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Item 7. Management’s Discussion and Analysis

2022-01-28 compared with 2021-01-22 · 210 added, 243 removed, 445 unchanged (50% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Financial Data" and our audited consolidated financial statements and accompanying notes included elsewhere in this Report.

Special Note Regarding Forward-Looking Statements

This annual report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.

These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “estimate,” “expect,” “forecast,” “intend,” “objective,” “plan,” “predict,” “projection,” “seek,” “strategy,” “target,” “will” or other words of similar meaning.

Some of them are opinions formed based upon general observations, anecdotal evidence and industry experience, but that are not supported by specific investigation or analysis.

These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions.

We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements.

The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to:

the potential negative impact to our business of the ongoing coronavirus (“COVID-19”) pandemic, the duration, impact and severity of which is highly uncertain;

increases in operating costs, including costs related to construction materials, labor, real estate taxes and insurance, and our inability to manage our cost structure, both in our Homebuilding and Multifamily businesses;

slowdowns in the residential real estate markets across the nation or in regions where we have significant homebuilding or multifamily development activities;

reduced availability of mortgage financing or increased interest rates;

our inability to successfully execute our strategies, including our land lighter strategy, our even flow production strategy and our strategy to better position our non-core assets;

changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit;

our inability to acquire land at anticipated prices;

the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods;

decreased demand for our homes or Multifamily rental properties;

the possibility that the benefit from our increasing use of technology will not justify its cost;

increased competition for home sales from other sellers of new and resale homes;

our inability to pay down debt;

whether government actions or other factors related to COVID-19 force us to further delay or terminate our program of repurchasing our stock;

a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets;

the failure of the participants in various joint ventures to honor their commitments;

difficulty obtaining land-use entitlements or construction financing;

natural disasters and other unforeseen events for which our insurance does not provide adequate coverage;

new laws or regulatory changes that adversely affect the profitability of our businesses;

our inability to refinance our debt on terms that are acceptable to us;

and changes in accounting conventions that adversely affect our reported earnings.

Please see "Item 1A-Risk Factors" of this Annual Report for a further discussion of these and other risks and uncertainties which could affect our future results.

We undertake no obligation to revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events, except to the extent we are legally required to disclose certain matters in SEC filings or otherwise.

With the exception of a relatively brief period in March and April, the single family housing market was strong during 2020, and we expect it to continue to be strong during 2021.

The underproduction of homes for the past 10 years has created a housing shortage that, combined with strong demand, has pushed home prices higher.

Demand is growing as the millennial generation has begun moving towards traditional family formation trends.

Concurrently, the proposition of home as more of an essential part of the way we live, not just a place to live, is becoming a way of life rather than a COVID-driven reaction.

Our measured growth strategy in the current market is to focus on selling homes when we begin construction which improves our inventory turn, while being patient with longer-term sales.

This enables price appreciation to offset future cost escalations to maximize margin.

Our deliveries are expected to grow faster in 2021 than they did in 2020.

We expect continued price appreciation and leverage from field expenses throughout the year, somewhat offset by higher lumber prices and other anticipated cost increases.

We anticipate that our community count will be growing through 2021, and that our new communities will be larger than the communities that sold out during 2020.

We are expecting strong margins for the foreseeable future and throughout 2021, and we expect our bottom line to grow faster than our top line.

We expect to deliver between 62,000 and 64,000 homes in 2021 with between a 23.75% and 24% gross margin as compared to the 22.8% full year gross margin in 2020.

Our technology initiatives have contributed meaningfully to our readiness for current economic and structural shifts while helping to improve our core business and drive our SG&A to a historic low of 8.1% for 2020.

Our results and our expectations for next year are solid in all respects, and they reflect our focused strategy to balance growth, margin, cash flow and returns.

We have remained focused on our optioned versus owned land strategy and believe we are in an excellent position to achieve our target of 50% owned land and 50% land controlled through options or similar agreements by the end of 2021.

At the end of fiscal 2020, the portion of land we controlled through options or similar agreements was 39%, up from 33% at the start of the year.

We ended fiscal 2020 with a 3.5 year supply of land owned, compared to a 4.1 year supply of land owned at the start of fiscal 2020, which put us well on the way to our goal of a 3.0 year supply by the end of 2021.

Among other things, this has increased our cash flow, which enabled us to reduce debt, including prepaying all of our senior debt that was scheduled to become due in fiscal 2021, such that our year-end homebuilding debt-to-total capital ratio improved to 24.9%, the lowest in our history.

We expect to be in a strong cash and liquidity position in 2021, and plan to continue with our strategies of reducing our debt balances and leverage ratio, and focusing on total shareholder return.

While we continue to refine and grow our ancillary business divisions, they are becoming a decidedly smaller part of the overall company picture.

We continue to work on strategies to better position our Multifamily platform, our emerging single-family home for rent platform, our strategic investment in FivePoint Holdings entities and our growing technology investments platform.

With a solid balance sheet, leading positions in almost all of our homebuilding markets and continued execution of our core operating strategies, we believe that we are well positioned to meet demand, drive strong margins and cash flow and continue to grow with the market.

It also should be read in conjunction with the disclosure under “Special Note Regarding Forward-Looking Statements” in Part I of this Form 10-K.

While supply chain challenges continued to dominate both the homebuilding and the broader economic narrative in 2021, we were extremely pleased with our performance this year.

The demand for housing continues to be strong, while the supply of new and existing homes continues to be constrained.

New home construction cannot ramp up quickly enough to fill the void of the underproduction of homes for the past decade, and short supply is likely to remain for some time to come.

Even though home prices have moved much higher, overall affordability remains strong as interest rates are still very attractive.

Personal savings for deposits are strong and wages seem to be rising faster than monthly payments.

However, those higher wages are starting to be reflected in government numbers and, unfortunately, in inflation as well.

Millennials are moving out of their parents’ homes and forming families, while large numbers of apartment dwellers are seeking first-time single-family homes.

First-time homes are selling at higher prices, and appreciated equity is enabling first-time move-ups.

The iBuyer and single-family for rent participants are providing additional liquidity to the marketplace for homes, as they evolve and provide ever more frictionless transactions.

While the housing market remains very strong in all of our major markets, our ability to actually execute and deliver results has been tested by the supply chain challenges for both land and construction, the workforce that is short in numbers while driven to produce more, and the never-ending competition for scarce entitled land assets.

The supply chain issues will continue into the first quarter of 2022 and beyond.

But we expect that as we enter the second half of the year, we will be less affected by supply chain disruptions, in part because of the greater number of homes we are starting, the lessons learned and incorporated in our Builder of Choice relationships with suppliers and trades, and the simplicity embedded in our Everything's Included® home offerings.

We remain focused on orderly, targeted growth, with our sales pace tightly matched with the numbers of homes we can build, which enables price appreciation to offset future cost escalations and therefore maximize margins.

Although there have been some headwinds throughout the year, fiscal 2021 was an extraordinary year for our company.

We established an operating plan that included cash flow generation and debt reduction in order to improve returns on capital and equity.

We expect our first quarter community count to be about 5% lower than year-end 2021 because of the shortages both of land and construction materials.

However, we expect community count to start to increase in the second quarter, and we expect to end 2022 with a low double-digit increase in community count year-over-year.

We expect our deliveries for the first quarter of 2022 will be approximately 12,500 homes.

We expect our gross margin to be about 26.75%, which reflects the impact of peak lumber prices from last year and less field expense leverage.

We have remained focused on our optioned versus owned land strategy.

We ended the year with a 3.0 years supply of land owned, compared to a 3.5 years supply of land owned at the same time last year, and our homesites controlled percentage increased to 59% from 39% in the prior year.

Among other things, this has enabled us to reduce debt, such that our homebuilding debt-to-total capital ratio improved to 18.3% at year end, from 24.9% in the prior year.

We have articulated a drive and desire to have a strong focus on new technology-driven efficiencies in our core business.

