Item 1. Business

Overview of Lennar Corporation

We are one of the nation’s largest homebuilders, a provider of real estate related financial services, a commercial real estate, investment management and finance company through our Rialto segment and a developer of multifamily rental properties in select U.S. markets primarily through unconsolidated entities.

Our homebuilding operations are the most substantial part of our business, comprising $11.2 billion in revenues, or approximately 89% of consolidated revenues, in fiscal 2017. On October 29, 2017, we entered into an agreement (the "Merger Agreement") pursuant to which CalAtlantic Group, Inc. (“CalAtlantic”), another of the nation’s largest homebuilders, will be merged with and into a subsidiary of Lennar (the "Merger"). That transaction, which is subject to approval by both our stockholders and CalAtlantic’s stockholders, will make us the largest homebuilder in the United States based on revenues.

As of November 30, 2017, our reportable homebuilding segments and Homebuilding Other had divisions located in:

East: Florida(1), Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia

Central: Arizona, Colorado and Texas

West: California and Nevada

Other: Illinois, Minnesota, Oregon, Tennessee and Washington

(1) Florida includes information related to WCI Communities, Inc. ("WCI") from the date of acquisition (February 10, 2017) to November 30, 2017.

Our other reportable segments are Lennar Financial Services, Rialto and Lennar Multifamily. For financial information about our Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily operations, review Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is Item 7 of this Report, and our consolidated financial statements and the notes to our consolidated financial statements, which are included in Item 8 of this Report.

A Brief History of Our Company

We are a national homebuilder that operates in various states with deliveries of 29,394 new homes in 2017. 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 1997, we completed the spin-off of our then commercial real estate business, LNR Property Corporation. 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. Through the most recent economic downturn, we strengthened and expanded our competitive position through strategic purchases of land at favorable prices. From 2010 through 2013, we expanded our homebuilding operations into the Georgia, Oregon, Washington and Tennessee markets. In 2017, we acquired WCI for $642.6 million in cash. WCI is a homebuilder of luxury single and multifamily homes, including a small percentage of luxury high-rise tower units, with operations in Florida. WCI's homes, tower units and communities are primarily targeted to move-up, active adult and second-home buyers.

We are currently focused on maintaining moderate growth in community count and homes sales, reducing selling, general and administrative expenses by using innovative strategies to reduce customer acquisition costs, as well as on our soft-pivot land strategy, shortening the average time between when we acquire land and when we expect to begin building homes on it.

In addition to focusing on growing our core operating platforms, Lennar Homebuilding and Lennar Financial Services, we have also been focusing on maximizing the value of our other businesses, including Rialto, Lennar Multifamily and Five Point Holdings, LLC ("FivePoint") (included as one of our Lennar Homebuilding unconsolidated entities), which is developing three very large multi-use planned developments in California.

CalAtlantic Merger

On October 29, 2017, we entered into an agreement pursuant to which CalAtlantic will be merged with and into a subsidiary of ours. CalAtlantic builds homes across the homebuilding spectrum, from entry level to luxury, in over 43 metropolitan statistical areas spanning 19 states. Although CalAtlantic also provides mortgage, title and escrow services, for the years ended December 31, 2016, 2015 and 2014, homebuilding revenue (consisting of home and land sales revenues) accounted for over 98% of CalAtlantic’s consolidated total revenue. We will issue an estimated 83.8 million shares of Class A common stock and 1.7 million shares of Class B common stock, and will make cash payments to CalAtlantic stockholders totaling $1.16

billion, as a result of the transaction. The transaction is subject to approval by our stockholders and by CalAtlantic’s stockholders at meetings scheduled to be held on February 12, 2018. As of and for the year ended December 31, 2017, CalAtlantic had:

•	14,602 home deliveries at an average sales price of $450,000

•	Net new orders of 15,205 at an average sales price of $459,000

•	565 average active selling communities

•	Backlog of 6,420 homes and backlog dollar value of $3.2 billion

•	67,961 homesites owned and controlled as of September 30, 2017

Homebuilding Operations

Overview

Our homebuilding operations include the construction and sale of single-family attached and detached homes as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which we have investments. New home deliveries, including deliveries from unconsolidated entities, were 29,394 in fiscal 2017, compared to 26,563 in fiscal 2016 and 24,292 in fiscal 2015. We primarily sell single-family attached and detached homes in communities targeted to first-time homebuyers, move-up homebuyers, active adult homebuyers and luxury homebuyers (with the acquisition of WCI). The average sales price of a Lennar home varies depending on product and geographic location. For fiscal 2017, the average sales price, excluding deliveries from unconsolidated entities, was $376,000, compared to $361,000 in fiscal 2016 and $344,000 in fiscal 2015.

