Operating and Reporting Segments

3 Months Ended

Feb. 28, 2021

The Company's homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennar brand name. In addition, the Company's homebuilding operations purchase, develop and sell land to third parties. The Company's chief operating decision makers manage and assess the Company’s performance at a regional level. Therefore, the Company performed an assessment of its operating segments in accordance with ASC 280, Segment Reporting, and determined that the following are its operating and reportable segments:

Homebuilding segments: (1) East (2) Central (3) Texas (4) West

(5) Financial Services

(6) Multifamily

(7) Lennar Other

The assets and liabilities related to the Company’s segments were as follows:


(In thousands)	February 28, 2021
Assets:	Homebuilding		Financial Services	Multifamily	Lennar Other	Total
Cash and cash equivalents	$	2,421,411	117,856	25,644	3,888	2,568,799
Restricted cash	17,878		8,521	—	—	26,399
Receivables, net (1)	300,134		495,484	96,842	—	892,460
Inventories	17,692,942		—	289,531	—	17,982,473
Loans held-for-sale (2)	—		1,094,600	—	—	1,094,600

Investments in equity securities (3)	—		—	—	666,956	666,956
Investments available-for-sale (4)	—		—	—	41,247	41,247
Loans held-for-investment, net	—		69,973	—	—	69,973
Investments held-to-maturity	—		163,290	—	—	163,290
Investments in unconsolidated entities	1,077,353		—	704,964	315,617	2,097,934
Goodwill	3,442,359		189,699	—	—	3,632,058
Other assets	1,162,564		78,128	66,739	8,360	1,315,791
	$	26,114,641	2,217,551	1,183,720	1,036,068	30,551,980
Liabilities:
Notes and other debts payable, net	$	5,976,168	963,070	—	1,906	6,941,144
Other liabilities	4,167,833		150,013	235,651	39,888	4,593,385
	$	10,144,001	1,113,083	235,651	41,794	11,534,529


(In thousands)	November 30, 2020
Assets:	Homebuilding		Financial Services	Multifamily	Lennar Other	Total
Cash and cash equivalents	$	2,703,986	116,171	38,963	3,918	2,863,038
Restricted cash	15,211		54,481	—	—	69,692
Receivables, net (1)	298,671		552,779	86,629	—	938,079
Inventories	16,925,228		—	249,920	—	17,175,148
Loans held-for-sale (2)	—		1,490,105	—	—	1,490,105

Investments in equity securities (3)	—		—	—	68,771	68,771
Investments available-for-sale (4)	—		—	—	53,497	53,497
Loans held-for-investment, net	—		72,626	—	—	72,626
Investments held-to-maturity	—		164,230	—	—	164,230
Investments in unconsolidated entities	953,177		—	724,647	387,097	2,064,921
Goodwill	3,442,359		189,699	—	—	3,632,058
Other assets	1,190,793		68,027	75,749	8,443	1,343,012
	$	25,529,425	2,708,118	1,175,908	521,726	29,935,177
Liabilities:
Notes and other debts payable, net	$	5,955,758	1,463,919	—	1,906	7,421,583
Other liabilities	3,969,893		180,329	252,911	11,060	4,414,193
	$	9,925,651	1,644,248	252,911	12,966	11,835,776

(1)Receivables, net for Financial Services primarily related to loans sold to investors for which the Company had not yet been paid as of February 28, 2021 and November 30, 2020, respectively.

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

(3)Investments in equity securities include investments of $85.1 million and $61.6 million without readily available fair values as of February 28, 2021 and November 30, 2020, respectively.

(4)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.

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


	Three Months Ended February 28, 2021
(In thousands)	Homebuilding		Financial Services	Multifamily	Lennar Other	Corporate and unallocated	Total
Revenues	$	4,943,056	244,069	131,443	6,900	—	5,325,468
Operating earnings (loss)	833,180		146,207	(874)	471,346	—	1,449,859
Corporate general and administrative expenses	—		—	—	—	110,531	110,531
Charitable foundation contribution	—		—	—	—	12,314	12,314
Earnings (loss) before income taxes	833,180		146,207	(874)	471,346	(122,845)	1,327,014

	Three Months Ended February 29, 2020
Revenues	$	4,172,116	198,661	132,617	1,943	—	4,505,337
Operating earnings	460,398		47,317	1,785	899	—	510,399
Corporate general and administrative expenses	—		—	—	—	82,634	82,634
Charitable foundation contribution	—		—	—	—	4,213	4,213
Earnings before income taxes	460,398		47,317	1,785	899	(86,847)	423,552

Homebuilding Segments

Information about homebuilding activities in states which are not economically similar to other states in the same geographic area is grouped under "Homebuilding Other," which is not considered a reportable segment.

Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s Homebuilding segments primarily 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 the Company’s unconsolidated entities. Operating earnings (loss) for the Homebuilding segments consist of revenues generated from the sales of homes and land, other revenues from management fees and forfeited deposits, equity in earnings (loss) from unconsolidated entities and other income

(expense), net, less the cost of homes sold and land sold, and selling, general and administrative expenses incurred by the segment.

The Company’s reportable Homebuilding segments and all other homebuilding operations not required to be reported separately have homebuilding divisions located in:

East: Florida, New Jersey, Pennsylvania and South Carolina

Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina and Virginia

Texas: Texas

West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington

Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint Holdings, LLC ("FivePoint")

The assets related to the Company’s homebuilding segments were as follows:



(In thousands)	East		Central	Texas	West	Other	Corporate and Unallocated	Total Homebuilding
February 28, 2021	$	5,540,055	3,561,065	2,353,652	11,101,983	1,314,990	2,242,896	26,114,641
November 30, 2020	5,308,114		3,438,600	2,150,916	10,504,374	1,301,618	2,825,803	25,529,425

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


	Three Months Ended February 28, 2021
(In thousands)	East		Central	Texas	West	Other	Total Homebuilding
Revenues	$	1,355,942	928,442	644,078	2,009,579	5,015	4,943,056
Operating earnings (loss)	262,083		132,023	129,643	321,706	(12,275)	833,180

	Three Months Ended February 29, 2020
Revenues	$	1,152,332	789,510	473,228	1,748,769	8,277	4,172,116
Operating earnings (loss)	148,754		55,723	53,073	224,907	(22,059)	460,398

Financial Services

Operations of the Financial Services segment include primarily mortgage financing, title and closing services primarily for buyers of the Company’s homes. It also includes originating and selling into securitizations commercial mortgage loans through its LMF Commercial business. Financial Services’ operating earnings consist of revenues generated primarily from mortgage financing, title and closing services, and property and casualty insurance, less the cost of such services and certain selling, general and administrative expenses incurred by the segment. The Financial Services segment operates generally in the same states as the Company’s homebuilding operations.

At February 28, 2021, the Financial Services warehouse facilities were all 364-day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows:


(In thousands)	Maximum Aggregate Commitment
Residential facilities maturing:
March 2021(1)	$	100,000
June 2021	600,000
July 2021	200,000
December 2021	500,000
Total - Residential facilities	$	1,400,000
LMF Commercial facilities maturing
November 2021	$	100,000
December 2021(2)	611,438


Total - LMF Commercial facilities	$	711,438
Total	$	2,111,438

(1)Subsequent to February 28, 2021, the maturity due date was extended to May 2021.

(2)Includes $11.4 million warehouse repurchase facility used by LMF Commercial to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans held-for-investment, net.

The Financial Services segment uses the residential facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to the Company and are expected to be

renewed or replaced with other facilities when they mature. The LMF Commercial facilities finance LMF Commercial loan originations and securitization activities and were secured by up to an 80% interest in the originated commercial loans financed.

Borrowings and collateral under the facilities and their prior year predecessors were as follows:


(In thousands)	February 28, 2021		November 30, 2020
Borrowings under the residential facilities	$	631,784	1,185,797
Collateral under the residential facilities	653,698		1,231,619
Borrowings under the LMF Commercial facilities	178,627		124,617

If the facilities are not renewed or replaced, the borrowings under the lines of credit will be repaid by selling the mortgage loans held-for-sale to investors and by collecting receivables on loans sold but not yet paid for. Without the facilities, the Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.

Substantially all of the residential loans the Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Purchasers sometimes try to defray losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan sale agreements. Mortgage investors could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors. The Company establishes accruals for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements. While the Company believes that it has adequately reserved for known losses and projected repurchase requests, given the volatility in the residential mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations, additional recourse expense may be incurred. Loan origination liabilities are included in Financial Services’ liabilities in the Company's condensed consolidated balance sheets. The activity in the Company’s loan origination liabilities was as follows:


	Three Months Ended
(In thousands)	February 28, 2021		February 29, 2020

Loan origination liabilities, beginning of period	$	7,569	9,364
Provision for losses	966		776


Payments/settlements	(102)		(144)
Loan origination liabilities, end of period	$	8,433	9,996

LMF Commercial - loans held-for-sale

LMF Commercial originated commercial loans as follows:


	Three Months Ended
(Dollars in thousands)	February 28, 2021		February 29, 2020

Originations (1)	$	219,500	412,250


Sold	282,965		314,439
Securitizations	2		2

(1)During both the three months ended February 28, 2021 and February 29, 2020 all the commercial loans originated were recorded as loans held-for-sale.

Investments held-to-maturity

At February 28, 2021 and November 30, 2020, the Financial Services' held commercial mortgage-backed securities ("CMBS"). These securities are classified as held-to-maturity based on its intent and ability to hold the securities until maturity and changes in estimated cash flows are reviewed periodically to determine if an other-than-temporary impairment has occurred. Based on the segment’s assessment, no impairment charges were recorded during either the three months ended February 28, 2021 or February 29, 2020. The Company has financing agreements to finance CMBS that have been purchased as investments by the Financial Services segment.

Details related to Financial Services' CMBS were as follows:


(Dollars in thousands)	February 28, 2021			November 30, 2020
Carrying value	$	163,290		164,230
Outstanding debt, net of debt issuance costs	152,659			153,505
Incurred interest rate	3.4		%	3.4	%


	February 28, 2021
Discount rates at purchase	6%	—	84%
Coupon rates	2.0%	—	5.3%
Distribution dates	October 2027		December 2028
Stated maturity dates	October 2050		December 2051

Multifamily

The Company is actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. The Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.

Operations of the Multifamily segment include revenues generated from the sales of land, revenue from construction activities, and management and promote fees generated from joint ventures and equity in earnings (loss) from unconsolidated entities and other gains (which includes sales of buildings), less the cost of sales of land sold, expenses related to construction activities and general and administrative expenses.

Lennar Other

Lennar Other primarily includes strategic investments in technology companies, primarily managed by the Company's LENX subsidiary, and fund interests the Company retained when it sold the Rialto asset and investment management platform. Operations of the Lennar Other segment include operating earnings (loss) consisting of revenues generated primarily from the Company's share of carried interests in the Rialto fund investments retained after the sale of Rialto's asset and investment management platform, along with equity in earnings (loss) from the Rialto fund investments and strategic technology investments, gains (losses) from investments in equity securities and other income (expense), net from the remaining assets related to the Company's former Rialto segment.

During the three months ended February 28, 2021, the Company recognized a gain of $469.7 million related to a strategic investment, Opendoor, which began trading on the Nasdaq stock market in December 2020. The gain relates to the mark to market of the Company's share holdings in the public entity net of carried interest. The gain was recognized due to the investment now being accounted for as an investment in equity securities which is held at fair value and the change in fair value is recognized through earnings. In addition to Opendoor, two other of the Company's strategic technology investments, Hippo Home Insurance and Doma, formerly States Title, have announced agreements to merge with publicly traded special purpose acquisition companies.

During the three months ended February 28, 2021, the Company entered into a definitive agreement with Sunnova Energy International Inc. ("Sunnova") under which Sunnova will acquire the Company's residential solar platform, Sunstreet. Under the agreement, the Company would receive up to 7.22 million shares of Sunnova common stock, with 3.33 million shares in initial consideration payable at closing. The remaining shares would be payable upon achievement of two earnouts. The Company expects to record a significant gain upon the closing of the sale, which is anticipated to be in the second quarter of 2021.