We invested in numerous new technologies, while eight prior investments were either sold or went public, which resulted in significant profits for the Company in 2021.

Perhaps more importantly, we have invested in companies that have enabled improvement in our core business, while we have benefited both through the investments and through incorporation in our core.

We are working to address the issues in supply chain, labor shortages, and production, using innovative technology in innovative ways.

We have continued to work on the structural components and organization of our proposed spin-off company as we focus on the strategy of becoming a pure-play homebuilding company.

We have sufficient excess capacity and balance sheet to be able to spin off our well-established ancillary businesses, and we expect to complete a tax-free spin-off by the second or third quarter of 2022.

To that end, in November 2021, we took our first significant step to complete the spin-off by formally filing a request for a private letter ruling from the Internal Revenue Service confirming that the spin-off would not result in taxation either to us or to our stockholders.

We have concluded that the spin company will be an asset-light asset management business that will have a limited balance sheet.

Three core verticals have been identified for the spin, and they are multifamily, single-family for rent, and land strategies.

Each of these verticals already has raised third-party capital, and we are active asset managers.

We believe we have never been better positioned financially, organizationally and technologically to thrive and grow in this evolving high demand housing market.

While difficulties in the supply chain present challenges for Lennar and the industry, the housing market remains strong, and supply of new and existing homes is very limited.

We remain focused on an

orderly, targeted growth strategy, with our sales pace tightly matched with our pace of production.

We focus on gross margin by selling in step with production, while controlling costs, and reducing our SG&A, and therefore driving our net margin.

As we look to 2022, we see continued strength in the market and double-digit growth for Lennar.

Results of Operations

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Total costs and expenses 20,502,541 407,731 652,810 30,955 — 21,594,037

Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (836) — 21,934 (35,037) — (13,939)

Financial Services gain on deconsolidation — 61,418 — — — 61,418

Other expense, net (29,749) — — (9,632) — (39,381)

Operating earnings (loss) 2,988,907 480,952 22,681 (10,334) — 3,482,206

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net (14,205) — 9,031 61,957 — 56,783

Homebuilding other income, net 3,266 — — — — 3,266

Lennar Other realized and unrealized gains — — — 680,576 — 680,576

Operating earnings 5,031,762 491,014 21,453 733,035 — 6,277,264

Corporate general and administrative expenses — — — — 398,381 398,381

Earnings (loss) before income taxes $ 2,988,907 480,952 22,681 (10,334) (358,418) 3,123,788

Charitable foundation contribution — — — — 59,825 59,825

Earnings before income taxes $ 5,031,762 491,014 21,453 733,035 (458,206) 5,819,058

Year ended November 30, 2020

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Total costs and expenses 17,961,644 470,777 575,581 6,744 — 19,014,746

Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (13,273) — 11,294 15,372 13,393

Other expense, net (31,338) — — (8,944) (40,282)

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net (836) — 21,934 (44,669) — (23,571)

Financial Services gain on deconsolidation — 61,418 — — — 61,418

Homebuilding other expense, net (29,749) — — — — (29,749)

Operating earnings 2,988,907 480,952 22,681 (10,334) — 3,482,206

Corporate general and administrative expenses — — — — 333,446 333,446

Earnings before income taxes $ 2,502,905 224,642 16,390 31,469 (341,114) 2,434,292

Charitable foundation contribution — — — — 24,972 24,972

Earnings (loss) before income taxes $ 2,988,907 480,952 22,681 (10,334) (358,418) 3,123,788

2021 versus 2020

Revenues from home sales increased 22% in the year ended November 30, 2021 to $25.3 billion from $20.8 billion in the year ended November 30, 2020.

Revenues were higher primarily due to a 3% increase in the number of home deliveries, excluding unconsolidated entities, partially offset by a 1% decrease in the average sales price of homes delivered.

New home deliveries, excluding unconsolidated entities, increased to 52,813 homes in the year ended November 30, 2020 from 51,412 homes in the year ended November 30, 2019, as a result of an increase in home deliveries in the Texas and West segments.

The average sales price of homes delivered, excluding unconsolidated entities, decreased to $395,000 in the year ended November 30, 2020 from $400,000 in the year ended November 30, 2019.

The decrease in average sales price primarily resulted from continuing to shift to lower-priced communities and regional product mix.

Revenues were higher primarily due to a 13% increase in the number of home deliveries and an 8% increase in the average sales price.

New home deliveries increased to 59,825 homes in the year ended November 30, 2021 from 52,925 homes in the year ended November 30, 2020 as a result of an increase in home deliveries in all our homebuilding segments.

The average sales price of homes delivered was $424,000 in the year ended November 30, 2021, compared to $395,000 in the year ended November 30, 2020 as a result of price appreciation in all of our homebuilding segments as a result of the current market conditions.

Gross margins on home sales were $6.8 billion, or 26.8%, in the year ended November 30, 2021, compared to $4.7 billion, or 22.8%, in the year ended November 30, 2020.

The gross margin percentage on home sales increased primarily due to our continued focus on reducing construction costs combined with favorable market conditions.

Loss on land sales in the year ended November 30, 2020 was $49.1 million, primarily due to a write-off of costs in the second quarter as a result of us not moving forward with a naval base development in Concord, California, northeast of San Francisco and a change in strategy with three land assets that resulted in impairments in the fourth quarter.

Selling, general and administrative expenses were $1.7 billion in both years ended November 30, 2020 and 2019.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.1% in the year ended November 30, 2020, from 8.3% in the year ended November 30, 2019, due to improved operating leverage as a result of an increase in home deliveries combined with the benefits of our technology initiatives.

Operating earnings for the Financial Services segment were $481.0 million ($495.0 million net of noncontrolling interests) in the year ended November 30, 2020, compared to $224.6 million ($244.3 million net of noncontrolling interests) in the year ended November 30, 2019.

Operating earnings increased due to an improvement in the mortgage and title businesses as a result of an increase in volume and margin, as well as reductions in loan origination costs.

Additionally, in the second quarter of 2020, the Financial Services segment recorded a $61.4 million gain on the deconsolidation of a previously consolidated entity.

Operating earnings for the Multifamily segment were $22.7 million in the year ended November 30, 2020, compared to operating earnings of $16.4 million ($18.1 million net of noncontrolling interests) in the year ended November 30, 2019.

Operating loss for the Lennar Other segment was $10.3 million in the year ended November 30, 2020, compared to operating earnings of $31.5 million ($32.0 million net of noncontrolling interests) in the year ended November 30, 2019.

In the fourth quarter of 2020, we retired $1.2 billion of senior notes which included the redemption of $300 million aggregate principal amount of our 2.95% senior notes due November 2020, and early retirement of $400 million aggregate principal amount of our 8.375% senior notes due January 2021 and $500 million aggregate principal amount of our 4.75% senior notes due April 2021.

During the year ended November 30, 2020, we retired $1.5 billion of senior notes which included the redemptions and retirements described above and the redemption of $300 million aggregate principal amount of our 6.625% senior notes due May 2020.

The redemption price for each issue of senior notes, which was paid in cash, was 100% of the principal amount plus accrued but unpaid interest and prepayment premiums.

For the years ended November 30, 2020 and 2019, we had a tax provision of $656.2 million and $592.2 million, respectively, which resulted in an overall effective income tax rate of 21.0% and 24.3%, respectively.

The reduction in the overall effective income tax rate was primarily due to the extension of the new energy efficient home tax credit during the first quarter of 2020.

At November 30, 2020, we had $2.7 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under our $2.4 billion revolving credit facility, thereby providing $5.1 billion of available capacity.

The gross margin percentage on home sales increased primarily as a result of price appreciation as the increase in revenues per square foot outpaced the increase in costs per square foot.

Selling, general and administrative expenses were $1.8 billion in the year ended November 30, 2021, compared to $1.7 billion in the year ended November 30, 2020.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 7.1% in the year ended November 30, 2021, from 8.1% in the year ended November 30, 2020, primarily due to a decrease in broker commissions and benefits of the Company's technology efforts.