We operate primarily under the Lennar brand name. Our homebuilding mission is focused on the profitable development of residential communities. Key elements of our strategy include:

•	Strong Operating Margins - We believe our operating leverage combined with our attractive land purchases position us for strong operating margins.

•	Everything’s Included® Approach - We are focused on distinguishing our products, including through our Everything’s Included® approach, which maximizes our purchasing power and enables us to include luxury features as standard items in our homes.

•

Innovative Homebuilding - We are constantly innovating the homes we build to create products that better meet our customers' needs and desires. Our Next Gen® home, or a home within a home, provides a unique new home solution for multi-generational households as homebuyers often need to accommodate children and parents to share the cost of their mortgage and other living expenses. In fiscal 2017, we delivered 1,475 Next Gen® homes representing an increase of 21% from the prior year and 5% of total home deliveries, excluding unconsolidated entities. The average sales price of the Next Gen® homes delivered in fiscal 2017 was $508,000, which is 35% above the average sales price of total home deliveries, excluding unconsolidated entities.

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

•	Digital Marketing - We are increasingly advertising homes through digital channels, which is significantly increasing the efficiency of our marketing efforts.

Diversified Program of Property Acquisition

We generally 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 directly from individual land owners/developers or homebuilders;

•	Acquiring local or regional homebuilders that own, or have options to purchase, land in strategic markets;

•	Acquiring land through option contracts, which generally enables us to control portions of properties owned by third parties (including land funds) and unconsolidated entities in which we have investments until we have determined whether to exercise the options;

•	Acquiring parcels of land through joint ventures or partnerships, which among other benefits, limits the amount of our capital invested in land while increasing our access to potential future homesites and allowing us to participate in strategic ventures;

•	Acquiring land in conjunction with Lennar Multifamily; and

•	Acquiring assets from banks and opportunity funds, often through relationships established by our Rialto segment.

At November 30, 2017, we owned 141,126 homesites and had access through option contracts to an additional 37,527 homesites, of which 32,082 homesites were through option contracts with third parties and 5,445 homesites were through option contracts with unconsolidated entities in which we have investments. At November 30, 2016, we owned 125,879 homesites and had access through option contracts to an additional 33,166 homesites, of which 26,650 homesites were through option contracts with third parties and 6,516 homesites were through option contracts with unconsolidated entities in which we have investments.

Construction and Development

Through our own efforts and those of unconsolidated entities in which Lennar Homebuilding has investments, 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 home construction. At November 30, 2017, we were actively building and marketing homes in 765 communities, including four communities being constructed by unconsolidated entities.

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 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. We believe that the sources and availability of raw materials to our subcontractors are adequate for our current and planned levels of operation. We generally do not own heavy construction equipment. We finance construction and land development activities primarily with cash generated from operations and debt issuances.

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.

Marketing

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 simplifies the home buying experience by including the most desirable features as standard items. This marketing program enables us to differentiate our homes from those of our competitors by creating value through standard features and competitive pricing, while reducing construction and overhead costs through a simplified construction process, product standardization and volume purchasing. In addition, our advances in including solar powered technology and home automation in certain of the homes we sell, enhance our brand and improve our ability to generate traffic and sales.

We sell our homes primarily 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.

Most recently our marketing strategy has shifted to increase advertising through digital channels including 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 and has helped us reduce our selling, general and administrative expenses as a percentage of home sales revenues. However, we also continue to advertise through more traditional media, including newspapers, radio advertisements and other local and regional publications 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.

Quality Service

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 home buying experience for our customers through the participation of sales associates, on-site construction supervisors and customer care associates, all working in a team effort, which we believe 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.

Local Operating Structure and Centralized Management

We balance a local operating structure with centralized corporate level management. Our local operating structure consists of homebuilding divisions across the country, which are generally managed by a division president, a controller and personnel focused on land entitlement, acquisition 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 of land and businesses, risk management, financing, cash management and information systems.

Backlog

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 15% in 2017, compared to 16% and 16% in 2016 and 2015, respectively. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.

