FinanceLooker

Excrept from filing document 2024-11-30

The aggregate market value of the registrant s Class A and Class B common stock held by non affiliates of the registrant 237 457 708 shares of Class A common stock and 10 946 506 shares of Class B common stock as of May 31 2024 based on the closing sale price per share as reported by the New York Stock Exchange on such date was 39 677 379 445
We are one of the largest homebuilders in the United States by deliveries revenues and net earnings an originator of residential and commercial mortgage loans a provider of title insurance and closing services and a developer of multifamily rental properties In addition we are a sponsor and manager of funds and joint ventures engaged in development and ownership of multifamily rental properties and a sponsor and manager of a fund engaged in ownership of single family rental properties We also have investments in companies that are engaged in applying technology to improve the homebuilding industry and real estate related aspects of the financial services industry
Our company was founded as a local Miami homebuilder in 1954 We completed our initial public offering in 1971 and listed our common stock on the New York Stock Exchange in 1972 During the 1980s and 1990s we entered and expanded operations in a number of homebuilding markets including California Florida and Texas through both organic growth and acquisitions such as Pacific Greystone Corporation in 1997 In 2000 we acquired U S Home Corporation which expanded our operations into New Jersey Maryland Virginia Minnesota and Colorado and strengthened our position in other states From 2002 through 2005 we acquired several regional homebuilders which brought us into new markets and strengthened our position in several existing markets From 2010 through 2013 we expanded our homebuilding operations into Georgia Oregon Washington and Tennessee In 2017 we acquired WCI Communities Inc a homebuilder of luxury single family and multifamily homes including a small number of luxury high rise tower units in Florida In 2018 we acquired CalAtlantic Group Inc CalAtlantic a major homebuilder which was building homes across the homebuilding spectrum from entry level to luxury in 43 metropolitan statistical areas spanning 19 states and providing mortgage title and escrow services
We are focused on increasing efficiencies in our building process and reducing selling general and administrative expenses by using technology and innovative strategies to reduce customer acquisition costs Our construction playbook has three primary areas of focus lowering construction costs reducing cycle time and achieving even flow production We have aimed to maintain strong operating margins by deferring home sale price commitments until construction costs are finalized to protect against cost escalations We focus on executing our operating strategy to be a consistent and high volume homebuilder with production pace in sync with sales pace while using our gross margin as a shock absorber In addition we are continuing our transition to a land light operating model by increasing the percentage of land we control through options or agreements but do not own which reduces our years supply of owned homesites In connection with this transition we expect to spin off a significant portion of our land assets to Millrose as defined below as discussed further below under the caption Homebuilding Operations Millrose Spin Off
Our homebuilding operations include the construction and sale of single family attached and detached homes as well as the purchase development and sale of residential land directly through entities in which we have investments New home deliveries including deliveries from unconsolidated entities were 80 210 in fiscal 2024 compared to 73 087 in fiscal 2023 and 66 399 in fiscal 2022 We primarily sell homes in communities targeted to first time move up active adult and luxury homebuyers The average sales price of a Lennar home varies depending on product and geographic location For fiscal 2024 the average sales price excluding deliveries from unconsolidated entities was 423 000 compared to 446 000 in fiscal 2023 and 480 000 in fiscal 2022
Our purchasing leverage combined with our focus on reducing selling general and administrative costs by using technology and innovative strategies and reducing interest expense through paydowns of debt has enabled us to achieve strong gross profit and operating margins
We are integrating standardized highly efficient value engineered Plan series across all divisions at different price points The Core Plans are driving cost savings and strong operating margins while delivering great value for our homebuyers
Our local operating structure gives us the flexibility to make operating decisions based on local homebuilding conditions and customer preferences while our centralized management structure provides strategic oversight for our homebuilding operations
We partner with and or invest in technology companies that are looking to improve the homebuilding and financial services industries to increase efficiencies reduce customer acquisition costs and create a better customer experience
We are focused on reducing our years supply of owned homesites and increasing the percentage of land we control through options or agreements including agreements with strategic land banks and joint ventures rather than ownership In connection with this strategy we expect to spin off a significant portion of our land assets to Millrose as discussed further below under the caption Homebuilding Operations Millrose Spin Off
We generally acquire or obtain options to acquire land for development and for the construction of homes that we sell to homebuyers Land purchases are subject to specified underwriting criteria and are made through our diversified program of property acquisition which may consist of
Acquiring land through option contracts which generally enables us to control portions of properties owned by land banks and other third parties or entities in which we have investments until we have determined whether to exercise the options
Acquiring access to land through joint ventures or partnerships which among other benefits limits the amount of our capital invested in land while helping to ensure our access to potential future homesites and allowing us to participate in strategic ventures
For the last several years we have been reducing our reliance on land we own and increasing our access to land through options and joint ventures most significantly through our use of land banks which is a critical part of our operating strategy At November 30 2024 82 of our total homesites were controlled through options with land banks land sellers and joint ventures compared to 76 at November 30 2023 For additional information about our investments in and relationships with unconsolidated entities see Management s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report
We are involved in all phases of planning and building in our residential communities including land acquisition site planning preparation and improvement of land and design construction and marketing of homes We use independent subcontractors for most aspects of land development and home construction At November 30 2024 we were actively building and marketing homes in 1 447 communities including 11 communities being constructed by unconsolidated entities This was an increase from the 1 260 communities including five communities being constructed by unconsolidated entities in which we were actively building and marketing homes at November 30 2023 At November 30 2024 and 2023 we had about 2 900 and 1 200 completed unsold homes respectively
We generally supervise and control the development of land and the design and building of our residential communities with a relatively small labor force We hire subcontractors for site improvements and virtually all of the work involved in the construction of homes Arrangements with our subcontractors generally provide that our subcontractors will complete specified work in accordance with price and time schedules and in compliance with applicable building codes and laws The price schedules may be subject to change to meet changes in labor and material costs or for other reasons Although we like homebuilders throughout the country encountered shortages of materials and skilled labor during 2022 we believe that because of our size and our builder of choice program where we work with our trade partners to drive efficiencies for them we were less affected by these shortages than many of our competitors Most shortages were eliminated due to the supply chain environment catching up to homebuilder demand as well as Lennar s continued effort to work with our suppliers and manufacturers on the volume and specific products needed to build homes We generally do not own heavy construction equipment We finance construction and land development activities primarily with cash generated from operations and historically from proceeds of unsecured corporate debt Following the Millrose Spin Off we expect that when Millrose acquires undeveloped or partially developed land that we have options to purchase Millrose will finance the horizontal development of all such homesites up to pre negotiated development budgets which will be incorporated into the takedown prices for Lennar s purchase options on the properties
We offer a diversified line of homes for first time move up active adult luxury and multi generational homebuyers in a variety of locations ranging from urban infill communities to suburban golf course communities Our Everything s Included
marketing program enables us to differentiate our homes from those of our competitors by including luxury items as standard features at competitive prices while reducing construction and overhead costs through a simplified construction process product standardization and volume purchasing In addition we include built in wireless capability home automation and solar power in many of the homes we sell which enhances our brand and improves our ability to generate traffic and sales
We sell our homes from models that we have designed and constructed We employ new home consultants who are paid salaries commissions or both to conduct on site sales of our homes We also sell homes through independent realtors We have made it possible for potential homebuyers to take virtual tours of model homes During fiscal 2024 and 2023 even with shifts in macroeconomic factors and adjusting to an inflationary environment in much of the period we were able to develop enhance use and improve the Lennar machine Our sales marketing and dynamic pricing machine is quickly becoming an advanced digital engine that has materially benefited from aggressive focused use and engagement while the market was most difficult
Our marketing strategy has increasingly involved advertising through digital channels including real estate listing sites paid search display advertising social media and e mail marketing all of which drive traffic to our website www lennar com This has allowed us to attract more qualified and knowledgeable homebuyers However we also continue to advertise through more traditional media on a limited basis including newspapers other local and regional publications radio and on billboards where appropriate We tailor our marketing strategy and message based on the community being advertised and the customers being targeted such as advertising our active adult communities in areas where prospective active adult homebuyers live or will potentially want to purchase During fiscal 2024 and 2023 increased interest rates as compared to prior years have made our homes less affordable to many prospective buyers and led us to reduce prices or increase sales incentives in a number of our communities to maintain sales pace
We continually strive to improve homeowner customer satisfaction throughout the pre sale sale construction closing and post closing periods We strive to create a quality homebuying experience for our customers through the participation of sales associates on site construction supervisors and customer care associates all working in a team effort as well as use of technology to simplify the homebuying and financing process We believe this leads to enhanced customer retention and referrals The quality of our homes is substantially affected by the efforts of on site management and others engaged in the construction process by the materials we use in particular homes and by other similar factors
We warrant our new homes against defective materials and workmanship for a minimum period of one year after the date of closing Although we subcontract virtually all segments 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 the homebuyers for the correction of any deficiencies
We balance a local operating structure with centralized corporate level management Our local operating structure consists of homebuilding divisions across the country each of which is usually managed by a division president a controller and personnel focused on land acquisition entitlement and development sales construction customer service and purchasing This local operating structure gives our division presidents and their teams who generally have significant experience in the homebuilding industry and in most instances in their particular markets the flexibility to make local operating decisions including land identification entitlement and development the management of inventory levels for our current sales volume community development home design construction and marketing of our homes We centralize at the corporate level decisions related to our overall strategy acquisitions and disposition of land and businesses risk management financing cash management and information systems
Backlog represents the number of homes under sales contracts Homes are sold using sales contracts which are generally accompanied by deposits In some instances purchasers are permitted to cancel sales contracts if they fail to qualify for financing or under certain other circumstances We experienced a cancellation rate of 14 in 2024 and 16 in 2023 We do not recognize revenue on homes that are the subject of sales contracts until the sales are closed and title passes to the new homeowners
The backlog dollar value including unconsolidated entities at November 30 2024 was 5 4 billion compared to 6 6 billion at November 30 2023 We expect that a significant portion of all homes currently in backlog will be delivered in fiscal year 2025
We create and participate in joint ventures that acquire and develop land for our homebuilding operations for sale to third parties or for use in the ventures own homebuilding operations Through these joint ventures we reduce the amount we invest in potential future homesites thereby reducing risks associated with land acquisitions and improving the return on our investments and in some instances we obtain access to land to which we could not otherwise have obtained access or could not have obtained access on as favorable terms As of both November 30 2024 and 2023 we had equity investments in 51 active homebuilding and land unconsolidated entities in which we were participating and our maximum recourse debt exposure related to Homebuilding unconsolidated joint ventures was 44 2 million and 42 1 million respectively This is discussed in greater detail in Management s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report
We are currently preparing to spin off the Millrose Spin Off a wholly owned subsidiary of Lennar Millrose Properties Inc Millrose into an independent publicly traded company that will be listed on the New York Stock Exchange In connection with the Millrose Spin Off we plan to contribute to Millrose in exchange for all outstanding shares of its common stock a significant portion of our undeveloped partially developed and some of our fully developed land with an expected total aggregate value between 5 0 billion and 6 0 billion as well as approximately 1 0 billion of cash To consummate the Millrose Spin Off on January 10 2025 our Board of Directors Board declared a stock dividend pursuant to which we will distribute to Lennar s stockholders of record as of January 21 2025 approximately 80 of the total outstanding number of shares of Millrose common stock on February 7 2025 The goal of the Millrose Spin off is to generally complete our migration to an asset light operating model by spinning off a significant portion of our land assets from our balance sheet We expect Millrose to qualify as a real estate investment trust that will acquire and develop land and will deliver fully developed homesites under a land option contract on a just in time basis for Lennar and potentially other homebuilders Millrose is expected to maintain a business model with a self sustaining recycling source of land acquisition and development capital Millrose is expected to be responsible for paying to develop the undeveloped and partially developed land into homesites up to a certain pre negotiated budget with Lennar performing the actual construction work Lennar will have options to purchase the homesites in accordance with pre set takedown schedules when Lennar expects to be ready to build homes on them Millrose is expected to use option exercise proceeds to purchase additional land designated by Lennar or other homebuilders in the future usually giving Lennar or the other homebuilders options to purchase the land when it is developed
As a result of the Millrose Spin Off both our inventory and our equity will be reduced by the amount of assets contributed to Millrose However our balance sheet will remain very strong after the Millrose Spin Off and we expect to have ample funds with which to pay down debt issue dividends and repurchase stock
Millrose has filed with the Securities and Exchange Commission a registration statement on Form S 11 relating to the Millrose Spin Off which became effective on January 17 2025 We expect that the Millrose Spin Off will be completed by February 7 2025 the distribution date of the Millrose common stock shares to Lennar s stockholders but there is no guarantee that the transaction will be completed on our anticipated timeline
During the fourth quarter of 2024 we entered into a definitive agreement to purchase Rausch Coleman Homes a residential homebuilder based in Fayetteville Arkansas With this acquisition we will expand our footprint into new markets in Arkansas Oklahoma Alabama Kansas and Missouri while adding to our existing footprint in Texas Oklahoma Alabama and Florida As previously disclosed in Millrose s registration statement on Form S 11 in connection with furthering our land light strategy we intend to assign the purchase of Rausch Coleman s land assets the Rausch Land Assets to Millrose Similar to the other land assets that Lennar expects to contribute to Millrose in connection with the Millrose Spin Off Lennar expects to enter into options to purchase the developed Rausch Land Assets in accordance with pre set takedown schedules We are expecting the acquisition to be completed in our first quarter of 2025
We offer conforming conventional FHA insured and VA guaranteed residential mortgage loan products and other residential mortgage products primarily to buyers of our homes through our financial services subsidiary Lennar Mortgage from locations in most of the states in which we have homebuilding operations In fiscal year 2024 our financial services subsidiaries provided loans to 84 of our homebuyers who obtained mortgage financing in areas where we offered services Because of the availability of mortgage loans from our financial services subsidiaries as well as from independent mortgage lenders we believe almost all creditworthy potential purchasers of our homes have access to financing
During fiscal year 2024 we originated approximately 54 600 residential mortgage loans totaling 19 8 billion compared to 47 000 residential mortgage loans totaling 17 4 billion during fiscal year 2023 Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market a majority of them on a servicing released non recourse basis After the loans are sold we retain potential liability for claims by purchasers that we breached certain limited industry standard representations and warranties in the loan sale agreements Occasional claims of this type are a normal incident of loan securitization activities We do not believe that the ultimate resolution of these claims will have a material adverse effect on our business or financial position During fiscal year 2024 we also locked interest rates on approximately 54 200 residential mortgage loans totaling 19 5 billion compared to 46 600 residential mortgage loans totaling 17 2 billion during fiscal year 2023
We finance our mortgage loan activities with borrowings under our financial services warehouse facilities or funds from our operating activities At November 30 2024 Financial Services had six warehouse residential facilities maturing at various dates through fiscal 2027 with a total maximum borrowing capacity of 3 1 billion including an uncommitted amount of 675 million We expect the facilities to be renewed or replaced with other facilities when they mature If they are not renewed or replaced we would have to find other sources of funding for our mortgage originations which might include our own funds We have a corporate risk management policy under which we hedge our interest rate risk on rate locked loan commitments and loans held for sale to mitigate exposure to interest rate fluctuations
We have been using new technology to automate portions of our mortgage loan origination process This new technology has made the mortgage financing process easier for homebuyers and improved the customer experience This new technology has also enabled us to increase the number of digital closings with digital document signing and where legally permitted digital notarization
We are licensed to provide title insurance and closing services for residential and or commercial transactions in 41 states to our homebuyers and others During fiscal 2024 and 2023 we provided closing services with regard to approximately 82 400 and 74 900 real estate transactions respectively in 25 states
Our LMF Commercial subsidiary originates and sells into securitizations first mortgage loans which are secured by income producing commercial properties The loans generally are between 5 million and 50 million each LMF Commercial also originates floating rate loans secured by commercial real estate properties many of which are in transition undergoing lease up sell out renovation or repositioning In order to finance LMF Commercial lending activities as of November 30 2024 LMF Commercial had two warehouse repurchase financing agreements maturing at various dates from 2025 through
We strategically invest in companies involved in technology initiatives that among other things help us enhance the homebuying or home ownership experience reduce our SG A expenses and help us stay at the forefront of homebuilding innovation Six of the companies in which we have strategic investments are publicly traded They are
Each of the investments listed above is reflected in our financial statements at market value with changes to the fair values of those investments generating gains or losses on our financial statements At November 30 2024 the book value of our investment in strategic technology investments was 587 1 million and is included in our Lennar Other segment
Our Multifamily business has been engaged in the development of multifamily communities since 2011 Initially the Multifamily business almost exclusively participated in shorter duration joint ventures that built multifamily communities with the intention of selling them soon after they were built and in most cases after they were substantially occupied However the Multifamily business now manages and owns interests in longer duration funds that build multifamily communities with the intention of retaining them as rental income generating assets At November 30 2024 Multifamily had interests in and was managing three funds and 23 joint ventures
From inception through November 30 2024 the Multifamily business has capitalized and developed 123 multifamily residential communities with approximately 37 100 rental units across 20 states throughout the United States The communities developed by the Multifamily business include a diversified mix of conventional garden mid rise and high rise multifamily properties in urban and suburban locations near major employment centers Most communities offer residents a mix of studio one two and three bedroom homes
As of November 30 2024 funds and ventures managed by Multifamily had a pipeline of 57 potential future developments which were owned under contract or subject to letters of intent totaling approximately 6 5 billion in anticipated development costs across several states
Multifamily has co investments in all the funds and ventures it manages and receives returns on these investments In addition it has carried interests in the funds or ventures it manages and receives distributions with regard to those carried interests
Lennar Multifamily Venture Fund I LMV I is a long term multifamily development investment vehicle involved in the development construction and property management of class A multifamily assets As of November 30 2023 there were 38 rental operation projects in LMV I During the second half of fiscal 2024 the LMV I partners decided to liquidate and sell all of the individual rental operation projects of LMV I as the fund has come to the end of its contractual life During the year ended November 30 2024 33 LMV I rental operation projects were sold to various third party buyers We recognized a net gain of 211 5 million on the sale of these rental operation projects which was recorded as equity in earnings losses in the condensed consolidated statement of operations and received net cash distributions of 199 5 million The remaining LMV I rental operation projects are expected to be monetized in the near term
In December 2020 Lennar formed the Upward America Venture LLC Upward America which a acquires communities of single family rental properties including townhomes duplexes and condominium buildings developed or
acquired for rental purposes and b leases and manages homes in those communities Lennar subsidiaries are the manager and the general partner of Upward America The investment period for Upward America closed in 2024 reducing the equity commitments from investors from 1 6 billion to 1 0 billion As of November 30 2024 institutional investors and Lennar had committed 1 0 billion to Upward America part of which was used to reduce an initial commitment Lennar had made from 225 million to 78 1 million Proceeds of commitments by other investors may be used to redeem more of Lennar s ownership but Lennar has agreed not to reduce its ownership below 50 million
As owner of the general partner of Upward America Lennar has the right to receive in addition to distributions regarding its own commitments distributions based on the amounts by which returns to limited partners exceed specified amounts i e carried interests As the manager of Upward America Lennar receives management and acquisition fees Lennar subsidiaries may also receive fees for property management leasing construction management and other services that they render through subcontractors In April 2024 Upward America entered into a joint venture agreement and property management agreement with Invitation Homes In addition Lennar engaged Invitation Homes to provide certain asset management services for the Upward America Venture
At November 30 2024 Upward America had purchased 4 697 homes in 103 communities across 19 metropolitan statistical areas for a total purchase price of 1 2 billion an average price of 258 000 per home and disposed of 92 homes for a total sales price of 26 0 million an average price of 283 000 per home The Limited Partnership Agreement of Upward America gives Upward America the right to purchase from Lennar for their appraised value all homes or communities that are purpose built by Lennar for single family home rental Upward America also is free to purchase homes from homebuilders other than Lennar or to purchase previously occupied homes Initially all the homes purchased by Upward America were purchased from Lennar but subsequently Upward America began purchasing homes from multiple homebuilders At both November 30 2024 and 2023 approximately 6 of the homes owned by Upward America were built by homebuilders other than Lennar
We own an indirect approximately 40 interest in FivePoint which is a publicly traded developer of three large master planned mixed use developments in California Newhall Ranch Great Park Neighborhoods and San Francisco Shipyard Candlestick Point We sometimes purchase properties from FivePoint for use in our homebuilding operations We have no active role in the management of FivePoint except that since August 2021 our Executive Chairman and Co Chief Executive Officer has been the non employee Executive Chairman of the Board of Directors but not the chief executive officer of FivePoint As of November 30 2024 the carrying amount of our investment in FivePoint was 470 8 million
Until November 30 2018 we had a group of subsidiaries including Rialto Capital Management LLC Rialto that primarily managed real estate related investment funds and other real estate related investment vehicles We sold the Rialto Management Group on November 30 2018 However we retained the right to share in carried interest distributions from some of the funds and other investment vehicles Rialto manages We also retained limited partner investments in several Rialto funds and investment vehicles that totaled 140 1 million as of November 30 2024
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 In addition we are working towards moving to a more even flow production where we start sell and deliver a similar number of homes each quarter
The residential homebuilding industry is highly competitive In each of the market regions where we operate we compete for homebuyers with numerous national regional and local homebuilders as well as with resales of existing homes and with the rental housing market We compete for homebuyers on the basis of a number of interrelated factors including location price reputation for customer satisfaction amenities design quality and financing In addition to competition for homebuyers we also compete with other homebuilders for desirable properties raw materials and access to reliable skilled labor We compete with a wide variety of property owners in our efforts to sell land to homebuilders and others We believe we are competitive in the market regions where we operate primarily due to our
Consumer insight capabilities which allow us to continually stay tapped into consumer preferences and feedback so we can continuously evolve and fine tune our offerings processes and communications for our customers
Our residential financial services operations compete with other residential mortgage lenders including national regional and local mortgage bankers and brokers banks savings and loan associations non bank mortgage lenders and other financial institutions in the origination and sale of residential mortgage loans Principal competitive factors include interest rates and other features of mortgage loan products available to the consumer We compete with other title insurance agencies and underwriters for closing services and title insurance Principal competitive factors include service and price
Our LMF Commercial subsidiary s commercial mortgage origination and sale business competes with a wide variety of banks and other lenders that offer small and mid sized mortgage loans to commercial enterprises Competition is based primarily on service price and relationships with mortgage brokers and other referral sources LMF Commercial is run by highly seasoned managers who have been originating and securitizing loans for over 30 years and benefit from long standing relationships with referral sources as well as being able to leverage Lennar s infrastructure facilities for rapid market entrances and analysis We believe these factors give LMF Commercial an advantage over many of the lenders with which it competes Additionally we believe access to Lennar s local homebuilding teams provides LMF Commercial with a distinct advantage in its evaluation of real estate assets
