What changed in this filing

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Item 1. Financial Statements

2022-04-01 compared with 2021-10-01 · 199 added, 363 removed, 594 unchanged (49% of the section changed)

3 unchanged sentences

(Dollars in thousands)

August 31, November 30,

February 28, November 30,

2022 (1) 2021 (1)

16 unchanged sentences

(1) Under certain provisions of Accounting Standards Codification ("ASC") Topic 810, Consolidations ("ASC 810"), the Company is required to separately disclose on its condensed consolidated balance sheets the assets owned by consolidated variable interest entities ("VIEs") and liabilities of consolidated VIEs as to which neither Lennar Corporation, nor any of its subsidiaries, has any obligations.

As of August 31, 2021, total assets include $ 1.0 billion related to consolidated VIEs of which $ 61.1 million is included in Homebuilding cash and cash equivalents, $ 4.4 million in Homebuilding receivables, net, $ 14.3 million in Homebuilding finished homes and construction in progress, $ 623.9 million in Homebuilding land and land under development, $ 284.7 million in Homebuilding consolidated inventory not owned, $ 1.3 million in Homebuilding investments in unconsolidated entities, $ 17.1 million in Homebuilding other assets and $ 17.7 million in Multifamily assets.

As of February 28, 2022, total assets include $ 1.1 billion related to consolidated VIEs of which $ 66.9 million is included in Homebuilding cash and cash equivalents, $ 0.3 million in Homebuilding receivables, net, $ 703.4 million in Homebuilding land and land under development, $ 218.3 million in Homebuilding consolidated inventory not owned, $ 1.1 million in Homebuilding investments in unconsolidated entities, $ 22.1 million in Homebuilding other assets and $ 59.4 million in Multifamily assets.

As of November 30, 2021, total assets include $ 1.1 billion related to consolidated VIEs of which $ 60.9 million is included in Homebuilding cash and cash equivalents, $ 4.4 million in Homebuilding receivables, net, $ 14.3 million in Homebuilding finished homes and construction in progress, $ 697.1 million in Homebuilding land and land under development, $ 239.2 million in Homebuilding consolidated inventory not owned, $ 1.1 million in Homebuilding investments in unconsolidated entities, $ 17.4 million in Homebuilding other assets and $ 80.6 million in Multifamily assets.

3 unchanged sentences

(In thousands, except share amounts)

August 31, November 30,

February 28, November 30,

2022 (2) 2021 (2)

13 unchanged sentences

Class A common stock of $ 0.10 par value;

August 31, 2021 and November 30, 2020 - 400,000,000 shares;

August 31, 2021 - 300,499,577 shares and November 30, 2020 - 298,942,836 shares

February 28, 2022 and November 30, 2021 - 400,000,000 shares;

February 28, 2022 - 302,427,896 shares and November 30, 2021 - 300,500,075 shares

30,243 30,050

Class B common stock of $ 0.10 par value;

August 31, 2021 and November 30, 2020 - 90,000,000 shares;

August 31, 2021 - 39,443,168 shares and November 30, 2020 - 39,443,168 shares

February 28, 2022 and November 30, 2021 - 90,000,000 shares;

February 28, 2022 - 39,443,168 shares and November 30, 2021 - 39,443,168 shares

Additional paid-in capital 8,855,151 8,807,891

1 unchanged sentence

Treasury stock, at cost;

August 31, 2021 - 28,647,421 shares of Class A common stock and 1,822,016 shares of Class B common stock;

February 28, 2022 - 43,806,845 shares of Class A common stock and 2,574,016 shares of Class B common stock;

November 30, 2021 - 38,586,961 shares of Class A common stock and 1,922,016 shares of Class B common stock

( 3,290,748 ) ( 2,709,448 )

Accumulated other comprehensive loss ( 1,300 ) ( 805 )

Accumulated other comprehensive income (loss) 1,686 ( 1,341 )

Total stockholders’ equity 20,679,064 20,816,425

2 unchanged sentences

Total liabilities and equity $ 32,635,252 33,207,778

(2) Under certain provisions of ASC 810, the Company is required to separately disclose on its condensed consolidated balance sheets the assets owned by consolidated VIEs and liabilities of consolidated VIEs as to which neither Lennar Corporation, nor any of its subsidiaries, has any obligations.

As of August 31, 2021, total liabilities include $ 320.6 million related to consolidated VIEs as to which there was no recourse against the Company, of which $ 25.4 million is included in Homebuilding accounts payable, $ 232.8 million in Homebuilding liabilities related to consolidated inventory not owned, $ 50.0 million in Homebuilding senior notes and other debts payable and $ 12.5 million in Homebuilding other liabilities.

(2) As of February 28, 2022, total liabilities include $ 236.4 million related to consolidated VIEs as to which there was no recourse against the Company, of which $ 23.8 million is included in Homebuilding accounts payable, $ 182.7 million in Homebuilding liabilities related to consolidated inventory not owned, $ 18.4 million in Homebuilding senior notes and other debts payable, $ 7.8 million in Homebuilding other liabilities and $ 3.8 million in Multifamily liabilities.

As of November 30, 2021, total liabilities include $ 258.5 million related to consolidated VIEs as to which there was no recourse against the Company, of which $ 26.6 million is included in Homebuilding accounts payable, $ 196.6 million in Homebuilding liabilities related to consolidated inventory not owned, $ 20.1 million in Homebuilding senior notes and other debt payable, $ 12.3 million in Homebuilding other liabilities and $ 2.8 million in Multifamily liabilities.

1 unchanged sentence

Lennar Corporation and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Condensed Consolidated Statements of Operations and Comprehensive Income

(In thousands, except per share amounts)

Three Months Ended Nine Months Ended

August 31, August 31,

2021 2020 2021 2020

Three Months Ended

Homebuilding $ 5,752,205 4,943,056

11 unchanged sentences

Total costs and expenses 5,123,151 4,474,294

Homebuilding equity in earnings (loss) from unconsolidated entities 2,391 ( 6,431 ) ( 3,862 ) ( 20,077 )

Homebuilding equity in loss from unconsolidated entities ( 286 ) ( 4,565 )

Homebuilding other income (expense), net ( 171 ) 12,975

Financial Services gain on deconsolidation — — — 61,418

Multifamily equity in earnings (loss) from unconsolidated entities and other gain 1,805 ( 1,268 )

Lennar Other realized and unrealized gain (loss) 495,202 — 847,377 —

Lennar Other equity in earnings (loss) from unconsolidated entities and other income (expense), net ( 2,220 ) ( 2,835 ) 59,954 ( 38,907 )

Lennar Other unrealized gain (loss) from technology investments ( 395,170 ) 469,745

Lennar Other equity in loss from unconsolidated entities and other expense, net, and other gain ( 9,808 ) ( 1,047 )

Earnings before income taxes 676,735 1,327,014

Provision for income taxes ( 167,420 ) ( 310,105 )

Net earnings (including net earnings (loss) attributable to noncontrolling interests) 1,409,218 669,323 3,262,899 1,576,644

Net earnings (loss) attributable to noncontrolling interests 2,330 2,905 23,279 ( 5,632 )

Net earnings (including net earnings attributable to noncontrolling interests) 509,315 1,016,909

Net earnings attributable to noncontrolling interests 5,734 15,540

Net earnings attributable to Lennar $ 503,581 1,001,369

1 unchanged sentence

Net unrealized gain (loss) on securities available-for-sale $ 742 ( 942 )

Reclassification adjustments for loss included in earnings, net of tax — — — ( 452 )

Reclassification adjustments for gain included in earnings, net of tax 2,285 —

Total other comprehensive income (loss), net of tax $ 3,027 ( 942 )

Total comprehensive income attributable to Lennar $ 506,608 1,000,427

Total comprehensive income (loss) attributable to noncontrolling interests $ 2,330 2,905 23,279 ( 5,632 )

