The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included under Item 1 of this Report and our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K, for our fiscal year endedNovember 30, 2020 . Some of the statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, are "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements typically include the words "anticipate," "believe," "consider," "estimate," "expect," "forecast," "intend," "objective," "plan," "predict," "projection," "seek," "strategy," "target," "will" or other words of similar meaning. Forward-looking statements contained herein may include opinions or beliefs regarding market conditions and similar matters. In many instances, those opinions and beliefs are based upon general observations by members of our management, anecdotal evidence and our experience in the conduct of our businesses, without specific investigation or analyses. Therefore, while they reflect our view of the industries and markets in which we are involved, they should not be viewed as reflecting verifiable views or views that are necessarily shared by all who are involved in those industries or markets. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The 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: the potential negative impact to our business of the ongoing coronavirus ("COVID-19") pandemic, the duration, impact and severity of which is highly uncertain; increases in operating costs, including costs related to construction materials, labor, real estate taxes and insurance, and our inability to manage our cost structure, both in our Homebuilding and Multifamily businesses; an extended slowdown in the real estate markets across the nation, including a slowdown in the market for single family homes or the multifamily rental market; reduced availability of mortgage financing or increased interest rates; our inability to successfully execute our strategies, including our land lighter strategy and our planned spin-off of certain businesses; 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; decreased demand for our homes or Multifamily rental properties; 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; our inability to pay down debt; whether government actions or other factors force us to terminate our program of repurchasing our stock; a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets; the failure of the participants in various joint ventures to honor their commitments; difficulty obtaining land-use entitlements or construction financing; natural disasters and other unforeseen events for which our insurance does not provide adequate coverage; new laws or regulatory changes that adversely affect the profitability of our businesses; our inability to refinance our debt on terms that are acceptable to us; and changes in accounting conventions that adversely affect our reported earnings. Please see our Form 10-K for the fiscal year endedNovember 30, 2020 and our other filings with theSEC for a further discussion of these and other risks and uncertainties which could affect our future results. We undertake no obligation, other than those imposed by securities laws, to publicly 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. 26 --------------------------------------------------------------------------------
Outlook
The housing market remains very strong. Demand has continued to strengthen while the supply of new and existing homes has remained constrained. New home construction cannot ramp up quickly enough to fill the void of the underproduction of homes for the past decade. The bottom line is that supply of homes is short and while land, labor and supply chain are limiting factors in the drive to meet current demand, we believe that the housing shortage is likely to remain for some time to come. Even though home prices have moved much higher and interest rates have ticked up slightly higher, overall affordability remains strong and interest rates are still lower than they were a year ago. Personal savings for deposits are strong and wages seem to be rising faster than monthly payments. Millennials are moving out of their parents' homes and forming families, while apartment dwellers are finding a first-time home. We believe we are uniquely positioned to capitalize and drive even greater growth in our bottom line on this demand given our focus on orderly, targeted growth, with our sales pace tightly matched with our pace of production, which enables price appreciation to offset future cost escalations to maximize margins. We do not currently see the rising cost of homes reducing demand for the homes we build. We believe we are making up for the years of underproduction of homes now, which should keep the housing market thriving for some time to come. The housing market is not only very strong, but it is also going through some structural changes that will promote stability in the market, and extend housing benefits to the breadth of a diverse society. The iBuyer and single-family for rent participants are providing additional liquidity to the marketplace to purchase and sell homes, as they evolve and provide ever more frictionless transactions. They are also solving important industry problems that have needed solutions for a very long time. The iBuyers, led by Opendoor, are becoming more than just a home sale option. They are an ever more effective and instrumental convenience provider, as the coordination of a new home is being complicated by supply chain disruption. Additionally, in the single-family for rent space, our Upward America Venture facilitates a better time delivery of our homes with reduced cycle times and makes the single-family lifestyle accessible to more families. Professional ownership of homes enables renters to access a single-family lifestyle, while they build the resources to own, and while commercial and professional owners manage the risk profile, which enables better housing for more families, and more diverse families, without weakening the mortgage market. Capitalized with$1.25 billion of equity from blue-chip institutional investors, the Upward America Venture had a pipeline of 2,534 homes with a total purchase price of$596 million at the end of the second quarter. The combined effects of this strong housing market along with structural changes, which we are in position to capitalize on through our strategic investments, puts Lennar in position to continue to drive returns and should position us for consistent continued growth into fiscal 2022. We are focused on cash flow, debt reduction, and stock buyback, land controlled versus owned, return on capital, and return on equity, and on innovative technologies. In addition, we have been carefully managing a stressed supply chain by maintaining our delivery targets for the year rather than increasing them. We still expect to deliver between 62,000 and 64,000 homes in 2021, but with a now higher expected gross margin of 26.5% to 27.0% and expected SG&A of 7.3% to 7.5% for the year. Our return on equity stands now at 18.8%, which is a 550 basis point improvement over last year. Our return on capital is now 15.0%, and a 500-basis point improvement. We have remained focused on our optioned versus owned land strategy, and achieved 50% land controlled through options or similar agreements two quarters earlier than expected. We ended the second quarter with a 3.3 years supply of land owned, compared to a 3.9 years supply of land owned at the same time last year. Among other things, this has enabled us to reduce debt, such