Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Lennar Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries (the "Company") as of November 30, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended November 30, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of November 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 28, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Lennar Homebuilding and Lennar Multifamily Investments in Unconsolidated Entities - Consolidation of Variable Interest Entities - Refer to Note 1, Summary of Significant Accounting Policies (Variable Interest Entities)****, and Note 8, Variable Interest Entities**, to the financial statements**

Critical Audit Matter Description

Certain of the Company’s investments in unconsolidated entities within their Homebuilding and Multifamily segments have complex structures and agreements which need to be evaluated for consolidation, including determining whether the joint venture is a variable interest entity (“VIE”), and if so, whether the Company is the primary beneficiary. This assessment is performed at the formation of the joint venture and upon the occurrence of reconsideration events. This determination requires significant judgment by management.

As of November 30, 2021, the carrying value of the Company’s consolidated VIE’s assets and non-recourse liabilities was $875.9 million and $61.9 million, respectively. Additionally, as of November 30, 2021, the carrying value of the Company’s investments in VIEs that are unconsolidated was $686.7 million.

We identified the consolidation and primary beneficiary assessment upon formation and the occurrence of reconsideration events of certain of the Company’s VIEs as a critical audit matter given the significant judgment required by management. This required a high degree of auditor judgment and an increased extent of audit effort due to the complexity of the entity structures and agreements.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the accounting determination for unconsolidated joint ventures included the following, among others:

• We tested the effectiveness of the investment consolidation controls over the initial accounting assessment of joint ventures and the continuous reassessment for reconsideration events, as required by the accounting framework.

• We selected a sample of unconsolidated joint ventures and evaluated the appropriateness of the Company’s accounting conclusions upon formation and reconsideration events by:

◦Reading the joint venture agreements and other related documents and evaluating the structure and terms of the agreement to determine if the joint venture should be classified as a VIE.

◦If an entity is determined to be a VIE, considering whether the Company appropriately determined the primary beneficiary by evaluating the contractual arrangements of the entity to determine if the Company has the power to direct activities, and if the Company has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could be significant to the VIE.

◦For those entities where the Company has determined it is the primary beneficiary, evaluating whether or not the Company consolidated the balances at the appropriate amounts.

◦Evaluating the evidence obtained in other areas of the audit to determine if there were additional reconsideration events that had not been identified by the Company, including, among others, reading joint venture board minutes and agreeing the terms of certain joint venture agreements and side agreements, if any.

/s/ Deloitte & Touche LLP

Miami, Florida

January 28, 2022

We have served as the Company's auditor since 1994.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2021 and 2020

			2021 (1)						2020 (1)
			(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents			$	2,735,213					2,703,986
Restricted cash			21,927						15,211
Receivables, net			490,278						298,671
Inventories:
Finished homes and construction in progress			10,446,139						8,593,399
Land and land under development			7,108,142						7,495,262
Consolidated inventory not owned			1,161,023						836,567
Total inventories			18,715,304						16,925,228
Investments in unconsolidated entities			972,084						953,177
Goodwill			3,442,359						3,442,359
Other assets			1,090,654						1,190,793
			27,467,819						25,529,425
Financial Services			2,964,367						2,708,118
Multifamily			1,311,747						1,175,908
Lennar Other			1,463,845						521,726
Total assets			$	33,207,778					29,935,177

(1)Under certain provisions of Accounting Standards Codification ("ASC") Topic 810, Consolidations, ("ASC 810") the Company is required to separately disclose on its consolidated balance sheets the assets of consolidated variable interest entities ("VIEs") that are owned by the consolidated VIEs and liabilities of consolidated VIEs as to which there is no recourse against the Company.

As of November 30, 2021, total assets include $1.1 billion related to consolidated VIEs of which $60.9 million is included in Homebuilding cash and cash equivalents, $4.4 million in Homebuilding receivables, net, $14.3 million in Homebuilding finished homes and construction in progress, $697.1 million in Homebuilding land and land under development, $239.2 million in Homebuilding consolidated inventory not owned, $1.1 million in Homebuilding investments in unconsolidated entities, $17.4 million in Homebuilding other assets and $80.6 million in Multifamily assets.

As of November 30, 2020, total assets include $1.1 billion related to consolidated VIEs of which $32.1 million is included in Homebuilding cash and cash equivalents, $0.1 million in Homebuilding receivables, net, $14.2 million in Homebuilding finished homes and construction in progress, $486.8 million in Homebuilding land and land under development, $426.3 million in Homebuilding consolidated inventory not owned, $1.6 million in Homebuilding investments in unconsolidated entities, $120.6 million in Homebuilding other assets and $39.9 million in Multifamily assets.

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2021 and 2020

			2021 (2)						2020 (2)
			(Dollars in thousands except per share amounts)
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable			$	1,321,247					1,037,338
Liabilities related to consolidated inventory not owned			976,602						706,691
Senior notes and other debts payable, net			4,652,338						5,955,758
Other liabilities			2,920,055						2,225,864
			9,870,242						9,925,651
Financial Services			1,906,343						1,644,248
Multifamily			288,930						252,911
Lennar Other			145,981						12,966
Total liabilities			12,211,496						11,835,776
Stockholders’ equity:
Preferred stock			—						—
Class A common stock of $0.10 par value per share; Authorized: 2021 and 2020 - 400,000,000 shares; Issued: 2021 - 300,500,075 shares; 2020 - 298,942,836 shares			30,050						29,894
Class B common stock of $0.10 par value per share; Authorized: 2021 and 2020 - 90,000,000 shares, Issued: 2021 - 39,443,168 shares; 2020 - 39,443,168 shares			3,944						3,944
Additional paid-in capital			8,807,891						8,676,056
Retained earnings			14,685,329						10,564,994
Treasury stock, at cost; 2021 - 38,586,961 shares of Class A common stock and 1,922,016 shares of Class B common stock; 2020 - 23,864,589 shares of Class A common stock and 1,822,016 shares of Class B common stock			(2,709,448)						(1,279,227)
Accumulated other comprehensive loss			(1,341)						(805)
Total stockholders’ equity			20,816,425						17,994,856
Noncontrolling interests			179,857						104,545
Total equity			20,996,282						18,099,401
Total liabilities and equity			$	33,207,778					29,935,177

(2)As of November 30, 2021, total liabilities include $258.5 million related to consolidated VIEs as to which there was no recourse against the Company, of which $26.6 million is included in Homebuilding accounts payable, $196.6 million in Homebuilding liabilities related to consolidated inventory not owned, $20.1 million in Homebuilding senior notes and other debts payable, $12.3 million in Homebuilding other liabilities and $2.8 million in Multifamily liabilities.

As of November 30, 2020, total liabilities include $528.5 million related to consolidated VIEs as to which there was no recourse against the Company, of which $28.4 million is included in Homebuilding accounts payable, $351.4 million in Homebuilding liabilities related to consolidated inventory not owned, $129.1 million in Homebuilding senior notes and other debts payable, $9.9 million in Homebuilding other liabilities and $9.8 million in Multifamily liabilities.

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Years Ended November 30, 2021, 2020 and 2019

			2021						2020						2019
			(Dollars in thousands, except per share amounts)
Revenues:
Homebuilding			$	25,545,242					20,981,136						20,793,216
Financial Services			898,745						890,311						824,810
Multifamily			665,232						576,328						604,700
Lennar Other			21,457						41,079						36,835
Total revenues			27,130,676						22,488,854						22,259,561
Costs and expenses:
Homebuilding			20,502,541						17,961,644						18,245,700
Financial Services			407,731						470,777						600,168
Multifamily			652,810						575,581						599,604
Lennar Other			30,955						6,744						11,794
Corporate general and administrative			398,381						333,446						321,188
Charitable foundation contribution			59,825						24,972						19,926
Total costs and expenses			22,052,243						19,373,164						19,798,380
Homebuilding equity in loss from unconsolidated entities			(14,205)						(836)						(13,273)
Homebuilding other income (expense), net			3,266						(29,749)						(31,338)
Financial Services gain on deconsolidation			—						61,418						—
Multifamily equity in earnings from unconsolidated entities and other gain			9,031						21,934						11,294
Lennar Other equity in earnings (loss) from unconsolidated entities and other income (expense), net			61,957						(44,669)						6,428
Lennar Other realized and unrealized gains			680,576						—						—
Earnings before income taxes			5,819,058						3,123,788						2,434,292
Provision for income taxes			(1,362,509)						(656,235)						(592,173)
Net earnings (including net earnings (loss) attributable to noncontrolling interests)			4,456,549						2,467,553						1,842,119
Less: Net earnings (loss) attributable to noncontrolling interests			26,438						2,517						(6,933)
Net earnings attributable to Lennar			$	4,430,111					2,465,036						1,849,052
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on securities available-for-sale			$	(536)					(851)						1,040
Reclassification adjustments for gains included in net earnings			—						(452)						(176)
Total other comprehensive income (loss), net of tax			$	(536)					(1,303)						864
Total comprehensive income attributable to Lennar			$	4,429,575					2,463,733						1,849,916
Total comprehensive income (loss) attributable to noncontrolling interests			$	26,438					2,517						(6,933)
Basic earnings per share			$	14.28					7.88						5.76
Diluted earnings per share			$	14.27					7.85						5.74

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

Years Ended November 30, 2021, 2020 and 2019

			2021						2020						2019
			(Dollars in thousands, except per share amounts)
Class A common stock:
Beginning balance			$	29,894					29,712						29,499
Employee stock and director plans			156						182						213
Balance at November 30,			30,050						29,894						29,712
Class B common stock:
Beginning balance			3,944						3,944						3,944
Balance at November 30,			3,944						3,944						3,944
Additional paid-in capital:
Beginning balance			8,676,056						8,578,219						8,496,677
Employee stock and director plans			1,207						576						415
Amortization of restricted stock			135,090						107,131						86,940
Equity adjustment related to noncontrolling interests			(4,462)						(9,870)						(5,813)
Balance at November 30,			8,807,891						8,676,056						8,578,219
Retained earnings:
Beginning balance			10,564,994						8,295,001						6,487,650
Net earnings attributable to Lennar			4,430,111						2,465,036						1,849,052
Cumulative-effect of accounting change			—						—						9,753
Cash dividends - Class A common stock ($1.00 per share for 2021, $0.625 per share for 2020 and $0.16 per share for 2019)			(272,162)						(171,520)						(45,418)
Cash dividends - Class B common stock ($1.00 per share for 2021 and $0.625 per share for 2020 and $0.16 per share for 2019)			(37,614)						(23,523)						(6,036)
Balance at November 30,			14,685,329						10,564,994						8,295,001
Treasury stock, at cost:
Beginning balance			(1,279,227)						(957,857)						(435,869)
Employee stock and directors plans			(64,662)						(32,855)						(29,049)
Purchases of treasury stock			(1,365,559)						(288,515)						(492,939)
Balance at November 30,			(2,709,448)						(1,279,227)						(957,857)
Accumulated other comprehensive income (loss):
Beginning balance			(805)						498						(366)
Total other comprehensive income (loss), net of tax			(536)						(1,303)						864
Balance at November 30,			(1,341)						(805)						498
Total stockholders’ equity			20,816,425						17,994,856						15,949,517
Noncontrolling interests:
Beginning balance			104,545						84,313						101,422
Net earnings (loss) attributable to noncontrolling interests			26,438						2,517						(6,933)
Receipts related to noncontrolling interests			69,675						176,617						27,859
Payments related to noncontrolling interests			(24,605)						(42,349)						(43,734)
Non-cash consolidations/deconsolidations, net			—						(114,712)						8,894
Non-cash purchase or activity of noncontrolling interests, net			3,804						(1,841)						(3,195)
Balance at November 30,			179,857						104,545						84,313
Total equity			$	20,996,282					18,099,401						16,033,830

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended November 30, 2021, 2020 and 2019

