LENNAR CORP /NEW/ Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Form 10-K)

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. 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.
Outlook
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
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orderly, targeted growth strategy, with our sales pace tightly matched with our
pace of production. We focus on gross margin by selling in step with production,
while controlling costs, and reducing our SG&A, and therefore driving our net
margin. As we look to 2022, we see continued strength in the market and
double-digit growth for Lennar.
Results of Operations
Overview
Our net earnings attributable to Lennar were $4.4 billion, or $14.27 per diluted
share ($14.28 per basic share) in 2021 and $2.5 billion, or $7.85 per diluted
share ($7.88 per basic share) in 2020.
Financial information relating to our operations was as follows:
                                                                                        Year ended November 30, 2021
                                                                 Financial                                    Lennar
(In thousands)                          Homebuilding             Services             Multifamily              Other              Corporate                Total
Revenues:
Sales of homes                        $   25,348,105                   -                     -                     -                    -               25,348,105
Sales of land                                167,913                   -                     -                     -                    -                  167,913
Other revenues                                29,224             898,745               665,232                21,457                    -                1,614,658
Total revenues                            25,545,242             898,745               665,232                21,457                    -               27,130,676
Costs and expenses:
Costs of homes sold                       18,562,213                   -                     -                     -                    -               18,562,213
Costs of land sold                           143,631                   -                     -                     -                    -                  143,631
Selling, general and administrative        1,796,697                   -                     -                     -                    -                1,796,697
Other costs and expenses                           -             407,731               652,810                30,955                    -                1,091,496
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                        (14,205)                  -                 9,031                61,957                    -               

56,783

Homebuilding other income, net                 3,266                   -                     -                     -                    -               

3,266

Lennar Other realized and unrealized
gains                                              -                   -                     -               680,576                    -                  680,576
Operating earnings                         5,031,762             491,014                21,453               733,035                    -                6,277,264
Corporate general and administrative
expenses                                           -                   -                     -                     -              398,381               

398 381

Charitable foundation contribution                 -                   -                     -                     -               59,825                   59,825
Earnings before income taxes          $    5,031,762             491,014                21,453               733,035             (458,206)               5,819,058


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                                                                                         Year ended November 30, 2020
                                                                  Financial                                    Lennar
(In thousands)                           Homebuilding             Services             Multifamily              Other              Corporate                Total
Revenues:
Sales of homes                         $   20,840,159                   -                     -                     -                    -               20,840,159
Sales of land                                 123,365                   -                     -                     -                    -                  123,365
Other revenues                                 17,612             890,311               576,328                41,079                    -                1,525,330
Total revenues                             20,981,136             890,311               576,328                41,079                    -               22,488,854
Costs and expenses:
Costs of homes sold                        16,092,069                   -                     -                     -                    -               16,092,069
Costs of land sold                            172,480                   -                     -                     -                    -                  172,480
Selling, general and administrative         1,697,095                   -                     -                     -                    -                1,697,095
Other costs and expenses                            -             470,777               575,581                 6,744                    -                1,053,102
Total costs and expenses                   17,961,644             470,777               575,581                 6,744                    -               19,014,746
Equity in earnings (loss) from
unconsolidated entities, Multifamily
other gain and Lennar Other other
income (expense), net                            (836)                  -                21,934               (44,669)                   -                  (23,571)
Financial Services gain on
deconsolidation                                     -              61,418                     -                     -                    -                   61,418
Homebuilding other expense, net               (29,749)                  -                     -                     -                    -                  (29,749)
Operating earnings                          2,988,907             480,952                22,681               (10,334)                   -                3,482,206
Corporate general and administrative
expenses                                            -                   -                     -                     -              333,446              

333 446

Charitable foundation contribution                  -                   -                     -                     -               24,972              

24,972

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



2021 versus 2020
Revenues from home sales increased 22% in the year ended November 30, 2021 to
$25.3 billion from $20.8 billion in the year ended November 30, 2020. Revenues
were higher primarily due to a 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.
Selling, general and administrative expenses were $1.8 billion in the year ended
November 30, 2021, compared to $1.7 billion in the year ended November 30, 2020.
As a percentage of revenues from home sales, selling, general and administrative
expenses improved to 7.1% in the year ended November 30, 2021, from 8.1% in the
year ended November 30, 2020, primarily due to a decrease in broker commissions
and benefits of the Company's technology efforts.
Operating earnings for our Financial Services segment were $491.0 million
($490.4 million net of noncontrolling interests) in the year ended November 30,
2021, compared to $481.0 million ($495.0 million net of noncontrolling
interests) in the year ended November 30, 2020. The year ended November 30, 2020
included a $61.4 million gain on the deconsolidation of a previously
consolidated entity. Excluding this fiscal 2020 gain, the improvement in
operating earnings during the year ended November 30, 2021 was primarily due to
an increase in volume and margin in our title businesses, partially offset by
lower mortgage net margins driven by a more competitive mortgage market.
Operating earnings for our Multifamily segment were $21.5 million in the year
ended November 30, 2021, compared to $22.7 million in the year ended November
30, 2020. Operating earnings for our Lennar Other segment were $733.0 million in
the year ended November 30, 2021, compared to an operating loss of $10.3 million
in the year ended November 30, 2020. The operating earnings for the year ended
November 30, 2021 were primarily due to mark to market gains on our strategic
technology investments that went public during the year and the sale of our
solar business.
During the year ended November 30, 2021, we retired $1.15 billion aggregate
principal amount of senior notes which included $600 million aggregate principal
amount of our 4.125% senior notes due January 2022 at par, retired early, at a
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premium, $250 million aggregate principal amount of our 5.375% senior notes due
October 2022 and $300 million aggregate principal amount of our 6.25% senior
notes due December 2021.
For the years ended November 30, 2021 and 2020, we had a tax provision of $1.4
billion and $656.2 million, respectively, which resulted in an overall effective
income tax rate of 23.5% and 21.0%, respectively. The overall effective income
tax rate was lower in 2020 primarily due to the retroactive extension of the new
energy efficient home tax credit during the first quarter of 2020.
Homebuilding Segments
At November 30, 2021, our homebuilding operating segments and Homebuilding Other
consisted of homebuilding divisions located in:
East: Florida, New Jersey, Pennsylvania and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina,
Tennessee and Virginia
Texas: Texas
West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington
Other: Urban divisions and other homebuilding related investments primarily in
California, including FivePoint
The following tables set forth selected financial and operational information
related to our homebuilding operations for the years indicated:
Selected Financial and Operational Data
                                                                                                                                      Year Ended November 30, 2021
                                                         Gross Margins                                                                                                          Operating Earnings (Loss)
                                                                                                                                                                                        Equity in Earnings
                                                                                                            Net Margins on                                                                 (Loss) from
                              Sales of Homes               Costs of Sales                                   Sales of Homes          Gross Margins on                                      Unconsolidated                                                 Operating Earnings
  (Dollars in thousands)          Revenues                    of Homes               Gross Margin %               (1)                 Sales of Land            Other Revenues                Entities               Other Income (Expense), net                (Loss)
East                       $     6,814,578                   4,858,456                       28.7  %       $    1,432,242                  10,835                  7,161                          308                           4,886                           1,455,432
Central                          4,807,194                   3,731,567                       22.4  %              713,229                   4,271                  1,977                        1,088                            (146)                            720,419
Texas                            3,204,609                   2,238,204                       30.2  %              725,065                   6,347                  1,630                          498                          (3,075)                            730,465
West                            10,503,305                   7,694,870                       26.7  %            2,179,980                   1,394                  4,778                        5,388                             906                           2,192,446
Other (2)                           18,419                      39,116                     (112.4) %              (61,321)                  1,435                 13,678                      (21,487)                            695                             (67,000)
          Totals           $    25,348,105                  18,562,213                       26.8  %       $    4,989,195                  24,282                 29,224                      (14,205)                          3,266                           5,031,762


