Operating and Reporting Segments

9 Months Ended

Aug. 31, 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)	August 31, 2022
Assets:	Homebuilding		Financial Services	Multifamily	Lennar Other	Total
Cash and cash equivalents	$	1,309,364	143,630	40,870	10,181	1,504,045
Restricted cash	32,575		14,710	—	—	47,285
Receivables, net (1)	665,472		606,672	108,313	—	1,380,457
Inventories	22,842,509		—	429,923	—	23,272,432
Loans held-for-sale (2)	—		1,260,122	—	—	1,260,122
Investments in equity securities (3)	—		—	—	487,082	487,082
Investments available-for-sale (4)	—		—	—	35,163	35,163
Loans held-for-investment, net	—		38,939	—	—	38,939
Investments held-to-maturity	—		151,015	—	—	151,015
Investments in unconsolidated entities	1,174,498		—	631,513	342,636	2,148,647
Goodwill	3,442,359		189,699	—	—	3,632,058
Other assets	1,163,519		119,183	57,289	42,641	1,382,632
	$	30,630,296	2,523,970	1,267,908	917,703	35,339,877
Liabilities:
Notes and other debts payable, net	$	4,057,496	1,487,913	16,683	—	5,562,092
Accounts payable and other liabilities	6,050,952		187,579	309,365	102,351	6,650,247
	$	10,108,448	1,675,492	326,048	102,351	12,212,339

(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 August 31, 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 $178.0 million and $100.1 million without readily available fair values as of August 31, 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 August 31, 2022
(In thousands)	Homebuilding		Financial Services	Multifamily	Lennar Other	Corporate and Unallocated	Total
Revenue	$	8,479,496	202,078	243,056	9,801	—	8,934,431
Operating earnings (loss) (1)	1,963,224		63,348	48,487	(117,980)	—	1,957,079
Corporate general and administrative expenses	—		—	—	—	115,557	115,557
Charitable foundation contribution	—		—	—	—	17,248	17,248
Earnings (loss) before income taxes	1,963,224		63,348	48,487	(117,980)	(132,805)	1,824,274
	Three Months Ended August 31, 2021
Revenues	$	6,558,509	206,973	167,921	8,000	—	6,941,403
Operating earnings (loss)	1,329,833		112,083	(9,393)	491,972	—	1,924,495
Corporate general and administrative expenses	—		—	—	—	94,942	94,942
Charitable foundation contribution	—		—	—	—	15,199	15,199
Earnings (loss) before income taxes	1,329,833		112,083	(9,393)	491,972	(110,141)	1,814,354

(1) Financial Services operating earnings for the three months ended August 31, 2022, included a $35.5 million one-time charge due to an increase in a litigation accrual related to a court judgment.

	Nine Months Ended August 31, 2022
(In thousands)	Homebuilding		Financial Services	Multifamily	Lennar Other	Corporate and Unallocated	Total
Revenues	$	22,209,683	578,945	686,436	21,579	—	23,496,643
Operating earnings (loss) (1)	4,953,485		258,074	54,582	(629,538)	—	4,636,603
Corporate general and administrative expenses	—		—	—	—	334,425	334,425
Charitable foundation contribution	—		—	—	—	46,335	46,335
Earnings (loss) before income taxes	4,953,485		258,074	54,582	(629,538)	(380,760)	4,255,843
	Nine Months Ended August 31, 2021
Revenues	$	17,529,606	669,789	476,837	20,884	—	18,697,116
Operating earnings	3,275,488		379,610	12,130	909,221	—	4,576,449
Corporate general and administrative expenses	—		—	—	—	296,190	296,190
Charitable foundation contribution	—		—	—	—	42,006	42,006
Earnings (loss) before income taxes	3,275,488		379,610	12,130	909,221	(338,196)	4,238,253

(1)Financial Services operating earnings for the nine months ended August 31, 2022, included a $35.5 million one-time charge due to an increase in a litigation accrual related to a court judgment.

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. Homebuilding Other also includes management of a fund that acquires single-family homes and holds them as rental properties.