			2021						2020						2019
			(In thousands)
Cash flows from operating activities:
Net earnings (including net earnings (loss) attributable to noncontrolling interests)			$	4,456,549					2,467,553						1,842,119
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			85,954						94,553						92,200
Amortization of discount/premium and accretion on debt, net			(6,775)						(24,775)						(26,210)
Equity in (earnings) loss from unconsolidated entities			(48,993)						22,127						(2,528)
Distributions of earnings from unconsolidated entities			45,984						62,073						12,753
Share-based compensation expense			134,621						107,131						86,940
Deferred income tax expense			191,627						92,082						235,493
Unrealized (gain) loss on loans held-for-sale			14,449						(21,765)						(4,891)
Lennar Other unrealized/realized gains			(680,576)						—						—
(Gain) loss on sale of other assets, operating properties and equipment, CMBS bonds, other liabilities and real estate owned			(27,678)						(8,626)						(23,124)
(Gain) loss on deconsolidation/consolidation of an entity			—						(56,594)						48,874
Gain on sale of interest in unconsolidated entity and other Multifamily gain			(1,167)						(4,617)						(10,865)
Gain on sale of Financial Services' portfolio/businesses			(3,811)						(5,014)						(2,368)
(Gain) loss on retirement of senior notes and other debts payable			(2,204)						7,997						—
Valuation adjustments and write-offs of option deposits and pre-acquisition costs, other receivables and other assets			25,696						117,825						56,125
Changes in assets and liabilities:
(Increase) decrease in receivables			(289,776)						25,868						312,255
(Increase) decrease in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisition costs			(1,960,614)						781,362						(623,644)
(Increase) decrease in other assets			(121,036)						90,534						(69,699)
(Increase) decrease in loans held-for-sale			(160,785)						176,617						(426,448)
Increase (decrease) in accounts payable and other liabilities			881,309						266,488						(14,639)
Net cash provided by operating activities			$	2,532,774					4,190,819						1,482,343
Cash flows from investing activities:
Net additions to operating properties and equipment			(65,172)						(72,752)						(86,497)
Proceeds from the sale of operating properties and equipment, other assets, CMBS bonds and real estate owned			41,551						33,934						79,307
Proceeds from sale of investment in consolidated/unconsolidated joint ventures			32,340						—						17,790
Proceeds from sale of Financial Services' portfolio/businesses			3,327						14,978						24,446
Investments in and contributions to unconsolidated entities/deconsolidation of previously consolidated entity			(408,183)						(486,217)						(436,325)
Distributions of capital from unconsolidated and consolidated entities			362,181						220,713						405,677
Proceeds from sale of commercial mortgage-backed securities bonds			11,307						3,248						—
Receipts of principal payments on loans receivable and other			—						—						2,382
Decrease (increase) in Financial Services loans held-for-investment, net			29,397						(3,122)						(3,516)
Purchases of investment securities			(128,162)						(45,548)						(36,261)
Proceeds from maturities/sales of investment securities			16,312						52,918						52,593
Other receipts, net			16						1,643						—
Net cash (used in) provided by investing activities			$	(105,086)					(280,205)						19,596

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Years Ended November 30, 2021, 2020 and 2019

			2021						2020						2019
			(In thousands)
Cash flows from financing activities:
Net borrowings (repayments) under warehouse facilities			$	262,107					(281,835)						166,552
Redemption of senior notes			(1,159,851)						(1,499,999)						(1,101,288)
Principal payments on notes payable and other borrowings			(195,212)						(604,995)						(189,479)
Proceeds from other borrowings			13,973						92,688						88,751
Proceeds from liabilities related to consolidated inventory not owned			694,185						346,406						—
Payments related to consolidated inventory not owned			(350,583)						—						—
(Payments) proceeds related to other liabilities, net			25,564						(116,541)						(3,850)
Receipts related to noncontrolling interests			69,675						176,617						27,859
Payments related to noncontrolling interests			(24,605)						(42,349)						(43,734)
Common stock:
Issuances			—						—						493
Repurchases			(1,430,212)						(321,524)						(523,074)
Dividends			(309,776)						(195,043)						(51,454)
Net cash used in financing activities			$	(2,404,735)					(2,446,575)						(1,629,224)
Net increase (decrease) in cash and cash equivalents and restricted cash			22,953						1,464,039						(127,285)
Cash and cash equivalents and restricted cash at beginning of year			2,932,730						1,468,691						1,595,976
Cash and cash equivalents and restricted cash at end of year			$	2,955,683					2,932,730						1,468,691
Summary of cash and cash equivalents and restricted cash:
Homebuilding			$	2,735,213					2,703,986						1,200,832
Financial Services			167,021						116,171						234,113
Multifamily			16,850						38,963						8,711
Lennar Other			2,660						3,918						2,340
Homebuilding restricted cash			21,927						15,211						9,698
Financial Services restricted cash			12,012						54,481						12,022
Lennar Other restricted cash			—						—						975
			$	2,955,683					2,932,730						1,468,691
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized			$	47,720					97,336						49,870
Cash paid for income taxes, net			$	1,140,858					402,180						261,445
Supplemental disclosures of non-cash investing and financing activities:
Purchases of inventories, land under development and other assets financed by sellers			$	141,319					120,796						101,300
Net non-cash contributions (distributions) to unconsolidated entities			27,880						97,281						156,075
Non-cash sale of operating properties and equipment and other assets			—						—						48,671
Non-cash right of use assets recognized due to adoption of ASU 2016-02			—						150,702						—
Non-cash lease liabilities recognized due to adoption of ASU 2016-02			—						159,717						—
Consolidation/deconsolidation of unconsolidated/consolidated entities, net:
Financial Services assets			$	—					(217,565)						—
Financial Services liabilities			—						115,175						—
Financial Services noncontrolling interests			—						102,390						—
Inventories			—						95,476						187,506
Receivables			—						—						102,959
Operating properties and equipment and other assets			—						6,870						53,412
Investments in unconsolidated entities			—						(68,290)						67,925
Notes payable			—						(44,924)						(383,212)
Other liabilities			—						(1,455)						(19,696)
Noncontrolling interests			—						12,323						(8,894)

See accompanying notes to consolidated financial statements.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of Lennar Corporation and all subsidiaries, partnerships and other entities in which Lennar Corporation has a controlling interest and VIEs (see Note 8) in which Lennar Corporation is deemed the primary beneficiary (the "Company"). The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in VIEs in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Homebuilding revenues and related profits from sales of homes are recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the homebuyer. The Company’s performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date. Cash proceeds from home closings held in escrow for the Company’s benefit, typically for approximately three to four days, are included in Homebuilding cash and cash equivalents in the Company's consolidated balance sheets. Contract liabilities include customer deposits liabilities related to sold but undelivered homes that are included in other liabilities in the Company's consolidated balance sheets. The Company periodically elects to sell parcels of land to third parties. Cash consideration from land sales is typically due on the closing date, which is generally when performance obligations are satisfied and revenue is recognized as title to and possession of the property are transferred to the buyer.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $74.2 million, $72.6 million and $84.3 million for the years ended November 30, 2021, 2020 and 2019, respectively.

Share-Based Payments

The Company has share-based awards outstanding under the 2016 Equity Incentive Plan (the "Plan"), which provides for the granting of stock options, stock appreciation rights, restricted common stock ("nonvested shares") and other share based awards to officers, associates and directors. The exercise prices of stock options may not be less than the market value of the common stock on the date of the grant. Exercises are permitted in installments determined when options are granted. Each stock option will expire on a date determined at the time of the grant, but not more than 10 years after the date of the grant. The Company accounts for stock option awards and nonvested share awards granted under the Plan based on the estimated grant date fair value.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Due to the short maturity period of cash equivalents, the carrying amounts of these instruments approximate their fair values. Homebuilding restricted cash consists of customer deposits on home sales held in restricted accounts until title transfers to the homebuyer, as required by the state and local governments in which the homes were sold, as well as funds on deposit to secure and support performance obligations. Financial Services restricted cash consists of upfront deposits and application fees LMF Commercial receives before originating loans and is recognized as income once the loan has been originated, as well as cash held in escrow by the Company’s loan service provider on behalf of customers and lenders and is disbursed in accordance with agreements between the transacting parties.

Homebuilding cash and cash equivalents as of November 30, 2021 and 2020 included $940.4 million and $314.3 million, respectively, of cash held in escrow for approximately three days.

Receivables

At November 30, 2021 and 2020, Homebuilding accounts receivable related primarily to other receivables and rebates. The Company performs ongoing credit evaluations of its customers and generally does not require collateral for accounts receivable. Mortgages and notes receivable arising from the sale of homes and land are generally collateralized by the property sold to the buyer. Allowances are maintained for potential credit losses based on historical experience, present economic

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

conditions and other factors considered relevant by the Company. Balances for the years ended November 30, 2021 and 2020 are noted below:

			November 30,
(In thousands)			2021						2020
Accounts receivable			$	245,004					133,560
Mortgages and notes receivable			247,805						167,909
			492,809						301,469
Allowance for credit losses			(2,531)						(2,798)
Receivables, net (1)			$	490,278					298,671

(1)At November 30, 2021, receivables, net included an $85 million short-term loan due from Upward America that was repaid subsequent to November 30, 2021.

Inventories

Finished homes and construction in progress are included within inventories. Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction. Construction overhead and selling expenses are expensed as incurred. Homes held-for-sale are classified as inventories until delivered. Land, land development, amenities and other costs are accumulated by specific area and allocated to homes within the respective areas.

The Company reviews its inventory for indicators of impairment by evaluating each community during each reporting period. The inventory within each community is categorized as finished homes and construction in progress or land under development based on the development state of the community. There were 1,259 and 1,173 active communities, excluding unconsolidated entities, as of November 30, 2021 and 2020, respectively. If the undiscounted cash flows expected to be generated by a community are less than its carrying amount, an impairment charge is recorded to write down the carrying amount of such community to its estimated fair value.

In conducting its review for indicators of impairment on a community level, the Company evaluates, among other things, the margins on homes that have been delivered, margins on homes under sales contracts in backlog, projected margins with regard to future home sales over the life of the community, projected margins with regard to future land sales and the estimated fair value of the land itself. The Company pays particular attention to communities in which inventory is moving at a slower than anticipated absorption pace and communities whose average sales price and/or margins are trending downward and are anticipated to continue to trend downward. From this review, the Company identifies communities in which to assess if the carrying values exceed their undiscounted projected cash flows.

The Company estimates the fair value of its communities using a discounted cash flow model. The projected cash flows for each community are significantly impacted by estimates related to market supply and demand, product type by community, homesite sizes, sales pace, sales prices, sales incentives, construction costs, sales and marketing expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors for that particular community. Every division evaluates the historical performance of each of its communities as well as current trends in the market and economy impacting the community and its surrounding areas. These trends are analyzed for each of the estimates listed above.

Each of the homebuilding markets in which the Company operates is unique, as homebuilding has historically been a local business driven by local market conditions and demographics. Each of the Company’s homebuilding markets has specific supply and demand relationships reflective of local economic conditions. The Company’s projected cash flows are impacted by many assumptions. Some of the most critical assumptions in the Company’s cash flow model are projected absorption pace for home sales, sales prices and costs to build and deliver homes on a community by community basis.

In order to arrive at the assumed absorption pace for home sales and the assumed sales prices included in the Company’s cash flow model, the Company analyzes its historical absorption pace and historical sales prices in the community and in other comparable communities in the geographical area. In addition, the Company considers internal and external market studies and places greater emphasis on more current metrics and trends, which generally include, but are not limited to, statistics and forecasts on population demographics and on sales prices in neighboring communities, unemployment rates and availability and sales prices of competing product in the geographical area where the community is located as well as the absorption pace realized in its most recent quarters and the sales prices included in the Company's current backlog for such communities.

Generally, if the Company notices a variation from historical results over a span of two fiscal quarters, the Company considers such variation to be the establishment of a trend and adjusts its historical information accordingly in order to develop assumptions on the projected absorption pace and sales prices in the cash flow model for a community.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In order to arrive at the Company’s assumed costs to build and deliver homes, the Company generally assumes a cost structure reflecting contracts currently in place with its vendors adjusted for any anticipated cost reduction initiatives or increases in cost structure. Those costs assumed are used in the cash flow model for the Company’s communities.

Since the estimates and assumptions included in the Company’s cash flow models are based upon historical results and projected trends, they do not anticipate unexpected changes in market conditions or strategies that may lead the Company to incur additional impairment charges in the future.

The determination of fair value requires discounting the estimated cash flows at a rate the Company believes a market participant would determine to be commensurate with the inherent risks associated with the assets and related estimated cash flow streams. The discount rate used in determining each asset’s fair value depends on the community’s projected life and development stage.

The Company estimates the fair value of inventory evaluated for impairment based on market conditions and assumptions made by management at the time the inventory is evaluated, which may differ materially from actual results if market conditions or assumptions change. For example, changes in market conditions and other specific developments or changes in assumptions may cause the Company to re-evaluate its strategy regarding previously impaired inventory, as well as inventory not currently impaired but for which indicators of impairment may arise if market deterioration occurs, and certain other assets that could result in further valuation adjustments and/or additional write-offs of option deposits and pre-acquisition costs due to abandonment of those options contracts.

