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Item 7. Management’s Discussion and Analysis

2023-01-26 compared with 2022-01-28 · 219 added, 174 removed, 481 unchanged (45% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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.

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

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.

We had strong 2022 results, particularly in view of the difficult home sale market in the second half of the year.

Market conditions continued to deteriorate in the fourth quarter as the now well-documented interest rate driven sales slowdown and pricing correction intersected with the still stressed supply chain, high labor and material costs and elongated cycle times (i.e., the time it takes to build a home).

Sales and sales prices are down across both the new and existing home markets.

We believe that production of single family and multifamily dwellings nationally will be down between a quarter to a third in 2023.

In addition, the supply of existing homes for sale has come down as homeowners hold on to extremely low mortgage rates.

This, combined with the housing production shortfall over the past decade, leaves the industry in the middle of what we believe should be a fairly short duration market correction and, unlike previous market corrections, there currently is no inventory overhang to resolve.

Against this backdrop, we have developed a strategy that we believe should enable us to maintain sales pace and increase market share despite the difficult market:

• We have adjusted prices in various communities to levels that are intended to enable us to maintain reasonable volume.

The result is that margin, as opposed to volume, becomes the shock absorber.

• We are working with our trade partners to right size our cost structure to current market conditions.

Although our trade partners are still completing homes that were started in the first half of 2022, the amount of new work they are receiving is down substantially.

We are offering a steady flow of starts in exchange for price reductions.

• We are being extremely selective on new land acquisitions and new communities.

We have re-reviewed and re-underwritten land purchases in our pipeline and are not going forward with land purchases that do not meet our standards under current market conditions.

• We will continue to improve our cost of doing business by focusing on and reducing SG&A expenses.

Over the past several years, we have seen quarter over quarter improvement in our SG&A expenses as a percentage of home sale revenues achieving record lows.

However, as average sales prices come down, the percentages will not hold without additional cost cuts.

Further, we know that in more difficult times there will be upward pressure on some of our sales and marketing costs in order to drive new sales.

• We will maintain tight control of our inventory under construction.

We will pace home starts to meet expected sales volume.

Nonetheless, inventory dollars related to inventory under construction has grown through the year because of expanded cycle times due to the supply chain disruption.

We expect to bring down our cycle time during the next few quarters.

This will free up a significant amount of cash that currently is tied up in the increased inventory dollars related to homes under construction.

We will continue to focus on our cash flow and bottom line to protect and enhance our already strong balance sheet.

While we continue to have many strong markets, in our more challenging areas we have had to adjust base sales prices, offer mortgage buy down programs and increase sales incentives to maintain or regain sales momentum.

Our cancellation rate increased significantly during our third quarter and into the beginning of our fourth quarter.

However, our cancellation rate peaked in October and declined significantly in November.

Our construction playbook has three primary areas of focus:

lowering construction costs, reducing cycle time, and achieving even flow production.

We expect what has been a steady increase in construction costs over the last few years due to supply shortages will reverse over the course of fiscal 2023, as many homebuilders reduce or totally curtail new starts.

Similarly, we expect cycle times, which increased significantly due to shortages of materials and labor, to start to return to normal as the number of homes being built falls as a result of market conditions.

During the fourth quarter of 2022, the average cycle time was the same as in the third quarter despite the continuing effect of supply chain disruptions and two hurricanes that delayed production in Florida and parts of the Carolinas.

Even flow production is a core focus for us and is a pillar for being the builder of choice for the trades as it maximizes efficiencies for them.

By maintaining our starts pace at a time when many homebuilders are reducing or stopping construction starts, we have been able to obtain cost reductions from our trade partners and increase our market share in many markets.

We continue to strategically acquire land, primarily through options.

Our continued focus on our land-light strategy resulted in ending fiscal 2022 with a percentage of homesites controlled rather than owned of 63%, up from 59% last year.

years’ supply of owned home sites decreased to 2.5 years as compared to 3.0 years at the end of the prior year.

From a leverage perspective, we continue to benefit from our paydown of senior notes and strong generation of earnings which brought our homebuilding debt to total capital down to 14.4% at year-end, our lowest ever, and an improvement from 18.3% at the end of the prior year.

While we did repurchase some stock in the fourth quarter, given the current market conditions and as a matter of careful capital allocation, we decided to go slow.