Total comprehensive income attributable to noncontrolling interests $ 5,734 15,540

Basic earnings per share $ 1.70 3.20

4 unchanged sentences

(In thousands)

Nine Months Ended

Three Months Ended

Cash flows from operating activities:

Net earnings (including net earnings (loss) attributable to noncontrolling interests) $ 3,262,899 1,576,644

Adjustments to reconcile net earnings to net cash provided by operating activities:

Net earnings (including net earnings attributable to noncontrolling interests) $ 509,315 1,016,909

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

Depreciation and amortization 20,089 22,325

Amortization of discount/premium on debt, net ( 490 ) ( 2,361 )

Equity in (earnings) loss from unconsolidated entities ( 64,571 ) 50,971

Equity in loss from unconsolidated entities 9,752 7,897

Distributions of earnings from unconsolidated entities 4,822 4,234

Share-based compensation expense 81,457 48,818

Deferred income tax expense 288,259 124,906

Deferred income tax (benefit) expense ( 54,032 ) 114,917

Loans held-for-sale unrealized loss 27,387 35,021

Lennar Other unrealized/realized gain ( 847,377 ) —

Lennar Other unrealized (gain) loss from technology investments 395,170 ( 469,745 )

Gain on sale of other assets and operating properties and equipment — ( 1,167 )

Loss on consolidation — 4,824

Gain on deconsolidation of previously consolidated entity — ( 61,418 )

Gain on sale of interest in unconsolidated entity and other Multifamily gain — ( 19,184 )

Gain on sale of Financial Services' portfolio/businesses

( 2,528 ) ( 5,014 )

Valuation adjustments and write-offs of option deposits and pre-acquisition costs

16,020 76,630

Changes in assets and liabilities:

Decrease in receivables 380,502 45,649

(Increase) decrease in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs ( 2,252,820 ) 113,429

Increase in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs ( 1,913,634 ) ( 862,120 )

Increase in other assets ( 49,968 ) ( 100,486 )

1 unchanged sentence

Increase in accounts payable and other liabilities 96,455 183,584

Net cash provided by operating activities 1,312,347 2,896,844

Net cash (used in) provided by operating activities ( 72,231 ) 385,508

Cash flows from investing activities:

3 unchanged sentences

Distributions of capital from unconsolidated entities 173,561 83,241

Proceeds from sale of investment in consolidated joint venture 15,950 —

Proceeds from sale of commercial mortgage-backed securities bonds 9,191 11,307

Proceeds from sale of Financial Services' portfolio/business 3,327 14,978

Increase in Financial Services loans held-for-investment, net 13,249 2,427

Decrease in Financial Services loans held-for-investment, net 11,431 3,777

Purchases of investment securities ( 71,269 ) —

Proceeds from maturities/sales of investment securities 1,783 8,994

Other receipts, net 12 1,639

Net cash used in investing activities $ ( 19,992 ) ( 93,352 )

3 unchanged sentences

(In thousands)

Nine Months Ended

Three Months Ended

Cash flows from financing activities:

Net repayments under warehouse facilities $ ( 528,667 ) ( 500,849 )

Redemption of senior notes ( 299,999 ) ( 313,000 )

Principal payments on notes payable and other borrowings ( 18,776 ) ( 55,350 )

2 unchanged sentences

Payments related to consolidated inventory not owned ( 166,100 ) —

(Payments) proceeds related to other liabilities, net ( 7,142 ) 6,559

Receipts related to noncontrolling interests 6,984 8,896

4 unchanged sentences

Net cash used in financing activities $ ( 1,257,886 ) ( 629,688 )

Net (decrease) increase in cash and cash equivalents and restricted cash ( 120,740 ) 763,387

Net decrease in cash and cash equivalents and restricted cash ( 1,350,109 ) ( 337,532 )

Cash and cash equivalents and restricted cash at beginning of period 2,955,683 2,932,730

12 unchanged sentences

Non-cash contributions to unconsolidated entities 124,864 —

Consolidation/deconsolidation of unconsolidated/consolidated entities, net:

Financial Services assets $ — 217,565

Financial Services liabilities — ( 115,175 )

Financial Services noncontrolling interests — ( 102,390 )

Inventories — 95,476

Operating properties and equipment and other assets — 6,870

Investments in unconsolidated entities — ( 68,290 )

Notes payable — ( 44,924 )

Other liabilities — ( 1,455 )

Noncontrolling interests — 12,323

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

Basis of Consolidation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

3 unchanged sentences

The Company has historically experienced, and expects to continue to experience, variability in quarterly results.

The condensed consolidated statements of operations for the three and nine months ended August 31, 2021 are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated statements of operations for the three months ended February 28, 2022 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

2 unchanged sentences

Cash and Cash Equivalents

Homebuilding cash and cash equivalents as of August 31, 2021 and November 30, 2020 included $ 666.8 million and $ 314.3 million , respectively, of cash held in escrow.

On average for the three months ended August 31, 2021, cash was held in escrow for approximately three days .

Homebuilding cash and cash equivalents as of February 28, 2022 and November 30, 2021 included $ 894.6 million and $ 940.4 million, respectively, of cash held in escrow.

On average for the three months ended February 28, 2022, cash was held in escrow for approximately two days .

Homebuilding Revenue Recognition

Homebuilding revenues and related profits from sales of homes are recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the homebuyer.

In order to promote sales of the homes, the Company may offer sales incentives to homebuyers.

The types of incentives vary on a community-by-community basis and home-by-home basis.

They include primarily price discounts on individual homes and financing incentives, all of which are reflected as a reduction of home sales revenues.

For the three months ended February 28, 2022 and 2021, sales incentives offered to homebuyers averaged $ 8,600 per home, or 1.9 % as a percentage of home sales revenues, and $ 12,300 per home, or 3.0 % as a percentage of home sales revenues, respectively.

Share-based Payments

During the three months ended August 31, 2021, the Company granted employees an immaterial number of nonvested shares.

During the three months ended August 31, 2020, the Company granted employees 0.9 million of nonvested shares.

During the nine months ended August 31, 2021 and 2020, the Company granted employees 1.4 million and 1.8 million nonvested shares, respectively.

During both the three months ended February 28, 2022 and 2021, the Company granted employees 1.4 million nonvested shares.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13").

ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments.

ASU 2016-13 requires immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which generally results in earlier recognition of allowances for credit losses on loans and other financial instruments.

ASU 2016-13 was effective for the Company's fiscal year beginning December 1, 2020.

The adoption of ASU 2016-13 did not have a material impact on the Company's condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Accounting for Goodwill Impairment ("ASU 2017-04").

ASU 2017-04 removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment.

A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes ("ASU 2019-12").

ASU 2019-12 was effective for the Company’s fiscal year beginning December 1, 2021.

The adoption of ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements.

New Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes ("ASU 2019-12").

ASU 2019-12 will be effective for the Company’s fiscal year beginning December 1, 2021.

The Company is currently evaluating the impact the adoption of ASU 2019-12 will have on the Company's condensed consolidated financial statements.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Reclassifications

Certain prior year amounts in the condensed consolidated financial statements have been reclassified to conform with the 2021 presentation.

The Company reclassed the balance of its investment in Doma, formerly States Title, to which the Company sold the majority of the Financial Services segment's retail title agency business and title insurance underwriter in the first quarter of 2019, from the Financial Services segment to the Lennar Other segment in the condensed consolidated balance sheets for all periods presented.

This was reclassed to be included in our strategic technology investments as the entity had announced that it would merge with a publicly traded special purpose acquisition company and during the three months ended August 31, 2021 completed the merger and became a publicly traded entity.

In addition, the Company reflected its contributions to its charitable foundation in a new line on its condensed consolidated statements of operations for all periods presented.