The table below summarizes communities reviewed for indicators of impairment and communities with valuation adjustments recorded:

			At November 30,						Communities with valuation adjustments for the years ended November 30,
			# of communities with potential indicator of impairment						# of communities						Fair Value (in thousands)						Valuation Adjustments (in thousands)
2021			4						1						$	5,267					$	11,849
2020			10						16						79,734						44,811

The table below summarizes the most significant unobservable inputs used in the Company's discounted cash flow model to determine the fair value of its communities for which the Company recorded valuation adjustments during the years ended November 30, 2021 and 2020:

			Years Ended November 30,
			2021						2020
Unobservable inputs									Range
Average selling price			$635,000						$201,000			-			$970,000
Absorption rate per quarter (homes)			11						3			-			15
Discount rate			20%						20%

The Company also has access to land inventory through option contracts, which generally enables the Company to defer acquiring portions of properties owned by third parties (including land funds) and unconsolidated entities until it has determined whether to exercise its option.

A majority of the Company’s option contracts require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land. The Company’s option contracts sometimes include price adjustment provisions, which adjust the purchase price of the land to its approximate fair value at the time of acquisition or are based on the fair value at the time of takedown.

In determining whether to walk away from an option contract, the Company evaluates the option primarily based upon its expected cash flows from the property under option. If the Company intends to walk away from an option contract, it records a charge to earnings in the period such decision is made for the deposit amount and any related pre-acquisition costs associated with the option contract.

Some option contracts contain a predetermined take-down schedule for the optioned land parcels. However, in almost all instances, the Company is not required to purchase land in accordance with those take-down schedules. In substantially all instances, the Company has the right and ability to not exercise its option and forfeit its deposit without further penalty, other than termination of the option and loss of any unapplied portion of its deposit and pre-acquisition costs. Therefore, in substantially all instances, the Company does not consider the take-down price to be a firm contractual obligation. When the Company does not intend to exercise an option, it writes off any unapplied deposit and pre-acquisition costs associated with the option contract.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investments in Unconsolidated Entities

The Company evaluates the long-lived assets in unconsolidated entities for indicators of impairment during each reporting period. If a valuation adjustment is recorded by an unconsolidated entity related to its assets, the Company generally uses a discount rate between 10% and 20%, subject to the perceived risks associated with the community’s cash flow streams relative to its inventory or operating assets. The Company’s proportionate share of a valuation adjustment is reflected in the Company's Homebuilding, Multifamily or Lennar Other equity in earnings (loss) from unconsolidated entities with a corresponding decrease to its Homebuilding, Multifamily or Lennar Other investment in unconsolidated entities.

Additionally, the Company evaluates if a decrease in the value of an investment below its carrying value is other-than-temporary. This evaluation includes certain critical assumptions made by management: (1) projected future distributions from the unconsolidated entities, (2) discount rates applied to the future distributions and (3) various other factors, which include age of the venture, relationships with the other partners and banks, general economic market conditions, land status and liquidity needs of the unconsolidated entity. If the decline in the fair value of the investment is other-than-temporary, then these losses are included in Homebuilding other income, net, Multifamily other gain (loss) or Lennar Other other gain (loss).

The Company tracks its share of cumulative earnings and distributions of its joint ventures ("JVs"). For purposes of classifying distributions received from JVs in the Company’s consolidated statements of cash flows, cumulative distributions are treated as returns on capital to the extent of cumulative earnings and included in the Company’s consolidated statements of cash flows as operating activities. Cumulative distributions in excess of the Company’s share of cumulative earnings are treated as returns of capital and included in the Company’s consolidated statements of cash flows as cash from investing activities.

Variable Interest Entities

GAAP requires the assessment of whether an entity is a VIE and, if so, if the Company is the primary beneficiary at the inception of the entity or at a reconsideration event. Additionally, GAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company’s variable interest in VIEs may be in the form of (1) equity ownership, (2) contracts to purchase assets, (3) management and development agreements between the Company and a VIE, (4) loans provided by the Company to a VIE or other partner and/or (5) guarantees provided by members to banks and other third parties. The Company examines specific criteria and uses its judgment when determining if it is the primary beneficiary of a VIE. Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing, experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights or voting rights, level of economic disproportionality, if any, between the Company and the other partner(s) and contracts to purchase assets from VIEs. The determination whether an entity is a VIE and, if so, whether the Company is the primary beneficiary may require it to exercise significant judgment.

Generally, all major decision making in the Company’s joint ventures is shared among all partners. In particular, business plans and budgets are generally required to be unanimously approved by all partners. Usually, management and other fees earned by the Company are nominal and believed to be at market and there is no significant economic disproportionality between the Company and other partners. Generally, the Company purchases less than a majority of the JV’s assets and the purchase prices under its option contracts are believed to be at market.

Generally, Homebuilding and Multifamily unconsolidated entities become VIEs and consolidate when the other partner(s) lack the intent and financial wherewithal to remain in the entity. As a result, the Company continues to fund operations and debt paydowns through partner loans or substituted capital contributions.

Goodwill

Goodwill is recorded with acquisitions of businesses when the purchase price of the business exceeds the fair value of the net tangible and identifiable assets acquired. In accordance with ASC Topic 350, Intangibles-Goodwill and Other ("ASC 350"), the Company evaluates goodwill for potential impairment on at least an annual basis. The Company has the option to perform a qualitative or quantitative assessment to determine whether the fair value of a reporting unit exceeds its carrying value. Qualitative factors may include, but are not limited to economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting units and other entity and reporting unit specific events. The fair value estimate is derived through various valuation methods, including the use of discounted expected future cash flows of each reporting unit. The expected future cash flows for each segment are significantly impacted by current market conditions. If these market conditions and resulting expected future cash flows for each reporting unit decline significantly, the actual results for each segment could differ from the Company's estimate, which would cause goodwill to be impaired. The annual goodwill impairment analysis was performed as of September 30, 2021 and no impairment was recorded.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Operating Properties and Equipment

Operating properties and equipment are recorded at cost and are included in other assets in the consolidated balance sheets. The assets are depreciated over their estimated useful lives using the straight-line method. At the time operating properties and equipment are disposed of, the asset and related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to earnings. The estimated useful life for operating properties is 30 years, for furniture, fixtures and equipment is two to 10 years and for leasehold improvements is five years or the life of the lease, whichever is shorter. Operating properties are reviewed for possible impairment if there are indicators that their carrying amounts are not recoverable.

Operating properties and equipment are included in Homebuilding other assets in the consolidated balance sheets and were as follows:

			November 30,
(In thousands)			2021						2020
Operating properties (1)			$	309,367					386,646
Leasehold improvements			56,620						57,084
Furniture, fixtures and equipment			172,774						145,307
			538,761						589,037
Accumulated depreciation and amortization			(198,855)						(177,519)
			$	339,906					411,518

(1)Operating properties primarily include solar systems, rental operations and commercial properties.

Investment Securities

The Company holds investment securities classified as available-for-sale or held-to-maturity. Available-for-sale securities are recorded at fair value. Any unrealized holding gains or losses on available-for-sale securities are reported as accumulated other comprehensive gain or loss, which is a separate component of stockholders’ equity, net of tax, until realized. Securities classified as held-to-maturity are carried at amortized cost because they are purchased with the intent and ability to hold to maturity.

At November 30, 2021 and 2020, the Financial Services segment had investment securities classified as held-to-maturity totaling $157.8 million and $164.2 million, respectively, which consist mainly of commercial mortgage-backed securities ("CMBS"), corporate debt obligations, U.S. government agency obligations, certificates of deposit and U.S. treasury securities that mature at various dates, mainly within three years.

At November 30, 2021 and 2020, the Lennar Other segment had investment securities classified as held-for-sale totaling $41.7 million and $53.5 million, respectively. Additionally, the Lennar Other segment had investments in equity securities with a readily determinable fair value (publicly traded common stock), not accounted for under the equity method, that are recorded at fair value with unrealized gains and losses included in earnings. For equity securities without a readily determinable fair value, the investment is recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings. The Lennar Other segment had investments in equity securities of $1.0 billion and $68.8 million, as of November 30, 2021 and 2020, respectively.

For equity method investments in the Lennar Other segment, the Company records the investment as Lennar Other investments in unconsolidated entities. The Company regularly reviews its investments in unconsolidated entities to determine whether there is a decline in fair value below book value. If there is a decline that is other-than-temporary, the investment is written down to fair value. There was no impairment recorded during the years ended November 30, 2021 and 2020.

Interest and Real Estate Taxes

Interest and real estate taxes attributable to land and homes are capitalized as inventory costs while they are being actively developed. Interest related to homebuilding and land, including interest costs relieved from inventories, is included in costs of homes sold and costs of land sold. Interest expense related to the Financial Services and Multifamily operations is included in its costs and expenses.

During the years ended November 30, 2021, 2020 and 2019, interest incurred by the Company’s homebuilding operations related to homebuilding debt was $275.1 million, $353.4 million and $422.7 million, respectively; interest capitalized into inventories was $254.9 million, $331.0 million and $405.1 million, respectively.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest expense was included in costs of homes sold, costs of land sold and other interest expense as follows:

			Years Ended November 30,
(In thousands)			2021						2020						2019
Interest expense in costs of homes sold			$	342,756					349,109						371,821
Interest expense in costs of land sold			2,475						2,594						5,554
Other interest expense (1)			20,142						22,401						17,620
Total interest expense			$	365,373					374,104						394,995

(1)Included in Homebuilding other income (expense), net.

Income Taxes

The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted. Interest related to unrecognized tax benefits is recognized in the financial statements as a component of income tax expense.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Company based on the consideration of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whether deferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards not expiring unused and tax planning alternatives.

Based on the analysis of positive and negative evidence, the Company believed that there was enough positive evidence for the Company to conclude that it was more likely than not that the Company would realize the majority of its deferred tax assets. As of November 30, 2021 and 2020, the Company's net deferred tax assets included a valuation allowance of $2.7 million and $4.4 million, respectively. See Note 5 for additional information.

Other Liabilities

Reflected within the consolidated balance sheets, the other liabilities balance as of November 30, 2021 and 2020, included accrued interest payable, product warranty (as noted below), accrued bonuses, accrued wages and benefits, lease liabilities, deferred income, customer deposits, income taxes payable, and other accrued liabilities.

Product Warranty

Warranty and similar reserves for homes are established at an amount estimated to be adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Reserves are determined based on historical data and trends with respect to similar product types and geographical areas. The Company regularly monitors the warranty reserve and makes adjustments to its pre-existing warranties in order to reflect changes in trends and historical data as information becomes available. Warranty reserves are included in Homebuilding other liabilities in the consolidated balance sheets. The activity in the Company’s warranty reserve was as follows:

			Years Ended November 30,
(In thousands)			2021						2020
Warranty reserve, beginning of year			$	341,765					294,138
Warranties issued			217,641						191,311
Adjustments to pre-existing warranties from changes in estimates (1)			29,436						29,461
Payments			(211,821)						(173,145)
Warranty reserve, end of year			$	377,021					341,765

(1)The adjustments to pre-existing warranties from changes in estimates during the years ended November 30, 2021 and 2020 primarily related to specific claims in certain of the Company's homebuilding communities and other adjustments.

Self-Insurance

Certain insurable risks such as construction defects, general liability, medical and workers’ compensation are self-insured by the Company up to certain limits. Undiscounted accruals for claims under the Company’s self-insurance program are based on claims filed and estimates for claims incurred but not yet reported. The Company’s self-insurance reserve, net of

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

expected recoveries, as of November 30, 2021 and 2020 was $169.1 million and $125.4 million which is included in Homebuilding other liabilities. Amounts incurred in excess of the Company's self-insurance occurrence or aggregate retention limits are covered by insurance up to the Company's purchased coverage levels. The Company's insurance policies are maintained with highly-rated underwriters for whom the Company believes counterparty default risk is not significant.

Earnings per Share

Basic earnings per share is computed by dividing net earnings attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the Company.

All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings. The Company’s restricted common stock ("nonvested shares") are considered participating securities.

Preferred Stock

The Company is authorized to issue 500,000 shares of preferred stock with a par value of $10 per share and 100 million shares of participating preferred stock with a par value of $0.10 per share. No shares of preferred stock or participating preferred stock have been issued as of November 30, 2021 and 2020.

