Operating and Reporting Segments

3 Months Ended

Feb. 28, 2022

Segment Reporting [Abstract]

Operating and Reporting Segments

Operating and Reporting Segments

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, 2022
Assets:	Homebuilding		Financial Services	Multifamily	Lennar Other	Total
Cash and cash equivalents	$	1,366,597	168,032	34,439	2,757	1,571,825
Restricted cash	27,025		6,724	—	—	33,749
Receivables, net (1)	456,185		358,866	101,334	—	916,385
Inventories	20,592,702		—	395,507	—	20,988,209
Loans held-for-sale (2)	—		1,199,603	—	—	1,199,603
Investments in equity securities (3)	—		—	—	670,980	670,980
Investments available-for-sale (4)	—		—	—	34,760	34,760
Loans held-for-investment, net	—		33,168	—	—	33,168
Investments held-to-maturity	—		156,587	—	—	156,587
Investments in unconsolidated entities	1,066,256		—	661,252	333,755	2,061,263
Goodwill	3,442,359		189,699	—	—	3,632,058
Other assets	1,141,362		70,654	58,038	66,611	1,336,665
	$	28,092,486	2,183,333	1,250,570	1,108,863	32,635,252
Liabilities:
Notes and other debts payable, net	$	4,639,222	1,197,360	16,930	—	5,853,512
Accounts payable and other liabilities	5,382,549		136,785	294,845	120,129	5,934,308
	$	10,021,771	1,334,145	311,775	120,129	11,787,820

(In thousands)	November 30, 2021
Assets:	Homebuilding		Financial Services	Multifamily	Lennar Other	Total
Cash and cash equivalents	$	2,735,213	167,021	16,850	2,660	2,921,744
Restricted cash	21,927		12,012	—	—	33,939
Receivables, net (1)	490,278		708,165	98,405	—	1,296,848
Inventories	18,715,304		—	454,093	—	19,169,397
Loans held-for-sale (2)	—		1,636,351	—	—	1,636,351
Investments in equity securities (3)	—		—	—	1,006,599	1,006,599
Investments available-for-sale (4)	—		—	—	41,654	41,654
Loans held-for-investment, net	—		44,582	—	—	44,582
Investments held-to-maturity	—		157,808	—	—	157,808
Investments in unconsolidated entities	972,084		—	654,029	346,270	1,972,383
Goodwill	3,442,359		189,699	—	—	3,632,058
Other assets	1,090,654		48,729	88,370	66,662	1,294,415
	$	27,467,819	2,964,367	1,311,747	1,463,845	33,207,778
Liabilities:
Notes and other debts payable, net	$	4,652,338	1,726,026	—	—	6,378,364
Accounts payable and other liabilities	5,217,904		180,317	288,930	145,981	5,833,132
	$	9,870,242	1,906,343	288,930	145,981	12,211,496

(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, 2022 and November 30, 2021, 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 $168.2 million and $100.1 million without readily available fair values as of February 28, 2022 and November 30, 2021, 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, 2022
(In thousands)	Homebuilding		Financial Services	Multifamily	Lennar Other	Corporate and unallocated	Total
Revenues (1)	$	5,752,205	176,701	267,359	7,251	—	6,203,516
Operating earnings (loss)	1,109,850		90,791	5,427	(403,134)	—	802,934
Corporate general and administrative expenses	—		—	—	—	113,661	113,661
Charitable foundation contribution	—		—	—	—	12,538	12,538
Earnings (loss) before income taxes	1,109,850		90,791	5,427	(403,134)	(126,199)	676,735
	Three Months Ended February 28, 2021
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

(1)Revenues for Multifamily for the three months ended February 28, 2022 includes $131.6 million of land sales to unconsolidated entities

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: Alabama, 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, 2022	$	6,552,930	3,939,627	3,240,006	11,854,213	1,414,532	1,091,178	28,092,486
November 30, 2021	5,854,057		3,782,847	2,801,192	11,171,741	1,443,163	2,414,819	27,467,819

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

	Three Months Ended February 28, 2022
(In thousands)	East		Central	Texas	West	Other	Total Homebuilding
Revenues	$	1,670,186	1,109,272	812,619	2,150,798	9,330	5,752,205
Operating earnings (loss)	351,995		152,078	171,312	441,448	(6,983)	1,109,850
	Three Months Ended February 28, 2021
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

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, 2022, 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:
April 2022	$	100,000
July 2022	400,000
October 2022	200,000
December 2022	500,000
Total - Residential facilities	$	1,200,000
LMF Commercial facilities maturing
November 2022	$	100,000
December 2022	400,000
July 2023	50,000
Total - LMF Commercial facilities	$	550,000
Total	$	1,750,000

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, 2022		November 30, 2021
Borrowings under the residential facilities	$	1,021,791	1,482,258
Collateral under the residential facilities	1,059,876		1,539,641
Borrowings under the LMF Commercial facilities	29,247		96,294

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
	February 28,
(In thousands)	2022		2021
Loan origination liabilities, beginning of period	$	11,670	7,569
Provision for losses	966		966
Payments/settlements	(165)		(102)
Loan origination liabilities, end of period	$	12,471	8,433

LMF Commercial - loans held-for-sale

LMF Commercial originated commercial loans as follows:

	Three Months Ended
	February 28,
(Dollars in thousands)	2022		2021
Originations (1)	$	264,845	219,500
Sold	178,082		282,965
Securitizations	1		2

(1)During both the three months ended February 28, 2022 and 2021 all the commercial loans originated were recorded as loans held-for-sale, which are held at fair value.

Investments held-to-maturity

At February 28, 2022 and November 30, 2021, the Financial Services segment 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, 2022 or 2021. 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, 2022			November 30, 2021
Carrying value	$	156,587		157,808
Outstanding debt, net of debt issuance costs	146,322			147,474
Incurred interest rate	3.4		%	3.4	%

	February 28, 2022
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 Capital Management ("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, realized and unrealized gains (losses) from investments in equity securities and other income (expense), net from the remaining assets related to the Company's former Rialto segment.

The Company has investments in Opendoor Technologies, Inc. ("Opendoor"), Hippo Holdings, Inc. ("Hippo"), Sunnova ("NOVA"), SmartRent, Inc. ("SmartRent"), Blend Labs, Inc. ("Blend") and Sonder ("SOND"), which are held at market and will therefore change depending on the value of the Company's share holdings in those entities on the last day of each quarter. The following is a detail of Lennar Other unrealized gain (loss):

	Three Months Ended
	February 28,
	2022		2021
Opendoor (OPEN) mark to market	$	(143,361)	469,745
Hippo (HIPO) mark to market	(124,457)		—
Sunnova (NOVA) mark to market	(75,041)		—
SmartRent (SMRT) mark to market	(44,363)		—
Blend Labs (BLND) mark to market	(7,442)		—
Sonder (SOND) mark to market	(506)		—
	$	(395,170)	469,745

During the year ended November 30, 2021, Opendoor, Hippo, Sunnova, SmartRent and Blend began trading in the public markets and the Company began to mark to market the Company's shares of share holdings in the public entities. During the three months ended February 28, 2022, shares of Sonder began trading in the public markets and the Company began to mark to market its share holding in the public entity. All the investments are accounted for as investments in equity securities which are held at fair value and the changes in fair values are recognized through earnings. In addition, Doma Holdings, Inc. ("Doma") went public during the year ended November 30, 2021. However, Doma is an investment that continues to be accounted for under the equity method due to the Company's significant ownership interest which allows the Company to exercise significant influence. As of February 28, 2022, the Company owns approximately 26% of Doma and the carrying amount of the Company's investment is $43.9 million.