that our second quarter homebuilding debt-to-total capital ratio improved to 23.1%, from 31.2% in the prior year. These points of improvement have enabled us to reconsider the size of our spin-off and aim for a larger asset base in order to further fortify the new company. Accordingly, we are now targeting an asset base of$5 billion to$6 billion , which will leave the remaining pure-play homebuilding and financial services company with an appropriately liquid balance sheet and no material loss of reported earnings. The new company will be an independent and active asset management business that raises third-party capital to support its ongoing business vertical. Two of these verticals, the multifamily platform and LSFR, our single-family rental platform, have already raised third-party capital and are active asset managers. Additionally, we have a dynamic and growing independent land development business, and we have a growing technology investment business, which is part of LENX. This separation of these businesses from the homebuilder will enable them to thrive in ways they cannot while they are part of Lennar. As a company we are recasting the cost structure all the way from hard costs like labor and materials, to the softer costs around SG&A. We are re-wiring the way that this business operates, including through the technologies that we are incorporating into our business, the efficiency of our land program, our just-in-time delivery of land and the emergent inventory management component of our single-family for rent program. Additionally, as we bring debt down, we have less capital cost, and that is continuing to help our margin picture. We believe that we have never been better positioned financially, organizationally and technologically to thrive and grow in an evolving and exciting housing market. The market conditions remain strong for the foreseeable future, and we expect a strong second half of 2021, and continued strength in the market as we begin to look to 2022. 27 -------------------------------------------------------------------------------- (1) Results of Operations Overview We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three and six months endedMay 31, 2021 are not necessarily indicative of the results to be expected for the full year. 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. Our net earnings attributable to Lennar were$831.4 million , or$2.65 per diluted share ($2.66 per basic share), in the second quarter of 2021, compared to net earnings attributable to Lennar of$517.4 million , or$1.65 per diluted share ($1.66 per basic share), in the second quarter of 2020. Our net earnings attributable to Lennar were$1.8 billion , or$5.85 per diluted share ($5.86 per basic share), in the six months endedMay 31, 2021 , compared to net earnings attributable to Lennar of$915.9 million , or$2.91 per diluted share ($2.92 per basic share), in the six months endedMay 31, 2020 . 28 --------------------------------------------------------------------------------
Financial information relating to our operations was as follows:
Three Months Ended May 31, 2021 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 5,980,731 - - - - 5,980,731 Sales of land 38,785 - - - - 38,785 Other revenues 8,525 218,747 177,473 5,984 - 410,729 Total revenues 6,028,041 218,747 177,473 5,984 - 6,430,245 Costs and expenses: Costs of homes sold 4,421,373 - - - - 4,421,373 Costs of land sold 32,979 - - - - 32,979 Selling, general and administrative expenses 455,164 - - - - 455,164 Other costs and expenses - 97,427 168,930 5,732 - 272,089 Total costs and expenses 4,909,516 97,427 168,930 5,732 - 5,181,605 Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net (1,688) - 13,854 63,221 - 75,387 Other expense, net (4,362) - - - - (4,362) Lennar Other realized and unrealized gain (loss) - - - (117,570) -
(117,570)
Operating earnings (loss)$ 1,112,475 121,320 22,397 (54,097) - 1,202,095 Corporate general and administrative expenses - - - - 90,717 90,717 Charitable foundation contribution - - - - 14,493 14,493 Earnings (loss) before income taxes$ 1,112,475 121,320 22,397 (54,097) (105,210) 1,096,885 Three Months Ended May 31, 2020
(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 4,925,081 - - - - 4,925,081 Sales of land 19,833 - - - - 19,833 Other revenues 4,570 196,263 123,117 18,509 - 342,459 Total revenues 4,949,484 196,263 123,117 18,509 - 5,287,373 Costs and expenses: Costs of homes sold 3,862,771 - - - - 3,862,771 Costs of land sold 43,369 - - - - 43,369 Selling, general and administrative expenses 407,191 - - - -
407,191
Other costs and expenses - 110,355 123,473 (1,072) - 232,756 Total costs and expenses 4,313,331 110,355 123,473 (1,072) - 4,546,087 Equity in loss from unconsolidated entities (9,100) - (282) (26,642) -
(36,024)
Financial Services gain on deconsolidation - 61,418 - - - 61,418 Other income (expense), net 4,308 - - (10,960) - (6,652) Operating earnings$ 631,361 147,326 (638) (18,021) - 760,028 Corporate general and administrative expenses - - - - 78,183
78,183
Charitable foundation contribution - - - - 5,268
5,268
Earnings (loss) before income taxes$ 631,361 147,326 (638) (18,021) (83,451) 676,577 29
-------------------------------------------------------------------------------- Six Months Ended May 31, 2021 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate and unallocated Total Revenues: Sales of homes$ 10,871,645 - - - - 10,871,645 Sales of land 86,428 - - - - 86,428 Other revenues 13,024 462,816 308,916 12,884 - 797,640 Total revenues 10,971,097 462,816 308,916 12,884 - 11,755,713 Costs and expenses: Costs of homes sold 8,088,235 - - - - 8,088,235 Costs of land sold 74,167 - - - - 74,167 Selling, general and administrative expenses 865,400 - - - - 865,400 Other costs and expenses - 195,289 299,979 9,984 - 505,252 Total costs and expenses 9,027,802 195,289 299,979 9,984 - 9,533,054 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (6,253) - 12,586 62,174 - 68,507 Other income, net 8,613 - - - - 8,613 Lennar Other realized and unrealized gain (loss) - - - 352,175 - 352,175 Operating earnings$ 1,945,655 267,527 21,523 417,249 - 2,651,954 Corporate general and administrative expenses - - - - 201,248 201,248 Charitable foundation contribution - - - - 26,807 26,807 Earnings (loss) before income taxes$ 1,945,655 267,527 21,523 417,249 (228,055) 2,423,899 Six Months Ended May 31, 2020 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate and unallocated Total Revenues: Sales of homes$ 9,065,848 - - - - 9,065,848 Sales of land 46,700 - - - - 46,700 Other revenues 9,052 394,924 255,734 20,452 - 680,162 Total revenues 9,121,600 394,924 255,734 20,452 - 9,792,710 Costs and expenses: Costs of homes sold 7,154,550 - - - - 7,154,550 Costs of land sold 70,504 - - - - 70,504 Selling, general and administrative 786,083 - - - - 786,083 Other costs and expenses - 261,699 260,821 1,502 524,022 Total costs and expenses 8,011,137 261,699 260,821 1,502 - 8,535,159 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (13,646) - 6,234 (26,523) - (33,935) Financial Services gain on deconsolidation - 61,418 - - - 61,418 Other expense, net (5,058) - - (9,549) - (14,607) Operating earnings (loss)$ 1,091,759 194,643 1,147 (17,122) - 1,270,427 Corporate general and administrative expenses - - - - 160,817 160,817 Charitable foundation contribution - - - - 9,481 9,481 Earnings (loss) before income taxes$ 1,091,759 194,643 1,147 (17,122) (170,298) 1,100,129 Three Months EndedMay 31, 2021 versus Three Months EndedMay 31, 2020 Revenues from home sales increased 21% in the second quarter of 2021 to$6.0 billion from$4.9 billion in the second quarter of 2020. Revenues were higher primarily due to a 14% increase in the number of home deliveries, excluding unconsolidated entities, and a 6% increase in the average sales price. New home deliveries, excluding unconsolidated entities, increased to 14,462 homes in the second quarter of 2021 from 12,653 homes in the second quarter of 2020. The average sales price of homes delivered was$414,000 in the second quarter of 2021, compared to$389,000 in the second quarter of 2020. 