This was previously reflected in the Corporate general and administrative line.

These reclassifications had no impact on the Company's total assets, total equity, revenues or net earnings in its condensed consolidated financial statements.

(2) Operating and Reporting Segments

9 unchanged sentences

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

(In thousands) August 31, 2021

(In thousands) February 28, 2022

Homebuilding Financial

14 unchanged sentences

Notes and other debts payable, net $ 4,639,222 1,197,360 16,930 — 5,853,512

Other liabilities 4,788,988 165,771 259,145 99,881 5,313,785

Accounts payable and other liabilities 5,382,549 136,785 294,845 120,129 5,934,308

$ 10,021,771 1,334,145 311,775 120,129 11,787,820

18 unchanged sentences

Notes and other debts payable, net $ 4,652,338 1,726,026 — — 6,378,364

Other liabilities 3,969,893 180,329 252,911 11,060 4,414,193

Accounts payable and other liabilities 5,217,904 180,317 288,930 145,981 5,833,132

$ 9,870,242 1,906,343 288,930 145,981 12,211,496

(1) Receivables, net for Financial Services primarily related to loans sold to investors for which the Company had not yet been paid.

(1) Receivables, net for Financial Services primarily related to loans sold to investors for which the Company had not yet been paid as of February 28, 2022 and November 30, 2021, respectively.

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

(3) Investments in equity securities include investments of $ 63.9 million and $ 61.6 million without readily available fair values as of August 31, 2021 and November 30, 2020, respectively.

(3) Investments in equity securities include investments of $ 168.2 million and $ 100.1 million without readily available fair values as of February 28, 2022 and November 30, 2021, respectively.

(4) Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss) on the condensed consolidated balance sheet.

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

Three Months Ended August 31, 2021

Three Months Ended February 28, 2022

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate and

5 unchanged sentences

Earnings (loss) before income taxes 1,109,850 90,791 5,427 ( 403,134 ) ( 126,199 ) 676,735

Three Months Ended August 31, 2020

Three Months Ended February 28, 2021

Revenues $ 4,943,056 244,069 131,443 6,900 — 5,325,468

3 unchanged sentences

Earnings (loss) before income taxes 833,180 146,207 ( 874 ) 471,346 ( 122,845 ) 1,327,014

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

Nine Months Ended August 31, 2021

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate and

unallocated Total

$ 17,529,606 669,789 476,837 20,884 — 18,697,116

Operating earnings 3,275,488 379,610 12,130 909,221 — 4,576,449

Corporate general and administrative expenses

— — — — 296,190 296,190

Charitable foundation contribution — — — — 42,006 42,006

Earnings before income taxes 3,275,488 379,610 12,130 909,221 ( 338,196 ) 4,238,253

Nine Months Ended August 31, 2020

$ 14,626,720 631,992 370,904 33,348 — 15,662,964

Operating earnings (loss) (1) 1,905,503 329,722 ( 4,001 ) ( 9,123 ) — 2,222,101

Corporate general and administrative expenses

— — — — 246,815 246,815

Charitable foundation contribution — — — — 16,144 16,144

Earnings (loss) before income taxes 1,905,503 329,722 ( 4,001 ) ( 9,123 ) ( 262,959 ) 1,959,142

(1) Operating loss for Lennar Other for the nine months ended August 31, 2020 included a $ 25.0 million write-down of assets held by Rialto legacy funds because of the disruption in the capital markets as a result of COVID-19 and the economic shutdown.

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

Homebuilding Segments

2 unchanged sentences

Operations of the Company’s Homebuilding segments primarily include the construction and sale of single-family attached and detached homes as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Operating earnings (loss) for the Homebuilding segments consist of revenues generated from the sales of homes and land, other revenues from management fees and forfeited deposits, equity in earnings (loss) from unconsolidated entities and other income (expense), net, less the cost of homes sold and land sold, and selling, general and administrative expenses incurred by the segment.

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

Florida, New Jersey, Pennsylvania and South Carolina

Alabama, Florida, New Jersey, Pennsylvania and South Carolina

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

3 unchanged sentences

(In thousands) East Central Texas West Other Corporate and Unallocated Total Homebuilding

August 31, 2021 $ 5,909,905 3,889,907 2,714,717 11,281,110 1,369,977 2,415,137 27,580,753

February 28, 2022 $ 6,552,930 3,939,627 3,240,006 11,854,213 1,414,532 1,091,178 28,092,486

November 30, 2021 5,854,057 3,782,847 2,801,192 11,171,741 1,443,163 2,414,819 27,467,819

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

Three Months Ended August 31, 2021

Three Months Ended February 28, 2022

(In thousands) East Central Texas West Other Total Homebuilding

1 unchanged sentence

Operating earnings (loss) 351,995 152,078 171,312 441,448 ( 6,983 ) 1,109,850

Three Months Ended August 31, 2020

$ 1,478,659 1,063,621 747,934 2,212,211 2,695 5,505,120

Operating earnings (loss) 244,189 132,678 116,111 342,834 ( 22,068 ) 813,744

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

Nine Months Ended August 31, 2021

(In thousands) East Central Texas West Other Total Homebuilding

Three Months Ended February 28, 2021

$ 1,355,942 928,442 644,078 2,009,579 5,015 4,943,056

Operating earnings (loss) 262,083 132,023 129,643 321,706 ( 12,275 ) 833,180

Nine Months Ended August 31, 2020

Revenues $ 3,908,421 2,839,415 1,933,918 5,920,804 24,162 14,626,720

Operating earnings (loss) 586,104 292,031 269,071 847,835 ( 89,538 ) 1,905,503

Financial Services

3 unchanged sentences

The Financial Services segment operates generally in the same states as the Company’s homebuilding operations.

At August 31, 2021, the Financial Services warehouse facilities were all 364 -day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows:

At February 28, 2022, the Financial Services warehouse facilities were all 364 -day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows:

(In thousands) Maximum Aggregate Commitment

Residential facilities maturing:

October 2021 $ 200,000

December 2021 500,000

April 2022 $ 100,000

July 2022 400,000

October 2022 200,000

December 2022 500,000

Total - Residential facilities

4 unchanged sentences

Total - LMF Commercial facilities

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

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

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.

2 unchanged sentences

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

(In thousands) August 31, 2021 November 30, 2020

(In thousands) February 28, 2022 November 30, 2021

Borrowings under the residential facilities $ 1,021,791 1,482,258

9 unchanged sentences

Mortgage investors could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties.

The Company’s mortgage operations have established accruals for

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

possible losses associated with mortgage loans previously originated and sold to investors.

The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors.

The Company establishes accruals for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements.

2 unchanged sentences

The activity in the Company’s loan origination liabilities was as follows:

Three Months Ended Nine Months Ended

August 31, August 31,

Three Months Ended

(In thousands) 2022 2021

5 unchanged sentences

LMF Commercial originated commercial loans as follows:

Three Months Ended Nine Months Ended

August 31, August 31,

Three Months Ended

(Dollars in thousands) 2022 2021

2 unchanged sentences

Securitizations 1 2

(1) During both the three and nine months ended August 31, 2021 and 2020 all the commercial loans originated were recorded as loans held-for-sale, which are held at fair value.

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

Investments held-to-maturity

At August 31, 2021 and November 30, 2020, the Financial Services segment held commercial mortgage-backed securities ("CMBS").

At February 28, 2022 and November 30, 2021, the Financial Services segment held commercial mortgage-backed securities ("CMBS").

These securities are classified as held-to-maturity based on its intent and ability to hold the securities until maturity and changes in estimated cash flows are reviewed periodically to determine if an other-than-temporary impairment has occurred.

Based on the segment’s assessment, no impairment charges were recorded during either the three or nine months ended August 31, 2021 or 2020.

