The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included under Item 1 of this Report and our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K, for our fiscal year endedNovember 30, 2021 . Some of the statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, are "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements typically include the words "anticipate," "believe," "consider," "estimate," "expect," "forecast," "intend," "objective," "plan," "predict," "projection," "seek," "strategy," "target," "will" or other words of similar meaning. Forward-looking statements contained herein may include opinions or beliefs regarding market conditions and similar matters. In many instances, those opinions and beliefs are based upon general observations by members of our management, anecdotal evidence and our experience in the conduct of our businesses, without specific investigation or analyses. Therefore, while they reflect our view of the industries and markets in which we are involved, they should not be viewed as reflecting verifiable views or views that are necessarily shared by all who are involved in those industries or markets. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements. The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to: an extended slowdown in the real estate markets in which we have significant homebuilding activity, including a slowdown in either the market for single family homes or the multifamily rental market; changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit; decreased demand for our homes or Multifamily rental properties; the impact of inflation or a higher interest rate environment; the potential negative impact to our business of the ongoing coronavirus ("COVID-19") pandemic, the duration, impact and severity of which is highly uncertain; continuation of supply shortages and increased costs related to construction materials and labor; cost increases related to real estate taxes and insurance; reduced availability or increased cost of mortgage financing for homebuyers; increased interest rates or increased competition in the mortgage industry; reductions in the market value of our investments in public companies; our inability to successfully execute our strategies, including our land lighter strategy and our strategy to monetize noncore assets; our inability to acquire land at anticipated prices; the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods; increased competition for home sales from other sellers of new and resale homes; our inability to pay down debt; government actions or other factors that might force us to terminate our program of repurchasing our stock; a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets; the failure of the participants in various joint ventures to honor their commitments; difficulty obtaining land-use entitlements or construction financing; natural disasters and other unforeseen events for which our insurance does not provide adequate coverage; new laws or regulatory changes that adversely affect the profitability of our businesses; our inability to refinance our debt on terms that are as favorable as our current arrangements; and changes in accounting conventions that adversely affect our reported earnings. Please see our Form 10-K for the fiscal year endedNovember 30, 2021 and our other filings with theSEC for a further discussion of these and other risks and uncertainties which could affect our future results. We undertake no obligation, other than those imposed by securities laws, to publicly revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events. 27 --------------------------------------------------------------------------------
Outlook
Our second quarter results demonstrated strength and excellent performance throughout the quarter. However, the weight of a rapid doubling of interest rates over six months, together with accelerated price appreciation, began to drive buyers in many markets to pause and reconsider. We began to see these effects after quarter end. Despite the pause, demand remains reasonably strong as household formation has continued to rise and buyers still have down payments and are able to qualify for mortgages. Buyers are seeking shelter and protection against inflationary pressures as scarcity of rentals drives rents higher. Owning a home with a fixed rate mortgage provides protection against annual or biennial rent increases. Although we have adjusted downward prices in some markets, even those prices remain higher than a year ago. Supply remains limited across the country and the need for affordable workforce housing continues to be at crisis levels. Production must catch up to the growing household numbers as production of dwellings over the past decade has lagged prior decades by as many as five million homes. Although market conditions in some markets are no longer as positive as they had been, indicators that this would happen have been building since theFederal Reserve's tightening began. Given theFederal Reserve's expressed commitment to combat inflation, we can expect continued market tightening until inflation subsides. We are focused on making the changes that are necessary to stay ahead of the trend. So far in June, new orders and traffic have weakened in many of our markets due to a rapid spike in mortgage rates and headwinds from negative economic headlines. Many markets have also slowed because we have entered the seasonably slower part of the year. To maintain sales momentum, we have offered mortgage buy down programs and increased sales incentives. We have adjusted prices in various communities to the levels that are necessary to maintain reasonable sales volumes. Our price reductions have led to sales upticks, which leads us to believe there is still underlying strength in the market. With respect to our financial services business, the mortgage market has become extraordinarily competitive as refinancings have all but halted and sales of previously owned homes have declined. As a result, margins on sales of mortgages into the secondary market have been decreasing. Although deliveries have been constrained by supply chain disruptions and an increase in labor costs, for the first time since the supply disruptions began, we saw a flattening