We expect to continue to look at repurchasing stock in the future as opportunities present themselves.

Regarding the planned spin-off of our multifamily and single-family rental investment and property management companies, current market conditions are not favorable so we are going to postpone the spin-off for the time being and wait for the right timing.

Given the uncertainty about market conditions, it is difficult to provide the targeted guidance about our expected future performance that we provided in the past.

Instead, we are providing broad ranges to give some boundaries for various components of our expected results during the first quarter of 2023.

We expect our new orders for the first quarter of 2023 to be in the range of 12,000 to 13,500 homes, and we anticipate our first quarter deliveries to be in the range of 12,000 to 13,500 homes.

We expect gross margins will be about 21.0%, though this number will adjust somewhat based on the number of deliveries.

We expect our SG&A expenses as a percentage of home sale revenues will be about 8%, but that percentage will adjust based on deliveries and homebuilding revenue.

We expect our first quarter ending community count to be about the same as the community count at the end of 2022, as we walked away from deals that would have produced new active communities.

Our first quarter average sales price should be in the range of $440,000 to $450,000 as we continue to price to market.

We believe our fiscal 2023 deliveries will be between 60,000 to 65,000 homes.

We ended the year with the highest revenues, the highest profit, the highest cash flow, and the highest liquidity in Lennar's history.

We have a plan of execution as we move into the uncertainties of 2023 with a focus on maintaining volume, maximizing margin through cost reductions, managing inventories, driving cash flow, managing land spend, and further enhancing our balance sheet in spite of challenging market conditions.

Results of Operations

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Total costs and expenses 25,161,299 426,378 848,931 32,258 — 26,468,866

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

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (17,235) — 52,821 (91,689) — (56,103)

Homebuilding other income, net 4,516 — — — — 4,516

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

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

Lennar Other unrealized loss from technology investments — — — (655,094) — (655,094)

Operating earnings (loss) 6,777,317 383,302 69,493 (734,649) — 6,495,463

Corporate general and administrative expenses — — — — 414,498 414,498

Charitable foundation contribution — — — — 66,399 66,399

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

Earnings (loss) before income taxes $ 6,777,317 383,302 69,493 (734,649) (480,897) 6,014,566

Year ended November 30, 2021

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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, 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)

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (14,205) — 9,031 231,731 — 226,557

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

Lennar Other unrealized gain from technology investments — — — 510,802 — 510,802

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

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

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

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

(1) During the year ended November 30, 2021, the Company realized a gain of $158.1 million on the sale of its residential solar business

2022 versus 2021

Revenues from home sales increased 25% in the year ended November 30, 2022 to $31.8 billion from $25.3 billion in the year ended November 30, 2021.

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 as a result of price appreciation as the increase in revenues per square foot outpaced the increase in costs per square foot.

Revenues were higher primarily due to an 11% increase in the number of home deliveries and a 13% increase in the average sales price.

New home deliveries increased to 66,399 homes in the year ended November 30, 2022 from 59,825 homes in the year ended November 30, 2021.

The average sales price of homes delivered was $480,000 in the year ended November 30, 2022, compared to $424,000 in the year ended November 30, 2021.

Gross margins on home sales were $8.8 billion, or 27.5% (27.7% pre-impairment), in the year ended November 30, 2022, compared to $6.8 billion, or 26.8%, in the year ended November 30, 2021.

Gross margins in the year ended November 30, 2022 include $33.6 million of homebuilding impairments in nine communities and $18.1 million of impairments to our homes in backlog taken during the year.

During the year ended November 30, 2022, an increase in costs per square foot primarily due to higher materials and labor costs, was mostly offset by an increase in revenues per square foot.

Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Gross loss on land sales was $28.5 million in the year ended November 30, 2022, which includes $47.9 million of deposit write-offs as we walked away from 42,000 controlled homesites.

This compared to gross margin on land sales of $24.3 million in the year ended November 30, 2021.

Selling, general and administrative expenses were $2.0 billion in the year ended November 30, 2022, compared to $1.8 billion in the year ended November 30, 2021.

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.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.2% in the year ended November 30, 2022, from 7.1% in the year ended November 30, 2021, due to a decrease in broker commissions, an increase in leverage, and benefits of our technology efforts.

Operating earnings for our Financial Services segment were $381.9 million in the year ended November 30, 2022.The operating earnings included a $35.5 million one-time charge due to an increase in a litigation accrual in the third quarter related to a court judgment.

We have appealed this judgment since we believe there were clear errors of law made by the trial court.

Excluding this one-time charge, operating earnings were $417.4 million, compared to operating earnings of $490.4 million in the year ended November 30, 2021.

The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market, partially offset by an increase in rate lock volume.

Mortgage results were partially offset by our title earnings, which increased primarily due to higher revenues per transaction and lower costs due to benefits of our technology efforts .

Operating earnings for the Multifamily segment were $66.8 million in the year ended November 30, 2022, compared to $21.5 million in the year ended November 30, 2021.

Operating loss for the Lennar Other segment was $735.6 million in the year ended November 30, 2022, compared to operating earnings of $733.0 million in the year ended November 30, 2021.

Lennar Other operating loss for the year ended November 30, 2022 was primarily due to negative mark-to-market adjustments on our publicly traded technology investments.

The operating earnings for the year ended November 30, 2021 were primarily due to positive mark-to-market adjustments on our publicly traded technology investments and the gain on the sale of the our solar business.

For both the years ended November 30, 2022 and 2021, we had a tax provision of $1.4 billion, which resulted in an overall effective income tax rate of 22.8% and 23.5%, respectively.

Our overall effective income tax rate was lower in 2022 primarily due to the resolution of an uncertain state tax position and the retroactive reinstatement of the energy efficient home credits for 2022, resulting from the passage of the Inflation Reduction Act by Congress.

Homebuilding Segments

At November 30, 2022, our Homebuilding operating segments and Homebuilding Other consisted of 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, Tennessee and Virginia

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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)

of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Loss on Sales of Land (2) Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss)

East $ 9,201,412 6,341,272 31.1 % $ 2,222,835 (10,701) 3,991 1,300 22,831 2,240,256

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

(2) Gross loss on sales of land includes $47.9 million of deposit write-offs as we walked away from 42,000 controlled homesites.

(3) 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

Years Ended November 30,

For the Years Ended November 30,

Homes Dollar Value (In thousands) Average Sales Price

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Of the total homes delivered listed above, 174 homes with a dollar value of $67.5 million and an average sales price of $388,000 represent home deliveries from unconsolidated entities for the year ended November 30, 2022, compared to 95 home deliveries with a dollar value of $31.6 million and an average sales price of $332,000 for the year ended November 30, 2021.

Sales Incentives (1):

Average Sales Incentives Per

Home Delivered Sales Incentives

as a % of Revenues

Years Ended November 30,

2022 2021 2022 2021

East $ 12,600 10,500 2.8 % 2.8 %

Central 11,900 8,500 2.6 % 2.1 %

Texas 23,000 10,000 6.6 % 3.3 %

West 22,200 6,900 3.3 % 1.2 %

Other 90,000 116,500 9.5 % 10.7 %

Total $ 17,300 9,000 3.5 % 2.1 %

(1) Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.

New Orders (2):

At November 30, Years Ended November 30,

At November 30, For the Years Ended November 30,

Active Communities Homes Dollar Value (In thousands) Average Sales Price

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(2) New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the years ended November 30, 2022 and 2021.

We experienced cancellation rates in our Homebuilding segments and Homebuilding other as follows:

Years Ended November 30,

East 11 % 8 %

Central 12 % 7 %

Texas 27 % 18 %

West 21 % 10 %

Other 49 % — %

Total 17 % 10 %

At November 30,

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Of the total homes in backlog listed above, 166 homes with a backlog dollar value of $77.8 million and an average sales price of $469,000 represent the backlog from unconsolidated entities at November 30, 2022, compared to 79 homes with a backlog dollar value of $28.6 million and an average sales price of $363,000 at November 30, 2021.

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

During the year ended November 30, 2022, we acquired 339 homes and 53 homes in backlog in the East and Central Homebuilding segments, respectively.

Backlog represents the number of homes under sales contracts.

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Homebuilding East:

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.

Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries and 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.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

For the year ended November 30, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Homebuilding Central:

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 Virginia was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities.

Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries in all the states of the segment except for Georgia and Virginia 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 an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Georgia and Virginia was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

For the year ended November 30, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margins remained flat year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Homebuilding Texas:

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

Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries and the average sales price.

The increase in the number of home 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 price appreciation year over year.

For the year ended November 30, 2022, gross margins decreased year over year as an increase in costs per square foot was partially offset by an increase in revenues per square foot.

Homebuilding West:

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.

Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries in all states of the segment except for Arizona, Nevada and Utah 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 an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Arizona, California, Nevada and Utah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

For the year ended November 30, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margins increased year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Financial Services Segment

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Originally, our Multifamily segment focused on building multifamily properties and selling them shortly after they were completed.

However, more recently we have focused on creating and participating in ventures that build multifamily properties with the intention of retaining them after they are completed.

However, more recently we have focused on creating and participating in funds that build multifamily properties with the intention of retaining them after they are completed.

The following tables provide information related to our investment in the Multifamily segment:

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Lennar's net investment in Multifamily 935,961 976,676

Statement of Operations November 30,

Statement of Operations Years Ended November 30,

(Dollars in thousands) 2022 2021

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Lennar's share of gains on the sale of operating properties/investments $ 43,308 14,784

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 ownership of class-A multifamily rental properties.

The Multifamily segment manages and has investments in 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 ownership of class-A multifamily rental properties.

Details of each as of and during the year ended November 30, 2022 are included below:

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Lennar's remaining commitments 4,097 15,193

Distributions to Lennar during the year ended November 30, 2021

Distributions to Lennar 25,576 12,555

Our Multifamily segment had equity investments in unconsolidated entities.

The details of the Multifamily segment's equity investments in unconsolidated entities and the development activities as of November 30, 2021 were as follows:

The breakout of the Multifamily segment's equity investments in unconsolidated entities and the development activities by stage were as follows:

(Dollars in thousands) November 30, 2022

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As of November 30, 2022, our Multifamily segment also had a pipeline of potential future projects, which were under contract or had letters of intent, totaling approximately $8.7 billion in anticipated development costs across a number of states that will be developed primarily by unconsolidated entities.

Despite widespread reductions in economic activity due to the COVID-19 pandemic, the properties in which the Multifamily segment has investments did not, overall, experience significant increases in vacancies or in delinquent rent payments to date.

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 homebuyers and homeowners and increase efficiencies.

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):

Our Lennar Other segment includes fund investments we retained subsequent to our 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 homebuyers and homeowners and increase efficiencies.

As of November 30, 2022 and 2021, our balance sheet had $788.5 million and $1.5 billion, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $316.5 million and $346.3 million, respectively.

We have investments in Blend Labs, Inc.

("Blend Labs"), Hippo Holdings, Inc.

("Hippo"), Opendoor, Inc.

("Opendoor"), SmartRent, Inc.

("SmartRent"), Sonder Holdings, Inc.

("Sonder") and Sunnova Energy International, Inc.

("Sunnova"), which are held at market and will therefore change depending on the fair value of our share holdings in those entities on the last day of each quarter.

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

The following is a detail of Lennar Other unrealized gains (losses) from our technology investments:

Years Ended November 30,

(In thousands) 2022 2021

Opendoor (OPEN) mark to market $ 239,312

Blend Labs (BLND) mark-to-market $ (25,630) (6,744)

Hippo (HIPO) mark-to-market (222,447) 207,634

Opendoor (OPEN) mark-to-market (265,276) 239,312

SmartRent (SMRT) mark-to-market (78,177) 79,483

Sonder (SOND) mark-to-market (2,339) —

Sunnova (NOVA) mark-to-market (61,225) (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 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.

Lennar Other unrealized gains (losses) from technology investments $ (655,094) 510,802

At November 30, 2022 and 2021, Lennar Other owned commercial mortgage-backed securities ("CMBS") with carrying values of $35.5 million and $41.7 million, respectively.

These securities were purchased at discount rates ranging from 33% to 55% with coupon rates ranging from 3.0% to 3.4%, stated and assumed final distribution dates between September 2025 and March 2026, and stated maturity dates between September 2058 and March 2059.

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

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During 2022 and 2021, cash provided by operating activities totaled $3.3 billion and $2.5 billion, respectively.

During 2022, cash provided by operating activities was positively impacted by our net earnings, excluding Lennar Other unrealized mark-to-market losses on our publicly traded technology investments and other realized loss totaling $672 million and an increase in accounts payable and other liabilities of $701 million.

This was partially offset by a $2.4 billion increase in inventories due to strategic land purchases, land development and construction costs and an increase in receivables of $422 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.

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

Investing Cash Flow Activities

During 2022 and 2021, cash used in investing activities totaled $128 million and $105 million, respectively.

During 2022, our cash used in investing activities was primarily due to cash contributions of $447 million to unconsolidated entities, which primarily included (1) $307 million to Homebuilding unconsolidated entities (2) $111 million to Lennar Other unconsolidated entities and (3) $30 million to Multifamily unconsolidated entities.

In addition, we had $94 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 $398 million, which primarily included (1) $79 million from Homebuilding unconsolidated entities, (2) $252 million from Multifamily unconsolidated entities, and (3) $67 million from our Lennar Other unconsolidated entities.

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.

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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;

and (4) the derecognition of $152 million of cash as of the date of deconsolidation of a previously consolidated Financial Services entity.

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.

Financing Cash Flow Activities

During 2022 and 2021, our cash used in financing activities totaled $1.3 billion and $2.4 billion, respectively.

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.

During 2022, our cash used in financing activities was primarily due to (1) early redemption of $575 million aggregate principal amount of our 4.75% senior notes due November 2022, (2) $48 million principal payments on notes payable and other borrowings, (3) repurchase of our common stock for $1.0 billion, which included $968 million of repurchases of our stock under our repurchase program and $72 million of repurchases related to our equity compensation plan, and (4) $438 million of dividend payments.

These were partially offset by (1) $485 million of net proceeds from liabilities related to consolidated inventory not owned due to land sales to land banks, net of takedowns, (2) $409 million of net borrowings under our Financial Services warehouse facilities, and (3) receipts related to noncontrolling interests of $42 million.

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) early retirement, at a premium, of $250 million aggregate principal amount of our 5.375% senior notes due October 2022, (3) retirement of $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 reductions in 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.

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

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.

At November 30, 2022, Homebuilding debt to total capital was lower compared to November 30, 2021 primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in homebuilding debt due to

debt paydowns, 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.

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

We have announced an intention to spin off, subject to market conditions, 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.

In May 2022, we amended the credit agreement governing our unsecured revolving credit facility (the “Credit Facility") which increased the commitment from $2.5 billion to $2.6 billion and extended the maturity to May 2027, except for $350 million which matures in April 2024.

The Credit Facility has a $425 million accordion feature, subject to additional commitments, thus the maximum borrowings are $3.0 billion.

The proceeds available under the Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes.

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

As of both November 30, 2022 and 2021, we had no outstanding borrowings under the Credit Facility.

Under the Credit Facility agreement, we are required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio.

These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures.

We believe we were in compliance with our debt covenants at November 30, 2021.

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

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Interest incurred $ 230,839 275,091

Under our Credit Facility agreement (the "Credit Agreement"), we are required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio.

These ratios are calculated per the Credit Agreement, which involves adjustments to GAAP financial measures.

As of the end of each fiscal quarter, we are required to maintain minimum consolidated tangible net worth of approximately $7.1 billion plus the sum of 50% of the cumulative consolidated net income for each completed fiscal quarter subsequent to February 28, 2019, if positive, and 50% of the net cash proceeds from any equity offerings from and after February 28, 2019, minus the lesser of 50% of the amount paid after April 11, 2019 to repurchase common stock and $375 million.

We are required to maintain a leverage ratio that shall not exceed 65% and may be reduced by 2.5% per quarter if our interest coverage ratio is less than 2.25:1.00 for two consecutive fiscal calendar quarters.

Under the Credit Facility agreement (the "Credit Agreement"), we are required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio.

These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures.

As of the end of each fiscal quarter, we are required to maintain minimum consolidated tangible net worth of approximately $10.6 billion plus 50% of the cumulative consolidated net income for each completed fiscal quarter subsequent to February 28, 2022, if positive, plus 50% of the net cash proceeds from any equity offerings from and after February 28, 2022, minus the amount paid after February 28, 2022 to repurchase common stock (subject to a limit on deductions in any four fiscal quarter period of 12.5% of consolidated tangible net worth) and minus, in the case of a spin-off transaction, the consolidated net worth of assets that are spun off (subject to a limit of $1.0 billion).

As of the end of each fiscal quarter, we are required to maintain a leverage ratio that shall not exceed 65% and may be reduced by 2.5% per quarter if our interest coverage ratio is less than 2.25:1.00 for two consecutive fiscal calendar quarters.

The leverage ratio will have a floor of 60%.

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December 2022 (1) $ 800,000

April 2022 700,000

July 2022 600,000

October 2022 500,000

May 2023 500,000

August 2023 1,000,000

Total - Residential facilities $ 2,300,000

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December 2022 (1) $ 400,000

November 2022 100,000

July 2023 50,000

November 2023 100,000

Total - LMF Commercial facilities $ 550,000

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Changes in Capital Structure

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:

In October 2021, the Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to the lesser of an additional $1.0 billion in value, excluding commission, or 25 million in shares, of our outstanding Class A or Class B common stock.

As a result of prior authorizations being almost exhausted, in March 2022, our Board of Directors approved an additional authorization for us to repurchase up to the lesser of $2.0 billion in value, or 30 million in shares, of our outstanding Class A or Class B common stock.

The repurchase authorization has no expiration date.

The following table provides information about our repurchases of Class A and Class B common stock:

November 30, 2022 November 30, 2021

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Shares repurchased 9,628,203 1,339,797 13,910,000 100,000

Principal $ 1,357,081 $ 8,197 $ 282,274 $ 6,155

Total purchase price $ 868,788 $ 98,613 $ 1,357,081 $ 8,197

Average price per share $ 90.23 $ 73.60 $ 97.56 $ 81.97

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, 2022, treasury stock decreased due to our retirement of 46.7 million and 2.8 million treasury shares of Class A and Class B common stock, respectively, as authorized by our Board of Directors.

The retirement of Class A and Class B common stock in treasury resulted in a reclass between treasury shares and additional paid-in capital within stockholders' equity.

During the year ended November 30, 2022, this decrease in treasury shares was partially offset by our repurchase of 9.6 million and 1.3 million shares of Class A and Class B common stock, respectively, through our stock repurchase program.

During the years ended November 30, 2022 and 2021, our Class A and Class B common stockholders received an aggregate per share annual dividend of $1.50 and $1.00, respectively.

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.

On January 12, 2023, our Board of Directors declared 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, 2023 to holders of record at the close of business on January 27, 2023.

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.

Based on our current financial condition and credit relationships, we believe that 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 (the "Guaranteed Notes").

Currently, certain of our 100% owned subsidiaries, which are primarily our homebuilding subsidiaries, are guaranteeing all our senior 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.

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, 2022 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.

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.

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Homebuilding - Investments in Unconsolidated Entities

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.

At November 30, 2022, we had equity investments in 48 active Homebuilding and land unconsolidated entities (of which 4 had recourse debt, 15 had non-recourse debt and 29 had no debt), compared to 41 active Homebuilding and land unconsolidated entities at November 30, 2021.

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.

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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.

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

We also monitor the performance of Homebuilding 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.

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Debt without recourse to Lennar $ 1,381,438 167,051 391,940 715,283 107,164 —

Land seller and CDD debt 5,102 — — — — 5,102

Land seller and other debt without recourse to Lennar 11,113 — — — 11,113 —

Maximum recourse debt exposure to Lennar 9,138 — — — 9,138 —

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Multifamily - Investments in Unconsolidated Entities

At November 30, 2021, Multifamily had equity investments in 17 unconsolidated entities that are engaged in multifamily residential developments (of which 11 had non-recourse debt and 6 had no debt), compared to 22 unconsolidated entities at November 30, 2020.

At November 30, 2022, Multifamily had equity investments in 23 active unconsolidated entities that are engaged in multifamily residential developments (of which 15 had non-recourse debt and 8 had no debt), compared to 14 active unconsolidated entities at November 30, 2021.

We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties.

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Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners’ capital.

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 ownership of class-A multifamily rental properties.

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 manages and has investments in 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, 2022 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.

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

We also monitor the performance of Multifamily 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.

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Lennar Other - Investments in Unconsolidated Entities

As part of the sale of the Rialto investment and asset management platform, we retained our ability to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds.

As part of the sale of the Rialto investment and asset management platform, we retained the right to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds.

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.

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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.

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 various land bank investor groups.

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 back in the future, if it is mutually beneficial to both parties.

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.

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

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

Excluding homes in inventory, our percentage of total homesites controlled as of November 30, 2022 and 2021 was 69% and 64%, respectively.

Excluding homes in inventory, our years of supply owned as of November 30, 2022 and 2021 was 1.9 years and 2.4 years, respectively.

Details on option contracts and related consolidated inventory not owned and exposure are included in Note 1 and Note 8 of the Notes to Consolidated Financial Statements.

Contractual Obligations and Commercial Commitments

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Interest commitments under interest bearing debt (2) 599,130 200,754 254,614 136,724 7,038

Operating leases obligations 184,145 40,387 52,109 32,767 58,882

Operating lease obligations 178,677 34,167 52,721 34,832 56,957

Other contractual obligations (3) 96,577 36,582 38,816 2,304 18,875

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(3) Amounts include $4.1 million and $15.2 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 $77.3 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.

We are subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate in the routine conduct of our business.

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

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, 2022, we had access to 281,409 homesites through option contracts with third parties and unconsolidated entities in which we have investments.

At November 30, 2022, we had $2.0 billion of non-refundable option deposits and pre-acquisition costs related to certain of these homesites and had posted $163.9 million of letters of credit in lieu of cash deposits under certain land and option contracts.

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Our Financial Services segment had a pipeline of loan applications in process of $3.8 billion at November 30, 2022.

Loans in process for which interest rates were committed to the borrowers totaled approximately $833.1 million as of November 30, 2021.

Substantially all of these commitments were for periods of 60 days or less.

Loans in process for which interest rates were committed to the borrowers totaled approximately $2.2 billion as of November 30, 2022.

A significant portion of these commitments had a remaining period of 60 days or less.

Since a portion of these commitments is expected to expire without being exercised by the borrowers or borrowers may not meet certain criteria at the time of closing, the total commitments do not necessarily represent future cash requirements.

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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.

At November 30, 2021, we had open commitments amounting to $1.9 billion to sell MBS with varying settlement dates through February 2022 and there were no open futures contracts.

At November 30, 2022, we had open commitments amounting to $3.5 billion to sell MBS with varying settlement dates through February 2023 and open future contracts in the amount of $9.5 million with the settlement dates through March 2023.

The following sections discuss market and financing risk, seasonality and interest rates and changing prices that may have an impact on our business:

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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 2008 - 2010 economic downturn.

Although we believe our land underwriting standards are conservative, we were required to take impairment charges with regards to several properties in 2022 due to the reduced demand for new homes in the second half of 2022.

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

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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

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 2018 acquisition of CalAtlantic.

We 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.

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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, we 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.

Our performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date.

Cash proceeds from home closings held in escrow for our benefit, typically for approximately three days, are included in Homebuilding cash and cash equivalents in the Consolidated Balance Sheets and disclosed in the notes to consolidated balance sheets.

Contract liabilities include customer deposits liabilities related to sold but undelivered homes that are included in other liabilities in the Consolidated Balance Sheets.

Contract liabilities include customer deposit liabilities related to sold but undelivered homes that are included in other liabilities in the Consolidated Balance Sheets.

We periodically elect to sell parcels of land to third parties.

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Management fees and general contractor services in the Multifamily segment are included in Multifamily revenue.

When the Multifamily segment acts as general contractor, it treats the entire construction cost as revenue and treats payments to subcontractors as expenses.

Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value.

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We believe that the accounting related to inventory valuation and impairment is a critical accounting policy because:

(1) assumptions inherent in the valuation of our inventory are highly subjective and susceptible to change and (2) the impact of recognizing impairments on our inventory has been and could continue to be material to our consolidated financial statements.

(1) assumptions inherent in the valuation of our inventory are highly subjective and susceptible to change and (2) the impact of recognizing impairments on our inventory could be material to our consolidated financial statements.

Product Warranty

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Generally, we purchase less than a majority of the JV’s assets and the purchase prices under our option contracts are believed to be at market.

Generally, our unconsolidated entities become VIEs and consolidate when the other partner(s) lack the intent and financial wherewithal to remain in the entity.

Generally, our unconsolidated entities become VIEs and consolidate if the other partner(s) lack the intent and financial wherewithal to remain in the entity.

As a result, we continue to fund operations and debt paydowns through partner loans or substituted capital contributions.

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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