Based on the segment’s assessment, no impairment charges were recorded during either the three months ended February 28, 2022 or 2021.

The Company has financing agreements to finance CMBS that have been purchased as investments by the Financial Services segment.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Details related to Financial Services' CMBS were as follows:

(Dollars in thousands) August 31, 2021 November 30, 2020

(Dollars in thousands) February 28, 2022 November 30, 2021

Carrying value $ 156,587 157,808

1 unchanged sentence

Incurred interest rate 3.4 % 3.4 %

August 31, 2021

February 28, 2022

Discount rates at purchase 6 % — 84 %

5 unchanged sentences

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

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

Lennar Other primarily includes strategic investments in technology companies, primarily managed by the Company's LEN X subsidiary, and fund interests the Company retained when it sold the Rialto asset and investment management platform.

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

During the nine months ended August 31, 2021, the Company completed the sale of the Company's residential solar business to Sunnova Energy International Inc.

("Sunnova") for shares in Sunnova.

The Company recorded a gain of $ 153.0 million upon the closing of the sale.

The calculation of the gain included the fair value of the 3.1 million shares in initial consideration received at closing and the fair value of potential shares to be received upon achievement of earnouts.

The significant unobservable fair value assumptions used in the calculation were a terminal value multiple of 3 and a 15 % discount rate.

The fair value of the earnouts was also based on the probability of achieving full or partial earnouts.

The investments in Opendoor Technologies, Inc.

("Opendoor"), Sunnova, Hippo Holdings, Inc.

("Hippo"), SmartRent, Inc.

("SmartRent") and Blend Labs, Inc.

("Blend") are held at market and will therefore change depending on the value of the Company's share holdings in those entities on the last day of each quarter.

The following is a detail of Lennar Other realized and unrealized gain (loss):

Three Months Ended Nine Months Ended

August 31, August 31,

2021 2020 2021 2020

Hippo (HIPO) mark to market $ 324,855 — 324,855 —

SmartRent (SMRT) mark to market 100,793 — 100,793 —

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

The Company has investments in Opendoor Technologies, Inc.

("Opendoor"), Hippo Holdings, Inc.

("Hippo"), Sunnova ("NOVA"), SmartRent, Inc.

("SmartRent"), Blend Labs, Inc.

("Blend") and Sonder ("SOND"), which are held at market and will therefore change depending on the value of the Company's share holdings in those entities on the last day of each quarter.

The following is a detail of Lennar Other unrealized gain (loss):

Three Months Ended

Opendoor (OPEN) mark to market $ ( 143,361 ) 469,745

Hippo (HIPO) mark to market ( 124,457 ) —

Sunnova (NOVA) mark to market ( 75,041 ) —

SmartRent (SMRT) mark to market ( 44,363 ) —

Blend Labs (BLND) mark to market ( 7,442 ) —

Gain on sale of solar business 1,531 — 153,006 —

Other realized gain — — 3,580 —

Sonder (SOND) mark to market ( 506 ) —

$ ( 395,170 ) 469,745

During the nine months ended August 31, 2021 , Opendoor, Hippo, SmartRent and Blend began trading and the Company began to mark to market the Company's share holdings in the public entities.

The mark to market recognition was due to the entities in which the Company holds the investments going public and the loss of a contractual right to a board seat, where applicable, during the nine months ended August 31, 2021 and the investments now being accounted for as investments in equity securities which are held at fair value and the changes in fair value are recognized through earnings.

As of November 30, 2020, the investments were included in the Company's investments in unconsolidated entities and were accounted for using the equity method.

In addition, as previously noted, Doma Holdings, Inc.

("Doma") went public during the three months ended August 31, 2021.

Doma is an investment that continues to be accounted for under the equity method due to the Company's significant ownership interest which allows the Company to exercise significant influence.

As of August 31, 2021, the Company owns approximately 25 % of Doma and the carrying amount of the Company's investment is $ 62.4 million.

During the year ended November 30, 2021, Opendoor, Hippo, Sunnova, SmartRent and Blend began trading in the public markets and the Company began to mark to market the Company's shares of share holdings in the public entities.

During the three months ended February 28, 2022, shares of Sonder began trading in the public markets and the Company began to mark to market its share holding in the public entity.

All the investments are accounted for as investments in equity securities which are held at fair value and the changes in fair values are recognized through earnings.

In addition, Doma Holdings, Inc.

("Doma") went public during the year ended November 30, 2021.

However, Doma is an investment that continues to be accounted for under the equity method due to the Company's significant ownership interest which allows the Company to exercise significant influence.

As of February 28, 2022, the Company owns approximately 26 % of Doma and the carrying amount of the Company's investment is $ 43.9 million.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

(3) Investments in Unconsolidated Entities

1 unchanged sentence

The investments in the Company's Homebuilding unconsolidated entities were as follows:

(In thousands) August 31, 2021 November 30, 2020

(In thousands) February 28, 2022 November 30, 2021

Investments in unconsolidated entities (1) (2) $ 1,066,256 972,084

2 unchanged sentences

(2) Included in the Company's recorded investments in Homebuilding unconsolidated entities is the Company's 40 % ownership of FivePoint.

As of August 31, 2021 and November 30, 2020, the carrying amount of the Company's investment was $ 389.8 million and $ 392.1 million, respectively.

As of February 28, 2022 and November 30, 2021, the carrying amount of the Company's investment was $ 376.6 million and $ 381.6 million, respectively.

As of February 28, 2022 and November 30, 2021, the Homebuilding segment's unconsolidated entities had non-recourse debt with completion guarantees of $ 205.0 million and $ 241.0 million, respectively.

The Company has an immaterial amount of recourse exposure to debt of the Homebuilding unconsolidated entities in which it has investments.

While the Company sometimes guarantees debt of unconsolidated entities, in most instances the Company’s partners have also guaranteed that debt and are required to contribute their shares of any payments.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

instances the amount of guaranteed debt of an unconsolidated entity is less than the value of the collateral securing it.

In the first quarter of 2021, the Company formed the Upward America Venture ("the Venture").

The Venture acquires single family homes for rent in high growth markets across the United States.

The Venture raised equity to get to a total commitment of $ 1.25 billion led by institutional investors.

Including leverage, the Venture will be positioned to acquire over $ 4.0 billion of new single family homes and townhomes from Lennar and potentially other homebuilders.

In most instances the amount of guaranteed debt of an unconsolidated entity is less than the value of the collateral securing it.

As of both February 28, 2022 and November 30, 2021, the fair values of the repayment guarantees, maintenance guarantees, and completion guarantees were not material.

The Company believes that as of February 28, 2022, in the event it becomes legally obligated to perform under a guarantee of the obligation of a Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral would be sufficient to repay at least a significant portion of the obligation or the Company and its partners would contribute additional capital into the venture.

In certain instances, the Company has placed performance letters of credit and surety bonds with municipalities with regard to obligations of its joint ventures (see Note 7 of the Notes to Condensed Consolidated Financial Statements).

In the first quarter of 2021, the Company formed the Upward America Venture ("Upward America"), and is managing and participating in Upward America.

Upward America is an investment fund that acquires new single-family homes in high growth markets across the United States and rents them to people who will live in them.

Upward America has raised equity commitments totaling $ 1.6 billion, including $ 350 million of equity commitments raised during the quarter ended February 28, 2022.

The commitments are primarily from institutional investors, including $ 125 million committed by Lennar.

Including leverage, Upward America will be positioned to acquire over $ 4.0 billion of new single family homes and townhomes from Lennar and potentially other homebuilders.

Multifamily Unconsolidated Entities

2 unchanged sentences

The details related to these are unchanged from the disclosure in the Company's Notes to the Financial Statements section in its Form 10-K for the year ended November 30, 2021.

As of both August 31, 2021 and November 30, 2020, the fair value of the completion guarantees was immaterial.