in cycle time - the time it takes us to build a home increased by only five days over the past four months. This may signal that supply chain problems have peaked. But it also is because we and our suppliers have become much better at managing supply problems. The pace at which we are starting new homes has been constrained by delays in getting permits. We are matching our sales to our starts, rather than trying to match our starts to what we can sell. We continue to strategically acquire land, primarily through options. This continues our land-light strategy as our percentage of homesites controlled increased byMay 31, 2022 to 62% from 50% in the prior year, while our years' supply of land owned decreased to 3.1 years as compared to 3.3 years last year. We are also continuing to pay down debt as it comes due, with the next tranche maturing inNovember 2022 , and we are continuing to repurchase our stock. Our playbook going forward will be to use our dynamic pricing model week by week to price products to current market conditions in order to maximize pricing and margin while we maintain a carefully limited inventory level. We continue to sell our homes later in the construction cycle to maximize prices and reduce the likelihood of costs increasing after we commit to sales prices. We will continue to build and to adjust prices in order to fill the housing shortage and provide much-needed workforce housing across markets. We will continue to work to improve our SG&A leverage and we expect to drive efficiencies through technology and process improvement to offset market adjustments. We will continue to focus on cash flow and our bottom line to protect and enhance our already strong balance sheet. Finally, we expect to conclude our long-planned spin-off by year end. We have formed a company, namedQuarterra Group , In. ("Quarterra"), which will have three asset management verticals - multifamily residential, single family for rent and land banking and similar land finance strategies. When it is spun off, Quarterra will remove$2.5 billion of assets from our balance sheet, without materially affecting our earnings. We believe we are well positioned financially, organizationally and technologically to thrive in this evolving housing market. We recognize that interest rates are rising and inflation continues to be a significant headwind. It is difficult to provide the more targeted guidance that we typically offer given the uncertainty about market conditions, so we are providing broader than normal ranges in our guidance for our third quarter. We expect our new orders for the third quarter of 2022 to be in the range of 16,000 to 18,000 homes, and we anticipate our third quarter deliveries to be in the range of 17,000 to 18,500 homes. We expect gross margins to be in the range of 28.5% to 29.5, and we expect our SG&A as a percentage of home sale revenues to be between 6.0% and 6.5%. We believe we are still on track to reach our goal of 2.75 years' land owned and 65% homesites controlled by year-end. As we look to the remainder of 2022, we recognize that there are challenges in the market to which we must pay careful attention. But there are also opportunities. We look forward to meeting the challenges and taking advantage of the opportunities to make Lennar an even stronger company in the future. 28 --------------------------------------------------------------------------------
(1) Operating results
Insight
We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three and six months endedMay 31, 2022 are not necessarily indicative of the results to be expected for the full year. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second and third fiscal quarters and increased deliveries in the second half of our fiscal year. However, a variety of factors can alter seasonal patterns. Our net earnings attributable to Lennar were$1.3 billion , or$4.49 per diluted share ($4.50 per basic share), in the second quarter of 2022, compared to net earnings attributable to Lennar of$831.4 million , or$2.65 per diluted share ($2.66 per basic share), in the second quarter of 2021. Results included unrealized mark-to-market losses of$78 million in the second quarter of 2022 and unrealized mark-to-market gains of$272.6 million in the second quarter of 2021 on our publicly traded technology investments. Excluding mark-to-market losses on technology investments in both years and a gain on the sale of our residential solar business in the prior year, second quarter net earnings attributable to Lennar in 2022 were$1.4 billion , or$4.69 per diluted share, compared to second quarter net earnings attributable to Lennar in 2021 of$923.6 million , or$2.95 per diluted share.
The financial information relating to our operations was as follows:
Three Months Ended May 31, 2022 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 7,963,683 - - - - 7,963,683 Sales of land 7,524 - - - - 7,524 Other revenues 6,775 200,166 176,021 4,527 - 387,489 Total revenues 7,977,982 200,166 176,021 4,527 - 8,358,696 Costs and expenses: Costs of homes sold 5,610,783 - - - - 5,610,783 Costs of land sold 7,815 - - - - 7,815 Selling, general and administrative expenses 486,555 - - - -
486 555
Other costs and expenses - 96,231 175,152 8,236 - 279,619 Total costs and expenses 6,105,153 96,231 175,152 8,236 - 6,384,772 Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) 4,862 - (201) (26,750) - (22,089) Other income, net 2,720 - - - - 2,720 Lennar Other unrealized losses from technology investments - - - (77,965) - (77,965) Operating earnings (loss)$ 1,880,411 103,935 668 (108,424) - 1,876,590 Corporate general and administrative expenses - - - - 105,207
105 207
Charitable foundation contribution - - - - 16,549
16,549
Earnings (loss) before income taxes$ 1,880,411 103,935 668 (108,424) (121,756) 1,754,834 29
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Three Months Ended May 31, 2021
(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total
Revenues:
Sales of homes $ 5,980,731 - - - - 5,980,731
Sales of land 38,785 - - - - 38,785
Other revenues 8,525 218,747 177,473 5,984 - 410,729
Total revenues 6,028,041 218,747 177,473 5,984 - 6,430,245
Costs and expenses:
Costs of homes sold 4,421,373 - - - - 4,421,373
Costs of land sold 32,979 - - - - 32,979