In each region where we develop and operate multifamily properties there is competition for residents with other owners of residential real estate whether for rent or for sale In addition when capital raising we compete with a wide variety of other investment opportunities that are being marketed by other firms related both to real estate and to a variety of other investment products We also compete for developable land with other developers of real estate for a variety of uses
In each region where our funds offer single family homes for rent there is competition for residents with other owners of residential real estate whether for rent or for sale In addition in seeking investors to acquire interests in funds we form we will be competing with a wide variety of investment opportunities related both to real estate and to a variety of other investment products Also in seeking to acquire single family homes that our funds can hold as rental properties our funds will be competing with other persons who plan to hold them as rental properties as well as persons who might want to purchase those homes to live in them
The residential communities and multifamily apartment developments that we build are subject to a large variety of local state and federal statutes ordinances rules and regulations relating to among other things zoning construction permits
or entitlements construction materials density building design and property elevation building codes and handling of waste These include laws requiring the use of construction materials that reduce the need for energy consuming heating and cooling systems These laws and regulations are subject to frequent change and often increase construction costs For example the California Energy Commission has adopted a requirement that most newly built homes in California must have rooftop solar panels In some instances we must comply with laws that require commitments from us to provide roads and other offsite infrastructure and may require them to be in place prior to the commencement of new home construction These laws and regulations are usually administered by counties and municipalities and may result in fees and assessments or building moratoriums In addition many new development projects are subject to assessments for schools parks streets and highways and other public improvements the costs of which can be substantial Also some governmental agencies are attempting to make homebuilders responsible for violations of wage and other labor laws by their subcontractors
Residential homebuilding and apartment development are also subject to a variety of local state and federal statutes ordinances rules and regulations concerning the protection of health and the environment These environmental laws include such subjects as storm water and surface water management soil groundwater and wetlands protection subsurface conditions and air quality protection and enhancement Environmental laws may result in delays in developing properties may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas
Over the years several cities and counties in which we have developments have submitted to voters slow growth initiatives and other ballot measures that could impact the affordability and availability of land suitable for residential development within those localities Although many of these initiatives have been defeated if similar initiatives were approved residential construction by us and others within certain cities or counties could be seriously impacted
In order to make it possible for some of our homebuyers to obtain FHA insured or VA guaranteed mortgages we must construct the homes they buy in compliance with regulations promulgated by those agencies Various states have statutory disclosure requirements relating to the marketing and sale of new homes These disclosure requirements vary widely from state to state In some states we are required to be registered as a licensed contractor and comply with applicable rules and regulations In various states our new home consultants are required to be registered as licensed real estate agents and to adhere to the laws governing the practices of real estate agents
Our mortgage and title subsidiaries must comply with applicable real estate lending and insurance laws and regulations The subsidiaries are licensed in the states in which they do business and must comply with laws and regulations in those states These laws and regulations include provisions regarding capitalization operating procedures investments lending and privacy disclosures forms of policies and premiums The Dodd Frank Wall Street Reform and Consumer Protection Act contains a number of requirements relating to mortgage lending and securitizations These include among others minimum standards for lender practices limitations on certain fees and a requirement that the originator of loans that are securitized retain a portion of the risk either directly or by holding interests in the securitizations
Several federal state and local laws rules regulations and ordinances including but not limited to the Federal Fair Debt Collection Practices Act FDCPA and the Federal Trade Commission Act and comparable state statutes regulate consumer debt collection activity Although for a variety of reasons we may not be specifically subject to the FDCPA or to some state statutes that govern debt collectors it is our policy to comply with applicable laws in our collection activities To the extent that some or all of these laws apply to our collection activities our failure to comply with such laws could have a material adverse effect on us We are also subject to regulations promulgated by the Federal Consumer Financial Protection Bureau regarding residential mortgage loans
We are focused on creating environmentally sustainable products and our purchasing power enables us to include green features in our homes Each new home we build is healthier and more energy efficient and has less impact on the environment than prior generations of homes as a result of features like
We also believe in the value of clean energy from solar power which is why we formed our own captive solar power company in 2013 In 2021 we sold our SunStreet solar operations to Sunnova a leading national residential solar company in exchange for stock in the company We consistently seek opportunities to integrate solar power where it provides great value for our homebuyers
Our associates i e employees are our most valuable asset and we are committed to supporting each associate s unique career journey We were built on a culture of inclusivity and a conscious focus on the associate experience bringing together the best talent to drive success as part of our Lennar family We believe having an inclusive work environment where everyone has a sense of belonging not only drives engagement but fosters innovation which is critical to driving growth Our Everyone s Included mantra relative to inclusion and diversity within our company anchors our unique culture
Our success starts and ends with having the best talent and as a result we are focused on attracting developing engaging and retaining our associates We understand the importance of balance and offer associates a competitive and comprehensive benefits package including paid parental leave and resources for whole self well being physical social and financial
We are committed to the health and safety of our associates and trade partners We hired a full time Chief Medical Officer in early 2020 at the beginning of the COVID 19 pandemic Our experienced teams adapted quickly to changes in safety protocols to protect our associates trade partners and homebuyers and we have continued these protocols even after the COVID 19 pandemic receded We are also committed to worker safety and regulatory compliance and among other things require that office associates with oversight of construction and associates who work in the field take additional safety courses Our Board and its Audit Committee regularly review the results of OSHA visits and other safety related information
Although we subcontract the land development and construction aspects of our homebuilding activities we are highly dependent on our skilled employees for critical aspects of what we do That includes senior executives who are responsible for our operational strategies and for approving significant land acquisitions and other major investments we make It also includes the people who head our homebuilding divisions and non homebuilding segments And it includes the many people who are involved in design construction oversight marketing and other aspects of our homebuilding business and in carrying out our other activities
At November 30 2024 we employed 13 265 individuals of whom 10 653 were involved in the Homebuilding operations 2 066 were involved in the Financial Services operations and 546 were involved in the Multifamily operations compared to November 30 2023 when we employed 12 284 individuals of whom 9 622 were involved in the Homebuilding operations 1 792 were involved in the Financial Services operations and 870 were involved in the Multifamily operations We do not have collective bargaining agreements relating to any of our associates However we subcontract many phases of our homebuilding operations and some of the subcontractors we use have employees who are represented by labor unions We believe our overall relations with our workforce are healthy
We are firmly committed to providing equal employment opportunities for all applicants and employees Our Code of Business Ethics and Conduct prohibits discrimination on the basis of a person s race color religion sex sexual orientation gender identity or expression national origin disability veteran status genetic information or any other legally protected status
This Report on Form 10 K and all other reports and amendments we file with or furnish to the SEC are publicly available free of charge on the investor relations section of the Lennar website as soon as reasonably practicable after we file such materials with or furnish them to the SEC Our website is www lennar com We caution you that the information on our website is not incorporated herein and is not a part of this or any other report we file with or furnish to the SEC In addition the SEC maintains a website that contains reports proxy and information statements and other information regarding issuers where you may obtain a copy of all of the materials we file publicly with the SEC The SEC website address is www sec gov
This annual report on Form 10 K contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 These statements concern expectations beliefs projections plans and strategies anticipated events or trends and similar expressions concerning matters that are not historical facts These forward looking statements typically include the words anticipate believe consider estimate expect forecast intend objective plan predict projection seek strategy target will may or other words of similar meaning Some of them are opinions formed based upon general observations anecdotal evidence and industry experience but that are not supported by specific investigation or analysis
These forward looking statements reflect our current views about future events and are subject to risks uncertainties and assumptions We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from what is anticipated by our forward looking statements The most important factors that could cause actual results to differ materially from those anticipated by our forward looking statements include but are not limited to slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities or own a substantial number of single family homes for rent decreased demand for our homes either for sale or for rent or Multifamily rental apartments the potential impact of inflation the impact of increased cost of mortgage financing for homebuyers increased or continued high interest rates or increased competition in the mortgage industry supply shortages and increased costs related to construction materials and labor the possibility that increased tariffs will increase the cost of production materials cost increases related to real estate taxes and insurance the effect of increased interest rates with regard to our funds borrowings on the willingness of the funds to invest in new projects reductions in the market value of the Company s investments in public companies natural disasters or catastrophic events for which our insurance may not provide adequate coverage our inability to successfully execute our strategies including our land lighter strategy and our planned spin off problems exercising options to purchase homesites a decline in the value of the land and home inventories we maintain and resulting possible future write downs of the carrying value of our real estate assets the forfeiture of deposits related to land purchase options we decide not to exercise the potential negative impact to our business of public health issues possible unfavorable outcomes in legal proceedings changes in general economic and financial conditions that reduce demand for our products and services lower our profit margins or reduce our access to credit our inability to acquire land at anticipated prices the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods the possibility that the benefit from our increasing use of technology will not justify its cost increased competition for home sales from other sellers of new and resale homes becoming unable to pay down debt government actions or other factors that might force us to terminate our program of repurchasing our stock the failure of the participants in various joint ventures to honor their commitments difficulty obtaining land use entitlements or construction financing harm to our business from information technology failures and data security breaches new laws or regulatory changes that adversely affect the profitability of our businesses including changes in tax laws or liabilities our inability to refinance our debt on terms that are as favorable as our current arrangements and changes in accounting conventions that adversely affect our reported earnings
of this Report for a further discussion of these and other risks and uncertainties which could affect our future results We undertake no obligation to revise any forward looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events except to the extent we are legally required to disclose certain matters in SEC filings or otherwise
The following risks which should be considered carefully with the information provided elsewhere in this Report could materially adversely affect our business financial condition or results of operations Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business financial condition or results of operations
Demand for our homes is dependent on a variety of macroeconomic factors such as employment levels inflation interest rates changes in stock market valuations consumer confidence consumer income housing demand availability and cost of financing for homebuyers availability and prices of new homes compared to those of previously occupied homes and demographic trends These factors can be significantly adversely affected by a variety of factors beyond our control Currently potential purchasers of our homes are being affected by inflation and continued high interest rates both of which increase what homebuyers have to pay for new homes
Our business success is dependent upon the reputation of the Lennar brand and its association with quality and integrity If we are unable to maintain the position of the Lennar brand our business may be adversely affected which could result in lower sales and earnings Unfavorable media or investor and analyst reports related to our industry company brand marketing personnel operations business performance or prospects may affect our stock price and the performance of our business regardless of its accuracy or inaccuracy We could be subject to knowingly false statements made for the purpose of impairing our reputation
These statements even if totally untrue can spread rapidly through the use of electronic communication including social media outlets websites and other digital platforms Our success in maintaining and enhancing our brand depends on our ability to adapt to this rapidly changing media environment Adverse publicity or negative commentary from media outlets could damage our reputation and reduce the demand for our homes which would adversely affect our business
Our strategies for our core homebuilding and mortgage finance businesses and any related initiatives or actions may not be successful Principal among our current strategies is continuing to reduce the inventory of land we own i e to become a land lighter company and to control a greater portion of the land we expect to use through options or other contractual arrangements including through the proposed Millrose Spin Off We cannot provide assurance that this strategy or other strategies we will follow will increase our value
The residential homebuilding industry is sensitive to changes in economic conditions and other factors such as the level of employment consumer confidence consumer income product affordability availability of financing inflation and interest rate levels As a result over the years demand for new homes has been cyclical with multi year periods of high demand followed by multi year periods of low demand During fiscal 2024 and 2023 a number of our markets experienced significant softening that required us to make substantial price reductions in order to maintain a steady sales pace It is possible that a continued market weakness could result in a further decline in demand for new homes with resulting price reductions which could require write downs in the carrying value of our land inventory and write offs of costs of land purchase options we decide not to exercise
Weaker demand has precluded us from raising home prices enough to keep up with the rate of inflation which has reduced our profit margins In addition in an inflationary environment our cost of capital labor and materials can increase and the purchasing power of our cash resources can decline which can have an adverse impact on our business or financial results Inflation may also accompany higher interest rates which could adversely impact potential buyers ability to obtain financing on favorable terms thereby decreasing demand for our homes We are taking steps that we hope will enable us to maintain acceptable operating margins in fiscal 2025 However it is possible that those steps will not be successful and that a combination of inflation and reduced demand for new homes driven by an increase in mortgage interest rates will continue to adversely affect our profitability
Housing has been considerably impacted by the more than doubling of mortgage interest rates in 2022 and 2023 and small decreases in 2024 When interest rates increase the cost of owning a new home increases which usually reduces the number of potential buyers who can afford or are willing to purchase homes we build
We are constantly purchasing land or acquiring options to purchase land for use in our homebuilding operations The value of land suitable for residential development fluctuates depending on local and national market conditions and other factors that affect demand for new homes When demand for homes fell during the 2007 2010 recession we were required to take significant write downs of the carrying value of our land inventory and we elected not to exercise many options to purchase land which required us to forfeit deposits and write off pre acquisition costs Although we have reduced our exposure to costs of that type a certain amount of exposure is inherent in our homebuilding business If market conditions were to deteriorate significantly in the future we could again be required to make significant write downs of the carrying value of our land inventory and write offs costs relating to decisions not to exercise land purchase options
There currently are ongoing conflicts involving Ukraine and Israel While we do not acquire essential components of the homes we build from either of those countries and while as of November 30 2024 neither of these conflicts has had a material direct impact on our consolidated financial performance those and other possible conflicts have already led and could lead to further market disruptions including significant volatility in commodity prices credit and capital markets as well as supply chain interruptions In addition the closure of or limitation on the use of significant shipping routes as a result of these and related conflicts may result in interruptions to the supply of certain key raw materials that are used in products which we incorporate in the homes we build increasing their cost International conflicts also may lead potential homebuyers to decide not to invest in new homes at this time which could have a material impact on our business operations and financial performance
The United States has experienced and may experience in the future outbreaks of contagious diseases that affect public health and public perception of health risk The extent to which public health issues impact our results will depend on future developments which cannot be predicted If a contagious disease causes significant negative impacts to economic conditions or consumer confidence our results of operations financial condition and cash flows could be materially adversely impacted
The homebuilding industry is highly competitive Homebuilders compete not only for homebuyers but also for desirable land financing raw materials skilled management and labor resources We compete in each of our markets with numerous national regional and local homebuilders We also compete with sellers of existing homes including foreclosed homes and with rental housing These competitive conditions can reduce the number of homes we deliver negatively impact our selling prices reduce our profit margins and cause impairments in the value of our inventory or other assets Competition can also affect our ability to acquire suitable land raw materials and skilled labor at acceptable prices or other terms
Our Financial Services residential and commercial lending businesses compete with other residential and commercial mortgage lenders including national regional and local banks and other financial institutions Mortgage lenders who have greater access to low cost funds superior technologies or different lending criteria than we do may be able to offer more attractive financing to potential customers than we can
Our multifamily rental business competes with other developers and operators of multifamily apartment communities at locations across the U S where we have investments in multifamily rental properties We also compete in securing partners equity capital and debt financing and we compete for tenants with the large supply of already existing or newly built rental apartments as well as with sellers and renters of single family homes These competitive conditions could negatively impact the ability of the funds and ventures we manage to find renters for the apartments they are building or the prices for which those apartments can be rented
In each region where our funds offer single family homes for rent there will be competition for residents with other owners of residential real estate whether for rent or for sale In addition in seeking investors to acquire interests in funds we form we will be competing with a wide variety of investment opportunities related both to real estate and to a variety of other investment products Also in seeking to acquire single family homes that our funds can hold as rental properties our funds will be competing with other persons who plan to hold them as rental properties as well as persons who might want to purchase those homes to live in them
As a homebuilder we are subject in the ordinary course of our business to warranty and construction defect claims We are also subject to claims for injuries that occur in the course of construction activities We record warranty and other reserves for the homes we sell based on historical experience in our markets and our judgment of the qualitative risks associated with the types of homes we build We have and many of our subcontractors have general liability property workers compensation and other business insurance These insurance policies are intended to protect us against risk of loss from claims subject to self insured retentions deductibles and coverage limits However it is possible that this insurance will not be adequate to address all warranty construction defect and liability claims to which we are subject
Additionally the cost of insurance has increased significantly in recent years Also the coverage offered and the availability of general liability insurance for construction defects is currently limited and policies that can be obtained often include exclusions based upon past losses those insurers suffered as a result of use of defective materials in homes we and many other homebuilders built As a result an increasing number of our subcontractors are unable to obtain insurance and we have in many cases had to waive our customary insurance requirements which increases our and our insurers exposure to claims and increases the possibility that our insurance will not be adequate to protect us against all the costs we incur This increase in cost and limitation in coverage has also increased our self insured retentions and decreased our total coverage It is possible in the future that insurance would not be available at commercially reasonable rates Even when insurance is available the high cost of insurance has recently led us to self insure against some risks
are inherently dangerous While safety is a priority on our land development and construction sites we cannot always control the way work is performed by subcontractors including whether they comply with laws and regulations designed to maximize the safety of construction workers Failures in health and safety performance on our
worksites may result in penalties for non compliance with relevant regulatory requirements and in our subcontractors having difficulty attracting the workers they need as well as in a negative impact to our reputation
We rely on subcontractors to perform the actual construction of our homes and in many cases to select and obtain building materials Despite our detailed specifications and quality control procedures in some cases subcontractors may use improper construction processes or defective materials Defective products widely used by the homebuilding industry can result in the need to perform extensive repairs to large numbers of homes The cost of complying with our warranty obligations may be significant if we are unable to recover the cost of repairs from subcontractors materials suppliers and insurers
We also can suffer damage to our reputation and may be exposed to possible liability if subcontractors fail to comply with applicable laws including laws involving things that are not within our control When we learn about possibly improper practices by subcontractors we try to cause the subcontractors to discontinue them However we may not always be able to do that and even when we can it may not avoid claims against us relating to work the subcontractors already performed
We incur many costs even before we begin to build homes in a community Depending on the stage of development a land parcel is in when we acquire it or when it is acquired by Millrose or another land banking entity these may include costs of preparing land finishing and entitling lots installing roads sewers water systems and other utilities and taxes and other costs related to ownership of the land on which we plan to build homes If the rate at which we sell and deliver homes slows or if we delay the opening of new home communities we may incur increased pre construction costs and it may take longer for us to recover those costs
Our business requires us to finance much of the cost of developing our residential communities One of the ways we do this is with bank borrowings At November 30 2024 we had a 2 9 billion revolving credit facility with a group of banks the Credit Facility which had an accordion feature that could increase it to 3 5 billion We also had warehouse borrowing facilities totaling 3 4 billion to support our residential and commercial mortgage lending activities The interest on borrowings under the Credit Facility is at rates based on prevailing short term rates from time to time In 2022 and 2023 the Federal Reserve steadily raised benchmark interest rates and the Federal Reserve did not begin reducing benchmark interest rates until well into 2024 At November 30 2024 we had no borrowings under our Credit Facility However if in the future we have a need for significant borrowings under our Credit Facility and interest rates continue be high that would increase the cost of the homes we build which either would make those homes more expensive for homebuyers which is likely to reduce demand or would lower our operating margins or both
Our backlog reflects agreements of sale with our homebuyers for homes that have not yet been delivered We usually have received a deposit from our homebuyer for each home reflected in our backlog and generally we have the right to retain the deposit if the homebuyer does not complete the purchase In some cases however a homebuyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local laws the homebuyer s inability to obtain mortgage financing the homebuyer s inability to sell their current home or our inability to complete and deliver the home within the specified time With the increase in interest rates we have experienced an increase in cancellation rates If there is a weakening of the housing market or if mortgage financing becomes less available or more expensive than it currently is or is expected to be more homebuyers may cancel their agreements of sale with us which would have an adverse effect on our business and results of operations
There is strong competition among homebuilders for land that is suitable for residential development The future availability of finished and partially finished developed lots and undeveloped land that meet our internal criteria depends on a number of factors outside our control including land availability in general competition with other homebuilders and land buyers for desirable property inflation in land prices zoning allowable housing density and other regulatory requirements Should suitable lots or land become less available the number of homes we could build and sell could be reduced and the cost of land could be increased perhaps substantially which could adversely impact our results of operations
We formed and intend to spin off Millrose to make it a recycling source of land acquisition funding However Millrose will not have the capacity to provide all the land acquisition funding we require and Millrose s policies will limit its acquisitions to land we expect to use within five years We will look to traditional land banks to acquire at least some of the
land that Millrose will not or cannot acquire Most land banks are funds that use financial investor capital to finance land acquisitions If returns to investors in land banks are not sufficient to attract investor funds and land banks are not able to identify alternative sources of funding we would no longer have access to land banks This could significantly impair our ability to carry out our strategy of reducing our inventory of owned land
We have made a strategic decision to increase the portion of our potential land inventory that we control through options or contracts and reduce the portion we own This substantially reduces our investment in land However if landowners who are parties to the options or contracts possibly including land banks were to refuse to honor them we could lose access to land at the time we want to use it in our homebuilding activities