Common Stock

During the year ended November 30, 2021, the Company’s Class A and Class B common stockholders received a per share annual dividend of $1.00. During the years ended 2020 and 2019, the Company’s Class A and Class B common stockholders received a per share annual dividend of $0.625 and $0.16, respectively. The only significant difference between the Class A common stock and Class B common stock is that Class A common stock entitles holders to one vote per share and the Class B common stock entitles holders to ten votes per share.

As of November 30, 2021, Stuart Miller, the Company’s Executive Chairman, directly owned, or controlled through family-owned entities, shares of Class A and Class B common stock, which represented approximately 35% voting power of the Company’s stock.

In January 2021, the Company's Board of Directors authorized a stock repurchase program, which replaced a January 2019 stock repurchase program, under which the Company was authorized to purchase up to the lesser of $1 billion in value, or 25 million in shares, of the Company’s outstanding Class A or Class B common stock. The repurchase authority has no expiration date. In October 2021, the Board of Directors authorized an increase to the stock repurchase program to enable the Company to repurchase up to the lesser of an additional $1 billion in value, or 25 million in shares, of the Company's outstanding Class A or Class B common stock. The repurchase authority has no expiration date. Shortly after the new authorization, the January 2021 stock repurchase program was completed as the Company had purchased the $1 billion in value authorized under that stock repurchase program. The following table provides information about the Company’s repurchases of Class A and Class B common stock for the years ended November 30, 2021 and 2020:

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

Restrictions on Payment of Dividends

There are no restrictions on the payment of dividends on common stock by the Company. There are no agreements which restrict the payment of dividends by subsidiaries of the Company other than the need to maintain the financial ratios and net worth requirements under the Financial Services segment’s warehouse lines of credit, which restrict the payment of dividends from the Company’s mortgage subsidiaries following the occurrence and during the continuance of an event of default thereunder and limit dividends to 50% of net income in the absence of an event of default.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

401(k) Plan

Under the Company’s 401(k) Plan (the "Plan"), contributions made by associates can be invested in a variety of mutual funds or proprietary funds provided by the Plan trustee. The Company may also make contributions for the benefit of associates. The Company records as compensation expense its contribution to the Plan. For the years ended November 30, 2021, 2020 and 2019, this amount was $29.4 million, $27.3 million and $24.5 million, respectively.

Share-Based Payments

Compensation expense related to the Company’s share-based awards was as follows:

			Years Ended November 30,
(In thousands)			2021						2020						2019
Total compensation expense for nonvested share-based awards			$	135,090					107,131						86,940

The fair value of nonvested shares is determined based on the trading price of the Company’s common stock on the grant date. The weighted average fair value of nonvested shares granted during the years ended November 30, 2021, 2020 and 2019 was $80.95, $60.10 and $48.26, respectively. A summary of the Company’s nonvested shares activity for the year ended November 30, 2021 was as follows:

			Shares						Weighted Average Grant Date Fair Value
Nonvested shares at November 30, 2020			3,546,576						$	55.01
Grants			1,562,138						$	80.95
Vested			(1,829,016)						$	57.56
Forfeited			(115,908)						$	62.49
Nonvested shares at November 30, 2021			3,163,790						$	66.07

At November 30, 2021, there was $118.5 million of unrecognized compensation expense related to unvested share-based awards granted under the Company’s share-based payment plan, all of which relates to nonvested shares with a weighted average remaining contractual life of 1.7 years. For the years ended November 30, 2021, 2020 and 2019, 1.8 million, 1.4 million and 1.4 million nonvested shares, respectively, vested each year.

Financial Services

Revenue Recognition

Title premiums on policies issued directly by the Company are recognized as revenue on the effective date of the title policies. Escrow fees and loan origination revenues are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. Revenues from title policies issued by independent agents are recognized as revenue when notice of issuance is received from the agent, which is generally when cash payment is received by the Company. Expected gains and losses from the sale of loans and their related servicing rights are included in the measurement of all written loan commitments that are accounted for at fair value through earnings at the time of commitment. Interest income on loans held-for-sale and loans held-for-investment is recognized as earned over the terms of the mortgage loans based on the contractual interest rates.

Loans Held-for-Sale

Loans held-for-sale by the Financial Services segment, including the rights to service the mortgage loans, are carried at fair value and changes in fair value are reflected in earnings. Premiums and discounts recorded on these loans are presented as an adjustment to the carrying amount of the loans and are not amortized. Management believes carrying loans held-for-sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions.

In addition, the Financial Services segment recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of these servicing rights is included in Financial Services' other assets as of November 30, 2021 and 2020. Fair value of the servicing rights is determined based on values in the Company’s servicing sales contracts.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Provision for Losses

The Company establishes reserves for possible losses associated with mortgage loans previously originated and sold to investors based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans, as well as previous settlements. Loan origination liabilities are included in Financial Services’ liabilities in the consolidated balance sheets. The activity in the Company’s loan origination liabilities was as follows:

			Years Ended November 30,
(In thousands)			2021						2020
Loan origination liabilities, beginning of year			$	7,569					9,364
Provision for losses			4,639						11,924
Payments/settlements			(538)						(13,719)
Loan origination liabilities, end of year			$	11,670					7,569

Loans Held-for-Investment, Net

Loans for which the Company has the positive intent and ability to hold to maturity consist of mortgage loans carried at the principal amount outstanding, net of unamortized discounts and allowance for loan losses. Discounts are amortized over the estimated lives of the loans using the interest method.

The Financial Services segment also provides an allowance for credit losses. The provision recorded and the adequacy of the related allowance is determined by management’s continuing evaluation of the loan portfolio in light of past loan loss experience, credit worthiness and nature of underlying collateral, present economic conditions and other factors considered relevant by the Company’s management. Anticipated changes in economic factors, which may influence the level of the allowance, are considered in the evaluation by the Company’s management when the likelihood of the changes can be reasonably determined. While the Company’s management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary as a result of future economic and other conditions that may be beyond management’s control.

Derivative Financial Instruments

The Financial Services segment, in the normal course of business, uses derivative financial instruments to reduce its exposure to fluctuations in mortgage-related interest rates. The segment uses mortgage-backed securities ("MBS") forward commitments, option contracts, future contracts and investor commitments to protect the value of fixed rate-locked loan commitments and loans held-for-sale from fluctuations in mortgage-related interest rates. These derivative financial instruments are carried at fair value with the changes in fair value included in Financial Services revenues.

LMF Commercial - Loans Held-for-Sale

The originated mortgage loans are classified as loans held-for-sale and are recorded at fair value. The Company elected the fair value option for LMF Commercial's loans held-for-sale in accordance with Accounting Standards Codification ("ASC") 825, Financial Instruments, which permits entities to measure various financial instruments and certain other items at fair value on a contract-by-contract basis. Management believes that carrying loans held-for-sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments, which are also carried at fair value, used to economically hedge them without having to apply complex hedge accounting provisions. Changes in fair values of the loans are reflected in Financial Services revenues in the accompanying consolidated statements of operations. Interest income on these loans is calculated based on the interest rate of the loan and is recorded in Financial Services revenues in the accompanying consolidated statements of operations. Substantially all of the mortgage loans originated are sold within a short period of time in a securitization on a servicing released, non-recourse basis; although, the Company remains liable for certain limited industry-standard representations and warranties related to loan sales. The Company recognizes revenue on the sale of loans into securitization trusts when control of the loans has been relinquished.

Multifamily

Management Fees and General Contractor Revenue

The Multifamily segment provides management services with respect to the development, construction and property management of rental projects in joint ventures in which the Company has investments. As a result, the Multifamily segment earns and receives fees, which are generally based upon a stated percentage of development and construction costs and a percentage of gross rental collections. In addition, the Multifamily segment provides general contractor services for the construction of some of its rental projects. Both management fees and general contractor revenue are recognized over the period in which the services are performed using an input method, which properly depicts the level of effort required to complete the management or construction services. These customer contracts require the Company to provide management and general

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

contractor services which represents a performance obligation that the Company satisfies over time. Management fees and general contractor services in the Multifamily segment are included in Multifamily revenue.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 requires immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which generally results in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 was effective for the Company's fiscal year beginning December 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Accounting for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 was effective for the Company’s fiscal year beginning December 1, 2020. The adoption of ASU 2017-04 did not have a material impact on the Company's consolidated financial statements.

New Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019- 12 will be effective for the Company’s fiscal year beginning December 1, 2022. The Company believes, the adoption of ASU 2019-12 will not have a material impact on the Company's consolidated financial statements.

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the 2021 presentation. The Company reclassified the balance of its investment in Doma, formerly States Title, to which the Company sold the majority of the Financial Services segment's retail title agency business and title insurance underwriter in the first quarter of 2019, from the Financial Services segment to the Lennar Other segment in the consolidated balance sheets for all periods presented. This was reclassified to be included in the Company's strategic technology investments as the entity had announced that it would merge with a publicly traded special purpose acquisition company and during the year ended November 30, 2021 completed the merger and became a publicly traded entity. In addition, the Company reflected its contributions to its charitable foundation in a new line on its consolidated statements of operations for all periods presented. This was previously reflected in the Corporate general and administrative line. These reclassifications had no impact on the company's total assets, total equity, revenues or net earnings in its consolidated financial statements.

2. Operating and Reporting Segments

The Company's homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennar brand name. In addition, the Company's homebuilding operations purchase, develop and sell land to third parties. The Company's chief operating decision makers manage and assess the Company's performance at a regional level. Therefore, the Company performed an assessment of its operating segments in accordance with ASC 280, Segment Reporting, and determined that the following are its operating and reportable segments:

Homebuilding segments: (1) East (2) Central (3) Texas (4) West

(5) Financial Services

(6) Multifamily

(7) Lennar Other

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The assets and liabilities related to the Company’s segments were as follows:

(In thousands)			November 30, 2021
Assets:			Homebuilding						Financial Services						Multifamily						Lennar Other						Total
Cash and cash equivalents			$	2,735,213					167,021						16,850						2,660						2,921,744
Restricted cash			21,927						12,012						—						—						33,939
Receivables, net (1)			490,278						708,165						98,405						—						1,296,848
Inventories			18,715,304						—						454,093						—						19,169,397
Loans held-for-sale (2)			—						1,636,351						—						—						1,636,351
Investments in equity securities (3)																					1,006,599						1,006,599
Investments available-for-sale (4)			—						—						—						41,654						41,654
Loans held-for-investments, net			—						44,582						—						—						44,582
Investments held-to-maturity			—						157,808						—						—						157,808
Investments in unconsolidated entities			972,084						—						654,029						346,270						1,972,383
Goodwill			3,442,359						189,699						—						—						3,632,058
Other assets			1,090,654						48,729						88,370						66,662						1,294,415
			$	27,467,819					2,964,367						1,311,747						1,463,845						33,207,778
Liabilities:
Notes and other debts payable, net			$	4,652,338					1,726,026						—						—						6,378,364
Accounts payable and other liabilities			5,217,904						180,317						288,930						145,981						5,833,132
			$	9,870,242					1,906,343						288,930						145,981						12,211,496

(In thousands)			November 30, 2020
Assets:			Homebuilding						Financial Services						Multifamily						Lennar Other						Total
Cash and cash equivalents			$	2,703,986					116,171						38,963						3,918						2,863,038
Restricted cash			15,211						54,481						—						—						69,692
Receivables, net (1)			298,671						552,779						86,629						—						938,079
Inventories			16,925,228						—						249,920						—						17,175,148
Loans held-for-sale (2)			—						1,490,105						—						—						1,490,105
Investments in equity securities (3)			—						—						—						68,771						68,771
Investments available-for-sale (4)			—						—						—						53,497						53,497
Loans held-for-investments, net			—						72,626						—						—						72,626
Investments held-to-maturity			—						164,230						—						—						164,230
Investments in unconsolidated entities			953,177						—						724,647						387,097						2,064,921
Goodwill			3,442,359						189,699						—						—						3,632,058
Other assets			1,190,793						68,027						75,749						8,443						1,343,012
			$	25,529,425					2,708,118						1,175,908						521,726						29,935,177
Liabilities:
Notes and other debts payable, net			$	5,955,758					1,463,919						—						1,906						7,421,583
Accounts payable and other liabilities			3,969,893						180,329						252,911						11,060						4,414,193
			$	9,925,651					1,644,248						252,911						12,966						11,835,776

(1)Receivables, net for Financial Services primarily related to loans sold to investors for which the Company had not yet been paid as of November 30, 2021 and November 30, 2020, respectively.

(2)Loans held-for-sale related to unsold residential and commercial loans carried at fair value.

(3)Investments in equity securities include investments of $100.1 million and $68.8 million without readily available fair values as of November 30, 2021 and November 30, 2020, respectively.