Selling, general and administrative
expenses 455,164 - - - -
455 164
Other costs and expenses - 97,427 168,930 5,732 - 272,089 Total costs and expenses 4,909,516 97,427 168,930 5,732 - 5,181,605 Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (1,688) - 13,854 218,276 - 230,442 Other expense, net (4,362) - - - - (4,362) Lennar Other unrealized losses from technology investments - - - (272,625) -
(272,625)
Operating earnings (loss)$ 1,112,475 121,320 22,397 (54,097) - 1,202,095 Corporate general and administrative expenses - - - - 90,717 90,717 Charitable foundation contribution - - - - 14,493 14,493 Earnings (loss) before income taxes$ 1,112,475 121,320 22,397 (54,097) (105,210) 1,096,885 (1) During the three months endedMay 31, 2021 , our Lennar Other segment realized a gain of$151.5 million on the sale of our residential solar business. Six Months Ended May 31, 2022 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 13,685,440 - - - - 13,685,440 Sales of land 31,491 - - - - 31,491 Other revenues (1) 13,256 376,867 443,380 11,778 - 845,281 Total revenues 13,730,187 376,867 443,380 11,778 - 14,562,212 Costs and expenses: Costs of homes sold 9,795,647 - - - - 9,795,647 Costs of land sold 36,371 - - - - 36,371 Selling, general and administrative expenses 915,033 - - - - 915,033 Other costs and expenses - 182,141 438,889 13,643 - 634,673 Total costs and expenses 10,747,051 182,141 438,889 13,643 - 11,381,724 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) 4,576 - 1,604 (36,558) - (30,378) Other expense, net 2,549 - - - - 2,549 Lennar Other unrealized losses from technology investments - - - (473,135) - (473,135) Operating earnings (loss)$ 2,990,261 194,726 6,095 (511,558) - 2,679,524 Corporate general and administrative expenses - - - - 218,868 218,868 Charitable foundation contribution - - - - 29,087 29,087 Earnings (loss) before income taxes$ 2,990,261 194,726 6,095 (511,558) (247,955) 2,431,569
(1) During the six months ended
30
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Six Months Ended May 31, 2021
(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total
Revenues:
Sales of homes $ 10,871,645 - - - - 10,871,645
Sales of land 86,428 - - - - 86,428
Other revenues 13,024 462,816 308,916 12,884 - 797,640
Total revenues 10,971,097 462,816 308,916 12,884 - 11,755,713
Homebuilding costs and expenses:
Costs of homes sold 8,088,235 - - - - 8,088,235
Costs of land sold 74,167 - - - - 74,167
Selling, general and administrative 865,400 - - - -
865,400
Other costs and expenses - 195,289 299,979 9,984 505,252 Total costs and expenses 9,027,802 195,289 299,979 9,984 - 9,533,054 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (6,253) - 12,586 217,229 - 223,562 Other income, net 8,613 - - - 8,613 Lennar Other unrealized losses from technology investments - - - 197,120 -
197 120
Operating earnings$ 1,945,655 267,527 21,523 417,249 - 2,651,954 Corporate general and administrative expenses - - - - 201,248
201 248
Charitable foundation contribution $ - - - - 26,807 26,807 Earnings (loss) before income taxes$ 1,945,655 267,527 21,523 417,249 (228,055) 2,423,899
(1) During the six months ended
Three months completed
Revenues from home sales increased 33% in the second quarter of 2022 to$8.0 billion from$6.0 billion in the second quarter of 2021. Revenues were higher primarily due to a 14% increase in the number of home deliveries to 16,549 homes from 14,493 homes and a 17% increase in the average sales price to$483,000 from$414,000 . Gross margin on home sales were$2.4 billion , or 29.5%, in the second quarter of 2022, compared to$1.6 billion , or 26.1%, in the second quarter of 2021. During the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt. Selling, general and administrative expenses were$486.6 million in the second quarter of 2022, compared to$455.2 million in the second quarter of 2021. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.1% in the second quarter of 2022, from 7.6% in the second quarter of 2021. This was the lowest percentage for a second quarter in our history primarily due to a decrease in broker commissions and the benefits of our technology efforts. Operating earnings for our Financial Services segment were$103.9 million in the second quarter of 2022, compared to$121.3 million in the second quarter of 2021. The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market, partially offset by an increase in rate lock volume and an increase in profit per order in our title business. Operating earnings for our Multifamily segment were$0.7 million in the second quarter of 2022, compared to$22.4 million in the second quarter of 2021. Operating loss for our Lennar Other segment was$108.4 million in the second quarter of 2022, compared to$54.1 million in the second quarter of 2021. Lennar Other operating loss in the second quarter of 2022 was primarily due to mark-to-market losses on our publicly traded technology investments. Lennar Other operating loss in the second quarter of 2021 was primarily due to mark-to-market losses on our publicly traded technology investments, partially offset by the gain on the sale of our residential solar business. 31 --------------------------------------------------------------------------------
Semester completed
Revenues from home sales increased 26% in the six months endedMay 31, 2022 to$13.7 billion from$10.9 billion in the six months endedMay 31, 2021 . Revenues were higher primarily due to a 9% increase in the number of home deliveries to 29,087 from 26,807 and a 16% increase in the average sales price to$472,000 from$406,000 . Gross margin on home sales were$3.9 billion , or 28.4%, in the six months endedMay 31, 2022 , compared to$2.8 billion , or 25.6%, in the six months endedMay 31, 2021 . During the six months endedMay 31, 2022 , an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt. Selling, general and administrative expenses were$915.0 million in the six months endedMay 31, 2022 , compared to$865.4 million in the six months endedMay 31, 2021 . As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.7% in the six months endedMay 31, 2022 , from 8.0% in the six months endedMay 31, 2021 . The improvement was primarily due to a decrease in broker commissions and the benefits of our technology efforts.