Operating earnings for our Financial Services segment were $491.0 million ($490.4 million net of noncontrolling interests) in the year ended November 30, 2021, compared to $481.0 million ($495.0 million net of noncontrolling interests) in the year ended November 30, 2020.

The year ended November 30, 2020 included a $61.4 million gain on the deconsolidation of a previously consolidated entity.

Excluding this fiscal 2020 gain, the improvement in operating earnings during the year ended November 30, 2021 was primarily due to an increase in volume and margin in our title businesses, partially offset by lower mortgage net margins driven by a more competitive mortgage market.

Operating earnings for our Multifamily segment were $21.5 million in the year ended November 30, 2021, compared to $22.7 million in the year ended November 30, 2020.

Operating earnings for our Lennar Other segment were $733.0 million in the year ended November 30, 2021, compared to an operating loss of $10.3 million in the year ended November 30, 2020.

The operating earnings for the year ended November 30, 2021 were primarily due to mark to market gains on our strategic technology investments that went public during the year and the sale of our solar business.

During the year ended November 30, 2021, we retired $1.15 billion aggregate principal amount of senior notes which included $600 million aggregate principal amount of our 4.125% senior notes due January 2022 at par, retired early, at a

premium, $250 million aggregate principal amount of our 5.375% senior notes due October 2022 and $300 million aggregate principal amount of our 6.25% senior notes due December 2021.

For the years ended November 30, 2021 and 2020, we had a tax provision of $1.4 billion and $656.2 million, respectively, which resulted in an overall effective income tax rate of 23.5% and 21.0%, respectively.

The overall effective income tax rate was lower in 2020 primarily due to the retroactive extension of the new energy efficient home tax credit during the first quarter of 2020.

Homebuilding Segments

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Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia

Arizona, California, Colorado, Nevada, Oregon, Utah and Washington

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

Urban divisions and other homebuilding related investments primarily in California, including FivePoint

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(Dollars in thousands) Sales of Homes

Revenue Costs of Sales

of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins (Loss) on Sales of Land Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expenses), net Operating Earnings (Loss)

Revenues Costs of Sales

of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins on Sales of Land Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss)

East $ 6,814,578 4,858,456 28.7 % $ 1,432,242 10,835 7,161 308 4,886 1,455,432

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Other (2) 18,419 39,116 (112.4) % (61,321) 1,435 13,678 (21,487) 695 (67,000)

Totals $ 25,348,105 18,562,213 26.8 % $ 4,989,195 24,282 29,224 (14,205) 3,266 5,031,762

Year Ended November 30, 2020

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(Dollars in thousands) Sales of Homes

Revenue Costs of Sales

Revenues Costs of Sales

East $ 5,689,419 4,269,452 25.0 % $ 929,181 2,587 6,404 4,189 (9,064) 933,297

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Other (2) 24,522 47,438 (93.5) % (45,119) (23,439) 1,046 (11,234) (11,661) (90,407)

$ 20,840,159 16,092,069 22.8 % $ 3,050,995 (49,115) 17,612 (836) (29,749) 2,988,907

(1) Net margins on sales of homes include selling, general and administrative expenses.

(2) Negative gross and net margins were due to period costs in Urban divisions that impact costs of homes sold without sufficient sales of homes revenue to offset those costs.

(2) Negative gross and net margins were due to period costs in Urban divisions that impact costs of homes sold without sufficient sales of homes revenues to offset those costs.

Summary of Homebuilding Data

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Total 59,825 52,925 $ 25,379,680 20,876,222 $ 424,000 394,000

Of the total homes delivered listed above, 112 homes with a dollar value of $36.1 million and an average sales price of $322,000 represent home deliveries from unconsolidated entities for the year ended November 30, 2020 and 79 home deliveries with a dollar value of $36.1 million and an average sales price of $458,000 for the year ended November 30, 2019.

Of the total homes delivered listed above, 95 homes with a dollar value of $31.6 million and an average sales price of $332,000 represent home deliveries from unconsolidated entities for the year ended November 30, 2021, compared to 112 home deliveries with a dollar value of $36.1 million and an average sales price of $322,000 for the year ended November 30, 2020.

New Orders (1):

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Total 1,263 1,177 64,543 56,169 $ 28,853,203 22,388,650 $ 447,000 399,000

Of the total new orders listed above, 119 represent the dollar value of new orders from unconsolidated entities with a dollar value of $37.3 million and an average sales price of $314,000 for the year ended November 30, 2020 and 103 new orders with a dollar value of $43.7 million and an average sales price of $424,000 for the year ended November 30, 2019.

Of the total new orders listed above, 136 homes with a dollar value of $48.8 million and an average sales price of $359,000 represent new orders from unconsolidated entities for the year ended November 30, 2021, compared to 119 new orders with a dollar value of $37.3 million and an average sales price of $314,000 for the year ended November 30, 2020.

(1) New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the years ended November 30, 2021 and 2020.

At November 30,

Homes Dollar Value (In thousands) Average Sales Price

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Total 23,771 18,821 $ 11,362,266 7,812,971 $ 478,000 415,000

Of the total homes in backlog listed above, 38 homes with a backlog dollar value of $11.5 million and an average sales price of $302,000 represent homes in backlog from unconsolidated entities at November 30, 2020 and 31 homes with a dollar value of $10.2 million and an average sales price of $328,000 represent homes in backlog from unconsolidated entities at November 30, 2019.

Of the total homes in backlog listed above, 79 homes with a backlog dollar value of $28.6 million and an average sales price of $363,000 represent the backlog from unconsolidated entities at November 30, 2021, compared to 38 homes with a backlog dollar value of $11.5 million and an average sales price of $302,000 at November 30, 2020.

(1) During the year ended November 30, 2021, we acquired 232 homes in backlog.

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Homebuilding East:

Revenues from home sales increased in 2020 compared to 2019, primarily due to an increase in the average sales price in all the states of the segment, except in Pennsylvania and South Carolina, partially offset by a decrease in the number of home deliveries in Florida and Pennsylvania.

The decrease in the number of home deliveries in Florida and Pennsylvania was primarily due to the effects of COVID-19 and the economic shutdown.

The increase in the average sales price of homes delivered in Florida and New Jersey was primarily due to favorable market conditions.

The decrease in the average sales price of homes delivered in South Carolina and Pennsylvania was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities.

Gross margin percentage on home sales for the year ended November 30, 2020 increased compared to the same period last year primarily due to reducing our construction costs and an increase in the average sales price of homes delivered.

Revenues from home sales increased in 2021 compared to 2020, primarily due to an increase in the number of home deliveries in all the states of the segment except for Pennsylvania and an increase in the average sales price in all the states of the segment.

The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased.

The decrease in the number of home deliveries in Pennsylvania was primarily due to a decrease in the number of communities as a result of the timing of opening and closing of communities.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

Gross margin percentage on home sales for the year ended November 30, 2021 increased compared to the same period last year primarily due to price appreciation as the increase in revenues per square foot of homes delivered outpaced the increase in costs per square foot.

Homebuilding Central:

Revenues from home sales decreased in 2020 compared to 2019, primarily due to a decrease in the number of home deliveries in Minnesota, North Carolina and Virginia, partially offset by an increase in the average sales price in all the states of the segment, except in Indiana, North Carolina and Tennessee.

The decrease in the number of deliveries was primarily due to the effects of COVID-19 and the economic shutdown.

Revenues from home sales increased in 2021 compared to 2020, primarily due to an increase in the number of home deliveries in all the states of the segment and an increase in the average sales price in all the states of the segment, except in Virginia.

The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

The decrease in the average sales price of homes delivered in Indiana, North Carolina and Tennessee was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities.

Gross margin percentage on home sales for the year ended November 30, 2020 increased compared to the same period last year primarily due to reducing our construction costs, partially offset by valuation adjustments taken in a few communities.

The decrease in the average sales price of homes delivered in Virginia was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities.

