financial services warehouse facilities or from our operating funds. At November 30, 2017, Lennar Financial Services had four warehouse facilities maturing at various dates through fiscal 2018 with a total maximum aggregate commitment of $1.5 billion including an uncommitted amount of $325 million. We expect the facilities to be renewed or replaced with other facilities when they mature. We have a corporate risk management policy under which we hedge our interest rate risk on rate-locked loan commitments and loans held-for-sale to mitigate exposure to interest rate fluctuations.
Title and Other Insurance and Closing Services
We provide title insurance and closing services to our homebuyers and others. During 2017, we provided title and closing services for approximately 110,000 real estate transactions, and issued approximately 314,800 title insurance policies through our underwriter subsidiary, North American Title Insurance Company, compared to approximately 116,000 real estate transactions and 298,900 title insurance policies during 2016. Title and closing services by agency subsidiaries are provided in 35 states. Title insurance services are provided in 40 states.
We also provide our homebuyers and others with personal lines, property and casualty insurance products through our insurance agency subsidiary, North American Advantage Insurance Services, LLC, which operates in the same states as our homebuilding divisions, as well as other states. During 2017 and 2016, we issued, as agent, approximately 12,800 and 13,500 new homeowner policies, respectively, and renewed approximately 26,500 and 27,700 homeowner policies, respectively.
Rialto Operations
The Rialto segment is a commercial real estate, investment management, and finance company. Rialto’s primary focus is to manage third-party capital and to originate commercial mortgage loans which it sells into securitizations. It also has invested its own capital in mortgage loans, properties and real estate related securities.
Rialto is the sponsor of, and an investor in, the private equity vehicles listed in the table below, that invest in real estate related assets and make other real estate related investments:
Private Equity Vehicle
Inception Year
Commitment
Rialto Real Estate Fund, LP
2010
$700 million (including $75 million by Lennar)
Rialto Real Estate Fund II, LP
2012
$1.3 billion (including $100 million by Lennar)
Rialto Mezzanine Partners Fund, LP
2013
$300 million (including $34 million by Lennar)
Rialto Capital CMBS Funds
2014
$119 million (including $52 million by Lennar)
Rialto Real Estate Fund III
2015
$1.9 billion (including $140 million by Lennar)
Rialto Credit Partnership, LP
2016
$220 million (including $20 million by Lennar)
Rialto owns general partner interests in each of the funds, which entitles it to receive additional revenue through carried interests if the funds exceed certain performance thresholds ("carried interests"). Rialto is also entitled to receive advance distributions in order to cover income tax obligations resulting from allocations of taxable income to hypothetical carried interests in the funds ("advance distributions"). Carried interest and advance distributions are collectively referred to as incentive income. During the years ended November 30, 2017, 2016 and 2015, Rialto received $44.2 million, $10.1 million and $20.0 million, respectively, in incentive income.
For Funds I, II and III, in order to protect investors in the Funds, we agreed that while the Funds were seeking investments (which no longer is the case with regard to Fund I and Fund II) we would not make investments on our behalf that would be suitable for the applicable Fund, unless an Advisory Committee of the Fund decides that the Fund should not make those particular investments, with an exception enabling us to purchase properties for use in connection with our homebuilding operations.
Rialto Mortgage Finance ("RMF") originates and sells into securitizations five, seven and ten year commercial first mortgage loans, which are secured by income producing properties. RMF also originates floating rate loans secured by commercial real estate properties, many of which are undergoing transition, including properties undergoing lease-up, sell-out and renovation or repositioning. In order to finance RMF lending activities, as of November 30, 2017, RMF had secured five

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warehouse repurchase financing agreements maturing between December 2017 and November 2018 with commitments totaling $1.2 billion, which includes $100 million for floating rate loans. Subsequent to November 30, 2017, the warehouse repurchase financing agreements maturing in December 2017 and January 2018 had their maturity dates extended to December 2019 and December 2018, respectively.
Lennar Multifamily Operations
We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. Our Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.
During the year ended November 30, 2017, our Lennar Multifamily segment continued to grow as a leading developer of apartment communities across the country with interests in 53 communities with development costs of approximately $5.1 billion, of which 13 communities were completed and operating, 12 communities were partially completed and leasing, 22 communities were under construction and the remaining communities were either owned or under contract. As of November 30, 2017, our Lennar Multifamily segment had a pipeline of future projects totaling $4.0 billion in assets across a number of states that will be developed primarily by unconsolidated entities.
Our Lennar Multifamily segment had equity investments in 27 and 28 unconsolidated entities (including the Lennar Multifamily Venture, described below) as of November 30, 2017 and 2016, respectively. During the year ended November 30, 2017, unconsolidated entities in which our Lennar Multifamily segment was a participant sold seven operating properties resulting in gains allocable to the Lennar Multifamily segment of $96.7 million, which are included in Lennar Multifamily equity in earnings from unconsolidated entities. During the years ended November 30, 2016 and 2015, our Lennar Multifamily segment sold seven and two operating properties, respectively, through its unconsolidated entities, resulting in the segment's $91.0 million and $22.2 million share of gains, respectively, included within Lennar Multifamily equity in earnings from unconsolidated entities.
The Lennar Multifamily Venture (the "Venture") is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets with $2.2 billion in equity commitments, including a $504 million co-investment commitment by us comprised of cash, undeveloped land and preacquisition costs. As of November 30, 2017, $1.5 billion of the $2.2 billion in equity commitments had been called, of which we have contributed $350.7 million representing our pro-rata portion of the called equity, resulting in a remaining equity commitment for us of $153.3 million.
For additional information about our investments in and relationships with unconsolidated entities, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.
Seasonality
We historically have experienced, and expect to continue to experience, variability in quarterly results. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second fiscal quarter and increased deliveries in the second half of our fiscal year. However, periods of economic downturn in the industry can alter seasonal patterns.
Competition
The residential homebuilding industry is highly competitive. We compete for homebuyers in each of the market regions where we operate with numerous national, regional and local homebuilders, as well as with resales of existing homes and with the rental housing market. We compete for homebuyers on the basis of a number of interrelated factors including location, price, reputation, amenities, design, quality and financing. In addition to competition for homebuyers, we also compete with other homebuilders for desirable properties, raw materials and access to reliable, skilled labor. We compete for land buyers with third parties in our efforts to sell land to homebuilders and others. We believe we are competitive in the market regions where we operate primarily due to our:
•
Everything’s Included® marketing program, which simplifies the home buying experience by including most desirable features as standard items;
•
Innovative home designs, such as our Next Gen® homes that provide both privacy and togetherness for multi-generational families;
•
Financial position, where we continue to focus on inventory management and liquidity;
•
Access to land, particularly in land-constrained markets;
•
Access to distressed assets, primarily through relationships established by our Rialto segment;
•
Pricing to current market conditions through sales incentives offered to homebuyers;

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•
Cost efficiencies realized through our national purchasing programs and production of value-engineered homes; and
•
Quality construction and home warranty programs, which are supported by a responsive customer care team.
Our financial services operations compete with other mortgage lenders, including national, regional and local mortgage bankers and brokers, banks, savings and loan associations and other financial institutions, in the origination and sale of residential mortgage loans. Principal competitive factors include interest rates and other features of mortgage loan products available to the consumer. We compete with other title insurance agencies and underwriters for closing services and title insurance. Principal competitive factors include service and price.
The business of Rialto, and the funds it manages, of purchasing real estate related assets is highly competitive and fragmented. A number of entities and funds have been formed in recent years for the purpose of acquiring real estate related assets and it is likely that additional entities and funds will be formed for this purpose during the next several years. We compete in the marketplace for assets based on many factors, including purchase price, representations, warranties and indemnities, timeliness of purchase decisions and reputation. In marketing of real estate investment funds we sponsor, we compete with a large variety of asset managers, including banks and other financial institutions and real estate investment firms. Rialto’s RMF business competes with other commercial mortgage lenders in a competitive market and its profitability depends on its ability to originate commercial real estate loans and sell them into securitizations at attractive prices.
Some of Rialto's competitors are substantially larger and have a lower cost of funds and greater financial, technical, marketing and other resources than Rialto and have access to funding sources that may not be available to Rialto. In addition, some of Rialto's competitors may have higher risk tolerances or make different risk assessments, than Rialto does, which could allow them to consider a wider variety of investments and establish more relationships than Rialto.
We believe that the major factors distinguishing Rialto from many of its competitors is that Rialto's team is made up of experienced managers who engage in working out and /or adding value to real estate assets and have been doing that for several years. RMF's business is conducted by highly seasoned managers who have been originating and securitizing loans for over 26 years with long-standing relationships and can leverage Rialto’s/Lennar’s infrastructure facilities for a rapid market entrance as well as Rialto’s current underwriting platform. Additionally, because Rialto is a lender or capital provider to developers, we believe having our homebuilding team participating in the underwriting process provides us with a distinct advantage in our evaluation of real estate assets. We believe that our experienced team and the infrastructure already in place give the Rialto segment an advantage and position the segment well when compared to a number of its competitors.
Our multifamily operations compete with other multifamily apartment developers and operators, including REITs, across the United States. In addition, our multifamily operations compete in securing capital, partners and equity, and in securing tenants within the large supply of already existing rental apartments. Principal competitive factors include location, rental price and quality, and management of the apartment buildings.
Regulation
The residential communities and multifamily apartment developments that we build are subject to a large variety of local, state and federal statutes, ordinances, rules and regulations relating to, among other things, zoning, construction permits or entitlements, construction materials, density, building design and property elevation, building codes and handling of waste. These include laws requiring the use of construction materials that reduce the need for energy-consuming heating and cooling systems. These laws and regulations are subject to frequent change and often increase construction costs. In some instances, we must comply with laws that require commitments from us to provide roads and other offsite infrastructure, and may require them to be in place prior to the commencement of new construction. These laws and regulations are usually administered by counties and municipalities and may result in fees and assessments or building moratoriums. In addition, certain new development projects are subject to assessments for schools, parks, streets and highways and other public improvements, the costs of which can be substantial. Also, some states are attempting to make homebuilders responsible for violations of wage and other labor laws by their subcontractors.
Residential homebuilding and apartment development are also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. These environmental laws include such areas as storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. Environmental laws and existing conditions may result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas. For example, a 2015 decision of the California Supreme Court significantly delayed the start, and increased the cost of a California master planned mixed-use development in which we have an indirect investment.
In recent years, several cities and counties in which we have developments have submitted to voters "slow growth" initiatives and other ballot measures that could impact the affordability and availability of land suitable for residential

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development within those localities. Although many of these initiatives have been defeated, we believe that if similar initiatives were approved, residential construction by us and others within certain cities or counties could be seriously impacted.
In order to make it possible for some of our homebuyers to obtain FHA-insured or VA-guaranteed mortgages, we must construct the homes they buy in compliance with regulations promulgated by those agencies. Various states have statutory disclosure requirements relating to the marketing and sale of new homes. These disclosure requirements vary widely from state-to-state. In addition, some states require that each new home be registered with the state at or before the time title is transferred to a buyer (e.g., the Texas Residential Construction Commission Act). In some states, we are required to be registered as a licensed contractor and comply with applicable rules and regulations. In various states, our new home consultants are required to be registered as licensed real estate agents and to adhere to the laws governing the practices of real estate agents.
Our mortgage and title subsidiaries must comply with applicable real estate, lending and insurance laws and regulations. The subsidiaries are licensed in the states in which they do business and must comply with laws and regulations in those states. These laws and regulations include provisions regarding capitalization, operating procedures, investments, lending and privacy disclosures, forms of policies and premiums. The Dodd-Frank Wall Street Reform and Consumer Protection Act contains a number of requirements relating to mortgage lending and securitizations. These include, among others, minimum standards for lender practices, limitations on certain fees and a requirement that the originator of loans that are securitized retain a portion of the risk, either directly or by holding interests in the securitizations.
Several federal, state and local laws, rules, regulations and ordinances, including, but not limited to, the Federal Fair Debt Collection Practices Act ("FDCPA") and the Federal Trade Commission Act and comparable state statutes, regulate consumer debt collection activity. Although, for a variety of reasons, we may not be specifically subject to the FDCPA or to some state statutes that govern debt collectors, it is our policy to comply with applicable laws in our collection activities. To the extent that some or all of these laws apply to our collection activities, our failure to comply with such laws could have a material adverse effect on us. We are also subject to regulations promulgated by the Federal Consumer Financial Protection Bureau regarding residential mortgage loans.
Since Rialto manages real estate asset investments, mezzanine loan and commercial mortgage-backed securities ("CMBS") funds and two entities partly owned by the FDIC, one of Rialto's entities is registered as an investment adviser under the Investment Advisers Act of 1940. This Act has requirements related to dealings between investment advisers and the entities they advise and imposes record keeping and disclosure obligations on investment advisers. Our RMF subsidiary must comply with laws and regulations applicable to commercial mortgage lending. Rialto or its subsidiaries must be licensed in states in which they make loans and must comply with laws and regulations in those states.
Associates
At November 30, 2017, we employed 9,111 individuals of whom 4,900 were involved in the Lennar Homebuilding operations, 3,414 were involved in the Lennar Financial Services operations, 335 were involved in the Rialto operations and 462 were involved in the Lennar Multifamily operations, compared to November 30, 2016, when we employed 8,335 individuals of whom 4,351 were involved in the Lennar Homebuilding operations, 3,224 were involved in the Lennar Financial Services operations, 365 were involved in the Rialto operations and 395 were involved in the Lennar Multifamily operations. We do not have collective bargaining agreements relating to any of our associates. However, we subcontract many phases of our homebuilding operations and some of the subcontractors we use have employees who are represented by labor unions.
NYSE Certification
On April 24, 2017, we submitted our Annual CEO Certification to the New York Stock Exchange ("NYSE") in accordance with NYSE's listing standards. The certification was not qualified in any respect.

Item 1A.
Risk Factors.
The following are what we believe to be the principal risks that could materially affect us and our businesses.
Market and Economic Risks
The homebuilding recovery has continued its progression; however, a downturn or decline in economic conditions could adversely affect our operations.
In fiscal 2017, we continued to experience a steadily improving housing market, and we saw increases in new sales contracts signed and homes delivered compared with the prior year. However, demand for new homes is sensitive to changes in economic conditions such as the level of employment, consumer confidence, consumer income, the availability of financing and interest rate levels. The prior economic downturn severely affected both the numbers of homes we could sell and the prices for which we could sell them. We cannot predict whether the recovery in the housing market will continue. If the recovery were

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to slow or stop, or there were another economic downturn, the resulting decline in demand for new homes would negatively impact our business, results of operations and financial condition.
During the prior economic downturn, we had to take significant write-downs on the carrying values of land we owned and of option values. A future decline in land values could result in similar write-downs.
Inventory risks are substantial for our homebuilding business. There are risks inherent in controlling, owning and developing land and if housing demand declines, we may own land or homesites we acquired at costs we will not be able to recover fully, or on which we cannot build and sell homes profitably. This is particularly true when entitled land becomes increasingly scarce, as it has recently, and the cost of purchasing such land may be relatively high. Also, there can be significant fluctuations in the value of our owned undeveloped land, building lots and housing inventories related to changes in market conditions. As a result, our deposits for building lots controlled under option or similar contracts may be put at risk, we may have to sell homes or land for lower than anticipated profit margins or we may have to record inventory impairment charges with regard to our developed and undeveloped land and lots. When demand for homes fell during the most recent recession, we were required to take significant write-downs of the carrying value of our land inventory and we elected not to exercise many options to purchase land, even though that required us to forfeit deposits and write-off pre-acquisition costs. Although we have reduced our exposure to costs of that type, a certain amount of exposure is inherent in our homebuilding business. If market conditions were to deteriorate significantly in the future, we could again be required to make significant write downs with regard to our land inventory, which would decrease the asset values reflected on our balance sheet and adversely affect our earnings and our stockholders' equity.
Inflation may adversely affect us by increasing costs beyond what we can recover through price increases.
Inflation can adversely affect us by increasing costs of land, materials and labor. In addition, significant inflation is often accompanied by higher interest rates, which have a negative impact on demand for our homes. In an inflationary environment, depending on homebuilding industry and other economic conditions, we may be unable to raise home prices enough to keep up with the rate of inflation, which would reduce our profit margins. Although the rate of inflation has been low for the last several years, we currently are experiencing increases in the prices of labor and materials above the general inflation rate.
Homebuilding, mortgage lending, real estate asset investing and multifamily rentals are very competitive industries, and competitive conditions could adversely affect our business or financial results.
Homebuilding. The homebuilding industry is highly competitive. Homebuilders compete not only for homebuyers, but also for desirable land, financing, raw materials, skilled management and labor resources. We compete in each of our markets with numerous national, regional and local homebuilders. We also compete with sellers of existing homes, including foreclosed homes, and with rental housing. These competitive conditions can reduce the number of homes we deliver, negatively impact our selling prices, reduce our profit margins, and cause impairments in the value of our inventory or other assets. Competition can also affect our ability to acquire suitable land, raw materials and skilled labor at acceptable prices or other terms.
Lennar Financial Services. Our Lennar Financial Services business competes with other mortgage lenders, including national, regional and local banks and other financial institutions. Mortgage lenders who have greater access to low cost funds, superior technologies or different lending criteria than we do may be able to offer more attractive financing to potential customers than we can.
Rialto. There are many firms and investment funds that compete with Rialto in trying to acquire mortgage portfolios and other real estate related assets. At least some of the firms with which Rialto competes, or will compete, for investment opportunities have a cost of funds or targeted investment returns that are lower than those of Rialto or the funds it manages, and therefore those firms may be able to pay more for investment opportunities than would be prudent for Rialto or the funds it manages. Our RMF business competes with national and regional banks as well as smaller community banks within the various markets in which it operates and with non-bank lenders, many of which are far larger than RMF or have access to lower cost funds than does RMF.
Lennar Multifamily. Our multifamily rental business competes with other multifamily apartment developers and operators at locations across the U.S. where we have investments in rental properties. We also compete in securing partners, equity capital and debt financing, and we compete for tenants with the large supply of already existing or newly built rental apartments, as well as with sellers of homes. These competitive conditions could negatively impact the ability of the ventures in which we are participating to find renters for the apartments they are building or the prices for which those apartments can be rented.
Operational Risks
We may be subject to significant potential liabilities as a result of warranty and liability claims made against us.