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, Tennessee 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
August 31, 2022	$	7,143,051	4,393,636	3,720,373	12,800,380	1,414,935	1,157,922	30,630,297
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 August 31, 2022
(In thousands)	East		Central	Texas	West	Other	Total Homebuilding
Revenues	$	2,540,285	1,577,544	1,140,556	3,212,169	8,942	8,479,496
Operating earnings (loss)	642,482		272,351	278,814	788,443	(18,866)	1,963,224
	Three Months Ended August 31, 2021
Revenues	$	1,678,851	1,268,817	827,229	2,775,556	8,056	6,558,509
Operating earnings (loss)	356,895		197,229	186,008	608,815	(19,114)	1,329,833

	Nine Months Ended August 31, 2022
(In thousands)	East		Central	Texas	West	Other	Total Homebuilding
Revenues	$	6,424,922	3,970,805	3,048,676	8,733,429	31,851	22,209,683
Operating earnings (loss)	1,548,296		631,224	722,983	2,077,740	(26,758)	4,953,485
	Nine Months Ended August 31, 2021
Revenues	$	4,602,560	3,294,842	2,270,566	7,338,906	22,732	17,529,606
Operating earnings (loss)	928,805		488,300	491,708	1,423,332	(56,657)	3,275,488

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 August 31, 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:
October 2022	$	200,000
December 2022	500,000
May 2023	200,000
August 2023	1,000,000
Total - Residential facilities	$	1,900,000
LMF Commercial facilities maturing
November 2022	$	100,000
December 2022	400,000
July 2023	50,000
Total - LMF Commercial facilities	$	550,000
Total	$	2,450,000

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)	August 31, 2022		November 30, 2021
Borrowings under the residential facilities	$	1,289,260	1,482,258
Collateral under the residential facilities	1,343,967		1,539,641
Borrowings under the LMF Commercial facilities	57,740		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. The provision for loan losses was immaterial for both the three and nine months ended August 31, 2022 and 2021. Loan origination liabilities were $12.1 million and $11.7 million as of August 31, 2022 and November 30, 2021, respectively, and included in Financial Services’ liabilities in the Company's condensed consolidated balance sheets.

LMF Commercial - loans held-for-sale

LMF Commercial originated commercial loans as follows:

	Three Months Ended			Nine Months Ended
	August 31,			August 31,
(Dollars in thousands)	2022		2021	2022	2021
Originations (1)	$	109,850	178,669	518,345	594,667
Sold	188,266		226,357	511,733	665,062
Securitizations	2		1	4	4

(1)During both the three and nine months ended August 31, 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 August 31, 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 the segment's 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 or nine months ended August 31, 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)	August 31, 2022			November 30, 2021
Carrying value	$	151,015		157,808
Outstanding debt, net of debt issuance costs	140,912			147,474
Incurred interest rate	3.4		%	3.4	%

	August 31, 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 funds and joint ventures, 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.

The Multifamily Segment (i) manages, and owns interests in, funds that are engaged in the development of multifamily residential communities with the intention of holding the newly constructed and occupied properties as income and fee generating assets, and (ii) manages, and owns interests in, joint ventures that are engaged in the development of multifamily residential communities, in most instances with the intention of selling them when they are built and substantially occupied. Our multifamily business is a vertically integrated platform with capabilities spanning development, construction, property management, asset management, and capital markets. Revenues are generated from the sales of land, from construction activities, and management and promote fees generated from joint ventures 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. Operations of the Multifamily Segment also include equity in earnings (loss) from unconsolidated entities.

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, along with equity in earnings (loss) from the Rialto fund investments and 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 Blend Labs, Inc. ("Blend Labs"), Hippo Holdings, Inc. ("Hippo"), Opendoor, Inc. ("Opendoor"), SmartRent, Inc. ("SmartRent"), Sonder Holdings, Inc. ("Sonder") and Sunnova Energy International, Inc. ("Sunnova"), 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. 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. The following is a detail of Lennar Other unrealized gains (losses) from the Company's technology investments:

	Three Months Ended			Nine Months Ended
	August 31,			August 31,
(In thousands)	2022		2021	2022	2021
Blend Labs (BLND) mark-to-market	$	(518)	6,852	(21,510)	6,852
Hippo (HIPO) mark-to-market	(32,933)		324,855	(195,336)	324,855
Opendoor (OPEN) mark-to-market	(54,391)		37,301	(218,751)	272,756
SmartRent (SMRT) mark-to-market	(23,118)		100,793	(71,431)	100,793
Sonder (SOND) mark-to-market	(168)		—	(2,300)	—
Sunnova (NOVA) mark-to-market	25,289		23,870	(49,646)	(14,465)
Lennar Other unrealized gains (losses) from technology investments	$	(85,839)	493,671	(558,974)	690,791

Doma Holdings, Inc. ("Doma") went public during the year ended November 30, 2021. However, Doma is a public company that is an investment accounted for under the equity method due to the Company's significant ownership interest which allows the Company to exercise significant influence. As of August 31, 2022, the Company owned approximately 25% of Doma and the carrying amount of the Company's investment was $17.1 million.