Homebuilding Texas:

Revenues from home sales increased in 2020 compared to 2019, primarily due to an increase in the number of home deliveries, partially offset by a decrease in the average sales price.

Revenues from home sales increased in 2021 compared to 2020, primarily due to an increase in the number of home deliveries and an increase in the average sales price.

The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased.

The decrease in the average sales price of homes delivered was primarily due to closing out higher priced communities and shifting into lower priced communities.

Gross margin percentage on home sales for the year ended November 30, 2020 increased compared to the same period last year primarily due to reducing our construction costs.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

Homebuilding West:

Revenues from home sales increased in 2020 compared to 2019, primarily due to an increase in the number of home deliveries in Arizona, California and Utah.

The increase in revenues was partially offset by a decrease in the average sales price in all the states of the segment, except in Arizona, Oregon and Utah.

The increase in the number of deliveries in Arizona, California and Utah was primarily due to higher demand as the number of deliveries per active community increased.

The decrease in the number of home deliveries in Colorado, Nevada, Oregon and Washington was primarily due to the effects of COVID-19 and the economic shutdown and a decrease in active communities due to timing of opening and closing of communities.

The decrease in the average sales price of homes delivered in Nevada, California, Colorado and Washington was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-

priced communities.

The increase in the average sales price of homes delivered in Arizona, Oregon and Utah was primarily due to favorable market conditions.

Gross margin percentage on home sales for the year ended November 30, 2020 increased compared to the same period last year primarily due to reducing our construction costs.

Revenues from home sales increased in 2021 compared to 2020, primarily due to an increase in the number of home deliveries and average sales price in all the states of the segment.

The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

Financial Services Segment

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At November 30, 2021 and 2020, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $157.8 million and $164.2 million, respectively.

These securities were purchased at discounts ranging from 6% to 84% with coupon rates ranging from 2.0% to 5.3%, stated and assumed final distribution dates between October 2027 and December 2028, and stated maturity dates between October 2050 and December 2051.

Our Financial Services segment classifies these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.

Details of these securities and related debt are within Note 2 of the Notes to Consolidated Financial Statements.

LMF Commercial

LMF Commercial originates and sells into securitizations five, seven and ten year commercial first mortgage loans, which are secured by income producing properties.

During the year ended November 30, 2020, LMF Commercial originated loans with a total principal balance of $703.8 million, all of which were recorded as loans held-for-sale, and sold $705.1 million of loans into 5 separate securitizations.

As of November 30, 2020 there were no unsettled transactions.

During the year ended November 30, 2019, LMF Commercial originated loans with a principal balance of $1.6 billion nearly all of which were recorded as loans held-for-sale, except $15.3 million which were recorded as accrual loans within loans receivables, net, and sold $1.4 billion of loans into 11 separate securitizations.

As of November 30, 2019, originated loans with an unpaid balance of $158.4 million which were sold into a securitization trust but not settled and thus were included as receivables, net.

LMF Commercial originates and sells into securitizations first mortgage loans, which are secured by income producing commercial properties.

LMF Commercial originated commercial loans as follows:

(Dollars in thousands) 2021 2020

Originations (1) $ 770,107 703,777

Sold 931,023 705,089

Securitizations 6 5

Multifamily Segment

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Balance Sheet November 30,

(Dollars in thousands) 2020 2019

(In thousands) 2021 2020

Multifamily investments in unconsolidated entities $ 654,029 724,647

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Lennar's share of gains on the sale of operating properties/investments $ 14,784 21,114

The Multifamily segment includes Multifamily Venture Fund I (the "LMV I") and Multifamily Venture Fund II LP (the "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 year ended November 30, 2021 are included below:

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Lennar Other Segment

Our Lennar Other segment includes fund investments we retained subsequent to the sale of the Rialto investment and asset management platform as well as strategic investments in technology companies that are looking to improve the homebuilding and financial services industries to better serve our customers and increase efficiencies.

As of November 30, 2020 and 2019, our balance sheet had $452.9 million and $495.4 million, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $387.0 million and $403.7 million, respectively.

As of November 30, 2021 and 2020, our balance sheet had $1.5 billion and $521.7 million, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $346.3 million and $387.1 million, respectively.

The increase in assets during the year ended November 30, 2021 was due to an increase in the value of our strategic technology investments in equity securities, primarily managed by our LEN X subsidiary.

This increase was largely related to our strategic investments in Opendoor, Hippo, and SmartRent.

For the years ended November 30, 2020 and 2019, there were no mark to market gains on our strategic investments in technology companies.

During the year ended November 30, 2021, we completed the sale of our residential solar business to Sunnova for shares in Sunnova.

The following is a detail of Lennar Other realized and unrealized gains (losses):

(In thousands) 2021

Opendoor (OPEN) mark to market $ 239,312

Hippo (HIPO) mark to market 207,634

SmartRent (SMRT) mark to market 79,483

Sunnova (NOVA) mark to market (8,883)

Blend Labs (BLND) mark to market (6,744)

Gain on sale of solar business 158,069

Other realized gains 11,705

At November 30, 2021 and 2020, the carrying value of Lennar Other's commercial mortgage-backed securities ("CMBS") was $41.7 million and $53.5 million, respectively.

These securities were purchased at discount rates ranging from 28% to 55% with coupon rates ranging from 2.8% to 4.0%, stated and assumed final distribution dates between November 2020 and October 2026, and stated maturity dates between November 2049 and March 2059.

These securities were purchased at discount rates ranging from 33% to 55% with coupon rates ranging from 2.8% to 3.4%, stated and assumed final distribution dates between September 2025 and October 2026, and stated maturity dates between November 2049 and March 2059.

We review changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on our CMBS.

Based on management’s assessment, no impairment charges were recorded during the years ended November 30, 2021 and 2020.

We classify these securities as held-for-sale at November 30, 2020 and held-to-maturity at November 30, 2019.

We have financing agreements to finance CMBS that have been purchased as investments by the segment.

At November 30, 2020 and 2019, the carrying amount, net of debt issuance costs, of outstanding debt in these agreements was $1.9 million and $13.3 million, respectively, and the interest is incurred at a rate of 3.0% and 3.9%, respectively.

We classify these securities as held-for-sale at November 30, 2021 and 2020.

Financial Condition and Capital Resources

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We finance all of our activities including homebuilding, financial services, multifamily, other and general operating needs primarily with cash generated from our operations, debt issuances and investor funds as well as cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility (the "Credit Facility").

At November 30, 2021, we had $2.7 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under our $2.5 billion revolving credit facility, thereby providing $5.2 billion of available capacity.

Operating Cash Flow Activities

During 2021 and 2020, cash provided by operating activities totaled $2.5 billion and $4.2 billion, respectively.

2020, cash provided by operating activities was positively impacted by our net earnings, a decrease in inventories of $781.4 million, an increase in accounts payable and other liabilities of $266.5 million and a decrease in loans held-for-sale of $154.9 million primarily related to the sale of loans originated by Financial Services.

During 2019, cash provided by operating activities was positively impacted by our net earnings and a decrease in receivables of $312.3 million, partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $623.6 million and an increase in Financial Services loans held-for-sale of $431.3 million.

During 2021, cash provided by operating activities was positively impacted by our net earnings, net of Lennar Other unrealized/realized gains of $681 million primarily due to mark to market gains on strategic investments that went public during the year ended November 30, 2021 (Opendoor, Hippo and SmartRent) and the sale of our solar business to Sunnova.

In addition, there was an increase in accounts payable and other liabilities of $881 million, partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $2.0 billion and an increase in receivables of $290 million.

During 2020, cash provided by operating activities was positively impacted by our net earnings, a decrease in inventories of $781 million, an increase in accounts payable and other liabilities of $266 million and a decrease in loans held-for-sale of $177 million primarily related to the sale of loans originated by Financial Services.

Investing Cash Flow Activities

During 2020 and 2019, cash (used in) provided by investing activities totaled ($280.2) million and $19.6 million, respectively.