30 -------------------------------------------------------------------------------- Gross margin on home sales were$1.6 billion , or 26.1%, in the second quarter of 2021, compared to$1.1 billion , or 21.6%, in the second quarter of 2020. The gross margin percentage on home sales increased primarily as a result of pricing power as the increase in revenue per square foot outpaced the increase in cost per square foot. Additionally, we continued to focus on controlling construction costs. Gross margin on land sales in the second quarter of 2021 was$5.8 million compared to a loss of$23.5 million in the second quarter of 2020. The loss in the second quarter of 2020 was primarily due to a write-off of costs as a result of us not moving forward with a naval base development inConcord, California , northeast ofSan Francisco . Selling, general and administrative expenses were$455.2 million in the second quarter of 2021, compared to$407.2 million in the second quarter of 2020. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 7.6% in the second quarter of 2021, from 8.3% in the second quarter of 2020. This was the lowest percentage for a second quarter in our history primarily due to a decrease in broker commissions and benefits of our technology efforts. Operating earnings for the Financial Services segment were$121.2 million in the second quarter of 2021, compared to$150.6 million in the second quarter of 2020 (which included$147.3 million of operating earnings and an add back of$3.3 million of net loss attributable to noncontrolling interests). The second quarter of 2020 included a$61.4 million gain on the deconsolidation of a previously consolidated entity. Excluding this gain, the improvement in operating earnings was primarily due to an increase in margin in the mortgage business and an increase in volume and margin in the title business. Operating earnings for the Multifamily segment were$22.4 million in the second quarter of 2021, compared to an operating loss of$0.6 million in the second quarter of 2020. Operating loss for the Lennar Other segment was$54.1 million in the second quarter of 2021, compared to$18.0 million in the second quarter of 2020. In the second quarter of 2021, we recorded mark to market losses on our Opendoor Technologies, Inc ("Opendoor") and Sunnova Energy International Inc. ("Sunnova") investments of$234.3 million and$38.3 million , respectively. This was partially offset by a gain of$151.5 million recognized during the quarter related to the sale of our solar business to Sunnova. Six Months EndedMay 31, 2021 versus Six Months EndedMay 31, 2020 Revenues from home sales increased 20% in the six months endedMay 31, 2021 to$10.9 billion from$9.1 billion in the six months endedMay 31, 2020 . Revenues were higher primarily due to a 17% increase in the number of home deliveries, excluding unconsolidated entities. New home deliveries, excluding unconsolidated entities, increased to 26,764 homes in the six months endedMay 31, 2021 from 22,966 homes in the six months endedMay 31, 2020 . The average sales price of homes delivered was$406,000 in the six months endedMay 31, 2021 , compared to$395,000 in the six months endedMay 31, 2020 . Gross margin on home sales were$2.8 billion , or 25.6%, in the six months endedMay 31, 2021 , compared to$1.9 billion or 21.1%, in the six months endedMay 31, 2020 . The gross margin percentage on home sales increased primarily as a result of pricing power as the increase in revenue per square foot outpaced the increase in cost per square foot. Additionally, we continued to focus on controlling construction costs. Gross margin on land sales in the six months endedMay 31, 2021 was$12.3 million , compared to a loss of$23.8 million in the six months endedMay 31, 2020 . The loss in the six months endedMay 31, 2020 was primarily due to a write-off of costs in the second quarter of 2020 as a result of us not moving forward with a naval base development inConcord, California , northeast ofSan Francisco . Selling, general and administrative expenses were$865.4 million in the six months endedMay 31, 2021 , compared to$786.1 million in the six months endedMay 31, 2020 . As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.0% in the six months endedMay 31, 2021 , from 8.7% in the six months endedMay 31, 2020 . The improvement was primarily due to a decrease in broker commissions and benefits of our technology efforts. Operating earnings for the Financial Services segment were$267.4 million in the six months endedMay 31, 2021 , compared to$208.8 million in the six months endedMay 31, 2020 (which included$194.6 million in operating earnings and an add back of$14.1 million net loss attributable to noncontrolling interests). The six months endedMay 31, 2020 included a$61.4 million gain on the deconsolidation of a previously consolidated entity. Excluding this gain, the improvement in operating earnings was primarily due to an increase in volume and margin in the mortgage and title businesses. Operating earnings for the Multifamily segment were$21.5 million in the six months endedMay 31, 2021 , compared to operating earnings of$1.1 million in the six months endedMay 31, 2020 . Operating earnings for the Lennar Other segment were$417.2 million in the six months endedMay 31, 2021 , compared to an operating loss of$17.1 million in the six months endedMay 31, 2020 . The operating earnings for the six months endedMay 31, 2021 were primarily due to the net gain related to the mark to market of our shareholdings in Opendoor, which began trading on the Nasdaq stock market inDecember 2020 , and the gain on the sale of our solar business to Sunnova. 31 -------------------------------------------------------------------------------- Homebuilding Segments AtMay 31, 2021 , our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements. The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated: Selected Financial and Operational Data Three Months Ended May 31, 2021 Gross Margins Operating Earnings (Loss) Equity in Earnings Sales of Homes Costs of Sales of Net Margins on Gross Margins on (Loss) from Other Income Operating Earnings ($ in thousands) Revenue Homes Gross Margin % Sales of Homes (1) Sales of Land Other Revenue Unconsolidated Entities (Expense), net (Loss) East$ 1,551,030 1,115,010 28.1 % 307,978 1,335 1,768 (59) (1,195) 309,827 Central 1,093,190 846,427 22.6 % 157,429 774 579 317 (51) 159,048Texas 790,391 551,067 30.3 % 173,803 1,837 562 387 (532) 176,057 West 2,543,263 1,893,148 25.6 % 491,223 1,860 1,311 (921) (662) 492,811 Other (2) 2,857 15,721 (450.3) % (26,239) - 4,305 (1,412) (1,922) (25,268) Totals$ 5,980,731 4,421,373 26.1 % 1,104,194 5,806 8,525 (1,688) (4,362) 1,112,475 Three Months Ended May 31, 2020 Gross Margins Operating Earnings (Loss) Gross Margins Equity in Earnings Sales of Homes Costs of Sales of Net Margins on (Loss) on Sales (Loss) from Other Income Operating Earnings ($ in thousands) Revenue Homes Gross Margin % Sales of Homes (1) of