(4)Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Financial information relating to the Company’s segments was as follows:

			Year ended November 30, 2021
(In thousands)			Homebuilding						Financial Services						Multifamily						Lennar Other						Corporate and unallocated (2)						Total
Revenues			$	25,545,242					898,745						665,232						21,457						—						27,130,676
Operating earnings			5,031,762						491,014						21,453						733,035						—						6,277,264
Corporate general and administrative expenses			—						—						—						—						(398,381)						(398,381)
Charitable foundation contribution			—						—						—						—						(59,825)						(59,825)
Earnings before income taxes			5,031,762						491,014						21,453						733,035						(458,206)						5,819,058

			Year ended November 30, 2020
(In thousands)			Homebuilding						Financial Services						Multifamily						Lennar Other (1)						Corporate and unallocated (2)						Total
Revenues			$	20,981,136					890,311						576,328						41,079						—						22,488,854
Operating earnings (loss)			2,988,907						480,952						22,681						(10,334)						—						3,482,206
Corporate general and administrative expenses			—						—						—						—						(333,446)						(333,446)
Charitable foundation contribution			—						—						—						—						(24,972)						(24,972)
Earnings (loss) before income taxes			2,988,907						480,952						22,681						(10,334)						(358,418)						3,123,788

			Year ended November 30, 2019
(In thousands)			Homebuilding						Financial Services						Multifamily						Lennar Other						Corporate and unallocated (2)						Total
Revenues			$	20,793,216					824,810						604,700						36,835						—						22,259,561
Operating earnings			2,502,905						224,642						16,390						31,469						—						2,775,406
Corporate general and administrative expenses			—						—						—						—						(321,188)						(321,188)
Charitable foundation contribution			—						—						—						—						(19,926)						(19,926)
Earnings before income taxes			2,502,905						224,642						16,390						31,469						(341,114)						2,434,292

(1)Operating loss for Lennar Other for the year ended November 30, 2020 included a $25.0 million write-down of assets held by Rialto legacy funds because of the disruption in the capital markets as a result of COVID-19 and the economic shutdown.

(2)Corporate and unallocated expenses primarily represent costs of operations at the Company's corporate headquarters in Miami. These operations include the Company's executive offices, information technology, treasury, corporate accounting and tax, legal, internal audit and human resources. Also included are property expenses related to the leases of corporate offices, data processing, general corporate expenses and charitable foundation contribution to the Lennar Foundation.

Homebuilding Segments

Information about homebuilding activities in states which are not economically similar to other states in the same geographic area is grouped under "Homebuilding Other," which is not considered a reportable segment.

Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s homebuilding segments primarily include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities. Operating earnings (loss) for the homebuilding segments consist of revenues generated from the sales of homes and land, equity in earnings (loss) from unconsolidated entities and other income (expense), net, less the cost of homes sold and land sold, selling, general and administrative expenses incurred by the segment.

The Company’s reportable homebuilding segments and all other homebuilding operations not required to be reported separately, have homebuilding divisions located in:

East: Florida, New Jersey, Pennsylvania and South Carolina

Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia

Texas: Texas

West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington

Other: Urban divisions and other homebuilding related investments primarily in California, including Five Point Holdings, LLC ("FivePoint")

The assets related to the Company's homebuilding segments were as follows:

(In thousands)			East						Central						Texas						West						Other						Corporate and Unallocated						Total Homebuilding
Balance at November 30, 2021			$	5,854,057					3,782,847						2,801,192						11,171,741						1,443,163						2,414,819						27,467,819
Balance at November 30, 2020			5,308,114						3,438,600						2,150,916						10,504,374						1,301,618						2,825,803						25,529,425

Financial information relating to the Company’s homebuilding segments was as follows:

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

			Year ended November 30, 2021
(In thousands)			East						Central						Texas						West						Other						Total Homebuilding
Revenues			$	6,870,944					4,826,535						3,241,321						10,563,756						42,686						25,545,242
Operating earnings (loss)			1,455,432						720,419						730,465						2,192,446						(67,000)						5,031,762
Interest expense			90,314						58,899						28,764						176,633						10,763						365,373
Depreciation and amortization			24,531						16,118						9,821						49,691						1,238						101,399
Net additions to (disposals of) operating properties and equipment			219						239						(9)						26,375						14,950						41,774

			Year ended November 30, 2020
(In thousands)			East						Central						Texas						West						Other						Total Homebuilding
Revenues			$	5,715,028					4,093,693						2,709,681						8,437,167						25,567						20,981,136
Operating earnings (loss)			933,297						482,929						421,594						1,241,494						(90,407)						2,988,907
Interest expense			93,245						58,777						29,901						178,498						13,683						374,104
Depreciation and amortization			21,504						13,659						9,366						50,316						249						95,094
Net additions to (disposals of) operating properties and equipment			955						(11,370)						712						165,869						(32)						156,134

			Year ended November 30, 2019
(In thousands)			East						Central						Texas						West						Other						Total Homebuilding
Revenues			$	5,717,858					4,120,085						2,578,962						8,227,304						149,007						20,793,216
Operating earnings (loss)			830,619						431,372						285,874						1,050,850						(95,810)						2,502,905
Interest expense			96,569						64,104						37,144						183,906						13,272						394,995
Depreciation and amortization			20,623						11,356						8,395						45,456						369						86,199
Net additions to (disposals of) operating properties and equipment			(31,338)						89						950						63,803						(1,214)						32,290

Financial Services

Operations of the Financial Services segment include primarily mortgage financing, title and closing services primarily for buyers of the Company’s homes. It also includes originating and selling into securitizations commercial mortgage loans through its LMF Commercial business. The Financial Services segment sells substantially all of the loans it originates within a short period of time in the secondary mortgage market, the majority of which are sold on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry standard representations and warranties in the loan sale agreements. Financial Services’ operating earnings consist of revenues generated primarily from mortgage financing, title and closing services, and property and casualty insurance, less the cost of such services and certain selling, general and administrative expenses incurred by the segment. The Financial Services segment operates generally in the same states as the Company’s homebuilding operations as well as in other states.

At November 30, 2021, the Financial Services segment had warehouse facilities, all of which were 364-day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows:

(In thousands)			Maximum Aggregate Commitment
Residential facilities maturing:
December 2021 (1)			$	500,000
April 2022			700,000
July 2022			600,000
October 2022			500,000
Total - Residential facilities			$	2,300,000
LMF Commercial facilities maturing:
December 2021 (1)			$	400,000
November 2022			100,000
July 2023			50,000
Total - LMF Commercial facilities			$	550,000
Total			$	2,850,000

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(1)Subsequent to November 30, 2021, the maturity date was extended to December 2022.

The Financial Services segment uses the residential warehouse facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature. The LMF Commercial facilities, which are guaranteed by Lennar Corporation, finance LMF Commercial loan originations and securitization activities and are secured by up to 80% interests in the originated commercial loans financed.

Borrowings and collateral under the facilities and their prior year predecessors were as follows:

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

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

Substantially all of the residential loans the Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Purchasers sometimes try to defray losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan sale agreements. Mortgage investors could seek to have the Company buy back

mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors. The Company establishes accruals for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as

previous settlements. While the Company believes that it has adequately reserved for known losses and projected repurchase requests, given the volatility in the residential mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations, additional recourse expense may be incurred. Loan origination liabilities are included in Financial Services’ liabilities in the Company's consolidated balance sheets.

LMF Commercial - loans held-for-sale

LMF Commercial originated commercial loans as follows:

			November 30,
(Dollars in thousands)			2021						2020
Originations (1)			$	770,107					703,777
Sold			$	931,023					705,089
Securitizations			6						5

(1)During both the year ended November 30, 2021 and 2020 all the commercial loans originated were recorded as loans held-for-sale, which are held at fair value.

Investments held-to-maturity

At November 30, 2021 and 2020, the Financial Services segment held commercial mortgage-backed securities ("CMBS"). These securities are classified as held-to-maturity based on its intent and ability to hold the securities until maturity and changes in estimated cash flows are reviewed periodically to determine if an other-than-temporary impairment has occurred. Based on the segment’s assessment, no impairment charges were recorded during the years ended November 30, 2021 or 2020. The Company has financing agreements to finance CMBS that have been purchased as investments by the Financial Services segment.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Details related to Financial Services' CMBS were as follows:

(Dollars in thousands)			November 30, 2021						November 30, 2020
Carrying value			$	157,808					164,230
Outstanding debt, net of debt issuance costs			$	147,474					153,505
Incurred interest rate			3.4		%				3.4		%

			November 30, 2021
Discount rates at purchase			6%			—			84%
Coupon rates			2.0%			—			5.3%
Distribution dates			October 2027			—			December 2028
Stated maturity dates			October 2050			—			December 2051

Multifamily

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

Operations of the Multifamily segment include revenues generated from land sales, revenue from construction activities and management fees generated from joint ventures, and equity in earnings from unconsolidated entities, less the cost of land sold, expenses related to construction activities and general and administrative expenses.

Lennar Other

Lennar Other primarily includes strategic investments in technology companies, primarily managed by the Company's LENX subsidiary, and fund interests the Company retained when it sold the Rialto asset and investment management platform. Operations of the Lennar Other segment include revenues generated primarily from the Company's share of carried interests in the Rialto fund investments retained after the sale of Rialto's asset and investment management platform, along with equity in earnings (loss) from the Rialto fund investments and strategic technology investments, gains (losses) from investments in equity securities and other income (expense), net from the remaining assets related to the Company's former Rialto segment.

During the year ended November 30, 2021, the Company completed the sale of the Company's residential solar business to Sunnova Energy International Inc. ("Sunnova") for shares in Sunnova. The Company recorded a gain of $153.0 million upon the closing of the sale. The calculation of the gain included the fair value of 3.1 million shares in initial consideration received at closing and the fair value of potential shares to be received upon achievement of earnouts. The significant unobservable fair value assumptions used in the calculation were a terminal value multiple of 3 and a 15% discount rate. The fair value of the earnouts was also based on the probability of achieving full or partial earnouts.

The investments in Opendoor Technologies, Inc. ("Opendoor"), Sunnova, Hippo Holdings, Inc. ("Hippo"), SmartRent, Inc. ("SmartRent") and Blend Labs, Inc. ("Blend") are held at market and will therefore change depending on the value of the Company's share holdings in those entities on the last day of each quarter. For the years ended November 30, 2020 and 2019, there were no mark to market gains on our strategic investments in technology companies. The following is a detail of Lennar Other realized and unrealized gains (losses):

			Year Ended
			November 30,
(In thousands)			2021
Opendoor (OPEN) mark to market			$	239,312
Hippo (HIPO) mark to market			207,634
SmartRent (SMRT) mark to market			79,483
Sunnova (NOVA) mark to market			(8,883)
Blend Labs (BLND) mark to market			(6,744)
Gain on sale of solar business			158,069
Other realized gains			11,705
			$	680,576

During the year ended November 30, 2021, Opendoor, Hippo, SmartRent and Blend began trading and the Company began to mark to market the Company's share holdings in the public entities. The mark to market recognition was due to the entities in which the Company holds the investments going public and the loss of a contractual right to a board seat, where applicable, during the year ended November 30, 2021 and the investments now being accounted for as investments in equity securities which are held at fair value and the changes in fair value are recognized through earnings. As of November 30, 2020,

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the investments, other than SmartRent since the first investment was made in fiscal 2021, were included in the Company's investments in unconsolidated entities and were accounted for using the equity method. In addition, as previously noted, Doma Holdings, Inc. ("Doma") went public during the third quarter of 2021. Doma is an investment that continues to be accounted for under the equity method due to the Company's significant ownership interest which allows the Company to exercise significant influence. As of November 30, 2021, the Company owns approximately 25.0% of Doma and the carrying amount of the Company's investment is $53.7 million.

Each reportable segment follows the same accounting policies described in Note 1—"Summary of Significant Accounting Policies" to the consolidated financial statements. Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented.

3. Investments in Unconsolidated Entities

Homebuilding Unconsolidated Entities

The investments in Company's Homebuilding unconsolidated entities were as follows:

						November 30,
(In thousands)						2021						2020
Investments in unconsolidated entities (1) (2)						$	972,084					953,177
Underlying equity in unconsolidated entities' net assets (1)						1,301,719						1,269,701

(1)The basis difference was primarily as a result of the Company contributing its investment in three strategic joint ventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to the Company.

(2)Included in the Company's recorded investments in Homebuilding unconsolidated entities is the Company's 40% ownership of FivePoint. As of November 30, 2021 and 2020, the carrying amount of the Company's investment was $381.6 million and $392.1 million, respectively.

The Company’s partners generally are unrelated homebuilders, land owners/developers and financial or other strategic partners. The unconsolidated entities follow accounting principles that are in all material respects the same as those used by the Company. The Company shares in the profits and losses of these unconsolidated entities generally in accordance with its ownership interests. In many instances, the Company is appointed as the day-to-day manager under the direction of a management committee that has shared powers among the partners of the unconsolidated entities and the Company receives management fees and/or reimbursement of expenses for performing this function. The Company and/or its partners sometimes obtain options or enter into other arrangements under which the Company can purchase portions of the land held by the unconsolidated entities. Option prices are generally negotiated prices that approximate fair value when the Company receives the options. The details of the activity was as follows:

			Years Ended November 30,
(In thousands)			2021						2020						2019
Land sales revenues (1)			$	57,944					99,935						82,966
Management fees and reimbursement of expenses, net of deferrals			16,464						2,363						2,716

(1)The Company does not include in its Homebuilding equity in loss from unconsolidated entities its pro-rata share of unconsolidated entities’ earnings resulting from land sales to its homebuilding divisions. Instead, the Company accounts for those earnings as a reduction of the cost of purchasing the land from the unconsolidated entities. This in effect defers recognition of the Company’s share of the unconsolidated entities’ earnings related to these sales until the Company delivers a home and title passes to a third-party homebuyer.

The total debt of the Homebuilding unconsolidated entities in which the Company has investments was $1.2 billion and $1.1 billion as of November 30, 2021 and 2020, respectively, of which the Company's maximum recourse exposure was $5.3 million and $4.9 million as of November 30, 2021 and 2020, respectively. In most instances in which the Company has guaranteed debt of an unconsolidated entity, the Company’s partners have also guaranteed that debt and are required to contribute their share of the guarantee payments. In a repayment guarantee, the Company and its venture partners guarantee repayment of a portion or all of the debt in the event of default before the lender would have to exercise its rights against the collateral. In a completion guarantee, the Company and its venture partners have been required to give guarantees of completion to the lenders. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. As of November 30, 2021 and 2020, the Homebuilding segment's unconsolidated entities had non-recourse debt with completion guarantees of $241.0 million and $183.3 million, respectively.

If the Company is required to make a payment under any guarantee, the payment would generally constitute a capital contribution or loan to the Homebuilding unconsolidated entity and increase the Company's investment in the unconsolidated entity and its share of any funds the entity distributes.

As of both November 30, 2021 and 2020, the fair values of the repayment, maintenance guarantees and completion guarantees were not material. The Company believes that as of November 30, 2021, in the event it becomes legally obligated to perform under a guarantee of the obligation of a Homebuilding unconsolidated entity due to a triggering event under a guarantee, the collateral should be sufficient to repay at least a significant portion of the obligation or the Company and its

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

partners would contribute additional capital into the venture. In certain instances, the Company has placed performance letters of credit and surety bonds with municipalities for its joint ventures (see Note 4).

In the first quarter of 2021, the Company formed the Upward America Venture (“Upward America”), and is managing and participating in Upward America. Upward America is an investment fund that acquires new single-family homes in high growth markets across the United States and rents them to the people who will live in them. Upward America has raised equity commitments totaling $1.25 billion primarily from institutional investors, including $125 million committed by Lennar. During the year ended November 30, 2021, Lennar delivered 1,457 homes to Upward America. Subsequent to November 30, 2021, the equity commitments were increased to $1.6 billion.

Multifamily Unconsolidated Entities

The unconsolidated entities in which the Multifamily segment has investments usually finance their activities with a combination of partner equity and debt financing. In connection with many of the loans to Multifamily unconsolidated entities, the Company (or entities related to them) has been required to give guarantees of completion and cost over-runs to the lenders and partners. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. Additionally, the Company guarantees the construction costs of the project as construction cost over-runs would be paid by the Company. Generally, these payments would increase the Company's investment in the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds. As of both November 30, 2021 and 2020, the fair value of the completion guarantees was immaterial. As of November 30, 2021 and 2020, Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $855.2 million and $722.9 million, respectively.

In many instances, the Multifamily segment is appointed as the construction, development and property manager for its Multifamily unconsolidated entities and receives fees for performing this function. The Multifamily segment also provides general contractor services for construction of some of the rental properties owned by unconsolidated entities in which the Company has investments. The details of the activity was as follows:

						Years Ended November 30,
(In thousands)						2021						2020						2019
General contractor services, net of deferrals						$	549,400					400,808						355,388
General contractor costs						533,398						383,649						340,081
Management fee income						56,573						56,253						53,597

The Multifamily segment includes Multifamily Venture Fund I (the "LMV I") and Multifamily Venture Fund II LP (the "LMV II"), which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties. Details of each as of and during the year ended November 30, 2021 are included below:

			November 30, 2021
(In thousands)			LMV I						LMV II
Lennar's carrying value of investments			$	254,732					320,565
Equity commitments			2,204,016						1,257,700
Equity commitments called			2,149,357						1,201,475
Lennar's equity commitments			504,016						381,000
Lennar's equity commitments called			499,031						362,913
Lennar's remaining commitments			4,985						18,087
Distributions to Lennar during the year ended November 30, 2021			67,197						9,672

Lennar Other

Lennar Other primarily includes fund investments the Company retained when it sold the Rialto asset and investment management platform, as well as strategic investments in technology companies.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Financial Information of Unconsolidated Entities

Summarized condensed financial information on a combined 100% basis related to the Company's unconsolidated entities that are accounted for under the equity method was as follows:

(In thousands)			November 30, 2021
Assets:			Homebuilding												Multifamily						Lennar Other						Total
Cash and cash equivalents			$	460,901											25,972						430,807						917,680
Loans receivable			—												—						65,971						65,971
Real estate owned			—												—						279,200						279,200
Investment securities			—												—						2,461,788						2,461,788
Investments in partnerships			—												—						346,042						346,042
Inventories			4,666,454												—						—						4,666,454
Operating properties and equipment			44,802												6,406,500						—						6,451,302
Other assets			1,044,771												111,750						219,680						1,376,201
			$	6,216,928											6,544,222						3,803,488						16,564,638
Liabilities and equity:
Accounts payable and other liabilities			$	904,078											240,928						179,879						1,324,885
Debt (1)			1,216,721												3,407,362						399,632						5,023,715
Equity			4,096,129												2,895,932						3,223,977						10,216,038
			$	6,216,928											6,544,222						3,803,488						16,564,638
Investments in unconsolidated entities			$	972,084											654,029						346,270						1,972,383

(In thousands)			November 30, 2020
Assets:			Homebuilding												Multifamily						Lennar Other						Total
Cash and cash equivalents			$	546,013											94,801						284,517						814,222
Loans receivable			—												—						95,281						95,281
Real estate owned			—												—						295,391						295,391
Investment securities			—												—						2,169,480						2,093,766
Investments in partnerships			—												—						260,721						260,721
Inventories			4,527,371												—						—						4,527,371
Operating properties and equipment			148,020												5,392,681						23,968						5,564,669
Other assets			862,875												115,968						1,263,881						2,077,942
			$	6,084,279											5,603,450						4,393,239						15,729,363
Liabilities and equity:
Accounts payable and other liabilities			$	866,812											219,522						190,384						1,117,447
Debt (1)			1,085,639												2,519,567						292,313						3,897,519
Equity			4,131,828												2,864,361						3,910,542						10,714,397
			$	6,084,279											5,603,450						4,393,239						15,729,363
Investments in unconsolidated entities			$	953,177											724,647						387,097						2,064,921

(1)Debt noted above is net of debt issuance costs. As of November 30, 2021 and 2020 this includes $11.9 million and $11.8 million, respectively, for Homebuilding, $23.4 million and $31.1 million, respectively, for Multifamily and an immaterial amount of debt issuance costs for Lennar Other.

(In thousands)
Statement of Operations****Years Ended:			Revenues						Cost and expenses						Other income (expense), net (1)						Net earnings (loss) of unconsolidated entities						Equity in earnings (loss) from unconsolidated entities
November 30, 2021			$	1,383,266					1,448,775						187,625						122,116						48,993
November 30, 2020			1,362,686						1,221,873						(244,680)						(103,867)						(13,939)
November 30, 2019			782,712						774,550						347,018						355,180						13,393

(1)Other income (expense), net included realized and unrealized gains (losses) on investments.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4. Homebuilding Senior Notes and Other Debts Payable

			November 30,
(Dollars in thousands)			2021						2020
4.750% senior notes due 2022			$	573,840					572,724
4.875% senior notes due December 2023			398,345						397,347
4.500% senior notes due 2024			648,253						647,528
5.875% senior notes due 2024			438,810						443,484
4.750% senior notes due 2025			498,446						498,002
5.25% senior notes due 2026			405,497						406,709
5.00% senior notes due 2027			352,124						352,508
4.75% senior notes due 2027			895,510						894,760
6.25% senior notes due December 2021			—						305,221
4.125% senior notes due 2022			—						598,876
5.375% senior notes due 2022			—						255,342
Mortgage notes on land and other debt			441,513						583,257
			$	4,652,338					5,955,758

The carrying amounts of the senior notes listed above are net of debt issuance costs of $11.0 million and $15.9 million, as of November 30, 2021 and 2020, respectively.

In June 2021, the Company retired $300 million aggregate principal amount of its 6.25% senior notes due December 2021 at par. In October 2021, the Company retired $600 million aggregate principal amount of its 4.125% senior notes due January 2022 at par. In November 2021, the Company retired early, at a premium, $250 million aggregate principal amount of its 5.375% senior notes due October 2022. The loss on early retirement of the $250 million senior notes was $7.4 million.

At November 30, 2021, the Company had an unsecured revolving credit facility (the "Credit Facility") with maximum borrowings of $2.5 billion maturing in 2024, that included a $300 million accordion feature, subject to additional commitments, thus the maximum borrowings could be $2.8 billion. The credit agreement also provides that up to $500 million in commitments may be used for letters of credit. As of both November 30, 2021 and 2020, the Company had no outstanding borrowings under the Credit Facility. Under the Credit Facility agreement, the Company is required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio. These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures. The Company believes it was in compliance with its debt covenants at November 30, 2021. In addition to the Credit Facility, the Company has other letter of credit facilities with different financial institutions.

Performance letters of credit are generally posted with regulatory bodies to guarantee the Company’s performance of certain development and construction activities. Financial letters of credit are generally posted in lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral. Additionally, at November 30, 2021, the Company had outstanding surety bonds including performance surety bonds related to site improvements at various projects (including certain projects of the Company’s joint ventures) and financial surety bonds. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all development and construction activities are completed. The Company does not presently anticipate any draws upon these bonds or letters of credit, but if any such draws occur, the Company does not believe they would have a material effect on its financial position, results of operations or cash flows.

The Company's outstanding letters of credit and surety bonds are described below:

			November 30,
(In thousands)			2021						2020
Performance letters of credit			$	924,584					752,096
Financial letters of credit			425,843						283,193
Surety bonds			3,553,047						3,087,711
Anticipated future costs primarily for site improvements related to performance surety bonds			1,690,861						1,584,642

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The terms of each of the Company's senior notes outstanding at November 30, 2021 were as follows:

Senior Notes Outstanding (1)						Principal Amount						Net Proceeds (2)						Price						Dates Issued
(Dollars in thousands)
4.750% senior notes due 2022						$	575,000					$	567,585					(4)						October 2012, February 2013, April 2013
4.875% senior notes due December 2023						400,000						393,622						99.169		%				November 2015
4.500% senior notes due 2024						650,000						644,838						100		%				April 2017
5.875% senior notes due 2024						425,000						(3)						(3)						(3)
4.750% senior notes due 2025						500,000						495,528						100		%				April 2015
5.25% senior notes due 2026						400,000						(3)						(3)						(3)
5.00% senior notes due 2027						350,000						(3)						(3)						(3)
4.75% senior notes due 2027						900,000						894,650						100		%				November 2017

(1)Interest is payable semi-annually for each of the series of senior notes. The senior notes are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries.

(2)The Company generally has historically used the net proceeds for working capital and general corporate purposes, which can include the repayment or repurchase of other outstanding senior notes.

(3)These notes were obligations of CalAtlantic when it was acquired, and were subsequently exchanged in part for notes of the Company. As part of purchase accounting, the senior notes have been recorded at their fair value as of the date of acquisition (February 12, 2018).

(4)The Company issued $350 million aggregate principal amount at a price of 100%, $175 million aggregate principal amount at a price of 98.073% and $50 million aggregate principal amount at a price of 98.250%.

The Company's senior notes are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries and some of the Company's other subsidiaries. Although the guarantees are full, unconditional and joint and several while they are in effect, (i) a subsidiary will have its guarantee suspended at any time when it is not directly or indirectly guaranteeing at least $75 million of debt of Lennar Corporation (the parent company) other than senior notes, and (ii) a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed of.

At November 30, 2021, the Company had mortgage notes on land and other debt due at various dates through 2036 bearing interest at rates up to 8.0% with an average interest rate of 4.0%. At November 30, 2021 and 2020, the carrying amount of the mortgage notes on land and other debt was $441.5 million and $583.3 million, respectively. During the years ended November 30, 2021 and 2020, the Company retired $195.2 million and $555.6 million, respectively, of mortgage notes on land and other debt.

The minimum aggregate principal maturities of Homebuilding senior notes and other debts payable during the five years subsequent to November 30, 2021 and thereafter are as follows:

(In thousands)			Debt Maturities
2022			$	718,279
2023			104,387
2024			1,529,977
2025			591,432
2026			402,794
Thereafter			1,294,642

The Company expects to pay its near-term maturities as they come due through cash generated from operations, the issuance of additional debt or equity offerings as well as borrowings under the Company's Credit Facility.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Income Taxes

The provision for income taxes consisted of the following:

			Years Ended November 30,
(In thousands)			2021						2020						2019
Current:
Federal			$	924,474					428,907						298,701
State			245,941						135,246						53,400
			$	1,170,415					564,153						352,101
Deferred:
Federal			$	149,349					59,065						165,080
State			42,745						33,017						74,992
			192,094						92,082						240,072
			$	1,362,509					656,235						592,173

A reconciliation of the statutory rate and the effective tax rate was as follows:

			Percentage of Pretax Income
			2021						2020						2019
Statutory rate			21.00		%				21.00		%				21.00		%
State income taxes, net of federal income tax benefit			4.03						4.00						4.17
Tax credits (1)			(1.73)						(4.46)						(1.49)
Nondeductible compensation			0.49						0.57						0.45
Tax reserves and interest expense, net			0.03						—						(0.03)
Deferred tax asset valuation allowance, net			(0.01)						—						(0.02)
Other			(0.29)						(0.09)						0.18
Effective rate			23.52		%				21.02		%				24.26		%

(1)During fiscal year 2020, Congress extended the new energy efficient home tax credit for homes delivered from 2018 to 2021, with retroactive effect for 2018 and 2019.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax assets were as follows:

			November 30,
(In thousands)			2021						2020
Deferred tax assets:
Inventory valuation adjustments			$	94,624					136,868
Reserves and accruals			187,466						161,984
Net operating loss carryforwards			74,902						88,021
Capitalized expenses			174,405						130,910
Investments in unconsolidated entities			48,913						67,405
Employee stock incentive plan			37,813						25,060
Other assets			49,828						51,655
Total deferred tax assets			667,951						661,903
Valuation allowance			(2,693)						(4,411)
Total deferred tax assets after valuation allowance			665,258						657,492
Deferred tax liabilities:
Capitalized expenses			187,332						181,729
Deferred income			272,827						240,903
Unrealized gains on investments in equity securities			164,534						—
Other liabilities			44,810						47,478
Total deferred tax liabilities			669,503						470,110
Net deferred tax assets (liabilities)			$	(4,245)					187,382

The detail of the Company's net deferred tax assets (liabilities) was as follows:

			November 30,
(In thousands)			2021						2020
Net deferred tax assets (liabilities): (1)
Homebuilding			$	84,198					119,467
Financial Services			(1,431)						1,024
Multifamily			64,247						38,155
Lennar Other			(151,259)						28,736
Net deferred tax assets (liabilities)			$	(4,245)					187,382

(1)Net deferred tax assets and net deferred tax liabilities detailed above are included within other assets and other liabilities in the respective segments.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Company based on the consideration of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whether deferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards not expiring unused and tax planning alternatives.

			November 30,
(In thousands)			2021						2020
Valuation allowance (1)			$	(2,693)					(4,411)
Federal tax effected NOL carryforwards (2)			32,968						36,264
State tax effected NOL carryforwards (3)			41,935						51,757

(1)As of November 30, 2021 and 2020, the deferred tax assets included valuation allowances primarily related to state net operating loss ("NOL") carryforwards that are not more likely than not to be utilized due to an inability to carry back these losses in most states and short carryforward periods that exist in certain states.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2)At November 30, 2021 and 2020, the Company had federal tax effected NOL carryforwards that may be carried forward to offset future taxable income and begin to expire in 2029.

(3)At November 30, 2021 and 2020, the Company had state tax effected NOL carryforwards that may be carried forward from 10 to 20 years or indefinitely, depending on the tax jurisdiction, with certain losses expiring between 2022 and 2039.

The following table summarizes the changes in gross unrecognized tax benefits:

			Years Ended November 30,
(In thousands)			2021						2020						2019
Gross unrecognized tax benefits, beginning of year			$	12,285					12,856						14,667
Lapse of statute of limitations			—						(349)						(1,811)
Decreases due to settlements with tax authorities			—						(222)						—
Gross unrecognized tax benefits, end of year			$	12,285					12,285						12,856

If the Company were to recognize its gross unrecognized tax benefits as of November 30, 2021, $9.7 million would affect the Company’s effective tax rate. The Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease by up to $12.3 million within the following twelve months.

The following summarizes the changes in interest and penalties accrued with respect to gross unrecognized tax benefits:

			November 30,
(In thousands)			2021						2020
Accrued interest and penalties, beginning of the year			$	57,764					55,333
Accrual of interest and penalties (primarily related to state audits)			2,173						2,802
Reduction of interest and penalties			—						(371)
Accrued interest and penalties, end of the year			$	59,937					57,764

The IRS is currently examining the Company's federal tax income tax returns for fiscal year 2020, and certain state taxing authorities are examining various fiscal years. The final outcome of these examinations is not yet determinable. The statute of limitations for the Company's major tax jurisdictions remains open for examination for fiscal year 2005 and subsequent years. The Company participates in an IRS examination program, Compliance Assurance Process, "CAP". This program operates as a contemporaneous exam throughout the year in order to keep exam cycles current and achieve a higher level of compliance.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

			Years Ended November 30,
(In thousands, except per share amounts)			2021						2020						2019
Numerator:
Net earnings attributable to Lennar			$	4,430,111					2,465,036						1,849,052
Less: distributed earnings allocated to nonvested shares			2,690						1,658						420
Less: undistributed earnings allocated to nonvested shares			50,229						26,731						15,722
Numerator for basic earnings per share			4,377,192						2,436,647						1,832,910
Less: net amount attributable to noncontrolling interests in Rialto's Carried Interest Incentive Plan (1)			2,907						8,971						4,204
Numerator for diluted earnings per share			$	4,374,285					2,427,676						1,828,706
Denominator:
Denominator for basic earnings per share - weighted average common shares outstanding			306,612						309,406						318,419
Effect of dilutive securities:
Share-based payments			—						1						3
Denominator for diluted earnings per share - weighted average common shares outstanding			306,612						309,407						318,422
Basic earnings per share			$	14.28					7.88						5.76
Diluted earnings per share			$	14.27					7.85						5.74

(1)The amounts presented above relate to Rialto's Carried Interest Incentive Plan and represent the difference between the advanced tax distributions received by the Lennar Other segment and the amount Lennar, as the parent company, is assumed to own.

For the years ended November 30, 2021, 2020 and 2019, there were no options to purchase shares of common stock that were outstanding and anti-dilutive.

7. Financial Instruments and Fair Value Disclosures

The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at November 30, 2021 and 2020, using available market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies might have a material effect on the estimated fair value amounts. The table excludes cash and cash equivalents, restricted cash, receivables, net, and accounts payable, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments.

									November 30,
									2021												2020
			Fair Value						Carrying						Fair						Carrying						Fair
(In thousands)			Hierarchy						Amount						Value						Amount						Value
ASSETS
Financial Services:
Loans held-for-investment, net			Level 3						$	44,582					44,594						72,626						70,808
Investments held-to-maturity			Level 3						157,808						184,495						164,230						196,047
LIABILITIES
Homebuilding senior notes and other debts payable, net			Level 2						$	4,652,338					5,046,721						5,955,758						6,581,798
Financial Services notes and other debts payable, net			Level 2						1,726,026						1,726,860						1,463,919						1,464,850
Lennar Other notes and other debts payable, net			Level 2						—						—						1,906						1,906

The following methods and assumptions are used by the Company in estimating fair values:

Financial Services—The fair values above are based on quoted market prices, if available. The fair values for instruments that do not have quoted market prices are estimated by the Company on the basis of discounted cash flows or other financial information. For notes and other debts payable, the fair values approximate their carrying value due to variable interest pricing terms and the short-term nature of the majority of the borrowings.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Homebuilding—For senior notes and other debts payable, the fair value of fixed-rate borrowings is primarily based on quoted market prices and the fair value of variable-rate borrowings is based on expected future cash flows calculated using current market forward rates.

Lennar Other—The fair value for notes payable approximate their carrying value due to variable interest pricing terms and the short-term nature of the borrowings.

Fair Value Measurements

GAAP provides a framework for measuring fair value, expands disclosures about fair value measurements and establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value summarized as follows:

Level 1: Fair value determined based on quoted prices in active markets for identical assets.

Level 2: Fair value determined using significant other observable inputs.

Level 3: Fair value determined using significant unobservable inputs.

The Company’s financial instruments measured at fair value on a recurring basis are summarized below:

									Fair Value at November 30,
(In thousands)			Fair Value Hierarchy						2021						2020
Financial Services Assets:
Residential loans held-for-sale			Level 2						$	1,636,283					1,296,517
LMF Commercial loans held-for-sale			Level 3						68						193,588
Mortgage servicing rights			Level 3						2,492						2,113
Lennar Other:
Investments in equity securities			Level 1						906,539						—
Investments available-for-sale			Level 3						41,654						53,497

Residential and LMF Commercial loans held-for-sale in the table above include:

			November 30,
			2021												2020
(In thousands)			Aggregate Principal Balance												Change in Fair Value						Aggregate Principal Balance												Change in Fair Value
Residential loans held-for-sale			$	1,586,764											49,519						1,232,548												63,969
LMF Commercial loans held-for-sale			—												68						194,362												(774)

The estimated fair values of the Company’s financial instruments have been determined by using available market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies might have a material effect on the estimated fair value amounts. The following methods and assumptions are used by the Company in estimating fair values:

Financial Services residential loans held-for-sale— Fair value is based on independent quoted market prices, where available, or the prices for other mortgage whole loans with similar characteristics. The Company recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of these are included in Financial Services’ loans held-for-sale as of November 30, 2021 and 2020. Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics.

LMF Commercial loans held-for-sale— The fair value of loans held-for-sale is calculated from model-based techniques that use discounted cash flow assumptions and the Company’s own estimates of CMBS spreads, market interest rate movements and the underlying loan credit quality. Loan values are calculated by allocating the change in value of an assumed CMBS capital structure to each loan. The value of an assumed CMBS capital structure is calculated, generally, by discounting the cash flows associated with each CMBS class at market interest rates and at the Company’s own estimate of CMBS spreads. The Company estimates CMBS spreads by observing the pricing of recent CMBS offerings, secondary CMBS markets, changes in the CMBX index, and general capital and commercial real estate market conditions. Considerations in estimating CMBS spreads include comparing the Company’s current loan portfolio with comparable CMBS offerings containing loans with similar duration, credit quality and collateral composition. These methods use unobservable inputs in estimating a discount rate that is used to assign a value to each loan. While the cash payments on the loans are contractual, the discount rate used and assumptions regarding the relative size of each class in the CMBS capital structure can significantly impact the valuation. Therefore, the estimates used could differ materially from the fair value determined when the loans are sold to a securitization trust.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Financial Services mortgage servicing rights — Financial Services records mortgage servicing rights when it sells loans on a servicing-retained basis or through the acquisition or assumption of the right to service a financial asset. The fair value of the mortgage servicing rights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and delinquency rates and are noted below:

			November 30, 2021
Unobservable inputs
Mortgage prepayment rate			13		%
Discount rate			13		%
Delinquency rate			4		%

Lennar Other investments in equity securities - The fair value of investments in equity securities was calculated based on independent quoted market prices. The Company’s investments in equity securities were recorded at fair value with all changes in fair value recorded to Lennar Other unrealized gain of the Company’s consolidated statements of operations and comprehensive income (loss).

Lennar Other investments available-for-sale - The fair value of investments available-for-sale is calculated from model-based techniques that use discounted cash flow assumptions and the Company’s own estimates of CMBS spreads, market interest rate movements and the underlying loan credit quality. Loan values are calculated by allocating the change in value of an assumed CMBS capital structure to each loan. The value of an assumed CMBS capital structure is calculated, generally, by discounting the cash flows associated with each CMBS class at market interest rates and at the Company’s own estimate of CMBS spreads.

The changes in fair values for Level 1 and Level 2 financial instruments measured on a recurring basis are shown below by financial instrument and financial statement line item:

			Years Ended November 30,
(In thousands)			2021						2020						2019
Changes in fair value included in Financial Services revenues:
Loans held-for-sale			$	(14,449)					21,765						4,891
Mortgage loan commitments			(8,302)						12,774						(85)
Forward contracts			11,513						(9,805)						6,504
Changes in fair value included in Lennar Other realized and unrealized gains:
Investments in equity securities			$	510,802					—						—
Changes in fair value included in other comprehensive income (loss), net of tax:
Lennar Other investments available-for-sale			$	(536)					(805)						—
Financial Services investments available-for-sale			—						(46)						1,040

Interest on Financial Services loans held-for-sale and LMF Commercial loans held-for-sale measured at fair value is calculated based on the interest rate of the loans and recorded as revenues in the Financial Services’ statement of operations.

The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements:

			Years Ended November 30,
			2021												2020
(In thousands)			Mortgage servicing rights												LMF Commercial loans held-for-sale						Mortgage servicing rights												LMF Commercial loans held-for-sale
Beginning of year			$	2,113											193,588						24,679												197,224
Purchases/loan originations			584												774,905						2,378												703,777
Sales/loan originations sold, including those not settled			—												(931,023)						—												(705,089)
Disposals/settlements (1)			(1,365)												(35,837)						(10,322)												—
Changes in fair value (2)			1,160												(388)						(14,622)												(25)
Interest and principal paydowns			—												(1,177)						—												(2,299)
End of year			$	2,492											68						2,113												193,588

(1)The year ended November 30, 2021 includes $28.5 million of loans sold/paid outside of LMF Commercial’s six securitizations and $7.3 million of loans converted to loans held-for-investment. The year ended November 30, 2020 includes $7.5 million related to the sale of a servicing portfolio.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2)Changes in fair value for LMF Commercial loans held-for-sale and Financial Services mortgage servicing rights are included in Financial Services' revenues.

The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments and write-offs. The fair values included in the tables below represent only those assets whose carrying values were adjusted to fair value during the respective periods disclosed. The assets measured at fair value on a nonrecurring basis are summarized below:

			Years Ended November 30,
									2021																		2020																		2019
(In thousands)			Fair Value Hierarchy						Carrying Value						Fair Value						Total Losses, Net (1)						Carrying Value						Fair Value						Total Losses, Net (1)						Carrying Value						Fair Value						Total Losses, Net (1)
Non-financial assets
Homebuilding:
Finished homes and construction in progress (2)			Level 3						$	32,364					16,342						(16,022)						176,637						148,684						(27,953)						218,942						205,201						(13,741)
Land and land under development (2)			Level 3						35,775						26,841						(8,934)						182,137						92,355						(89,782)						121,564						82,816						(38,748)
Other assets (2)			Level 3						12,764						12,024						(740)						—						—						—						60,363						56,727						(3,636)

(1)Represents losses due to valuation adjustments, write-offs, gains (losses) from transfers or acquisitions of real estate through foreclosure and REO impairments recorded during the year.

(2)Valuation adjustments for finished homes, construction in progress and land and land under development were included in Homebuilding costs and expenses and valuation adjustments for other assets were included in homebuilding other income (expense), net in the Company's consolidated statements of operations for the years ended November 30, 2021, 2020 and 2019.

See Note 1 for a detailed description of the Company’s process for identifying and recording valuation adjustments related to Homebuilding inventory.

8. Variable Interest Entities

The Company evaluated the joint venture ("JV") agreements of its JV's that were formed or that had reconsideration events, such as changes in the governing documents or to debt arrangements during the year ended November 30, 2021 and based on the Company's evaluation, during the year ended November 30, 2021, the Company consolidated seven entities that had a total combined assets and liabilities of $77.1 million and $3.2 million, respectively. During the year ended November 30, 2021, there were no VIEs that were deconsolidated.

During the year ended November 30, 2020, the Company's Financial Services segment deconsolidated one entity that had total assets and liabilities of $291.2 million and $204.1 million, respectively. In January 2019, this JV was formed by the sale of the Company’s retail title agency and its retail title insurance business to this JV entity. In exchange for the sale of the retail agency and retail title insurance business, the Company received 20% of the JV entity’s preferred stock, warrants exercisable to purchase additional shares of preferred stock in the JV entity and a note due from the JV to the Company. The JV entity’s reconsideration event was due to a significant equity raise that was completed during the three months ended May 31, 2020. The proceeds of the equity raise resulted in approximately a 43% reduction of the principal amount of debt owed by the JV entity to the Company as well as an approximately 20% reduction of the Company’s ownership interest in the JV. The JV remained a VIE at November 30, 2020, however, the Company concluded that it is no longer the primary beneficiary as the Company no longer has the power to direct the VIE. In aggregate, the resulting fair value of the equity investment and note receivable totaled $123.4 million, of which $70.8 million was included in Financial Services investments in unconsolidated entities at the time of deconsolidation. Upon deconsolidation, the Company recorded a gain of $61.4 million during the year ended November 30, 2020. In the current year, the investment in that entity has been reclassified to the Lennar Other Segment, as such, the investment as of November 30, 2020 has also been reclassed to the Lennar Other segment. See Note 1 for additional discussion regarding the reclass.

The carrying amount of the Company's consolidated VIE's assets and non-recourse liabilities are disclosed in the footnote to the 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 and other debts payable. The assets held by a VIE usually are 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 the VIE’s banks. Other than debt guarantee agreements with a VIE’s banks, 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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Unconsolidated VIEs

At November 30, 2021 and 2020, the Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to loss were as follows:

			November 30,
			2021												2020
(In thousands)			Investments in Unconsolidated VIEs						Lennar’s Maximum Exposure to Loss						Investments in Unconsolidated VIEs						Lennar’s Maximum Exposure to Loss
Homebuilding (1)			$	107,323					301,619						89,654						89,828
Multifamily (2)			579,388						611,937						619,540						717,271
Financial Services (3)			157,808						157,808						164,230						164,230
Lennar Other (4)			12,680						12,680						76,023						130,177
			$	857,199					1,084,044						949,447						1,101,506

(1)As of November 30, 2021 and 2020, the maximum exposure to loss of Homebuilding's investments in unconsolidated VIEs was limited to its investments in unconsolidated VIEs, except as of November 30, 2021, with regard to the Company's remaining commitment to fund capital in the Upward America Venture, a single family for rent platform, and a short-term note provided by the Company to the Upward America Venture.

(2)As of November 30, 2021 and 2020, the maximum exposure to loss of Multifamily's investments in unconsolidated VIEs was primarily limited to its investments in the unconsolidated VIEs, except with regard to the remaining equity commitment of $23.1 million and $88.1 million, respectively, to fund LMV I and LMV II for futre expenditures related to the construction and development of its projects.

(3)As of both November 30, 2021 and 2020, the maximum exposure to loss of the Financial Services segment was limited to its investment in the unconsolidated entities VIEs and related to the Financial Services' CMBS investments held-to-maturity.

(4)At November 30, 2021, the decrease in investments in unconsolidated VIEs and maximum exposure to loss was related to an entity which had a reconsideration event due to the payoff of a note receivable which caused the entity to no longer be considered a VIE.

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 funds) and unconsolidated entities until the Company has determined whether to exercise the options.

The Company evaluates all option contracts 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 or makes a significant deposit for optioned land, it may need to consolidate the land under option at the purchase price of the optioned land.

During the year ended November 30, 2021, consolidated inventory not owned increased by $324.5 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2021.The increase was primarily due to additions in the year ended November 30, 2021 as the Company focused on increasing its controlled homesites, partially offset by 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 land under development in the accompanying consolidated balance sheet as of November 30, 2021. 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.

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s exposure to loss related to its option contracts with third parties and unconsolidated entities were as follows:

			November 30,
(In thousands)			2021						2020
Non-refundable option deposits and pre-acquisition costs			$	1,228,057					414,154
Letters of credit in lieu of cash deposits under certain land and option contracts			175,937						87,537

9. Commitments and Contingent Liabilities

The Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, the disposition of these matters will not have a material adverse effect on the Company’s consolidated financial statements. From time to time, the Company is also a party to various lawsuits involving purchases and sales of real property. These lawsuits include claims regarding representations and warranties made in connection with the transfer of properties and disputes regarding the obligation to purchase or sell properties.

The Company does not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on its business or financial position. However, the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property, which may have changed from the time the agreement for purchase or sale was entered into.

The Company is subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate, which it does in the routine conduct of its business. Option contracts generally enable the Company to control portions of properties owned by third parties (including land funds) and unconsolidated entities until the Company determines whether to exercise the option. The use of option contracts allows the Company to reduce the financial risks associated with long-term land holdings. At November 30, 2021, the Company had $1.2 billion of non-refundable option deposits and pre-acquisition costs related to certain of these homesites, which were included in inventories in the consolidated balance sheet.

Leases

The Company has entered into agreements to lease certain office facilities and equipment under operating leases. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. ROU assets and lease liabilities are recorded on the balance sheet for all leases, except leases with an initial term of 12 months or less. Many of the Company's leases include options to renew. The exercise of lease renewal options is at the Company's option and therefore renewal option payments have not been included in the ROU assets or lease liabilities. The following table includes additional information about the Company's leases:

(Dollars in thousands)			November 30, 2021
Right-of-use assets			$	155,616
Lease liabilities			$	163,513
Weighted-average remaining lease term (in years)			8.2
Weighted-average discount rate			2.8%

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company has entered into agreements to lease certain office facilities and equipment under operating leases. Future minimum payments under the noncancellable leases in effect at November 30, 2021 were as follows:

(In thousands)			Lease Payments
2022			$	40,387
2023			28,878
2024			23,231
2025			18,797
2026 and thereafter			72,852
Total future minimum lease payments (1)			$	184,145
Less: Interest (2)			20,632
Present value of lease liabilities (2)			$	163,513

(1)Future minimum lease payments exclude variable lease costs and short-term lease costs, which were $29.2 million and $1.9 million, respectively, for the year ended November 30, 2021. This also does not include minimum lease payments for executed and legally enforceable leases that have not yet commenced. As of November 30, 2021, the minimum lease payments for these leases that have not yet commenced were immaterial.

(2)The Company's leases do not include a readily determinable implicit rate. As such, the Company has estimated the discount rate for these leases to determine the present value of lease payments at the lease commencement date or as of December 1, 2019, which was the effective date of ASU 2016-02. The Company recognized the lease liabilities on its balance sheets within other liabilities of the respective segments.

The Company's rental expense was as follows:

			November 30,
(In thousands)			2021						2020						2019
Rental expense			$	84,991					82,090						92,178

On occasion, the Company may sublease rented space which is no longer used for the Company's operations. For the year ended November 30, 2021, the Company had an immaterial amount of sublease income.

The Company is committed, under various letters of credit, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit under these arrangements totaled $1.4 billion at November 30, 2021. Additionally, at November 30, 2021, the Company had outstanding surety bonds of $3.6 billion including performance surety bonds related to site improvements at various projects (including certain projects in the Company’s joint ventures) and financial surety bonds. Although significant development and construction activities have been completed related to these site improvements, these bonds are generally not released until all development and construction activities are completed. As of November 30, 2021, there were approximately $1.7 billion, or 48%, of anticipated future costs to complete related to these site improvements. The Company does not presently anticipate any draws upon these bonds that would have a material effect on its consolidated financial statements.

Substantially all of the loans the Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Over the last decade there has been an industry-wide effort by purchasers to defray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan sale agreements. Mortgage investors or others could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors. The Company establishes accruals for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements. While the Company believes that it has adequately reserved for known losses and projected repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations, additional recourse expense may be incurred. Loan origination liabilities are included in Financial Services’ liabilities in the Company's consolidated balance sheets.