As of August 31, 2021 and November 30, 2020, Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $ 866.9 million and $ 722.9 million, respectively.

As of both February 28, 2022 and November 30, 2021, the fair value of the completion guarantees was immaterial.

As of February 28, 2022 and November 30, 2021, Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $ 985.1 million and $ 855.2 million, respectively.

In many instances, the Multifamily segment is appointed as the construction, development and property manager for its Multifamily unconsolidated entities and receives fees for performing this function.

1 unchanged sentence

The details of the activity was as follows:

Three Months Ended Nine Months Ended

August 31, August 31,

Three Months Ended

(In thousands) 2022 2021

2 unchanged sentences

Management fee income 13,127 14,871

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The Multifamily segment includes Multifamily Venture Fund I ("LMV I") and Multifamily Venture Fund II LP ("LMV II"), which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets.

Details of each as of and during the nine months ended August 31, 2021 are included below:

August 31, 2021

Details of each as of and during the three months ended February 28, 2022 are included below:

February 28, 2022

(In thousands) LMV I LMV II

5 unchanged sentences

Lennar's remaining commitments 4,800 17,251

Distributions to Lennar during the nine months ended August 31, 2021 54,393 1,307

Lennar Other Unconsolidated Entities

Lennar Other's unconsolidated entities includes fund investments the Company retained when it sold the Rialto assets and investment management platform, as well as strategic investments in technology companies, primarily managed by the Company's LEN X subsidiary.

These strategic investments include the Company's investment in Doma, formerly known as States Title, which was reclassified from the Financial Services segment.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

Distributions to Lennar during the three months ended February 28, 2022 8,732 3,735

During the first quarter of 2022, the Multifamily segment completed the initial closing of a new Lennar Multifamily Fund (the "Fund") for the development, construction and property management of Class A multifamily assets across high growth metropolitan areas in the United States.

The Multifamily segment expects the Fund to have almost $ 1 billion in equity and Lennar's ownership percentage in the Fund is expected to be 4 %.

The Company currently has a $ 10.3 million investment in the Fund.

Additional dollars will be committed as opportunities are identified by the Fund.

Other Unconsolidated Entities

Lennar Other's unconsolidated entities includes fund investments the Company retained when it sold the Rialto assets and investment management platform in 2018, as well as strategic investments in technology companies, primarily managed by the Company's LEN X subsidiary.

(4) Stockholders' Equity

The following tables reflect the changes in equity attributable to both Lennar Corporation and the noncontrolling interests of its consolidated subsidiaries in which it has less than a 100% ownership interest for the three and nine months ended August 31, 2021 and 2020:

Three Months Ended August 31, 2021

Three Months Ended February 28, 2022

(In thousands) Total

5 unchanged sentences

Earnings Noncontrolling

Balance at May 31, 2021 $ 19,702,098 30,049 3,944 8,755,020 ( 1,452,874 ) ( 1,431 ) 12,241,400 125,990

Balance at November 30, 2021 $ 20,996,282 30,050 3,944 8,807,891 ( 2,709,448 ) ( 1,341 ) 14,685,329 179,857

Net earnings (including net earnings attributable to noncontrolling interests) 509,315 — — — — — 503,581 5,734

11 unchanged sentences

Total other comprehensive income, net of tax 3,027 — — — — 3,027 — —

Balance at August 31, 2021 $ 20,779,539 30,050 3,944 8,778,609 ( 1,731,741 ) ( 1,300 ) 13,570,626 129,351

Three Months Ended August 31, 2020

(In thousands) Total

Equity Class A

Common Stock Class B

Common Stock Additional

Paid - in Capital Treasury

Stock Accumulated Other Comprehensive Income (loss) Retained

Earnings Noncontrolling

Balance at May 31, 2020 $ 16,632,624 29,804 3,944 8,630,442 ( 1,253,863 ) ( 338 ) 9,132,714 89,921

Net earnings (including net earnings attributable to noncontrolling interests) 669,323 — — — — — 666,418 2,905

Employee stock and directors plans

( 22,843 ) 90 — ( 105 ) ( 22,828 ) — — —

Amortization of restricted stock

28,658 — — 28,658 — — — —

Cash dividends ( 38,967 ) — — — — — ( 38,967 ) —

Receipts related to noncontrolling interests

6,504 — — — — — — 6,504

Payments related to noncontrolling interests

( 7,949 ) — — — — — — ( 7,949 )

Non-cash consolidations/deconsolidations, net 17,079 — — — — — — 17,079

Non-cash purchase or activity of noncontrolling interests, net ( 4,259 ) — — ( 4,041 ) — — — ( 218 )

Total other comprehensive loss, net of tax 175 — — — — 175 — —

Balance at August 31, 2020 $ 17,280,345 29,894 3,944 8,654,954 ( 1,276,691 ) ( 163 ) 9,760,165 108,242

Balance at February 28, 2022 $ 20,847,432 30,243 3,944 8,855,151 ( 3,290,748 ) 1,686 15,078,788 168,368

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Nine Months Ended August 31, 2021

(In thousands) Total

Equity Class A

Common Stock Class B

Common Stock Additional

Paid - in Capital Treasury

Stock Accumulated Other Comprehensive Loss Retained

Earnings Noncontrolling

Balance at November 30, 2020 $ 18,099,401 29,894 3,944 8,676,056 ( 1,279,227 ) ( 805 ) 10,564,994 104,545

Net earnings (including net earnings attributable to noncontrolling interests)

3,262,899 — — — — — 3,239,620 23,279

Employee stock and directors plans

( 63,242 ) 156 — 1,161 ( 64,559 ) — — —

Purchases of treasury stock

( 387,955 ) — — — ( 387,955 ) — — —

Amortization of restricted stock

105,846 — — 105,846 — — — —

Cash dividends ( 233,988 ) — — — — — ( 233,988 ) —

Receipts related to noncontrolling interests

18,575 — — — — — — 18,575

Payments related to noncontrolling interests

( 20,859 ) — — — — — — ( 20,859 )

Non-cash purchase or activity of noncontrolling interests, net ( 643 ) — — ( 4,454 ) — — — 3,811

Total other comprehensive loss, net of tax ( 495 ) — — — — ( 495 ) — —

Balance at August 31, 2021 $ 20,779,539 30,050 3,944 8,778,609 ( 1,731,741 ) ( 1,300 ) 13,570,626 129,351

Nine Months Ended August 31, 2020

Three Months Ended February 28, 2021

(In thousands) Total

6 unchanged sentences

Balance at November 30, 2020 $ 18,099,401 29,894 3,944 8,676,056 ( 1,279,227 ) ( 805 ) 10,564,994 104,545

Net earnings (including net loss attributable to noncontrolling interests)

1,576,644 — — — — — 1,582,276 ( 5,632 )

Net earnings (including net earnings attributable to noncontrolling interests) 1,016,909 — — — — — 1,001,369 15,540

Employee stock and directors plans

8 unchanged sentences

( 11,397 ) — — — — — — ( 11,397 )

Non-cash consolidations/deconsolidations, net ( 114,712 ) — — — — — — ( 114,712 )

Non-cash purchase or activity of noncontrolling interests, net 2,998 — — ( 623 ) — — — 3,621

Total other comprehensive loss, net of tax ( 942 ) — — — — ( 942 ) — —

Balance at Aug 31, 2020 $ 17,280,345 29,894 3,944 8,654,954 ( 1,276,691 ) ( 163 ) 9,760,165 108,242

On September 29, 2021, the Company's Board of Directors declared a quarterly cash dividend of $ 0.25 per share on both its Class A and Class B common stock, payable on October 28, 2021 to holders of record at the close of business on October 14, 2021.