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As a homebuilder, we are subject in the ordinary course of our business to warranty and construction defect claims. We are also subject to claims for injuries that occur in the course of construction activities. We record warranty and other reserves for the homes we sell based on historical experience in our markets and our judgment of the qualitative risks associated with the types of homes we build. We have, and many of our subcontractors have, general liability, property, workers compensation and other business insurance. These insurance policies are intended to protect us against risk of loss from claims, subject to self-insured retentions, deductibles and coverage limits. However, it is possible that this insurance will not be adequate to address all warranty, construction defect and liability claims to which we are subject. Additionally, the coverage offered and the availability of general liability insurance for construction defects are currently limited and policies that can be obtained are costly and often include exclusions based upon past losses those insurers suffered as a result of use of defective products in homes we and many other homebuilders built. As a result, an increasing number of our subcontractors are unable to obtain insurance, and we have in many cases had to waive our customary insurance requirements, which increases our and our insurers’ exposure to claims and increases the possibility that our insurance will not be adequate to protect us against all the costs we incur.
Products supplied to us and work done by subcontractors can expose us to risks that could adversely affect our business.
We rely on subcontractors to perform the actual construction of our homes, and in many cases, to select and obtain building materials. Despite our detailed specifications and quality control procedures, in some cases, subcontractors may use improper construction processes or defective materials. Defective products widely used by the homebuilding industry can result in the need to perform extensive repairs to large numbers of homes. The cost of complying with our warranty obligations may be significant if we are unable to recover the cost of repairs from subcontractors, materials suppliers and insurers.
We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with applicable laws, including laws involving things that are not within our control. When we learn about possibly improper practices by subcontractors, we try to cause the subcontractors to discontinue them. However, we may not always be able to do that, and even when we can, it may not avoid claims against us relating to what the subcontractors already did.
Supply shortages and risks related to the demand for skilled labor and building materials could increase costs and delay deliveries.
Increased costs or shortages of skilled labor and/or lumber, framing, concrete, steel and other building materials could cause increases in construction costs and construction delays. During 2017, we experienced increases in the prices of some building materials and shortages of skilled labor in some areas. We generally are unable to pass on increases in construction costs to customers who have already entered into purchase contracts, as those contracts generally fix the price of the homes at the time the contracts are signed, which may be well in advance of the construction of the homes. Sustained increases in construction costs may, over time, erode our margins, particularly if pricing competition or weak demand restricts our ability to pass additional costs of materials and labor on to homebuyers.
Reduced numbers of home sales extend the time it takes us to recover land purchase and property development costs.
We incur many costs even before we begin to build homes in a community. Depending on the stage of development a land parcel is in when we acquire it, these may include costs of preparing land, finishing and entitling lots, installing roads, sewers, water systems and other utilities, taxes and other costs related to ownership of the land on which we plan to build homes. If the rate at which we sell and deliver homes slows, or if we delay the opening of new home communities, we may incur additional pre-construction costs and it may take longer for us to recover our costs.
Increased demand for homes could require us to increase our corporate credit line, and our inability to do that could limit our ability to take full advantage of market opportunities.
Our business requires that we be able to finance the development of our residential communities. One of the ways we do this is with bank borrowings. At November 30, 2017, we had a $2.0 billion revolving credit facility with a group of banks (the "Credit Facility"), which includes a $403 million accordion feature, subject in part to additional commitments. If market conditions strengthen to the point that we need additional funding but we are not able to increase our Credit Facility or obtain funds from other types of financings, that could prevent us from taking full advantage of the enhanced market opportunities.
Failure to comply with the covenants and conditions imposed by our credit facilities could restrict future borrowing or cause our debt to become immediately due and payable.
The agreement governing our Credit Facility (the "Credit Agreement") makes it a default if we fail to pay principal or interest when it is due (subject in some instances to grace periods) or to comply with various covenants, including covenants regarding financial ratios. In addition, our Lennar Financial Services segment has warehouse facilities to finance its lending activities and our Rialto segment has warehouse facilities to finance its mortgage origination activities. If we default under the Credit Agreement or our warehouse facilities, the lenders will have the right to terminate their commitments to lend and to require immediate repayment of all outstanding borrowings. This could reduce our available funds at a time when we are

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having difficulty generating all the funds we need from our operations, in capital markets or otherwise, and restrict our ability to obtain financing in the future. Further, Rialto's 7.00% senior notes due 2018 (the "7.00% Senior Notes") contain restrictive covenants imposing operational and financial restrictions on our Rialto segment, including restrictions that may limit Rialto’s ability to sell assets, pay dividends or make other distributions, enter into transactions with affiliates or incur additional indebtedness. In addition, if we default under the Credit Agreement or our warehouse facilities, it could cause the amounts outstanding under our senior notes to become immediately due and payable, which would have a material adverse impact on our consolidated financial condition.
We have a substantial level of indebtedness, which may have an adverse effect on our business or limit our ability to take advantage of business, strategic or financing opportunities.
As of November 30, 2017, our consolidated debt, net of debt issuance costs, and excluding amounts outstanding under our credit facilities, was $6.9 billion. The indentures governing our senior notes do not restrict our incurrence of future secured or unsecured debt, and the agreement governing our Credit Facility allows us to incur a substantial amount of future unsecured debt. Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal, interest or other amounts due on our indebtedness. Further, the expected acquisition of CalAtlantic will make us responsible for CalAtlantic debt, which was $3.8 billion as of September 30, 2017. Our reliance on debt to help support our operations exposes us to a number of risks, including:
•
we may be more vulnerable to general adverse economic and homebuilding industry conditions;
•
we may have to pay higher interest rates upon refinancing indebtedness if interest rates rise, thereby reducing our earnings and cash flows;
•
we may find it difficult, or may be unable to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements that would be in our best long-term interests;
•
we may be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our debt, reducing the cash flow available to fund operations and investments;
•
we may have reduced flexibility in planning for, or reacting to, changes in our businesses or the industries in which they are conducted;
•
we may have a competitive disadvantage relative to other companies in our industry that are less leveraged; and
•
we may be required to sell debt or equity securities or sell some of our core assets, possibly on unfavorable terms, in order to meet payment obligations.
Our inability to obtain performance bonds could adversely affect our results of operations and cash flows.
We often are required to provide surety bonds to secure our performance or obligations under construction contracts, development agreements and other arrangements. At November 30, 2017, we had outstanding surety bonds of $1.3 billion including performance surety bonds related to site improvements at various projects (including certain projects of our joint ventures) and financial surety bonds. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all development and construction activities are completed. Our ability to obtain surety bonds primarily depends upon our credit rating, financial condition, past performance and similar factors, the capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue performance bonds for construction and development activities. If we are unable to obtain surety bonds when required, our results of operations and cash flows could be adversely affected.
Our Lennar Financial Services segment and RMF have warehouse facilities that mature between 2018 and 2019, and if we cannot renew or replace these facilities, we may have to reduce our mortgage lending and origination activities.
Our Lennar Financial Services segment has committed and uncommitted amounts under four warehouse repurchase credit facilities that totaled $1.5 billion as of November 30, 2017, all of which will mature between December 2017 and December 2018. Subsequent to November 30, 2017, the warehouse repurchase credit facility due December 2017 was extended to December 2018. Our Lennar Financial Services segment uses these facilities to finance its mortgage lending activities until the mortgage loans it originates are sold to investors. In addition, RMF, the commercial mortgage lender in our Rialto segment, has committed amounts under five warehouse repurchase credit facilities that totaled $1.2 billion as of November 30, 2017, all of which will mature between December 2017 and November 2018. Subsequent to November 30, 2017, the warehouse credit facilities due December 2017 and January 2018 were extended to December 2019 and December 2018, respectively. RMF uses these facilities primarily to finance its mortgage origination activities. We expect these facilities to be renewed or replaced with other facilities when they mature. If we were unable to renew or replace these facilities on favorable terms or at all when they mature, that could seriously impede the activities of our Lennar Financial Services segment and RMF, as applicable, which would have a material adverse impact on our financial results.

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We conduct some of our operations through joint ventures with independent third parties and we can be adversely impacted by our joint venture partners' failures to fulfill their obligations or decisions to act contrary to our wishes.
In our Homebuilding and Lennar Multifamily segments, we participate in joint ventures in order to help us acquire attractive land positions, to manage our risk profile and to leverage our capital base. In certain circumstances, joint venture participants, including us, are required to provide guarantees of obligations relating to the joint ventures, such as completion and environmental guarantees. If a joint venture partner does not perform its obligations, we may be required to bear more than our proportional share of the cost of fulfilling them. For example, in connection with our Lennar Multifamily business, and its joint ventures, we and the other venture participants have guaranteed certain obligations to complete construction of multifamily residential buildings at agreed upon costs, which could make us and the other venture participants responsible for cost over-runs. Although all the participants in a venture are normally responsible for sharing the costs of fulfilling obligations of that type, if some of the venture participants are unable or unwilling to meet their share of the obligations, we may be held responsible for some or all of the defaulted payments. In addition, because we do not have a controlling interest in most of the joint ventures in which we participate, we may not be able to cause joint ventures to sell assets, return invested capital or take other actions when such actions might be in our best interest.
Several of the joint ventures in which we participate will in the relatively near future be required to repay, refinance, renegotiate or extend their borrowings. If any of those joint ventures are unable to do this, we could be required to provide at least a portion of the funds the joint ventures need to be able to repay the borrowings and to conduct the activities for which they were formed, which could adversely affect our financial position.
The loss of the services of members of our senior management or a significant number of our operating employees could negatively affect our business.
Our success depends to a significant extent upon the performance and active participation of our senior management, many of whom have been with the Company for a significant number of years. If we were to lose members of our senior management, we might not be able to find appropriate replacements on a timely basis and our operations could be negatively affected. Also, the loss of a significant number of operating employees and our inability to hire qualified replacements could have a material adverse effect on our business.
Our access to capital and our ability to obtain additional financing could be affected by any downgrade of our credit ratings.
Our corporate credit rating and ratings of our senior notes affect, among other things, our ability to access new capital, especially debt, and the costs of that new capital. A substantial portion of our access to capital is through the issuance of senior notes, of which we have more than $6.0 billion outstanding, net of debt issuance costs, and excluding Rialto's 7.00% Senior Notes, as of November 30, 2017. Further, the expected acquisition of CalAtlantic will make us responsible for CalAtlantic debt, which was $3.8 billion as of September 30, 2017. Among other things, we rely on proceeds of debt issuances to pay the principal of existing senior notes when they mature. Negative changes in the ratings of our senior notes could make it difficult for us to sell senior notes in the future and could result in more stringent covenants and higher interest rates with regard to new senior notes we issue.
We will have to replace a substantial amount of debt in fiscal year 2018.
We have a substantial amount of debt that matures in fiscal year 2018. We have $250 million of senior notes that mature in June 2018 and we will have to replace or renew a total of $2.6 billion of warehouse lines used by Lennar Financial Services and RMF as they mature. In addition, assuming we complete the acquisition of CalAtlantic, based on balances as of September 30, 2017, CalAtlantic will have to offer to repurchase $258 million of convertible senior notes that otherwise will mature in 2019. CalAtlantic also has $575 million of senior notes and $223 million of convertible senior notes as of September 30, 2017 that mature in May 2018 (although the convertible senior notes are likely to be converted before they mature). Additionally, we will have to replace a $750 million revolving credit facility currently maintained by CalAtlantic. We (including CalAtlantic) might have to raise as much as an additional $1.9 billion by December 2018 to replace the senior notes that will become due on or before that date. In January 2018, we commenced offers to exchange any and all of the outstanding $3.0 billion aggregate principal amount of senior notes of CalAtlantic for up to the same aggregate principal amount of new notes issued by Lennar. This includes the notes due in 2018. The new Lennar notes will have the same maturities as the CalAtlantic notes for which they are exchanged, and therefore will not change the maturities of debt that will have to be repaid.
Natural disasters and severe weather conditions could delay deliveries and increase costs of new homes in affected areas, which could harm our sales and results of operations.
Many of our homebuilding operations are conducted in areas that are subject to natural disasters, including hurricanes, earthquakes, droughts, floods, wildfires and severe weather. The occurrence of natural disasters or severe weather conditions can delay new home deliveries, increase costs by damaging inventories and lead to shortages of labor and materials in areas affected by the disasters, and can negatively impact the demand for new homes in affected areas. If our insurance does not fully

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cover business interruptions or losses resulting from these events, our results of operations could be adversely affected. In the third and fourth quarters of 2017, our homebuilding operation was disrupted due to impacts from Hurricanes Harvey and Irma, which caused delays of 550 home deliveries that were pushed into fiscal 2018.
If our homebuyers are not able to obtain suitable financing, that would reduce demand for our homes and our home sales revenues.
Most purchasers of our homes obtain mortgage loans to finance a substantial portion of the purchase price of the homes they purchase. While the majority of our homebuyers obtain their mortgage financing from Lennar Financial Services, others obtain mortgage financing from banks and other independent lenders. The uncertainties in the mortgage markets and increased government regulation could adversely affect the ability of potential homebuyers to obtain financing for home purchases, thus preventing them from purchasing our homes. Among other things, changes made by Fannie Mae, Freddie Mac and FHA/VA to sponsored mortgage programs, as well as changes made by private mortgage insurance companies, have reduced the ability of many potential homebuyers to qualify for mortgages. Principal among these are higher income requirements, larger required down payments, increased reserves and higher required credit scores. In addition, there has been uncertainty regarding the future of Fannie Mae and Freddie Mac, including proposals that they reduce or terminate their role as the principal sources of liquidity in the secondary market for mortgage loans. It is not clear how, if Fannie Mae and Freddie Mac were to curtail their secondary market mortgage loan purchases, the liquidity they provide would be replaced. There is a substantial possibility that substituting an alternate source of liquidity would increase mortgage interest rates, which would increase the buyers' effective costs of paying for the homes we sell, and therefore could reduce demand for our homes and adversely affect our results of operations.
Our Lennar Financial Services segment can be adversely affected by reduced demand for our homes or by a slowdown in mortgage refinancings.
Approximately 61% of the mortgage loans made by our Lennar Financial Services segment in 2017 were made to buyers of homes we built. Therefore, a decrease in the demand for our homes would adversely affect the revenues of this segment of our business. In addition, the revenues of our Lennar Financial Services segment would be adversely affected by a continued decrease in refinance transactions, if mortgage interest rates continue to rise.
If our ability to sell mortgages into the secondary market is impaired, that could significantly reduce our ability to sell homes unless we are willing to become a long-term investor in loans we originate.
Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. If we became unable to sell loans into the secondary mortgage market or directly to Fannie Mae and Freddie Mac, we would have to either curtail our origination of residential mortgage loans, which among other things, could significantly reduce our ability to sell homes, or commit our own funds to long term investments in mortgage loans, which, in addition to requiring us to deploy substantial amounts of our own funds, could delay the time when we recognize revenues from home sales on our statements of operations.
We may be liable for certain limited representations and warranties we make in connection with sale of loans.
While substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis, we remain responsible for certain limited representations and warranties we make in connection with such sales. Mortgage investors currently are seeking to have us buy back mortgage loans or compensate them for losses incurred on mortgage loans that we have sold based on claims that we breached our limited representations or warranties. In addition, when our Rialto segment sells loans to securitization trusts or other purchasers, it gives limited industry standard representations and warranties about the loans, which, if incorrect, may require it to repurchase the loans, replace them with substitute loans or indemnify persons for losses or expenses incurred as a result of breaches of representations and warranties. If we have significant liabilities with respect to such claims, it could have an adverse effect on our results of operations, and possibly our financial condition.
If real estate Rialto acquires through foreclosures is not properly valued when it is acquired, we could be required to take valuation charge-offs, which would reduce our earnings.
When a loan is foreclosed upon and we take title to the property, we obtain a valuation of the property and base its book value on that valuation. The book value of the foreclosed property is periodically compared to its updated market value (or its updated market value less estimated selling costs if the foreclosed property is classified as held-for-sale), and a charge-off is recorded for any excess of the property's book value over its fair value. If the revised valuation we establish for a property proves to be too high, we may have to record additional charge-offs in subsequent periods. Material charge-offs could have an adverse effect on our results of operations, and possibly even on our financial condition.

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Regulatory Risks
We may be adversely impacted by legal and regulatory changes.
We are subject with regard to almost all of our activities to a variety of federal, state and local laws and regulations. Laws and regulations, and policies under or interpretations of existing laws and regulations, change frequently. Our businesses could be adversely affected by changes in laws, regulations, policies or interpretations or by our inability to comply with them without making significant changes in our businesses.
We may be adversely impacted by laws and regulations directed at the financial industry.
New or modified regulations and related regulatory guidance focused on the financial industry may have adverse effects on aspects of our businesses. For example, in October 2014, final rules were promulgated under the Dodd-Frank Wall Street Reform Act that require mortgage lenders or third-party B-piece buyers to retain a portion of the credit risk related to securitized loans. We have determined that the rules do not affect our residential mortgage lending operations at this time; however, the rules may adversely impact our RMF subsidiary’s commercial mortgage lending operations. The rules have been in effect for over a year; however, their long term impact is still undetermined. If, in the future, the rules cause a decrease the price of CMBS and/or a decrease in the overall volume of CMBS related loan purchases in the industry, this could negatively impact the financial results of our RMF business. In addition, if our residential mortgage lending operations became subject to these rules in the future, that would substantially increase the amount we would have to invest in our mortgage lending operations and increase our risks with regard to loans we originate and sell in the secondary mortgage market.
Governmental regulations regarding land use and environmental matters could increase the cost and limit the availability of our development and homebuilding projects and adversely affect our business or financial results.
We are subject to extensive and complex laws and regulations that affect the land development, homebuilding and apartment development process, including laws and regulations related to zoning, permitted land uses, levels of density, building design, elevation of properties, water and waste disposal and use of open spaces. These regulations often provide broad discretion to the administering governmental authorities as to the conditions we must meet prior to development or construction being approved, if they are approved at all. We are also subject to determinations by governmental authorities as to the adequacy of water or sewage facilities, roads and other local services with regard to particular residential communities. New housing developments may also be subject to various assessments for schools, parks, streets and other public improvements. In addition, in many markets government authorities have implemented no growth or growth control initiatives. Any of these can limit, delay, or increase the costs of land development or home construction.
We are also subject to a variety of local, state and federal laws and regulations concerning protection of the environment. In some of the markets where we operate, we are required by law to pay environmental impact fees, use energy-saving construction materials and give commitments to municipalities to provide infrastructure such as roads and sewage systems. We generally are required to obtain permits, entitlements and approvals from local authorities to commence and carry out residential development or home construction. These permits, entitlements and approvals may, from time-to-time, be opposed or challenged by local governments, environmental advocacy groups, neighboring property owners or other possibly interested parties, adding delays, costs and risks of non-approval to the process. Violations of environmental laws and regulations can result in injunctions, civil penalties, remediation expenses, and other costs. In addition, some environmental laws impose strict liability, which means that we may be held liable for unlawful environmental conditions on property we own which we did not create.
We are also subject to laws and regulations related to workers' health and safety, and there are efforts to subject homebuilders like us to other labor related laws or rules, some of which may make us responsible for things done by our subcontractors over which we have little or no control. In addition, our residential mortgage subsidiary is subject to various state and federal statutes, rules and regulations, including those that relate to lending operations and other areas of mortgage origination and loan servicing. The impact of those statutes, rules and regulations can increase our homebuyers’ costs of financing, and our cost of doing business, as well as restricting our homebuyers’ access to some types of loans.
Our obligation to comply with the laws and regulations under which we operate, and our need to ensure that our associates, subcontractors and other agents comply with these laws and regulations, could result in delays in construction and land development, cause us to incur substantial costs and prohibit or restrict land development and homebuilding activity in certain areas in which we operate. Budget reductions by state and local governmental agencies may increase the time it takes to obtain required approvals and therefore may aggravate the delays we could encounter. Government agencies also routinely initiate audits, reviews or investigations of our business practices to ensure compliance with applicable laws and regulations, which can cause us to incur costs or create other disruptions in our businesses that can be significant.

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We can be injured by improper acts of persons over whom we do not have control.
Although we expect all of our associates (i.e., employees), officers and directors to comply at all times with all applicable laws, rules and regulations, there may be instances in which subcontractors or others through whom we do business engage in practices that do not comply with applicable laws, regulations or governmental guidelines. When we learn of practices that do not comply with applicable laws or regulations, including practices relating to homes, buildings or multifamily rental properties we build or finance, we move actively to stop the non-complying practices as soon as possible and we have taken disciplinary action with regard to associates of ours who were aware of non-complying practices and did not take steps to address them, including in some instances terminating their employment. However, regardless of the steps we take after we learn of practices that do not comply with applicable laws or regulations, we can in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices' having taken place.
We could be hurt by efforts to impose liabilities or obligations on persons with regard to labor law violations by other persons whose employees perform contracted services.
The homes we sell are built by employees of subcontractors and other contract parties. We do not have the ability to control what these contract parties pay their employees or the work rules they impose on their employees. However, various governmental agencies are trying to hold contract parties like us responsible for violations of wage and hour laws and other work related laws by firms whose employees are performing contracted for services. A recent National Labor Relations Board ruling held that for labor law purposes a firm could under some circumstances be responsible as a joint employer of its contractors' employees. That ruling has been withdrawn. If it had not been withdrawn and had been upheld on appeal, it could have made us responsible for collective bargaining obligations of, and labor law violations by our subcontractors. Governmental rulings that make us responsible for labor practices by our subcontractors could create substantial exposures for us in situations that are not within our control.
Our ability to collect upon mortgage loans may be limited by the application of state laws.
Our mortgage loans typically permit us to accelerate the debt upon default by the borrower. The courts of all states will enforce acceleration clauses in the event of a material payment default, subject in some cases to a right of the court to revoke the acceleration and reinstate the mortgage loan if a payment default is cured. The equity courts of a state, however, may refuse to allow the foreclosure of a mortgage or to permit the acceleration of the indebtedness in instances in which they decide that the exercise of those remedies would be inequitable or unjust or the circumstances would render an acceleration unconscionable.
Further, the ability to collect upon mortgage loans may be limited by the application of state and federal laws. For example, Nevada has enacted a law providing that if the amount an assignee of a mortgage note paid to acquire the note is less than the face amount of the note, the assignee cannot recover more through a deficiency action than the amount it paid for the note. If the Nevada law is upheld, or similar laws are enacted in other jurisdictions, it could materially and adversely affect our ability and the ability of funds we manage to profit from purchases of distressed debt.
Other Risks
Our results of operations could be adversely affected if legal claims against us are not resolved in our favor.
In the ordinary course of our business, we are subject to legal claims by homebuyers, borrowers against whom we have instituted foreclosure proceedings, persons with whom we have land purchase contracts and a variety of other persons. We establish reserves against legal claims and we believe that, in general, legal claims will not have a material adverse effect on our business or financial condition. However, if the amounts we are required to pay as a result of claims against us substantially exceed the sums anticipated by our reserves, the need to pay those amounts could have a material adverse effect on our results of operations for the periods when we are required to make the payments. During fiscal 2017, we were required to make a significant payment, and make a significant charge against earnings, as a result of a litigation against us in a contract suit.

15

Information technology failures and data security breaches could harm our business.
We rely extensively on information technology ("IT") systems, including Internet sites, data hosting facilities and other hardware and software platforms, some of which are hosted by third parties, to assist in conducting our businesses. Our IT systems, like those of most companies, may be vulnerable to a variety of interruptions, including, but not limited to, natural disasters, telecommunications failures, hackers, and other security issues. Moreover, our computer systems, like those of most companies, are subjected to computer viruses or other malicious codes, and to cyber or phishing-attacks. Although we have implemented administrative and technical controls and taken other actions to minimize the risk of cyber incidents and protect our information technology, computer intrusion efforts are becoming increasingly sophisticated, and even the enhanced controls we have installed might be breached. If our IT systems cease to function properly, we could suffer interruptions in our operations. If our cyber-security is breached, unauthorized persons may gain access to proprietary or confidential information, including information about purchasers of our homes or borrowers from our mortgage lending subsidiaries. This could damage our reputation, expose us to claims, and require us to incur significant costs to repair or restore the security of our computer systems.
Increases in the rate of cancellations of home sale agreements could have an adverse effect on our business.
Our backlog reflects agreements of sale with our homebuyers for homes that have not yet been delivered. We have received a deposit from our home buyer for each home reflected in our backlog, and generally we have the right to retain the deposit if the homebuyer does not complete the purchase. In some cases, however, a homebuyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local laws, the homebuyer’s inability to obtain mortgage financing, his or her inability to sell his or her current home or our inability to complete and deliver the home within the specified time. If there is a downturn in the housing market, or if mortgage financing becomes even less available than it currently is, more homebuyers may cancel their agreements of sale with us, which would have an adverse effect on our business and results of operations.
Our success depends on our ability to acquire land suitable for residential homebuilding at reasonable prices, in accordance with our land investment criteria.
There is strong competition among homebuilders for land that is suitable for residential development. The future availability of finished and partially finished developed lots and undeveloped land that meet our internal criteria depends on a number of factors outside our control, including land availability in general, competition with other homebuilders and land buyers for desirable property, inflation in land prices, zoning, allowable housing density, and other regulatory requirements. Should suitable lots or land become less available, the number of homes we could build and sell could be reduced, and the cost of land could be increased, perhaps substantially, which could adversely impact our results of operations. Our expected acquisition of CalAtlantic will substantially increase our supply of land that is suitable for residential development, but it will also substantially increase the rate at which we are building homes.
Expansion of our services and investments into international markets through our Rialto segment subjects us to risks inherent in international operations.
Fund II, of which our Rialto segment owns an interest and for which it performs asset management services, owns an interest in a joint venture which holds real estate assets in Spain. Expansion of our services and investments in Spain and any expansion into other international markets in the future, could result in operational problems not typically experienced in the United States. Our activities outside the United States are subject to risks associated with doing business internationally, including fluctuations in currency exchange rates, the implementation of currency controls, material changes in a specific country’s or region’s political or economic conditions, differences in the legal and regulatory systems, reputational risks and cultural differences which may lead to competitive disadvantages, particularly due to our need to comply with U.S. anti-corruption laws. There also are tax consequences of doing business outside the U.S., both under U.S. tax laws and under the tax laws of the countries in which we do business.
We could suffer adverse tax and other financial consequences if we are unable to utilize our net operating loss ("NOL") carryforwards.
At November 30, 2017, we had state tax NOL carryforwards totaling $66.2 million that will expire between 2018 and 2036. At November 30, 2017, we had a valuation allowance of $6.4 million, primarily related to state NOL carryforwards that are not more likely than not to be utilized due to an inability to carry back these losses in most states and short carryforward periods that exist in certain states. If we are unable to use our NOLs, we may have to record charges or reduce our deferred tax assets, which could have an adverse effect on our results of operations.

16

There have been substantial changes to the Internal Revenue Code, some of which could have an adverse effect on our business.
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act, which contains substantial changes to the Internal Revenue Code, effective January 1, 2018, some of which could have an adverse effect on our business. Among the possible changes that could make purchasing homes less attractive are (i) limitations on the ability of our homebuyers to deduct property taxes, (ii) limitations on the ability of our homebuyers to deduct mortgage interest, and (iii) limitations on the ability of our homebuyers to deduct state and local income taxes. Although the rate at which we pay federal income tax will be reduced, this will require us to write down our deferred tax assets by approximately $70 million, which will negatively impact our results of operations in the first quarter of fiscal year 2018. Lastly, the new law eliminates the ability to carry back any future NOLs and only allows for carryforwards, the utilization of which is limited to 80% of taxable income in a given carryforward year. This could affect the timing of our ability to utilize net operating losses in the future.
We experience variability in our operating results on a quarterly basis and, as a result, our historical performance may not be a meaningful indicator of future results.
We historically have experienced, and expect to continue to experience, variability in quarterly results. As a result of such variability, our short-term performance may not be a meaningful indicator of future results. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second fiscal quarter and increased deliveries in the second half of our fiscal year. Our quarterly results of operations may continue to fluctuate in the future as a result of a variety of factors, including, among others, seasonal home buying patterns, the timing of home closings and land sales and weather-related problems.
We have a stockholder who can exercise significant influence over matters that are brought to a vote of our stockholders.
Stuart Miller, our Chief Executive Officer and a Director, has voting control, through personal holdings and holdings by family-owned entities, of Class B, and to a lesser extent Class A, common stock that enables Mr. Miller to cast approximately 39.0% of the votes that can be cast by the holders of all our outstanding Class A and Class B common stock combined. This percentage will be reduced to 33.1% by the issuance of shares in connection with the expected merger with CalAtlantic, but even that reduced percentage probably gives Mr. Miller the power to control the election of our directors and the approval of matters that are presented to our stockholders. Mr. Miller's voting power might discourage someone from seeking to acquire us or from making a significant equity investment in us, even if we needed the investment to meet our obligations or to operate our business. Also, because of his voting power, Mr. Miller could be able to cause our stockholders to approve actions that are contrary to our other stockholders' desires.
The trading price of our Class B common stock normally is lower than that of our Class A common stock.
The only significant difference between our Class A common stock and our Class B common stock is that the Class B common stock entitles the holders to ten votes per share, while the Class A common stock entitles holders to only one vote per share. However, the trading price of the Class B common stock on the New York Stock Exchange ("NYSE") normally is substantially lower than the NYSE trading price of our Class A common stock. We believe this is because only a relatively small number of shares of Class B common stock are available for trading, which reduces the liquidity of the market for our Class B common stock to a point where many investors are reluctant to invest in it. The limited liquidity could make it difficult for a holder of even a relatively small number of shares of our Class B common stock to dispose of the stock without materially reducing the trading price of the Class B common stock.
Changes in global or regional environmental conditions and governmental actions in response to such changes may adversely affect us by increasing the costs of or restricting our planned or future growth activities.
There is growing concern from many members of the scientific community and the general public that an increase in global average temperatures due to emissions of greenhouse gases and other human activities have caused, or will cause, significant changes in weather patterns and increase the frequency and severity of natural disasters. Government mandates, standards or regulations intended to reduce greenhouse gas emissions or projected climate change impacts have resulted, and are likely to continue to result, in restrictions on land development in certain areas and increased energy, transportation and raw material costs, or cause us to incur compliance expenses that we will be unable fully to recover, which could reduce our housing gross profit margins and adversely affect our results of operations.
Risks relating to the Merger of CalAtlantic
Lennar has never done an acquisition as large as the expected merger with CalAtlantic
Although Lennar has acquired a number of homebuilders through the years, and as recently as February 2017 it completed the acquisition of WCI, a New York Stock Exchange listed homebuilder, Lennar has never acquired a homebuilder, or any other type of company, as large as CalAtlantic. It is possible that techniques Lennar has used in the past to integrate

17

operations of acquired companies and to realize cost savings and other operating and administrative benefits with regard to them, will not be as effective with regard to CalAtlantic as they were with regard to smaller companies.
The Merger is subject to closing conditions and may not be completed on a timely basis, or at all. Failure to complete the combination could have a significant adverse effect on us.
Completion of the Merger that will make CalAtlantic a wholly owned subsidiary of ours is subject to a number of conditions, including (i) the approval by our stockholders of the issuance of our Class A and Class B common stock as part of the Merger consideration, and (ii) approval by the CalAtlantic stockholders of a proposal to adopt the Merger Agreement. This makes the timing of completion of the Merger, or whether it will be completed at all, uncertain. Either we or CalAtlantic can terminate the Merger Agreement if the Merger is not consummated by May 31, 2018 (which can be extended under some circumstances to August 31, 2018). In addition, either the CalAtlantic board of directors or our board of directors can withdraw its recommendation that stockholders vote in favor of the Merger if it determines that, because of an intervening event, failure to do so would be inconsistent with its fiduciary obligations, and CalAtlantic can in any event terminate the Merger Agreement in order to accept what its board determines to be a superior proposal that we do not at least match. If our board withdraws or negatively modifies its recommendation, CalAtlantic can terminate the Merger Agreement, in which case we would be required to pay CalAtlantic a termination fee of $178.7 million. In addition, if our stockholders fail to give the required stockholder approval or approvals, we will be required to reimburse CalAtlantic for its costs related to the Merger up to $30 million. Although we would be entitled to a $178.7 million termination fee if CalAtlantic’s Board withdraws or negatively modifies its recommendation or reimbursement of costs up to $30 million if CalAtlantic’s stockholders fail to give the required stockholder approvals, our loss of anticipated benefits deriving from the Merger is likely to be far greater than the termination fee or expense reimbursement we may receive.
If the Merger is not completed by August 31, 2018, we will be required to redeem $1.2 billion of senior notes we sold in November 2017.
In November 2017, we sold a total of $1.2 billion of senior notes to raise funds with which, among other things, to pay the more than $1.16 billion that CalAtlantic stockholders will receive as Merger consideration. If (x) consummation of the CalAtlantic Merger does not occur on or before August 31, 2018, or (y) prior to August 31, 2018 we notify the trustee for the noteholders that we will not pursue consummation of the Merger, we will be required to redeem all the outstanding senior notes for 101% of their principal amount plus accrued and unpaid interest.
We may not realize the expected benefits of the Merger because of integration difficulties and other challenges.
The success of the CalAtlantic Merger will depend in large part on our successfully integrating its and our personnel, operations, strategies, technologies and other components of the two companies’ businesses following the completion of the CalAtlantic merger. We may fail to realize some or all of the anticipated benefits of the Merger if the integration process takes longer than expected or is more costly than expected. In any event, we anticipate that the overall integration of CalAtlantic will be a time consuming and expensive process that, without proper planning and effective and timely implementation, could significantly disrupt our business.
Any delay in completing the Merger may reduce the benefits from the Merger.
The CalAtlantic merger is subject to a number of conditions that may prevent or delay its completion. A delay in completing the Merger would delay the time when we would begin to realize the benefits of the synergies that we expect the Merger to produce.
The Merger will significantly increase the ratio of our homebuilding debt to our total capital net of cash.
We will incur or become subject to a substantial amount of additional debt as a result of the Merger. We have sold $1.2 billion of debt securities primarily to finance the more than $1.16 billion we will pay to CalAtlantic stockholders who exercise (or are deemed to exercise) an option to elect to receive cash instead of our stock as a result of the Merger. In addition, the surviving corporation, which will be our wholly owned subsidiary, will become subject to CalAtlantic’s debt, which at September 30, 2017 totaled $3.8 billion. We estimate that the Merger will increase the ratio of our consolidated homebuilding debt to total capital, net of cash, from its November 30, 2017 level of 34.4% to a pro forma level of 45.5%. We anticipate being able to reduce the ratio to its pre-merger level by the end of fiscal 2019. However, to the extent cash flows of the combined companies are less than anticipated, we may not be able to reduce the ratio of our consolidated homebuilding debt to total capital, net of cash, to its pre-merger level until well after the end of fiscal 2019, if we are ever able to do that.
The Merger will add a substantial amount of goodwill to our balance sheet.
Since the price we will be deemed to have paid for the net assets of CalAtlantic for accounting purposes will depend on the value of our Class A and Class B common stock when the Merger takes place, and neither those stock prices nor the value of the CalAtlantic assets we will acquire in the CalAtlantic Merger will be known until the Merger takes place, we will

18

not know until after the Merger takes place the amount by which for accounting purposes we are deemed to pay will exceed the net value of the assets we receive and the liabilities our subsidiary assumes in the Merger (i.e., the portion of the deemed purchase price that will be treated as goodwill). However, we estimate that if the value of our Class A common stock at the time of the Merger is $62.36 per share and the value of our Class B common stock at the time of the Merger is $49.47 per share, the respective closing prices of those shares on December 18, 2017, the Merger would result in our adding approximately $3.4 billion to the goodwill carried on our balance sheet. If it is determined in the future that the profits generated by the assets acquired in the Merger are not sufficient to justify that goodwill, we will have to write off some or all of it, and to charge the amount written off against our earnings.
The amount of the Merger consideration we agreed to pay was influenced by our assumption that we will be able to achieve significant cost savings as a result of the Merger.
Our willingness to agree to the equity consideration and cash consideration reflected in the Merger Agreement was based in substantial part on an analysis by our management which concluded, among other things, that we would be able to accomplish substantial annual savings in selling, general and administrative costs and in operating costs following the CalAtlantic Merger. Although our management was previously able to achieve its anticipated cost savings with regard to homebuilding activities of WCI, which we acquired in February 2017, CalAtlantic is much larger than WCI or any other company we have ever acquired. If we are not able to accomplish significant cost savings with regard to development of the CalAtlantic properties, and with regard to some of the properties or companies we already own, we may not be able to generate sufficient merger-related profits to justify the cost of the Merger to us.

Item 1B.
Unresolved Staff Comments.
Not applicable.
Executive Officers of Lennar Corporation
The following individuals are our executive officers as of January 24, 2018:
Name
Position
Age
Stuart Miller
Chief Executive Officer
60
Richard Beckwitt
President
58
Jonathan M. Jaffe
Vice President and Chief Operating Officer
58
Bruce Gross
Vice President and Chief Financial Officer
59
Diane J. Bessette
Vice President and Treasurer
57
Mark Sustana
Secretary and General Counsel
56
David M. Collins
Controller
48
Mr. Miller is one of our Directors and has served as our Chief Executive Officer since 1997. Mr. Miller served as our President from 1997 to April 2011. Before 1997, Mr. Miller held various executive positions with us. Mr. Miller also serves on the Board of Directors of Five Point Holdings, LLC.
Mr. Beckwitt served as our Executive Vice President from March 2006 to 2011. Since April 2011, Mr. Beckwitt has served as our President. Mr. Beckwitt also serves on the Board of Directors of Eagle Materials Inc. and Five Point Holdings, LLC, and previously served on the Board of Directors of D.R. Horton, Inc. from 1993 to November 2003. From 1993 to March 2000, he held various executive officer positions at D.R. Horton, including President of the company.
Mr. Jaffe has served as Vice President since 1994 and has served as our Chief Operating Officer since December 2004. Before that time, Mr. Jaffe served as a Regional President in our Homebuilding operations. Additionally, prior to his appointment as Chief Operating Officer, Mr. Jaffe was one of our Directors from 1997 through June 2004. Mr. Jaffe serves on the Board of Directors of Five Point Holdings, LLC.
Mr. Gross has served as Vice President and our Chief Financial Officer since 1997. Before that, Mr. Gross was Senior Vice President, Controller and Treasurer of Pacific Greystone Corporation, which we acquired in 1997.
Ms. Bessette joined us in 1995 and served as our Controller from 1997 to 2008. Since February 2008, she has served as our Treasurer. She was appointed a Vice President in 2000.
Mr. Sustana has served as our Secretary and General Counsel since 2005.
Mr. Collins joined us in 1998 and has served as our Controller since February 2008.
Item 2.
Properties.

19

We lease and maintain our executive offices in an office complex in Miami, Florida. Our homebuilding, financial services, Rialto and multifamily offices are located in the markets where we conduct business, primarily in leased space. We believe that our existing facilities are adequate for our current and planned levels of operation.
Because of the nature of our homebuilding operations, significant amounts of property are held as inventory in the ordinary course of our homebuilding business. We discuss these properties in the discussion of our homebuilding operations in Item 1 of this Report.

Item 3.
Legal Proceedings.
We are party to various claims and lawsuits which arise in the ordinary course of business, but we do not consider the volume of our claims and lawsuits unusual given the number of homes we deliver and the fact that the lawsuits often relate to homes delivered several years before the lawsuits are commenced. Although the specific allegations in the lawsuits differ, they most commonly involve claims that we failed to construct homes in particular communities in accordance with plans and specifications or applicable construction codes and seek reimbursement for sums allegedly needed to remedy the alleged deficiencies, assert contract issues or relate to personal injuries. Lawsuits of these types are common within the homebuilding industry. We are a plaintiff in many cases in which we seek contribution from our subcontractors for home repair costs. The costs incurred by us in construction defect lawsuits may be offset by warranty reserves, our third-party insurers, subcontractor insurers or indemnity contributions from subcontractors. We are also a party to various lawsuits involving purchases and sales of real property. These lawsuits include claims regarding representations and warranties made in connection with the transfer of the property and disputes regarding the obligation to purchase or sell the property. From time-to-time, we also receive notices from environmental agencies or other regulators regarding alleged violations of environmental or other laws. We typically settle these matters before they reach litigation for amounts that are not material to us. In addition, we are a defendant in several lawsuits by persons to which we sold pools of mortgages we originated, alleging breaches of warranties in the sale documents.
Our mortgage subsidiary has been subpoenaed by the United States Department of Justice ("DOJ") regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration loans originated and sold in prior years. We have provided information related to these loans and our processes to the DOJ, and communications are ongoing. The DOJ has to date not asserted any claim for damages or penalties.
We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business or financial position. However, the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property, which may have changed from the time the agreement for purchase or sale was entered into.
Item 4.
Mine Safety Disclosures.
Not applicable.


20

PART II

Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our Class A and Class B common stock are listed on the New York Stock Exchange under the symbols "LEN" and "LEN.B," respectively. The Class A and Class B high and low stock prices have been restated for all periods presented to reflect the effect of the stock dividend discussed below. The following table shows the high and low sales prices for our Class A and Class B common stock for the periods indicated, as reported by the New York Stock Exchange, and cash dividends declared per share:
 
Class A Common  Stock
High/Low Prices
 
Cash Dividends
Per  Class A Share
Fiscal Quarter
2017
 
2016
 
2017
 
2016
First
$48.18 - 41.13
 
$51.61 - 36.52
 
4¢
 
4¢
Second
$52.89 - 48.27
 
$48.14 - 41.66
 
4¢
 
4¢
Third
$54.82 - 49.59
 
$48.77 - 42.39
 
4¢
 
4¢
Fourth
$63.15 - 48.69
 
$46.80 - 39.02
 
4¢
 
4¢
 
Class B Common  Stock
High/Low Prices
 
Cash Dividends
Per  Class B Share
Fiscal Quarter
2017
 
2016
 
2017
 
2016
First
$38.82 - 32.74
 
$41.86 - 29.45
 
4¢
 
4¢
Second
$43.60 - 38.90
 
$38.53 - 33.05
 
4¢
 
4¢
Third
$46.52 - 41.01
 
$39.15 - 34.00
 
4¢
 
4¢
Fourth
$51.90 - 40.59
 
$37.42 - 31.46
 
4¢
 
4¢
As of December 31, 2017, the last reported sale price of our Class A common stock was $63.24 and the last reported sale price of our Class B common stock was $51.68. As of December 31, 2017, there were approximately 668 and 510 holders of record of our Class A and Class B common stock, respectively.
On January 11, 2018, our Board of Directors declared a quarterly cash dividend of $0.04 per share for both our Class A and Class B common stock, which is payable on February 9, 2018, to holders of record at the close of business on January 26, 2018.
On November 27, 2017, we paid a stock dividend of one share of Class B common stock for each 50 shares of Class A common stock or Class B common stock to holders of record at the close of business on November 10, 2017, as declared by our Board of Directors on October 30, 2017. Our Board of Directors evaluates each quarter the decision whether to declare a dividend and the amount of the dividend.
The following table provides information about our repurchases of common stock during the three months ended November 30, 2017:
Period:
Total Number of Shares Purchased (1)
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
 
Maximum Number of Shares that may yet be Purchased under the Plans or Programs (2)
September 1 to September 30, 2017
228

 
$
52.23

 
—

 
6,218,968

October 1 to October 31, 2017
351

 
$
56.01

 
—

 
6,218,968

November 1 to November 30, 2017
183

 
$
54.62

 
—

 
6,218,968

(1)
Represents shares of Class A common stock withheld by us to cover withholding taxes due, at the election of certain holders of nonvested shares, with market value approximating the amount of withholding taxes due.
(2)
In June 2001, our Board of Directors authorized a stock repurchase program under which we were authorized to purchase up to 20 million shares of our outstanding Class A common stock or Class B common stock. This repurchase authorization has no expiration date.
The information required by Item 201(d) of Regulation S-K is provided in Item 12 of this Report.

21

Performance Graph
The following graph compares the five-year cumulative total return of our Class A common stock with the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index. The graph assumes $100 invested on November 30, 2012 in our Class A common stock, the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index, and the reinvestment of all dividends.

chart-cafbe8011838521cbeb.jpg
 
2012
 
2013
 
2014
 
2015
 
2016
 
2017
Lennar Corporation
$
100

 
94

 
125

 
136

 
114

 
168

Dow Jones U.S. Home Construction Index
$
100

 
104

 
124

 
141

 
124

 
222

Dow Jones U.S. Total Market Index
$
100

 
131

 
152

 
155

 
168

 
205



22

Item 6.
Selected Financial Data.
The following table sets forth our selected consolidated financial and operating information as of or for each of the years ended November 30, 2013 through 2017. The information presented below is based upon our historical financial statements.
 
At or for the Years Ended November 30,
(Dollars in thousands, except per share amounts)
2017
 
2016
 
2015
 
2014
 
2013
Results of Operations:
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
Lennar Homebuilding
$
11,200,242

 
9,741,337

 
8,466,945

 
7,025,130

 
5,354,947

Lennar Financial Services
$
770,109

 
687,255

 
620,527

 
454,381

 
427,342

Rialto
$
281,243

 
233,966

 
221,923

 
230,521

 
138,060

Lennar Multifamily
$
394,771

 
287,441

 
164,613

 
69,780

 
14,746

Total revenues
$
12,646,365

 
10,949,999

 
9,474,008

 
7,779,812

 
5,935,095

Operating earnings (loss):
 
 
 
 
 
 
 
 
 
Lennar Homebuilding
$
1,269,039

 
1,344,932

 
1,271,641

 
1,033,721

 
733,075

Lennar Financial Services
$
155,524

 
163,617

 
127,795

 
80,138

 
85,786

Rialto
$
(22,495
)
 
(16,692
)
 
33,595

 
44,079

 
26,128

Lennar Multifamily
$
73,432

 
71,174

 
(7,171
)
 
(10,993
)
 
(16,988
)
Corporate general and administrative expenses
$
285,889

 
232,562

 
216,244

 
177,161

 
146,060

Earnings before income taxes
$
1,189,611

 
1,330,469

 
1,209,616

 
969,784

 
681,941

Net earnings attributable to Lennar (1)
$
810,480

 
911,844

 
802,894

 
638,916

 
479,674

Diluted earnings per share (2)
$
3.38

 
3.86

 
3.39

 
2.75

 
2.10

Cash dividends declared per each - Class A and
Class B common stock
$
0.16

 
0.16

 
0.16

 
0.16

 
0.16

Financial Position:
 
 
 
 
 
 
 
 
 
Total assets
$
18,745,034

 
15,361,781

 
14,419,509

 
12,923,151

 
11,239,885

Debt:
 
 
 
 
 
 
 
 
 
Lennar Homebuilding
$
6,410,003

 
4,575,977

 
5,025,130

 
4,661,266

 
4,165,792

Rialto
$
625,081

 
622,335

 
771,728

 
617,077

 
437,161

Lennar Financial Services
$
937,431

 
1,077,228

 
858,300

 
704,143

 
374,166

Lennar Multifamily
$
—

 
—

 
—

 
—

 
13,858

Stockholders’ equity
$
7,872,317

 
7,026,042

 
5,648,944

 
4,827,020

 
4,168,901

Total equity
$
7,986,132

 
7,211,567

 
5,950,072

 
5,251,302

 
4,627,470

Shares outstanding (000s) (2)
239,964

 
239,133

 
215,804

 
209,697

 
209,070

Stockholders’ equity per share (2)
$
32.81

 
29.38

 
26.18

 
23.02

 
19.94

Lennar Homebuilding Data (including unconsolidated entities):
 
 
 
 
 
 
 
 
 
Number of homes delivered
29,394

 
26,563

 
24,292

 
21,003

 
18,290

New orders
30,348

 
27,372

 
25,106

 
22,029

 
19,043

Backlog of home sales contracts
8,935

 
7,623

 
6,646

 
5,832

 
4,806

Backlog dollar value
$
3,550,366

 
2,891,538

 
2,477,751

 
1,974,328

 
1,619,601

(1)
Net earnings attributable to Lennar for the year ended November 30, 2013 included $177.0 million net tax provision, which included a tax benefit of $67.1 million for a valuation allowance reversal.
(2)
As a result of the stock dividend distributed during 2017, the diluted earnings per share, shares outstanding and stockholders' equity per share for all periods presented were adjusted to reflect 4.7 million additional Class B shares.

23

Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Financial Data" and our audited consolidated financial statements and accompanying notes included elsewhere in this Report.

Special Note Regarding Forward-Looking Statements
This annual report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “estimate,” “expect,” “forecast,” “intend,” “objective,” “plan,” “predict,” “projection,” “seek,” “strategy,” “target,” “will” or other words of similar meaning. Some of them are opinions formed based upon general observations, anecdotal evidence and industry experience, but that are not supported by specific investigation or analysis.
These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements. The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to: our inability to acquire land at anticipated prices; increases in operating costs, including costs related to real estate taxes, construction materials, labor and insurance; unfavorable outcomes in legal proceedings; anything that prevents the CalAtlantic transaction from taking place when expected; our inability to realize the anticipated synergy benefits from the CalAtlantic transaction; our inability to close a one-time transaction expected to take place in the first quarter of 2018; a downturn in the market for residential real estate; changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit; the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods; decreased demand for our Lennar Multifamily rental units or difficulty selling our rental properties; the possibility that the Tax Cuts and Jobs Act will have more negative than positive impact on us; the possibility that the benefit from our increasing use of technology will not justify its cost; increased competition for home sales from other sellers of new and resale homes; negative effects of increasing mortgage interest rates; our inability to reduce our homebuilding debt to our total capital net of cash; a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets; the failure of the participants in various joint ventures to honor their commitments; difficulty obtaining land-use entitlements or construction financing; natural disasters and other unforeseen events for which our insurance does not provide adequate coverage; the inability of Rialto to sell mortgages it originates into securitizations on favorable terms; new laws or regulatory changes that adversely affect the profitability of our businesses; our inability to refinance our debt on terms that are acceptable to us; and changes in accounting conventions that adversely affect our reported earnings.
Please see "Item 1A-Risk Factors" of this Annual Report for a further discussion of these and other risks and uncertainties which could affect our future results. We undertake no obligation to revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events, except to the extent we are legally required to disclose certain matters in SEC filings or otherwise.

Outlook
The housing market has been strong in 2017 and there continues to be a general sense of optimism in the market, with increased job creation across the country and wages have generally been moving higher. We believe lower unemployment, modest wage growth and consumer confidence should increase household formation, which drives families to purchase homes and to rent apartments. We believe that the generally strong, stable and improving economy, together with limited supply and production deficits from past years, have been and will continue to drive demand and pricing power in the upcoming spring selling season, even though that will be offset by land and construction cost increases. The recently passed Tax Cuts and Jobs Act has added additional momentum to the economic landscape. While there have been concerns about the new tax law on housing, initial readings and reviews are suggesting that it is generally stimulative to the economy. In addition, concerns about the reduction of the mortgage interest deduction, deductibility of real estate taxes and state and local taxes seem to be offset by overall optimistic momentum around economic stability and growth. For our typical buyer profile, we have found that the effect of the new tax law is generally positive at their income levels. Additionally, the doubling of the standard deduction should help a new group of aspiring homeowners accumulate savings for a down payment to purchase a home and create personal financial stability.
Fiscal 2017 was another excellent year for Lennar, with revenues increasing 15% from 2016. Our core homebuilding business continued to produce strong operating results as gross margins and operating margins were 22.1% and 12.9%, respectively. Our home deliveries and new orders both increased 11% compared to fiscal 2016. Our efficient Everything’s

24

Included® manufacturing model helped mitigate the impact of a tight labor market and our focus on strategic innovation and higher volume helped to improve our S,G&A leverage. In addition, we ended the year with a strong sales backlog, up 17% in homes and 23% in dollar value, which gives us a strong start for fiscal 2018.
Complementing our homebuilding business, we also had strong performances from our Financial Services and Multifamily rental businesses during fiscal 2017. Our Financial Services segment produced $155.5 million of pretax earnings compared to $163.6 million in 2016. The decrease was due to lower profitability in the segment's mortgage operations as a result of a decrease in refinance transactions, which led to both lower origination volume and profit per loan. This was partially offset by higher profit per transaction in the segment's title operations.
Our Multifamily rental business continued to grow during fiscal 2017, as it sold seven operating properties. With a $9.1 billion geographically diversified pipeline of multifamily product, this segment continues to grow while capitalizing on future development opportunities.
In fiscal 2018, our principal focus will be on the successful integration of the CalAtlantic merger, which is expected to close on February 12, 2018. The transaction is all about creating leadership and scale in the markets that we know best and with the product lines that have defined our companies for decades. With scale, we believe we can drive both synergies and efficiencies as we build best-of-class operating platforms in the most strategic markets in the country. We believe we can use technologies to innovate and improve our operations to drive down costs in our homebuilding operations.
In the first quarter of 2018, we expect to close on a strategic one-time, non-core, non Rialto transaction that shifted from the fourth quarter of 2017. This will result in a profit that will benefit from the lower federal tax rate passed in December 2017.
We expect that our Company’s main driver of earnings will continue to be our homebuilding and financial services operations as we believe we are currently positioned to deliver between 32,000 and 32,500 homes in fiscal 2018, excluding the impact from the CalAtlantic merger. We are also focused on our multiple platforms including Rialto and Multifamily, as such ancillary businesses continue to mature and expand their franchises providing opportunities that we expect will enhance shareholder value. Overall, we believe we are on track to achieve another year of strong profitability in fiscal 2018.


25

Results of Operations
Overview
Our net earnings attributable to Lennar were $810.5 million, or $3.38 per diluted share ($3.38 per basic share) in 2017, $911.8 million, or $3.86 per diluted share ($4.05 per basic share) in 2016, and $802.9 million, or $3.39 per diluted share ($3.78 per basic share) in 2015. All earnings per share amounts have been retroactively adjusted for the Class B stock dividend.
The following table sets forth financial and operational information for the years indicated related to our operations.
 
Years Ended November 30,
(Dollars in thousands)
2017
 
2016
 
2015
Lennar Homebuilding revenues:
 
 
 
 
 
Sales of homes
$
11,035,299

 
9,558,517

 
8,335,904

Sales of land
164,943

 
182,820

 
131,041

Total Lennar Homebuilding revenues
11,200,242

 
9,741,337

 
8,466,945

Lennar Homebuilding costs and expenses:
 
 
 
 
 
Costs of homes sold
8,601,346

 
7,362,853

 
6,332,850

Costs of land sold
135,075

 
138,111

 
100,939

Selling, general and administrative
1,015,848

 
898,917

 
831,050

Total Lennar Homebuilding costs and expenses
9,752,269

 
8,399,881

 
7,264,839

Lennar Homebuilding operating margins
1,447,973

 
1,341,456

 
1,202,106

Lennar Homebuilding equity in earnings (loss) from unconsolidated entities
(61,708
)
 
(49,275
)
 
63,373

Lennar Homebuilding other income, net
22,774

 
52,751

 
6,162

Lennar Homebuilding loss due to litigation
(140,000
)
 
—

 
—

Lennar Homebuilding operating earnings
$
1,269,039

 
1,344,932

 
1,271,641

Lennar Financial Services revenues
$
770,109

 
687,255

 
620,527

Lennar Financial Services costs and expenses
614,585

 
523,638

 
492,732

Lennar Financial Services operating earnings
$
155,524

 
163,617

 
127,795

Rialto revenues
$
281,243

 
233,966

 
221,923

Rialto costs and expenses
247,549

 
229,769

 
222,875

Rialto equity in earnings from unconsolidated entities
25,447

 
18,961

 
22,293

Rialto other income (expense), net
(81,636
)
 
(39,850
)
 
12,254

Rialto operating earnings (loss)
$
(22,495
)
 
(16,692
)
 
33,595

Lennar Multifamily revenues
$
394,771

 
287,441

 
164,613

Lennar Multifamily costs and expenses
407,078

 
301,786

 
191,302

Lennar Multifamily equity in earnings from unconsolidated entities
85,739

 
85,519

 
19,518

Lennar Multifamily operating earnings (loss)
$
73,432

 
71,174

 
(7,171
)
Total operating earnings
$
1,475,500

 
1,563,031

 
1,425,860

Corporate general and administrative expenses
285,889

 
232,562

 
216,244

Earnings before income taxes
$
1,189,611

 
1,330,469

 
1,209,616

Net earnings attributable to Lennar
$
810,480

 
911,844

 
802,894

Gross margin as a % of revenue from home sales
22.1
%
 
23.0
%
 
24.0
%
S,G&A expenses as a % of revenues from home sales
9.2
%
 
9.4
%
 
10.0
%
Operating margin as a % of revenues from home sales
12.9
%
 
13.6
%
 
14.1
%
Average sales price
$
376,000

 
361,000

 
344,000


26

2017 versus 2016
Revenues from home sales increased 15% in the year ended November 30, 2017 to $11.0 billion from $9.6 billion in 2016. Revenues were higher primarily due to an 11% increase in the number of home deliveries, excluding unconsolidated entities, and a 4% increase in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, increased to 29,322 homes in the year ended November 30, 2017 from 26,481 homes last year. There was an increase in home deliveries in all of our Homebuilding segments and Homebuilding Other. The increase in the number of deliveries was primarily driven by an increase in active communities over the last year and by higher demand as the number of deliveries per active community increased. The average sales price of homes delivered, excluding unconsolidated entities, increased to $376,000 in the year ended November 30, 2017 from $361,000 in the year ended November 30, 2016, primarily due to product mix (selling at different price points) and increased pricing in certain of our markets due to favorable market conditions. Sales incentives offered to homebuyers were $22,700 per home delivered in the year ended November 30, 2017, or 5.7% as a percentage of home sales revenue, compared to $22,500 per home delivered in the year ended November 30, 2016, or 5.9% as a percentage of home sales revenue.
Gross margins on home sales were $2.4 billion, or 22.1%, in the year ended November 30, 2017, compared to $2.2 billion, or 23.0%, in the year ended November 30, 2016. Gross margin percentage on home sales decreased compared to the year ended November 30, 2016 primarily due to an increase in construction and land costs per home, partially offset by an increase in the average sales price of homes delivered.
Selling, general and administrative expenses were $1.0 billion in the year ended November 30, 2017, compared to $898.9 million in the year ended November 30, 2016. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 9.2% in the year ended November 30, 2017, from 9.4% in the year ended November 30, 2016 due to improved operating leverage as a result of an increase in home deliveries.
Gross profits on land sales were $29.9 million in the year ended November 30, 2017, compared to $44.7 million in the year ended November 30, 2016.
Lennar Homebuilding equity in loss from unconsolidated entities was $61.7 million in the year ended November 30, 2017, compared to $49.3 million in the year ended November 30, 2016. In the year ended November 30, 2017, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to our share of net operating losses from our unconsolidated entities which were primarily driven by general and administrative expenses and valuation adjustments related to assets of Lennar Homebuilding unconsolidated entities, partially offset by profits from land sales. In the year ended November 30, 2016, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to our share of costs associated with the FivePoint combination as well as our share of net operating losses associated with the new FivePoint unconsolidated entity formed as the result of this combination. This was partially offset by $12.7 million of equity in earnings from one of our unconsolidated entities primarily due to sales of homesites to third parties.
Lennar Homebuilding other income, net, totaled $22.8 million in the year ended November 30, 2017, compared to $52.8 million in the year ended November 30, 2016. In the year ended November 30, 2016, other income, net included management fee income and a profit participation related to Lennar Homebuilding's strategic joint ventures and gains on the sale of several clubhouses.
Lennar Homebuilding loss due to litigation of $140 million in the year ended November 30, 2017, was related to litigation regarding a contract we entered into in 2005 to purchase property in Maryland. As a result of the litigation, we purchased the property for $114 million, which approximated our estimate of fair value for the property. In addition, we paid approximately $124 million in interest and other closing costs and have accrued for the amount we expect to pay as reimbursement for attorney's fees.
Lennar Homebuilding interest expense was $277.8 million in the year ended November 30, 2017 ($260.7 million was included in costs of homes sold, $10.0 million in costs of land sold and $7.2 million in other interest expense), compared to $245.1 million in the year ended November 30, 2016 ($235.1 million was included in costs of homes sold, $5.3 million in costs of land sold and $4.6 million in other interest expense). Interest expense included in costs of homes sold increased primarily due to an increase in home deliveries.
Operating earnings for our Lennar Financial Services segment were $155.5 million in the year ended November 30, 2017, compared to $163.6 million in the year ended November 30, 2016. Operating earnings decreased due to lower profitability in the segment's mortgage operations as a result of a decrease in refinance transactions, which led to both lower origination volume and profit per loan. This was partially offset by higher profit per transaction in the segment's title operations and earnings from the real estate brokerage business which was acquired as part of the WCI acquisition in February 2017.
Operating earnings for our Rialto segment were $23.6 million in the year ended November 30, 2017 (which included $22.5 million of operating loss and an add back of $46.1 million of net loss attributable to noncontrolling interests). Operating earnings in the year ended November 30, 2016 were $2.1 million (which included $16.7 million of operating loss and add back

27

of $18.8 million of net loss attributable to noncontrolling interests). The increase in operating earnings was primarily related to an increase in incentive income related to carried interest distributions from the Rialto real estate funds, as well as an increase in management fee income and equity in earnings from unconsolidated entities. This was partially offset by an increase in REO and loan impairments and general and administrative expenses. In addition, the year ended November 30, 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.
Operating earnings for our Lennar Multifamily segment were $73.4 million in the year ended November 30, 2017, compared to operating earnings of $71.2 million in the year ended November 30, 2016. The increase in profitability was primarily due to the segment's $96.7 million share of gains as a result of the sale of seven operating properties by Lennar Multifamily's unconsolidated entities, compared to the segment's $91.0 million share of gains as a result of the sale of seven operating properties by Lennar Multifamily's unconsolidated entities in the year ended November 30, 2016.
Corporate general and administrative expenses were $285.9 million, or 2.3% as a percentage of total revenues, in the year ended November 30, 2017, compared to $232.6 million, or 2.1% as a percentage of total revenues, in the year ended November 30, 2016. The increase was primarily due to personnel and related expenses and professional expenses related to technology investments.
Net earnings (loss) attributable to noncontrolling interests were ($38.7) million and $1.2 million in the years ended November 30, 2017 and 2016, respectively. Net loss attributable to noncontrolling interests during the year ended November 30, 2017 was primarily attributable to net loss related to the FDIC's interest in the portfolio of real estate loans that we acquired in partnership with the FDIC in 2010. Net earnings attributable to noncontrolling interests during the year ended November 30, 2016 were primarily attributable to earnings related to Lennar Homebuilding consolidated joint ventures, partially offset by a net loss related to the FDIC's interest in the portfolio of real estate loans that we acquired in partnership with the FDIC.
In the years ended November 30, 2017 and 2016, we had a tax provision of $417.9 million and $417.4 million, respectively. Our overall effective income tax rates were 34.02% and 31.40% for the years ended November 30, 2017 and 2016, respectively. The increase is primarily the result of the new energy efficient home credits expiring during the year ended November 30, 2017, which increased our effective tax rate by 1.74%. For the years ended November 30, 2017 and 2016, the impact of this tax credit was (0.73%) and (2.47%), respectively.
In December 2017, the Tax Cuts and Jobs Act was enacted which will have a positive impact on our effective tax rate in 2018 and subsequent years. The tax reform bill will reduce our effective tax rate in 2018 from 34% to approximately 25%. Excluded from our 2018 effective tax rate is a one-time non-cash write-down of our deferred tax assets of approximately $70 million which will be recorded in the first quarter of 2018 as a result of our lower federal tax rate.
2016 versus 2015
Revenues from home sales increased 15% in the year ended November 30, 2016 to $9.6 billion from $8.3 billion in 2015. Revenues were higher primarily due to a 9% increase in the number of home deliveries, excluding unconsolidated entities, and a 5% increase in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, increased to 26,481 homes in the year ended November 30, 2016 from 24,209 homes in 2015. There was an increase in home deliveries in all of our Homebuilding segments and Homebuilding Other. The increase in the number of deliveries was primarily driven by an increase in active communities over 2015 and by higher demand as the number of deliveries per active community increased. The average sales price of homes delivered increased to $361,000 in the year ended November 30, 2016 from $344,000 in the year ended November 30, 2015, primarily due to product mix and increased pricing in certain of our markets due to favorable market conditions. Sales incentives offered to homebuyers were $22,500 per home delivered in the year ended November 30, 2016, or 5.9% as a percentage of home sales revenue, compared to $21,400 per home delivered in the year ended November 30, 2015, or 5.9% as a percentage of home sales revenue.
Gross margins on home sales were $2.2 billion, or 23.0%, in the year ended November 30, 2016, compared to $2.0 billion, or 24.0%, in the year ended November 30, 2015. Gross margin percentage on home sales decreased compared to the year ended November 30, 2015 primarily due to an increase in land costs per home, partially offset by an increase in the average sales price of homes delivered.
Selling, general and administrative expenses were $898.9 million in the year ended November 30, 2016, compared to $831.1 million in the year ended November 30, 2015. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 9.4% in the year ended November 30, 2016, from 10.0% in the year ended November 30, 2015 due to improved operating leverage as a result of an increase in home deliveries and benefits from our focus on digital marketing.
Gross profits on land sales were $44.7 million in the year ended November 30, 2016, compared to $30.1 million in the year ended November 30, 2015.

28

Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was ($49.3) million in the year ended November 30, 2016, compared to $63.4 million in the year ended November 30, 2015. In the year ended November 30, 2016, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to our share of costs associated with the FivePoint combination and operational net losses from the new FivePoint unconsolidated entity, totaling $42.6 million. This was partially offset by $12.7 million of equity in earnings from one of our unconsolidated entities primarily due to sales of homesites to third parties. In the year ended November 30, 2015, Lennar Homebuilding equity in earnings from unconsolidated entities included $82.8 million of equity in earnings from one of our unconsolidated entities primarily due to sales of homesites and a commercial property to third parties, sales of homesites to another joint venture in which we have a 50% investment, and a gain on debt extinguishment.
Lennar Homebuilding other income, net, totaled $52.8 million in the year ended November 30, 2016, compared to $6.2 million in the year ended November 30, 2015. In the year ended November 30, 2016, other income, net, included management fee income and a profit participation related to Lennar Homebuilding's strategic joint ventures and gains on the sale of several clubhouses. In the year ended November 30, 2015, other income, net included $10.2 million aggregate gains on sales of an operating property and a clubhouse.
Lennar Homebuilding interest expense was $245.1 million in the year ended November 30, 2016 ($235.1 million was included in costs of homes sold, $5.3 million in costs of land sold and $4.6 million in other interest expense), compared to $220.1 million in the year ended November 30, 2015 ($205.2 million was included in costs of homes sold, $2.5 million in costs of land sold and $12.5 million in other interest expense). Interest expense included in costs of homes sold increased primarily due to an increase in home deliveries.
Operating earnings for our Lennar Financial Services segment were $163.6 million in the year ended November 30, 2016, compared to $127.8 million in the year ended November 30, 2015. The increase in profitability was primarily due to increased transactions and higher profit per transaction in the segment's mortgage and title operations.
Operating earnings for our Rialto segment were $2.1 million in the year ended November 30, 2016 (which included a $16.7 million operating loss and an add back of $18.8 million of net loss attributable to noncontrolling interests). Operating earnings in the year ended November 30, 2015 were $28.8 million (which included $33.6 million of operating earnings, partially offset by $4.8 million of net earnings attributable to noncontrolling interests).The decrease in operating earnings was primarily attributable to 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, a decrease in net realized gains on the sale of REO, an increase in REO and loan impairments, and general and administrative expenses. This was partially offset by an increase in operating earnings related to RMF as a result of higher securitization margins. The hospital is managed by a third party management company.
Operating earnings for our Lennar Multifamily segment were $71.2 million in the year ended November 30, 2016, compared to an operating loss of $7.2 million in the year ended November 30, 2015. The increase in profitability was primarily due to the segment's $91.0 million share of gains as a result of the sale of seven operating properties by Lennar Multifamily's unconsolidated entities. In the year ended November 30, 2015, the operating loss in Lennar Multifamily primarily related to general and administrative expenses, partially offset by the segment's $22.2 million share of gains as a result of the sale of two operating properties by Lennar Multifamily's unconsolidated entities, management fee income and general contractor income, net.
Corporate general and administrative expenses were $232.6 million, or 2.1% as a percentage of total revenues, in the year ended November 30, 2016, compared to $216.2 million, or 2.3% as a percentage of total revenues, in the year ended November 30, 2015. As a percentage of total revenues, corporate general and administrative expenses improved due to increased operating leverage.
Net earnings attributable to noncontrolling interests were $1.2 million and $16.3 million in the years ended November 30, 2016 and 2015, respectively. Net earnings attributable to noncontrolling interests during the year ended November 30, 2016 were primarily attributable to earnings related to Lennar Homebuilding consolidated joint ventures, partially offset by a net loss related to the FDIC's interest in the portfolio of real estate loans that we acquired in partnership with the FDIC. Net earnings attributable to noncontrolling interests during the year ended November 30, 2015 were primarily attributable to earnings related to Lennar Homebuilding consolidated joint ventures and net earnings related to the FDIC's interest in the portfolio of real estate loans that we acquired in partnership with the FDIC.
In the years ended November 30, 2016 and 2015, we had a tax provision of $417.4 million and $390.4 million, respectively. Our overall effective income tax rates were 31.40% and 32.72% for the years ended November 30, 2016 and 2015, respectively. The reduction is primarily the result of the reversal of an accrual due to a settlement with the IRS in the year ended November 30, 2016, which reduced our effective tax rate by (1.02%). During the year ended November 30, 2016, tax legislation was passed extending the new energy efficient home credit through 2016, as well as extending the 30% investment

29

tax credit for solar energy property through 2022. For the years ended November 30, 2016 and 2015, the impact of these tax credits was (3.46%) and (1.92%), respectively.

Homebuilding Segments
Our Homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennar brand name. In addition, our homebuilding operations purchase, develop and sell land to third parties. In certain circumstances, we diversify our operations through strategic alliances and attempt to minimize our risks by investing with third parties in joint ventures.
As of and for the year ended November 30, 2017, we have aggregated our homebuilding activities into three reportable segments, which we refer to as Homebuilding East, Homebuilding Central, and Homebuilding West, based primarily upon similar economic characteristics, geography, and product type. Information about homebuilding activities in states that do not have economic characteristics that are similar to those in other states in the same geographic area is grouped under "Homebuilding Other," which is not a reportable segment. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to homebuilding segments are to those three reportable segments.
At November 30, 2017 our reportable homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in:
East: Florida(1), Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia
Central: Arizona, Colorado and Texas
West: California and Nevada
Other: Illinois, Minnesota, Oregon, Tennessee and Washington
(1) Florida includes the financial information related to WCI from the date of acquisition (February 10, 2017) to November 30, 2017.
The following tables set forth selected financial and operational information related to our homebuilding operations for the years indicated:
Selected Financial and Operational Data
 
Years Ended November 30,
(In thousands)
2017
 
2016
 
2015
Homebuilding revenues:
 
 
 
 
 
East:
 
 
 
 
 
Sales of homes
$
4,577,296

 
3,887,217

 
3,524,691

Sales of land
35,269

 
54,119

 
38,987

Total East
4,612,565

 
3,941,336

 
3,563,678

Central:
 
 
 
 
 
Sales of homes
2,444,924

 
2,218,590

 
1,888,126

Sales of land
64,368

 
64,989

 
56,186

Total Central
2,509,292

 
2,283,579

 
1,944,312

West:
 
 
 
 
 
Sales of homes
3,150,422

 
2,704,670

 
2,338,652

Sales of land
46,752

 
52,988

 
26,867

Total West
3,197,174

 
2,757,658

 
2,365,519

Other:
 
 
 
 
 
Sales of homes
862,657

 
748,040

 
584,435

Sales of land
18,554

 
10,724

 
9,001

Total Other
881,211

 
758,764

 
593,436

Total homebuilding revenues
$
11,200,242

 
9,741,337

 
8,466,945


30

 
Years Ended November 30,
(In thousands)
2017
 
2016
 
2015
Operating earnings:
 
 
 
 
 
East:
 
 
 
 
 
Sales of homes
$
614,114

 
578,207

 
578,185

Sales of land
4,970

 
22,035

 
10,448

Equity in earnings (loss) from unconsolidated entities
1,413

 
(230
)
 
118

Other income (expense), net (1)
3,187

 
17,163

 
(7,888
)
Loss due to litigation (2)
(140,000
)
 
—

 
—

Total East
483,684

 
617,175

 
580,863

Central:
 
 
 
 
 
Sales of homes
272,712

 
245,103

 
196,372

Sales of land (3)
8,168

 
2,038

 
13,595

Equity in earnings (loss) from unconsolidated entities (4)
(7,447
)
 
401

 
75

Other expense, net
(3,971
)
 
(1,567
)
 
(1,344
)
Total Central
269,462

 
245,975

 
208,698

West:
 
 
 
 
 
Sales of homes
429,588

 
396,696

 
358,054

Sales of land
12,719

 
16,689

 
446

Equity in earnings (loss) from unconsolidated entities (5)
(55,181
)
 
(49,731
)
 
62,960

Other income, net (6)
16,809

 
32,692

 
14,358

Total West
403,935

 
396,346

 
435,818

Other:
 
 
 
 
 
Sales of homes
101,691

 
76,741

 
39,393

Sales of land
4,011

 
3,947

 
5,613

Equity in earnings (loss) from unconsolidated entities
(493
)
 
285

 
220

Other income, net
6,749

 
4,463

 
1,036

Total Other
111,958

 
85,436

 
46,262

Total homebuilding operating earnings
$
1,269,039

 
1,344,932

 
1,271,641

(1)
Other income, net, for the year ended November 30, 2016, included gains of $14.5 million on the sales of three clubhouses. Other expense, net, for the year ended November 30, 2015, primarily related to a loss on a strategic sale of an operating property from one of our consolidated joint ventures, partially offset by noncontrolling interests.
(2)
Loss due to litigation regarding a contract we entered into in 2005 to purchase property in Maryland. As a result of the litigation, we purchased the property for $114 million, which approximated our estimate of fair value for the property. In addition, we paid approximately $124 million in interest and other closing costs and has accrued for the amount it expects to pay as reimbursement for attorney's fees.
(3)
Sales of land for the year ended November 30, 2016 included $6.3 million of valuation adjustments to land we intend to sell or have sold to third parties.
(4)
Equity in loss from unconsolidated entities for the year ended November 30, 2017 included valuation adjustments recorded for an unconsolidated entity.
(5)
Equity in loss from unconsolidated entities for the year ended November 30, 2017 included our share of operational net losses from unconsolidated entities driven by general and administrative expenses and valuation adjustments related to assets of Lennar Homebuilding unconsolidated entities, partially offset by profit from land sales. Equity in loss for the year ended November 30, 2016 included our share of costs associated with the FivePoint combination and operational net losses from the new FivePoint unconsolidated entity, totaling $42.6 million, partially offset by $12.7 million of equity in earnings from one of our unconsolidated entities primarily due to sales of homesites to third parties. Equity in earnings from unconsolidated entities for the year ended November 30, 2015 included $82.8 million of equity in earnings from one of our unconsolidated entities primarily due to the sale of a commercial property and homesites to third parties and a gain on debt extinguishment.
(6)
Other income, net for the year ended November 30, 2017 included an $8.6 million gain on the sale of an operating property. Other income, net, for the year ended November 30, 2016 included $30.1 million of management fee income and a profit participation related to Lennar Homebuilding's strategic joint ventures. Other income, net, for the year ended November 30, 2015 included a $6.5 million gain on the sale of an operating property.

31

Summary of Homebuilding Data
Deliveries:
 
Years Ended November 30,
 
Homes
 
2017
 
2016
 
2015
East
14,076

 
12,483

 
11,515

Central
7,262

 
6,788

 
6,171

West
6,238

 
5,734

 
5,245

Other
1,818

 
1,558

 
1,361

Total
29,394

 
26,563

 
24,292

Of the total homes delivered listed above, 72, 82 and 83 represent home deliveries from unconsolidated entities for the years ended November 30, 2017, 2016 and 2015, respectively.
 
Years Ended November 30,
 
Dollar Value (In thousands)
 
Average Sales Price
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
East
$
4,577,296

 
3,890,405

 
3,527,612

 
$
325,000

 
312,000

 
306,000

Central
2,444,924

 
2,218,590

 
1,888,127

 
337,000

 
327,000

 
306,000

West
3,199,252

 
2,757,112

 
2,383,432

 
513,000

 
481,000

 
454,000

Other
862,657

 
748,040

 
584,435

 
475,000

 
480,000

 
429,000

Total
$
11,084,129

 
9,614,147

 
8,383,606

 
$
377,000

 
362,000

 
345,000

Of the total dollar value of home deliveries listed above, $48.8 million, $55.6 million and $47.7 million represent the dollar value of home deliveries from unconsolidated entities for the years ended November 30, 2017, 2016 and 2015, respectively. The home deliveries from unconsolidated entities had an average sales price of $678,000, $678,000 and $575,000 for the years ended November 30, 2017, 2016 and 2015, respectively.
Sales Incentives (1):
 
Years Ended November 30,
 
(In thousands)
 
2017
 
2016
 
2015
East
$
332,531

 
278,979

 
258,594

Central
201,701

 
183,921

 
153,173

West
99,532

 
101,337

 
80,617

Other
31,975

 
32,062

 
25,679

Total
$
665,739

 
596,299

 
518,063

 
Years Ended November 30,
 
Average Sales Incentives Per
Home Delivered
 
Sales Incentives as a
% of Revenue
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
East
$
23,600

 
22,400

 
22,500

 
6.8
%
 
6.7
%
 
6.8
%
Central
27,800

 
27,100

 
24,800

 
7.6
%
 
7.7
%
 
7.5
%
West
16,100

 
17,900

 
15,600

 
3.1
%
 
3.6
%
 
3.3
%
Other
17,600

 
20,600

 
18,900

 
3.6
%
 
4.1
%
 
4.2
%
Total
$
22,700

 
22,500

 
21,400

 
5.7
%
 
5.9
%
 
5.9
%
(1)
Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.