Operating profit from our financial services segment was
Operating earnings for our Multifamily segment were$6.1 million in the six months endedMay 31, 2022 , compared to$21.5 million in the six months endedMay 31, 2021 . Operating loss for our Lennar Other segment was$511.6 million in the six months endedMay 31, 2022 , compared to operating earnings of$417.2 million in the six months endedMay 31, 2021 . Lennar Other operating loss for the six months endedMay 31, 2022 was primarily due to mark-to-market losses on our publicly traded technology investments. Lennar Other operating earnings for the six months endedMay 31, 2021 was primarily due to mark-to-market unrealized gains on our publicly traded technology investments and the gain on the sale of our residential solar business. For the six months endedMay 31, 2022 and 2021, we had a tax provision of$599.7 million and$570.2 million , respectively, which resulted in an overall effective income tax rate of 24.7% and 23.7%, respectively. The overall effective income tax rate was higher in 2022 primarily due to the expiration of the new energy efficient home tax credit. 32 --------------------------------------------------------------------------------
Residential building segments
AtMay 31, 2022 , our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements. The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated:
Selected financial and operational data
Three Months Ended May 31, 2022
Gross Margins Operating Earnings (Loss)
Gross Margins Equity in Earnings
Sales of Homes Costs of Sales of Gross Margin Net Margins on (Loss) on (Loss) from Other Income Operating Earnings
($ in thousands) Revenue Homes % Sales of Homes (1) Sales of Land Other Revenue Unconsolidated Entities (Expense), net (Loss)
East $ 2,209,967 1,510,758 31.6 % 546,589 (619) 1,195 (659) 7,313 553,819
Central 1,283,763 981,832 23.5 % 206,893 - 226 302 (626) 206,795
Texas 1,093,533 747,861 31.6 % 272,934 473 255 - (805) 272,857
West 3,367,261 2,360,554 29.9 % 846,340 (145) 678 2,571 (1,595) 847,849
Other (2) 9,159 9,778 (6.8) % (6,411) - 4,421 2,648 (1,567) (909)
Totals $ 7,963,683 5,610,783 29.5 % 1,866,345 (291) 6,775 4,862 2,720 1,880,411
Three Months Ended May 31, 2021
Gross Margins Operating Earnings (Loss)
Equity in Earnings
Sales of Homes Costs of Sales of Net Margins on Gross Margins on (Loss) from Other Income Operating Earnings
($ in thousands) Revenue Homes Gross Margin % Sales of Homes (1) Sales of Land Other Revenue Unconsolidated Entities (Expense), net (Loss)
East $ 1,551,030 1,115,010 28.1 % 307,978 1,335 1,768 (59) (1,195) 309,827
Central 1,093,190 846,427 22.6 % 157,429 774 579 317 (51) 159,048
Texas 790,391 551,067 30.3 % 173,803 1,837 562 387 (532) 176,057
West 2,543,263 1,893,148 25.6 % 491,223 1,860 1,311 (921) (662) 492,811
Other (2) 2,857 15,721 (450.3) % (26,239) - 4,305 (1,412) (1,922) (25,268)
Totals $ 5,980,731 4,421,373 26.1 % 1,104,194 5,806 8,525 (1,688) (4,362) 1,112,475
Six Months Ended May 31, 2022
Gross Margins Operating Earnings (Loss)
Equity in Earnings
Sales of Homes Costs of Sales of Net Margins on Gross Margins (Loss) (Loss) from Other Income Operating Earnings
($ in thousands) Revenue Homes Gross Margin % Sales of Homes (1) on Sales of Land Other Revenue Unconsolidated Entities (Expense), net (Loss)