During 2021 and 2020, cash used in investing activities totaled $105 million and $280 million, respectively.

During 2021, our cash used in investing activities was primarily due to cash contributions of $408 million to unconsolidated entities, which primarily included (1) $251 million to Homebuilding unconsolidated entities (2) $72 million to Multifamily unconsolidated entities, and (3) $83 million to strategic technology investments included in the Lennar Other segment.

In addition, we had $128 million of purchases of investment securities related to strategic technology investments in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $362 million, which primarily included (1) $177 million from Homebuilding unconsolidated entities (2) $128 million from Multifamily unconsolidated entities, and (3) $57 million from our Lennar Other segment, which included our unconsolidated Rialto real estate funds and distributions from strategic investments.

During 2020, our cash used in investing activities was primarily due to cash contributions of $486 million to unconsolidated entities and the deconsolidation of a previously consolidated entity, which included (1) $167 million to Multifamily unconsolidated entities, (2) $104 million to Homebuilding unconsolidated entities, (3) $63 million to the strategic technology investments included in the Lennar Other segment;

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This was partially offset by distributions of capital from unconsolidated entities of $221 million, which primarily included (1) $93 million from Multifamily unconsolidated entities, (2) $75 million from Homebuilding unconsolidated entities, (3) $1 million from strategic technology ventures, and (4) $44 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment.

During 2019, our cash provided by investing activities was primarily due to $52.6 million of proceeds from sales of securities, $70.4 million of proceeds from the sale of two Homebuilding operating properties and other assets, and distributions of capital from unconsolidated entities of $405.7 million.

This was partially offset by net additions to operating properties and equipment of $86.5 million and cash contributions of $436.2 million to unconsolidated entities.

Financing Cash Flow Activities

During 2021 and 2020, our cash used in financing activities totaled $2.4 billion and $2.4 billion, respectively.

During 2020, our cash used in financing activities was primarily impacted by (1) redemption of $300 million aggregate principal amount of our 2.95% senior notes due November 2020, (2) redemption of $400 million aggregate principal amount of our 8.375% senior notes due January 2021, (3) redemption of $500 million aggregate principal amount redemption of our 4.75% senior notes due April 2021, (4) redemption of $300 million aggregate principal amount of our 6.625% senior notes due May 2020, (5) $605.0 million principal payments on notes payable and other borrowings, (6) repurchase of our common stock for $321.5 million, which included $288.5 million of repurchases of our stock under our repurchase program and $32.9 million of repurchases related to our equity compensation plan and (7) $281.8 million of net repayments under our Financial Services warehouse facilities.

This was partially offset by (1) proceeds from other liabilities of $346.4 million, (2) receipts related to noncontrolling interests of $176.6 million, and (3) $92.7 million of proceeds from other borrowings.

During 2019, our cash used in financing activities was primarily impacted by (1) $600 million aggregate principal amount redemption of our 4.50% senior notes due November 2019, (2) $500 million aggregate principal amount redemption of our 4.500% senior notes due June 2019, (3) $189.5 million principal payments on other borrowings, and (4) repurchase of our common stock for $523.1 million, which included $492.9 million of repurchases of our stock under our repurchase program and $29.0 million of repurchases related to our equity compensation plan.

This was partially offset by $166.6 million of net borrowings under our Financial Services warehouse facilities and $88.8 million of proceeds from other borrowings.

During 2021, our cash used in financing activities was primarily impacted by (1) redemption of $600 million aggregate principal amount of our 4.125% senior notes due January 2022 at par, (2) retired early, at a premium, $250 million aggregate principal amount of our 5.375% senior notes due October 2022, (3) $300 million aggregate principal amount of our 6.25% senior notes due December 2021, (4) $195 million principal payments on notes payable and other borrowings, (5) repurchase of our common stock for $1.4 billion, which included $1.4 billion of repurchases of our stock under our repurchase program and $65 million of repurchases related to our equity compensation plan, and (6) $310 million of dividend payments.

These were partially offset by (1) $344 million of net proceeds from liabilities related to consolidated inventory not owned due to land sales to land banks, (2) $262 million of net borrowings under our Financial Services warehouse facilities, and (3) receipts related to noncontrolling interests of $70 million.

During 2020, our cash used in financing activities was primarily impacted by (1) redemption of $300 million aggregate principal amount of our 2.95% senior notes due November 2020, (2) redemption of $400 million aggregate principal amount of our 8.375% senior notes due January 2021, (3) redemption of $500 million aggregate principal amount of our 4.75% senior notes due April 2021, (4) redemption of $300 million aggregate principal amount of our 6.625% senior notes due May 2020, (5) $605 million principal payments on notes payable and other borrowings, (6) repurchase of our common stock for $322 million, which included $289 million of repurchases of our stock under our repurchase program and $33 million of repurchases related to our equity compensation plan, (7) $282 million of net repayments under our Financial Services warehouse facilities, and (8) $195 million of dividend payments.

This was partially offset by (1) $346 million of proceeds from liabilities related to consolidated inventory not owned due to land sales to land banks, (2) $177 million of receipts related to noncontrolling interests, and (3) $93 million of proceeds from other borrowings.

Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our Homebuilding operations.

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(1) Net homebuilding debt to total capital is a non-GAAP financial measure defined as net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity).

Our management believes the ratio of net homebuilding debt to total capital is a relevant and a useful financial measure to investors in understanding the

leverage employed in our homebuilding operations.

Our management believes the ratio of net homebuilding debt to total capital is a relevant and a useful financial measure to investors in understanding the leverage employed in our homebuilding operations.

However, because net homebuilding debt to total capital is not calculated in accordance with GAAP, this financial measure should not be considered in isolation or as an alternative to financial measures prescribed by GAAP.

Rather, this non-GAAP financial measure should be used to supplement our GAAP results.

At November 30, 2020, Homebuilding debt to total capital was lower compared to November 30, 2019, primarily as a result of a decrease in Homebuilding debt and an increase in stockholders' equity due to net earnings.

At November 30, 2021, Homebuilding debt to total capital was lower compared to November 30, 2020, primarily as a result of a decrease in Homebuilding debt due to debt pay downs and an increase in stockholders' equity due to net earnings, partially offset by share repurchases.

We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings.

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In connection with some of our non-homebuilding businesses, we are also considering other types of transactions such as sales, restructurings, joint ventures, spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company.

Our Homebuilding senior notes and other debts payable are summarized within Note 4 of the Notes to the Consolidated Financial Statements.

At November 30, 2020, we had an unsecured revolving credit facility (the "Credit Facility") with maximum borrowings of $2.4 billion maturing in 2024.

We have announced an intention to spin off our multifamily and single family rental asset management businesses and some of our investment assets.

Our Homebuilding senior notes and other debts payable are summarized within Note 4 of the Notes to Consolidated Financial Statements.

At November 30, 2021, we had an unsecured revolving credit facility (the "Credit Facility") with maximum borrowings of $2.5 billion maturing in 2024, that included a $300 million accordion feature, subject to additional commitments, thus the maximum borrowings could be $2.8 billion.

The credit agreement provides that up to $500 million in commitments may be used for letters of credit.

Subsequent to November 30, 2020, our Credit Facility maximum borrowings were increased by $100 million to $2.5 billion and included a $300 million accordion feature, subject to additional commitments, thus the maximum borrowings could be $2.8 billion.

As of both November 30, 2021 and 2020, we had no outstanding borrowings under the Credit Facility.

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In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions.

We often post letters of credit instead of making cash deposits for option contracts and for similar purposes.

We often are required to post surety bonds to guarantee completion of projects, particularly when municipal authorities are involved.

Our outstanding letters of credit and surety bonds are described below:

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Performance letters of credit $ 924,584 752,096

Financial letters of credit 425,843 283,193

Surety bonds 3,553,047 3,087,711

Anticipated future costs primarily for site improvements related to performance surety bonds 1,690,861 1,584,642

Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes (the "Guaranteed Notes").