The backlog dollar value including unconsolidated entities at November 30, 2017 was $3.6 billion, compared to $2.9 billion at November 30, 2016 and $2.5 billion at November 30, 2015. We expect that substantially all homes currently in backlog will be delivered in fiscal year 2018.

Lennar Homebuilding Investments in Unconsolidated Entities

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 their own homebuilding operations. Through these joint ventures, we reduce the amount we invest in potential future homesites, thereby mitigating certain risks associated with land acquisitions, 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, 2017 and 2016, we had 38 Lennar Homebuilding unconsolidated joint ventures in which we were participating, and our maximum recourse debt exposure related to Lennar Homebuilding unconsolidated joint ventures was $69.2 million and $52.4 million, respectively.

Homebuilding Ancillary Businesses

We have ancillary business activities that are related to our homebuilding business, but are not components of our core homebuilding operations.

FivePoint - In May 2016, we, through our wholly-owned subsidiaries, contributed, or obtained the right to contribute, our investments in three strategic joint ventures which own the Newhall Ranch, Great Park Neighborhoods, and the San Francisco Shipyard and Candlestick Point (the "Shipyard Venture") master planned mixed-use developments in California previously managed by FivePoint Communities, in exchange for an investment in FivePoint, which is currently included within our Lennar Homebuilding unconsolidated entities. A portion of the assets in the Shipyard Venture was retained by us and our Shipyard Venture partner. In May 2017, FivePoint completed its initial public offering ("IPO"). Concurrent with the IPO, we invested an additional $100 million in FivePoint in a private placement. As of November 30, 2017, we owned approximately 40% of FivePoint and the carrying amount of our investment was $359.2 million.

Sunstreet - Our solar business is focused on providing homeowners through solar purchases or lease programs, high-efficiency solar power systems that generate much of a home's annual expected energy needs. In fiscal 2017, Sunstreet expanded its operations into South Carolina and reentered the Nevada market. In addition to these states, Sunstreet also operates in California, Colorado, Delaware, Florida, Maryland, Oregon,Texas and Washington. During the year ended November 30, 2017, we monetized $200 million of future lease payments related to solar systems.

Lennar Financial Services Operations

Mortgage Financing

We offer conforming conventional, FHA-insured and VA-guaranteed residential mortgage loan products and other home mortgage products to buyers of our homes and others through our financial services subsidiary, Eagle Home Mortgage, LLC, from locations in most of the states in which we have homebuilding operations, as well as some other states. In 2017, our financial services subsidiaries provided loans to 80% 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 credit worthy potential purchasers of our homes have access to financing.

During 2017, we originated approximately 31,600 residential mortgage loans totaling $9.0 billion, compared to 33,500 residential mortgage loans totaling $9.3 billion during 2016. Substantially all of the residential mortgage loans we originate are sold 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. Several claims of this type have been asserted against us. We do not believe that the ultimate resolution of these claims will have a material adverse effect on our business or financial position.

We finance our mortgage loan activities with borrowings under our financial services warehouse facilities or from our operating funds. At November 30, 2017, Lennar Financial Services had four warehouse facilities maturing at various dates through fiscal 2018 with a total maximum aggregate commitment of $1.5 billion including an uncommitted amount of $325 million. We expect the facilities to be renewed or replaced with other facilities when they mature. 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.

Title and Other Insurance and Closing Services

We provide title insurance and closing services to our homebuyers and others. During 2017, we provided title and closing services for approximately 110,000 real estate transactions, and issued approximately 314,800 title insurance policies through our underwriter subsidiary, North American Title Insurance Company, compared to approximately 116,000 real estate transactions and 298,900 title insurance policies during 2016. Title and closing services by agency subsidiaries are provided in 35 states. Title insurance services are provided in 40 states.

We also provide our homebuyers and others with personal lines, property and casualty insurance products through our insurance agency subsidiary, North American Advantage Insurance Services, LLC, which operates in the same states as our homebuilding divisions, as well as other states. During 2017 and 2016, we issued, as agent, approximately 12,800 and 13,500 new homeowner policies, respectively, and renewed approximately 26,500 and 27,700 homeowner policies, respectively.

Rialto Operations

The Rialto segment is a commercial real estate, investment management, and finance company. Rialto’s primary focus is to manage third-party capital and to originate commercial mortgage loans which it sells into securitizations. It also has invested its own capital in mortgage loans, properties and real estate related securities.