32

New Orders (2):
 
Years Ended November 30,
 
Homes
 
2017
 
2016
 
2015
East
14,775

 
12,764

 
11,579

Central
7,154

 
7,041

 
6,448

West
6,715

 
5,910

 
5,608

Other
1,704

 
1,657

 
1,471

Total
30,348

 
27,372

 
25,106

Of the total new orders listed above, 65, 23 and 105 represent new orders from unconsolidated entities for the years ended November 30, 2017, 2016 and 2015, respectively.
 
Years Ended November 30,
 
Dollar Value (In thousands)
 
Average Sales Price
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
East
$
4,795,740

 
3,977,605

 
3,570,496

 
$
325,000

 
312,000

 
308,000

Central
2,409,559

 
2,354,618

 
2,037,339

 
337,000

 
334,000

 
316,000

West
3,529,945

 
2,832,993

 
2,617,393

 
526,000

 
479,000

 
467,000

Other
823,993

 
788,721

 
663,247

 
484,000

 
476,000

 
451,000

Total
$
11,559,237

 
9,953,937

 
8,888,475

 
$
381,000

 
364,000

 
354,000

Of the total dollar value of new orders listed above, $48.0 million, $9.2 million and $70.2 million represent the dollar value of new orders from unconsolidated entities for the years ended November 30, 2017, 2016 and 2015, respectively. The new orders from unconsolidated entities had an average sales price of $738,000, $401,000 and $669,000 for the years ended November 30, 2017, 2016 and 2015, respectively.
(2)
New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the years ended November 30, 2017, 2016 and 2015.
Backlog:
 
November 30,
 
Homes
 
2017
 
2016
 
2015
East (3)
4,300

 
3,243

 
2,852

Central
2,213

 
2,321

 
2,068

West
2,007

 
1,530

 
1,354

Other (4)
415

 
529

 
372

Total
8,935

 
7,623

 
6,646

Of the total homes in backlog listed above, 23, 30 and 89 represent homes in backlog from unconsolidated entities at November 30, 2017, 2016 and 2015, respectively.
 
November 30,
 
Dollar Value (In thousands)
 
Average Sales Price
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
East
$
1,468,830

 
1,065,425

 
928,098

 
$
342,000

 
329,000

 
325,000

Central
785,469

 
821,608

 
685,750

 
355,000

 
354,000

 
332,000

West
1,078,760

 
748,488

 
671,524

 
537,000

 
489,000

 
496,000

Other
217,307

 
256,017

 
192,379

 
524,000

 
484,000

 
517,000

Total
$
3,550,366

 
2,891,538

 
2,477,751

 
$
397,000

 
379,000

 
373,000

Of the total dollar value of homes in backlog listed above, $15.2 million, $16.0 million and $62.4 million represent the dollar value of homes in backlog from unconsolidated entities at November 30, 2017, 2016 and 2015, respectively. The homes in backlog from unconsolidated entities had an average sales price of $659,000, $533,000 and $701,000 at November 30, 2017, 2016 and 2015, respectively.
(3)
During the year ended November 30, 2017, we acquired 359 homes in backlog as a result of the WCI acquisition. During the year ended November 30, 2016, we acquired 110 homes in backlog from other homebuilders.

33

(4)
During the year ended November 30, 2016, we acquired 58 homes in backlog.
Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales if they fail to qualify for financing or under certain other circumstances. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.
We experienced cancellation rates as follows:
 
Years Ended November 30,
 
2017
 
2016
 
2015
East
15
%
 
14
%
 
15
%
Central
19
%
 
20
%
 
21
%
West
14
%
 
15
%
 
13
%
Other
10
%
 
11
%
 
11
%
Total
15
%
 
16
%
 
16
%
Active Communities:
 
November 30,
 
2017
 
2016
 
2015
East (1)
354

 
303

 
284

Central
216

 
199

 
206

West
138

 
135

 
119

Other
57

 
58

 
56

Total
765

 
695

 
665

Of the total active communities listed above, four communities represent active communities being developed by unconsolidated entities as of November 30, 2017. Of the total active communities listed above, two and three communities represent active communities being constructed by unconsolidated entities as of November 30, 2016 and 2015, respectively.
(1)
We acquired 51 active communities related to the WCI acquisition on February 10, 2017. As of November 30, 2017, there were 52 active communities.
The following table details our gross margins on home sales for each of our reportable homebuilding segments and Homebuilding Other:
 
Years Ended November 30,
 
(Dollars in thousands)
2017
 
2016
 
2015
 
East:
 
 
 
 
 
 
Sales of homes
$
4,577,296

 
3,887,217

 
3,524,691

 
Costs of homes sold
3,504,176

 
2,935,921

 
2,599,855

 
Gross margins on home sales
1,073,120

23.4%
951,296

24.5%
924,836

26.2%
Central:
 
 
 
 
 
 
Sales of homes
2,444,924

 
2,218,590

 
1,888,126

 
Costs of homes sold
1,936,879

 
1,752,781

 
1,485,243

 
Gross margins on home sales
508,045

20.8%
465,809

21.0%
402,883

21.3%
West:
 
 
 
 
 
 
Sales of homes
3,150,422

 
2,704,670

 
2,338,652

 
Costs of homes sold
2,489,788

 
2,086,480

 
1,773,651

 
Gross margins on home sales
660,634

21.0%
618,190

22.9%
565,001

24.2%
Other:
 
 
 
 
 
 
Sales of homes
862,657

 
748,040

 
584,435

 
Costs of homes sold
670,503

 
587,671

 
474,101

 
Gross margins on home sales
192,154

22.3%
160,369

21.4%
110,334

18.9%
Total gross margins on home sales
$
2,433,953

22.1%
2,195,664

23.0%
2,003,054

24.0%

34

2017 versus 2016
Homebuilding East: Revenues from home sales increased in 2017 compared to 2016, primarily due to an increase in the number of home deliveries in Florida and the Carolinas, partially offset by a decrease in the number of home deliveries in Georgia and Virginia. Revenues from home sales also increased as a result of the increase in the average sales price of homes delivered in Florida and the Carolinas, partially offset by a decrease in the average sales price of homes delivered in Georgia and Virginia. The increase in the number of deliveries in Florida was primarily driven by an increase in active communities over the last year primarily related to the WCI acquisition. The increase in the number of deliveries in the Carolinas was primarily driven by an increase in active communities. The decrease in the number of deliveries in Georgia and Virginia was primarily due to a decrease in deliveries per active community as a result of timing of opening and closing of communities. The increase in the average sales price of homes delivered in Florida and the Carolinas was primarily due to an increase in home deliveries in higher-priced communities and favorable market conditions. The decrease in the average sales price of homes delivered in Georgia and Virginia was primarily driven by a change in product mix due to closing out the remaining homes in higher-priced communities and opening lower-priced communities during the year ended November 30, 2017. Gross margin percentage on home sales for the year ended November 30, 2017 decreased compared to the same period last year primarily due to an increase in direct construction costs per home, partially offset by an increase in the average sales price of homes delivered.
Homebuilding Central: Revenues from home sales increased in 2017 compared to 2016, primarily due to an increase in the number of home deliveries in Texas and Arizona and an increase in the average sales price of homes delivered in all the states in the segment. The increase in the number of deliveries in Texas was primarily driven by higher demand as the number of deliveries per active community increased and the number of active communities increased. The increase in the number of deliveries in Arizona was primarily driven by an increase in the number of active communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. Gross margin percentage on home sales for the year ended November 30, 2017 decreased compared to the same period last year primarily due to an increase in land and direct construction costs per home, partially offset by an increase in the average sales price of homes delivered.
Homebuilding West: Revenues from home sales increased in 2017 compared to 2016, primarily due to an increase in the number of home deliveries and average sales price in all the states in the segment. The increase in the number of home deliveries is primarily driven by higher demand as the number of deliveries per active community increased. The increase in the average sales price of homes delivered was primarily due to a change in product mix and favorable market conditions. Gross margin percentage on home sales for the year ended November 30, 2017 decreased compared to the same period last year primarily due to an increase in direct construction and land costs per home, partially offset by an increase in the average sales price of homes delivered.
Homebuilding Other: Revenues from home sales increased in 2017 compared to 2016, primarily due to an increase in the number of home deliveries in Minnesota and Tennessee, partially offset by a decrease in the average sales price of homes delivered in all states in Homebuilding Other except Washington. The increase in the number of deliveries in Minnesota and Tennessee was primarily driven by higher demand as the number of deliveries per active community increased. The decrease in the average sales price of homes delivered in all states in Homebuilding Other, except Washington, was primarily driven by a change in product mix due to closing out the remaining homes in higher-priced communities and opening lower-priced communities during the year ended November 30, 2017. The increase in the average sales price of homes delivered in Washington was primarily due to favorable market conditions and a change in product mix. Gross margin percentage on home sales for the year ended November 30, 2017 increased compared to the same period last year primarily due to a decrease in construction costs per home delivered as the average sales price of homes delivered decreased as well.
2016 versus 2015
Homebuilding East: Revenues from home sales increased in 2016 compared to 2015, primarily due to an increase in the number of home deliveries in all the states in the segment, except Virginia and Georgia, and an increase in the average sales price of homes delivered in all the states in the segment, except Florida. The increase in the number of deliveries was primarily driven by an increase in active communities over 2015 primarily in Florida and/or driven by higher demand as the number of deliveries per active community increased. The decrease in home deliveries in Virginia and Georgia was primarily driven by a decrease in active communities that had a high volume of home deliveries in 2015. The increase in the average sales price of homes delivered was primarily due to a change in product mix as there was an increase in home deliveries in higher-priced communities in 2016 compared to 2015 and/or because we have been able to increase the sales price in certain of our communities due to favorable market conditions. The decrease in average sales price of homes delivered in Florida was primarily driven by a change in product mix due to closing out the remaining homes in higher-priced communities in 2015 and opening lower-priced communities in 2016. In addition, we have also been able to increase the sales prices in certain of our communities due to favorable market conditions. Gross margin percentage on home sales decreased compared to 2015 primarily due to an increase in land and direct construction costs per home, partially offset by an increase in average sales price of homes delivered.

35

Homebuilding Central: Revenues from home sales increased in 2016 compared to 2015, primarily due to an increase in the number of home deliveries and in the average sales price of homes delivered in all the states in the segment. The increase in the number of deliveries was primarily driven by higher demand as the number of deliveries per active community increased. The increase in the average sales price of homes delivered was primarily due to a change in product mix driven by an increase in home deliveries in higher-priced close out communities in 2016 compared to 2015 and/or because we have been able to increase the sales prices in certain of our communities due to favorable market conditions. Gross margin percentage on home sales slightly decreased compared to 2015 primarily due to an increase in land costs per home, partially offset by an increase in the average sales price of homes delivered.
Homebuilding West: Revenues from home sales increased in 2016 compared to 2015, primarily due to an increase in the number of home deliveries in California, partially offset by a decrease in the number of home deliveries in Nevada and an increase in the average sales price of homes delivered in all the states in the segment. The increase in the number of deliveries in California was primarily driven by an increase in active communities over 2015 and/or by higher demand as the number of deliveries per active community increased. The decrease in the number of deliveries in Nevada was primarily driven by lower demand as the number of deliveries per active community decreased due to a change in product mix (selling at different price points) from 2015. The increase in the average sales price of homes delivered was primarily due to a change in product mix (selling at different price points) and/or because we have been able to increase the sales prices in certain of our communities due to favorable market conditions. Gross margin percentage on home sales decreased compared to 2015 primarily due to an increase in land costs per home and an increase in sales incentives offered to homebuyers as a percentage of revenues from home sales, partially offset by an increase in the average sales price of homes delivered.
Homebuilding Other: Revenues from home sales increased in 2016 compared to 2015, primarily due to an increase in the number of home deliveries in all the states in Homebuilding Other and an increase in the average sales price of homes delivered in all states in Homebuilding Other, except Minnesota. The increase in the number of deliveries was primarily driven by an increase in active communities over 2015 and/or by higher demand as the number of deliveries per active community increased. The increase in the average sales price of homes delivered was primarily due to an increase in home deliveries in higher-priced communities in 2016 compared to 2015. The decrease in the average sales price of homes delivered in Minnesota was primarily due to the lower average sales price of the homes acquired in backlog. Gross margin percentage on home sales increased compared to 2015 primarily due to an increase in the average sales price of homes delivered and a decrease in construction and land costs per home (prior year's land costs per home included a valuation adjustment of $9.6 million in our Northeast Urban operations).
Lennar Financial Services Segment
Our Lennar Financial Services reportable segment provides mortgage financing, title insurance and closing services for both buyers of our homes and others. Our 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, we retain potential liability for possible claims by purchasers that we breached certain limited industry-standard representations and warranties in the loan sale agreements. Several claims of this type have been asserted against us. We do not believe these claims will have a material adverse effect on our business.
As part of the WCI acquisition in February 2017, Lennar Financial Services acquired a real estate brokerage business
under the Berkshire Hathaway Home Services brand. This business operates only in Florida.
In June 2017, our captive mortgage financing services operations changed its name from Universal American Mortgage Company, LLC to Eagle Home Mortgage, LLC.
The following table sets forth selected financial and operational information related to our Lennar Financial Services segment:
 
Years Ended November 30,
(Dollars in thousands)
2017
 
2016
 
2015
Revenues
$
770,109

 
687,255

 
620,527

Costs and expenses
614,585

 
523,638

 
492,732

Operating earnings
$
155,524

 
163,617

 
127,795

Dollar value of mortgages originated
$
8,973,000

 
9,343,000

 
8,877,000

Number of mortgages originated
31,600

 
33,500

 
32,600

Mortgage capture rate of Lennar homebuyers
80
%
 
82
%
 
82
%
Number of title and closing service transactions
110,000

 
116,000

 
108,600

Number of title policies issued
314,800

 
298,900

 
263,500


36

Rialto Segment
Our Rialto reportable segment is a commercial real estate investment, investment management, and finance company focused on raising, investing and managing third-party capital, originating and selling into securitizations commercial mortgage loans as well as investing our own capital in real estate related mortgage loans, properties and related securities. Rialto utilizes its vertically-integrated investment and operating platform to underwrite, perform diligence, acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and securities as well as providing strategic real estate capital. Rialto's primary focus is to manage third-party capital and to originate and sell into securitizations commercial mortgage loans. Rialto has continued the workout and/or oversight of billions of dollars of real estate assets across the United States, including commercial and residential real estate loans and properties as well as mortgage backed securities with the objective of generating superior, risk-adjusted returns. To date, many of the investment and management opportunities have arisen from the dislocation in the United States real estate markets and the restructuring and recapitalization of those markets.
Rialto's operating earnings (loss) were as follows:
 
Years Ended November 30,
(In thousands)
2017
 
2016
 
2015
Revenues
$
281,243

 
233,966

 
221,923

Costs and expenses (1)
247,549

 
229,769

 
222,875

Rialto equity in earnings from unconsolidated entities
25,447

 
18,961

 
22,293

Rialto other income (expense), net (2)
(81,636
)
 
(39,850
)
 
12,254

Operating earnings (loss) (3)
$
(22,495
)
 
(16,692
)
 
