Multifamily Segment (Tables)

9 Months Ended

Aug. 31, 2019

Segment Reporting [Abstract]

Schedule of Assets and Liabilities

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

(In thousands)	August 31, 2019		November 30, 2018
Assets:
Homebuilding East	$	6,996,012	7,183,758
Homebuilding Central	2,866,868		2,522,799
Homebuilding Texas	2,428,952		2,311,760
Homebuilding West	11,003,703		10,291,385
Homebuilding Other	1,202,051		1,013,367
Financial Services	2,329,786		2,778,910
Multifamily	1,020,842		874,219
Lennar Other	552,968		588,959
Corporate and unallocated	1,058,265		1,001,024
Total assets	$	29,459,447	28,566,181
Homebuilding goodwill	$	3,442,359	3,442,359
Financial Services goodwill (1)	$	215,516	237,688

(1) Decrease in goodwill related to the Financial Services' segment sale of substantially all of its retail mortgage and its real estate brokerage business.

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2019			2018		2019		2018
Revenues:
Homebuilding East	$	1,843,670		1,701,622		4,807,825		4,181,328
Homebuilding Central	724,753			670,908		1,773,605		1,562,000
Homebuilding Texas	713,376			729,150		1,825,105		1,786,015
Homebuilding West	2,063,323			2,174,564		5,747,243		5,447,133
Homebuilding Other	93,876			9,498		104,540		35,356
Financial Services (1)	224,502			258,208		572,029		704,004
Multifamily	183,958			101,064		428,764		312,013
Lennar Other	9,600			27,555		28,919		84,572
Total revenues (2)	$	5,857,058		5,672,569		15,288,030		14,112,421
Operating earnings (loss) (3):
Homebuilding East	$	256,715		199,205		602,562		454,427
Homebuilding Central	79,209			69,018		165,479		103,192
Homebuilding Texas	78,298			70,742		185,950		122,407
Homebuilding West	259,424			292,050		722,989		656,074
Homebuilding Other (4)	(14,664		)	(22,261	)	(66,614	)	111,724
Total Homebuilding operating earnings	658,982			608,754		1,610,366		1,447,824
Financial Services	74,698			60,515		149,887		142,151
Multifamily	10,225			(3,853	)	12,700		9,734
Lennar Other	15,793			8,840		20,724		15,580
Corporate and unallocated (5)	(92,615		)	(108,338	)	(248,071	)	(389,133	)
Earnings before income taxes	$	667,083		565,918		1,545,606		1,226,156

(1) Financial Services revenues are lower period over period primarily due to the loss of revenues as a result of the sales of substantially all of the segment's retail mortgage business and the segment's retail agency business and title insurance underwriter.

(2) Total revenues were net of sales incentives of $330.2 million ($24,400 per home delivered) and $890.7 million ($25,400 per home delivered) for the three and nine months ended August 31, 2019, respectively, compared to $289.0 million ($22,900 per home delivered) and $717.0 million ($22,800 per home delivered) for the three and nine months ended August 31, 2018, respectively.

(3) All Homebuilding segments were impacted by purchase accounting adjustments that totaled $84.2 million and $376.0 million for the three and nine months ended August 31, 2018, respectively.

(4) Homebuilding Other operating loss during the nine months ended August 31, 2019 included a one-time loss of $48.9 million from the consolidation of a previously unconsolidated entity. Homebuilding Other operating earnings during the nine months ended August 31, 2018 included $164.9 million related to a gain on the sale of an 80% interest in one of Homebuilding's strategic joint ventures, Treasure Island Holdings.

(5)

Corporate and unallocated includes corporate, general and administrative expenses, and for the three and nine months ended August 31, 2018, $12.0 million and $140.1 million, respectively, of acquisition and integration costs related to the CalAtlantic acquisition.

The assets and liabilities related to the Financial Services segment were as follows:

(In thousands)	August 31, 2019		November 30, 2018
Assets:
Cash and cash equivalents	$	228,217	188,485
Restricted cash	10,189		17,944
Receivables, net (1)	255,083		731,169
Loans held-for-sale (2)	1,228,592		1,213,889
Loans held-for-investment, net	73,366		70,216
Investments held-to-maturity	193,268		189,472
Investments available-for-sale (3)	3,597		4,161
Goodwill	215,516		237,688
Other assets (4)	121,958		125,886
	$	2,329,786	2,778,910
Liabilities:
Notes and other debts payable	$	1,156,078	1,558,702
Other liabilities (5)	299,378		309,500
	$	1,455,456	1,868,202

(1) Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of August 31, 2019 and November 30, 2018, respectively.

(2) Loans held-for-sale related to unsold residential and commercial 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 August 31, 2019 and November 30, 2018, other assets included mortgage loan commitments carried at fair value of $25.9 million and $16.4 million, respectively, and mortgage servicing rights carried at fair value of $23.1 million and $37.2 million, respectively.

(5)

As of August 31, 2019 and November 30, 2018, other liabilities included $63.4 million and $60.3 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. In addition, as of August 31, 2019 and November 30, 2018, other liabilities also included forward contracts carried at fair value of $9.6 million and $10.4 million, respectively.

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

(In thousands)	August 31, 2019		November 30, 2018
Assets:
Cash and cash equivalents	$	16,478	7,832
Receivables (1)	78,016		73,829
Land under development	284,595		277,894
Investments in unconsolidated entities	539,697		481,129
Other assets	102,056		33,535
	$	1,020,842	874,219
Liabilities:
Accounts payable and other liabilities	$	176,914	170,616
Notes payable (2)	36,140		—
	$	213,054	170,616

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

(2)

Notes payable are net of debt issuance costs.

The assets and liabilities related to Lennar Other were as follows:

(In thousands)	August 31, 2019		November 30, 2018
Assets:
Cash and cash equivalents	$	5,362	24,334
Restricted cash	975		7,175
Real estate owned, net	2,943		25,632
Investments in unconsolidated entities	447,734		424,104
Investments held-to-maturity	60,803		59,974
Other assets	35,151		47,740
	$	552,968	588,959
Liabilities:
Notes and other debts payable	$	15,131	14,488
Other liabilities	9,496		53,020
	$	24,627	67,508

I

Equity Method Investments

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

(Dollars in thousands)	August 31, 2019			November 30, 2018
Non-recourse bank debt and other debt (partner’s share of several recourse)	$	49,995		48,313
Non-recourse debt with completion guarantees	154,774			239,568
Non-recourse debt without completion guarantees	647,010			861,371
Non-recourse debt to the Company	851,779			1,149,252
The Company’s maximum recourse exposure (1)	10,036			65,707
Debt issuance costs	(9,725		)	(12,403	)
Total debt (1)	$	852,090		1,202,556
The Company’s maximum recourse exposure as a % of total JV debt	1		%	5	%

(1)

As of August 31, 2019 and November 30, 2018, the Company's maximum recourse exposure was primarily related to the Company providing repayment guarantees on two and four unconsolidated entities' debt, respectively. The decrease in maximum recourse exposure and total debt was primarily related to the Company's consolidation of a previously unconsolidated entity in the second quarter of 2019.

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

Statements of Operations

	Three Months Ended					Nine Months Ended
	August 31,					August 31,
(In thousands)	2019			2018		2019		2018
Revenues	$	74,939		153,136		231,269		322,277
Costs and expenses	99,611			195,525		313,725		451,627
Other income (1)	513			13,903		76,578		119,095
Net loss of unconsolidated entities	$	(24,159	)	(28,486	)	(5,878	)	(10,255	)
Homebuilding equity in loss from unconsolidated entities	$	(10,459	)	(16,739	)	(4,601	)	(43,537	)

(1)

During the nine months ended August 31, 2019, other income was primarily attributable to a $64.9 million gain on the settlement of contingent consideration recorded by one Homebuilding unconsolidated entity, of which the Company's pro-rata share was $25.9 million. During the nine months ended August 31, 2018, other income was primarily due to FivePoint recording income resulting from the Tax Cuts and Jobs Act of 2017’s reduction in its corporate tax rate to reduce its liability pursuant to its tax receivable agreement (“TRA Liability”) with its non-controlling interests. However, the Company has a 70% interest in the FivePoint TRA Liability. Therefore, the Company did not include in Homebuilding’s equity in earnings (loss) from unconsolidated entities its pro-rata share of earnings related to the Company’s portion of the TRA Liability. As a result, the Company’s unconsolidated entities have net earnings, but the Company has an equity in loss from unconsolidated entities.

Balance Sheets

(In thousands)	August 31, 2019		November 30, 2018
Assets:
Cash and cash equivalents	$	536,251	781,833
Inventories	4,262,446		4,291,470
Other assets	1,012,391		1,045,274
	$	5,811,088	6,118,577
Liabilities and equity:
Accounts payable and other liabilities	$	800,962	874,355
Debt (1)	852,090		1,202,556
Equity	4,158,036		4,041,666
	$	5,811,088	6,118,577
Homebuilding investments in unconsolidated entities (2)	$	1,002,936	870,201

(1) Debt presented above is net of debt issuance costs of $9.7 million and $12.4 million, as of August 31, 2019 and November 30, 2018, respectively. The decrease in debt was primarily related to the Company's consolidation of a previously unconsolidated entity in the second quarter of 2019.

(2)

Homebuilding investments in unconsolidated entities as of November 30, 2018, does not include $62.0 million of the negative investment balance for one unconsolidated entity as it was reclassed to other liabilities.

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

Balance Sheets

(Dollars in thousands)	August 31, 2019		November 30, 2018
Assets:
Cash and cash equivalents	$	28,260	61,571
Operating properties and equipment/construction in progress	4,188,948		3,708,613
Other assets	57,298		40,899
	$	4,274,506	3,811,083
Liabilities and equity:
Accounts payable and other liabilities	$	200,850	199,119
Notes payable (1)	1,731,702		1,381,656
Equity	2,341,954		2,230,308
	$	4,274,506	3,811,083
Multifamily investments in unconsolidated entities	$	539,697	481,129

(1) Notes payable are net of debt issuance costs of $21.5 million and $15.7 million, as of August 31, 2019 and November 30, 2018, respectively.

Statements of Operations

	Three Months Ended				Nine Months Ended
	August 31,				August 31,
(Dollars in thousands)	2019		2018		2019		2018
Revenues	$	44,338	31,907		118,318		82,980
Costs and expenses	64,423		47,235		175,636		122,512
Other income, net	33,178		13,588		54,578		52,457
Net earnings (loss) of unconsolidated entities	$	13,093	(1,740	)	(2,740	)	12,925
Multifamily equity in earnings (loss) from unconsolidated entities and other gain (1)	$	7,883	(1,730	)	15,446		15,293

(1)

During the three months ended August 31, 2019, the Multifamily segment sold, through its unconsolidated entities, one operating property resulting in the segment's $12.6 million share of gain. During the nine months ended August 31, 2019, the Multifamily segment sold, through its unconsolidated entities, two operating properties and an investment in an operating property resulting in the segment's $28.1 million share of gains. The gain of $11.9 million recognized on the sale of the investment in an operating property and recognition of the Company's share of deferred development fees that were capitalized at the joint venture level are included in Multifamily equity in earnings (loss) from unconsolidated entities and other gain, and are not included in net earnings (loss) of unconsolidated entities. During the three and nine months ended August 31, 2018, the Multifamily segment sold one and four operating properties, respectively, through its unconsolidated entities resulting in the segment's $1.7 million and $23.3 million share of gains, respectively.