On July 19, 2021, the Company paid cash dividends of $ 0.25 per share on both its Class A and Class B common stock to holders of record at the close of business on July 2, 2021, as declared by its Board of Directors on June 18, 2021.

The Company approved and paid cash dividends of $ 0.125 per share for each of the first three quarters of 2020 and $ 0.25 per share in the fourth quarter of 2020 and each of the first three quarters of 2021 on both its Class A and Class B common stock.

In January 2021, the Company's Board of Directors authorized the repurchase of up to the lesser of $ 1 billion in value, excluding commissions, or 25 million in shares, of the Company's outstanding Class A and Class B common stock.

The repurchase has no expiration date.

The following table represents the repurchase of the Company's Class A and Class B common stocks under this program and its predecessor for the three and nine months ended August 31, 2021 and 2020:

Three Months Ended Nine Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

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

Balance at February 28, 2021 $ 19,017,451 30,047 3,944 8,724,192 ( 1,348,710 ) ( 1,747 ) 11,488,520 121,205

On February 10, 2022, the Company paid cash dividends of $ 0.375 per share on both its Class A and Class B common stock to holders of record at the close of business on January 27, 2022, as declared by its Board of Directors on January 12, 2022.

The Company approved and paid cash dividends of $ 0.250 per share for each of the four quarters of 2021 on both its Class A and Class B common stock.

In October 2021, the Company's Board of Directors authorized an increase to the Company's stock repurchase program to enable the Company to repurchase up to the lesser of an additional $ 1 billion in value or 25 million in shares, of its outstanding Class A or Class B common stock.

As a result of prior authorizations being almost exhausted, in March 2022, the Company's Board of Directors approved an additional authorization for the Company to repurchase up to the lesser of $ 2 billion in value, or 30 million in shares, of its outstanding Class A or Class B common stock.

The repurchase authorization has no expiration date.

The following table represents the repurchases of the Company's Class A and Class B common stocks under the authorized repurchase programs for the three months ended February 28, 2022 and 2021:

Three Months Ended

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

Shares repurchased 4,616,000 652,000 510,000 —

1 unchanged sentence

Average price per share $ 102.45 $ 81.80 $ 84.51 $ —

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

(5) Income Taxes

The provision for income taxes and effective tax rate were as follows:

Three Months Ended Nine Months Ended

August 31, August 31,

Three Months Ended

(Dollars in thousands) 2022 2021

1 unchanged sentence

Effective tax rate (1) 25.0 % 23.6 %

(1) For both the three and nine months ended August 31, 2021 and 2020, the effective tax rate included state income tax expense and non-deductible executive compensation, partially offset by new energy efficient home and solar tax credits.

The nine months ended August 31, 2020 also included benefits related to the years ended November 30, 2018 and 2019, due to Congress retroactively extending the new energy efficient home tax credit in December 2019.

(1) For both the three months ended February 28, 2022 and 2021, the effective tax rate included state income tax expense and non-deductible executive compensation, partially offset by energy efficient home and solar tax credits.

(6) Earnings Per Share

2 unchanged sentences

All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the two-class method.

The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

participation rights in undistributed earnings.

The Company’s restricted common stock ("nonvested shares") is considered participating securities.

Basic and diluted earnings per share were calculated as follows:

Three Months Ended Nine Months Ended

August 31, August 31,

Three Months Ended

(In thousands, except per share amounts) 2022 2021

6 unchanged sentences

Denominator for basic earnings per share - weighted average common shares outstanding 293,930 309,020

Effect of dilutive securities:

Shared based payments — 1 — 1

Denominator for diluted earnings per share - weighted average common shares outstanding 293,930 309,020

2 unchanged sentences

(1) The amounts presented relate to Rialto's Carried Interest Incentive Plan and represent the difference between the advanced tax distributions received from the Rialto funds included in the Lennar Other segment and the amount Lennar is assumed to own.

For both the three and nine months ended August 31, 2021 and 2020, there were no options to purchase shares of common stock that were outstanding and anti-dilutive.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

For both the three months ended February 28, 2022 and 2021, there were no options to purchase shares of common stock that were outstanding and anti-dilutive.

(7) Homebuilding Senior Notes and Other Debts Payable

(Dollars in thousands) August 31, 2021 November 30, 2020

4.125 % senior notes due 2022 (1)

$ 599,619 598,876

5.375 % senior notes due 2022

253,199 255,342

(Dollars in thousands) February 28, 2022 November 30, 2021

4.750 % senior notes due 2022

14 unchanged sentences

895,697 895,510

6.25 % senior notes due December 2021

Mortgage notes on land and other debt 429,017 441,513

$ 4,639,222 4,652,338

(1) Subsequent to August 31, 2021, the Company provided notice that it would redeem on October 15, 2021 its $ 600 million 4.125 % senior unsecured notes, which have a scheduled maturity of January 15, 2022.

The carrying amounts of the senior notes in the table above are net of debt issuance costs of $ 12.4 million and $ 15.9 million as of August 31, 2021 and November 30, 2020, respectively.

In June 2021, the Company redeemed $ 300 million aggregate principal amount of its 6.25 % senior notes due December 2021.

The redemption price, which was paid in cash, was 100% of the principal amount plus accrued unpaid interest.

As of August 31, 2021 the maximum available borrowings on the Company's unsecured revolving credit facility (the "Credit Facility") were $ 2.5 billion and included a $ 300 million accordion feature, subject to additional commitments, thus the maximum borrowings could be $ 2.8 billion maturing in 2024.

The carrying amounts of the senior notes in the table above are net of debt issuance costs of $ 10.1 million and $ 11.0 million as of February 28, 2022 and November 30, 2021, respectively.

As of February 28, 2022 the maximum available borrowings on the Company's unsecured revolving credit facility (the "Credit Facility") were $ 2.5 billion and included a $ 300 million accordion feature, subject to additional commitments, thus the maximum borrowings could be $ 2.8 billion maturing in 2024.

The Credit Facility agreement (the "Credit Agreement") provides that up to $ 500 million in commitments may be used for letters of credit.

1 unchanged sentence

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

Procedures related to performance letters of credit, financial letters of credit and surety bonds are unchanged from the disclosure in the Company's Financial Condition and Capital Resources section in its Form 10-K for the year ended November 30, 2020.

The Company's processes for posting performance and financial letters of credit and surety bonds are unchanged from the disclosure in the Company's Financial Condition and Capital Resources section in its Form 10-K for the year ended November 30, 2021.

The Company's outstanding performance letters of credit and surety bonds are described below:

(In thousands) August 31, 2021 November 30, 2020

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

(In thousands) February 28, 2022 November 30, 2021

Performance letters of credit $ 1,007,295 924,584

Financial letters of credit 542,072 425,843

Surety bonds 3,660,958 3,553,047

5 unchanged sentences

Reserves are determined based on historical data and trends with respect to similar product types and geographical areas.

The activity in

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

the Company’s warranty reserve, which are included in Homebuilding other liabilities, was as follows:

Three Months Ended Nine Months Ended

August 31, August 31,

The activity in the Company’s warranty reserve, which is included in Homebuilding other liabilities, was as follows:

Three Months Ended

(In thousands) 2022 2021

4 unchanged sentences

Warranty reserve, end of period $ 374,146 348,100

(1) The adjustments to pre-existing warranties from changes in estimates during the three and nine months ended August 31, 2021 and August 31, 2020 primarily related to specific claims in certain of the Company's homebuilding communities and other adjustments.

(1) The adjustments to pre-existing warranties from changes in estimates during the three months ended February 28, 2022 and 2021 primarily related to specific claims in certain of the Company's homebuilding communities and other adjustments.

(9) Financial Instruments and Fair Value Disclosures

The following table presents the carrying amounts and estimated fair values of financial instruments held or issued by the Company at August 31, 2021 and November 30, 2020, using available market information and what the Company believes to be appropriate valuation methodologies.