Rialto is the sponsor of, and an investor in, the private equity vehicles listed in the table below, that invest in real estate related assets and make other real estate related investments:

Private Equity Vehicle	Inception Year	Commitment
Rialto Real Estate Fund, LP	2010	$700 million (including $75 million by Lennar)
Rialto Real Estate Fund II, LP	2012	$1.3 billion (including $100 million by Lennar)
Rialto Mezzanine Partners Fund, LP	2013	$300 million (including $34 million by Lennar)
Rialto Capital CMBS Funds	2014	$119 million (including $52 million by Lennar)
Rialto Real Estate Fund III	2015	$1.9 billion (including $140 million by Lennar)
Rialto Credit Partnership, LP	2016	$220 million (including $20 million by Lennar)

Rialto owns general partner interests in each of the funds, which entitles it to receive additional revenue through carried interests if the funds exceed certain performance thresholds ("carried interests"). Rialto is also entitled to receive advance distributions in order to cover income tax obligations resulting from allocations of taxable income to hypothetical carried interests in the funds ("advance distributions"). Carried interest and advance distributions are collectively referred to as incentive income. During the years ended November 30, 2017, 2016 and 2015, Rialto received $44.2 million, $10.1 million and $20.0 million, respectively, in incentive income.

For Funds I, II and III, in order to protect investors in the Funds, we agreed that while the Funds were seeking investments (which no longer is the case with regard to Fund I and Fund II) we would not make investments on our behalf that would be suitable for the applicable Fund, unless an Advisory Committee of the Fund decides that the Fund should not make those particular investments, with an exception enabling us to purchase properties for use in connection with our homebuilding operations.

Rialto Mortgage Finance ("RMF") originates and sells into securitizations five, seven and ten year commercial first mortgage loans, which are secured by income producing properties. RMF also originates floating rate loans secured by commercial real estate properties, many of which are undergoing transition, including properties undergoing lease-up, sell-out and renovation or repositioning. In order to finance RMF lending activities, as of November 30, 2017, RMF had secured five

warehouse repurchase financing agreements maturing between December 2017 and November 2018 with commitments totaling $1.2 billion, which includes $100 million for floating rate loans. Subsequent to November 30, 2017, the warehouse repurchase financing agreements maturing in December 2017 and January 2018 had their maturity dates extended to December 2019 and December 2018, respectively.

Lennar Multifamily Operations

We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. Our Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.

During the year ended November 30, 2017, our Lennar Multifamily segment continued to grow as a leading developer of apartment communities across the country with interests in 53 communities with development costs of approximately $5.1 billion, of which 13 communities were completed and operating, 12 communities were partially completed and leasing, 22 communities were under construction and the remaining communities were either owned or under contract. As of November 30, 2017, our Lennar Multifamily segment had a pipeline of future projects totaling $4.0 billion in assets across a number of states that will be developed primarily by unconsolidated entities.

Our Lennar Multifamily segment had equity investments in 27 and 28 unconsolidated entities (including the Lennar Multifamily Venture, described below) as of November 30, 2017 and 2016, respectively. During the year ended November 30, 2017, unconsolidated entities in which our Lennar Multifamily segment was a participant sold seven operating properties resulting in gains allocable to the Lennar Multifamily segment of $96.7 million, which are included in Lennar Multifamily equity in earnings from unconsolidated entities. During the years ended November 30, 2016 and 2015, our Lennar Multifamily segment sold seven and two operating properties, respectively, through its unconsolidated entities, resulting in the segment's $91.0 million and $22.2 million share of gains, respectively, included within Lennar Multifamily equity in earnings from unconsolidated entities.

The Lennar Multifamily Venture (the "Venture") is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets with $2.2 billion in equity commitments, including a $504 million co-investment commitment by us comprised of cash, undeveloped land and preacquisition costs. As of November 30, 2017, $1.5 billion of the $2.2 billion in equity commitments had been called, of which we have contributed $350.7 million representing our pro-rata portion of the called equity, resulting in a remaining equity commitment for us of $153.3 million.

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.

Seasonality

We historically have experienced, and expect to continue to experience, variability in quarterly results. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second fiscal quarter and increased deliveries in the second half of our fiscal year. However, periods of economic downturn in the industry can alter seasonal patterns.