East $ 3,872,958 2,687,311 30.6 % 898,143 (6,293) 1,992 (2,017) 13,989 905,814
Central 2,389,693 1,852,445 22.5 % 357,268 1,619 460 431 (905) 358,873
Texas 1,899,163 1,321,703 30.4 % 442,875 2,871 497 - (2,074) 444,169
West 5,509,465 3,918,290 28.9 % 1,290,864 (984) 1,559 2,707 (4,849) 1,289,297
Other (2) 14,161 15,898 (12.3) % (14,390) (2,093) 8,748 3,455 (3,612) (7,892)
Totals $ 13,685,440 9,795,647 28.4 % 2,974,760 (4,880) 13,256 4,576 2,549 2,990,261
Six Months Ended May 31, 2021
Gross Margins Operating Earnings (Loss)
Equity in Earnings
Sales of Homes Costs of Sales of Net Margins on Gross Margins on (Loss) from Other Income Operating Earnings
($ in thousands) Revenue Homes Gross Margin % Sales of Homes (1) Sales of Land Other Revenue Unconsolidated Entities (Expense), net (Loss)
East $ 2,898,641 2,103,873 27.4 % 549,512 6,411 3,186 (551) 13,352 571,910
Central 2,019,628 1,559,973 22.8 % 289,528 751 984 415 (607) 291,071
Texas 1,426,801 1,002,264 29.8 % 302,964 2,871 820 541 (1,496) 305,700
West 4,520,071 3,400,875 24.8 % 809,213 2,228 2,361 41 674 814,517
Other (2) 6,504 21,250 (226.7) % (33,207) - 5,673 (6,699) (3,310) (37,543)
Totals $ 10,871,645 8,088,235 25.6 % 1,918,010 12,261 13,024 (6,253) 8,613 1,945,655
(1)Net margins on sales of homes include selling, general and administrative
expenses.
(2)Negative gross and net margins were due to period costs and impairments in
Urban divisions that impact costs of homes sold without sufficient sales of
homes revenue to offset those costs.
33
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Summary of Homebuilding Data
Deliveries:
Three Months Ended
Homes Dollar Value (In thousands) Average Sales Price
May 31, May 31, May 31,
2022 2021 2022 2021 2022 2021
East 5,198 4,480 $ 2,225,725 1,560,934 $ 428,000 348,000
Central 2,944 2,761 1,283,763 1,093,190 436,000 396,000
Texas 3,288 2,747 1,093,533 790,391 333,000 288,000
West 5,110 4,502 3,367,261 2,543,263 659,000 565,000
Other 9 3 9,159 2,857 1,018,000 952,000
Total 16,549 14,493 $ 7,979,441 5,990,635 $ 483,000 414,000
Of the total homes delivered listed above, 44 homes with a dollar value of $15.8
million and an average sales price of $358,000 represent home deliveries from
unconsolidated entities for the three months ended May 31, 2022 , compared to 31
home deliveries with a dollar value of $9.9 million and an average sales price
of $319,000 for the three months ended May 31, 2021 .
Six Months Ended
Homes Dollar Value (In thousands) Average Sales Price
May 31, May 31, May 31,
2022 2021 2022 2021 2022 2021
East 9,280 8,400 $ 3,898,097 2,912,235 $ 420,000 347,000
Central 5,465 5,180 2,389,692 2,019,628 437,000 390,000
Texas 5,825 5,096 1,899,163 1,426,802 326,000 280,000
West 8,502 8,124 5,509,465 4,520,071 648,000 556,000
Other 15 7 14,161 6,504 944,000 929,000
Total 29,087 26,807 $ 13,710,578 10,885,240 $ 472,000 406,000
Of the total homes delivered listed above, 69 homes with a dollar value of $25.1
million and an average sales price of $364,000 represent home deliveries from
unconsolidated entities for the six months ended May 31, 2022 , compared to 43
home deliveries with a dollar value of $13.6 million and an average sales price
of $316,000 for the six months ended May 31, 2021 .