The following table presents the carrying amounts and estimated fair values of financial instruments held or issued by the Company at February 28, 2022 and November 30, 2021, using available market information and what the Company believes to be appropriate valuation methodologies.

Considerable judgment is required in interpreting market data to develop the estimates of fair value.

1 unchanged sentence

The table excludes cash and cash equivalents, restricted cash, receivables, net and accounts payable, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments.

August 31, 2021 November 30, 2020

February 28, 2022 November 30, 2021

(In thousands) Fair Value Hierarchy Carrying Amount Fair Value Carrying Amount Fair Value

4 unchanged sentences

Financial Services notes and other debts payable, net Level 2 1,197,360 1,198,107 1,726,026 1,726,860

Lennar Other notes and other debts payable, net Level 2 1,906 1,906 1,906 1,906

The following methods and assumptions are used by the Company in estimating fair values:

3 unchanged sentences

Homebuilding —For senior notes and other debts payable, the fair value of fixed-rate borrowings is primarily based on quoted market prices and the fair value of variable-rate borrowings is based on expected future cash flows calculated using current market forward rates.

Lennar Other —The fair value for notes payable approximate their carrying value due to variable interest pricing terms and the short-term nature of the borrowings.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Fair Value Measurements:

3 unchanged sentences

Fair value determined using significant unobservable inputs.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

The Company’s financial instruments measured at fair value on a recurring basis are summarized below:

Fair Value Hierarchy Fair Value at

(In thousands) August 31, 2021 November 30, 2020

(In thousands) February 28, 2022 November 30, 2021

Financial Services Assets:

6 unchanged sentences

Residential and LMF Commercial loans held-for-sale in the table above include:

August 31, 2021 November 30, 2020

February 28, 2022 November 30, 2021

(In thousands) Aggregate Principal Balance Change in Fair Value Aggregate Principal Balance Change in Fair Value

4 unchanged sentences

The Company recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower.

The fair value of these are included in Financial Services’ loans held-for-sale as of August 31, 2021 and November 30, 2020.

The fair value of these are included in Financial Services’ loans held-for-sale as of February 28, 2022 and November 30, 2021.

Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics.

7 unchanged sentences

The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and delinquency rates and are noted below:

Unobservable inputs As of August 31, 2021 As of November 30, 2020

Unobservable inputs As of February 28, 2022 As of November 30, 2021

Mortgage prepayment rate 11 % 13 %

2 unchanged sentences

Lennar Other investments in equity securities - The fair value of investments in equity securities was calculated based on independent quoted market prices.

The Company’s investments in equity securities were recorded at fair value with all changes in fair value recorded to Lennar Other unrealized gain of the Company’s condensed consolidated statements of operations and comprehensive income (loss).

The Company’s investments in equity securities were recorded at fair value with all changes in fair value recorded to Lennar Other unrealized gain (loss) from technology investments on the Company’s condensed consolidated statements of operations and comprehensive income.

Lennar Other investments available-for-sale - The fair value of investments available-for-sale is calculated from model-based techniques that use discounted cash flow assumptions and the Company’s own estimates of CMBS spreads, market interest rate movements and the underlying loan credit quality.

Loan values are calculated by allocating the change in value of an assumed CMBS capital structure to each loan.

The value of an assumed CMBS capital structure is calculated, generally, by discounting the cash flows associated with each CMBS class at market interest rates and at the Company’s own estimate of CMBS spreads.

Loan values are calculated by allocating the change in

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

value of an assumed CMBS capital structure to each loan.

The changes in fair values for Level 1 and Level 2 financial instruments measured on a recurring basis are shown below by financial instrument and financial statement line item:

Three Months Ended Nine Months Ended

August 31, August 31,

Three Months Ended

(In thousands) 2022 2021

3 unchanged sentences

Forward contracts 9,990 34,238

Changes in fair value included in Lennar Other realized and unrealized gain (loss):

Changes in fair value included in Lennar Other unrealized gain (loss) from technology investments:

Investments in equity securities $ ( 395,170 ) 469,745

Changes in fair value included in other comprehensive loss, net of tax:

Changes in fair value included in other comprehensive gain (loss), net of tax:

Lennar Other investments available-for-sale $ 742 ( 942 )

2 unchanged sentences

Three Months Ended

August 31, 2021 August 31, 2020

(In thousands) Mortgage servicing rights LMF Commercial loans held-for-sale Mortgage servicing rights LMF Commercial loans held-for-sale

6 unchanged sentences

Ending balance $ 2,793 85,795 1,499 123,148

Nine Months Ended

August 31, 2021 August 31, 2020

(In thousands) Mortgage servicing rights LMF Commercial loans held-for-sale Mortgage servicing rights LMF Commercial loans held-for-sale

Beginning balance $ 2,113 193,588 24,679 197,224

Purchases/loan originations 499 599,465 1,917 582,030

Sales/loan originations sold, including those not settled

— ( 665,062 ) — ( 622,251 )

Disposals/settlements (1) ( 1,222 ) ( 11,392 ) ( 10,231 ) —

Changes in fair value (2) 992 ( 2,551 ) ( 15,009 ) 2,102

Interest and principal paydowns — ( 919 ) — ( 2,074 )

Ending balance $ 2,382 113,129 1,356 157,031

(1) The nine months ended August 31, 2020 include $ 7.5 million related to the sale of a servicing portfolio.

(1) Changes in fair value for LMF Commercial loans held-for-sale and Financial Services mortgage servicing rights are included in Financial Services' revenues.

2 unchanged sentences

The assets measured at fair value on a nonrecurring basis are summarized below:

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

Three Months Ended

August 31, 2021 August 31, 2020

(In thousands) Fair Value

3 unchanged sentences

Land and land under development Level 3 20,752 10,760 ( 9,992 ) 2,543 2,350 ( 193 )

Nine Months Ended

August 31, 2021 August 31, 2020

(In thousands) Fair Value

Hierarchy Carrying Value Fair Value Total Losses, Net (1) Carrying Value Fair Value Total Losses, Net (1)

Non-financial assets - Homebuilding:

Finished homes and construction in progress (1) Level 3 $ 25,752 11,015 ( 14,737 ) 162,459 138,493 ( 23,966 )

Land and land under development (1) Level 3 2,145 862 ( 1,283 ) 86,683 34,019 ( 52,664 )

(1) Valuation adjustments were included in Homebuilding costs and expenses in the Company's condensed consolidated statements of operations and comprehensive income (loss).

(1) Valuation adjustments were included in Homebuilding costs and expenses in the Company's condensed consolidated statements of operations and comprehensive income.

Finished homes and construction in progress are included within inventories.

1 unchanged sentence

The Company disclosed its accounting policy related to inventories and its review for indicators of impairment in the Summary of Significant Accounting Policies in its Form 10-K for the year ended November 30, 2021.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The Company estimates the fair value of inventory evaluated for impairment based on market conditions and assumptions made by management at the time the inventory is evaluated, which may differ materially from actual results if market conditions or assumptions change.

4 unchanged sentences

Communities with valuation adjustments

At or for the Nine Months Ended # of active communities # of communities with potential indicator of impairment # of communities Fair Value

At or for the Three Months Ended # of active communities # of communities with potential indicator of impairment # of communities Fair Value

(in thousands)

1 unchanged sentence

(in thousands)

August 31, 2021 1,192 8 1 $ 17,117 $ 11,849

August 31, 2020 1,194 28 14 76,115 40,364

The table below summarizes the most significant unobservable inputs used in the Company's discounted cash flow model to determine the fair value of its communities for which the Company recorded valuation adjustments:

Nine Months Ended August 31,

Unobservable inputs Range

Average selling price $ 635,000 201,000 - 970,000

Absorption rate per quarter (homes) 11 3 - 15

Discount rate 20 % 20 %

February 28, 2022 1,199 5 — $ — $ —

February 28, 2021 1,158 10 — — —

(10) Variable Interest Entities

The Company evaluated the joint venture ("JV") agreements of its JV's that were formed or that had reconsideration events, such as changes in the governing documents or to debt arrangements during the nine months ended August 31, 2021 and based on the Company's evaluation, during the nine months ended August 31, 2021, the Company consolidated two entities that had a total combined assets and liabilities of $ 30.7 million and $ 0.7 million, respectively.

