Investments in Unconsolidated Entities

6 Months Ended

May 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Homebuilding Unconsolidated Entities

As of May 31, 2020 and November 30, 2019, the Company’s recorded investments in Homebuilding unconsolidated entities were $973.0 million and $1.0 billion, respectively, while the underlying equity in Homebuilding unconsolidated entities partners’ net assets as of both May 31, 2020 and November 30, 2019 was $1.3 billion. The basis difference was primarily as a

result of the Company contributing its investment in three strategic joint ventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to the Company. Included in the Company's recorded investments in Homebuilding unconsolidated entities is the Company's 40% ownership of FivePoint. As of May 31, 2020 and November 30, 2019, the carrying amount of the Company's FivePoint investment was $376.9 million and $374.0 million, respectively.

The Homebuilding unconsolidated entities in which the Company has investments usually finance their activities with a combination of partner equity and debt financing. In some instances, the Company and its partners have guaranteed debt of certain unconsolidated entities.

Indebtedness of an unconsolidated entity is secured by its own assets. Some unconsolidated entities own multiple properties and other assets. There is no cross collateralization of debt of different unconsolidated entities. The Company also does not use its investment in one unconsolidated entity as collateral for the debt of another unconsolidated entity or commingle funds among Homebuilding unconsolidated entities.

In connection with loans to a Homebuilding unconsolidated entity, the Company and its partners often guarantee to a lender, either jointly and severally or on a several basis, any or all of the following: (i) the completion of the development, in whole or in part, for which the financing was obtained (ii) indemnification of the lender against losses from environmental issues, (iii) indemnification of the lender from "bad boy acts" of the unconsolidated entity (or full recourse liability in the event of an unauthorized transfer or bankruptcy) and (iv) that the loan to value and/or loan to cost will not exceed a certain percentage (maintenance or remargining guarantee) or that a percentage of the outstanding loan will be repaid (repayment guarantee).

The total debt of the Homebuilding unconsolidated entities in which the Company has investments was $1.1 billion as of both May 31, 2020 and November 30, 2019, of which the Company's maximum recourse exposure was $4.9 million and $10.8 million as of May 31, 2020 and November 30, 2019, respectively. In most instances in which the Company has guaranteed debt of an unconsolidated entity, the Company’s partners have also guaranteed that debt and are required to contribute their share of the guarantee payments. In a repayment guarantee, the Company and its venture partners guarantee repayment of a portion or all of the debt in the event of default before the lender would have to exercise its rights against the collateral.

If the Company is required to make a payment under any guarantee, the payment would constitute a capital contribution or loan to the Homebuilding unconsolidated entity and increase the Company’s investment in the unconsolidated entity and its share of any funds the unconsolidated entity distributes.

As of both May 31, 2020 and November 30, 2019, the fair values of the repayment guarantees, maintenance guarantees, and completion guarantees were not material. The Company believes that as of May 31, 2020, in the event it becomes legally obligated to perform under a guarantee of the obligation of a Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral would be sufficient to repay at least a significant portion of the obligation or the Company and its partners would contribute additional capital into the venture. In certain instances, the Company has placed performance letters of credit and surety bonds with municipalities with regard to obligations of its joint ventures (see Note 7 of the Notes to the Condensed Consolidated Financial Statements).

Multifamily Unconsolidated Entities

The unconsolidated entities in which the Multifamily segment has investments usually finance their activities with a combination of partner equity and debt financing. In connection with many of the loans to Multifamily unconsolidated entities, the Company (or entities related to them) has been required to give guarantees of completion and cost over-runs to the lenders and partners. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. Additionally, the Company guarantees the construction costs of the project as construction cost over-runs would be paid by the Company. Generally, these payments would increase the Company's investment in the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds. As of both May 31, 2020 and November 30, 2019, the fair value of the completion guarantees was immaterial. As of May 31, 2020 and November 30, 2019, Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $813.8 million and $867.3 million, respectively.

In many instances, the Multifamily segment is appointed as the construction, development and property manager for its Multifamily unconsolidated entities and receives fees for performing this function. During the three and six months ended May 31, 2020, the Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $14.6 million and $28.4 million, respectively. During the three and six months ended May 31, 2019, the Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $13.3 million and $26.4 million, respectively.

The Multifamily segment also provides general contractor services for construction of some of the rental properties owned by unconsolidated entities in which the Company has an investment. During the three and six months ended May 31, 2020, the

Multifamily segment provided general contractor services, net of deferrals, totaling $104.5 million and $198.4 million, respectively, which were partially offset by costs related to those services of $100.3 million and $190.5 million, respectively. During the three and six months ended May 31, 2019, the Multifamily segment provided general contractor services, net of deferrals, totaling $99.2 million and $181.6 million, respectively, which were partially offset by costs related to those services of $95.2 million and $174.6 million, respectively.

The Multifamily segment includes Multifamily Venture Fund I ("LMV I") and Multifamily Venture Fund II LP ("LMV II"), which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets. Details of each as of and during the six months ended May 31, 2020 are included below:


	May 31, 2020
(In thousands)	LMV I		LMV II
Lennar's carrying value of investments	$	355,136	213,635
Equity commitments	2,204,016		1,257,700
Equity commitments called	2,127,560		754,177
Lennar's equity commitments	504,016		381,000
Lennar's equity commitments called	493,730		227,372
Lennar's remaining commitments	10,286		153,628
Distributions to Lennar during the six months ended May 31, 2020	19,969		—