34
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New orders (1):
Three Months Ended
Active Communities Homes Dollar Value (In thousands) Average Sales Price
May 31, May 31, May 31, May 31,
2022 2021 2022 2021 2022 2021 2022 2021
East 354 351 5,973 5,351 $ 2,753,770 1,987,929 $ 461,000 372,000
Central 315 297 3,576 3,416 1,663,354 1,399,730 465,000 410,000
Texas 205 232 3,375 3,250 1,189,263 1,000,013 352,000 308,000
West 348 342 4,858 5,135 3,482,679 3,172,569 717,000 618,000
Other 3 3 10 5 9,203 5,146 920,000 1,029,000
Total 1,225 1,225 17,792 17,157 $ 9,098,269 7,565,387 $ 511,000 441,000
Of the total homes listed above, 60 homes with a dollar value of $30.8 million
and an average sales price of $514,000 represent homes in seven active
communities from unconsolidated entities for the three months ended May 31,
2022 , compared to 32 homes with a dollar value of $9.9 million and an average
sales price of $373,000 in four active communities for the three months ended
May 31, 2021 .
Six Months Ended
Homes Dollar Value (In thousands) Average Sales Price
May 31, May 31, May 31,
2022 2021 2022 2021 2022 2021
East 10,883 10,165 $ 4,886,826 3,688,041 $ 449,000 363,000
Central 6,688 6,742 3,065,492 2,733,356 458,000 405,000
Texas 6,141 6,025 2,111,048 1,812,182 344,000 301,000
West 9,812 9,787 6,818,611 5,864,964 695,000 599,000
Other 15 8 13,831 8,121 922,000 1,015,000
Total 33,539 32,727 $ 16,895,808 14,106,664 $ 504,000 431,000
Of the total new orders listed above, 104 homes with a dollar value of $48.2
million and an average sales price of $463,000 represent new orders from
unconsolidated entities for the six months ended May 31, 2022 , compared to 67
new orders with a dollar value of $23.5 million and an average sales price of
$351,000 for the six months ended May 31, 2021 .
(1)Homes represent the number of new sales contracts executed with homebuyers,
net of cancellations, during the three and six months ended May 31, 2022 and
2021.
Backlog:
At
Homes Dollar Value (In thousands) Average Sales Price
May 31, May 31, May 31,
2022 2021 2022 2021 2022 2021
East 9,882 7,778 $ 4,566,295 3,086,740 $ 462,000 397,000
Central 6,381 5,933 3,010,596 2,475,900 472,000 417,000
Texas 4,582 3,752 1,665,155 1,209,965 363,000 322,000
West 7,775 7,275 5,444,307 4,258,324 700,000 585,000
Other 4 3 3,611 3,465 903,000 1,155,000
Total 28,624 24,741 $ 14,689,964 11,034,394 $ 513,000 446,000
Of the total homes in backlog listed above, 114 homes with a backlog dollar
value of $51.7 million and an average sales price of $453,000 represent the
backlog from unconsolidated entities at May 31, 2022 , compared to 62 homes with
a backlog dollar value of $21.4 million and an average sales price of $345,000
at May 31, 2021 . During the six months ended May 31, 2022 , we acquired 347 homes
and 54 homes in backlog in the East and Central Homebuilding segment,
respectively.
Backlog represents the number of homes under sales contracts. Homes are sold
using sales contracts, which are generally accompanied by sales deposits. In
some instances, purchasers are permitted to cancel sales if they fail to qualify
for financing or under certain other circumstances. Various state and federal
laws and regulations may sometimes give purchasers a right to cancel homes in
backlog. We do not recognize revenue on homes under sales contracts until the
sales are closed and title passes to the new homeowners.
Three months completed
Homebuilding East: Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except inNew Jersey and an increase in the average sales price of homes delivered in all the states of the segment. The increase in the number of home deliveries was primarily driven by an increase in the number of active communities. The decrease in the number of home deliveries inNew Jersey was primarily due to a decrease in the number of active communities due to the timing of opening and 35 -------------------------------------------------------------------------------- closing of communities as a result of supply chain disruptions. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. In the second quarter of 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat. Homebuilding Central: Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except inNorth Carolina andVirginia , and an increase in the average sales price of homes delivered in all the states in the segment except inGeorgia ,Maryland andTennessee . The increase in the number of home deliveries was primarily driven by an increase in active communities. The decrease in the number of home deliveries inNorth Carolina andVirginia was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered inGeorgia ,Maryland andTennessee was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. In the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat. Homebuilding Texas: Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries and an increase in the average sales price of homes delivered. The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. In the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat. Homebuilding West: Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except inUtah , and an increase in the average sales price of homes delivered in all the states in the segment. The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year. The decrease in the number of home deliveries inUtah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. In the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.