During the nine months ended August 31, 2021, there were no VIEs that were deconsolidated.

The Company evaluated the joint venture ("JV") agreements of its JV's that were formed or that had reconsideration events, such as changes in the governing documents or to debt arrangements during the three months ended February 28, 2022 and based on the Company's evaluation, there were two entities that consolidated with total combined assets of $ 6.1 million and no outstanding liabilities.

During the three months ended February 28, 2022, there were no VIEs that were deconsolidated.

The carrying amount of the Company's consolidated VIE's assets and non-recourse liabilities are disclosed in the footnote to the condensed consolidated balance sheets.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

A VIE’s assets can only be used to settle obligations of that VIE.

6 unchanged sentences

The Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to loss were as follows:

August 31, 2021 November 30, 2020

February 28, 2022 November 30, 2021

(In thousands) Investments in

8 unchanged sentences

$ 940,564 1,102,422 857,199 1,084,044

(1) As of August 31, 2021 and November 30, 2020, the maximum exposure to loss of Homebuilding's investments in unconsolidated VIEs was limited to its investments in unconsolidated VIEs, except as of August 31, 2021, with regard to the Company's remaining commitment to fund capital in the Upward America Venture, a single family for rent platform.

The increase was due to the Company's commitment to fund the Upward America Venture.

(2) As of August 31, 2021 and November 30, 2020, the maximum exposure to loss of Multifamily's investments in unconsolidated VIEs was primarily limited to its investments in the unconsolidated VIEs, except with regard to the remaining equity commitment of $ 24.9 million and $ 88.1 million, respectively, to fund LMV I and LMV II for future expenditures related to the construction and development of its projects.

(1) As of February 28, 2022 and November 30, 2021, the maximum exposure to loss of Homebuilding's investments in unconsolidated VIEs was limited to its investments in unconsolidated VIEs, except with regard to the Company's remaining $ 102.7 million commitment to fund capital in Upward America, and a $ 26.8 million short-term loan provided by the Company to Upward America.

(2) As of February 28, 2022 and November 30, 2021, the maximum exposure to loss of Multifamily's investments in unconsolidated VIEs was primarily limited to its investments in the unconsolidated VIEs, except with regard to the remaining equity commitment of $ 22.1 million and $ 23.1 million, respectively, to fund LMV I and LMV II for future expenditures related to the construction and development of its projects.

The decrease was due to the funding of capital for LMV I and LMV II.

(3) As of August 31, 2021, the decrease in investments in unconsolidated VIEs and maximum exposure to loss was related to an entity which had a reconsideration event due to the payoff of a note receivable which caused the entity to no longer be considered a VIE.

(3) As of February 28, 2022 and November 30, 2021, the maximum exposure to loss of the Financial Services segment was limited to its investment in the unconsolidated entities VIEs and related to the Financial Services' CMBS investments held-to-maturity.

(4) As of February 28, 2022, the maximum recourse exposure to loss of the Lennar Other segment was limited to its investments in the unconsolidated VIEs.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

While these entities are VIEs, the Company has determined that the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance is generally shared and the Company and its partners are not de-facto agents.

9 unchanged sentences

Although the Company does not have legal title to the optioned land, if the Company is deemed to be the primary beneficiary or makes a significant deposit for optioned land, it may need to consolidate the land under option at the purchase price of the optioned land.

During the nine months ended August 31, 2021, consolidated inventory not owned increased by $ 167.8 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as of August 31, 2021.

The increase was primarily due to additions in the nine months ended August 31, 2021 as the Company focused on increasing its controlled homesites, partially offset by takedowns.

To reflect the purchase price of the homesite takedowns, the Company had a net reclass related to option deposits from consolidated inventory not owned to land under development in the accompanying condensed consolidated balance sheet as of August 31, 2021.

During the three months ended February 28, 2022, consolidated inventory not owned increased by $ 85.5 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as of February 28, 2022.

The increase was primarily due to additions in the three months ended February 28, 2022 as the Company focused on increasing its controlled homesites, partially offset by takedowns.

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

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

The Company's exposure to losses on its option contracts with third parties and unconsolidated entities were as follows:

(Dollars in thousands) August 31, 2021 November 30, 2020

(Dollars in thousands) February 28, 2022 November 30, 2021

Non-refundable option deposits and pre-acquisition costs $ 1,435,142 1,228,057

4 unchanged sentences

From time to time, the Company is also a party to various lawsuits involving purchases and sales of real property.

These lawsuits include claims regarding representations and warranties made in connection with the transfer of properties and disputes regarding the obligation to purchase or sell properties.

These lawsuits often include claims regarding representations and warranties made in connection with the transfer of properties and disputes regarding the obligation to purchase or sell properties.

The Company does not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on its business or financial position.

However, the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property, which may have changed from the time the agreement for purchase or sale was entered into.

Lennar Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The Company has entered into agreements to lease certain office facilities and equipment under operating leases.

The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

ROU assets and right-of-use lease liabilities are recorded on the balance sheet for all leases, except leases with an initial term of 12 months or less.

Right-of-use ("ROU") assets and lease liabilities are recorded on the balance sheet for all leases, except leases with an initial term of 12 months or less.

Many of the Company's leases include options to renew.

1 unchanged sentence

The following table includes additional information about the Company's leases:

(Dollars in thousands) August 31, 2021 November 30, 2020

(Dollars in thousands) February 28, 2022 November 30, 2021

Right-of-use assets $ 152,066 155,616

2 unchanged sentences

Weighted-average discount rate 2.9 % 2.8 %

Future minimum payments under the noncancellable leases in effect at August 31, 2021 were as follows:

Future minimum payments under the noncancellable leases in effect at February 28, 2022 were as follows:

(In thousands) Lease Payments

2022 $ 26,898

2027 and thereafter 63,257

4 unchanged sentences

This also does not include minimum lease payments for executed and legally enforceable leases that have not yet commenced.

As of August 31, 2021, the minimum lease payments for these leases that have not yet commenced were immaterial.

As of February 28, 2022, the minimum lease payments for these leases that have not yet commenced were immaterial.

(2) The Company's leases do not include a readily determinable implicit rate.

As such, the Company has estimated the discount rate for these leases to determine the present value of lease payments at the lease commencement date or as of December 1, 2019, which was the effective date of ASU 2016-02.

As of August 31, 2021, the weighted average remaining lease term and weighted average discount rate used in calculating the lease liabilities were 8.3 years and 2.9 %, respectively.

As of February 28, 2022, the weighted average remaining lease term and weighted average discount rate used in calculating the lease liabilities were 8.1 years and 2.9 %, respectively.

The Company recognized the lease liabilities on its condensed consolidated balance sheets within accounts payable or other liabilities of the respective segments.

The Company's rental expense and payments on lease liabilities were as follows:

Nine months ended

(In thousands) August 31, 2021 August 31, 2020

Three months ended

(In thousands) February 28, 2022 February 28, 2021

Rental expense $ 25,641 20,707

1 unchanged sentence

On occasion, the Company may sublease rented space which is no longer used for the Company's operations.

For both the nine months ended August 31, 2021 and 2020, the Company had an immaterial amount of sublease income.

For both the three months ended February 28, 2022 and 2021, the Company had an immaterial amount of sublease income.

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-Q

Item 1. Financial Statements