The guarantees are full and unconditional.

However, they will be suspended as to a subsidiary any time it is not directly or indirectly guaranteeing at least $75 million of Lennar Corporation debt (other than senior notes) and be released when the subsidiary is sold.

These guarantees are outlined in the Supplemental Financial Information below.

Our Homebuilding average debt outstanding and the average rates of interest were as follows:

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Although we are in compliance with our debt covenants for both calculations, we have only disclosed our liquidity test.

At November 30, 2020, 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:

At November 30, 2021, the Financial Services segment had warehouse facilities, all of which were 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:

January 2021 (1) $ 500,000

March 2021 500,000

June 2021 600,000

December 2021 (1) $ 500,000

April 2022 700,000

July 2022 600,000

October 2022 500,000

Total - Residential facilities $ 2,300,000

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November 2022 100,000

December 2021 200,000

July 2023 50,000

Total - LMF Commercial facilities $ 550,000

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(1) Subsequent to November 30, 2021, the maturity date was extended to December 2022.

(2) Includes $50 million LMF Commercial warehouse repurchase facility used to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans held-for-investment, net.

There were borrowings under this facility of $11.4 million as of November 30, 2020.

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 Financial Services segment uses the residential warehouse 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 us 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 an up to 80% interest in the originated commercial loans financed.

The LMF Commercial facilities finance LMF Commercial loan originations and securitization activities and were secured by up to 80% interests in the originated commercial loans financed.

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

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Without the facilities, the Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.

LMF Commercial - loans held-for-sale

During the year ended November 30, 2020, LMF Commercial originated commercial loans with a total principal balance of $703.8 million, all of which were recorded as loans held-for-sale and sold $705.1 million of commercial loans into five separate securitizations.

As of November 30, 2020, there were no unsettled transactions.

During the year ended November 30, 2019, LMF Commercial originated commercial loans with a total principal balance of $1.6 billion, nearly all of which were recorded as loans held-for-sale except $15.3 million which were recorded as accrual loans receivables, net, and sold $1.4 billion of loans into 11 separate securitizations.

As of November 30, 2019,

originated loans with an unpaid balance of $158.4 million which were sold into a securitization trust but not settled and thus were included as receivables, net.

Changes in Capital Structure

In January 2019, our Board of Directors authorized a stock repurchase program, under which we are authorized to purchase up to the lesser of $1 billion in value, or 25 million in shares, of our outstanding Class A or Class B common stock.

The repurchase authorization has no expiration date.

The following table shows the repurchase of our Class A and Class B common stock, under this program, for the years ended November 30, 2020 and 2019:

In January 2021, our Board of Directors authorized a stock repurchase program, which replaced a January 2019 stock repurchase program, under which we were authorized to purchase up to the lesser of $1.0 billion in value, or 25.0 million in shares, of our outstanding Class A or Class B common stock.

The repurchase authority had no expiration date.

In October 2021, the Board of Directors authorized an increase to the stock repurchase program to enable us to repurchase up to the lesser of an additional $1.0 billion in value, or 25.0 million in shares, of our outstanding Class A or Class B common stock.

The repurchase authority has no expiration date.

Shortly after the new authorization, the January 2021 stock repurchase program was completed as we had purchased the $1.0 billion in value authorized under that stock repurchase program.

The following table provides information about our repurchases of Class A and Class B common stock for the years ended November 30, 2021 and 2020:

November 30, 2021 November 30, 2020

(Dollars in thousands, except price per share) Class A Class B Class A Class B

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Average price per share $ 97.56 $ 81.97 $ 66.42 $ 53.52

During the year ended November 30, 2020, treasury stock increased by 4.5 million shares of Class A common stock due primarily to 4.4 million shares of common stock repurchased during the year through our stock repurchase program.

During the year ended November 30, 2019, treasury stock increased by 10.5 million shares of Class A common stock primarily due to 9.8 million shares of common stock repurchased during the year through our stock repurchase program.

During the year ended November 30, 2021, treasury stock increased by 14.7 million shares of Class A common stock and 0.1 million shares of Class B common stock primarily due to 14.0 million shares of common stock repurchased during the year through our stock repurchase program.

During the year ended November 30, 2020, treasury stock increased by 4.9 million shares of Class A common stock and 0.1 million shares of Class B common stock primarily due to 4.4 million shares of common stock repurchased during the year through our stock repurchase program.

During the years ended November 30, 2021 and 2020, our Class A and Class B common stockholders received an aggregate per share annual dividend of $1.00 and $0.625, respectively.

On January 14, 2021, our Board of Directors declared a quarterly cash dividend of $0.25 per share on both our Class A and Class B common stock, payable on February 12, 2021 to holders of record at the close of business on January 29, 2021.

On January 12, 2022, our Board of Directors increased the annual dividend rate to $1.50 per share, resulting in a quarterly cash dividend of $0.375 per share on both our Class A and Class B common stock.

The dividend is payable on February 10, 2022 to holders of record at the close of business on January 27, 2022.

Based on our current financial condition and credit relationships, we believe that, assuming the effects of the COVID-19 pandemic and resulting governmental actions on our operations do not significantly worsen for a protracted period, our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity.

Supplemental Financial Information

Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes.

Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes (the "Guaranteed Notes").

The guarantees are full and unconditional.

These guarantees are outlined in the Supplemental Financial Information below.

The indentures governing our senior notes require that, if any of our 100% owned subsidiaries, other than our finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation (other than senior notes), those subsidiaries must also guarantee Lennar Corporation’s obligations with regard to its senior notes.

Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at November 30, 2020 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 4 of the Notes to the Consolidated Financial Statements.

The guarantees are full, unconditional and joint and several and the guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation.

Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at November 30, 2021 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 4 of the Notes to Consolidated Financial Statements.

The guarantees are full, unconditional and joint and several and the

guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation.

A subsidiary's guarantee of Lennar senior notes will be suspended at any time when it is not directly or indirectly guaranteeing at least $75 million principal amount of debt of Lennar Corporation (other than senior notes), and a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed.

If the proposed spin-off of our multifamily and single family rental asset management businesses takes place, the subsidiaries involved in those businesses will no longer guarantee our senior notes.

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at November 30, 2021 is included in the following tables.

Intercompany balances and transactions within the Obligors have been eliminated and amounts attributable to the Obligor’s investment in consolidated subsidiaries that have not issued or guaranteed the senior notes have been excluded.

Amounts due from and transactions with nonobligor subsidiaries and related parties are separately disclosed:

Amounts due from and transactions with non-guarantor subsidiaries and related parties are separately disclosed:

(In thousands) November 30, 2021

November 30, 2020

Due from non-guarantor subsidiaries $ 4,187,044 2,655,503

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Homebuilding - Investments in Unconsolidated Entities

At November 30, 2020, we had equity investments in 38 active homebuilding and land unconsolidated entities (of which 3 had recourse debt, 9 had non-recourse debt and 26 had no debt), compared to 36 active homebuilding and land unconsolidated entities at November 30, 2019.

At November 30, 2021, we had equity investments in 41 active homebuilding and land unconsolidated entities (of which four had recourse debt, 11 had non-recourse debt and 26 had no debt), compared to 38 active homebuilding and land unconsolidated entities at November 30, 2020.

Historically, we have invested in unconsolidated entities that acquired and developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers.

Through these entities, we have primarily sought to reduce and share our risk by limiting the amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures.

The use of these entities also, in some instances, has enabled us to acquire land which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner.

The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner.

Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategic partners.

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Each joint venture is governed by an executive committee consisting of members from the partners.

As of November 30, 2020 and 2019, our recorded investments in Homebuilding unconsolidated entities were $953.2 million and $1.0 billion, respectively, while the underlying equity in Homebuilding unconsolidated entities partners’ net assets as of both November 30, 2020 and 2019 was $1.3 billion.

The basis difference was primarily as a result of us contributing our 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 us.