Semester completed
Homebuilding East: Revenues from home sales increased in the six months endedMay 31, 2022 compared to the six months endedMay 31, 2021 , primarily due to an increase in the number of home deliveries and an increase the average sales price of homes delivered in all the states in the segment. The increase in the number of home deliveries was primarily driven by an increase in the number of active communities. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. In the six months endedMay 31, 2022 , an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat. Homebuilding Central: Revenues from home sales increased in the six months endedMay 31, 2022 compared to the six months endedMay 31, 2021 , primarily due to an increase in the number of home deliveries in all the states in the segment except inNorth Carolina andVirginia , and an increase in the average sales price of homes delivered in all the states of the segment except inGeorgia andTennessee . The increase in the number of home deliveries was primarily driven by an increase in active communities. The decrease in the number of home deliveries inNorth Carolina andVirginia was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered inGeorgia andTennessee was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. In the six months endedMay 31, 2022 , an increase in revenues per square foot was less than offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margin percentage on home deliveries was slightly down year over year while land costs remained relatively flat. Homebuilding Texas: Revenues from home sales increased in the six months endedMay 31, 2022 compared to the six months endedMay 31, 2021 , primarily due to an increase in the number of home deliveries and an increase in the average sales price of homes delivered. The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year. The increase in the average sales price of homes delivered was primarily due 36 --------------------------------------------------------------------------------
at favorable market conditions. In the six months ended
Homebuilding West: Revenues from home sales increased in the six months endedMay 31, 2022 compared to the six months endedMay 31, 2021 , primarily due to an increase in the number of home deliveries in all the states in the segment except inArizona ,Nevada andUtah , and an increase in the average sales price of homes delivered in all the states in the segment. The decrease in the number of home deliveries inArizona ,Nevada andUtah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. In the six months endedMay 31, 2022 , an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.
Financial services sector
Our Financial Services reportable segment provides mortgage financing, title and closing services primarily for buyers of our homes. The segment also originates and sells into securitizations commercial mortgage loans through itsLMF Commercial business. Our Financial Services segment sells substantially all of the residential loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a servicing released, non-recourse basis. After the loans are sold, we retain potential liability for possible claims by purchasers that we breached certain limited industry-standard representations and warranties in the loan sale agreements. The following table sets forth selected financial and operational information related to the residential mortgage and title activities of our Financial Services segment: Three Months Ended Six Months Ended May 31, May 31, (Dollars in thousands) 2022 2021 2022 2021 Dollar value of mortgages originated$ 3,507,000 3,186,000 6,267,000 5,947,000 Number of mortgages originated 9,200 9,500 16,500 17,900 Mortgage capture rate of Lennar homebuyers 69 % 74 % 71 % 75 % Number of title and closing service transactions 17,400 17,100 31,100 32,100 AtMay 31, 2022 andNovember 30, 2021 , the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was$155.8 million and$157.8 million , respectively. Details of these securities and related debt are within Note 2 of the Notes to Condensed Consolidated Financial Statements.
Multi-family segment
We have been actively involved, primarily through unconsolidated funds and joint ventures, in the development, construction and property management of multifamily rental properties. Our Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in selectU.S. markets. The following tables provide information related to our investment in the Multifamily segment: Balance Sheets (In thousands) May 31, 2022 November 30, 2021 Multifamily investments in unconsolidated entities$ 638,559 654,029 Lennar's net investment in Multifamily 934,022 976,676 Statement of Operations Three Months Ended Six Months Ended May 31, May 31, (Dollars in thousands) 2022 2021 2022 2021
Number of operating/investment properties sold through joint ventures
- 1 - 1
Lennar's share of gains on the sale of operating
properties/investments $ - 14,784 - 14,784
37
--------------------------------------------------------------------------------
Lennar Other Segment
Lennar Other primarily includes strategic investments in technology companies, primarily managed by our LENX subsidiary, and fund interests we retained when we sold theRialto Capital Management ("Rialto") asset and investment management platform in 2018. AtMay 31, 2022 andNovember 30, 2021 , we had$1.0 billion and$1.5 billion , respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of$325.3 million and$346.3 million , respectively. The investments in equity securities ofBlend Labs, Inc. ("Blend Labs "), Hippo Holdings, Inc. ("Hippo"),Opendoor, Inc. ("Opendoor"), SmartRent, Inc. ("SmartRent"), Sonder Holdings, Inc. ("Sonder"), and Sunnova Energy International, Inc. ("Sunnova") are held at market and will therefore change depending on the value of our share holdings in those entities on the last day of each quarter. The following is a detail of Lennar Other unrealized gains (losses) from technology investments: Three Months Ended Six Months Ended May 31, May 31, (In thousands) 2022 2021 2022 2021 Blend Labs (BLND) mark-to-market$ (13,550) - (20,992) - Hippo (HIPO) mark-to-market (37,946) - (162,403) - Opendoor (OPEN) mark-to-market (20,999) (234,290) (164,360) 235,455 SmartRent (SMRT) mark-to-market (3,950) - (48,313) - Sonder (SOND) mark-to-market (1,626) - (2,132) - Sunnova (NOVA) mark-to-market 106 (38,335) (74,935) (38,335) Lennar Other unrealized gains (losses) from technology investments$ (77,965) (272,625) (473,135) 197,120
(2) Financial position and capital resources
AtMay 31, 2022 , we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of$1.6 billion , compared to$3.0 billion atNovember 30, 2021 and$2.8 billion atMay 31, 2021 . We finance all of our activities, including homebuilding, financial services, multifamily, other and general operating needs, primarily with cash generated from our operations, debt issuances and cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility (the "Credit Facility"). AtMay 31, 2022 , we had$1.3 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our$2.575 billion revolving credit facility, thereby providing$3.9 billion of available capacity.
