Variable Interest Entities

9 Months Ended

Aug. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

During the nine months ended August 31, 2024, the Company evaluated the joint venture (“JV”) agreements of its JVs that were formed or that had reconsideration events, such as changes in the governing documents or to debt arrangements. Based on the Company's evaluation, there were no variable interest entities (“VIEs”) that were consolidated or deconsolidated during the nine months ended August 31, 2024.

The carrying amount of the Company's consolidated VIEs' assets and non-recourse liabilities are disclosed in the footnote to the condensed consolidated balance sheets.

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 debt 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 unless the Company and/or the other partner(s) have entered into debt guarantees with 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.

Unconsolidated VIEs

The Company’s recorded investments in VIEs that are unconsolidated and related estimated maximum exposure to loss were as follows:


	August 31, 2024			November 30, 2023
(In thousands)	Investments in Unconsolidated VIEs		Lennar’s Maximum Exposure to Loss	Investments in Unconsolidated VIEs	Lennar’s Maximum Exposure to Loss
Homebuilding (1)	$	782,772	854,782	659,224	787,226
Multifamily (2)	132,897		136,702	384,718	402,735
Financial Services (3)	138,045		138,045	140,676	140,676
Lennar Other (4)	125,232		125,232	56,009	56,009
	$	1,178,946	1,254,761	1,240,627	1,386,646

(1)As of August 31, 2024 and November 30, 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 $20.7 million and $69.8 million, respectively. In addition, as of August 31, 2024 and November 30, 2023, there was recourse debt of VIEs of $44.2 million and $42.1 million, respectively.

(2)As of August 31, 2024 and November 30, 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 August 31, 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 August 31, 2024.

(3)As of both August 31, 2024 and November 30, 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 investments held-to-maturity.

(4)As of both August 31, 2024 and November 30, 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 August 31, 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.

Option 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. Land under option with third party holding companies that the Company was economically compelled to takedown was $2.5 billion as of August 31, 2024 and 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 $1.4 billion as of August 31, 2024.

During the nine months ended August 31, 2024, consolidated inventory not owned increased by $850.1 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as of August 31, 2024. The increase was primarily due to land financing transactions and the consolidation of homesites under option that the Company is economically compelled to takedown. These increases were partially offset by homesite takedowns. To reflect the purchase price of the homesite takedowns, 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 condensed consolidated balance sheet as of August 31, 2024. 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.

The Company's exposure to losses on its option contracts with third parties and unconsolidated entities was as follows:


(Dollars in thousands)	August 31, 2024		November 30, 2023
Non-refundable option deposits and pre-acquisition costs	$	2,890,534	1,949,219
Non-refundable option deposits included in consolidated inventory not owned	498,721		451,632
Letters of credit in lieu of cash deposits under certain land and option contracts	307,678		198,920

For the nine months ended August 31, 2024, the Company purchased a significant portion of land from one land bank (the “Land Bank”). There were no amounts due to the Land Bank as of August 31, 2024, resulting from land purchases as the full purchase price of the land is typically paid to the Land Bank at closing when land is purchased by the Company. As of August 31, 2024, the total deposits and pre-acquisition costs on real estate relating to contracts with the Land Bank were $820.7 million. As of August 31, 2024, total consolidated inventory not owned and liabilities related to consolidated inventory not owned relating to contracts with the Land Bank were $768.1 million and $644.9 million, respectively.

The Company believes there are other land banks that could be substituted should the Land Bank 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 this Land Bank would have a material adverse effect on the Company’s business, financial condition or cash flows.