Included in our recorded investments in Homebuilding unconsolidated entities is our 40% ownership of FivePoint.

As of November 30, 2020 and 2019, the carrying amount of our investment was $392.1 million and $374.0 million, respectively.

The total debt of the Homebuilding unconsolidated entities in which we have investments was $1.1 billion as of both November 30, 2020 and 2019, of which our maximum recourse exposure was $4.9 million and $10.8 million as of November 30, 2020 and 2019, respectively.

In most instances in which we have guaranteed debt of an unconsolidated entity, our partners have also guaranteed that debt and are required to contribute their share of the guarantee payment.

In a repayment guarantee, we and our venture partners guarantee repayment of a portion or all of the debt in the event of a default before the lender would have to exercise its rights against the collateral.

In connection with many of the loans to Homebuilding unconsolidated entities, we and our joint venture partners (or entities related to them) have been required to give guarantees of completion to the lenders.

Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained.

If the construction is to be done in phases, the guarantee generally is limited to completing only the phases as to which construction has already commenced and for which loan proceeds were used.

If we are required to make a payment under any guarantee, the payment would generally constitute a capital contribution or loan to the Homebuilding unconsolidated entity and increase our share of any funds the unconsolidated entity distributes.

As of both November 30, 2020 and 2019, the fair values of our repayment, maintenance and completion guarantees were not material.

We believe that as of November 30, 2020, in the event we become legally obligated to perform under a guarantee of an obligation of a Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral should to be sufficient to repay at least a significant portion of the obligation or we and our partners would contribute additional capital into the venture.

In certain instances, we have placed performance letters of credit and surety bonds with municipalities for our joint ventures (see Note 4 of the notes to our Consolidated Financial Statements).

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of November 30, 2020 and it does not represent estimates of future cash payments that will be made to reduce debt balances.

Details regarding these investments, balances and debt are included in Note 3 of the Notes to Consolidated Financial Statements.

We regularly monitor the results of our unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.

We also monitor the performance of joint ventures in which we have investments on a regular basis to assess compliance with debt covenants.

For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment.

We believe all of the joint ventures were in compliance with their debt covenants at November 30, 2021.

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of November 30, 2021.

It does not represent estimates of future cash payments that will be made to reduce debt balances.

Many JV loans have extension options in the loan agreements that would allow the loans to be extended into future years.

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Total $ 1,216,721 264,428 68,335 252,052 638,666 (6,760)

Financial Services - Investment in an Unconsolidated Entity

In connection with the sale of the majority of its retail title agency business and title insurance underwriter in the first quarter of 2019, we provided seller financing and received a substantial minority equity ownership stake in the buyer.

The combination of both the equity and debt components of this transaction caused the transaction not to meet the accounting requirements for sale treatment and, therefore, we were required to consolidate the buyer’s results at that time.

During the year ended November 30, 2020, there was a significant equity raise that was completed, which resulted in the entity’s deconsolidation.

Upon deconsolidation, we recorded a gain of $61.4 million.

As of November 30, 2020, our recorded investment in the Financial Services unconsolidated entity was $68.9 million.

Multifamily - Investments in Unconsolidated Entities

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Each joint venture is governed by an operating agreement that provides significant substantive participating voting rights on major decisions to our partners.

The Multifamily segment includes LMV I and 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 year ended November 30, 2020 are included below:

November 30, 2020

(In thousands) LMV I LMV II

Lennar's carrying value of investments $ 328,365 288,476

Equity commitments 2,204,016 1,257,700

Equity commitments called 2,139,322 995,206

Lennar's equity commitments 504,016 381,000

Lennar's equity commitments called 496,483 300,393

Lennar's remaining commitments 7,533 80,607

Distributions to Lennar during the year ended November 30, 2020 39,988 —

The Multifamily segment includes LMV I and LMV II, which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties.

Details of each as of and during the year ended November 30, 2021 are included in Note 3 of the Notes to Consolidated Financial Statements.

We regularly monitor the results of our unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.

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We believe all of the joint ventures were in compliance with their debt covenants at November 30, 2021.

The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of November 30, 2020 and does not represent estimates of future cash payments that will be made to reduce debt balances.

The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of November 30, 2021.

It does not represent estimates of future cash payments that will be made to reduce debt balances.

Principal Maturities of Multifamily Unconsolidated JVs Debt by Period

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We periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable income to the carried interests.

These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled from the applicable funds and have been recorded as revenues.

As of November 30, 2020 and 2019, we had strategic technology investments in unconsolidated entities of $196.6 million and $167.0 million, respectively.

These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled and have been recorded as revenues.

As of November 30, 2021 and 2020, we had strategic technology investments in unconsolidated entities of $145.6 million and $196.6 million, respectively, accounted for under the equity method of accounting.

Option Contracts

We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options.

In fiscal year 2020 and beyond, we anticipate increasing the percentage of our total homesites that we control through options rather than own.

As a continuation of our focus on strategic partnerships to further enhance our land lighter strategy, we have entered into arrangements with a land bank investor group and a joint venture in which we are a 20% participant.

These arrangements have specified time periods (12 to 18 months in one instance and three years in the other).

Under these arrangements, in most instances when we want to acquire a property for use in our for-sale single family home business, we will offer the investor group or the joint venture the opportunity to acquire the property and give us an option to purchase all or a portion of it in the future back, if it is mutually beneficial to both parties.

The maximum amount the investor group and the joint venture are committed to spend is $2.5 billion, but that may be increased.

To the extent the investor group or the joint venture does not elect to purchase properties we identify, we can purchase them directly.

The arrangement with the investor group and the joint venture, together with existing and other strategic partnerships we are discussing, are significant steps in our strategy to migrate to a higher percentage of our homesites which we control but do not own, which we expect will result in greater cash flow and higher returns on assets and equity.

Since fiscal year 2020, we have been increasing the percentage of our total homesites that we control through options rather than own.

As part of our focus on strategic relationships to further enhance our land lighter strategy, at the end of fiscal year 2020 we entered into an arrangement with a land bank investor group.

The arrangement has a specified time land holding of 12 to 18 months.

Under the arrangement, in most instances when we want to acquire a property for use in our for-sale single family home business, we will offer the investor group the opportunity to acquire the property and give us an option to purchase all or a portion of it in the future back, if it is mutually beneficial to both parties.

The maximum amount the investor group is

committed to spend is $3.1 billion.

To the extent the investor group does not elect to purchase properties we identify, we can utilize our other investor relationships to have other investor groups purchase the land or we can purchase it directly.

The arrangement with the investor group, together with existing and other strategic partnerships we are discussing, are significant steps in our strategy to migrate to a higher percentage of our homesites which we control but do not own, which we expect will result in greater cash flow and higher returns on assets and equity.

The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties ("optioned") or unconsolidated JVs (i.e., controlled homesites) at November 30, 2021 and 2020:

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(1) Based on trailing twelve months of home deliveries.

We evaluate all option contracts for land to determine whether they are variable interest entities ("VIEs") and, if so, whether we are the primary beneficiary of certain of these option contracts.

Although we do not have legal title to the optioned land, if we are deemed to be the primary beneficiary or make a significant deposit for optioned land, we may need to consolidate the land under option at the purchase price of the optioned land.

During the year ended November 30, 2020, consolidated inventory not owned increased by $523.4 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet.

The increase was primarily due to homesites sold to the investor group.

This strategic relationship is a continuation of our land light strategy and allows us to offer the investor group the opportunity to acquire the property and give us an option to purchase all or a portion of it in the future.

The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and our cash deposits.

Our exposure to loss related to our option contracts with third parties and unconsolidated entities consisted of our non-refundable option deposits and pre-acquisition costs totaling $414.2 million and $320.5 million at November 30, 2020 and 2019, respectively.

Additionally, we had posted $87.5 million and $75.0 million of letters of credit in lieu of cash deposits under certain land and option contracts as of November 30, 2020 and 2019, respectively.