                                                                                                                                    Year Ended November 30, 2020
                                                        Gross Margins                                                                                                        Operating Earnings (Loss)
                                                                                                                                                                                    Equity in Earnings
                                                                                                           Net Margins on          Gross Margins                                       (Loss) from
                              Sales of Homes               Costs of Sales                                  Sales of Homes         (Loss) on Sales                                     Unconsolidated                                                 Operating Earnings
  (Dollars in thousands)          Revenues                    of Homes              Gross Margin %               (1)                  of Land              Other Revenues                Entities               Other Income (Expense), net                (Loss)
East                       $     5,689,419                   4,269,452                      25.0  %       $      929,181                2,587                  6,404                        4,189                          (9,064)                            933,297
Central                          4,084,514                   3,265,086                      20.1  %              481,697                 (544)                 2,787                          792                          (1,803)                            482,929
Texas                            2,640,762                   1,974,375                      25.2  %              416,520                6,994                  1,292                          782                          (3,994)                            421,594
West                             8,400,942                   6,535,718                      22.2  %            1,268,716              (34,713)                 6,083                        4,635                          (3,227)                          1,241,494
Other (2)                           24,522                      47,438                     (93.5) %              (45,119)             (23,439)                 1,046                      (11,234)                        (11,661)                            (90,407)
                           $    20,840,159                  16,092,069                      22.8  %       $    3,050,995              (49,115)                17,612                         (836)                        (29,749)                          2,988,907


(1)Net margins on sales of homes include selling, general and administrative
expenses.
(2)Negative gross and net margins were due to period costs in Urban divisions
that impact costs of homes sold without sufficient sales of homes revenues to
offset those costs.
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Summary of Homebuilding Data
Deliveries:
                                                                       Years Ended November 30,
                                                                        Dollar Value (In
                                             Homes                         thousands)                      Average Sales Price
                                    2021                2020                      2021                   2020                                    2021               2020
East                                18,879             16,976                $  6,846,153             5,725,481                              $ 363,000            337,000
Central                             12,138             10,684                   4,807,195             4,084,514                                396,000            382,000
Texas                               10,939              9,425                   3,204,609             2,640,762                                293,000            280,000
West                                17,850             15,814                  10,503,304             8,400,943                                588,000            531,000
Other                                   19                 26                      18,419                24,522                                969,000            943,000
Total                               59,825             52,925                $ 25,379,680            20,876,222                              $ 424,000            394,000


Of the total homes delivered listed above, 95 homes with a dollar value of $31.6
million and an average sales price of $332,000 represent home deliveries from
unconsolidated entities for the year ended November 30, 2021, compared to 112
home deliveries with a dollar value of $36.1 million and an average sales price
of $322,000 for the year ended November 30, 2020.
New Orders (1):
                               At November 30,                                                       Years Ended November 30,
                                                                                                      Dollar Value (In
                             Active Communities                            Homes                         thousands)                      Average Sales Price
                          2021                 2020               2021                2020                      2021                    2020                                    2021               2020
East                       345                   323              20,566             17,299                $  7,908,164              6,010,047                              $ 385,000            347,000
Central                    302                   285              12,871             11,905                   5,366,197              4,602,720                                417,000            387,000
Texas                      241                   213              12,382             10,078                   3,833,294              2,752,008                                310,000            273,000
West                       372                   353              18,703             16,868                  11,725,035              9,005,958                                627,000            534,000
Other                        3                     3                  21                 19                      20,513                 17,917                                977,000            943,000
Total                    1,263                 1,177              64,543             56,169                $ 28,853,203             22,388,650                              $ 447,000            399,000


Of the total new orders listed above, 136 homes with a dollar value of $48.8
million and an average sales price of $359,000 represent new orders from
unconsolidated entities for the year ended November 30, 2021, compared to 119
new orders with a dollar value of $37.3 million and an average sales price of
$314,000 for the year ended November 30, 2020.
(1)New orders represent the number of new sales contracts executed with
homebuyers, net of cancellations, during the years ended November 30, 2021 and
2020.
Backlog:
                                                                         At November 30,
                                                 Homes                                 Dollar Value (In thousands)                          Average Sales Price
                                        2021                 2020                       2021                   2020                       2021                2020
East (1)                                  7,932              6,013                $    3,448,719            2,310,935                $   435,000            384,000
Central                                   5,104              4,371                     2,321,174            1,762,172                    455,000            403,000
Texas                                     4,266              2,823                     1,453,270              824,584                    341,000            292,000
West                                      6,465              5,612                     4,135,161            2,913,432                    640,000            519,000
Other                                         4                  2                         3,942                1,848                    986,000            924,000
Total                                    23,771             18,821                $   11,362,266            7,812,971                $   478,000            415,000


Of the total homes in backlog listed above, 79 homes with a backlog dollar value
of $28.6 million and an average sales price of $363,000 represent the backlog
from unconsolidated entities at November 30, 2021, compared to 38 homes with a
backlog dollar value of $11.5 million and an average sales price of $302,000 at
November 30, 2020.
(1)During the year ended November 30, 2021, we acquired 232 homes in backlog.
Backlog represents the number of homes under sales contracts. Homes are sold
using sales contracts, which are generally accompanied by sales deposits. In
some instances, purchasers are permitted to cancel sales if they fail to qualify
for financing or under certain other circumstances. We do not recognize revenue
on homes under sales contracts until the sales are closed and title passes to
the new homeowners.
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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. The increase in the number of home
deliveries was primarily due to higher demand as the number of deliveries per
active community increased. The decrease in the number of home deliveries in
Pennsylvania was primarily due to a decrease in the number of communities as a
result of the timing of opening and closing of communities. The increase in the
average sales price of homes delivered was primarily due to favorable market
conditions. Gross margin percentage on home sales for the year ended November
30, 2021 increased compared to the same period last year primarily due to price
appreciation as the increase in revenues per square foot of homes delivered
outpaced the increase in costs per square foot.
Homebuilding Central: Revenues from home sales 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. Gross margin percentage on home sales for the year ended November
30, 2021 increased compared to the same period last year primarily due to price
appreciation as the increase in revenues per square foot of homes delivered
outpaced the increase in costs per square foot.
Homebuilding 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. Gross margin percentage on home sales for the year
ended November 30, 2021 increased compared to the same period last year
primarily due to price appreciation as the increase in revenues per square foot
of homes delivered outpaced the increase in costs per square foot.
Homebuilding 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. 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.
Financial Services Segment
Our Financial Services reportable segment primarily provides mortgage financing,
title and closing services primarily for buyers of our homes, as well as
property and casualty insurance. The segment also originates and sells into
securitizations commercial mortgage loans through its LMF Commercial business.
Our Financial Services segment sells substantially all of the residential loans
it originates within a short period in the secondary mortgage market, the
majority of which are sold on a servicing released, non-recourse basis. After
the loans are sold, we retain potential liability for possible claims by
purchasers that we breached certain limited industry-standard representations
and warranties in the loan sale agreements.
The following table sets forth selected financial and operational information
related to the residential mortgage and title activities of our Financial
Services:
                                                                          Years Ended November 30,
(Dollars in thousands)                                                  2021                   2020
Dollar value of mortgages originated                              $  13,247,100              12,939,200
Number of mortgages originated                                           38,100                  40,000
Mortgage capture rate of Lennar homebuyers                                     75%                     80%
Number of title and closing service transactions                         67,500                  61,100


At November 30, 2021 and 2020, the carrying value of Financial Services'
commercial mortgage-backed securities ("CMBS") was $157.8 million and $164.2
million, respectively. Details of these securities and related debt are within
Note 2 of the Notes to Consolidated Financial Statements.

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LMF Commercial
LMF Commercial originates and sells into securitizations first mortgage loans,
which are secured by income producing commercial properties. LMF Commercial
originated commercial loans as follows:
                                   November 30,
(Dollars in thousands)          2021             2020
Originations (1)           $     770,107       703,777

Sold                             931,023       705,089
Securitizations                        6             5


Multifamily Segment
We have been actively involved, primarily through unconsolidated entities, in
the development, construction and property management of multifamily rental
properties. Our Multifamily segment focuses on developing a geographically
diversified portfolio of institutional quality multifamily rental properties in
select U.S. markets.
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.
The following tables provide information related to our investment in the
Multifamily segment:
Balance Sheet                                                 November 30,
(In thousands)                                             2021             

2020

Multi-family investments in unconsolidated entities $654,029 724,647 Lennar net investment in Multifamily

                      976,676       906,632


Statement of Operations                                                              November 30,
(Dollars in thousands)                                                       2021                   2020

Number of operating/investment properties sold through joint ventures

        1                       5
Lennar's share of gains on the sale of operating
properties/investments                                                 $      14,784                  21,114


The Multifamily segment includes Multifamily Venture Fund I (the "LMV I") and
Multifamily Venture Fund II LP (the "LMV II"), which are long-term multifamily
development investment vehicles involved in the development, construction and
ownership of class-A multifamily rental properties. Details of each as of and
during the year ended November 30, 2021 are included below:
                                                                              November 30, 2021
(In thousands)                                                          LMV I                     LMV II
Lennar's carrying value of investments                          $          254,732                 320,565
Equity commitments                                                       2,204,016               1,257,700
Equity commitments called                                                2,149,357               1,201,475
Lennar's equity commitments                                                504,016                 381,000
Lennar's equity commitments called                                         499,031                 362,913
Lennar's remaining commitments                                               4,985                  18,087
Distributions to Lennar during the year ended November 30, 2021             67,197                   9,672


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:
(Dollars in thousands)                 November 30, 2021
Under construction/owned                              17
Partially completed and leasing                        6
Completed and operating                               43
Total unconsolidated joint ventures                   66
Total development costs               $        7,900,000


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As of November 30, 2021, our Multifamily segment also had a pipeline of
potential future projects, which were under contract or had letters of intent,
totaling approximately $8.5 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 LENX
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):
                                           Year Ended
                                          November 30,
(In thousands)                                                2021
Opendoor (OPEN) mark to market                             $ 239,312
Hippo (HIPO) mark to market                                  207,634
SmartRent (SMRT) mark to market                               79,483
Sunnova (NOVA) mark to market                                 (8,883)
Blend Labs (BLND) mark to market                              (6,744)
Gain on sale of solar business                               158,069
Other realized gains                                          11,705
                                                           $ 680,576


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. We review changes in estimated cash
flows periodically to determine if an other-than-temporary impairment has
occurred on our CMBS. Based on management's assessment, no impairment charges
were recorded during the years ended November 30, 2021 and 2020. We classify
these securities as held-for-sale at November 30, 2021 and 2020.
Financial Condition and Capital Resources
At November 30, 2021, we had cash and cash equivalents and restricted cash
related to our homebuilding, financial services, multifamily and other
operations of $3.0 billion, compared to $2.9 billion at November 30, 2020.
We finance all of our activities including homebuilding, financial services,
multifamily, other and general operating needs primarily with cash generated
from our operations, debt issuances and investor funds as well as cash borrowed
under our warehouse lines of credit and our unsecured revolving credit facility
(the "Credit Facility"). At November 30, 2021, we had $2.7 billion of
Homebuilding cash and cash equivalents and no outstanding borrowings under our
$2.5 billion revolving credit facility, thereby providing $5.2 billion of
available capacity.
Operating Cash Flow Activities
During 2021 and 2020, cash provided by operating activities totaled $2.5 billion
and $4.2 billion, respectively. 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.
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During 2020, cash provided by operating activities was positively impacted by
our net earnings, a decrease in inventories of $781 million, an increase in
accounts payable and other liabilities of $266 million and a decrease in loans
held-for-sale of $177 million primarily related to the sale of loans originated
by Financial Services.
Investing Cash Flow Activities
During 2021 and 2020, cash used in investing activities totaled $105 million and
$280 million, respectively. During 2021, our cash used in investing activities
was primarily due to cash contributions of $408 million to unconsolidated
entities, which primarily included (1) $251 million to Homebuilding
unconsolidated entities (2) $72 million to Multifamily unconsolidated entities,
and (3) $83 million to strategic technology investments included in the Lennar
Other segment. In addition, we had $128 million of purchases of investment
securities related to strategic technology investments in the Lennar Other
segment. This was partially offset by distributions of capital from
unconsolidated entities of $362 million, which primarily included (1) $177
million from Homebuilding unconsolidated entities (2) $128 million from
Multifamily unconsolidated entities, and (3) $57 million from our Lennar Other
segment, which included our unconsolidated Rialto real estate funds and
distributions from strategic investments.
During 2020, our cash used in investing activities was primarily due to cash
contributions of $486 million to unconsolidated entities and the deconsolidation
of a previously consolidated entity, which included (1) $167 million to
Multifamily unconsolidated entities, (2) $104 million to Homebuilding
unconsolidated entities, (3) $63 million to the strategic technology investments
included in the Lennar Other segment; 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 2021 and 2020, our cash used in financing activities totaled $2.4 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.
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Debt to total equity ratios are financial measures commonly used in the residential construction industry and are presented to help understand the leverage of our residential construction business. Residential construction debt to total capital and net residential construction debt to total capital were calculated as follows:

                                                         November 30,
(Dollars in thousands)                               2021             2020
Homebuilding debt                               $  4,652,338        5,955,758
Stockholders' equity                              20,816,425       17,994,856
Total capital                                   $ 25,468,763       23,950,614
Homebuilding debt to total capital                       18.3%            

24.9%

Homebuilding debt                               $  4,652,338        

5,955,758

Less: Cash and cash equivalents from residential construction 2,735,213 2,703,986 Net debt from residential construction

                           $  1,917,125        

3,251,772

Net Homebuilding debt to total capital (1)                8.4%            

15.3%


(1)Net homebuilding debt to total capital is a non-GAAP financial measure
defined as net homebuilding debt (homebuilding debt less homebuilding cash and
cash equivalents) divided by total capital (net homebuilding debt plus
stockholders' equity). Our management believes the ratio of net homebuilding
debt to total capital is a relevant and a useful financial measure to investors
in understanding the leverage employed in our homebuilding operations. However,
because net homebuilding debt to total capital is not calculated in accordance
with GAAP, this financial measure should not be considered in isolation or as an
alternative to financial measures prescribed by GAAP. Rather, this non-GAAP
financial measure should be used to supplement our GAAP results.
At November 30, 2021, Homebuilding debt to total capital was lower compared to
November 30, 2020, primarily as a result of a decrease in Homebuilding debt due
to debt pay downs and an increase in stockholders' equity due to net earnings,
partially offset by share repurchases.
We are continually exploring various types of transactions to manage our
leverage and liquidity positions, take advantage of market opportunities and
increase our revenues and earnings. These transactions may include the issuance
of additional indebtedness, the repurchase of our outstanding indebtedness, the
repurchase of our common stock, the acquisition of homebuilders and other
companies, the purchase or sale of assets or lines of business, the issuance of
common stock or securities convertible into shares of common stock, and/or the
pursuit of other financing alternatives. 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.
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. As of
both November 30, 2021 and 2020, 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.
We often post letters of credit instead of making cash deposits for option
contracts and for similar purposes. We often are required to post surety bonds
to guarantee completion of projects, particularly when municipal authorities are
involved. Our outstanding letters of credit and surety bonds are described
below:
                                                                                 November 30,
(In thousands)                                                             2021                  2020
Performance letters of credit                                        $     924,584              752,096
Financial letters of credit                                                425,843              283,193
Surety bonds                                                             3,553,047            3,087,711

Expected future costs primarily for site improvements related to performance bonds

1,690,861            1,584,642



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Our average outstanding residential construction debt and average interest rates were as follows:

                                                   November 30,
(Dollars in thousands)                         2021             2020

Average outstanding residential construction debt $5,711,100 7,594,961 Average interest rate

                               4.9%            4.9%
Interest incurred                         $    275,091         353,403


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. The leverage ratio
will have a floor of 60%. If our interest coverage ratio subsequently exceeds
2.25:1.00 for two consecutive fiscal calendar quarters, the leverage ratio we
will be required to maintain will be increased by 2.5% per quarter to a maximum
of 65%. As of the end of each fiscal quarter, we are also required to maintain
either (1) liquidity in an amount equal to or greater than 1.00x consolidated
interest incurred for the last twelve months then ended or (2) an interest
coverage ratio equal to or greater than 1.50:1.00 for the last twelve months
then ended. We believe that we were in compliance with our debt covenants at
November 30, 2021.
The following summarizes our required debt covenants and our actual levels or
ratios with respect to those covenants as calculated per the Credit Agreement as
of November 30, 2021:
(Dollars in thousands)      Covenant Level       Level Achieved as of November 30, 2021
Minimum net worth test     $    10,416,935                      13,758,218
Maximum leverage ratio                 65.0%                                        12.5%
Liquidity test (1)                    1.00                           10.85


(1)We are only required to maintain either (1) liquidity in an amount equal to
or greater than 1.00x consolidated interest incurred for the last twelve months
then ended or (2) an interest coverage ratio of equal to or greater than
1.50:1.00 for the last twelve months then ended. Although we are in compliance
with our debt covenants for both calculations, we have only disclosed our
liquidity test.
At November 30, 2021, the Financial Services segment had warehouse facilities,
all of which were 364-day repurchase facilities and were used to fund
residential mortgages or commercial mortgages for LMF Commercial as follows:
        (In thousands)                         Maximum Aggregate Commitment
        Residential facilities maturing:
        December 2021 (1)                     $                     500,000
        April 2022                                                  700,000
        July 2022                                                   600,000
        October 2022                                                500,000
        Total - Residential facilities        $                   2,300,000
        LMF Commercial facilities maturing:
        December 2021 (1)                     $                     400,000
        November 2022                                               100,000
        July 2023                                                    50,000
        Total - LMF Commercial facilities     $                     550,000
        Total                                 $                   2,850,000

(1) Following November 30, 2021the due date has been extended to December 2022.

The Financial Services segment uses the residential warehouse facilities to
finance its residential lending activities until the mortgage loans are sold to
investors and the proceeds are collected. The facilities are non-recourse to us
and are expected to be renewed or replaced with other facilities when they
mature. The LMF Commercial facilities finance LMF Commercial loan originations
and securitization activities and were secured by up to 80% interests in the
originated commercial loans financed.
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Borrowings and guarantees under the facilities and their predecessors in the prior year were as follows:

                                                          November 30,
(In thousands)                                        2021             2020
Borrowings under the residential facilities      $  1,482,258         1,185,797
Collateral under the residential facilities         1,539,641         1,231,619
Borrowings under the LMF Commercial facilities         96,294           124,617



If the facilities are not renewed or replaced, the borrowings under the lines of
credit will be repaid by selling the mortgage loans held-for-sale to investors
and by collecting receivables on loans sold but not yet paid for. Without the
facilities, the Financial Services segment would have to use cash from
operations and other funding sources to finance its lending activities.
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:
                                                                            

Completed exercises

                                                          November 30, 2021                      November 30, 2020
(Dollars in thousands, except price per share)        Class A             Class B            Class A            Class B
Shares repurchased                                  13,910,000           100,000           4,250,000           115,000
Principal                                          $ 1,357,081          $  8,197          $  282,274          $  6,155
Average price per share                            $     97.56          $  81.97          $    66.42          $  53.52



During the year ended November 30, 2021, treasury stock increased by 14.7
million shares of Class A common stock and 0.1 million shares of Class B common
stock primarily due to 14.0 million shares of common stock repurchased during
the year through our stock repurchase program. During the year ended
November 30, 2020, treasury stock increased by 4.9 million shares of Class A
common stock and 0.1 million shares of Class B common stock primarily due to 4.4
million shares of common stock repurchased during the year through our stock
repurchase program.
During the years ended November 30, 2021 and 2020, our Class A and Class B
common stockholders received an aggregate per share annual dividend of $1.00 and
$0.625, respectively. On January 12, 2022, our Board of Directors increased the
annual dividend rate to $1.50 per share, resulting in a quarterly cash dividend
of $0.375 per share on both our Class A and Class B common stock. The dividend
is payable on February 10, 2022 to holders of record at the close of business on
January 27, 2022.
Based on our current financial condition and credit relationships, we believe
that, assuming the effects of the COVID-19 pandemic and resulting governmental
actions on our operations do not significantly worsen for a protracted period,
our operations and borrowing resources will provide for our current and
long-term capital requirements at our anticipated levels of activity.
Supplemental Financial Information
Currently, substantially all of our 100% owned homebuilding subsidiaries are
guaranteeing all our senior notes (the "Guaranteed Notes"). The guarantees are
full and unconditional. However, they will be suspended as to a subsidiary any
time it is not directly or indirectly guaranteeing at least $75 million of
Lennar Corporation debt (other than senior notes) and be released when the
subsidiary is sold. These guarantees are outlined in the Supplemental Financial
Information below.
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, 2021 they were guaranteeing Lennar Corporation's
letter of credit facilities and its Credit Facility, disclosed in Note 4 of the
Notes to Consolidated Financial Statements. The guarantees are full,
unconditional and joint and several and the
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guarantor subsidiaries are 100% directly or indirectly owned by Lennar
Corporation. A subsidiary's guarantee of Lennar senior notes will be suspended
at any time when it is not directly or indirectly guaranteeing at least $75
million principal amount of debt of Lennar Corporation (other than senior
notes), and a subsidiary will be released from its guarantee and any other
obligations it may have regarding the senior notes if all or substantially all
its assets, or all of its capital stock, are sold or otherwise disposed. If the
proposed spin-off of our multifamily and single family rental asset management
businesses takes place, the subsidiaries involved in those businesses will no
longer guarantee our senior notes.
Supplemental information for the Obligors, which excludes non-guarantor
subsidiaries and intercompany transactions, at November 30, 2021 is included in
the following tables. Intercompany balances and transactions within the Obligors
have been eliminated and amounts attributable to the Obligor's investment in
consolidated subsidiaries that have not issued or guaranteed the senior notes
have been excluded. Amounts due from and transactions with non-guarantor
subsidiaries and related parties are separately disclosed:
(In thousands)                          November 30, 2021       November 30, 2020
Due from non-guarantor subsidiaries    $        4,187,044         2,655,503
Equity method investments                         937,920           951,579
Total assets                                   30,750,296        27,695,067
Total liabilities                               9,631,796         9,599,718


                                            Year Ended
(In thousands)                          November 30, 2021
Total revenues                         $       25,711,448
Operating earnings                              5,143,250
Earnings before income taxes                    4,690,105
Net earnings attributable to Lennar             3,592,305


Off-Balance Sheet Arrangements
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. Historically, we have
invested in unconsolidated entities that acquired and developed land (1) for our
homebuilding operations or for sale to third parties or (2) for the construction
of homes for sale to third-party homebuyers. Through these entities, we have
primarily sought to reduce and share our risk by limiting the amount of our
capital invested in land, while obtaining access to potential future homesites
and allowing us to participate in strategic ventures. The use of these entities
also, in some instances, has enabled us to acquire land to which we could not
otherwise obtain access, or could not obtain access on as favorable terms,
without the participation of a strategic partner. Participants in these joint
ventures have been land owners/developers, other homebuilders and financial or
strategic partners. Joint ventures with land owners/developers have given us
access to homesites owned or controlled by our partners. Joint ventures with
other homebuilders have provided us with the ability to bid jointly with our
partners for large land parcels. Joint ventures with financial partners have
allowed us to combine our homebuilding expertise with access to our partners'
capital. Joint ventures with strategic partners have allowed us to combine our
homebuilding expertise with the specific expertise (e.g. commercial or infill
experience) of our partner. Each joint venture is governed by an executive
committee consisting of members from the partners. Details regarding these
investments, balances and debt are included in Note 3 of the Notes to
Consolidated Financial Statements.
We regularly monitor the results of our unconsolidated joint ventures and any
trends that may affect their future liquidity or results of operations. We also
monitor the performance of joint ventures in which we have investments on a
regular basis to assess compliance with debt covenants. For those joint ventures
not in compliance with the debt covenants, we evaluate and assess possible
impairment of our investment. We believe all of the joint ventures were in
compliance with their debt covenants at November 30, 2021.
The following table summarizes the principal maturities of our Homebuilding
unconsolidated entities ("JVs") debt as per current debt arrangements as of
November 30, 2021. It does not represent estimates of future cash payments that
will be made to reduce debt balances. Many JV loans have extension options in
the loan agreements that would allow the loans to be extended into future years.
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Main unconsolidated residential construction joint venture debt maturities by period (in thousands)

                                  Total JV Debt                2022               2023               2024             Thereafter          

Other

Debt without recourse to Lennar            $          1,218,174            260,829             68,335            252,052            636,958                     -
Land seller and CDD debt                                  5,102                  -                  -                  -                  -                 5,102
Maximum recourse debt exposure to
Lennar                                                    5,307              3,599                  -                  -              1,708                     -
Debt issuance costs                                     (11,862)                 -                  -                  -                  -               (11,862)
Total                                      $          1,216,721            264,428             68,335            252,052            638,666                (6,760)


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. We invest in unconsolidated entities that acquire and
develop land to construct multifamily rental properties. Through these entities,
we are focusing on developing a geographically diversified portfolio of
institutional quality multifamily rental properties in select U.S. markets.
Participants in these joint ventures have been financial partners. 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. Details of
each as of and during the year ended November 30, 2021 are included in Note 3 of
the Notes to Consolidated Financial Statements.
We regularly monitor the results of our unconsolidated joint ventures and any
trends that may affect their future liquidity or results of operations. We also
monitor the performance of joint ventures in which we have investments on a
regular basis to assess compliance with debt covenants. For those joint ventures
not in compliance with the debt covenants, we evaluate and assess possible
impairment of our investment. We believe all of the joint ventures were in
compliance with their debt covenants at November 30, 2021.
The following table summarizes the principal maturities of our Multifamily
unconsolidated entities debt as per current debt arrangements as of November 30,
2021. It does not represent estimates of future cash payments that will be made
to reduce debt balances.
                                                                   

Main debt maturities of unconsolidated multi-family joint ventures by period (in thousands)

                              Total JV Debt                2022               2023                2024              Thereafter         

Other

Debt without recourse to Lennar        $          3,430,807            586,964           1,034,645            682,946            1,126,252                     -
Debt issuance costs                                 (23,445)                 -                   -                  -                    -               (23,445)
Total                                  $          3,407,362            586,964           1,034,645            682,946            1,126,252               (23,445)


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. We periodically
receive advance distributions related to the carried interests in order to cover
income tax obligations resulting from allocations of taxable income to the
carried interests. These distributions are not subject to clawbacks but will
reduce future carried interest payments to which we become entitled and have
been recorded as revenues.
As of November 30, 2021 and 2020, we had strategic technology investments in
unconsolidated entities of $145.6 million and $196.6 million, respectively,
accounted for under the equity method of accounting.
Option Contracts
We often obtain access to land through option contracts, which generally enable
us to control portions of properties owned by third parties (including land
funds) and unconsolidated entities until we have determined whether to exercise
the options. 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
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committed to spend is $3.1 billion. To the extent the investor group does not
elect to purchase properties we identify, we can utilize our other investor
relationships to have other investor groups purchase the land or we can purchase
it directly. The arrangement with the investor group, together with existing and
other strategic partnerships we are discussing, are significant steps in our
strategy to migrate to a higher percentage of our homesites which we control but
do not own, which we expect will result in greater cash flow and higher returns
on assets and equity.
The table below indicates the number of homesites owned and homesites to which
we had access through option contracts with third parties ("optioned") or
unconsolidated JVs (i.e., controlled homesites) at November 30, 2021 and 2020:
                                                    Controlled Homesites
                                                                                                           Owned                   Total            Years of Supply
November 30, 2021                  Optioned                  JVs                  Total                  Homesites               Homesites             Owned (1)
East                                    87,083                   -                   87,083                   51,041             138,124
Central                                 30,682                   -                   30,682                   41,872              72,554
Texas                                   75,027                   -                   75,027                   37,946             112,973
West                                    58,631                   -                   58,631                   49,059             107,690
Other                                        -               6,086                    6,086                    2,043               8,129
Total homesites                        251,423               6,086                  257,509                  181,961             439,470                    3.0
% of total homesites                                                                     59  %                    41  %


                                                    Controlled Homesites
                                                                                                            Owned                  Total            Years of Supply
November 30, 2020                  Optioned                  JVs                   Total                  Homesites              Homesites             Owned (1)
East                                    33,877                8,397                   42,274                  58,561             100,835
Central                                 17,525                  110                   17,635                  41,950              59,585
Texas                                   23,156                    -                   23,156                  34,497              57,653
West                                    24,714                2,848                   27,562                  49,357              76,919
Other                                    1,137                7,519                    8,656                   2,242              10,898
Total homesites                        100,409               18,874                  119,283                 186,607             305,890                    3.5
% of total homesites                                                                      39  %                   61  %


(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.
Contractual Obligations and Commercial Commitments
The following table summarizes certain of our contractual obligations at
November 30, 2021:
                                                                                               Payments Due by Period
                                                                  Less than                   1 to 3                  3 to 5              More than
(In thousands)                               Total                  1 year                     years                  years                5 years
Homebuilding - Senior notes and other
debts payable (1)                        $ 4,641,511                718,279                 1,634,364                994,226             1,294,642
Financial Services - Notes and other
debts payable                              1,726,026              1,574,226                     4,326                      -               147,474

Interest commitments under interest
bearing debt (2)                             831,237                230,272                   352,409                182,234                66,322
Operating leases obligations                 184,145                 40,387                    52,109                 32,767                58,882
Other contractual obligations (3)            129,158                 75,935                    53,223                      -                     -
Total contractual obligations (4)        $ 7,512,077              2,639,099                 2,096,431              1,209,227             1,567,320


(1)The amounts presented in the table above exclude debt issuance costs and any
discounts/premiums and purchase accounting adjustments.
(2)Interest commitments on variable interest-bearing debt are determined based
on the interest rate as of November 30, 2021.
(3)Amounts include $5.0 million and $18.1 million remaining equity investment
commitments to LMV I and LMV II, respectively, for future expenditures related
to the construction and development of the projects and $106.1 million remaining
equity investment commitment to the Upward America Venture.
(4)Total contractual obligations exclude our gross unrecognized tax benefits and
accrued interest and penalties totaling $72.2 million as of November 30, 2021,
because we are unable to make reasonable estimates as to the period of cash
settlement with the respective taxing authorities.
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
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257,509 homesites through option contracts with third parties and unconsolidated
entities in which we have investments. At November 30, 2021, we had $1.2 billion
of non-refundable option deposits and pre-acquisition costs related to certain
of these homesites and had posted $175.9 million of letters of credit in lieu of
cash deposits under certain land and option contracts.
At November 30, 2021, we had letters of credit outstanding in the amount of $1.4
billion (which included the $175.9 million of letters of credit discussed
above). Details on our letters of credit outstanding and outstanding surety
bonds are included in Note 4 of the Notes to Consolidated Financial Statements.
Our Financial Services segment had a pipeline of loan applications in process of
$5.6 billion at November 30, 2021. 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. 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.
Our Financial Services segment uses mandatory mortgage-backed securities ("MBS")
forward commitments, option contracts, futures contracts and investor
commitments to hedge our mortgage-related interest rate exposure. These
instruments involve, to varying degrees, elements of credit and interest rate
risk. Credit risk associated with MBS forward commitments, option contracts,
futures contracts and loan sales transactions is managed by limiting our
counterparties to investment banks, federally regulated bank affiliates and
other investors meeting our credit standards. 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.
The following sections discuss market and financing risk, seasonality and
interest rates and changing prices that may have an impact on our business:
Market and Financing Risk
We finance our contributions to JVs, land acquisition and development
activities, construction activities, financial services activities, Multifamily
activities and general operating needs primarily with cash generated from
operations and debt, as well as borrowings under our Credit Facility and
warehouse repurchase facilities. We also purchase land under option agreements,
which enables us to control homesites until we have determined whether to
exercise the options. We try to manage the financial risks of adverse market
conditions associated with land holdings by what we believe to be prudent
underwriting of land purchases in areas we view as desirable growth markets,
careful management of the land development process and limitation of risks by
using partners to share the costs of purchasing and developing land as well as
obtaining access to land through option contracts. Although we believed our land
underwriting standards were conservative, we did not anticipate the severe
decline in land values and the sharply reduced demand for new homes encountered
in the 2008 - 2010 economic downturn.
Seasonality
We historically have experienced, and expect to continue to experience,
variability in quarterly results. Our homebuilding business is seasonal in
nature and generally reflects higher levels of new home order activity in our
second and third fiscal quarters and increased deliveries in the second half of
our fiscal year. However, a variety of factors can alter seasonal patterns. For
example, in 2020, the shutdown of large portions of our national economy in
March and April due to the COVID-19 pandemic temporarily reduced our home sales,
and therefore altered our normal seasonal pattern.
Interest Rates and Changing Prices
Inflation can have a long-term impact on us because increasing costs of land,
materials and labor result in a need to increase the sales prices of homes. In
addition, inflation is often accompanied by higher interest rates, which can
have a negative impact on housing demand and increase the costs of financing
land development activities and housing construction. Rising interest rates as
well as increased material and labor costs, may reduce gross margins. An
increase in materials and labor costs would be particularly a problem during a
period of declining home prices. Conversely, deflation can impact the value of
real estate and make it difficult for us to recover our land costs. Therefore,
either inflation or deflation could adversely impact our future results of
operations.
New Accounting Pronouncements
See Note 1 of the notes to our consolidated financial statements for a
comprehensive list of new accounting pronouncements.
Critical Accounting Policies and Estimates
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
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accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions about future events that
affect the amounts reported in our consolidated financial statements and
accompanying notes. Future events and their effects cannot be determined with
absolute certainty. Therefore, the determination of estimates requires the
exercise of judgment. Actual results could differ from those estimates, and such
differences may be material to our consolidated financial statements. Listed
below are those policies and estimates that we believe are critical and require
the use of significant judgment in their application.
Goodwill
We have recorded a significant amount of goodwill in connection with the 2018
acquisition of CalAtlantic. We record goodwill associated with acquisitions of
businesses when the purchase price of the business exceeds the fair value of the
net tangible and identifiable assets acquired. In accordance with ASC Topic 350,
Intangibles-Goodwill and Other ("ASC 350"), we evaluate goodwill for potential
impairment on at least an annual basis. We have the option to perform a
qualitative or quantitative assessment to determine whether the fair value of a
reporting unit exceeds its carrying value. Qualitative factors may include, but
are not limited to, economic conditions, industry and market considerations,
cost factors, overall financial performance of the reporting units and other
entity and reporting unit specific events. We believe that the accounting
estimate for goodwill is a critical accounting estimate because of the judgment
required in assessing the fair value of each of our reporting units. We estimate
fair value through various valuation methods, including the use of discounted
expected future cash flows of each reporting unit. The expected future cash
flows for each segment are significantly impacted by current market conditions.
If these market conditions and resulting expected future cash flows for each
reporting unit decline significantly, the actual results for each segment could
differ from our estimate, which would cause goodwill to be impaired. Our
accounting for goodwill represents our best estimate of future events.
Homebuilding Revenue Recognition
Homebuilding revenues and related profits from sales of homes are recognized at
the time of the closing of a sale, when title to and possession of the property
are transferred to the homebuyer. 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. We periodically elect to sell
parcels of land to third parties. Cash consideration from land sales is
typically due on the closing date, which is generally when performance
obligations are satisfied, and revenue is recognized as title to and possession
of the property are transferred to the buyer.
Multifamily Revenue Recognition
Our Multifamily segment provides management services with respect to the
development, construction and property management of rental projects in joint
ventures in which we have investments. As a result, our Multifamily segment
earns and receives fees, which are generally based upon a stated percentage of
development and construction costs and a percentage of gross rental collections.
These fees are recorded over the period in which the services are performed
using an input method, which properly depicts the level of effort required to
complete the management services. In addition, our Multifamily segment provides
general contractor services for the construction of some of its rental projects
and recognizes the revenue over the period in which the services are performed
using an input method, which properly depicts the level of effort required to
complete the construction services. These customer contracts require us to
provide management and general contractor services which represents a
performance obligation that we satisfy over time. Management fees and general
contractor services in the Multifamily segment are included in Multifamily
revenue.
Inventories
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. Inventory costs include land, land development and home
construction costs, real estate taxes, deposits on land purchase contracts and
interest related to development and construction. We review our inventory for
indicators of impairment by evaluating each community during each reporting
period. If the undiscounted cash flows expected to be generated by a community
are less than its carrying amount, an impairment charge is recorded to write
down the carrying amount of such community to its estimated fair value.
In conducting our review for indicators of impairment on a community level, we
evaluate, among other things, the margins on homes that have been delivered,
margins on homes under sales contracts in backlog, projected margins with regard
to future home sales over the life of the community, projected margins with
regard to future land sales, and the estimated fair value of the land itself.
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We estimate the fair value of our communities using a discounted cash flow
model. The projected cash flows for each community are significantly impacted by
estimates related to market supply and demand, product type by community,
homesite sizes, sales pace, sales prices, sales incentives, construction costs,
sales and marketing expenses, the local economy, competitive conditions, labor
costs, costs of materials and other factors for that particular community. Every
division evaluates the historical performance of each of its communities as well
as current trends in the market and economy impacting the community and its
surrounding areas. These trends are analyzed for each of the estimates listed
above.
Since the estimates and assumptions included in our cash flow models are based
upon historical results and projected trends, they do not anticipate unexpected
changes in market conditions or strategies that may lead to us incurring
additional impairment charges in the future.
Using all the available information, we calculate our best estimate of projected
cash flows for each community. While many of the estimates are calculated based
on historical and projected trends, all estimates are subjective and change from
market to market and community to community as market and economic conditions
change. The determination of fair value also requires discounting the estimated
cash flows at a rate we believe a market participant would determine to be
commensurate with the inherent risks associated with the assets and related
estimated cash flow streams. The discount rate used in determining each asset's
fair value depends on the community's projected life and development stage.
We estimate the fair value of inventory evaluated for impairment based on market
conditions and assumptions made by management at the time the inventory is
evaluated, which may differ materially from actual results if market conditions
or our assumptions change.
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.
Product Warranty
Although we subcontract virtually all aspects of construction to others and our
contracts call for the subcontractors to repair or replace any deficient items
related to their trades, we are primarily responsible to homebuyers to correct
any deficiencies. Additionally, in some instances, we may be held responsible
for the actions of or losses incurred by subcontractors. Warranty and similar
reserves for homes are established at an amount estimated to be adequate to
cover potential costs for materials and labor with regard to warranty-type
claims expected to be incurred subsequent to the delivery of a home. Reserves
are determined based upon historical data and trends with respect to similar
product types and geographical areas. We believe the accounting estimate related
to the reserve for warranty costs is a critical accounting estimate because the
estimate requires a large degree of judgment. While we believe that the reserve
for warranty costs is adequate, there can be no assurances that historical data
and trends will accurately predict our actual warranty costs. Additionally,
there can be no assurances that future economic or financial developments might
not lead to a significant change in the reserve.
Investments in Unconsolidated Entities
We strategically invest in unconsolidated entities that acquire and develop land
(1) for our homebuilding operations or for sale to third parties, (2) for
construction of homes for sale to third-party homebuyers or (3) for the
construction and sale of multifamily rental properties. Our Homebuilding
partners generally are unrelated homebuilders, land owners/developers and
financial or other strategic partners. Additionally, in recent years, we have
invested in technology companies that are looking to improve the homebuilding
and financial services industry in order to better serve homebuyers and
homeowners and increase efficiencies. Our Multifamily partners are all financial
partners.
Most of the unconsolidated entities through which we acquire and develop land
are accounted for by the equity method of accounting because we are not the
primary beneficiary or a de-facto agent, and we have a significant, but less
than controlling, interest in the entities. We record our investments in these
entities in our consolidated balance sheets as Investments in Unconsolidated
Entities and our pro-rata share of the entities' earnings or losses in our
consolidated statements of operations as Equity in Earnings (Loss) from
Unconsolidated Entities within each of the respective segments. For most
unconsolidated entities, we generally have the right to share in earnings and
distributions on a pro-rata basis based upon ownership percentages. However,
certain Homebuilding unconsolidated entities and all of our Multifamily
unconsolidated entities provide for a different allocation of profit and cash
distributions if and when cumulative results of the joint venture exceed
specified targets (such as a specified internal rate of return). Advances to
these entities are included in the investment balance.
Management looks at specific criteria and uses its judgment when determining if
we are the primary beneficiary of, or have a controlling interest in, an
unconsolidated entity. Factors considered in determining whether we have
significant influence, or we have control include risk and reward sharing,
experience and financial condition of the other partners, voting rights,
involvement in day-to-day capital and operating decisions and continuing
involvement. The accounting policy relating to the use of the equity method of
accounting is a critical accounting policy due to the judgment required in
determining whether the entity is a VIE or a voting interest entity and then
whether we are the primary beneficiary or have control or significant
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influence. We believe that the equity method of accounting is appropriate for
our investments in unconsolidated entities where we are not the primary
beneficiary and we do not have a controlling interest, but rather share control
with our partners.
We evaluate the long-lived assets in unconsolidated entities for indicators of
impairment during each reporting period. A series of operating losses of an
investee or other factors may indicate that a decrease in the fair value of our
investment in the unconsolidated entity below its carrying amount has occurred
which is other-than-temporary. The amount of impairment recognized is the excess
of the investment's carrying amount over its estimated fair value.
The evaluation of our investment in unconsolidated entities for
other-than-temporary impairment includes certain critical assumptions:
(1) projected future distributions from the unconsolidated entities,
(2) discount rates applied to the future distributions and (3) various other
factors. Our assumptions on the projected future distributions from
unconsolidated entities are dependent on market conditions.
We believe our assumptions on discount rates are critical accounting policies
because the selection of the discount rates affects the estimated fair value of
our investments in unconsolidated entities. A higher discount rate reduces the
estimated fair value of our investments in unconsolidated entities, while a
lower discount rate increases the estimated fair value of our investments in
unconsolidated entities. Because of changes in economic conditions, actual
results could differ materially from management's assumptions and may require
material valuation adjustments to our investments in unconsolidated entities to
be recorded in the future.
Consolidation of Variable Interest Entities
GAAP requires the assessment of whether an entity is a VIE and, if so, if we are
the primary beneficiary at the inception of the entity or at a reconsideration
event. Additionally, GAAP requires the consolidation of VIEs in which we have a
controlling financial interest. A controlling financial interest will have both
of the following characteristics: (a) the power to direct the activities of a
VIE that most significantly impact the VIE's economic performance and (b) the
obligation to absorb losses of the VIE that could potentially be significant to
the VIE or the right to receive benefits from the VIE that could potentially be
significant to the VIE.
Our variable interest in VIEs may be in the form of (1) equity ownership,
(2) contracts to purchase assets, (3) management services and development
agreements between us and a VIE, (4) loans provided by us to a VIE or other
partner and/or (5) guarantees provided by members to banks and other third
parties. We examine specific criteria and use our judgment when determining if
we are the primary beneficiary of a VIE. Factors considered in determining
whether we are the primary beneficiary include risk and reward sharing,
experience and financial condition of other partner(s), voting rights,
involvement in day-to-day capital and operating decisions, representation on a
VIE's executive committee, existence of unilateral kick-out rights or voting
rights, level of economic disproportionality between us and the other partner(s)
and contracts to purchase assets from VIEs.
Generally, all major decision making in our joint ventures is shared among all
partners. In particular, business plans and budgets are generally required to be
unanimously approved by all partners. Usually, management and other fees earned
by us are nominal and believed to be at market and there is no significant
economic disproportionality between us and other partners. 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. As a result, we continue to fund operations and debt paydowns through
partner loans or substituted capital contributions. The accounting policy
relating to variable interest entities is a critical accounting policy because
the determination of whether an entity is a VIE and, if so, whether we are
primary beneficiary may require us to exercise significant judgment.
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to a number of market risks in the ordinary course of business.
Our primary market risk exposure relates to fluctuations in interest rates on
our investments, loans held-for-sale, loans held-for-investment and outstanding
variable rate debt.
For fixed rate debt, such as our senior notes, changes in interest rates
generally affect the fair value of the debt instrument, but not our earnings or
cash flows. For variable rate debt such as our unsecured revolving credit
facility and Financial Services' and LMF Commercial's warehouse repurchase
facilities, changes in interest rates generally do not affect the fair value of
the outstanding borrowings on the debt facilities but do affect our earnings and
cash flows.
In our Financial Services operations, we utilize mortgage backed securities
forward commitments, option contracts and investor commitments to protect the
value of rate-locked commitments and loans held-for-sale from fluctuations in
mortgage-related interest rates.
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To mitigate interest risk associated with LMF Commercial's loans held-for-sale,
we use derivative financial instruments to hedge our exposure to risk from the
time a borrower locks a loan until the time the loan is securitized. We hedge
our interest rate exposure through entering into interest rate swap futures. We
also manage a portion of our credit exposure by buying protection within the
CMBX and CDX markets.
We do not enter into or hold derivatives for trading or speculative purposes.
The table below provides information at November 30, 2021 about our significant
instruments that are sensitive to changes in interest rates. For loans
held-for-investment, net and investments held-to-maturity, senior notes and
other debts payable and notes and other debts payable, the table presents
principal cash flows and related weighted average effective interest rates by
expected maturity dates and estimated fair values at November 30, 2021. Weighted
average variable interest rates are based on the variable interest rates at
November 30, 2021.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7 and Notes 1 and 7 of the Notes to Consolidated Financial
Statements in Item 8 for a further discussion of these items and our strategy of
mitigating our interest rate risk.
                Information Regarding Interest Rate Sensitivity
                         Principal (Notional) Amount by
                  Expected Maturity and Average Interest Rate
                               November 30, 2021
                                                                                                                                                                                                  Fair Value at
                                                                             Years Ending November 30,                                                                                             November 30,
(Dollars in millions)                          2022                2023                 2024                 2025                2026               Thereafter                Total                    2021
ASSETS

Financial Services:

Loans held-for-investment, net:
Fixed rate                                $     1.0                   1.1                   1.1                 1.1                 1.2                    31.6                   37.1                 37.1
Average interest rate                           3.7    %              3.7  %                3.7  %              3.7  %              3.7  %                  3.6  %                 3.6  %                 -
Variable rate                             $       -                   7.3                     -                   -                   -                     0.2                    7.5                  7.5
Average interest rate                             -                   4.9  %                  -                   -                   -                     3.1  %                 4.8  %                 -
LIABILITIES
Homebuilding:
Senior notes and other debts payable:
Fixed rate                                $   718.3                 104.4               1,530.0               591.4               402.8                 1,294.6                4,641.5              5,046.7
Average interest rate                           4.4    %              4.2  %                5.0  %              4.8  %              5.2  %                  4.9  %                 4.8  %                 -

Financial Services:
Notes and other debts payable:
Fixed rate                                $       -                     -                     -                   -                   -                   147.5                  147.5                148.3
Average interest rate                             -                     -                     -                   -                   -                     3.4  %                 3.4  %                 -


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