Land Other Revenue Unconsolidated Entities (Expense), net (Loss) East$ 1,276,275 978,677 23.3 % 185,194 (1,126) 1,156 218 7,445 192,887 Central 984,248 800,736 18.6 % 102,873 280 1,074 19 (342) 103,904Texas 694,110 530,004 23.6 % 98,566 1,524 250 1 (454) 99,887 West 1,957,435 1,533,513 21.7 % 279,509 (776) 1,914 (40) (513) 280,094 Other (2) 13,013 19,841 (52.5) % (11,023) (23,438) 176 (9,298) (1,828) (45,411) Totals$ 4,925,081 3,862,771 21.6 % 655,119 (23,536) 4,570 (9,100) 4,308 631,361 Six Months Ended May 31, 2021 Gross Margins Operating Earnings (Loss) Equity in Earnings Sales of Homes Costs of Sales of Net Margins on Gross Margins on (Loss) from Other Income Operating Earnings (In thousands) Revenue Homes Gross Margin % Sales of Homes (1) Sales of Land Other Revenue Unconsolidated Entities (Expense), net (Loss) East$ 2,898,641 2,103,873 27.4 % 549,512 6,411 3,186 (551) 13,352 571,910 Central 2,019,628 1,559,973 22.8 % 289,528 751 984 415 (607) 291,071Texas 1,426,801 1,002,264 29.8 % 302,964 2,871 820 541 (1,496) 305,700 West 4,520,071 3,400,875 24.8 % 809,213 2,228 2,361 41 674 814,517 Other (2) 6,504 21,250 (226.7) % (33,207) - 5,673 (6,699) (3,310) (37,543) Totals$ 10,871,645 8,088,235 25.6 % 1,918,010 12,261 13,024 (6,253) 8,613 1,945,655 Six Months Ended May 31, 2020 Gross Margins Operating Earnings (Loss) Equity in Earnings Sales of Homes Costs of Sales of Net Margins on Gross Margins on Sales (Loss) from Other Income Operating Earnings (In thousands) Revenue Homes Gross Margin % Sales of Homes (1) of Land Other Revenue Unconsolidated Entities (Expense), net (Loss) East$ 2,426,996 1,859,895 23.4 % 340,019 (1,577) 2,618 577 4 341,641 Central 1,770,945 1,458,018 17.7 % 157,277 (647) 1,525 572 900 159,627Texas 1,157,907 890,278 23.1 % 151,693 3,197 767 204 (2,901) 152,960 West 3,688,948 2,912,803 21.0 % 498,016 (1,339) 3,728 3,900 696 505,001 Other (2) 21,052 33,556 (59.4) % (21,790) (23,438) 414 (18,899) (3,757) (67,470) Totals$ 9,065,848 7,154,550 21.1 % 1,125,215 (23,804) 9,052 (13,646) (5,058) 1,091,759 (1)Net margins on sales of homes include selling, general and administrative expenses. (2)Negative gross and net margins were due to period costs and impairments in Urban divisions that impact costs of homes sold without sufficient sales of homes revenue to offset those costs. 32 -------------------------------------------------------------------------------- Summary of Homebuilding Data Deliveries: Three Months Ended Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, 2021 2020 2021 2020 2021 2020 East 4,480 3,814$ 1,560,934 1,282,553$ 348,000 336,000 Central 2,761 2,579 1,093,190 984,247 396,000 382,000 Texas 2,747 2,462 790,391 694,110 288,000 282,000 West 4,502 3,804 2,543,263 1,957,435 565,000 515,000 Other 3 13 2,857 13,013 952,000 1,001,000 Total 14,493 12,672$ 5,990,635 4,931,358$ 413,000 389,000 Of the total homes delivered listed above, 31 homes with a dollar value of$9.9 million and an average sales price of$319,000 represent home deliveries from unconsolidated entities for the three months endedMay 31, 2021 , compared to 19 home deliveries with a dollar value of$6.3 million and an average sales price of$330,000 for the three months endedMay 31, 2020 . Six Months Ended Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, 2021 2020 2021 2020 2021 2020 East 8,400 7,202$ 2,912,235 2,436,268$ 347,000 338,000 Central 5,180 4,622 2,019,628 1,770,945 390,000 383,000 Texas 5,096 4,039 1,426,802 1,157,907 280,000 287,000 West 8,124 7,108 4,520,071 3,688,948 556,000 519,000 Other 7 22 6,504 21,052 929,000 957,000 Total 26,807 22,993$ 10,885,240 9,075,120$ 406,000 395,000 Of the total homes delivered listed above, 43 homes with a dollar value of$13.6 million and an average sales price of$316,000 represent home deliveries from unconsolidated entities for the six months endedMay 31, 2021 , compared to 27 home deliveries with a dollar value of$9.3 million and an average sales price of$343,000 for the six months endedMay 31, 2020 . New Orders (1): Three Months Ended Active Communities Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, May 31, 2021 2020 2021 2020 2021 2020 2021 2020 East 351 344 5,351 4,126$ 1,987,929 1,360,519$ 372,000 330,000 Central 297 325 3,416 2,699 1,399,730 1,024,724 410,000 380,000 Texas 232 221 3,250 2,582 1,000,013 670,139 308,000 260,000 West 342 352 5,135 3,608 3,172,569 1,802,705 618,000 500,000 Other 3 3 5 - 5,146 - 1,029,000 - Total 1,225 1,245 17,157 13,015$ 7,565,387 4,858,087$ 441,000 373,000 Of the total homes listed above, 32 homes with a dollar value of$9.9 million and an average sales price of$373,000 represent homes in four active communities from unconsolidated entities for the three months endedMay 31, 2021 , compared to 25 homes with a dollar value of$9.0 million and an average sales price of$361,000 in four active communities for the three months endedMay 31, 2020 . (1)Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and six months endedMay 31, 2021 andMay 31, 2020 . Six Months Ended Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, 2021 2020 2021 2020 2021 2020 East 10,165 7,857$ 3,688,041 2,634,872$ 363,000 335,000 Central 6,742 5,366 2,733,356 2,043,167 405,000 381,000 Texas 6,025 4,581 1,812,182 1,243,218 301,000 271,000 West 9,787 7,573 5,864,964 3,928,337 599,000 519,000 Other 8 14 8,121 13,581 1,015,000 970,000 Total 32,727 25,391$ 14,106,664 9,863,175$ 431,000 388,000 33
-------------------------------------------------------------------------------- Of the total homes listed above, 67 homes with a dollar value of$23.5 million and an average sales price of$351,000 represent homes from unconsolidated entities for the six months endedMay 31, 2021 , compared to 51 homes with a dollar value of$17.1 million and an average sales price of$335,000 for the six months endedMay 31, 2020 . Backlog: At Homes Dollar Value (In thousands) Average Sales Price May 31, May 31, May 31, 2021 2020 2021 2020 2021 2020 East 7,778 6,345$ 3,086,740 2,224,974$ 397,000 351,000 Central 5,933 3,894 2,475,900 1,516,188 417,000 389,000 Texas 3,752 2,712 1,209,965 798,648 322,000 294,000 West 7,275 5,023 4,258,324 2,547,649 585,000 507,000 Other 3 1 3,465 1,138 1,155,000 1,138,000 Total 24,741 17,975$ 11,034,394 7,088,597$ 446,000 394,000 Of the total homes in backlog listed above, 62 homes with a backlog dollar value of$21.4 million and an average sales price of$345,000 represent the backlog from unconsolidated entities atMay 31, 2021 , compared to 55 homes with a backlog dollar value of$18.0 million and an average sales price of$327,000 atMay 31, 2020 . 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. Various state and federal laws and regulations may sometimes give purchasers a right to cancel homes in backlog. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners. Three Months EndedMay 31, 2021 versus Three Months EndedMay 31, 2020 Homebuilding East: Revenues from home sales increased in the second quarter of 2021 compared to the second quarter of 2020, primarily due to an increase in the number of home deliveries in all the states of the segment except inPennsylvania and an increase in the average sales price of homes delivered in all the states of the segment except inNew Jersey . The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of home deliveries inPennsylvania was primarily due to a decrease in the number of communities due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered inNew Jersey was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. Gross margin percentage on home deliveries in the second quarter of 2021 increased compared to the same period last year primarily due to an increase in the revenue per square foot of homes delivered, which outpaced increases in costs per square foot. Homebuilding Central: Revenues from home sales increased in the second quarter of 2021 compared to the second quarter of 2020, primarily due to an increase in the number of home deliveries in all the states of the segment except inGeorgia ,Tennessee andVirginia , and an increase in the average sales price of homes delivered in all the states of the segment. The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of home deliveries inGeorgia ,Tennessee andVirginia was primarily due to a decrease in the number of communities due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the second quarter of 2021 increased compared to the same period last year primarily due to an increase in revenue per square foot of homes delivered, which outpaced increases in cost per square foot. Homebuilding Texas: Revenues from home sales increased in the second quarter of 2021 compared to the second quarter of 2020, primarily due to an increase in the number of home deliveries and an increase in the average sales price of homes delivered. The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the second quarter of 2021 increased compared to the same period last year primarily due to an increase in revenue per square foot of homes delivered, which outpaced increases in cost per square foot. Homebuilding West: Revenues from home sales increased in the second quarter of 2021 compared to the second quarter of 2020, primarily due to an increase in the number of home deliveries in all the states of the segment except inOregon and an increase in the average sales price of homes delivered in all the states of the segment except inColorado . The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased during the quarter. The decrease in the number of home deliveries inOregon was primarily due to a decrease in the number of 34 -------------------------------------------------------------------------------- deliveries per active community due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered inColorado was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. Gross margin percentage on home deliveries in the second quarter of 2021 increased compared to the same period last year primarily due to an increase in revenue per square foot of homes delivered, which outpaced increases in cost per square foot. Six Months EndedMay 31, 2021 versus Six Months EndedMay 31, 2020 Homebuilding East: Revenues from home sales increased in the six months endedMay 31, 2021 compared to the six months endedMay 31, 2020 , primarily due to an increase in the number of home deliveries in all the states of the segment except inPennsylvania and an increase in the average sales price of homes delivered in all the states of the segment except inNew Jersey . The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of home deliveries inPennsylvania was primarily due to a decrease in the number of communities due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered inNew Jersey was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. Gross margin percentage on home deliveries in the six months endedMay 31, 2021 increased compared to the same period last year primarily due to an increase in the revenue per square foot of homes delivered while cost per square foot were unchanged. Homebuilding Central: Revenues from home sales increased in the six months endedMay 31, 2021 compared to the six months endedMay 31, 2020 , primarily due to an increase in the number of home deliveries in all the states of the segment except inGeorgia ,Maryland andVirginia , and an increase in the average sales price of homes delivered in all the states of the segment except inNorth Carolina andIndiana . The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of home deliveries inGeorgia ,Maryland andVirginia was primarily due to a decrease in the number of communities due to the timing of opening and closing of communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered inNorth Carolina andIndiana was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. Gross margin percentage on home deliveries in the six months endedMay 31, 2021 increased compared to the same period last year primarily due to an increase in revenue per square foot of homes delivered. Homebuilding Texas: Revenues from home sales increased in the six months endedMay 31, 2021 compared to the six months endedMay 31, 2020 , primarily due to an increase in the number of home deliveries, partially offset by a decrease in the average sales price of homes delivered. The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in average sales price of homes delivered was primarily due to closing out higher priced communities and shifting into lower priced communities. Gross margin percentage on home deliveries in the six months endedMay 31, 2021 increased compared to the same period last year primarily due to an increase in revenue per square foot of homes delivered while cost per square foot were unchanged. Homebuilding West: Revenues from home sales increased in the six months endedMay 31, 2021 compared to the six months endedMay 31, 2020 , primarily due to an increase in the number of home deliveries in all states of the segment and an increase in the average sales price of homes delivered in all the states of the segment except inColorado . The increase in the number of home deliveries in all states of the segment was primarily due to higher demand as the number of deliveries per active community increased during the quarter. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in average sales price of homes delivered inColorado was primarily due to closing out higher priced communities and shifting into lower priced communities. Gross margin percentage on home deliveries in the six months endedMay 31, 2021 increased compared to the same period last year primarily due to an increase in revenue per square foot of homes delivered, which outpaced increases in cost per square foot. Financial Services Segment Our Financial Services reportable segment provides mortgage financing, title and closing services primarily for buyers of our homes. The segment also originates and sells into securitizations commercial mortgage loans through itsLMF 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. 35 -------------------------------------------------------------------------------- The following table sets forth selected financial and operational information related to the residential mortgage and title activities of our Financial Services segment: Three Months Ended Six Months Ended May 31, May 31, (Dollars in thousands) 2021 2020 2021 2020 Dollar value of mortgages originated$ 3,186,000 3,258,000 5,947,000 5,478,000 Number of mortgages originated 9,500 10,100 17,900 17,000 Mortgage capture rate of Lennar homebuyers 74 % 82 % 75 % 79 % Number of title and closing service transactions 17,100 14,400 32,100 25,500 AtMay 31, 2021 andNovember 30, 2020 , the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was$162.9 million and$164.2 million , respectively. Details of these securities and related debt are within Note 2 of the Notes to Condensed Consolidated Financial Statements. Multifamily Segment We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. Our Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in selectU.S. markets. Originally, our Multifamily segment focused on building multifamily properties and selling them shortly after they were completed. However, more recently we have focused on creating and participating in ventures that build multifamily properties with the intention of retaining them after they are completed. The following tables provide information related to our investment in the Multifamily segment: Balance Sheets (In thousands) May 31, 2021 November 30, 2020 Multifamily investments in unconsolidated entities$ 691,330 724,647 Lennar's net investment in Multifamily 936,941 906,632 Statements of Operations Three Months Ended Six Months Ended May 31, May 31, (Dollars in thousands) 2021 2020 2021 2020
Number of operating properties/investments sold through joint ventures
1 - 1 2 Lennar's share of gains on the sale of operating properties/investments$ 14,784 - 14,784 3,000 Lennar Other Segment AtMay 31, 2021 andNovember 30, 2020 , we had$1.1 billion and$521.7 million , respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of$379.2 million and$387.1 million , respectively. The increase in assets during the six months endedMay 31, 2021 was due to an increase in the value of our strategic technology investments, primarily managed by our LENX subsidiary. This increase was largely related to our strategic investments in Opendoor and Sunnova. During the three months endedMay 31, 2021 , we completed the sale of our residential solar business to Sunnova for shares in the entity. The following is a detail of Lennar Other realized and unrealized gain (loss): Three Months Ended Six Months Ended May 31, May 31, (In thousands) 2021 2020 2021 2020
Opendoor (OPEN) mark to market $ (234,290) - 235,455
- Sunnova (NOVA) mark to market (38,335) - (38,335) - Gain on sale of solar business 151,475 - 151,475 - Other realized gain 3,580 - 3,580 - $ (117,570) - 352,175 - 36
-------------------------------------------------------------------------------- (2) Financial Condition and Capital Resources AtMay 31, 2021 , we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of$2.8 billion , compared to$2.9 billion atNovember 30, 2020 and$1.7 billion atMay 31, 2020 . We finance all of our activities, including homebuilding, financial services, multifamily, other and general operating needs, primarily with cash generated from our operations, debt issuances and cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility (the "Credit Facility"). Operating Cash Flow Activities During the six months endedMay 31, 2021 andMay 31, 2020 , cash provided by operating activities totaled$718.1 million and$1.3 billion , respectively. During the six months endedMay 31, 2021 , cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of$444.4 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of$184.7 million , and a decrease in receivables of$117.9 million , partially offset by an increase in inventories due to strategic land purchases, and land development and construction costs of$1.6 billion . During the six months endedMay 31, 2020 , cash provided by operating activities was impacted primarily by our net earnings and a decrease in loans held-for-sale of$479.4 million primarily related to the sale of loans originated by our Financial Services segment, partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of$159.1 million and increase in other assets of$148.1 million . Investing Cash Flow Activities During the six months endedMay 31, 2021 andMay 31, 2020 , cash used in investing activities totaled$50.1 million and$174.0 million , respectively. During the six months endedMay 31, 2021 , our cash used in investing activities was primarily due to cash contributions of$282.2 million to unconsolidated entities, which included (1)$178.6 million to Homebuilding unconsolidated entities, (2)$57.8 million to Multifamily unconsolidated entities, and (3)$45.8 million to the strategic technology investments included in the Lennar Other segment. This was partially offset by distributions of capital from unconsolidated entities of$231.5 million , which primarily included (1)$134.2 million from Homebuilding unconsolidated entities, (2)$80.1 million from Multifamily unconsolidated entities, and (3)$17.2 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment. During the six months endedMay 31, 2020 , our cash used in investing activities was primarily due to$302.8 million of investments in and contributions to unconsolidated entities and deconsolidation of a previously consolidated entity, which included (1)$31.2 million to Homebuilding unconsolidated entities; (2)$79.7 million to Multifamily unconsolidated entities; (3)$39.3 million in strategic technology investments included in our Lennar Other segment; and (4) derecognition of$152.5 million of cash as of the date of deconsolidation of a previously consolidated Financial Services entity. This was partially offset by distributions of capital from unconsolidated entities of$115.1 million , which primarily included (1)$33.4 million from Multifamily unconsolidated entities, (2)$36.4 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment and (3)$45.3 million from Homebuilding unconsolidated entities. Financing Cash Flow Activities During the six months endedMay 31, 2021 andMay 31, 2020 , cash used in financing activities totaled$817.8 million and$948.6 million , respectively. During the six months endedMay 31, 2021 , cash used in financing activities was primarily impacted by (1)$535.7 million of net repayments under our Financial Services' warehouse facilities, which included theLMF Commercial warehouse repurchase facilities; (2)$156.3 million of dividend payments; and (3) repurchases of our common stock for$173.6 million , which included$141.6 million of repurchases under our repurchase program and$32.1 million of repurchases related to our equity compensation plan. These were partially offset by$301.9 million of proceeds from liabilities related to consolidated inventory not owned due to land sales to land banks. During the six months endedMay 31, 2020 , cash used in financing activities was primarily impacted by (1)$310.2 million of net repayments under our Financial Services' warehouse facilities, which included theLMF Commercial warehouse repurchase facilities; (2) the redemption of$300.0 million aggregate principal amount of our 6.625% senior notes dueMay 2020 ; (3) repurchases of our common stock, which included$288.5 million of repurchases under our repurchase program and$7.5 million of repurchases related to our equity compensation plan; and (4)$174.4 million of principal payments on notes payable and other borrowings. These were partially offset by$169.1 million of receipts related to noncontrolling interests. 37 -------------------------------------------------------------------------------- Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our homebuilding operations. Homebuilding debt to total capital and net Homebuilding debt to total capital are calculated as follows: (Dollars in thousands) May 31, 2021 November 30, 2020 May 31, 2020 Homebuilding debt$ 5,894,342 5,955,758 7,495,674 Stockholders' equity 19,576,108 17,994,856 16,542,703 Total capital$ 25,470,450 23,950,614 24,038,377 Homebuilding debt to total capital 23.1 % 24.9 % 31.2 % Homebuilding debt$ 5,894,342 5,955,758 7,495,674 Less: Homebuilding cash and cash equivalents 2,581,583 2,703,986 1,398,682 Net Homebuilding debt$ 3,312,759 3,251,772 6,096,992 Net Homebuilding debt to total capital (1) 14.5 % 15.3 % 26.9 % (1)Net homebuilding debt to total capital is a non-GAAP financial measure defined as net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity). We believe 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 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. AtMay 31, 2021 , Homebuilding debt to total capital was lower compared toMay 31, 2020 , primarily as a result of a decrease in Homebuilding debt and an increase in stockholders' equity due to net earnings. AtMay 31, 2021 , Homebuilding debt to total capital was lower compared toNovember 30, 2020 , primarily as a result of an increase in stockholders' equity due to net earnings. 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. Our Homebuilding senior notes and other debts payable as well as letters of credit and surety bonds are summarized within Note 7 of the Notes to Condensed Consolidated Financial Statements. Our Homebuilding average debt outstanding and the average rates of interest was as follows: Six Months Ended May 31, (Dollars in thousands) 2021 2020 Homebuilding average debt outstanding$ 5,981,490 $ 8,171,686 Average interest rate 4.9 % 4.9 % Interest incurred$ 142,517 $ 184,198 As ofMay 31, 2021 , the maximum borrowings on our Credit Facility were$2.5 billion and included a$300 million accordion feature, subject to additional commitments, thus the maximum borrowings could be$2.8 billion maturing in 2024. The Credit Facility agreement (the "Credit Agreement") provides that up to$500 million in commitments may be used for letters of credit. Under the Credit Agreement, we are subject to debt covenants. The maturity, details and debt covenants of the Credit Facility are unchanged from the disclosure in the Financial Condition and Capital Resources section of our Form 10-K for the year endedNovember 30, 2020 . The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Agreement as ofMay 31, 2021 : Level Achieved as of (Dollars in thousands) Covenant Level May 31, 2021 Minimum net worth test$ 9,290,371 13,075,167 Maximum leverage ratio 65.0 % 18.8 % Liquidity test 1.00 9.09 38
-------------------------------------------------------------------------------- Financial Services Warehouse Facilities Our Financial Services segment uses the residential facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature. TheLMF Commercial facilities financeLMF Commercial loan origination and securitization activities and were secured by up to an 80% interest in the originated commercial loans financed. These facilities and the related borrowings and collateral are detailed in Note 2 of the Notes to Condensed Consolidated Financial Statements. Changes in Capital Structure InJanuary 2021 , our Board of Directors authorized the repurchase of up to the lesser of$1.0 billion in value, or 25 million in shares, of our outstanding Class A and Class B common stock. The repurchase authorization replaced aJanuary 2019 authorization and has no expiration date. The details of our Class A and Class B common stock under this program for both the three and six months endedMay 31, 2021 and 2020 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements. During the six months endedMay 31, 2021 , treasury stock increased due to our repurchase of 1.9 million shares of Class A and Class B common stock due primarily to our repurchase of 1.5 million shares of Class A and Class B common stock through our stock repurchase program. During the six months endedMay 31, 2020 , treasury stock increased due to our repurchase of 4.4 million shares of Class A and Class B common stock through our stock repurchase program. OnJune 18, 2021 , our Board of Directors declared a quarterly cash dividend of$0.25 per share on both our Class A and Class B common stock, payable onJuly 19, 2021 to holders of record at the close of business onJuly 2, 2021 . OnMay 5, 2021 , we paid cash dividends of$0.25 per share on both our Class A and Class B common stock to holders of record at the close of business onApril 21, 2021 , as declared by our Board of Directors onApril 7, 2021 . We approved and paid cash dividends of$0.125 per share for each of the first three quarters of 2020 and$0.25 per share in fourth quarter of 2020 on both our Class A and Class B common stock and first two quarter of 2021 on both its Class A and Class B common stock. Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity. Supplemental Financial Information Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes. The guarantees are full and unconditional. 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 ofLennar Corporation (other than senior notes), those subsidiaries must also guaranteeLennar Corporation's obligations with regard to its senior notes. Included in the following tables as part of "Obligors" together withLennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because atMay 31, 2021 they were guaranteeingLennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes to Condensed Consolidated Financial Statements. The guarantees are full, unconditional and joint and several and the guarantor subsidiaries are 100% directly or indirectly owned byLennar 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$75 million principal amount of debt ofLennar Corporation (other than senior notes), and a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed. Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, atMay 31, 2021 is included in the following tables. Intercompany balances and transactions within the Obligors have been eliminated and amounts attributable to the Obligor's investment in consolidated subsidiaries that have not issued or guaranteed the senior notes have been excluded. Amounts due from and transactions with nonobligor subsidiaries and related parties are separately disclosed: (In thousands) May 31, 2021 November 30, 2020 Due from non-guarantor subsidiaries$ 3,501,212 2,655,503 Equity method investments 1,008,979 951,579 Total assets 29,645,023 27,695,067 Total liabilities 9,824,021 9,599,718 39
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Six Months Ended (In thousands) May 31, 2021 Total revenues$ 11,065,793 Operating earnings 2,009,860 Earnings before income taxes 1,784,336 Net earnings attributable to Lennar 1,363,838 Off-Balance Sheet Arrangements Homebuilding: Investments in Unconsolidated Entities As ofMay 31, 2021 , we had equity investments in 42 active homebuilding and land unconsolidated entities (of which three had recourse debt, 13 had non-recourse debt and 26 had no debt) compared to 38 active homebuilding and land unconsolidated entities atNovember 30, 2020 . Historically, we have invested in unconsolidated entities that acquired and developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers. Through these entities, we have primarily sought to reduce and share our risk by limiting the amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures. The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner. Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategic partners. Joint ventures with land owners/developers have given us access to homesites owned or controlled by our partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for large land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with access to our partners' capital. Joint ventures with strategic partners have allowed us to combine our homebuilding expertise with the specific expertise (e.g. commercial or infill experience) of our partners. 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 Condensed Consolidated Financial Statements. The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as ofMay 31, 2021 and 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.
Principal Maturities of Unconsolidated JVs by Period (In thousands)
Total JV Debt 2021 2022 2023 Thereafter
Other
Debt without recourse to Lennar$ 1,204,527 97,054 224,668 19,255 863,550
-
Land seller and CDD and other debt 11,208 - - - -
11,208
Maximum recourse debt exposure to Lennar 3,599 - 3,599 - - - Debt issuance costs (13,118) - - - - (13,118) Total$ 1,206,216 97,054 228,267 19,255 863,550 (1,910) Multifamily: Investments in Unconsolidated Entities AtMay 31, 2021 , Multifamily had equity investments in 16 unconsolidated entities that are engaged in multifamily residential developments (of which 10 had non-recourse debt and six had no debt), compared to 22 unconsolidated entities atNovember 30, 2020 . We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties. Through these entities, we are focusing on developing a geographically diversified portfolio of institutional quality multifamily rental properties in selectU.S. markets. Initially, we participated in building multifamily developments and selling them soon after they were completed. Recently, however, we have been focused on developing properties with the intention of retaining them. Participants in these joint ventures have been financial partners. Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners' capital. Each joint venture is governed by an operating agreement that provides significant substantive participating voting rights on major decisions to our partners. The Multifamily segment includes LMV I and LMV II, which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets. Details of each as of and during the six months endedMay 31, 2021 are included in Note 3 of the Notes to Condensed Consolidated Financial Statements. We regularly monitor the results of both our Homebuilding and Multifamily unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations. We also monitor the performance of joint ventures in which we have investments on a regular basis to assess compliance with debt covenants. For those joint ventures not in compliance with 40 -------------------------------------------------------------------------------- the debt covenants, we evaluate and assess possible impairment of our investment. We believe all of the joint ventures were in compliance with applicable debt covenants atMay 31, 2021 . The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as ofMay 31, 2021 and it does not represent estimates of future cash payments that will be made to reduce debt balances. Principal Maturities of Unconsolidated JVs by Period (In thousands) Total JV Debt 2021 2022 2023 Thereafter Other Debt without recourse to Lennar$ 2,865,860 288,422 529,886 758,597 1,288,955 - Debt issuance costs (26,220) - - - - (26,220) Total$ 2,839,640 288,422 529,886 758,597 1,288,955 (26,220) Lennar Other: Investments in Unconsolidated Entities As part of the sale of the Rialto investment and asset management platform, we retained our ability to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds. We periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable income to the carried interests. These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled from the applicable funds and have been recorded as revenues. As ofMay 31, 2021 andNovember 30, 2020 , we had strategic technology investments in unconsolidated entities of$178.2 million and$196.7 million , respectively. Option Contracts We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options. The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties ("optioned") or unconsolidated JVs (i.e., controlled homesites): Controlled Homesites Years of May 31, 2021 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1) East 55,537 5,750 61,287 55,218 116,505 Central 24,283 92 24,375 41,816 66,191 Texas 43,447 - 43,447 38,332 81,779 West 52,347 3,444 55,791 51,336 107,127 Other 4 7,569 7,573 2,235 9,808 Total homesites 175,618 16,855 192,473 188,937 381,410 3.3 % of total homesites 50 % 50 % Controlled Homesites Years of May 31, 2020 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1) East 22,812 13,608 36,420 63,932 100,352 Central 13,271 122 13,393 43,203 56,596 Texas 23,164 - 23,164 36,179 59,343 West 12,355 2,900 15,255 59,777 75,032 Other - 8,681 8,681 2,071 10,752 Total homesites 71,602 25,311 96,913 205,162 302,075 3.9 % of total homesites 32 % 68 % (1)Based on trailing twelve months of home deliveries. Details on option contracts and related consolidated inventory not owned and exposure are included in Note 10 of the Notes to Condensed Consolidated Financial Statements. Contractual Obligations and Commercial Commitments Our contractual obligations and commercial commitments have not changed materially from those reported in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year endedNovember 30, 2020 . There were no outstanding borrowings under our Credit Facility as ofMay 31, 2021 . 41 -------------------------------------------------------------------------------- (3) New Accounting Pronouncements See Note 1 of the Notes to Condensed Consolidated Financial Statements included under Item 1 of this Report for a discussion of new accounting pronouncements applicable to our company. (4) Critical Accounting Policies We believe that there have been no significant changes to our critical accounting policies during the six months endedMay 31, 2021 as compared to those we disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year endedNovember 30, 2020 . Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks related to fluctuations in interest rates on our investments, debt obligations, loans held-for-sale and loans held-for-investment. We utilize forward commitments and option contracts to mitigate the risks associated with our mortgage loan portfolio. As ofMay 31, 2021 , we had no outstanding borrowings under our Credit Facility. As ofMay 31, 2021 , our borrowings under Financial Services' warehouse repurchase facilities totaled$671.5 million under residential facilities and$104.2 million underLMF Commercial facilities. Information Regarding Interest Rate Sensitivity Principal (Notional) Amount by Expected Maturity and Average Interest Rate May 31, 2021 Six Months Ending November 30, Years EndingNovember 30 , Fair Value atMay 31 , (Dollars in millions) 2021 2022 2023 2024 2025 2026 Thereafter Total 2021 LIABILITIES: Homebuilding: Senior Notes and other debts payable: Fixed rate$ 355.2 1,539.7 99.0 1,557.2 591.8 402.9 1,297.5 5,843.3 6,381.0 Average interest rate 5.6 % 4.5 % 4.2 % 5.0 % 4.8 % 5.2 % 4.7 % 4.8 % - Variable rate$ 33.0 - - - - - - 33.0 33.3 Average interest rate 4.6 % - - - - - - 4.6 % - Financial Services: Notes and other debts payable: Fixed rate $ - - - - - - 152.4 152.4 153.3 Average interest rate - - - - - - 3.4 % 3.4 % - Variable rate$ 775.8 - - - - - - 775.8 775.8 Average interest rate 2.4 % - - - - - - 2.4 % - Lennar Other: Notes and other debts payable: Fixed rate$ 1.9 - - - - - - 1.9 1.9 Average interest rate 3.0 % - - - - - - 3.0 % - For additional information regarding our market risk refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year endedNovember 30, 2020 . Item 4. Controls and Procedures Each of our Co-Chief Executive Officers and Co-Presidents ("Co-CEOs") and Chief Financial Officer 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 ofMay 31, 2021 to ensure that information required to be disclosed in our reports filed or 42 -------------------------------------------------------------------------------- submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in theSecurities 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 endedMay 31, 2021 . That evaluation did not identify any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 43
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