Details on option contracts and related consolidated inventory not owned and exposure are included in Note 8 of the Notes to Consolidated Financial Statements.

Contractual Obligations and Commercial Commitments

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Financial Services - Notes and other debts payable 1,726,026 1,574,226 4,326 — 147,474

Lennar Other - Notes and other debts payable

1,906 1,906 — — —

Interest commitments under interest bearing debt (2) 831,237 230,272 352,409 182,234 66,322

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(2) Interest commitments on variable interest-bearing debt are determined based on the interest rate as of November 30, 2021.

(3) Amounts include $7.5 million and $80.6 million remaining equity commitment to fund the LMV I and LMV II, respectively, for future expenditures related to the construction and development of the projects.

(3) Amounts include $5.0 million and $18.1 million remaining equity investment commitments to LMV I and LMV II, respectively, for future expenditures related to the construction and development of the projects and $106.1 million remaining equity investment commitment to the Upward America Venture.

(4) Total contractual obligations exclude our gross unrecognized tax benefits and accrued interest and penalties totaling $72.2 million as of November 30, 2021, because we are unable to make reasonable estimates as to the period of cash settlement with the respective taxing authorities.

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Option contracts for the purchase of land generally reduces our financial risk and costs of capital associated with land holdings.

At November 30, 2020, we had access to 119,283 homesites through option contracts with third parties and unconsolidated entities in which we have investments.

At November 30, 2020, we had $414.2 million of non-refundable option deposits and pre-acquisition costs related to certain of these homesites and had posted $87.5 million of letters of credit in lieu of cash deposits under certain land and option contracts.

At November 30, 2021, we had access to

257,509 homesites through option contracts with third parties and unconsolidated entities in which we have investments.

At November 30, 2021, we had $1.2 billion of non-refundable option deposits and pre-acquisition costs related to certain of these homesites and had posted $175.9 million of letters of credit in lieu of cash deposits under certain land and option contracts.

At November 30, 2021, we had letters of credit outstanding in the amount of $1.4 billion (which included the $175.9 million of letters of credit discussed above).

These letters of credit are generally posted either with regulatory bodies to guarantee our performance of certain development and construction activities, or in lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral.

Additionally, at November 30, 2020, we had outstanding surety bonds of $3.1 billion including performance surety bonds related to site improvements at various projects (including certain projects of our joint ventures) and financial surety bonds.

Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all of the development and construction activities are completed.

As of November 30, 2020, there were approximately $1.6 billion, or 51%, of anticipated future costs to complete related to these site improvements.

We do not presently anticipate any draws upon these bonds or letters of credit, but if any such draws occur, we do not believe they would have a material adverse effect on our financial position, results of operations or cash flows.

Details on our letters of credit outstanding and outstanding surety bonds are included in Note 4 of the Notes to Consolidated Financial Statements.

Our Financial Services segment had a pipeline of loan applications in process of $5.6 billion at November 30, 2021.

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These instruments involve, to varying degrees, elements of credit and interest rate risk.

Credit risk associated with MBS forward commitments,

option contracts, futures contracts and loan sales transactions is managed by limiting our counterparties to investment banks, federally regulated bank affiliates and other investors meeting our credit standards.

Credit risk associated with MBS forward commitments, option contracts, futures contracts and loan sales transactions is managed by limiting our counterparties to investment banks, federally regulated bank affiliates and other investors meeting our credit standards.

Our risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and the option contracts.

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Market and Financing Risk

We finance our contributions to JVs, land acquisition and development activities, construction activities, financial services activities, Multifamily activities and general operating needs primarily with cash generated from operations, debt and equity issuances, as well as borrowings under our Credit Facility and warehouse repurchase facilities.

We finance our contributions to JVs, land acquisition and development activities, construction activities, financial services activities, Multifamily activities and general operating needs primarily with cash generated from operations and debt, as well as borrowings under our Credit Facility and warehouse repurchase facilities.

We also purchase land under option agreements, which enables us to control homesites until we have determined whether to exercise the options.

We try to manage the financial risks of adverse market conditions associated with land holdings by what we believe to be prudent underwriting of land purchases in areas we view as desirable growth markets, careful management of the land development process and limitation of risks by using partners to share the costs of purchasing and developing land as well as obtaining access to land through option contracts.

Although we believed our land underwriting standards were conservative, we did not anticipate the severe decline in land values and the sharply reduced demand for new homes encountered in the prior economic downturn.

We historically have experienced, and expect to continue to experience, variability in quarterly results.

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However, a variety of factors can alter seasonal patterns.

In 2020, the shutdown of large portions of our national economy in March and April due to the COVID-19 pandemic temporarily reduced our home sales, and therefore altered our normal seasonal pattern.

For example, in 2020, the shutdown of large portions of our national economy in March and April due to the COVID-19 pandemic temporarily reduced our home sales, and therefore altered our normal seasonal pattern.

Interest Rates and Changing Prices

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Rising interest rates as well as increased material and labor costs, may reduce gross margins.

An increase in materials and labor costs is particularly a problem during a period of declining home prices.

An increase in materials and labor costs would be particularly a problem during a period of declining home prices.

Conversely, deflation can impact the value of real estate and make it difficult for us to recover our land costs.

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Our accounting policies are more fully described in Note 1 of the notes to our consolidated financial statements included in Item 8 of this document.

As discussed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes.

As discussed in Note 1, the preparation of financial statements in conformity with

accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes.

Future events and their effects cannot be determined with absolute certainty.

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Listed below are those policies and estimates that we believe are critical and require the use of significant judgment in their application.

We have recorded a significant amount of goodwill in connection with the recent acquisition of CalAtlantic.

We have recorded a significant amount of goodwill in connection with the 2018 acquisition of CalAtlantic.

We record goodwill associated with acquisitions of businesses when the purchase price of the business exceeds the fair value of the net tangible and identifiable assets acquired.

In accordance with ASC Topic 350, Intangibles-Goodwill and Other ("ASC 350"), we evaluate goodwill for potential impairment on at least an annual basis.

We evaluate potential impairment by comparing the carrying value of each of our reporting units to their estimated fair values.

We have the option to perform a qualitative or quantitative assessment to determine whether the fair value of a reporting unit exceeds its carrying value.

Qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting units and other entity and reporting unit specific events.

We believe that the accounting estimate for goodwill is a critical accounting estimate because of the judgment required in assessing the fair value of each of our reporting units.

We estimate fair value through various valuation methods, including the use of discounted expected future cash flows of each

reporting unit.

We estimate fair value through various valuation methods, including the use of discounted expected future cash flows of each reporting unit.

The expected future cash flows for each segment are significantly impacted by current market conditions.

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Our Homebuilding partners generally are unrelated homebuilders, land owners/developers and financial or other strategic partners.

Additionally, in recent years, we have invested in technology companies that are looking to improve the homebuilding and financial services industry in order to better serve our customers and increase efficiencies.

Additionally, in recent years, we have invested in technology companies that are looking to improve the homebuilding and financial services industry in order to better serve homebuyers and homeowners and increase efficiencies.

Our Multifamily partners are all financial partners.

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Factors considered in determining whether we have significant influence, or we have control include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and continuing involvement.

The accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the judgment required in determining whether the entity is a VIE or a voting interest entity and then whether we are the primary beneficiary or have control or significant influence.

We believe that the equity method of accounting is appropriate for our investments in unconsolidated entities where we are not the primary beneficiary and we do not have a controlling interest, but rather share control with our partners.

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A higher discount rate reduces the estimated fair value of our investments in unconsolidated entities, while a lower discount rate increases the estimated fair value of our investments in unconsolidated entities.

Because of changes in economic conditions, actual results could differ materially from

management’s assumptions and may require material valuation adjustments to our investments in unconsolidated entities to be recorded in the future.

Because of changes in economic conditions, actual results could differ materially from management’s assumptions and may require material valuation adjustments to our investments in unconsolidated entities to be recorded in the future.

Consolidation of Variable Interest Entities

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis