What changed in this filing

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Item 1. Business

2025-01-23 compared with 2024-01-26 · 69 added, 32 removed, 308 unchanged (25% of the section changed)

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As of November 30, 2024, our reportable Homebuilding segments and all Other Homebuilding operations not required to be reported separately have divisions located in:

Alabama, Florida, New Jersey, Pennsylvania and South Carolina

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

Alabama, Florida, New Jersey and Pennsylvania

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

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

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We have aimed to maintain strong operating margins by deferring home sale price commitments until construction costs are finalized to protect against cost escalations.

We focus on executing our operating strategy to be a consistent and high-volume homebuilder with production pace in sync with sales pace while using our gross margin as a shock absorber.

In addition, we are continuing our transition to a land light operating model by increasing the percentage of land we control through options or agreements but do not own, which reduces our years’ supply of owned homesites.

In connection with this transition, we expect to spin off a significant portion of our land assets to Millrose (as defined below), as discussed further below under the caption “Homebuilding Operations – Millrose Spin-Off.”

Homebuilding Operations

Our homebuilding operations 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 entities in which we have investments.

New home deliveries, including deliveries from unconsolidated entities, were 80,210 in fiscal 2024, compared to 73,087 in fiscal 2023 and 66,399 in fiscal 2022.

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Our Next Gen ® home provides what can be a home within a home to accommodate children or parents or can be an office from which to work remotely.

• Core Plans - We are integrating standardized, highly efficient, value engineered Plan series across all divisions at different price points.

The Core Plans are driving cost savings and strong operating margins, while delivering great value for our homebuyers.

• Flexible Operating Structure - Our local operating structure gives us the flexibility to make operating decisions based on local homebuilding conditions and customer preferences, while our centralized management structure provides strategic oversight for our homebuilding operations.

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• Land light strategy - We are focused on reducing our years' supply of owned homesites and increasing the percentage of land we control through options or agreements, including agreements with strategic land banks and joint ventures, rather than ownership.

• Even flow production - We are focused on maintaining consistent starts and sales paces in order to generate increased market share in all the markets we build in.

In connection with this strategy, we expect to spin off a significant portion of our land assets to Millrose, as discussed further below under the caption “Homebuilding Operations – Millrose Spin-Off.”

• Even flow production - We adjust prices, with our gross margin being a shock absorber, in an effort to maintain consistent starts and sales paces in order to generate increased market share in all the markets we build in.

Diversified Program of Property Acquisition

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We use independent subcontractors for most aspects of land development and home construction.

At November 30, 2023, we were actively building and marketing homes in 1,260 communities, including five communities being constructed by unconsolidated entities.

This was an increase from the 1,208 communities, including eight communities being constructed by unconsolidated entities, in which we were actively building and marketing homes at November 30, 2022.

At November 30, 2024, we were actively building and marketing homes in 1,447 communities, including 11 communities being constructed by unconsolidated entities.

This was an increase from the 1,260 communities, including five communities being constructed by unconsolidated entities, in which we were actively building and marketing homes at November 30, 2023.

At November 30, 2024 and 2023, we had about 2,900 and 1,200 completed unsold homes, respectively.

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We finance construction and land development activities primarily with cash generated from operations and historically from proceeds of unsecured corporate debt.

Following the Millrose Spin-Off, we expect that, when Millrose acquires undeveloped or partially developed land that we have options to purchase, Millrose will finance the horizontal development of all such homesites up to pre-negotiated development budgets, which will be incorporated into the takedown prices for Lennar’s purchase options on the properties.

We offer a diversified line of homes for first-time, move-up, active adult, luxury and multi-generational homebuyers in a variety of locations ranging from urban infill communities to suburban golf course communities.

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We have made it possible for potential homebuyers to take virtual tours of model homes.

During fiscal 2023, even with shifts in macroeconomic factors and adjusting to the recent inflationary environment, we were able to develop, enhance, use, and improve the Lennar machine.

During fiscal 2024 and 2023, even with shifts in macroeconomic factors and adjusting to an inflationary environment in much of the period, we were able to develop, enhance, use, and improve the Lennar machine.

Our sales, marketing, and dynamic pricing machine is quickly becoming an advanced digital engine that has materially benefited from aggressive, focused use and engagement while the market was most difficult.

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We tailor our marketing strategy and message based on the community being advertised and the customers being targeted, such as advertising our active adult communities in areas where prospective active adult homebuyers live or will potentially want to purchase.

During fiscal 2023, significant increases in interest rates made our homes less affordable to many prospective buyers and led us to reduce prices or increase sales incentives in a number of our communities to maintain sales pace.

During fiscal 2024 and 2023, increased interest rates as compared to prior years have made our homes less affordable to many prospective buyers and led us to reduce prices or increase sales incentives in a number of our communities to maintain sales pace.

Quality Service

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This is discussed in greater detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.

Millrose Spin-Off

We are currently preparing to spin off (the “Millrose Spin-Off”) a wholly owned subsidiary of Lennar, Millrose Properties Inc.

(“Millrose”) into an independent, publicly traded company that will be listed on the New York Stock Exchange.

In connection with the Millrose Spin-Off, we plan to contribute to Millrose, in exchange for all outstanding shares of its common stock, a significant portion of our undeveloped, partially developed, and some of our fully developed, land, with an expected total aggregate value between $5.0 billion and $6.0 billion, as well as approximately $1.0 billion of cash.

To consummate the Millrose Spin-Off, on January 10, 2025, our Board of Directors ("Board") declared a stock dividend, pursuant to which we will distribute to Lennar’s stockholders of record as of January 21, 2025 approximately 80% of the total outstanding number of shares of Millrose common stock on February 7, 2025.

The goal of the Millrose Spin-off is to generally complete our migration to an asset-light operating model by spinning off a significant portion of our land assets from our balance sheet.

We expect Millrose to qualify as a real estate investment trust that will acquire and develop land and will deliver fully developed homesites under a land option contract on a just in time basis for Lennar and potentially other homebuilders.

Millrose is expected to maintain a business model with a self-sustaining, recycling source of land acquisition and development capital.

Millrose is expected to be responsible for paying to develop the undeveloped and partially developed land into homesites up to a certain pre-negotiated budget, with Lennar performing the actual construction work.

Lennar will have options to purchase the homesites in accordance with pre-set takedown schedules when Lennar expects to be ready to build homes on them.

Millrose is expected to use option exercise proceeds to purchase additional land designated by Lennar or other homebuilders in the future, usually giving Lennar or the other homebuilders options to purchase the land when it is developed.

As a result of the Millrose Spin-Off, both our inventory and our equity will be reduced by the amount of assets contributed to Millrose.

However, our balance sheet will remain very strong after the Millrose Spin-Off and we expect to have ample funds with which to pay down debt, issue dividends and repurchase stock.

Millrose has filed with the Securities and Exchange Commission a registration statement on Form S-11 relating to the Millrose Spin-Off, which became effective on January 17, 2025.

We expect that the Millrose Spin-Off will be completed by February 7, 2025, the distribution date of the Millrose common stock shares to Lennar’s stockholders, but there is no guarantee that the transaction will be completed on our anticipated timeline.

Pending Acquisition of Rausch Coleman Homes

During the fourth quarter of 2024, we entered into a definitive agreement to purchase Rausch Coleman Homes, a residential homebuilder based in Fayetteville, Arkansas.

With this acquisition, we will expand our footprint into new markets in Arkansas, Oklahoma, Alabama, Kansas and Missouri while adding to our existing footprint in Texas, Oklahoma, Alabama and Florida.

As previously disclosed in Millrose’s registration statement on Form S-11, in connection with furthering our land light strategy, we intend to assign the purchase of Rausch Coleman's land assets (the “Rausch Land Assets”) to Millrose.

Similar to the other land assets that Lennar expects to contribute to Millrose in connection with the Millrose Spin-Off, Lennar expects to enter into options to purchase the developed Rausch Land Assets in accordance with pre-set takedown schedules.

We are expecting the acquisition to be completed in our first quarter of 2025.

Financial Services Operations

Residential Mortgage Financing

We offer conforming conventional, FHA-insured and VA-guaranteed residential mortgage loan products and other home mortgage products primarily to buyers of our homes through our financial services subsidiary, Lennar Mortgage, from locations in most of the states in which we have homebuilding operations.

We offer conforming conventional, FHA-insured and VA-guaranteed residential mortgage loan products and other residential mortgage products primarily to buyers of our homes through our financial services subsidiary, Lennar Mortgage, from locations in most of the states in which we have homebuilding operations.

In fiscal year 2024, our financial services subsidiaries provided loans to 84% of our homebuyers who obtained mortgage financing in areas where we offered services.

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We finance our mortgage loan activities with borrowings under our financial services warehouse facilities or funds from our operating activities.

At November 30, 2023, Financial Services had five warehouse residential facilities maturing at various dates through fiscal 2024 with a total maximum borrowing capacity of $2.5 billion including an uncommitted amount of $750 million.

At November 30, 2024, Financial Services had six warehouse residential facilities maturing at various dates through fiscal 2027 with a total maximum borrowing capacity of $3.1 billion including an uncommitted amount of $675 million.

We expect the facilities to be renewed or replaced with other facilities when they mature.

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We are licensed to provide title insurance, and closing services for residential and/or commercial transactions in 41 states to our homebuyers and others.

During fiscal 2023 and 2022, we provided closing services with regard to approximately 74,900 and 68,800 real estate transactions, respectively, in 25 and 20 states, respectively.

During fiscal 2024 and 2023, we provided closing services with regard to approximately 82,400 and 74,900, real estate transactions, respectively, in 25 states.

Commercial Mortgage Origination

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LMF Commercial also originates floating rate loans secured by commercial real estate properties, many of which are in transition, undergoing lease-up, sell-out, renovation or repositioning.

In order to finance LMF Commercial lending activities, as of November 30, 2023, LMF Commercial had three warehouse repurchase financing agreements maturing at various dates from December 2023 through fiscal 2024 with commitments totaling $500 million.

In order to finance LMF Commercial lending activities, as of November 30, 2024, LMF Commercial had two warehouse repurchase financing agreements maturing at various dates from 2025 through

fiscal 2026 with commitments totaling $300 million.

This is discussed in greater detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.

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We strategically invest in companies involved in technology initiatives that, among other things, help us enhance the homebuying or home ownership experience, reduce our SG&A expenses and help us stay at the forefront of homebuilding innovation.

Seven of the companies in which we have strategic investments are publicly traded.

Six of the companies in which we have strategic investments are publicly traded.

• Blend Labs, Inc.

("Blend"), a digital lending platform developer simplifying and fast tracking the consumer finance process;

• Doma Holdings, Inc.

("Doma"), a company that built a predictive analytics platform for title insurers;

• Hippo Holdings, Inc.

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("Sunnova"), a leading national residential solar company, to which during 2021, we sold our solar power business in return for equity.

Each of the investments listed above, except Doma, is reflected in our financial statements at market value, with changes to the fair values of those investments generating gains or losses on our quarterly financial statements.

Doma is accounted for using the equity method.

At November 30, 2023, the book value of our investment in strategic technology investments (including those recorded at fair value) was $424.7 million and is included in our Lennar Other segment.

Each of the investments listed above is reflected in our financial statements at market value, with changes to the fair values of those investments generating gains or losses on our financial statements.

At November 30, 2024, the book value of our investment in strategic technology investments was $587.1 million and is included in our Lennar Other segment.

For additional information about our investments in strategic technology investments, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.

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In addition, it has carried interests in the funds or ventures it manages, and receives distributions with regard to those carried interests.

Lennar Multifamily Venture Fund I (“LMV I") is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets.

As of November 30, 2023, there were 38 rental operation projects in LMV I.

During the second half of fiscal 2024, the LMV I partners decided to liquidate and sell all of the individual rental operation projects of LMV I as the fund has come to the end of its contractual life.

During the year ended November 30, 2024, 33 LMV I rental operation projects were sold to various third-party buyers.

We recognized a net gain of $211.5 million on the sale of these rental operation projects which was recorded as equity in earnings (losses) in the condensed consolidated statement of operations and received net cash distributions of $199.5 million.

The remaining LMV I rental operation projects are expected to be monetized in the near term.

Single-Family Home Rentals

In December 2020, Lennar formed the Upward America Venture, LLC (“Upward America”), which (a) acquires communities of single-family rental properties (including townhomes, duplexes and condominium buildings developed or acquired for rental purposes), and (b) leases and manages homes in those communities.

acquired for rental purposes), and (b) leases and manages homes in those communities.

Lennar subsidiaries are the manager and the general partner of Upward America.

The investment period for Upward America closed in 2024, reducing the equity commitments from investors from $1.6 billion to $1.0 billion.

As of November 30, 2024, institutional investors and Lennar had committed $1.0 billion to Upward America, part of which was used to reduce an initial commitment Lennar had made from $225 million to $78.1 million.

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Lennar subsidiaries may also receive fees for property management, leasing, construction management and other services that they render through subcontractors.

At November 30, 2023, Upward America had purchased 4,697 homes in 103 communities across 19 metropolitan statistical areas for a total purchase price of $1.2 billion (an average price of $258,000 per home), of which 4,420 of the homes owned by Upward America had been leased to occupants.

In April 2024, Upward America entered into a joint venture agreement and property management agreement with Invitation Homes.

In addition, Lennar engaged Invitation Homes to provide certain asset management services for the Upward America Venture.

At November 30, 2024, Upward America had purchased 4,697 homes in 103 communities across 19 metropolitan statistical areas for a total purchase price of $1.2 billion (an average price of $258,000 per home) and disposed of 92 homes for a total sales price of $26.0 million (an average price of $283,000 per home).

The Limited Partnership Agreement of Upward America gives Upward America the right to purchase from Lennar for their appraised value all homes or communities that are purpose built by Lennar for single-family home rental.

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Each new home we build is healthier and more energy efficient, and has less impact on the environment, than prior generations of homes as a result of features like:

• Low-VOC paint that reduces pollution;

• Low-VOC paint that reduces pollution with less odor and hazard;

• WaterSense® faucets that reduce water flow without sacrificing performance;

• Low-E windows that reduce infrared and ultraviolet light coming into the home;

• Low-E windows that reduce infrared and ultraviolet light coming into the home, make homes cooler, and reduce damage to furnishing;

• Energy Star® appliances that reduce energy consumption.

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In 2021, we sold our SunStreet solar operations to Sunnova, a leading national residential solar company, in exchange for stock in the company.

We believe Sunnova will be better able than us at maximizing the potential of the SunStreet solar operations.

We are also partnering with Sunnova for it to be our exclusive residential home solar and battery storage provider, and we are working with Sunnova on the development of community solar microgrids.

We consistently seek opportunities to integrate solar power where it provides great value for our homebuyers.

Human Capital Management

Diversity, Equity and Inclusion;

Talent and Development

Talent Management and Leadership Development

Our associates (i.e., employees) are our most valuable asset, and we are committed to supporting each associate’s unique career journey.

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We are also committed to worker safety and regulatory compliance, and among other things, require that office associates with oversight of construction and associates who work in the field take additional safety courses.

Our Board of Directors and its Audit Committee regularly review the results of OSHA visits and other safety-related information to ensure that we are successfully managing and improving our safety program.

Our Board and its Audit Committee regularly review the results of OSHA visits and other safety-related information to ensure that we are successfully managing and improving our safety program.

Employees and Labor Relations

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We believe our overall relations with our workforce are healthy.

We have policies that prohibit us from discriminating in employment opportunities on the basis of race or gender, and we take active steps to offer employment opportunities to members of under-represented ethnic groups.

We are firmly committed to providing equal employment opportunities for all applicants and employees.

Our Code of Business Ethics and Conduct prohibits discrimination on the basis of a person’s race, color, religion, sex, sexual orientation, gender identity or expression, national origin, disability, veteran status, genetic information, or any other legally protected status.

Available Information

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

We wish to caution readers that certain important factors may have affected and could in the future affect our

actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements.

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

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

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the potential impact of inflation;

the impact of increased cost of mortgage financing for homebuyers, increased interest rates or increased competition in the mortgage industry;

the impact of increased cost of mortgage financing for homebuyers, increased or continued high interest rates or increased competition in the mortgage industry;

supply shortages and increased costs related to construction materials and labor;

the possibility that increased tariffs will increase the cost of production materials;

cost increases related to real estate taxes and insurance;

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natural disasters or catastrophic events for which our insurance may not provide adequate coverage;

our inability to successfully execute our strategies, including our land lighter strategy and our planned spin-off of certain businesses;

our inability to successfully execute our strategies, including our land lighter strategy and our planned spin-off;

problems exercising options to purchase homesites;

a decline in the value of the land and home inventories we maintain and resulting possible future write downs of the carrying value of our real estate assets;

the forfeiture of deposits related to land purchase options we decide not to exercise;

the potential negative impact to our business of public health issues, including the coronavirus (COVID-19) pandemic;

the potential negative impact to our business of public health issues;

possible unfavorable outcomes in legal proceedings;

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difficulty obtaining land-use entitlements or construction financing;

harm to our business from information technology failures and data security breaches;

new laws or regulatory changes that adversely affect the profitability of our businesses (including changes in tax laws or liabilities);

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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 1. Business