Competition

The residential homebuilding industry is highly competitive. We compete for homebuyers in each of the market regions where we operate 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, 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 for land buyers with third parties 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:

•	Everything’s Included® marketing program, which simplifies the home buying experience by including most desirable features as standard items;

•	Innovative home designs, such as our Next Gen® homes that provide both privacy and togetherness for multi-generational families;

•	Financial position, where we continue to focus on inventory management and liquidity;

•	Access to land, particularly in land-constrained markets;

•	Access to distressed assets, primarily through relationships established by our Rialto segment;

•	Pricing to current market conditions through sales incentives offered to homebuyers;

•	Cost efficiencies realized through our national purchasing programs and production of value-engineered homes; and

•	Quality construction and home warranty programs, which are supported by a responsive customer care team.

Our financial services operations compete with other mortgage lenders, including national, regional and local mortgage bankers and brokers, banks, savings and loan associations 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.

The business of Rialto, and the funds it manages, of purchasing real estate related assets is highly competitive and fragmented. A number of entities and funds have been formed in recent years for the purpose of acquiring real estate related assets and it is likely that additional entities and funds will be formed for this purpose during the next several years. We compete in the marketplace for assets based on many factors, including purchase price, representations, warranties and indemnities, timeliness of purchase decisions and reputation. In marketing of real estate investment funds we sponsor, we compete with a large variety of asset managers, including banks and other financial institutions and real estate investment firms. Rialto’s RMF business competes with other commercial mortgage lenders in a competitive market and its profitability depends on its ability to originate commercial real estate loans and sell them into securitizations at attractive prices.

Some of Rialto's competitors are substantially larger and have a lower cost of funds and greater financial, technical, marketing and other resources than Rialto and have access to funding sources that may not be available to Rialto. In addition, some of Rialto's competitors may have higher risk tolerances or make different risk assessments, than Rialto does, which could allow them to consider a wider variety of investments and establish more relationships than Rialto.

We believe that the major factors distinguishing Rialto from many of its competitors is that Rialto's team is made up of experienced managers who engage in working out and /or adding value to real estate assets and have been doing that for several years. RMF's business is conducted by highly seasoned managers who have been originating and securitizing loans for over 26 years with long-standing relationships and can leverage Rialto’s/Lennar’s infrastructure facilities for a rapid market entrance as well as Rialto’s current underwriting platform. Additionally, because Rialto is a lender or capital provider to developers, we believe having our homebuilding team participating in the underwriting process provides us with a distinct advantage in our evaluation of real estate assets. We believe that our experienced team and the infrastructure already in place give the Rialto segment an advantage and position the segment well when compared to a number of its competitors.

Our multifamily operations compete with other multifamily apartment developers and operators, including REITs, across the United States. In addition, our multifamily operations compete in securing capital, partners and equity, and in securing tenants within the large supply of already existing rental apartments. Principal competitive factors include location, rental price and quality, and management of the apartment buildings.

Regulation

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. 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 construction. These laws and regulations are usually administered by counties and municipalities and may result in fees and assessments or building moratoriums. In addition, certain 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 states 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 areas as storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. Environmental laws and existing conditions may result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas. For example, a 2015 decision of the California Supreme Court significantly delayed the start, and increased the cost of a California master planned mixed-use development in which we have an indirect investment.

In recent 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, we believe that 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 addition, some states require that each new home be registered with the state at or before the time title is transferred to a buyer (e.g., the Texas Residential Construction Commission Act). 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.

Since Rialto manages real estate asset investments, mezzanine loan and commercial mortgage-backed securities ("CMBS") funds and two entities partly owned by the FDIC, one of Rialto's entities is registered as an investment adviser under the Investment Advisers Act of 1940. This Act has requirements related to dealings between investment advisers and the entities they advise and imposes record keeping and disclosure obligations on investment advisers. Our RMF subsidiary must comply with laws and regulations applicable to commercial mortgage lending. Rialto or its subsidiaries must be licensed in states in which they make loans and must comply with laws and regulations in those states.

Associates

At November 30, 2017, we employed 9,111 individuals of whom 4,900 were involved in the Lennar Homebuilding operations, 3,414 were involved in the Lennar Financial Services operations, 335 were involved in the Rialto operations and 462 were involved in the Lennar Multifamily operations, compared to November 30, 2016, when we employed 8,335 individuals of whom 4,351 were involved in the Lennar Homebuilding operations, 3,224 were involved in the Lennar Financial Services operations, 365 were involved in the Rialto operations and 395 were involved in the Lennar 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.

NYSE Certification

On April 24, 2017, we submitted our Annual CEO Certification to the New York Stock Exchange ("NYSE") in accordance with NYSE's listing standards. The certification was not qualified in any respect.