Our success depends to a significant extent upon the performance and active participation of our senior management many of whom have been with us for 20 or more years If we were to lose members of our senior management we might not be able to find appropriate replacements on a timely basis and our operations could be negatively affected Also the loss of a significant number of key operating employees and our inability to hire qualified replacements could have a material adverse effect on our business
Many of our homebuilding operations are conducted in areas that are subject to natural disasters including hurricanes earthquakes droughts floods wildfires and severe weather The occurrence of natural disasters or severe weather conditions can delay new home deliveries increase costs by damaging inventories and lead to shortages of labor and materials in areas affected by the disasters and can negatively impact the demand for new homes in affected areas Our insurance may not cover business interruptions or losses resulting from these events and our results of operations could be adversely affected by these events Additionally natural disasters and severe weather conditions may increase the cost of homeowner s insurance or create difficulties in obtaining homeowners insurance at all which could reduce the number of potential buyers who can afford or are willing to purchase homes we build in affected areas For example the incidence of large wildfires in California has substantially increased in recent years and the risk of future wildfires is expected to increase The housing markets in areas affected by California s recent wildfires have been adversely affected by increased insurance costs and difficulties in obtaining homeowners insurance which we expect to be exacerbated by the recent wildfires in Los Angeles
Most purchasers of our homes obtain mortgage loans to finance a substantial portion of the purchase price of the homes they purchase While the majority of our homebuyers obtain their mortgage financing from our Financial Services segment others obtain mortgage financing from banks and other independent lenders Disruptions in the mortgage markets or increased government regulation could adversely affect the ability of potential homebuyers to obtain financing for home purchases making it difficult for them to purchase our homes Among other things changes made by Fannie Mae Freddie Mac Ginnie Mae and FHA VA in recent years to sponsored mortgage programs as well as changes made in recent years by private mortgage insurance companies have reduced the ability of a number of potential homebuyers to qualify for mortgages Principal among these are higher income requirements larger required down payments increased reserves and higher required credit scores In addition there has been uncertainty regarding the future of Fannie Mae Freddie Mac and Ginnie Mae including proposals that they reduce or terminate their role as the principal sources of liquidity in the secondary market for mortgage loans It is not clear how if Fannie Mae Freddie Mac and Ginnie Mae were to curtail their secondary market mortgage loan purchases the liquidity they provide would be replaced There is a substantial possibility that substituting an alternate source of liquidity would increase mortgage interest rates which would increase the buyers effective costs of paying for the homes we sell and therefore could reduce demand for our homes and adversely affect our results of operations
Currently there are significant income tax benefits from owning a home including deductibility of all or some interest on mortgage loans incurred to finance home purchases and the deductibility of property taxes subject to certain limits If federal or state tax laws are changed to eliminate or reduce any of these income tax benefits or if personal income or property tax rates were to increase
100 of the residential mortgage loans made by our Financial Services segment in 2024 were made to buyers of homes we built Therefore a decrease in the demand for our homes or an increase in the mortgage financing obtained by homebuyers from lenders other than our Financial Services segment would adversely affect the revenues of this aspect of our business
If our ability to sell residential mortgages into the secondary market is impaired that could significantly reduce our ability to sell homes unless we are willing to become a long term investor in loans we originate
Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market on a servicing released non recourse basis If we became unable to sell residential mortgage loans into the secondary mortgage market or directly to Fannie Mae Freddie Mac and Ginnie Mae we would have to either curtail our origination of residential mortgage loans which among other things could significantly reduce our ability to sell homes or commit our own funds to long term investments in mortgage loans which in addition to requiring us to deploy substantial amounts of our own funds could delay the time when we recognize revenues from home sales on our statements of operations
While substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market on a servicing released non recourse basis we remain responsible for certain industry standard limited representations and warranties we make in connection with such sales Mortgage investors sometimes seek to have us buy back mortgage loans or compensate them for losses incurred on mortgage loans that we have sold based on claims that we breached our limited representations and warranties In addition when LMF Commercial sells loans to securitization trusts or other purchasers it gives limited industry standard representations and warranties about the loans which if incorrect may require it to repurchase the loans replace them with substitute loans or indemnify persons for losses or expenses incurred as a result of breaches of representations and warranties If we have significant liabilities with respect to such claims it could have an adverse effect on our results of operations and possibly our financial condition
The agreement governing our Credit Facility the Credit Agreement makes it a default if we fail to pay principal or interest when it is due subject in some instances to grace periods or to comply with various covenants including covenants regarding financial ratios In addition our Financial Services residential mortgage companies and our LMF Commercial mortgage lending group have warehouse facilities to finance their mortgage lending If we default under the Credit Agreement or our warehouse facilities the lenders will have the right to terminate their commitments to lend and to require immediate repayment of all outstanding borrowings This could reduce our available funds at a time when we are having difficulty generating all the funds we need from our operations in the capital markets or otherwise and restrict our ability to obtain financing in the future In addition if we default under the Credit Agreement or our warehouse facilities it could cause the amounts outstanding under our senior notes to become immediately due and payable which would seriously adversely impact our consolidated financial condition
As of November 30 2024 we had outstanding senior notes which we had sold into the capital markets over a number of years totaling 2 0 billion The indentures governing our senior notes do not restrict our incurrence of future secured or unsecured debt and the agreement governing our Credit Facility allows us to incur a substantial amount of future unsecured debt We reduced our outstanding senior notes during fiscal 2024 by 554 0 million but we still have a significant amount outstanding Sales of senior debt into the capital markets was historically a significant source of funding for our operations and acquisitions
We may find it difficult or may be unable to obtain additional financing to fund future working capital capital expenditures and other general corporate requirements that would be in our best long term interests
We may be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our debt reducing the cash flow available to fund operations and investments and reducing the amount we can return to our stockholders
Our corporate credit rating and ratings of our senior notes affect among other things our ability to access new capital especially debt and the costs of that new capital Historically a substantial portion of our access to capital has been through the issuance of senior notes of which we have approximately 2 0 billion outstanding net of debt issuance costs as of November 30 2024 Among other things we have often relied on proceeds of debt issuances to pay the principal of existing senior notes when they mature Negative changes in the ratings of our senior notes could make it difficult for us to sell senior notes in the future and could result in more stringent covenants and higher interest rates with regard to new senior notes we issue
During 2025 we will have to replace or renew a total of 3 4 billion of warehouse lines used by Financial Services including LMF Commercial as they mature We expect these facilities to be renewed or replaced with other facilities when they mature If we are unable to renew or replace these facilities on favorable terms or at all when they mature that could seriously impede the activities of our Financial Services segment which would have an impact on our financial results
We often are required to provide surety bonds to secure our performance of obligations under construction contracts development agreements and other arrangements At November 30 2024 we had outstanding surety bonds of 5 1 billion including performance surety bonds related to site improvements at various projects including certain projects of our joint ventures and financial surety bonds Although significant development and construction activities have been completed related to these site improvements these bonds are generally not released until all development and construction activities to which they relate are completed Our ability to obtain surety bonds primarily depends upon our credit rating financial condition past performance and similar factors the capacity of the surety market and the underwriting practices of surety bond issuers Our ability to obtain surety bonds also can be impacted by unwillingness of insurance companies to issue performance bonds for construction and development activities If we were unable to obtain surety bonds when required our operations could be adversely affected
We conduct some of our operations through joint ventures with independent third parties and we can be adversely impacted by our joint venture partners failures to fulfill their obligations or decisions to act contrary to our wishes
In our Homebuilding and Multifamily segments we participate in joint ventures in order to help us acquire attractive land positions to manage our risk profile and to leverage our capital base In certain circumstances joint venture participants including us are required to provide guarantees of obligations relating to the joint ventures such as completion and environmental guarantees If a joint venture partner does not perform its obligations we may be required to bear more than our proportional share of the cost of fulfilling the joint venture s obligations For example in connection with our Multifamily business and its joint ventures we and the other venture participants have guaranteed obligations to complete construction of multifamily residential buildings at agreed upon costs which could make us and the other venture participants responsible for cost over runs Although all the participants in a venture are normally responsible for sharing the costs of fulfilling obligations of that type if some of the venture participants are unable or unwilling to meet their share of the obligations we may be held responsible for some or all of the defaulted payments In addition because we do not have a controlling interest in most of the joint ventures in which we participate we may not be able to cause joint ventures to sell assets return invested capital or take other actions when such actions might be in our best interest
Several of the joint ventures in which we participate will in the relatively near future be required to repay refinance renegotiate or extend their borrowings If any of those joint ventures are unable to do this we could be required to provide at least a portion of the funds the joint ventures need to be able to repay the borrowings and to finance the activities for which they were incurred which could adversely impact our financial position
During the past several years the U S government has imposed new or increased existing tariffs on an array of imported materials and products that are used in the homes we build including lumber steel aluminum solar panels and washing machines which increases the costs of those items The tariffs that have been imposed or increased have impacted our
construction costs and caused disruptions in our supply chains In addition President Trump has expressed a desire to impose substantial new or increased tariffs Any widespread imposition of new or increased tariffs could increase the cost of and reduce the demand for homes we build and any cost increases will either require us to increase prices or negatively impact our profit margins New or increased tariffs could also negatively affect U S national or regional economies which could affect the demand for the homes we build
We are subject with regard to almost all of our activities to a variety of federal state and local laws and regulations Laws and regulations and policies under or interpretations of existing laws and regulations change frequently Our businesses could be adversely affected by changes in laws regulations policies or interpretations or by our inability to comply with them without making significant changes in our businesses
Governmental regulations regarding land use and environmental matters could increase the cost and limit the availability of our development and homebuilding projects and adversely affect our business or financial results
We are subject to extensive and complex laws and regulations that affect land development homebuilding and apartment development processes including laws and regulations related to zoning permitted land uses levels of density building design elevation of properties water and waste disposal and use of open spaces These regulations often provide broad discretion to the administering governmental authorities as to the conditions that must be met prior to development or construction being approved if they are approved at all We are also subject to determinations by governmental authorities as to the adequacy of water or sewage facilities roads and other local services with regard to particular residential communities New housing developments may also be subject to various assessments for schools parks streets and other public improvements In addition in many markets government authorities have implemented no growth or growth control initiatives Any of these can limit delay or increase the costs of land development or home construction Government restrictions standards or regulations intended to reduce greenhouse gas emissions or potential climate change impacts are likely to result in restrictions on land development in certain areas and may increase energy transportation or raw material costs which could reduce our profit margins and adversely affect our results of operations This is a particular concern in the western United States where some of the most extensive and stringent environmental laws and residential building construction standards in the country have been enacted and where we have substantial homebuilding and multifamily operations
We are also subject to a variety of local state and federal laws and regulations concerning protection of the environment In some of the markets where we operate we are required by law to pay environmental impact fees use energy saving construction materials and give commitments to municipalities to provide infrastructure such as roads and sewage systems We generally are required to obtain permits entitlements and approvals from local authorities to commence and carry out residential development or home construction These permits entitlements and approvals sometimes are opposed or challenged by local governments environmental advocacy groups neighboring property owners or other possibly interested parties adding delays costs and risks of non approval to the process Violations of environmental laws and regulations can result in injunctions civil penalties remediation expenses and other costs In addition some environmental laws impose strict liability which means that we may be held liable for unlawful environmental conditions on property we own which we did not create
We are also subject to laws and regulations related to workers health and safety and there are efforts to subject homebuilders like us to other labor related laws or rules some of which may make us responsible for things done by our subcontractors over which we have little or no control
In addition our residential mortgage subsidiary is subject to various state and federal statutes rules and regulations including those that relate to lending operations and other areas of mortgage origination and loan servicing The impact of those statutes rules and regulations can increase our homebuyers costs of financing and our cost of doing business as well as restricting our homebuyers access to some types of loans
Our obligation to comply with the laws and regulations under which we operate and our need to ensure that our associates subcontractors and other agents comply with these laws and regulations could result in delays in construction and land development cause us to incur substantial costs and prohibit or restrict land development and homebuilding activity in certain areas in which we operate Budget reductions by state and local governmental agencies may increase the time it takes to obtain required approvals and therefore may aggravate the delays we encounter In 2020 and 2021 shutdowns of government offices in response to the COVID 19 pandemic often delayed the time it took to obtain required approvals Government agencies also routinely initiate audits reviews or investigations of our business practices to ensure compliance with applicable laws and regulations which can cause us to incur costs or create other disruptions in our businesses that can be significant
Although we expect all of our associates officers and directors to comply at all times with all applicable laws rules and regulations there may be instances in which subcontractors or others through whom we do business engage in practices
that do not comply with applicable laws regulations or governmental guidelines When we learn of practices that do not comply with applicable laws or regulations including practices relating to homes buildings or multifamily rental properties we build or finance we move actively to stop the non complying practices as soon as possible and we have taken disciplinary action with regard to associates of ours who were aware of non complying practices and did not take steps to address them including in some instances terminating their employment However regardless of the steps we take after we learn of practices that do not comply with applicable laws or regulations we can in certain cases be subject to fines or other governmental penalties and our reputation can be injured due to the practices having taken place
The homes we sell are built by employees of subcontractors and other contract parties We do not have the ability to control what these contract parties pay their employees or the work rules they impose on their employees However various governmental agencies have sought and in the future may seek to hold contract parties like us responsible for violations of wage and hour laws workers compensation and other work related laws by firms whose employees are performing contracted for services While the future of joint employer liability remains uncertain if we were deemed to be a joint employer of our subcontractors employees we could become responsible for collective bargaining obligations of and labor law violations by our subcontractors Governmental rulings that make us responsible for labor practices by our subcontractors could create substantial exposures for us in situations that are not within our control
We previously announced that we expect to spin off a significant portion of our land assets from our balance sheet through the spin off of Millrose Millrose has filed a registration statement on Form S 11 with the Securities and Exchange Commission which became effective on January 17 2025 and our Board declared a special stock dividend to effect the Millrose Spin Off to Lennar stockholders of record as of January 21 2025 with a distribution date of February 7 2025 However the completion of the Millrose Spin Off remains subject to the satisfaction of a number of conditions including the execution of certain agreements relating to the Millrose Spin Off and other customary conditions some of which will not occur until shortly prior to the distribution date The failure to satisfy all of the required conditions as well as other factors outside of our control including general economic and market conditions could delay the completion of the Millrose Spin Off relative to the anticipated timeline or prevent it from occurring Any delay in the completion of the Millrose Spin Off or any change to the anticipated terms of the transaction could reduce the expected benefits of the transaction or delay the time at which such benefits are realized There can also be no assurance that the anticipated benefits of the transaction will be realized if the Millrose Spin Off is completed or that the costs will not exceed the anticipated benefits
In addition whether or not the Millrose Spin Off is ultimately completed we have incurred and expect to continue to incur costs associated with the planned transaction and the pendency of the planned transaction has imposed and may continue to impose challenges on us including the diversion of management and employee time on matters relating to the proposed transaction while continuing to operate in the ordinary course of business
If the planned Millrose Spin Off is completed Millrose may fail to perform under various transaction agreements that we expect to enter into in connection with the Millrose Spin Off and our homebuilding operations could be seriously disrupted if Millrose refused to honor purchase options it is expected to grant us
If completed in connection with the Millrose Spin Off we expect to enter into a number of agreements with Millrose pursuant to which Millrose will provide Lennar with land acquisition and horizontal development financing solutions We would rely on Millrose to satisfy its performance and payment obligations under these agreements If Millrose were unable or unwilling to satisfy its obligations under these agreements including its indemnification obligations we could incur operational difficulties and or losses
In particular if the planned Millrose Spin Off is completed we expect to transfer a significant portion of our inventory of undeveloped and partially developed land as well as some finished homesites to Millrose which would be an independent externally managed publicly traded company In addition if the planned Millrose Spin Off is completed we expect that in the future we will do a number of our land acquisitions through arrangements under which Millrose will acquire land we specify and grant us options to purchase the land when it is developed into finished homesites That land is and would be essential to our homebuilding operations and we expect to have options that would give us access to that land when it is developed into finished homesites We also expect that our options and other agreements with Millrose would contain provisions requiring Millrose to deliver homesites to us even if it is disputing our right to exercise options However if Millrose were to refuse to honor option exercises despite requirements that it honor them that could delay or prevent us from building and delivering homes while we try to get courts to require Millrose to deliver homesites to us Even if we were to succeed in any legal proceedings against Millrose there is no guarantee that a court would compel Millrose to deliver the homesites to us Monetary damages may not be sufficient for us to fully recoup our losses particularly if we have contracts with homebuyers with respect
to the disputed homesites and we would not be able to satisfy our obligations with respect to those contracts Any loss of access to our homesites could injure both our revenues and our reputation as a reliable homebuilder
If the planned Millrose Spin Off is completed we may lose access to the land or homesites we would contribute to Millrose or that Millrose acquires in the future pursuant to our specifications in the event of lender foreclosures or bankruptcy proceedings
If the planned Millrose Spin Off is completed Millrose will be an independent publicly traded company and in the future may enter into various secured financing arrangements which may include but are not limited to secured or collateralized loans or any other transactions where assets may be pledged or used as collateral to secure the financing instrument In connection with these arrangements Millrose would have the right to pledge or use as collateral the inventory of land assets we would transfer to them in connection with the Millrose Spin Off and the land assets that Millrose acquires in the future pursuant to our specifications If Millrose were to default under these arrangements the lenders of these arrangements may foreclose on these assets Similarly if Millrose were become subject to bankruptcy or insolvency proceedings Millrose may forfeit its assets including these assets to any and all creditors or creditors may reject our purchase options in bankruptcy If we were unable to successful protect our purchase options buy the applicable assets directly from the lenders or otherwise retain access to these assets that could delay or prevent us from building and delivering homes and cause us significant harm
Stuart Miller our Executive Chairman and Co Chief Executive Officer through family and personal holdings of Class B and to a lesser extent Class A common stock has the power to cast approximately 40 of the votes that can be cast by the holders of all our outstanding Class A and Class B common stock combined This gives Mr Miller substantial influence regarding the election of our directors and the approval of most other matters that are presented to our stockholders Mr Miller s voting power might discourage someone from making a significant equity investment in us even if we needed the investment to meet our obligations or to operate our business Also because of his voting power Mr Miller may be able to cause our stockholders to approve actions that are contrary to many of our other stockholders desires
The only significant difference between our Class A common stock and our Class B common stock is that the Class B common stock entitles the holders to ten votes per share while the Class A common stock entitles holders to only one vote per share However for many years the trading price of the Class B common stock on the NYSE has been substantially lower than the NYSE trading price of our Class A common stock We believe this is because only a relatively small number of shares of Class B common stock are available for trading which reduces the liquidity of the market for our Class B common stock to a point where many large investors are reluctant to invest in it The limited liquidity could make it difficult for a holder of even a relatively small number of shares of our Class B common stock to dispose of the stock without materially reducing the trading price of the Class B common stock
The trading price of our stock has at times experienced significant volatility and may continue to be volatile In addition to the factors discussed in this report the trading prices of our Class A common stock and our Class B common stock have fluctuated and may continue to fluctuate widely in response to various factors many of which are beyond our control including among others developments in our industry the activities of our peers and changes in broader economic and political conditions and policies in the United States and around the world These broad market and industry factors could harm the market price of our Class A common stock and our Class B common stock regardless of our actual operating performance
We have investments in funds and other investment vehicles managed by Rialto Capital Management a company we sold in November 2018 investments in a number of companies that are applying technology to various aspects of building and marketing homes and real estate related aspects of the financial services industry and investments in Five Point Holdings LLC a publicly traded company that has ownership interests in and is managing the development of three large multi use master planned communities in California As a minority investor we have little or no influence over decisions made with regard to
In the ordinary course of our business we are subject to legal claims by homebuyers borrowers against whom we have instituted foreclosure proceedings persons with whom we have land purchase contracts and a variety of other claimants We establish reserves against legal claims and we believe that in general the outcome of legal claims will not have a material adverse effect on our business or financial condition However if the amounts we are required to pay as a result of claims against us substantially exceed the sums anticipated by our reserves the need to pay those amounts could have an adverse effect on our results of operations for the periods when we are required to make or accrue the payments
We have provisions and reserves for taxes that we believe are sufficient to reflect our future tax obligations However it is possible that a taxing authority will successfully assert that we owe taxes that we do not believe that we owe and for which we do not have a provision or reserves
If the additional taxes are material they could adversely affect our income tax provision and consequently our operating results and financial condition in the period in which we determine we need an additional provision or reserves
We rely extensively on information technology IT systems including Internet sites data hosting facilities and other hardware and software platforms some of which are hosted by third parties to assist in conducting our businesses These IT systems like those used by most companies may be vulnerable to a variety of disruptions including but not limited to those caused by natural disasters telecommunications failures hackers and other security issues Moreover these IT systems like those of most companies are subject to the possibility of computer viruses or other malicious codes and to security breaches cyber incidents ransomware attacks or phishing attacks Cyber intrusion efforts are becoming increasingly frequent and sophisticated including as a result of the use of artificial intelligence and it is possible that any controls we or third parties have installed could at some time be breached in a material respect While to date we have not had a cybersecurity disruption failure breach or attack that had a material impact on our business or results of operations if we were to be subject to a material successful cyber incident that could result in remediation or service restoration costs increased cyber protection costs lost revenues or loss of customers litigation or regulatory actions by governmental authorities increased insurance premiums reputational damage and damage to our competitiveness our stock price and our long term stockholder value We may be required to incur significant costs to protect against damages caused by information technology failures or security breaches including through the provision of insurance
In connection with our business we and the third parties we work with collect and retain personally identifiable information e g information regarding our customers suppliers and employees and our customers suppliers and employees have an expectation that we will adequately protect that information The U S regulatory environment surrounding information security and privacy is increasingly demanding A significant theft loss or fraudulent use of the personally identifiable information we or third parties maintain or of our data by cyber criminals or otherwise could adversely impact our reputation and could result in significant costs fines and litigation We may be required to incur significant costs to protect against damages caused by the failure to satisfy privacy and data protection laws and regulations in the future as legal requirements continue to increase including through the provision of insurance
We historically have sold significant numbers of homes in communities in the United States to people who are not residents of the United States and some large investors in our multifamily development and single family rental funds and ventures are located outside the United States Dealings with people or institutions located outside the United States create risks related to currencies and to political affairs in various countries In some instances the U S government may review the possible effects of investments by non U S entities on U S national security We must also be careful to comply with U S anti corruption laws Also we have to be aware of tax issues involved in doing business outside the United States or with people who are not residents of the United States both under U S tax laws and under the tax laws of the countries in which we do business or in which the non residents reside
Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second fiscal quarter and increased deliveries in the second half of our fiscal year However a variety of factors can change seasonal patterns Our quarterly results of operations may continue to fluctuate in the future as a result of a variety of factors
We have made investments in companies that are engaged in applying technology to improve the homebuilding industry and real estate related aspects of the financial services industry Our investments in Blend Hippo Opendoor SmartRent Sonder and Sunnova all of which have publicly traded shares of common stock are carried on our books at their fair values which will change depending on the value of the Company s shareholdings on the last day of each quarter As a result our net earnings could be significantly affected by mark to market gains or losses on our investments
Changes in global or regional environmental conditions and governmental actions in response to such changes may adversely affect us by increasing the costs of or restricting our planned or future growth activities
There is growing concern from many members of the scientific community and the general public that an increase in global average temperatures due to emissions of greenhouse gases and other human activities have caused or will cause significant changes in weather patterns and increase the frequency and severity of natural disasters Government mandates standards or regulations intended to reduce greenhouse gas emissions or projected climate change impacts have resulted and are likely to continue to result in restrictions on land development in certain areas and increased energy transportation and raw material costs We have tried to reduce the effect of the homes we build on the climate by installing solar power systems and energy saving devices in many of those homes Nonetheless governmental requirements directed at reducing effects on climate could cause us to incur expenses that we cannot recover or that will require us to increase the price of homes we sell to the point that it affects demand for those homes
The risk factors described above are those that we think may be material with regard to an investment in us that are not applicable generally to all business enterprises However we are subject to the many risks that affect all or most business enterprises in the United States or internationally and our business or financial condition could be materially affected by those risks
Mr Miller has served as our Executive Chairman since April 2018 and as our Executive Chairman and Co Chief Executive Officer since September 2023 Mr Miller served as our Chief Executive Officer from 1997 to April 2018 and as our President from 1997 to April 2011 Before 1997 Mr Miller held various executive positions with us Mr Miller also serves as non employee Executive Chairman of the Board of Directors of Five Point Holdings LLC and served as a member of the Board of Directors of Doma Holdings Inc from 2019 to 2024
Mr Jaffe is one of our Directors and has served as our Co Chief Executive Officer and President since September 2023 Prior to that Mr Jaffe served as our Co Chief Executive Officer and Co President from November 2020 to September 2023 Mr Jaffe previously served as our President from April 2018 to November 2020 and as our Chief Operating Officer from December 2004 to January 2019 Mr Jaffe served as a Vice President from 1994 to April 2018 and prior to that served as a Regional President in our Homebuilding operations
Ms Bessette has served as our Chief Financial Officer since April 2018 and as a Vice President since 2000 Ms Bessette initially joined us in 1995 and served as our Controller from 1997 to 2008 and as our Treasurer from February 2008 to April 2024 Ms Bessette is a member of the Board of the Miami Branch of the Federal Reserve Bank of Atlanta
We rely extensively on information technology IT systems including Internet sites data hosting facilities and other hardware and software platforms some of which are hosted by third parties to assist in conducting our businesses These systems like those used by most companies may be vulnerable to a variety of disruptions including but not limited to those caused by natural disasters telecommunications failures hackers and other security issues Moreover these IT systems like those used by most companies are subject to the possibility of computer viruses or other malicious codes and to security breaches cyber incidents ransomware attack or phishing attacks Cybersecurity is an integral part of risk management at our Company and we maintain a comprehensive process for assessing identifying and managing material risks from cybersecurity threats which is part of our overall risk management system and processes
We have installed and continually upgrade an array of protections against cyber intrusions Our cybersecurity risk management processes are based upon the National Institute of Standards and Technology NIST Cybersecurity Framework as well as various other regulatory requirements and industry specific standards We implement risk based controls to protect our information the information of our customers suppliers and other third parties our information systems our business operations and our products and related services These controls include multifactor authentication on all critical systems firewalls encryption anti virus protections intrusion detection and prevention systems and identity management systems We provide mandatory cybersecurity awareness training of threats to associates at least annually and routinely deploy simulated phishing tests to increase security awareness
Additionally in connection with our cybersecurity risk management processes from time to time we engage independent third parties to assess our cybersecurity program and to assist us with defining our cybersecurity strategy uplifting our processes and aligning our objectives Outside counsel has also advised the Board about legal obligations in managing cybersecurity issues and risks
We maintain a cybersecurity incident response plan which provides a framework for handling cybersecurity incidents based on among other factors the potential severity of the incident and facilitates cross functional coordination across the Company We also conduct tabletop exercises including exercises facilitated by third parties during which we simulate cybersecurity incidents to ensure that we are prepared to respond to such an incident and to highlight any areas for potential improvement in our cybersecurity incident response plan These exercises are conducted at both the technical level and senior management level and have included participation by members of our Board
Our cybersecurity risk management processes extend to the oversight and identification of threats associated with our use of third party service providers including through due diligence of such providers cybersecurity practices contractual obligations to operate their IT systems in accordance with certain cybersecurity standards and ongoing monitoring
Our business strategy results of operations and financial condition have not been materially affected by risks from cybersecurity threats including as a result of previous cybersecurity incidents but we cannot provide assurance that they will not be materially affected in the future by such risks and any future material incidents See Risk Factors in Item 1A of this Annual Report on Form 10 K for more information on risks from cybersecurity threats that are reasonably likely to materially affect our business strategy results of operations and financial condition
Our Chief Technology Officer CTO is responsible for assessing and managing our material risks from cybersecurity threats We have also established a cross functional Cyber Steering Committee which includes our CTO Chief Information Security Officer CISO General Counsel certain business leaders on a rotating basis and representatives of human resources and communications The CISO supported by inputs from the CTO team leads delivers quarterly updates to the Committee on key risks and overall security program posture as well as monthly strategic updates to the CTO on high visibility and key action items Our CTO regularly reports to our Board and the Audit Committee
Our CTO has served in this role since 2023 and has over 25 years of experience in the technology industry Prior to his current role he served as the CTO of Tyson Foods and before arriving at Tyson he was the Chief Information Officer at Hewlett Packard and then CIO at Hewlett Packard Enterprise
our CTO at least quarterly and more often as needed including in the event of a significant cybersecurity incident The report includes information regarding the nature of threats defense and detection capabilities incident response plans and associate training activities Our Board retains responsibility for the oversight of our overall risk management systems and processes and is briefed our CTO on cybersecurity risks on a quarterly basis
We maintain our corporate headquarters in an office building in Miami Florida In December 2023 we purchased this office building in which we had previously leased office space for our corporate headquarters This building contains approximately 213 200 square feet of office space of which we lease approximately 53 000 square feet of unused office space to other tenants Our homebuilding financial services and multifamily offices are located in the markets where we conduct business primarily in leased spaces We believe that our existing facilities are adequate for our current and planned levels of operation
Because of the nature of our homebuilding operations we hold significant amounts of property as inventory in connection with our homebuilding business We discuss these properties in the discussion of our homebuilding operations in Items 1 and 7 of this Report
We are party to various claims and lawsuits relating to homes we sold which arise in the ordinary course of business but we do not consider the volume of our claims and lawsuits unusual given the number of homes we deliver and the fact that the lawsuits often relate to homes delivered several years before the lawsuits are commenced Although the specific allegations in the lawsuits differ they most commonly involve claims that we failed to construct homes in particular communities in accordance with plans and specifications or applicable construction codes and seek reimbursement for sums allegedly needed to remedy the alleged deficiencies assert contract issues or relate to personal injuries Lawsuits of these types are common within the homebuilding industry We are a plaintiff in a number of cases in which we seek contribution from our subcontractors for home repair costs The costs incurred by us in construction defect lawsuits may be offset by warranty reserves our third party insurers subcontractor insurers or indemnity contributions from subcontractors From time to time we are also a party to lawsuits involving purchases and sales of real property These lawsuits often include claims regarding representations and warranties made in connection with the transfer of the property and disputes regarding the obligation to purchase or sell the property From time to time we also receive notices from environmental agencies or other regulators regarding alleged violations of environmental or other laws We typically settle all of the foregoing matters before they reach litigation for amounts that are not material to us
We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business or financial position However the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property which may have changed from the time the agreement for purchase or sale was entered into
Our Class A and Class B common stock are listed on the New York Stock Exchange NYSE under the symbols LEN and LEN B respectively As of December 31 2024 the last reported sale price of our Class A and Class B common stock on the NYSE was 136 37 and 132 15 respectively As of December 31 2024 there were approximately 2 326 and 855 holders of record of our Class A and Class B common stock respectively
On January 14 2025 our Board declared a quarterly cash dividend of 0 50 per share on both our Class A and Class B common stock payable on February 12 2025 to holders of record at the close of business on January 29 2025
in value of our outstanding Class A or Class B common stock This authorization was in additions to what was remaining of our March 2022 stock repurchase program Repurchases are authorized to be made in open market or private transactions The repurchase authorization has no expiration date
The following graph compares the five year cumulative total return of our Class A common stock with the Dow Jones U S Home Construction Index and the Dow Jones U S Total Market Index The graph assumes 100 invested on November 30 2019 in our Class A common stock the Dow Jones U S Home Construction Index and the Dow Jones U S Total Market Index and the reinvestment of all dividends
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and accompanying notes included elsewhere in this Report It also should be read in conjunction with the disclosure under Special Note Regarding Forward Looking Statements in Part I of this Form 10 K
As the fourth quarter of fiscal 2024 began we expected affordability to ease with the reduction in interest rates by the Fed and we priced accordingly however mortgage rates climbed approximately 100 basis points instead of falling We saw sales stall at then existing price and incentive levels which required us to increase incentives provide interest rate buy downs and adjust prices to stimulate sales and avoid inventory build up As a result we have moderated our expectations for margins and sales in the first quarter of fiscal 2025 as the market adjusts and stabilizes
A combination of wavering consumer confidence and elevated acquisition costs dampened customers desire and ability to transact In addition inflation and interest rates have hindered the ability of the average family to accumulate a down payment or qualify for a mortgage Higher interest rates have curtailed the normal move up homebuyer as families expand and need more space However strong employment often goes hand in hand with a strong housing market and we expect broad based demand to resume as rates stabilize or even moderate releasing pent up demand against short supply
Tariffs and immigration have recently been added to the list of concerns confronting the homebuilding industry Our early evaluation suggests that steps we took in the past several years to move supply into the United States will reduce our exposure to the effect of increased tariffs The likely effects of reduced immigration and possible widespread deportations are more difficult to predict We feel confident that similar to the supply chain disruptions during the pandemic we will be able to work with our local trades and national manufacturers to find the most effective solutions due to our Builder of Choice position with consistent high volume and a focus on production efficiencies
The first is our focus on matching production with sales pace Even though our execution in the fourth quarter was challenged by the unexpected change in the direction of interest rates we were able to adjust incentives and pricing sufficiently to prevent our inventory of finished homes from significantly spiking We are currently focused on accelerating sales volume in order to correct the sales miss that we had in the fourth quarter Of course the catch up in sales pace comes at a cost and that cost is impacting our results of operations and placing additional pressure on margin in the first quarter of 2025 We have been able to solve the community count shortfalls of the past and ended the year with 1 447 communities which was 15 higher than the prior year Our community count positions us to drive the volume we expect at lower absorption rates as we enter 2025 We expect lower absorption rates to put less stress on our margin over time
The other core part of our operating strategy is our migration from a company with a large inventory of undeveloped and partially developed land to a land light model where we purchase land on a just in time basis In the fourth quarter of 2024 we had land purchases of 2 1 billion but 80 of these were finished homesites on which vertical construction can soon begin This lowers our asset base and our risk profile and will continue to be an intense focus for us
The last major step to complete our land light strategy will be the spin off of Millrose Properties Inc to which we expect to transfer approximately 5 billion to 6 billion of undeveloped and partially developed land subject to option agreements to repurchase the land as it is developed into finished homesites and approximately 1 billion in cash Because Millrose unlike investor financed land banking funds is designed to be able to reinvest proceeds of homesite purchases in new land acquisition and development arrangements we expect it to be a long term reliable source of land acquisition and development financing for Lennar and other homebuilders As previously disclosed in Millrose s registration statement on Form S 11 in connection with the Millrose Spin Off we are coordinating a post spin off transaction with Millrose which has already been approved by the current Millrose Board of Directors and which we expect will be ratified by the independent Millrose Board of Directors that will be appointed immediately prior to the distribution in connection with our pending acquisition of Rausch Coleman Homes a residential homebuilder based in Fayetteville Arkansas Rausch Coleman The acquisition of Rausch Coleman will result in our expanding into new and desirable markets in Arkansas Kansas and Missouri while growing our existing operations in Texas Alabama Oklahoma and Florida In this pending acquisition Lennar will acquire the work in process inventory and the operations of Rausch Coleman We intend to assign the purchase of most of Rausch Coleman s land assets the Rausch Land Assets to Millrose Similar to the other land assets Lennar expects to contribute to Millrose in connection with the Millrose Spin Off Lennar expects to enter into options to purchase the developed Rausch Land Assets homesites in accordance with pre set takedown schedules We are expecting the acquisition to be completed shortly following the distribution date of the Millrose Spin Off We believe that the ongoing relationship with Millrose can facilitate other transactions in an asset light manner as well
Looking ahead we will continue to drive production to meet the housing shortage we know persists across our markets We believe volume will continue to help reduce cost pressure and as interest rates normalize pent up demand will be released and margins will recover We are well prepared with a strong and growing national footprint an increasing community count and higher volume Our strong balance sheet and even stronger land banking relationships afford us flexibility and opportunity to execute thoughtful growth for our future We will focus on our manufacturing model and use our strategic land relationships to achieve higher returns on capital and equity
We will continue to pursue our pure play business model and reduce exposure to non core assets We will be laser focused on our just in time homesite deliveries and the resulting asset light balance sheet As we complete our asset light
Against the backdrop we anticipate 17 000 to 17 500 closings in the first quarter of fiscal 2025 with gross margins of 19 to 19 25 and we expect to deliver between 86 000 and 88 000 homes in 2025 including the impact of the Rausch Coleman acquisition
Our net earnings attributable to Lennar were 3 9 billion or 14 31 per diluted and basic share in 2024 and 3 9 billion or 13 73 per diluted and basic share in 2023 Excluding mark to market gains of 25 2 million on technology investments one time items of 90 0 million in our Multifamily segment and a 46 5 million one time gain on the sale of a technology investment net earnings attributable to Lennar in 2024 were 3 8 billion or 13 86 per diluted share Excluding mark to market losses of 50 2 million on technology investments a 65 0 million write off of one of our non public technology investments and other one time items net earnings attributable to Lennar in 2023 were 4 1 billion or 14 25 per diluted share
Revenues from home sales increased 4 in the year ended November 30 2024 to 33 8 billion from 32 5 billion in the year ended November 30 2023 Revenues were higher primarily due to a 10 increase in the number of home deliveries partially offset by a 5 decrease in the average sales price of homes delivered New home deliveries increased to 80 210 homes in the year ended November 30 2024 from 73 087 homes in the year ended November 30 2023 The average sales price of homes delivered was 423 000 in the year ended November 30 2024 compared to 446 000 in the year ended November 30 2023 The decrease in average sales price of homes delivered in the year ended November 30 2024 compared to the same period last year was primarily due to pricing to market through an increased use of incentives and product mix
Gross margins on home sales were 7 5 billion or 22 3 in the year ended November 30 2024 compared to 7 6 billion or 23 3 in the year ended November 30 2023 During the year ended November 30 2024 gross margins decreased primarily because revenue per square foot decreased while land costs increased year over year which was partially offset by a decrease in costs per square foot due to lower costs of materials as we continued to focus on construction cost savings
Selling general and administrative expenses were 2 5 billion in the year ended November 30 2024 compared to 2 2 billion in the year ended November 30 2023 As a percentage of revenues from home sales selling general and administrative expenses increased to 7 3 in the year ended November 30 2024 from 6 9 in the year ended November 30 2023 primarily due to an increase in professional expenses insurance costs and digital marketing and advertising costs to generate more direct sales
During the years ended November 30 2024 and 2023 our homebuilding operating earnings included 164 8 million and 141 2 million of interest income respectively due to an increase in cash balances and higher interest rates During the year ended November 30 2023 this was partially offset by an impairment of 36 8 million of an investment in a joint venture
Operating earnings for our Financial Services segment were 574 2 million in the year ended November 30 2024 compared to operating earnings of 507 1 million in the year ended November 30 2023 The increase in operating earnings was primarily due to higher lock volume because of an increase in capture rate and deliveries There was also an increase in profitability from our title business due to higher volume and productivity as a result of continued implementation of technology initiatives
Operating earnings for the Multifamily segment were 43 0 million in the year ended November 30 2024 compared to operating loss of 50 6 million in the year ended November 30 2023 The increase in operating earnings was due to a 179 0 million one time net gain from the sale of assets in our LMV Fund I partially offset by a one time 90 0 million write down of
noncore assets as we focus on monetizing these assets Operating loss for the Lennar Other segment was 46 9 million in the year ended November 30 2024 compared to an operating loss of 211 2 million in the year ended November 30 2023 The Lennar Other operating loss for the year ended November 30 2024 was primarily related to operating losses from certain strategic investments which were partially offset by 25 2 million of mark to market gains on our publicly traded technology investments and a 46 5 million one time gain on the sale of a technology investment Lennar Other operating loss for the year ended November 30 2023 was primarily due to negative mark to market adjustments of 50 2 million on our publicly traded technology investments and a 65 0 million write off of one of our non public technology investments
For the years ended November 30 2024 and 2023 we had a tax provision of 1 2 billion in each period which resulted in an overall effective income tax rate of 23 6 and 24 0 respectively Our overall effective income tax rate was slightly lower than last year primarily due to additional tax credits recognized during 2024
For the years ended November 30 2024 and 2023 gross margins loss on sales of land included 5 1 million and 19 9 million of deposit write offs as we walked away from 6 300 and 10 600 controlled homesites respectively
Of the total homes delivered listed above 383 homes with a dollar value of 186 4 million and an average sales price of 487 000 represent home deliveries from unconsolidated entities for the year ended November 30 2024 compared to 340 home deliveries with a dollar value of 156 2 million and an average sales price of 459 000 for the year ended November 30 2023
Of the total new orders listed above 315 homes with a dollar value of 175 7 million and an average sales price of 558 000 represent new orders from unconsolidated entities for the year ended November 30 2024 compared to 321 new orders with a dollar value of 152 9 million and an average sales price of 476 000 for the year ended November 30 2023
Of the total homes in backlog listed above 79 homes with a backlog dollar value of 63 8 million and an average sales price of 807 000 represent the backlog from unconsolidated entities at November 30 2024 compared to 147 homes with a backlog dollar value of 74 5 million and an average sales price of 507 000 at November 30 2023
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
Revenues from home sales decreased in 2024 compared to 2023 primarily due to a decrease in the average sales price of homes delivered in all the states in the segment except in New Jersey which was partially offset by an increase in the number of home deliveries in all the states in the segment The decrease in the average sales price of homes delivered in Alabama Florida and Pennsylvania was primarily due to pricing to market and product mix The increase in the average sales price of homes delivered in New Jersey was primarily due to product mix The increase in the number of home deliveries in Alabama Florida New Jersey and Pennsylvania was primarily due to an increase in the number of active communities For the year ended November 30 2024 a decrease in revenues per square foot was partially offset by a decrease in costs per square foot In addition land costs increased year over year Overall this resulted in a decrease in gross margin percentage of home deliveries
Revenues from home sales increased in 2024 compared to 2023 primarily due to an increase in the number of home deliveries in all the states in the segment which was partially offset by a decrease in the average sales price of homes delivered in all the states in the segment except in Illinois and Maryland The increase in the number of home deliveries in Georgia Illinois Indiana Maryland Minnesota North Carolina South Carolina Tennessee and Virginia was primarily due to an increase in the number of active communities The decrease in the average sales price of homes delivered in Georgia Indiana Minnesota North Carolina South Carolina Tennessee and Virginia was primarily due to pricing to market and product mix The increase in the average sales price of homes delivered in Illinois and Maryland was primarily due to product mix For the year ended November 30 2024 a decrease in revenues per square foot was more than offset by a decrease in costs per square foot In addition land costs increased year over year Overall this resulted in a decrease in gross margin percentage of home deliveries
Revenues from home sales increased in 2024 compared to 2023 primarily due to an increase in the number of home deliveries which was partially offset by a decrease in the average sales price of homes delivered The increase in the number of home deliveries was primarily due to an increase in the number of active communities The decrease in the average sales price of homes delivered was primarily due to pricing to market For the year ended November 30 2024 a decrease in revenues per square foot was partially offset by a decrease in costs per square foot In addition land costs increased year over year Overall the gross margin percentage of home deliveries decreased year over year
Revenues from home sales increased in 2024 compared to 2023 primarily due to an increase in the number of home deliveries in all the states in the segment except in Colorado which was partially offset by a decrease in the average sales price of homes delivered in Arizona Colorado and Washington The increase in the number of home deliveries in Arizona California Idaho Nevada Oregon Utah and Washington was primarily due to an increase in the number
of active communities The decrease in the number of home deliveries in Colorado was primarily due to a decrease in the number of active communities due to the timing of opening and closing of communities The decrease in the average sales price of homes delivered in Arizona Colorado and Washington was primarily due to pricing to market through an increased use of incentives and product mix The increase in the average sales price of homes delivered in California Idaho Nevada Oregon and Utah was primarily due to product mix For the year ended November 30 2024 an increase in revenues per square foot and a decrease in costs per square foot resulted in an increase in gross margin percentage of home deliveries In addition land costs increased year over year
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
At November 30 2024 and 2023 the carrying value of Financial Services commercial mortgage backed securities CMBS was 135 6 million and 140 7 million respectively Details of these securities and related debt are within Note 2 of the Notes to Consolidated Financial Statements
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 funds that build multifamily properties with the intention of retaining them after they are completed
The Multifamily segment manages and has investments in Multifamily Venture Fund I the LMV I and Multifamily Venture Fund II LP the LMV II which are long term multifamily development investment vehicles involved in the
As of November 30 2023 there were 38 rental operation projects in LMV I During the second half of fiscal year 2024 the LMV I partners decided to liquidate and sell all of the individual rental operation projects of LMV I as the fund has come to the end of its contractual life In the second half of 2024 33 LMV I rental operation projects were sold to various third party buyers We recognized a net gain of 211 5 million on the sale of these rental operation projects which was recorded as equity in earnings losses in the condensed consolidated statement of operations As a result we received net cash distributions of 199 5 million
Our Multifamily segment had equity investments in unconsolidated entities The breakout of the Multifamily segment s equity investments in unconsolidated entities and the development activities by stage were as follows
As of November 30 2024 our Multifamily segment also had a pipeline of potential future projects which were under contract or had letters of intent totaling approximately 6 5 billion in anticipated development costs across a number of states that will be developed primarily by unconsolidated entities
Our Lennar Other segment includes fund investments we retained subsequent to our sale of the Rialto investment and asset management platform as well as strategic investments in technology companies that are looking to improve the homebuilding and financial services industries to better serve homebuyers and homeowners and increase efficiencies As of November 30 2024 and 2023 our balance sheet had 894 9 million and 657 9 million respectively of assets in the Lennar Other segment which included investments in unconsolidated entities of 379 4 million and 276 2 million respectively We have investments in Blend Labs Inc Blend Labs Hippo Holdings Inc Hippo Opendoor Technologies Inc Opendoor SmartRent Inc SmartRent Sonder Holdings Inc Sonder and Sunnova Energy International Inc Sunnova which are held at market and the carrying value of which will therefore change depending on the fair value of our shareholdings in those entities on the last day of each quarter All the investments are accounted for as investments in equity securities which are held at fair value and the changes in fair values are recognized through earnings The following is a detail of Lennar Other unrealized gains losses from mark to market adjustments on our technology investments
At November 30 2024 and 2023 Lennar Other owned CMBS with carrying values of 40 6 million and 38 0 million respectively These securities were purchased at discount rates ranging from 33 to 55 with coupon rates ranging from 3 0 to 3 4 stated and assumed final distribution dates between September 2025 and March 2026 and stated maturity dates between September 2058 and March 2059 We review changes in estimated cash flows periodically to determine if an other than temporary impairment has occurred on our CMBS Based on management s assessment no impairment charges were recorded during the years ended November 30 2024 and 2023 We classify these securities as held for sale at November 30 2024 and 2023
At November 30 2024 we had cash and cash equivalents and restricted cash related to our homebuilding financial services multifamily and other operations of 5 0 billion compared to 6 6 billion at November 30 2023
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 2024 we had 4 7 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under our 2 9 billion Credit Facility thereby approximately 7 6 billion of available capacity
During 2024 and 2023 cash provided by operating activities totaled 2 4 billion and 5 2 billion respectively During 2024 cash provided by operating activities was positively impacted by our net earnings and an increase in accounts payable and other liabilities of 380 million This was offset by an increase in inventories due to our growth strategy strategic land purchases land development and construction costs of 285 million an increase in deposits and pre acquisition costs on real estate of 1 6 billion as we increased the percentage of controlled homesites and an increase in loans held for sale of 218 million primarily related to the sale of loans originated by our Financial Services segment
During 2023 cash provided by operating activities was positively impacted by our net earnings and 2 3 billion decrease in inventories due to our strategy of controlling more homesites and acquiring finished homesites thus reducing the amount of spend related to inventory This was partially offset by a decrease in accounts payable and other liabilities 626 million primarily due to the payment of income taxes an increase in receivables of 329 million an increase in deposits and preacquisition costs on real estate of 296 million as we increased the percentage of controlled homesites and an increase in loan held for sale of 367 million primarily related to the sale of loans originated by our Financial Services segment
During 2024 and 2023 cash used in investing activities totaled 303 million and 177 million respectively During 2024 our cash used in investing activities was primarily due to cash contributions of 426 million to unconsolidated entities which primarily included 1 222 million to Homebuilding unconsolidated entities 2 182 million to Lennar Other
unconsolidated entities and 3 21 million to Multifamily unconsolidated entities This was partially offset by distributions of capital from unconsolidated entities of 231 million which primarily included 1 117 million from Multifamily unconsolidated entities 2 61 million from Homebuilding unconsolidated entities and 3 54 million from our Lennar Other unconsolidated entities
During 2023 our cash used in investing activities was primarily due to cash contributions of 201 million to unconsolidated entities which primarily included 1 94 million to Homebuilding unconsolidated entities 2 81 million to Lennar Other unconsolidated entities and 3 27 million to Multifamily unconsolidated entities This was partially offset by distributions of capital from unconsolidated entities of 100 million which primarily included 1 70 million from Homebuilding unconsolidated entities and 2 29 million from our Lennar Other unconsolidated entities
During 2024 and 2023 our cash used in financing activities totaled 3 7 billion and 3 2 billion respectively During 2024 our cash used in financing activities was primarily due to the 1 2 3 billion of repurchases of our common stock which included 2 2 billion of repurchases under our repurchase program and 87 million of repurchases related to our equity compensation plan 2 549 million of dividend payments 3 233 million of net repayments under our Financial Services warehouse facilities 4 redemption of 454 million aggregate principal amount of our 4 50 senior notes due April 2024 5 100 million of partial repurchase of our 4 75 senior notes due 2027 and 6 14 million of net payments from liabilities related to consolidated inventory not owned due to activity with land banks
During 2023 our cash used in financing activities was primarily due to the 1 redemption of 378 million aggregate principal amount of our 4 875 senior notes due December 2023 2 redemption of 425 million aggregate principal amount of our 5 875 senior notes due November 2024 3 296 million combined of partial repurchase of our 4 500 senior notes due 2024 and 4 75 senior notes due 2027 4 105 million principal payment on notes payable and other borrowings 5 repurchase of our common stock for 1 2 billion which included 1 1 billion of repurchase of our stock under our repurchase program and 73 million of repurchases related to our equity compensation plan 6 431 million of dividend payments and 7 381 million of net payments from liabilities related to consolidated inventory not owned due to land sales to land banks These were partially offset by 1 29 million of net borrowings under our Financial Services warehouse facilities and 2 receipts related to noncontrolling interest of 21 million
Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our Homebuilding operations Homebuilding debt to total capital and net Homebuilding debt to total capital were calculated as follows
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 2024 Homebuilding debt to total capital was lower compared to November 30 2023 primarily as a result of an increase in stockholders equity due to net earnings and a decrease in Homebuilding debt due to debt paydowns and debt repurchases 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 subject to market conditions our multifamily and single family rental asset management businesses and some of our investment assets
We are currently preparing to spin off the Millrose Spin Off a wholly owned subsidiary for Lennar Millrose Properties Inc Millrose into an independent publicly traded company that will be listed on the New York Stock Exchange In connection with the Millrose Spin Off we plan to contribute to Millrose in exchange for all outstanding shares of its common stock a significant portion of our undeveloped partially developed and some of our fully developed land with an expected total aggregate value between 5 0 billion and 6 0 billion as well as approximately 1 0 billion of cash To consummate the Millrose Spin Off our Board declared a stock dividend on January 10 2025 pursuant to which we will distribute to Lennar s stockholders of record as of January 21 2025 approximately 80 of the total outstanding number of shares of Millrose common stock on February 7 2025 The goal of the Millrose Spin off is to generally complete our migration to an asset light operating model by spinning off a significant portion of our land assets from our balance sheet We expect Millrose to qualify as a real estate investment trust that will acquire and develop land and will deliver fully developed homesites under a land option contract on a just in time basis for Lennar and potentially other homebuilders Millrose is expected to maintain a business model with a self sustaining recycling source of land acquisition and development capital Millrose is expected to be responsible for paying to develop the undeveloped and partially developed land into homesites up to a certain pre negotiated budget with Lennar performing the actual construction work Lennar will have options to purchase the homesites in accordance with pre set takedown schedules when Lennar expects to be ready to build homes on them Millrose is expected to use option exercise proceeds to purchase additional land designated by Lennar or other homebuilders in the future usually giving Lennar or the other homebuilders options to purchase the land when it is developed
During the fourth quarter of 2024 we entered into a definitive agreement to purchase Rausch Coleman Homes a residential homebuilder based in Fayetteville Arkansas With this acquisition we will expand our footprint into new markets in Arkansas Oklahoma Alabama Kansas and Missouri while adding to our existing footprint in Texas Oklahoma Alabama and Florida As previously disclosed in Millrose s registration statement on Form S 11 in connection with furthering our land light strategy we intend to assign the purchase of Rausch Coleman s land assets the Rausch Land Assets to Millrose Similar to the other land assets Lennar expects to contribute to Millrose in connection with the Millrose Spin Off Lennar expects to enter into options to purchase the developed Rausch Land Assets in accordance with pre set takedown schedules We are expecting the acquisition to be completed in the first quarter of 2025
The proceeds available under the Credit Facility which are subject to specified conditions for borrowing may be used for working capital and general corporate purposes The credit agreement also provides that up to 477 5 million in commitments may be used for letters of credit As of both November 30 2024 and 2023 we had no outstanding borrowings under the Credit Facility 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
Under the Credit Facility agreement the Credit Agreement we are required to maintain a minimum consolidated tangible net worth a maximum leverage ratio and either a liquidity or an interest coverage ratio These ratios are calculated per the Credit Facility agreement which involves adjustments to GAAP financial measures As of the end of each fiscal quarter we are required to maintain minimum consolidated tangible net worth of 10 0 billion As of the end of each fiscal quarter we are required to maintain a maximum leverage ratio that shall not exceed 60 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 2024
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 2024 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
The Financial Services segment uses residential mortgage loan 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
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
In January 2024 our Board authorized an increase to our stock repurchase program to enable us to repurchase up to an additional 5 0 billion in value of our outstanding Class A or Class B common stock Repurchases are authorized to be made in open market or private transactions The repurchase authorization has no expiration date This authorization was in addition to what was remaining of our March 2022 stock repurchase program At November 30 2024 we have a remaining authorization to repurchase 3 4 billion in value of our Class A or B common stock Repurchases are authorized to be made in open market or private transactions The repurchase authorization has no expiration date
During the year ended November 30 2024 treasury stock increased by 14 2 million shares primarily due to our repurchase of 13 6 million shares of Class A and Class B common stock through our stock repurchase program During the year ended November 30 2023 treasury stock increased by 11 3 million shares primarily due to our repurchase of 10 0 million shares of Class A and Class B common stock through our stock repurchase program
During the years ended November 30 2024 and 2023 our Class A and Class B common stockholders received an aggregate per share annual dividend of 2 00 and 1 50 respectively On January 14 2025 our Board declared a quarterly cash dividend of 0 50 per share on both our Class A and Class B common stock payable on February 12 2025 to holders of record at the close of business on January 29 2025
Based on our current financial condition and credit relationships we believe that our operations and borrowing resources will provide for our current and long term capital requirements at our anticipated levels of activity
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 2024 they were guaranteeing Lennar Corporation s letter of credit facilities and its Credit Facility disclosed in Note 4 of the Notes to Consolidated Financial Statements The guarantees are full unconditional and joint and several and the guarantor subsidiaries are 100 directly or indirectly owned by Lennar Corporation A subsidiary s guarantee of Lennar senior notes will be suspended at any time when it is not directly or indirectly guaranteeing at least 75 million principal amount of debt of Lennar Corporation other than senior notes and a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets or all of its capital stock are sold or otherwise disposed
Supplemental information for the Obligors which excludes non guarantor subsidiaries and intercompany transactions at November 30 2024 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
We regularly monitor the results of our Homebuilding Multifamily and Lennar Other unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations We also monitor the performance of Homebuilding joint ventures in which we have investments on a regular basis to assess compliance with debt covenants For those joint ventures not in compliance with their debt covenants we evaluate and assess possible impairment of our investments We believe that substantially all of the joint ventures were in compliance with their debt covenants at November 30 2024 except for the other than temporary impairment which is included in Note 1 of the Notes to Consolidated Financial Statements
At November 30 2024 we had equity investments in 51 active Homebuilding and land unconsolidated entities of which 5 had recourse debt 14 had non recourse debt and 32 had no debt compared to 48 active Homebuilding and land unconsolidated entities at November 30 2023 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
The following table summarizes the principal maturities of our Homebuilding unconsolidated entities JVs debt as per current debt arrangements as of November 30 2024 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
At November 30 2024 Multifamily had equity investments in 23 active unconsolidated entities that are engaged in multifamily residential developments of which 18 had non recourse debt and 5 had no debt and 22 active unconsolidated entities at November 30 2023 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 manages and has investments in LMV I LMV II and Canada Pension Plan Investments Fund which are long term multifamily development investment vehicles involved in the development construction and ownership of class A multifamily assets During the year ended November 30 2024 the LMV I fund sold some of its individual rental operation projects which resulted in a net gain of 211 5 million and received net cash distributions of 199 5 million The remaining LMV I rental operation projects are expected to be monetized in the near term Details of each as of and during the year ended November 30 2024 are included in Note 3 of the Notes to Consolidated Financial Statements
We regularly monitor the results of our Multifamily unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations We also monitor the performance of Multifamily joint ventures in which we have investments on a regular basis to assess compliance with debt covenants For those joint ventures not in compliance with the debt covenants we evaluate and assess possible impairment of our investment We believe all of the joint ventures were in compliance with their debt covenants at November 30 2024
The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of November 30 2024 It does not represent estimates of future cash payments that will be made to reduce debt balances
As part of the sale of the Rialto investment and asset management platform we retained the right to receive a portion of payments with regard to carried interests if certain 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 reduce future carried interest payments to which we become entitled from the applicable funds and were recorded as equity in earnings losses in the consolidated statement of operations Our investment in the Rialto funds totaled 140 1 million and 148 7 million as of November 30 2024 and 2023 respectively
As of November 30 2024 and 2023 we had strategic technology investments in unconsolidated entities of 239 3 million and 127 5 million respectively accounted for under the equity method of accounting Our strategic technology investments through our LEN
We often obtain access to land through option contracts which generally enable us to control portions of properties owned by third parties including land banks 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 various land bank investor groups Under the arrangement in most instances when we want to acquire a property for use in our for sale single family home business we will offer the investor group the opportunity to acquire the property and give us an option to purchase all or a portion of it back in the future if it is mutually beneficial to both parties To the extent the investor group does not elect to purchase properties we identify we can utilize our other investor relationships to have other investor groups purchase the land or we can purchase it directly The arrangement with the investor group together with existing and other strategic partnerships we are discussing are significant steps in our strategy to migrate
The table below indicates the number of homesites to which we had access through option contracts with third parties or unconsolidated JVs i e controlled homesites and homesites owned at November 30 2024 and 2023
Amount includes purchase commitments due to land banks upon maturity of the contracts Our intention is to have a land bank close on the land purchase commitments and we will option land from the land bank
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 reduce our financial risk and costs of capital associated with land holdings At November 30 2024 we had access to 393 649 homesites through option contracts with third parties and unconsolidated entities in which we have investments At November 30 2024 we had 3 5 billion of non refundable option deposits and pre acquisition costs related to certain of these homesites and had posted 341 8 million of letters of credit in lieu of cash deposits under certain land and option contracts
At November 30 2024 we had letters of credit outstanding in the amount of 2 4 billion which included the 341 8 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 2 8 billion at November 30 2024 Loans in process for which interest rates were committed to the borrowers totaled approximately 1 8 billion as of November 30 2024 A significant portion of these commitments had a remaining period of 60 days or less Since a portion of these commitments is expected to expire without being exercised by the borrowers or borrowers may not meet certain criteria at the time of closing the total commitments do not necessarily represent future cash requirements
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 2024 we had open commitments amounting to 3 8 billion to sell forward contracts which include MBS and interest rate swaps with varying settlement dates through February 2025 and open future contracts in the amount of 2 3 million with the varying settlement dates through March 2025
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 believe our land underwriting standards are conservative we do not anticipate a severe decline in land values and the sharply reduced demand for new homes in the near future
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
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
Our accounting policies are more fully described in Note 1 of the notes to our consolidated financial statements included in Item 8 of this document As discussed in Note 1 the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes 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
We recorded a significant amount of goodwill in connection with the 2018 acquisition of CalAtlantic We record goodwill associated with acquisitions of businesses when the purchase price of the business exceeds the fair value of the net tangible and identifiable assets acquired In accordance with ASC Topic 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 revenues and related profits from sales of homes are recognized at the time of the closing of a sale when title to and possession of the property are transferred to the homebuyer In order to promote sales of the homes we may offer sales incentives to homebuyers The types of incentives vary on a community by community basis and home by home basis They include primarily price discounts on individual homes and financing incentives all of which are reflected as a reduction of home sales revenues Our performance obligation to deliver the agreed upon home is generally satisfied in less than one year from the original contract date Cash proceeds from home closings held in escrow for our benefit typically for approximately three days are included in Homebuilding cash and cash equivalents in the Consolidated Balance Sheets and disclosed in the notes to consolidated balance sheets Contract liabilities include customer deposit liabilities related to sold but undelivered homes that are included in other liabilities in the Consolidated Balance Sheets We periodically elect to sell parcels of land to third parties 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
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 When the Multifamily segment acts as general contractor it treats the entire construction cost as revenue and treats payments to subcontractors as expenses
Inventories are stated at cost unless the inventory within a community is determined to be impaired in which case the impaired inventory is written down to fair value Inventory costs include land land development and home construction costs real estate taxes 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
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 We evaluate the historical performance of each of our 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 could be material to our consolidated financial statements
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
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 losses 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 variable interest entity VIE or a voting interest entity and then whether we are the primary beneficiary or have
control or significant influence We believe that the equity method of accounting is appropriate for our investments in unconsolidated entities where we are not the primary beneficiary and we do not have a controlling interest but rather share control with our partners
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 3 the length of the time and the extent to which the market value has been less than cost and 4 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
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 if the other partner s lack the intent and financial wherewithal to remain in the entity As a result we continue to fund operations and debt paydowns through partner loans or substituted capital contributions 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
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
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
The table below provides information at November 30 2024 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 2024 Weighted average variable interest rates are based on the variable interest rates at November 30 2024
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
We have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries the Company as of November 30 2024 and 2023 the related consolidated statements of operations and comprehensive income loss equity and cash flows for each of the three years in the period ended November 30 2024 and the related notes and the financial statement schedule listed in the Index at Item 15 collectively referred to as the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company as of November 30 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended November 30 2024 in conformity with accounting principles generally accepted in the United States of America
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of November 30 2024 based on criteria established in
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 23 2025 expressed an unqualified opinion on the Company s internal control over financial reporting
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relate to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole and we are not by communicating the critical audit matter below providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
Generally Accepted Accounting Principles GAAP requires the assessment of whether an entity is a Variable interest entity VIE and if so if the Company is the primary beneficiary at the inception of the entity or at a reconsideration event Additionally GAAP requires the consolidation of VIEs in which an enterprise has 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
Certain of the Company s investments in unconsolidated entities within their Homebuilding and Multifamily segments need to be evaluated for consolidation including determining whether the joint venture is a VIE and if so whether the Company is the primary beneficiary This assessment is performed at the formation of the joint venture and upon the occurrence of reconsideration events This determination requires significant judgment by management
We identified the consolidation and primary beneficiary assessment upon formation and the occurrence of reconsideration events of certain of the Company s VIE s as a critical audit matter given the significant judgment required by management
We tested the design and operating effectiveness of the investment consolidation controls over the initial accounting assessment of joint ventures and the continuous reassessment for reconsideration events as required by the accounting framework
Reading the joint venture agreements and other related documents and evaluating the structure and terms of the agreement as well as any reconsideration events which took place during the year to determine if the joint venture should be classified as a VIE
If an entity is determined to be a VIE considering whether the Company appropriately determined the primary beneficiary by evaluating the contractual arrangements of the entity to determine if the Company has the power to direct activities that most significantly impact the VIE s economic performance and if the Company has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could be significant to the VIE
Evaluating the evidence obtained in other areas of the audit to determine if there were additional reconsideration events that had not been identified by the Company including among others reading joint venture board minutes and agreeing the terms of certain joint venture agreements and side agreements if any
ASC 810 the Company is required to separately disclose on its consolidated balance sheets the assets of consolidated variable interest entities VIEs that are owned by the consolidated VIEs and liabilities of consolidated VIEs as to which there is no recourse against the Company
As of November 30 2024 total assets include 3 7 billion related to consolidated VIEs of which 67 0 million is included in Homebuilding cash and cash equivalents 6 0 million in Homebuilding receivables net 9 7 million in Homebuilding finished homes and construction in progress 602 9 million in Homebuilding land and land under development 2 8 billion in Homebuilding consolidated inventory not owned 71 8 million in Homebuilding deposits and pre acquisition costs on real estate 0 3 million in Homebuilding investments in unconsolidated entities 42 3 million in Homebuilding other assets and 33 9 million in Multifamily assets
As of November 30 2023 total assets include 1 9 billion related to consolidated VIEs of which 22 8 million is included in Homebuilding cash and cash equivalents 1 8 million in Homebuilding receivables net 18 3 million in Homebuilding finished homes and construction in progress 628 0 million in Homebuilding land and land under development 1 2 billion in Homebuilding consolidated inventory not owned 55 0 million in Homebuilding deposits and pre acquisition costs on real estate 0 3 million in Homebuilding investments in unconsolidated entities 23 0 million in Homebuilding other assets and 32 6 million in Multifamily assets
Treasury stock at cost 2024 23 814 148 shares of Class A common stock and 4 532 701 shares of Class B common stock 2023 11 207 889 shares of Class A common stock and 2 920 200 shares of Class B common stock
As of November 30 2024 total liabilities include 2 7 billion related to consolidated VIEs as to which there was no recourse against the Company of which 67 3 million is included in Homebuilding accounts payable 2 6 billion in Homebuilding liabilities related to consolidated inventory not owned 6 0 million in Homebuilding senior notes and other debts payable net 45 8 million in Homebuilding other liabilities and 1 0 million in Multifamily liabilities
As of November 30 2023 total liabilities include 1 2 billion related to consolidated VIEs as to which there was no recourse against the Company of which 53 7 million is included in Homebuilding accounts payable 1 1 billion in Homebuilding liabilities related to consolidated inventory not owned 38 1 million in Homebuilding other liabilities and 4 1 million in Multifamily liabilities
The accompanying consolidated financial statements include the accounts of Lennar Corporation and all subsidiaries partnerships and other entities in which Lennar Corporation has a controlling interest and VIEs see Note 8 in which Lennar Corporation is deemed the primary beneficiary the Company The Company s investments in both unconsolidated entities in which a significant but less than controlling interest is held and in VIEs in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method All intercompany transactions and balances have been eliminated in consolidation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes Actual results could differ from those estimates
Homebuilding revenues and related profits from sales of homes are recognized at the time of the closing of a sale when title to and possession of the property are transferred to the homebuyer In order to promote sales of homes the Company may offer sales incentives to homebuyers The types of incentives vary on a community by community basis and home by home basis They include primarily price discounts on individual homes and financing incentives all of which are reflected as a reduction of home sales revenues For the years ended November 30 2024 2023 and 2022 sales incentives offered to homebuyers averaged 48 800 per home or 10 3 as a percentage of home sales revenues 42 900 per home or 8 8 as a percentage of home sales revenues and 17 300 per home or 3 5 as a percentage of home sales revenues respectively The Company s 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 are included in Homebuilding cash and cash equivalents in the Company s consolidated balance sheets Contract liabilities include customer deposits liability related to sold but undelivered homes that are included in other liabilities in the Company s consolidated balance sheets The Company periodically elects 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
The Company expenses advertising costs as incurred Advertising costs were 190 9 million 146 0 million and 102 1 million for the years ended November 30 2024 2023 and 2022 respectively These costs were included in Homebuilding costs and expenses in the Company s consolidated statements of operations and comprehensive income loss for the years ended November 30 2024 2023 and 2022
The Company has share based awards outstanding under the 2016 Equity Incentive Plan the Plan which provides for the granting of stock options stock appreciation rights restricted common stock nonvested shares and other share based awards to officers associates and directors The exercise prices of stock options may not be less than the market value of the common stock on the date of the grant Exercises are permitted in installments determined when options are granted Each stock option will expire on a date determined at the time of the grant but not more than 10 years after the date of the grant The Company accounts for stock option awards and nonvested share awards granted under the Plan based on the estimated grant date fair value
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents Due to the short maturity period of cash equivalents the carrying amounts of these instruments approximate their fair values Homebuilding restricted cash consists of customer deposits on home sales held in restricted accounts until title transfers to the homebuyer as required by the state and local governments in which the homes were sold as well as funds on deposit to secure and support performance obligations Financial Services restricted cash consists of upfront deposits and application fees LMF Commercial receives before originating loans and is recognized as income once the loan has been originated as well as cash held in escrow by the Company s loan service provider on behalf of customers and lenders which is disbursed in accordance with agreements between the transacting parties
At November 30 2024 and 2023 Homebuilding accounts receivable primarily related to receivables from land banks for land development rebates and joint ventures The Company performs ongoing credit evaluations of its customers and generally does not require collateral for accounts receivable Receivables from land banks represent development costs incurred by the Company which are reimbursable from the land banks Mortgages and notes receivable arising from the sale of homes and land are generally collateralized by the property sold to the buyer Allowances are maintained for potential credit losses based on historical experience present economic conditions and other factors considered relevant by the Company Balances as of November 30 2024 and 2023 are noted below
Finished homes and construction in progress are included within 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 home construction costs real estate taxes and interest related to development and construction Construction overhead and selling expenses are expensed as incurred Homes held for sale are classified as inventories until delivered Land land development amenities and other costs are accumulated by specific area and allocated to homes within the respective areas
The Company reviews its inventory for indicators of impairment by evaluating each community during each reporting period The inventory within each community is categorized as finished homes construction in progress or land under development based on the development state of the community There were 1 436 and 1 255 active communities excluding unconsolidated entities as of November 30 2024 and 2023 respectively If the undiscounted projected 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 its review for indicators of impairment on a community level the Company evaluates 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 The Company pays particular attention to communities in which inventory is moving at a slower than anticipated absorption pace and communities whose average sales price and or margins are trending downward and are anticipated to continue to trend downward From this review the Company identifies communities in which to assess if the carrying values exceed their undiscounted projected cash flows
The Company estimates the fair value of its 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
Each of the homebuilding markets in which the Company operates is unique as homebuilding has historically been a local business driven by local market conditions and demographics Each of the Company s homebuilding markets has specific supply and demand relationships reflective of local economic conditions The Company s projected cash flows are impacted by many assumptions Some of the most critical assumptions in the Company s cash flow model are projected absorption pace for home sales sales prices and costs to build and deliver homes on a community by community basis
In order to arrive at the assumed absorption pace for home sales and the assumed sales prices included in the Company s cash flow model the Company analyzes its historical absorption pace and historical sales prices in the community and in other comparable communities in the geographical area In addition the Company considers internal and external market studies and places greater emphasis on more current metrics and trends which generally include but are not limited to statistics and forecasts on population demographics and on sales prices in neighboring communities unemployment rates and availability and sales prices of competing product in the geographical area where the community is located as well as the
Generally if the Company notices a variation from historical results over a span of two fiscal quarters the Company considers such variation to be the establishment of a trend and adjusts its historical information accordingly in order to develop assumptions on the projected absorption pace and sales prices in the cash flow model for a community
In order to arrive at the Company s assumed costs to build and deliver homes the Company generally assumes a cost structure reflecting contracts currently in place with its vendors adjusted for any anticipated cost reduction initiatives or increases in cost structure Those costs assumed are used in the cash flow model for the Company s communities
Since the estimates and assumptions included in the Company s 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 the Company to incur additional impairment charges in the future
The determination of fair value requires discounting the projected cash flows at a rate the Company believes 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
The Company estimates the fair value of inventory evaluated for impairment based on market conditions and assumptions made by management at the time the inventory is evaluated which may differ materially from actual results if market conditions or assumptions change For example changes in market conditions and other specific developments or changes in assumptions may cause the Company to re evaluate its strategy regarding previously impaired inventory as well as inventory not currently impaired but for which indicators of impairment may arise if market deterioration occurs and certain other assets that could result in further valuation adjustments and or additional write offs of option deposits and pre acquisition costs due to abandonment of those options contracts
The Company s valuation adjustments for finished homes and construction in progress were included in Homebuilding costs and expenses in the Company s consolidated statements of operations and comprehensive income loss for the years ended November 30 2024 and 2023 The table below summarizes communities reviewed for indicators of impairment and communities with valuation adjustments recorded
The table below summarizes the most significant unobservable inputs used in the Company s discounted cash flow model to determine the fair value of its communities for which the Company recorded valuation adjustments
In the course of executing on the Company s land light strategy the Company may sell land to third parties including land banks and unconsolidated entities while maintaining an option to repurchase the land in the future Although such transactions include cash consideration from the buyer and the transfer of title from the Company to the buyer such transactions do not meet the criteria for revenue recognition under GAAP due to the Company s option to repurchase the land from the buyer in the future As such land related to such transactions remains on the Company s accompanying consolidated balance sheet and is reclassified from land and land under development to consolidated inventory not owned The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and the Company s cash deposits During the year ended November 30 2024 consolidated inventory not owned increased by 1 1 billion with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30 2024 The increase was primarily due to consolidation of land bank option contracts and reclassifications from land and land under development to consolidated inventory not owned during
the year ended November 30 2024 as the Company continued to focus on increasing its controlled homesites as compared to owned homesites The increase was partially offset by takedowns during the year ended November 30 2024
Company to defer acquiring portions of properties owned by third parties including land banks and unconsolidated entities until it has determined whether to exercise its option The use of option contracts allows the Company to reduce the financial risks associated with long term land holdings
As of November 30 2024 the Company had 3 5 billion of non refundable option deposits and pre acquisition costs related to certain of these homesites The Company s option contracts sometimes include price adjustment provisions which adjust the purchase price of the land to its approximate fair value at the time of acquisition or are based on the fair value at the time of takedown
Deposits and pre acquisition costs on real estate are stated at cost unless the deposit or pre acquisition costs within a community is determined to be impaired in which case the impaired cost is written down to fair value Costs include deposits on land purchase contracts and capitalizable due diligence and development costs incurred prior to the acquisition of land
Some option contracts contain a predetermined take down schedule for the optioned land parcels However in substantially all instances the Company has the right and ability to not exercise its option and forfeit its deposit without further penalty other than termination of the option and loss of any unapplied portion of its deposit and pre acquisition costs and the incurrence of any applicable termination fee associated with the option contract Therefore in all instances the Company does not consider the take down price to be a firm contractual obligation In determining whether to walk away from an option contract the Company evaluates the option primarily based upon its expected cash flows from the property under option If the Company intends to walk away from an option contract it records a charge to earnings in the period such decision is made for the unapplied deposit amount and any related pre acquisition costs and accrues any applicable termination fee associated with the option contract During the years ended November 30 2024 and 2023 the Company wrote off 5 1 million and 19 9 million respectively of deposit and pre acquisition costs To reflect the purchase price of homesite take downs related to option contracts that the Company decided to exercise the Company had a net reclass related to option deposits from consolidated inventory not owned to finished homes and construction in progress in the accompanying consolidated balance sheet as of November 30 2024
The Company evaluates the long lived assets in unconsolidated entities for indicators of impairment during each reporting period The Company s proportionate share of a valuation adjustment is reflected in the Company s Homebuilding Multifamily or Lennar Other equity in earnings losses from unconsolidated entities with a corresponding decrease to its Homebuilding Multifamily or Lennar Other investment in unconsolidated entities
Additionally the Company evaluates whether a decrease in the fair value of an investment below its carrying value is other than temporary This evaluation includes an assessment of 1 projected future distributions from the unconsolidated entities 2 the length of the time and the extent to which the market value has been less than cost and 3 various other factors which include but are not limited to relationships with the other partners and banks general economic market conditions unfavorable regulatory actions land status and liquidity needs of the unconsolidated entity If the Company determines from the evaluation of the indicators that the decline in the fair value of the investment is other than temporary the Company will write down the investment to fair value The impairment if any would be included in Homebuilding other income net Multifamily other gain loss or Lennar Other other gain loss During the year ended November 30 2024 the Company evaluated its investments in unconsolidated entities and concluded that no material other than temporary impairments were required During the year ended November 30 2023 the Company estimated the fair value of an investment in an unconsolidated entity using a cash flow analysis with a 15 discount rate and concluded that the investment had an other than temporary impairment of 36 8 million included in other income expense net in the Company s consolidated statements of operations and comprehensive income loss
The Company tracks its share of cumulative earnings and distributions of its joint ventures JVs For purposes of classifying distributions received from JVs in the Company s consolidated statements of cash flows cumulative distributions are treated as returns on capital to the extent of cumulative earnings and included in the Company s consolidated statements of cash flows as operating activities Cumulative distributions in excess of the Company s share of cumulative earnings are treated as returns of capital and included in the Company s consolidated statements of cash flows as cash from investing activities
GAAP requires the assessment of whether an entity is a variable interest entity VIE and if so if the Company is the primary beneficiary at the inception of the entity or at a reconsideration event Additionally GAAP requires the consolidation of VIEs in which an enterprise has 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
The Company s variable interest in VIEs may be in the form of 1 equity ownership 2 contracts to purchase assets 3 management and development agreements between the Company and a VIE 4 loans provided by the Company to a VIE or other partner and or 5 guarantees provided by members to banks and other third parties The Company examines specific criteria and uses its judgment when determining if it is the primary beneficiary of a VIE Factors considered in determining whether the Company is 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 if any between the Company and the other partner s and contracts to purchase assets from VIEs The determination of whether an entity is a VIE and if so whether the Company is the primary beneficiary may require management to exercise significant judgment
Generally all major decision making in the Company s joint ventures is shared among all partners In particular business plans and budgets are generally required to be unanimously approved by all partners Generally the Company has options on less than a majority of the JV s assets at the balance sheet date and the purchase prices under its option contracts are initially negotiated at fair value
Generally Homebuilding Multifamily and Lennar Other unconsolidated entities are determined to be VIEs due to insufficient equity at risk for the JV entity as the partner s continue to provide subordinated financial support in the form of capital contributions Homebuilding Multifamily and Lennar Other unconsolidated entities become VIEs and consolidate if the other partner s lack the intent or financial wherewithal to remain in the entity As a result the Company continues to fund operations and debt paydowns through partner loans or substituted capital contributions
Goodwill is recorded with regard to 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 350
the Company evaluates goodwill for potential impairment on at least an annual basis The Company has 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 If a quantitative assessment is performed the fair value estimate is derived through various valuation methods including the use of discounted expected future cash flows of each reporting unit The expected future cash flows for each reporting unit 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 the Company s estimate which may cause goodwill to be impaired The annual qualitative goodwill impairment analysis was performed as of September 30 2024 and no impairment was recorded
Operating properties and equipment are recorded at cost and are included in other assets in the consolidated balance sheets The assets are depreciated over their estimated useful lives using the straight line method At the time operating properties and equipment are disposed of the asset and related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to earnings The estimated useful life for operating properties is 30 years for furniture fixtures and equipment is two to 10 years and for leasehold improvements is five years or the life of the lease whichever is shorter Operating properties are reviewed for possible impairment if there are indicators that their carrying amounts are not recoverable
The Company holds investment securities classified as available for sale or held to maturity Available for sale securities are recorded at fair value Any unrealized holding gains or losses on available for sale securities are reported as accumulated other comprehensive income or loss which is a separate component of stockholders equity net of tax until realized Securities classified as held to maturity are carried at amortized cost because they are purchased with the intent and ability to hold to maturity
At November 30 2024 and 2023 the Financial Services segment had investment securities classified as held to maturity totaling 135 6 million and 140 7 million respectively which consist mainly of commercial mortgage backed securities CMBS corporate debt obligations U S government agency obligations certificates of deposit and U S treasury securities that mature at various dates mainly within three years
At November 30 2024 and 2023 the Lennar Other segment had investment securities classified as held for sale totaling 40 6 million and 38 0 million respectively Additionally the Lennar Other segment had investments in equity securities with a readily determinable fair value publicly traded common stock not accounted for under the equity method that are recorded at fair value with unrealized gains and losses included in earnings For equity securities without a readily determinable fair value the investment is recorded at cost less any impairment plus or minus adjustments related to observable transactions for the same or similar securities with unrealized gains and losses included in earnings The Lennar Other segment had investments in equity securities of 347 8 million and 297 2 million that are recorded at fair value with unrealized gains and losses included in earnings as of November 30 2024 and 2023 respectively
For equity method investments in the Lennar Other segment the Company records the investment as Lennar Other investments in unconsolidated entities The Company regularly reviews its investments in unconsolidated entities to determine whether there is a decline in fair value below book value If there is a decline that is other than temporary the investment is written down to fair value There were no impairments recorded during the years ended November 30 2024 and 2023
Interest and real estate taxes attributable to land and homes are capitalized as inventory costs while they are being actively developed Interest related to homebuilding and land including interest costs relieved from inventories is included in costs of homes sold and costs of land sold Interest expense related to the Financial Services and Multifamily operations is included in its costs and expenses
During the years ended November 30 2024 2023 and 2022 interest incurred by the Company s homebuilding operations related to homebuilding debt was 129 3 million 187 6 million and 230 8 million respectively interest capitalized into inventories was 110 5 million 172 0 million and 211 7 million respectively
The Company records income taxes under the asset and liability method whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating loss and tax credit carryforwards Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted Interest related to unrecognized tax benefits is recognized in the financial statements as a component of income tax expense
A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if based on the available evidence it is more likely than not that such assets will not be realized Accordingly the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Company based on the consideration of all available positive and negative evidence using a more likely than not standard with respect to whether deferred tax assets will be realized This assessment considers among other matters the nature frequency and severity of current and cumulative losses actual earnings forecasts of future profitability the duration of statutory carryforward periods the Company s experience with loss carryforwards not expiring unused and tax planning alternatives
Based on the analysis of positive and negative evidence the Company believed that there was enough positive evidence for the Company to conclude that it was more likely than not that the Company would realize the majority of its deferred tax assets As of November 30 2024 and 2023 the Company s net deferred tax assets of 272 4 million and 326 5 million included a valuation allowance of 2 6 million and 2 3 million respectively See Note 5 for additional information
Reflected within the consolidated balance sheets the other liabilities balance as of November 30 2024 and 2023 included accrued interest payable product warranty as noted below accrued bonuses accrued wages and benefits lease liabilities deferred income customer deposits income taxes payable and other accrued liabilities
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 on historical data and trends with respect to similar product types and geographical areas The Company regularly monitors the warranty reserve and makes adjustments to its pre existing warranties in order to reflect changes in trends and historical data as information becomes available Warranty reserves are included in Homebuilding other liabilities in the consolidated balance sheets The activity in the Company s warranty reserve was as follows
The adjustments to pre existing warranties from changes in estimates during the years ended November 30 2024 and 2023 primarily related to specific claims in certain of the Company s homebuilding communities and other adjustments
Reserves for estimated losses for construction defects general liability and workers compensation have been established using the assistance of a third party actuary The third party actuary uses the Company s historical warranty and construction defect data to assist management in estimating the unpaid claims claim adjustment expenses and incurred but not reported claims reserves for the risks that the Company is assuming under the general liability and construction defect programs The estimates include provisions for inflation claims handling and legal fees These estimates are subject to a high degree of variability due to uncertainties such as trends in construction defect claims relative to the markets and the types of products the Company builds claim settlement patterns insurance industry practices and legal interpretations Given the high degree of judgment required in determining these estimated liability amounts actual future costs could differ significantly from the Company s currently estimated amounts The Company s self insurance reserve net of expected recoveries as of November 30 2024 and 2023 was 277 4 million and 245 8 million respectively and was included in Homebuilding other liabilities Amounts incurred in excess of the Company s self insurance occurrence or aggregate retention limits are covered by insurance up to the Company s purchased coverage levels The Company s insurance policies are maintained with highly rated underwriters for whom the Company believes counterparty default risk is not significant
Basic earnings per share is computed by dividing net earnings attributable to common stockholders by the weighted average number of common shares outstanding for the period Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the Company
All outstanding nonvested shares that contain non forfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the two class method The two class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings The Company s restricted common stock nonvested shares are considered participating securities
The Company is authorized to issue 500 000 shares of preferred stock with a par value of 10 per share and 100 million shares of participating preferred stock with a par value of 0 10 per share No shares of preferred stock or participating
During the years ended November 30 2024 2023 and 2022 the Company s Class A and Class B common stockholders received a per share annual dividend of 2 00 1 50 and 1 50 respectively The only significant difference between the Class A common stock and Class B common stock is that Class A common stock entitles holders to one vote per share and the Class B common stock entitles holders to ten votes per share
As of November 30 2024 Stuart Miller the Company s Executive Chairman and Co Chief Executive Officer directly owned or controlled through family owned entities shares of Class A and Class B common stock which represented approximately 40 voting power of the Company s stock
In January 2024 the Company s Board of Directors authorized an increase to its stock repurchase program to enable it to repurchase up to an additional 5 billion in value of its outstanding Class A or Class B common stock Repurchases are authorized to be made in open market or private transactions This authorization was in addition to what was remaining of the Company s March 2022 stock repurchase program The repurchase authorization has no expiration date At November 30 2024 we have a remaining authorization to repurchase 3 4 billion in value of the Company s Class A or B common stock
There are no restrictions on the payment of dividends on common stock by the Company There are no agreements which restrict the payment of dividends by subsidiaries of the Company other than the need to maintain the financial ratios and net worth requirements under the Financial Services segment s warehouse lines of credit which restrict the payment of dividends from the Company s mortgage subsidiaries following the occurrence and during the continuance of an event of default thereunder
Under the Company s 401 k Plan the Plan contributions made by associates can be invested in a variety of mutual funds or proprietary funds provided by the Plan trustee The Company may also make contributions for the benefit of associates The Company records as compensation expense its contribution to the Plan For the years ended November 30 2024 2023 and 2022 this amount was 69 7 million 53 4 million and 37 5 million respectively
The fair value of nonvested shares is determined based on the trading price of the Company s common stock on the grant date The weighted average fair value of nonvested shares granted during the years ended November 30 2024 2023 and 2022 was 141 11 91 61 and 88 92 respectively A summary of the Company s nonvested shares activity for the year ended November 30 2024 was as follows
At November 30 2024 there was 134 2 million of unrecognized compensation expense related to unvested share based awards granted under the Company s share based payment plan all of which relates to nonvested shares with a weighted
Premiums on title policies issued directly by the Company are recognized as revenue on the effective date of the title policies Escrow fees and loan origination revenues are recognized at the time the related real estate transactions are completed usually upon the close of escrow Expected gains and losses from the sale of loans and their related servicing rights are included in the measurement of all written loan commitments that are accounted for at fair value through earnings at the time of commitment Interest income on loans held for sale and loans held for investment is recognized as earned over the terms of the mortgage loans based on the contractual interest rates
Loans held for sale by the Financial Services segment including the rights to service the mortgage loans are carried at fair value and changes in fair value are reflected in earnings Premiums and discounts recorded on these loans are presented as an adjustment to the carrying amount of the loans and are not amortized Management believes carrying loans held for sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions
In addition the Financial Services segment recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower The fair value of these servicing rights is included in Financial Services other assets as of November 30 2024 and 2023 Fair value of the servicing rights is determined based on values in the Company s servicing sales contracts
The Company establishes reserves for possible losses associated with mortgage loans previously originated and sold to investors based upon among other things an analysis of repurchase requests received an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements Loan origination liabilities are included in Financial Services liabilities in the consolidated balance sheets The activity in the Company s loan origination liabilities was as follows
Loans for which the Company has the positive intent and ability to hold to maturity consist of mortgage loans carried at the principal amounts outstanding net of unamortized discounts and allowance for credit losses Discounts are amortized over the estimated lives of the loans using the interest method
The Financial Services segment provides an allowance for credit losses The provision recorded and the adequacy of the related allowance is determined by management s continuing evaluation of the loan portfolio in light of past loan loss experience credit worthiness and nature of underlying collateral present economic conditions and other factors considered relevant by the Company s management Anticipated changes in economic factors which may influence the level of the allowance are considered in the evaluation by the Company s management when the likelihood of the changes can be reasonably determined While the Company s management uses the best information available to make such evaluations future adjustments to the allowance may be necessary as a result of future economic and other conditions that may be beyond management s control
The Financial Services segment in the normal course of business uses derivative financial instruments to reduce its exposure to fluctuations in mortgage related interest rates The segment uses mortgage backed securities MBS forward commitments option contracts future contracts and investor commitments to protect the value of fixed rate locked loan commitments and loans held for sale from fluctuations in mortgage related interest rates These derivative financial instruments are carried at fair value with the changes in fair value included in Financial Services revenues
The originated mortgage loans are classified as loans held for sale and are recorded at fair value The Company elected the fair value option for LMF Commercial s loans held for sale in accordance with ASC 825
which permits entities to measure various financial instruments and certain other items at fair value on a contract by contract basis Management believes that carrying loans held for sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments which are also carried at fair value used to economically hedge them without having to apply complex hedge accounting provisions Changes in fair values of the loans are reflected in Financial Services revenues in the accompanying consolidated statements of operations Interest income on these loans is calculated based on the interest rate of the loan and is recorded in Financial Services revenues in the accompanying consolidated statements of operations Substantially all of the mortgage loans originated are sold within a short period of time in securitizations on a servicing released non recourse basis although the Company remains liable for certain limited industry standard representations and warranties related to loan sales The Company recognizes revenue on the sale of loans into securitization trusts when control of the loans has been relinquished
The Multifamily segment provides management services with respect to the development construction and property management of rental projects in joint ventures in which the Company has investments or the funds the Company manages As a result the 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 In addition the Multifamily segment provides general contractor services for the construction of some of the rental projects Both management fees and general contractor revenue are recognized 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 or construction services These customer contracts require the Company to provide management and general contractor services which represents a performance obligation that the Company satisfies over time Management fees and general contractor services in the Multifamily segment are included in Multifamily revenue
ASU 2024 03 which requires disclosure of disaggregated information about certain income statement expense line items in the notes to the financial statements on an interim and annual basis ASU 2024 03 will be effective for the annual reporting periods in fiscal years beginning after December 15 2026 with early adoption permitted The Company is currently evaluating the impact that the adoption of ASU 2024 03 will have on its consolidated financial statements
ASU 2023 09 ASU 2023 09 requires public companies to annually 1 disclose specific categories in the rate reconciliation and 2 provide additional information for reconciling items that meet a quantitative threshold if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate ASU 2023 09 will be effective for the annual reporting periods in fiscal years beginning after December 15 2024 The Company is currently evaluating ASU 2023 09 and does not expect it to have a material effect on its consolidated financial statements
ASU 2023 07 ASU 2023 07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker CODM and included within the segment measure of profit or loss an amount and description of its composition for other segment items to reconcile to segment profit or loss and the title and position of the entity s CODM ASU 2023 07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15 2023 and interim reporting periods in fiscal years beginning after December 31 2024 The Company is currently reviewing the impact that the adoption of ASU 2023 07 may have on its consolidated financial statements and disclosure
Certain prior year segment information in the consolidated financial statements has been reclassified to conform with the 2024 presentation This reclassification was for operational purposes and between segments and had no impact on the Company s total assets total equity revenue or net income in the consolidated financial statements
Each reportable segment follows the accounting policies described in Note 1 Summary of Significant Accounting Policies to the consolidated financial statements Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent stand alone entity during the periods presented
The Company s homebuilding operations construct and sell homes primarily for first time move up and active adult homebuyers primarily under the Lennar brand name In addition the Company s homebuilding operations purchase develop and sell land to third parties The Company s chief operating decision makers manage and assess the Company s performance at a regional level Therefore the Company performed an assessment of its operating segments in accordance with ASC 280
Company s publicly traded technology investments and a 65 0 million write off of one of the Company s non public technology investments Operating loss for Lennar Other for the year ended November 30 2022 included 655 1 million of mark to market unrealized losses on the Company s publicly traded technology investments
Corporate and unallocated expenses primarily represent costs of operations at the Company s corporate headquarters in Miami These operations include the Company s executive offices information technology treasury corporate accounting and tax legal internal audit and human resources Also included are property expenses related to the leases of corporate offices data processing general corporate expenses and charitable foundation contributions to the Lennar Foundation
Information about homebuilding activities in states which are not economically similar to other states in the same geographic area is grouped under Homebuilding Other which is not considered a reportable segment
Evaluation of segment performance is based primarily on operating earnings loss before income taxes Operations of the Company s Homebuilding segments primarily include the construction and sale of single family attached and detached homes as well as the purchase development and sale of residential land directly and through the Company s unconsolidated entities Operating earnings loss for the Homebuilding segments consist of revenues generated from the sales of homes and land other revenues from management fees and forfeited deposits equity in earnings losses from unconsolidated entities and other income expense net less the cost of homes sold and land sold and selling general and administrative expenses incurred by the segment Homebuilding Other also includes management of a fund that acquires single family homes and holds them as rental properties
Operations of the Financial Services segment include mortgage financing title and closing services primarily for buyers of the Company s homes They also include originating and selling into securitizations commercial mortgage loans through its LMF Commercial business The Financial Services segment sells substantially all of the loans it originates within a short period of time in the secondary mortgage market the majority of which are sold on a servicing released non recourse basis After the loans are sold the Company retains potential liability for possible claims by purchasers that it breached certain limited industry standard representations and warranties in the loan sale agreements Financial Services operating earnings consist of revenues generated primarily from mortgage financing title and closing services and sales of property and casualty insurance less the cost of such services and certain selling general and administrative expenses incurred by the segment The Financial Services segment operates generally in the same states as the Company s homebuilding operations
At November 30 2024 the Financial Services segment had warehouse facilities which were all 364 day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows
The Financial Services segment uses the residential mortgage loan 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 the Company 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
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
Substantially all of the residential loans the Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released non recourse basis After the loans are sold the Company retains potential liability for possible claims by purchasers that it breached certain limited industry standard representations and warranties in the loan sale agreements Purchasers sometimes try to defray losses by purporting to have found inaccuracies related to sellers representations and warranties in particular loan sale agreements Mortgage investors could seek to have the Company buy back
mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties The Company s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors The Company establishes accruals for such possible losses based upon among other things an analysis of repurchase requests received an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as
previous settlements While the Company believes that it has adequately reserved for known losses and projected repurchase requests given the volatility in the residential mortgage industry and the uncertainty regarding the ultimate resolution of these claims if either actual repurchases or the losses incurred resolving those repurchases exceed the Company s expectations additional recourse expense may be incurred The provision for loan losses was immaterial for both the years ended November 30 2024 and 2023 Loan origination liabilities were 16 7 million and 17 6 million as of November 30 2024 and 2023 respectively and included in Financial Services liabilities in the Company s consolidated balance sheets
At November 30 2024 and 2023 the Financial Services segment held commercial mortgage backed securities CMBS These securities are classified as held to maturity based on the segment s intent and ability to hold the securities until maturity and changes in estimated cash flows are reviewed periodically to determine if an other than temporary impairment has occurred Based on the segment s assessment no impairment charges were recorded during the years ended November 30 2024 and 2023 The Company has financing agreements to finance CMBS that have been purchased as investments by the Financial Services segment
The Company is actively involved primarily through unconsolidated funds and joint ventures in the development construction and property management of multifamily rental properties The Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U S markets
The Multifamily Segment i manages and owns interests in funds that are engaged in the development of multifamily residential communities with the intention of holding the newly constructed and occupied properties as income and fee generating assets and ii manages and owns interests in joint ventures that are engaged in the development of multifamily residential communities in most instances with the intention of selling them when they are built and substantially occupied The multifamily business is a vertically integrated platform with capabilities spanning development construction property management asset management and capital markets Revenues are generated from the sales of land from construction activities and from management and promote fees generated from funds and joint ventures less the cost of sales of land sold expenses related to construction activities and general and administrative expenses Operations of the Multifamily Segment also include equity in earnings losses from unconsolidated entities and other gains which includes proceeds of sales of buildings and investments
Rialto asset and investment management platform Operations of the Lennar Other segment include operating earnings loss consisting of revenues generated primarily from the Company s share of carried interests in the Rialto fund investments along with equity in earnings losses from the Rialto fund investments and technology investments realized and unrealized gains losses from investments in equity securities and other income expense net from the remaining assets related to the Company s former Rialto segment
International Inc Sunnova which are held at market and the carrying value of which will therefore change depending on the value of the Company s shareholdings in those entities on the last day of each quarter All the investments are accounted for as investments in equity securities which are held at fair value and the changes in fair values are recognized through earnings The following is a detail of Lennar Other unrealized gains losses from mark to market adjustments on the Company s technology investments
Doma Holdings Inc Doma which went public during the year ended November 30 2021 is an investment that was accounted for under the equity method due to the Company s significant ownership interest of 25 of Doma which allowed the Company to exercise significant influence During the year ended November 30 2024 the Company sold its investment in Doma and recorded a gain of 20 9 million in other income expense net in the consolidated statement of operations and comprehensive income loss
During the year ended November 30 2024 there was a 46 5 million one time realized gain in Lennar Other on the sale of a technology investment that was included in other income expense net and other gains losses on the Company s consolidated statements of operations and comprehensive income During the year ended November 30 2023 the Company wrote off 65 0 million relating to one of the Company s non public technology cost method investments which was recorded in Other income expense net and other gains losses in the Company s consolidated statements of operations and comprehensive income loss
Included in the Company s recorded investments in Homebuilding unconsolidated entities is the Company s 40 ownership of FivePoint As of November 30 2024 and 2023 the carrying amount of the Company s investment was 470 8 million and 422 2 million respectively
The Company s partners generally are unrelated homebuilders land owners developers and financial or other strategic partners The unconsolidated entities follow accounting principles that are in all material respects the same as those used by the Company The Company shares in the profits and losses of these unconsolidated entities generally in accordance with its ownership interests In many instances the Company is appointed as the day to day manager under the direction of a management committee that has shared powers among the partners of the unconsolidated entities and the Company receives management fees and or reimbursement of expenses for performing this function The Company and or its partners sometimes obtain options or enter into other arrangements under which the Company can purchase portions of the land held by the unconsolidated entities Option prices are generally negotiated prices that approximate fair value when the Company receives the options The details of the activity was as follows
The Company does not include in its Homebuilding equity in earnings losses from unconsolidated entities its pro rata share of unconsolidated entities earnings losses resulting from land sales to the Company s homebuilding divisions Instead the Company accounts for those earnings as a reduction of the cost of purchasing the land from the unconsolidated entities This in effect defers recognition of the Company s share of the unconsolidated entities earnings related to these sales until the Company delivers a home and title passes to a third party homebuyer
The total debt of the Homebuilding unconsolidated entities in which the Company has investments was 1 3 billion and 1 4 billion as of November 30 2024 and 2023 respectively of which the Company s maximum recourse exposure was 44 2 million and 42 1 million as of November 30 2024 and 2023 respectively In most instances in which the Company has guaranteed debt of an unconsolidated entity the Company s partners have also guaranteed that debt and are required to contribute their share of the guarantee payments In a repayment guarantee the Company and its venture partners guarantee repayment of a portion or all of the debt in the event of default before the lender would have to exercise its rights against the collateral The maintenance guarantees only apply if the value of the collateral generally land and improvements is less than a specified percentage of the loan balance The Company would be required to make a payment under a maintenance guarantee to bring the value of the collateral above the specified percentage of the loan balance In a completion guarantee the Company and its venture partners have been required to give guarantees of completion to the lenders Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained As of November 30 2024 and 2023 the Homebuilding segment s unconsolidated entities had non recourse debt with completion guarantees of 287 0 million and 316 5 million respectively
If the Company is required to make a payment under any guarantee the payment would generally constitute a capital contribution or loan to the Homebuilding unconsolidated entity and increase the Company s investment in the unconsolidated entity and its share of any funds the entity distributes
The Company has an immaterial amount of recourse exposure to debt of the Homebuilding unconsolidated entities in which it has investments While the Company sometimes guarantees debt of unconsolidated entities in most instances the Company s partners have also guaranteed that debt and are required to contribute their shares of any payments In most instances the amount of guaranteed debt of an unconsolidated entity is less than value of the collateral securing it
As of both November 30 2024 and 2023 the fair values of the repayment guarantees maintenance guarantees and completion guarantees were not material The Company believes that as of November 30 2024 in the event it becomes legally obligated to perform under a guarantee of the obligation of a Homebuilding unconsolidated entity due to a triggering event under a guarantee the collateral would be sufficient to repay at least a significant portion of the obligation or the Company and its partners would contribute additional capital into the venture In certain instances the Company has placed performance letters of credit and surety bonds with municipalities with regard to obligations of its joint ventures see Note 4 of the Notes to Consolidated Financial Statements
The Upward America Ventures LP Upward America is an investment fund that acquires new single family homes in high growth markets across the United States and rents them to the people who will live in them Upward America could raise equity commitments totaling 1 0 billion The commitments are primarily from institutional investors including 78 million committed by Lennar As of November 30 2024 and 2023 the carrying amount of the Company s investment in Upward America was 20 8 million and 14 8 million respectively
The unconsolidated joint ventures in which the Multifamily segment has investments usually finance their activities with a combination of partner equity and debt financing In connection with many of the bank loans to the Multifamily unconsolidated joint ventures the Company or entities related to them has been required to give guarantees of completion and cost over runs to the lenders and partners Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained Additionally the Company guarantees the construction costs of the project as construction cost over runs would be paid by the Company Generally these payments would increase the Company s investment in the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds As of both November 30 2024 and 2023 the fair value of the completion guarantees was immaterial As of November 30 2024 and 2023 the Multifamily segment s unconsolidated entities had non recourse debt with completion guarantees of 907 8 million and 1 4 billion respectively The decrease in the non recourse debt with completion guarantees was due to completion of projects and sale of rental operation projects in Multifamily Venture Fund I
In many instances the Multifamily segment is appointed as the construction development and property manager for its Multifamily unconsolidated entities and receives fees for performing this function Each Multifamily real estate investment trust JV and fund has unilateral decision making rights related to development and other sales activity through its executive committee or asset management committee The Multifamily segment also provides general contractor services for construction of some of the rental properties owned by unconsolidated entities in which the Company has investments In some situations the Multifamily segment sells land to various joint ventures and funds The details of the activity were as follows
The Multifamily segment includes managing and investing in Multifamily Venture Fund I LMV I Multifamily Venture Fund II LP LMV II and Canada Pension Plan Investments Fund the CPPIB Fund which are long term multifamily development investment vehicles involved in the development construction and property management of class A multifamily assets The Multifamily segment completed the closing of the CPPIB Fund The Multifamily segment expects the CPPIB Fund to have almost 1 0 billion in equity and Lennar s ownership percentage in the CPPIB Fund is 4 As of November 30 2024 the Company has a 26 5 million investment in the CPPIB Fund Additional dollars will be committed as opportunities are identified by the CPPIB Fund
As of November 30 2023 there were 38 rental operation projects in LMV I During the second half of fiscal 2024 the LMV I partners decided to liquidate and sell 38 rental operation projects of LMV I as the fund has come to the end of its contractual life During the year ended November 30 2024 33 LMV I rental operation projects were sold to various third party buyers The Company recognized a net gain of 211 5 million on the sale of these rental operations projects which was recorded as equity in earnings losses in the condensed consolidated statement of operations As a result the Company received net cash distributions of 199 5 million
Lennar Other s unconsolidated entities include fund investments the Company retained when it sold the Rialto assets and investment management platform in 2018 as well as strategic investments in technology companies and investment funds The Company s investment in the Rialto funds totaled 140 1 million and 148 7 million as of November 30 2024 and November 30 2023 respectively In addition the Company is entitled to a portion of the carried interest distributions by those funds The Company also had strategic technology investments in unconsolidated entities and investment funds with a carrying value of 239 3 million and 127 5 million as of November 30 2024 and November 30 2023 respectively During the year ended November 30 2024 there was a 46 5 million one time realized gain in Lennar Other on the sale of a technology investment that was included in other income expense net and other gains losses on the Company s consolidated statements of operations and comprehensive income loss
Summarized condensed financial information on a combined 100 basis related to the Company s unconsolidated entities that are accounted for under the equity method of which the Company s investments in unconsolidated entities were 2 2 billion and 2 0 billion as of November 30 2024 and 2023 respectively Financial information relating to the Company s unconsolidated entities was as follows
Debt noted above is net of debt issuance costs As of November 30 2024 and 2023 this includes 3 2 million and 13 0 million respectively for Homebuilding 16 1 million and 19 5 million respectively for Multifamily and an immaterial amount of debt issuance costs for Lennar Other
In April 2024 the Company redeemed 454 million aggregate principal amount of its 4 50 senior notes due April 2024 The redemption price which was paid in cash was 100 of the principal amount outstanding
In November 2024 the Company amended and restated the credit agreement governing its unsecured revolving credit facility the Credit Facility The maximum available borrowings on the Credit Facility were as follows
The proceeds available under the Credit Facility which are subject to specified conditions for borrowing may be used for working capital and general corporate purposes The credit agreement also provides that up to 477 5 million in commitments may be used for letters of credit As of both November 30 2024 and 2023 the Company had no outstanding borrowings under the Credit Facility Under the Credit Facility agreement the Company is 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 The Company believes it was in compliance with its debt covenants at November 30 2024 In addition to the Credit Facility the Company has other letter of credit facilities with different financial institutions
Performance letters of credit are generally posted with regulatory bodies to guarantee the Company s performance of certain development and construction activities Financial letters of credit are generally posted in lieu of cash deposits on option contracts for insurance risks credit enhancements and as other collateral Additionally at November 30 2024 the Company had outstanding surety bonds including performance surety bonds related to site improvements at various projects including certain projects of the Company s joint ventures and financial surety bonds Although significant development and construction activities have been completed related to these site improvements these bonds are generally not released until all development and construction activities are completed The Company does not presently anticipate any draws upon these bonds or letters of credit but if any such draws occur the Company does not believe they would have a material effect on its financial position results of operations or cash flows
Interest is payable semi annually for each of the series of senior notes The senior notes are unsecured and unsubordinated but are guaranteed by substantially all of the Company s 100 owned homebuilding subsidiaries
These notes represent obligations of CalAtlantic when it was acquired that were subsequently exchanged in part for the notes of the Company As part of the purchase accounting the senior notes have been recorded at their fair value as of the date of acquisition February 12 2018
All of the senior notes are guaranteed by certain of the Company s 100 owned subsidiaries which are primarily the Company s homebuilding subsidiaries Although the guarantees are full unconditional and joint and several while they are in effect i a subsidiary will have its guarantee suspended at any time when it is not directly or indirectly guaranteeing at least 75 million of debt of Lennar Corporation the parent company other than senior notes and ii 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 of
The Company expects to pay its near term maturities as they come due through either cash generated from operations the issuance of additional debt or equity offerings or borrowings under the Company s Credit Facility
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes The tax effects of significant temporary differences that give rise to the net deferred tax assets were as follows
A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if based on the available evidence it is more likely than not that such assets will not be realized Accordingly the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Company based on the consideration of all available positive and negative evidence using a more likely than not standard with respect to whether deferred tax assets will be realized This assessment considers among other matters the nature frequency and severity of current and cumulative losses actual earnings forecasts of future profitability the duration of statutory carryforward periods the Company s experience with loss carryforwards not expiring unused and tax planning alternatives
As of November 30 2024 and 2023 the deferred tax assets included valuation allowances primarily related to state net operating loss NOL carryforwards that are not more likely than not to be utilized due to an inability to carry back these losses in most states and short carryforward periods that exist in certain states
As of November 30 2024 and 2023 the Company had state tax effected NOL carryforwards that may be carried forward from 10 to 20 years or indefinitely depending on the tax jurisdiction with certain losses expiring between 2025 and 2041
The Company participates in an IRS examination program the Compliance Assurance Process CAP This program operates as a contemporaneous exam throughout the year in order to keep exam cycles current and achieve a higher level of compliance Certain state taxing authorities are examining various fiscal years The final outcome of these examinations is not yet determinable The statute of limitations for the Company s major tax jurisdictions remains open for examination for 2019 and subsequent years
The amounts presented relate to Rialto s Carried Interest Incentive Plan and represent the difference between the advanced tax distributions received from the Rialto funds included in the Lennar Other segment and the amount Lennar is assumed to own
The following table presents the carrying amounts and estimated fair values of financial instruments held or issued by the Company at November 30 2024 and 2023 using available market information and what the Company believes to be
appropriate valuation methodologies Considerable judgment is required in interpreting market data to develop the estimates of fair value The use of different market assumptions and or estimation methodologies might have a material effect on the estimated fair value amounts The table excludes cash and cash equivalents restricted cash receivables net and accounts payable all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments
The fair values above are based on quoted market prices if available The fair values for instruments that do not have quoted market prices are estimated by the Company on the basis of discounted cash flows or other financial information For notes and other debts payable the fair values approximate their carrying value due to variable interest pricing terms and the short term nature of the majority of the borrowings
For senior notes and other debts payable the fair value of fixed rate borrowings is primarily based on quoted market prices and the fair value of variable rate borrowings is based on expected future cash flows calculated using current market forward rates
GAAP provides a framework for measuring fair value expands disclosures about fair value measurements and establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value summarized as follows
The estimated fair values of the Company s financial instruments have been determined by using available market information and what the Company believes to be appropriate valuation methodologies Considerable judgment is required in interpreting market data to develop the estimates of fair value The use of different market assumptions and or estimation methodologies might have a material effect on the estimated fair value amounts The following methods and assumptions are used by the Company in estimating fair values
Fair value is based on independent quoted market prices where available or the prices for other mortgage whole loans with similar characteristics The Company recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower The fair value of these are included in Financial Services loans held for sale as of November 30 2024 and 2023 Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics
The fair value of commercial loans held for sale is calculated from model based techniques that use discounted cash flow assumptions and the Company s own estimates of CMBS spreads market interest rate movements and the underlying loan credit quality Loan values are calculated by allocating the change in value of an assumed CMBS capital structure to each loan The value of an assumed CMBS capital structure is calculated generally by discounting the cash flows associated with each CMBS class at market interest rates and at the Company s own estimate of CMBS spreads The Company estimates CMBS spreads by observing the pricing of recent CMBS offerings secondary CMBS markets changes in the CMBX index and general capital and commercial real estate market conditions Considerations in estimating CMBS spreads include comparing the Company s current loan portfolio with comparable CMBS offerings containing loans with similar duration credit quality and collateral composition These methods use unobservable inputs in estimating a discount rate that is used to assign a value to each loan While the cash payments on the loans are contractual the discount rate used and assumptions regarding the relative size of each class in the CMBS capital structure can significantly impact the valuation Therefore the estimates used could differ materially from the fair value determined when the loans are sold to a securitization trust
Financial Services records mortgage servicing rights when it sells loans on a servicing retained basis or through the acquisition or assumption of the right to service a financial asset The fair value of the mortgage servicing rights is calculated using third party valuations The key assumptions which are generally unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates discount rates and delinquency rates and are noted below
Fair value of forward options is based on independent quoted market prices for similar financial instruments The fair value of these are included in Financial Services other assets and the Company recognizes the changes in the fair value of the premium paid as Financial Services Revenue
The fair value of investments in equity securities was calculated based on independent quoted market prices The Company s investments in equity securities were recorded at fair value with all changes in fair value recorded to Lennar Other unrealized gains losses from technology investments on the Company s consolidated statements of operations and comprehensive income loss
The fair value of investments available for sale is calculated from model based techniques that use discounted cash flow assumptions and the Company s own estimates of CMBS spreads market interest rate movements and the underlying loan credit quality Loan values are calculated by allocating the change in value of an assumed CMBS capital structure to each loan The value of an assumed CMBS capital structure is calculated generally by discounting the cash flows associated with each CMBS class at market interest rates and at the Company s own estimate of CMBS spreads
Interest on Financial Services loans held for sale and LMF Commercial loans held for sale measured at fair value is calculated based on the interest rate of the loans and recorded as revenues in the Financial Services statement of operations
The Company s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments and write offs The fair values included in the table below represent only those assets whose carrying values were adjusted to fair value during the respective periods disclosed The assets measured at fair value on a nonrecurring basis are summarized below
Forfeited deposits and write off of pre acquisition costs on real estate were included in Homebuilding costs and expenses in the Company s condensed consolidated statements of operations and comprehensive income loss
Valuation adjustments related to Homebuilding investments in unconsolidated entities were primarily included in other income expense net in the Company s consolidated statements of operations and comprehensive income loss for the years ended November 30 2023 and 2022 respectively
Valuation adjustments related to Multifamily investments in unconsolidated entities were included in other income expense net in the Company s consolidated statements of operations and comprehensive income loss for the year ended November 30 2024
During the year ended November 30 2023 the Company wrote off 65 0 million relating to one of the Company s non public technology cost method investments which was recorded in Other income expense net and other gains losses in the Company s consolidated statements of operations and comprehensive income loss
The Company evaluated the joint venture JV agreements of its JV s that were formed or that had reconsideration events such as changes in the governing documents or to debt arrangements during the year ended November 30 2024 and based on the Company s evaluation it consolidated one entity that had a total assets and liabilities of 3 6 million and 3 2 million respectively During the year ended November 30 2024 there were no variable interest entities VIEs that were deconsolidated
A VIE s assets can only be used to settle obligations of that VIE The VIEs are not guarantors of the Company s senior notes or other debts payable The assets held by a VIE are usually collateral for that VIE s debt The Company and other partners do not generally have an obligation to make capital contributions to a VIE other than as a result of capital calls in accordance with business plans unless the Company and or the other partner s have entered into debt guarantees with the VIE s lenders Other than debt guarantee agreements with VIE s lenders there are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company to provide financial support to a VIE While the Company has option contracts to purchase land from certain of its VIEs the Company is not required to purchase the assets and could walk away from the contracts but that would require forfeiture of deposits and pre acquisition costs
As of November 30 2024 and 2023 the Company s maximum exposure to loss of Homebuilding s investments in unconsolidated VIEs was limited to its investments in unconsolidated VIEs except with regard to the Company s remaining commitment to fund capital in Upward America of 20 4 million and 69 8 million respectively In addition as of November 30 2024 and 2023 there was recourse debt of VIEs of 44 2 million and 42 1 million respectively
As of November 30 2024 and 2023 the Company s maximum exposure to loss of Multifamily s investments in unconsolidated VIEs was primarily limited to its investments in the unconsolidated VIEs The maximum exposure for LMV II in addition to the investment also included the remaining combined equity commitment of 12 8 million as of November 30 2023 for expenditures related to the construction and development of its projects The decrease in exposure as of November 30 2024 is primarily due to the removal of LMV II as the fund does not expect to call for equity in the future As a result LMV II is not a VIE as of November 30 2024
As of both November 30 2024 and 2023 the Company s maximum exposure to loss of the Financial Services segment was limited to its investment in the unconsolidated VIEs and related to the Financial Services CMBS held to maturity investments
At November 30 2024 and 2023 the Company s maximum recourse exposure to loss of the Lennar Other segment was limited to its investments in the unconsolidated VIEs The increase in exposure was due to the Company entering into a new JV which is a VIE and its continued contributions to VIEs
The Company and its JV partners generally fund JVs as needed and in accordance with business plans to allow the entities to finance their activities Because such JVs are expected to make future capital calls in order to continue to finance their activities the entities are determined to be VIEs as of November 30 2024 in accordance with ASC 810 due to insufficient equity at risk While these entities are VIEs the Company has determined that the power to direct the activities of the VIEs that most significantly impact the VIEs economic performance is generally shared and the Company and its partners are not de facto agents While the Company generally manages the day to day operations of the VIEs each of these VIEs has an executive committee made up of representatives from each partner The members of the executive committee have equal votes and major decisions require unanimous consent and approval from all members The Company does not have the unilateral ability to exercise participating voting rights without partner consent
There are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company to provide financial support to the VIEs Except for the unconsolidated VIEs discussed above the Company and the other partners did not guarantee any debt of the other unconsolidated VIEs While the Company has option contracts to purchase land from certain of its unconsolidated VIEs the Company is not required to purchase the assets and could walk away from the contracts
The Company has access to land through option contracts which generally enable it to control portions of properties owned by third parties including land banks until the Company has determined whether to exercise the options
The Company evaluates option contracts with third party land holding companies for land to determine whether they are VIEs and if so whether the Company is the primary beneficiary of certain of these option contracts Although the Company does not have legal title to the optioned land if the Company is deemed to be the primary beneficiary and makes a significant deposit or pre acquisition cost investment for optioned land or is otherwise economically compelled to takedown the optioned land it may need to consolidate the land under option at the purchase price of the optioned land As of November 30 2024 land under option with third parties that the Company was economically compelled to takedown was 2 8 billion of which 1 5 billion were land purchase contract obligations due to land banks upon maturity of the contracts The Company s intention is to have other land banks close on the land purchase commitments and the Company will option the land from the land banks Land under option with third parties is included in consolidated inventory not owned Consolidated inventory not owned related to land financing transactions which are land sale transactions that did not meet the criteria for revenue recognition and derecognition of land by the Company as a result of the Company maintaining an option to repurchase the land in the future was 1 2 billion as of November 30 2024
For the year ended November 30 2024 the Company purchased a significant portion of land from two land banks the Land Banks There were no amounts due to the Land Banks as of November 30 2024 resulting from land purchases as the full purchase price of the land is typically paid to the Land Banks at closing when land is purchased by the Company As of November 30 2024 the total deposits and pre acquisition costs on real estate relating to contracts with the Land Banks were 1 4 billion As of November 30 2024 total consolidated inventory not owned and liabilities related to consolidated inventory not owned relating to contracts with the Land Banks were 726 5 million and 560 0 million respectively
The Company believes there are other land banks that could be substituted should the Land Banks become unavailable or non competitive with respect to land banking of future land Thus the Company does not believe that the loss of the Company s relationship with these Land Banks would have a material adverse effect on the Company s business financial condition or cash flows
The Company is party to various claims legal actions and complaints relating to homes sold by the Company arising in the ordinary course of business In the opinion of management the disposition of these matters will not have a material adverse effect on the Company s consolidated financial statements From time to time the Company is also a party to various lawsuits involving purchases and sales of real property These lawsuits often include claims regarding representations and warranties made in connection with the transfer of properties and disputes regarding the obligation to purchase or sell properties
The Company does not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on its business or financial position However the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property which may have changed from the time the agreement for purchase or sale was entered into
The Company is subject to the usual obligations associated with entering into contracts including option contracts for the purchase development and sale of real estate which it does in the routine conduct of its business Option contracts generally enable the Company to control portions of properties owned by third parties including land banks and unconsolidated entities until the Company determines whether to exercise the option The use of option contracts allows the Company to reduce the financial risks associated with long term land holdings At November 30 2024 the Company had 3 5 billion of non refundable option deposits and pre acquisition costs related to certain of these homesites which were recorded in deposits and pre acquisition costs on real estate in the consolidated balance sheet
The Company has entered into agreements to lease certain office facilities and equipment under operating leases The Company recognizes lease expense for these leases on a straight line basis over the lease term Right of use ROU assets and lease liabilities are recorded on the balance sheet for all leases except leases with an initial term of 12 months or less Many of the Company s leases include options to renew The exercise of lease renewal options is at the Company s option and therefore renewal option payments have not been included in the ROU assets or lease liabilities The following table includes additional information about the Company s leases
The Company has entered into agreements to lease certain office facilities and equipment under operating leases Future minimum payments under the noncancellable leases in effect at November 30 2024 were as follows
The Company s leases do not include a readily determinable implicit rate As such the Company has estimated the discount rate for these leases to determine the present value of lease payments at the lease commencement date or as of December 1 2019 which was the effective date of ASU 2016 02 As of November 30 2024 the Company recognized the lease liabilities on its consolidated balance sheets within accounts payable and other liabilities of the respective segments
In December 2023 the Company purchased its corporate headquarters building in which the Company had previously leased office space This building contains approximately 213 200 square feet of office space of which the Company leases approximately 53 000 square feet of unused office space to other tenants On occasion the Company may sublease other rented space which is no longer used for the Company s operations For both the years ended November 30 2024 and 2023 the Company had an immaterial amount of sublease income
The Company is committed under various letters of credit to perform certain development and construction activities and provide certain guarantees in the normal course of business Outstanding letters of credit under these arrangements totaled 2 4 billion at November 30 2024 Additionally at November 30 2024 the Company had outstanding surety bonds of 5 1 billion including performance surety bonds related to site improvements at various projects including certain projects of the Company s joint ventures and financial surety bonds Although significant development and construction activities have been completed related to these site improvements these bonds are generally not released until all development and construction activities are completed As of November 30 2024 there were approximately 2 8 billion or 54 of anticipated future costs to complete related to these site improvements The Company does not presently anticipate any draws upon these bonds that would have a material effect on its consolidated financial statements
Substantially all of the loans the Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released non recourse basis After the loans are sold the Company retains potential liability for possible claims by purchasers that it breached certain limited industry standard representations and warranties in the loan sale agreements Purchasers sometimes try to defray any losses incurred by purporting to have found inaccuracies related to sellers representations and warranties in particular loan sale agreements Mortgage investors or others could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties The Company s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors The Company establishes accruals for such possible losses based upon among other things an analysis of repurchase requests received an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements While the Company believes that it has adequately reserved for known losses and projected repurchase requests given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of these claims if either actual repurchases or the losses incurred resolving those repurchases exceed the Company s expectations additional recourse expense may be incurred Loan origination liabilities are included in Financial Services liabilities in the Company s consolidated balance sheets
Our Executive Chairman and Co Chief Executive Officer our Co Chief Executive Officer and President together Co CEOs and Chief Financial Officer CFO participated in an evaluation by our management of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report Based on their participation in that evaluation our Co CEOs and CFO concluded that our disclosure controls and procedures were effective as of November 30 2024 to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 as amended is recorded processed summarized and reported within the time periods specified in the Securities and Exchange Commission s rules and forms and to ensure that information required to be disclosed in our reports filed or furnished under the Securities Exchange Act of 1934 as amended is accumulated and communicated to our management including both of our Co CEOs and CFO as appropriate to allow timely decisions regarding required disclosures
Both of our Co CEOs and CFO also participated in an evaluation by our management of any changes in our internal control over financial reporting that occurred during the quarter ended November 30 2024 That evaluation did not identify any changes that have materially affected or are reasonably likely to materially affect our internal control over financial reporting
Management s Annual Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm obtained from Deloitte Touche LLP relating to the effectiveness of Lennar Corporation s internal control over financial reporting are included elsewhere in this document
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a 15 f Under the supervision and with the participation of our management including both of our Co CEOs and CFO we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
our management concluded that our internal control over financial reporting was effective as of November 30 2024 The effectiveness of our internal control over financial reporting as of November 30 2024 has been audited by Deloitte Touche LLP an independent registered public accounting firm as stated in their attestation report which is included herein
issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO In our opinion the Company maintained in all material respects effective internal control over financial reporting as of November 30 2024 based on criteria established in
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated financial statements as of and for the year ended November 30 2024 of the Company and our report dated January 23 2025 expressed an unqualified opinion on those financial statements
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Annual Report on Internal Control Over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
During the three months ended November 30 2024 no director or executive officer of the Company adopted or terminated a Rule 10b5 1 trading arrangement or non Rule 10b5 1 trading arrangement as each term is defined in Item 408 a of Regulation S K
The information required by this item for executive officers is set forth under the heading Information about our Executive Officers in Part I We have adopted a Code of Business Conduct and Ethics that applies to each of our Co Chief Executive Officers and President our Chief Financial Officer and our Chief Accounting Officer The Code of Business Conduct and Ethics is located on our internet web site at www lennar com under Investor Relations Governance We intend to provide disclosure of any amendments or waivers of our Code of Business Conduct and Ethics on our website within four business days following the date of the amendment or waiver The other information called for by this item is incorporated by reference to our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than March 30 2025 120 days after the end of our fiscal year
We have adopted an insider trading policy governing the purchase sale and or other dispositions of our securities by our directors officers and employees that we believe is reasonably designed to promote compliance with insider trading laws rules and regulations and the exchange listing standards applicable to us A copy of our insider trading policy is filed as Exhibit 19 to this Annual Report on Form 10 K
The information required by this item is incorporated by reference to our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than March 30 2025 120 days after the end of our fiscal year
The information required by this item is incorporated by reference to our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than March 30 2025 120 days after the end of our fiscal year except for the information required by Item 201 d of Regulation S K which is provided below
The information required by this item is incorporated by reference to our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than March 30 2025 120 days after the end of our fiscal year
The information required by this item is incorporated by reference to our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than March 30 2025 120 days after the end of our fiscal year
Restated Certificate of Incorporation of the Company dated January 14 2015 as amended by the Certificate of Amendment to Restated Certificate of Incorporation of the Company dated February 12 2018 Incorporated by reference to Exhibit 3 1 of the Company s Annual Report on Form 10 K for the fiscal year ended November 30 2019
Certificate of Amendment to Restated Certificate of Incorporation of the Company dated April 10 2024 Incorporated by reference to Exhibit 3 1 of the Company s Current Report on Form 8 K dated April 10 2024
Indenture dated as of December 31 1997 between Lennar Corporation and Bank One Trust Company N A as trustee Incorporated by reference to Exhibit 4 of the Company s Registration Statement on Form S 3 Registration No 333 45527 filed with the Commission on February 3 1998
Tenth Supplemental Indenture dated as of April 28 2015 among Lennar Corporation each of the guarantors identified therein and The Bank of New York Mellon as trustee including the form of 4 750 Senior Notes due 2025 Incorporated by reference to Exhibit 4 14 of the Company s Current Report on Form 8 K dated April 28 2015
Indenture dated as of November 29 2017 among Lennar Corporation each of the guarantors identified therein and The Bank of New York Mellon as trustee including the form of 4 75 Senior Notes due 2027 Incorporated by reference to Exhibit 4 1 of the Company s Current Report on Form 8 K dated November 29 2017
Indenture dated as of February 20 2018 among Lennar Corporation each of the guarantors identified therein and The Bank of New York Mellon as trustee governing the 5 25 Senior Notes due June 1 2026 including the form of 5 25 Senior Notes due June 1 2026 Incorporated by reference to Exhibit 4 7 of the Company s Current Report on Form 8 K dated February 16 2018
Indenture dated as of February 20 2018 among Lennar Corporation each of the guarantors identified therein and The Bank of New York Mellon as trustee governing the 5 00 Senior Notes due June 15 2027 including the form of 5 00 Senior Notes due June 15 2027 Incorporated by reference to Exhibit 4 8 of the Company s Current Report on Form 8 K dated February 16 2018
Lennar Corporation 2016 Equity Incentive Plan Amended and Restated Effective January 12 2022 Incorporated by reference to Exhibit A to the Registrant s Definitive Proxy Statement on Schedule 14A filed with the Commission on March 1 2022
Lennar Corporation 2016 Equity Incentive Plan Amended and Restated Effective January 12 2022 Additional Terms for Israeli Participants effective May 14 2024 Incorporated by reference to Exhibit 10 1 to the Company s Current Report on Form 10 Q for the quarter ended May 31 2024
Lennar Corporation 2016 Incentive Compensation Plan as Amended and Restated effective January 12 2022 Incorporated by reference to Exhibit 10 2 of the Company s Annual Report on Form 10 K for the fiscal year ended November 30 2021
Ninth Amended and Restated Credit Agreement dated as of November 25 2024 among Lennar Corporation as borrower JPMorgan Chase Bank N A as issuing lender and administrative agent the several lenders from time to time parties thereto and the other parties and agents thereto Incorporated by reference to Exhibit 10 1 of the Company s Current Report on Form 8 K dated November 25 2024
Ninth Amended and Restated Guarantee Agreement dated as of November 24 2024 among certain of Lennar Corporation s subsidiaries in favor of guaranteed parties referred to therein Incorporated by reference to Exhibit 10 2 of the Company s Current Report on Form 8 K dated November 25 2024
Form of Aircraft Time Sharing Agreement dated February 12 2015 between U S Home Corporation and Lessee Incorporated by reference to Exhibit 10 19 of the Company s Current Report on Form 8 K dated February 12 2015
Aircraft Time Sharing Agreement dated December 4 2023 between U S Home LLC and Jonathan M Jaffe Incorporated by reference to Exhibit 10 2 of the Company s Current Report on Form 8 K dated December 4 2023
Separation Agreement and General Release dated July 14 2023 between Lennar Corporation and Rick Beckwitt Incorporated by reference to Exhibit 10 1 of the Company s Current Report on Form 8 K dated July 14 2023
Master Agreement dated October 8 2020 between AG Essential Housing Company 1 L P and Essential Housing Financing LLC Incorporated by reference to Exhibit 10 12 of the Company s Annual Report on Form 10 K for the fiscal year ended November 30 2020
Form of 2021 Award Agreement under the Company s 2016 Equity Incentive Plan for Mr Miller Mr Beckwitt Mr Jaffe Ms Bessette and Mr McCall Incorporated by reference to Exhibit 10 2 of the Company s Current Report on Form 8 K dated February 26 2021
Form of 2022 Award Agreement under the Company s 2016 Equity Incentive Plan for Mr Miller Mr Jaffe Ms Bessette and Mr McCall Incorporated by reference to Exhibit 10 2 of the Company s Current Report on Form 8 K dated February 28 2022
Form of the Amended and Restated 2022 Award Agreement under the Company s 2016 Equity Incentive Plan for Mr Miller and Mr Jaffe Incorporated by reference to Exhibit 10 2 of the Company s Current Report on Form 8 K dated November 17 2022
Form of the 2022 Award Agreement for Performance Shares granted under the Company s 2016 Equity Incentive Plan for Mr Miller and Mr Jaffe Incorporated by reference to Exhibit 10 3 of the Company s Current Report on Form 8 K dated November 17 2022
2023 Award Agreements under the Company s 2016 Incentive Compensation Plan as amended for Mr Miller Mr Jaffe Ms Bessette Mr McCall and Mr Sustana Incorporated by reference to Exhibit 10 1 of the Company s Current Report on Form 8 K dated February 28 2023
2023 Award Agreement under the Company s 2016 Incentive Compensation Plan as amended for Mr Collins Incorporated by reference to Exhibit 10 1 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
Amended 2023 Award Agreement under the Company s 2016 Incentive Compensation Plan as amended for Mr Collins Incorporated by reference to Exhibit 10 2 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
Form of 2023 Award Agreement under the Company s 2016 Equity Incentive Plan for Mr Miller Mr Jaffe Ms Bessette and Mr McCall Incorporated by reference to Exhibit 10 2 of the Company s Current Report on Form 8 K dated February 28 2023
2024 Award Agreement under the Company s 2016 Incentive Compensation Plan as amended for Mr Miller Incorporated by reference to Exhibit 10 3 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
2024 Award Agreement under the Company s 2016 Incentive Compensation Plan as amended for Mr Jaffe Incorporated by reference to Exhibit 10 4 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
2024 Award Agreement under the Company s 2016 Incentive Compensation Plan as amended for Ms Bessette Incorporated by reference to Exhibit 10 5 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
2024 Award Agreement under the Company s 2016 Incentive Compensation Plan as amended for Mr McCall Incorporated by reference to Exhibit 10 6 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
2024 Award Agreement under the Company s 2016 Incentive Compensation Plan as amended for Mr Sustana Incorporated by reference to Exhibit 10 7 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
2024 Award Agreement under the Company s 2016 Incentive Compensation Plan as amended for Mr Collins Incorporated by reference to Exhibit 10 8 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
Form of 2024 Award Agreement under the Company s 2016 Equity Incentive Plan for Mr Miller Mr Jaffe Ms Bessette and Mr McCall Incorporated by reference to Exhibit 10 9 of the Company s Current Report on Form 10 Q for the quarter ended February 29 2024
The following financial statements from Lennar Corporation Annual Report on Form 10 K for the year ended November 30 2024 filed on January 23 2025 formatted in iXBRL Inline Extensible Business Reporting Language i Consolidated Balance Sheets ii Consolidated Statements of Operations and Comprehensive Income Loss iii Consolidated Statements of Equity iv Consolidated Statements of Cash Flows and v the Notes to Consolidated Financial Statements
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized
Pursuant to the requirements of the Securities Exchange Act of 1934 this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	LENNAR CORP /NEW/ Vist SEC web-site
Category	GEN BUILDING CONTRACTORS - RESIDENTIAL BUILDINGS
Trading Symbol	LEN