33,595

(1)
Costs and expenses included loan impairments of $32.6 million, $18.2 million and $10.4 million for the years ended November 30, 2017, 2016 and 2015, respectively, primarily associated with the segment's FDIC loans portfolio (before noncontrolling interests).
(2)
Rialto other income (expense), net, included REO impairments of $63.6 million, $24.4 million and $12.4 million for the years ended November 30, 2017, 2016 and 2015, respectively.
(3)
Operating earnings (loss) for the years ended November 30, 2017, 2016 and 2015 included net earnings (loss) attributable to noncontrolling interests of ($46.1) million, ($18.8) million and $4.8 million, respectively.
The following is a detail of Rialto other income (expense), net:
 
Years Ended November 30,
(In thousands)
2017
 
2016
 
2015
Realized gains on REO sales, net
$
4,578

 
17,495

 
35,242

Unrealized losses on transfer of loans receivable to REO and impairments, net
(64,623
)
 
(23,087
)
 
(13,678
)
REO and other expenses
(49,432
)
 
(54,008
)
 
(57,740
)
Rental and other income (1)
27,841

 
19,750

 
48,430

Rialto other income (expense), net
$
(81,636
)
 
(39,850
)
 
12,254

(1)
Rental and other income for the year ended November 30, 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.
Rialto Mortgage Finance
RMF originates and sells into securitizations five, seven and ten year commercial first mortgage loans, which are secured by income producing properties. This business has become a significant contributor to Rialto's revenues.
During the year ended November 30, 2017, RMF originated loans with a total principal balance of $1.7 billion, of which $1.6 billion were recorded as loans held-for-sale and $98.4 million as accrual loans within loans receivable, net, and sold $1.5 billion of loans into 12 separate securitizations. During the year ended November 30, 2016, RMF originated loans with a total principal balance of $1.8 billion of which $1.7 billion were recorded as loans held-for-sale and $81.2 million were recorded as accrual loans within loans receivable, net, and sold $1.9 billion of loans into 11 separate securitizations. As of November 30, 2017, there were no unsettled transactions. As of November 30, 2016, originated loans with an unpaid principal balance of $199.8 million were sold into a securitization trust but not settled and thus were included as Rialto's receivables, net.
FDIC Portfolios
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 we were determined to be the primary beneficiary, we consolidated the LLCs. In February 2017, the FDIC exercised its “clean-up call rights” under the Amended and Restated Limited Liability Company Agreement. As a result, Rialto had until July 10, 2017 to liquidate and sell the assets in the FDIC Portfolios. On July 10, 2017, Rialto and the FDIC entered into an

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agreement which extended the original agreement date to January 10, 2018. At November 30, 2017, the consolidated LLCs had total combined assets of $48.8 million, which primarily included $23.8 million in cash, $20.0 million of real estate owned, net and $1.6 million of loans held-for-sale. As of January 11, 2018, (1) the FDIC can, at its discretion, sell any remaining assets, or (2) Rialto has the option to purchase the FDIC's interest in the portfolios. As of January 19, 2018, there were only four assets with a carrying value totaling $0.3 million which were not under contract to sell.
Investments
Rialto is the sponsor of and an investor in private equity vehicles that invest in and manage real estate related assets and other related investments. These include:
Private Equity Vehicle
Inception Year
Commitment
Rialto Real Estate Fund, LP
2010
$700 million (including $75 million by us)
Rialto Real Estate Fund II, LP
2012
$1.3 billion (including $100 million by us)
Rialto Mezzanine Partners Fund, LP
2013
$300 million (including $34 million by us)
Rialto Capital CMBS Funds
2014
$119 million (including $52 million by us)
Rialto Real Estate Fund III
2015
$1.9 billion (including $140 million by us)
Rialto Credit Partnership, LP
2016
$220 million (including $20 million by us)
Rialto also earns fees for its role as a manager of these vehicles and for providing asset management and other services to those vehicles and other third parties.
At November 30, 2017 and 2016, the carrying value of Rialto's commercial mortgage-backed securities ("CMBS") was $179.7 million and $71.3 million, respectively. These securities were purchased at discount rates ranging from 9% to 84% with coupon rates ranging from 1.3% to 5.0%, stated and assumed final distribution dates between November 2020 and October 2027, and stated maturity dates between November 2043 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 any of the years ended November 30, 2017, 2016 and 2015. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.
During 2017, Rialto purchased a 5% vertical strip in three separate CMBS transactions. A vertical interest is an equal interest in each class of securities issued in the securitization (e.g., 5.0% of each class) or a single vertical security entitling the holder to a specific percentage of the amounts paid on each class of those securities. As part of the Dodd-Frank Wall Street Reform and Protection Act that came into effect in December 2016, originators that contribute loans to a CMBS trust are required to satisfy risk retention rules. Some risk retention rules permit the retention of risk by third parties, and the risk may be held by purchasing vertical, horizontal or other combined strips in a securitization.
Lennar Multifamily Segment
We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. Our Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.
As of November 30, 2017 and 2016, our balance sheet had $710.7 million and $526.1 million, respectively, of assets related to our Lennar Multifamily segment, which included investments in unconsolidated entities of $407.5 million and $318.6 million, respectively. Our net investment in the Lennar Multifamily segment as of November 30, 2017 and 2016 was $561.0 million and $412.9 million, respectively. During the year ended November 30, 2017, our Lennar Multifamily segment sold seven operating properties through its unconsolidated entities resulting in the segment's $96.7 million share of gains. During the years ended November 30, 2016 and 2015, our Lennar Multifamily segment sold seven and two operating properties, respectively, through its unconsolidated entities resulting in the segment's $91.0 million and $22.2 million share of gains, respectively. During the year ended November 30, 2016, our Lennar Multifamily segment sold land to third parties generating gross profit of $5.6 million.
Our Lennar Multifamily segment had equity investments in 27 and 28 unconsolidated entities (including the Lennar Multifamily Venture, the "Venture") as of November 30, 2017 and 2016, respectively. As of November 30, 2017, our Lennar Multifamily segment had interests in 53 communities with development costs of $5.1 billion, of which 13 communities were completed and operating, 12 communities were partially completed and leasing, 22 communities were under construction and the remaining communities were either owned or under contract. As of November 30, 2017, our Lennar Multifamily segment also had a pipeline of potential future projects totaling $4.0 billion in assets across a number of states that would be developed primarily by future unconsolidated entities.

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The Venture is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets with $2.2 billion in equity commitments, including a $504 million co-investment commitment by us comprised of cash, undeveloped land and preacquisition costs.

Financial Condition and Capital Resources
At November 30, 2017, we had cash and cash equivalents related to our homebuilding, financial services, Rialto and multifamily operations of $2.7 billion, compared to $1.3 billion and $1.2 billion at November 30, 2016 and 2015, respectively. At November 30, 2017, cash included $1.16 billion, which will be paid to CalAtlantic stockholders in connection with the acquisition of CalAtlantic.
We finance all of our activities including Homebuilding, financial services, Rialto, multifamily and general operating needs primarily with cash generated from our operations, debt issuances and equity offerings as well as cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility (the "Credit Facility").
Operating Cash Flow Activities
During 2017, 2016 and 2015, cash provided by (used in) operating activities totaled $996.9 million, $507.8 million and ($419.6) million, respectively. During 2017, cash provided by operating activities was positively impacted by our net earnings, a decrease in receivables, an increase in accounts payable and other liabilities and a decrease in restricted cash, partially offset by an increase in other assets and an increase in loans held-for-sale of $108.9 million related to Rialto. In addition, cash provided by operating activities was negatively impacted by an increase in inventories due to strategic land purchases, land development and construction costs. For the year ended November 30, 2017, distributions of earnings from unconsolidated entities were (1) $35.0 million from Lennar Homebuilding unconsolidated entities, (2) $12.9 million from Rialto unconsolidated entities, and (3) $89.7 million from Lennar Multifamily unconsolidated entities.
During 2016, cash provided by operating activities was positively impacted by our net earnings, a net decrease in loans held-for-sale primarily related to RMF due to the timing of the securitizations and an increase in accounts payable and other liabilities, partially offset by a smaller increase in inventories than in 2015 due to our soft-pivot strategy, and an increase in receivables and other assets. For the year ended November 30, 2016, distributions of earnings from unconsolidated entities were (1) $86.3 million from Lennar Multifamily unconsolidated entities, (2) $14.0 million from Rialto unconsolidated entities, and (3) $1.7 million from Lennar Homebuilding unconsolidated entities.
During 2015, cash used in operating activities was impacted by an increase in inventories due to strategic land purchases and land development costs, an increase of $213.5 million in Rialto loans held-for-sale related to RMF and an increase of $105.2 million in Lennar Financial Services loans held-for-sale, partially offset by our net earnings and an increase in accounts payable and other liabilities. For the year ended November 30, 2015, distributions of earnings from unconsolidated entities were (1) $26.3 million from Lennar Homebuilding unconsolidated entities, (2) $21.1 million from Lennar Multifamily unconsolidated entities, and (3) $13.3 million from Rialto unconsolidated entities.
Investing Cash Flow Activities
During 2017, 2016 and 2015, cash used in investing activities totaled $869.8 million, $85.8 million and $98.4 million, respectively. During 2017, our cash used in investing activities was primarily due to our $611.1 million acquisition of WCI, net of cash acquired. In addition, we had cash contributions to unconsolidated entities of $430.3 million, which included (1) $261.9 million to Lennar Homebuilding unconsolidated entities primarily for working capital and paydowns of joint venture debt, including $120.7 million to Five Point, (2) $119.7 million to Lennar Multifamily unconsolidated entities primarily for working capital and (3) $48.7 million to Rialto unconsolidated entities comprised primarily of $32.9 million contributed to Rialto Real Estate Fund III ("Fund III"), $8.8 million contributed to the Rialto Credit Partnership, LP ("RCP") and $7.0 million contributed to other investments. In addition, cash used in investing activities was impacted by purchases of CMBS bonds by our Rialto segment. This was partially offset by the receipt of $165.4 million of principal payments on loans receivable and other, $86.6 million of proceeds from the sales of REO and distributions of capital from unconsolidated entities of $207.3 million, which primarily included (1) $83.0 million from Lennar Multifamily unconsolidated entities, of which $26.8 million was distributed by the Venture, (2) $80.9 million from Lennar Homebuilding unconsolidated entities, and (3) $41.6 million from Rialto unconsolidated entities comprised primarily of $21.2 million distributed by Rialto Real Estate Fund II, LP (" Fund II"), $5.4 million distributed by Fund III, $7.0 million distributed by the Rialto Mezzanine Partners Fund, LP ("Mezzanine Fund"), and $5.4 million distributed by the CMBS Funds.
During 2016, our cash used in investing activities was primarily impacted by cash contributions to unconsolidated entities of (1) $198.2 million to Lennar Multifamily unconsolidated entities primarily related to contributions to the Venture, (2) $184.2 million to Lennar Homebuilding unconsolidated entities primarily for working capital, (3) $43.4 million to Rialto unconsolidated entities comprised of $28.8 million contributed to the CMBS Funds, $7.2 million contributed to Fund III, $5.7 million contributed to RCP and $1.7 million contributed to other investments. In addition, cash used in investing activities was

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impacted by purchases of CMBS by our Rialto segment and origination of loans receivable primarily related to floating rate loans originated by RMF. This was partially offset by distributions of capital from unconsolidated entities of (1) $251.2 million from Lennar Multifamily unconsolidated entities, of which $193.7 million was distributed by the Venture, (2) $44.6 million from Lennar Homebuilding unconsolidated entities, and (3) $27.4 million from Rialto unconsolidated entities comprised of $12.8 million distributed by Fund II, $11.7 million distributed by the Mezzanine Fund and $2.9 million distributed by the CMBS Funds; by the receipt of $97.9 million of proceeds from the sales of REO; and receipt of $84.4 million of principal payments on loans receivable and settlement of accrual loans.
During 2015, our cash used in investing activities was primarily impacted by cash contributions to unconsolidated entities of (1) $210.7 million to Lennar Homebuilding unconsolidated entities primarily for working capital, (2) $63.0 million to Rialto unconsolidated entities comprised of $41.7 million contributed to Fund II, $13.3 million contributed to the Mezzanine Fund and $8.0 million contributed to the CMBS Funds, and (3) $41.3 million to Lennar Multifamily unconsolidated entities primarily for working capital. In addition, cash used in investing activities was impacted by purchases of investment securities and loans held-for-investments. This was partially offset by the receipt of $73.7 million of proceeds from the sale of a Lennar Homebuilding operating property, $155.3 million of proceeds from the sale of REO and by distributions of capital from unconsolidated entities of (1) $118.0 million from Lennar Homebuilding unconsolidated entities, (2) $78.1 million from Lennar Multifamily unconsolidated entities, of which $55.3 million was distributed by the Venture, and (3) $22.9 million from Rialto unconsolidated entities comprised of $16.9 million distributed by Fund II, $3.4 million distributed by the Mezzanine Fund and $2.6 million distributed by the CMBS Funds.
Financing Cash Flow Activities
During 2017, 2016 and 2015, our cash provided by (used in) financing activities totaled $1.2 billion, ($250.9) million and $394.7 million, respectively. During 2017, our cash provided by financing activities was primarily attributed to the receipt of proceeds related to the (1) issuance of $600 million aggregate principal amount of 4.125% senior notes due 2022 (the "4.125% Senior Notes"), (2) issuance of $650 million aggregate principal amount of 4.50% senior notes due 2024 (the "4.50% Senior Notes"), (3) issuance of $300 million aggregate principal amount of 2.95% senior notes due 2020 (the "2.95% Senior Notes"), (4) issuance of $900 million aggregate principal amount of 4.750% senior notes due 2027 (the "4.750% Senior Notes"), (5) $31.2 million of proceeds from other borrowings, (6) $99.6 million of proceeds from the issuance of Rialto notes payable and (7) $195.5 million of proceeds from other liabilities. This was partially offset by (1) the retirement of $400 million aggregate principal amount of our 12.25% senior notes due 2017 (the "12.25% Senior Notes"), (2) the redemption of $400 million aggregate principal amount of our 4.75% senior notes due 2017 (the "4.75% Senior Notes"), (3) the redemption of $250 million principal amount of our 6.875% senior notes due 2021 that had been issued by WCI, (4) $199.7 million of net repayments under our warehouse facilities, which was comprised of $139.8 million of net repayments under our Lennar Financial Services warehouse repurchase facilities and $59.9 million of net repayments under our Rialto warehouse facilities, (5) $74.4 million of payments related to noncontrolling interests, and (5) $139.7 million of principal payments on other borrowings. The proceeds from the issuance of the 2.95% Senior Notes and the 4.750% Senior Notes will be used primarily to pay the cash portion of the consideration related to the merger with CalAtlantic.
During 2016, our cash used in financing activities was primarily impacted by (1) the redemption of $250 million aggregate principal amount of our 6.50% senior notes due April 2016 (the "6.50% Senior Notes"), (2) $234.0 million of cash payments in connection with exchanges or conversions of our 2.75% convertible senior notes due December 2020 (the "2.75% Convertible Senior Notes"), (3) $211.0 million of principal payments on other borrowings, (4) $111.3 million of net repayments under our Rialto's warehouse repurchase facilities, and (5) $127.4 million of payments related to noncontrolling interests. The cash used in financing activities was partially offset by the receipt of proceeds of the sale of $500 million aggregate principal amount of our 4.750% senior notes due 2021 and $218.8 million of net borrowings under our Lennar Financial Services' warehouse repurchase facilities.
During 2015, our cash provided by financing activities was primarily attributed to the receipt of proceeds related to the sale of (1) $400 million aggregate principal amount of 4.875% senior notes due 2023, (2) an additional $250 million aggregate principal amount of our 4.50% senior notes due November 2019, and (3) $500 million aggregate principal amount of our 4.750% senior notes due 2025; proceeds of $101.6 million from other borrowings; and net borrowings of $366.3 million under our Lennar Financial Services' and Rialto's warehouse repurchase facilities. The cash provided by financing activities was partially offset by the redemption of $500 million principal amount of our 5.60% senior notes due 2015, exchanges and conversions of $212.1 million principal amount of our 2.75% Convertible Senior Notes, principal payments of $258.1 million on other borrowings, and payments of $133.4 million related to noncontrolling interests.

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Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our Lennar Homebuilding operations. Lennar Homebuilding debt to total capital and net Lennar Homebuilding debt to total capital were calculated as follows: