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Rialto Segment (Tables)

3 Months Ended

Feb. 28, 2018

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



(In thousands)	February 28, 2018		November 30, 2017
Assets:
Homebuilding East	$	7,537,607	4,754,581
Homebuilding Central	3,609,537		2,037,905
Homebuilding West	7,668,640		5,165,218
Homebuilding Other	1,547,102		960,541
Lennar Financial Services	1,748,432		1,689,508
Rialto	909,249		1,153,840
Lennar Multifamily	892,830		710,725
Corporate and unallocated	4,030,626		2,272,716
Total assets	$	27,944,023	18,745,034
Lennar Homebuilding goodwill (1)	$	3,433,477	136,566
Lennar Financial Services goodwill (1)	$	210,628	59,838
Rialto goodwill	$	5,396	5,396

(1)

In connection with the CalAtlantic acquisition, the Company recorded a provisional amount of homebuilding goodwill of $3.3 billion. The allocation of goodwill by homebuilding reporting segment has not yet been finalized. A provisional amount of goodwill related to the CalAtlantic acquisition of $150 million was allocated to Lennar Financial Services. In connection with the WCI acquisition in 2017, the Company allocated $136.6 million of goodwill to the Lennar Homebuilding East reportable segment and $20.0 million to the Lennar Financial Services segment.



	Three Months Ended
	February 28,
(In thousands)	2018			2017
Revenues:
Homebuilding East	$	1,070,654		767,726
Homebuilding Central	611,780			516,181
Homebuilding West	779,879			552,798
Homebuilding Other	199,780			181,989
Lennar Financial Services	171,140			148,043
Rialto	54,302			82,006
Lennar Multifamily	93,256			88,685
Total revenues (1)	$	2,980,791		2,337,428
Operating earnings (loss) (2):
Homebuilding East (3)	$	105,921		(55,709	)
Homebuilding Central (4)	42,546			52,858
Homebuilding West (5)	251,276			53,360
Homebuilding Other (6)	13,984			20,829
Lennar Financial Services	19,695			20,664
Rialto	9,212			(843	)
Lennar Multifamily	(1,201		)	19,183
Total operating earnings	441,433			110,342
Acquisition and integration costs related to CalAtlantic	104,195			—
Corporate general and administrative expenses	67,810			60,699
Earnings before income taxes	$	269,428		49,643


(1)	Total revenues were net of sales incentives of $149.9 million ($22,300 per home delivered) for the three months ended February 28, 2018, compared to $123.5 million ($22,700 per home delivered) for the three months ended February 28, 2017.


(2)	All homebuilding segments and Homebuilding other were impacted by purchase accounting adjustments for three months ended February 28, 2018.


(3)	Homebuilding East operating earnings for the three months ended February 28, 2017 included a $140 million loss due to litigation (see Note 17).


(4)	Homebuilding Central operating earnings for the three months ended February 28, 2018 included a $6.9 million valuation adjustment.


(5)	Homebuilding West operating earnings includes $164.9 million related to a gain on the sale of an 80% interest in one of Lennar Homebuilding's strategic joint ventures, Treasure Island Holdings.

(6)

Homebuilding Other operating earnings for the three months ended February 28, 2018 were impacted by the timing of opening and closing of communities.The assets and liabilities related to the Lennar Financial Services segment were as follows:



(In thousands)	February 28, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	165,849	117,410
Restricted cash	11,251		12,006
Receivables, net (1)	366,100		313,252
Loans held-for-sale (2)	689,172		937,516
Loans held-for-investment, net	69,832		44,193
Investments held-to-maturity	60,831		52,327
Investments available-for-sale (3)	57,768		57,439
Goodwill (4)	210,628		59,838
Other (5)	117,001		95,527
	$	1,748,432	1,689,508
Liabilities:
Notes and other debts payable	$	772,240	937,431
Other (6)	232,762		240,383
	$	1,005,002	1,177,814


(1)	Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of February 28, 2018 and November 30, 2017, respectively.


(2)	Loans held-for-sale related to unsold loans carried at fair value.


(3)	Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss) on the condensed consolidated balance sheet.


(4)	As of February 28, 2018, goodwill included $20.0 million of goodwill related to the WCI acquisition. The assignment of goodwill to the Company's reporting segments related to the CalAtlantic acquisition has not been completed yet, however, a provisional amount of goodwill of approximately $150 million was allocated to Lennar Financial Services (see Note 2).

(5)

As of February 28, 2018 and November 30, 2017, other assets included mortgage loan commitments carried at fair value of $11.7 million and $9.9 million, respectively, and mortgage servicing rights carried at fair value of $36.8 million and $31.2 million, respectively. In addition, other assets also included forward contracts carried at fair value of $4.8 million and $1.7 million as of February 28, 2018 and November 30, 2017, respectively.

(6)

As of February 28, 2018 and November 30, 2017, other liabilities included $57.2 million and $57.7 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation.The assets and liabilities related to the Rialto segment were as follows:



(In thousands)	February 28, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	113,582	241,861
Restricted cash (1)	20,536		22,466
Loans held-for-sale (2)	125,013		236,018
Loans receivable, net	1,932		1,933
Real estate owned, net	63,284		86,047
Investments in unconsolidated entities	275,850		265,418
Investments held-to-maturity	210,882		179,659
Other	98,170		120,438
	$	909,249	1,153,840
Liabilities:
Notes and other debts payable (3)	$	438,879	625,081
Other	49,225		94,975
	$	488,104	720,056

(1)

Restricted cash primarily consisted of cash set aside for future investments on behalf of a real estate investment trust that Rialto is a sub-advisor to. It also included upfront deposits and application fees Rialto Mortgage Finance ("RMF") receives before originating loans and is recognized as income once the loan has been originated, as well as cash held in escrow by the Company’s loan servicer provider on behalf of customers and lenders and is disbursed in accordance with agreements between the transacting parties.


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


(3)	As of February 28, 2018 and November 30, 2017, notes and other debts payable primarily included $249.1 million and $349.4 million, respectively, related to Rialto's 7.00% senior notes due December 2018, and $45.9 million and $162.1 million, respectively, related to

Rialto's warehouse repurchase facilities. Subsequent to February 28, 2018, the remaining principal balance of Rialto's 7.00% senior notes due December 2018 was paid off.

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



(In thousands)	February 28, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	16,249	8,676
Receivables (1)	72,613		69,678
Land under development	332,291		208,618
Investment in unconsolidated entities	437,367		407,544
Other assets	34,310		16,209
	$	892,830	710,725
Liabilities:
Accounts payable and other liabilities	$	141,057	149,715

(1)

Receivables primarily related to general contractor services, net of deferrals and management fee income receivables due from unconsolidated entities.

Schedule of Line of Credit Facilities

At February 28, 2018, the Lennar Financial Services segment warehouse facilities were as follows:



(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures March 2018 (1)	$	150,000
364-day warehouse repurchase facility that matures June 2018	400,000
364-day warehouse repurchase facility that matures June 2018 (2)	300,000
364-day warehouse repurchase facility that matures September 2018	300,000
364-day warehouse repurchase facility that matures December 2018 (3)	400,000
Total	$	1,550,000


(1)	Maximum aggregate commitment includes an uncommitted amount of $75 million. Subsequent to February 28, 2018, the warehouse repurchase facility maturity was extended to March 2019.


(2)	Maximum aggregate commitment includes an uncommitted amount of $300 million.

(3)

Maximum aggregate commitment includes an uncommitted amount of $250 million.At February 28, 2018, Rialto's warehouse facilities were as follows:



(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures October 2018 (one year extension)	$	400,000
364-day warehouse repurchase facility that matures November 2018	200,000
364-day warehouse repurchase facility that matures December 2018	200,000
364-day warehouse repurchase facility that matures December 2019	200,000
Total - Loan origination and securitization business (RMF)	$	1,000,000
Warehouse repurchase facility that matures August 2018 (two - one year extensions) (1)	100,000
Total	$	1,100,000

(1)

Rialto uses this warehouse repurchase facility to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans receivable, net. There were no borrowings under this facility as of both February 28, 2018 and November 30, 2017.

Equity Method Investments

The total debt of the Lennar Homebuilding unconsolidated entities in which the Company has investments, including Lennar's maximum recourse exposure, were as follows:



(Dollars in thousands)	February 28, 2018			November 30, 2017
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	62,720		64,197
Non-recourse land seller debt and other debt	1,997			1,997
Non-recourse debt with completion guarantees	251,235			255,903
Non-recourse debt without completion guarantees	355,844			351,800
Non-recourse debt to the Company	671,796			673,897
The Company’s maximum recourse exposure (1)	70,096			69,181
Debt issue costs	(5,296		)	(5,747	)
Total debt	$	736,596		737,331
The Company’s maximum recourse exposure as a % of total JV debt	10		%	9	%

(1)

As of both February 28, 2018 and November 30, 2017, the Company's maximum recourse exposure was primarily related to the Company providing repayment guarantees on three unconsolidated entities' debtBalance Sheets



(In thousands)	February 28, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	816,965	953,261
Inventories	4,155,615		3,751,525
Other assets	1,063,853		1,061,507
	$	6,036,433	5,766,293
Liabilities and equity:
Accounts payable and other liabilities	$	907,108	832,151
Debt (1)	736,596		737,331
Equity	4,392,729		4,196,811
	$	6,036,433	5,766,293

(1)

Debt presented above is net of debt issuance costs of $5.3 million and $5.7 million, as of February 28, 2018 and November 30, 2017, respectively. Summarized condensed financial information on a combined 100% basis related to Lennar Homebuilding’s unconsolidated entities that are accounted for by the equity method was as follows:Statements of Operations



	Three Months Ended
	February 28,
(In thousands)	2018			2017
Revenues	$	68,872		46,136
Costs and expenses	108,424			79,066
Net loss of unconsolidated entities	$	(39,552	)	(32,930	)
Lennar Homebuilding equity in loss from unconsolidated entities	$	(14,287	)	(11,534	)

Statements of Operations



	Three Months Ended
	February 28,
(In thousands)	2018		2017
Revenues	$	89,764	57,156
Costs and expenses	22,071		28,001
Other income, net (1)	49,187		327
Net earnings of unconsolidated entities	$	116,880	29,482
Rialto equity in earnings from unconsolidated entities	$	9,114	722

(1)

Other income, net, includes realized and unrealized gains (losses) on investments.The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and other investments:



								February 28, 2018		February 28, 2018		November 30, 2017
(Dollars in thousands)	Inception Year	Equity Commitments		Equity Commitments Called		Commitment to Fund by the Company		Funds Contributed by the Company		Investment
Rialto Real Estate Fund, LP	2010	$	700,006	$	700,006	$	75,000	$	75,000	$	41,871	41,860
Rialto Real Estate Fund II, LP	2012	1,305,000		1,305,000		100,000		100,000		87,884		86,904
Rialto Mezzanine Partners Fund, LP	2013	300,000		300,000		33,799		33,799		14,917		19,189
Rialto Capital CMBS Funds	2014	119,174		119,177		52,474		52,474		54,409		54,018
Rialto Real Estate Fund III	2015	1,887,000		699,590		140,000		49,962		49,882		41,223
Rialto Credit Partnership, LP	2016	220,000		208,181		19,999		18,925		17,190		13,288
Other investments										9,697		8,936
										$	275,850	265,418

Summarized condensed financial information on a combined 100% basis related to Rialto’s investments in unconsolidated entities that are accounted for by the equity method was as follows:

Balance Sheets



(In thousands)	February 28, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	44,270	95,552
Loans receivable	591,157		538,317
Real estate owned	346,320		348,601
Investment securities	1,942,045		1,849,795
Investments in partnerships	416,311		393,874
Other assets	58,014		42,949
	$	3,398,117	3,269,088
Liabilities and equity:
Accounts payable and other liabilities	$	42,177	48,374
Notes payable (1)	535,790		576,810
Equity	2,820,150		2,643,904
	$	3,398,117	3,269,088

(1)

Notes payable are net of debt issuance costs of $4.1 million and $3.1 million, as of February 28, 2018 and November 30, 2017, respectively.

Summarized condensed financial information on a combined 100% basis related to Lennar Multifamily's investments in unconsolidated entities that are accounted for by the equity method was as follows:

Balance Sheets



(In thousands)	February 28, 2018		November 30, 2017
Assets:
Cash and cash equivalents	$	33,666	37,073
Operating properties and equipment	3,167,040		2,952,070
Other assets	31,431		36,772
	$	3,232,137	3,025,915
Liabilities and equity:
Accounts payable and other liabilities	$	211,429	212,123
Notes payable (1)	959,563		879,047
Equity	2,061,145		1,934,745
	$	3,232,137	3,025,915


(1)	Notes payable are net of debt issuance costs of $17.6 million as of both February 28, 2018 and November 30, 2017, respectively.

Statements of Operations



	Three Months Ended
	February 28,
(In thousands)	2018			2017
Revenues	$	23,952		11,617
Costs and expenses	31,795			22,346
Other income, net	7,307			50,539
Net earnings (loss) of unconsolidated entities	$	(536	)	39,810
Lennar Multifamily equity in earnings from unconsolidated entities (1)	$	2,742		23,147

(1)

During the three months ended February 28, 2018, the Lennar Multifamily segment sold one operating property through an unconsolidated entity resulting in the segment's $4.1 million share of gains. During the three months ended February 28, 2017, the Lennar Multifamily segment sold two operating properties through its unconsolidated entities resulting in the segment's $26.0 million share of gains.The Company’s recorded investments in unconsolidated entities were as follows:



(In thousands)	February 28, 2018		November 30, 2017
Lennar Homebuilding	$	990,723	900,769
Rialto	$	275,850	265,418
Lennar Multifamily	$	437,367	407,544