Operating cash activities
During the six months endedMay 31, 2022 and 2021, cash provided by operating activities totaled$53 million and$718 million , respectively. During the six months endedMay 31, 2022 , cash provided by operating activities was impacted primarily by our net earnings, gross of Lennar Other mark-to-market loss on our publicly trade technology investments and other loss of$483 million , a decrease in loans held-for-sale of$336 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of$277 million and a decrease in receivables of$126 million primarily related to a decrease in Financial Services' receivables, net, which are loans sold to investors for which we have not been paid. This was partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of$3.1 billion . During the six months endedMay 31, 2021 , cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of$444 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of$185 million , and a decrease in receivables of$118 million , partially offset by an increase in inventories due to strategic land purchases, and land development and construction costs of$1.6 billion .
Investing Cash Flow Activities
During the six months endedMay 31, 2022 and 2021, cash used in investing activities totaled$65 million and$50 million , respectively. During the six months endedMay 31, 2022 , our cash used in investing activities was primarily due to cash contributions of$261 million to unconsolidated entities, which included (1)$197 million to Homebuilding unconsolidated entities (2)$53 million to Lennar Other unconsolidated entities and (3)$11 million to Multifamily unconsolidated entities. In addition, we had$79 million of purchases of investment securities related to strategic technology investments included in the Lennar Other segment. This was partially offset by distributions of capital from unconsolidated entities of$239 million , which primarily included (1)$156 million from Multifamily unconsolidated entities, (2)$67 million from Homebuilding unconsolidated entities, and (3)$16 million from our Lennar Other unconsolidated entities. 38 -------------------------------------------------------------------------------- During the six months endedMay 31, 2021 , our cash used in investing activities was primarily due to cash contributions of$282 million to unconsolidated entities, which included (1)$178.6 million to Homebuilding unconsolidated entities, (2)$57.8 million to Multifamily unconsolidated entities, and (3)$45.8 million to the strategic technology investments included in the Lennar Other segment. This was partially offset by distributions of capital from unconsolidated entities of$231.5 million , which primarily included (1)$134.2 million from Homebuilding unconsolidated entities, (2)$80.1 million from Multifamily unconsolidated entities, and (3)$17.2 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment.
Financing of treasury activities
During the six months endedMay 31, 2022 and 2021, cash used in financing activities totaled$1.4 billion and$818 million , respectively. During the six months endedMay 31, 2022 , cash used in financing activities was primarily due to (1)$404 million of net repayments under our Financial Services' warehouse facilities, which included theLMF Commercial warehouse repurchase facilities; (2)$906 million of repurchases of our common stock, which included$847 million of repurchases under our repurchase program and$58 million of repurchases related to our equity compensation plan; and (3)$221 million of dividend payments. These were partially offset by$210 million of net proceeds from liabilities related to consolidated inventory not owned due to activity with land banks. During the six months endedMay 31, 2021 , cash used in financing activities was primarily impacted by (1)$535.7 million of net repayments under our Financial Services' warehouse facilities, which included theLMF Commercial warehouse repurchase facilities; (2)$156.3 million of dividend payments; and (3) repurchases of our common stock for$173.6 million , which included$141.6 million of repurchases under our repurchase program and$32.1 million of repurchases related to our equity compensation plan. These were partially offset by$301.9 million of proceeds from liabilities related to consolidated inventory not owned due to land sales to land banks. Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our homebuilding operations. Homebuilding debt to total capital and net Homebuilding debt to total capital are calculated as follows: (Dollars in thousands) May 31, 2022 November 30, 2021 May 31, 2021 Homebuilding debt$ 4,645,791 4,652,338 5,894,342 Stockholders' equity 21,598,255 20,816,425 19,576,108 Total capital$ 26,244,046 25,468,763 25,470,450 Homebuilding debt to total capital 17.7 % 18.3 % 23.1 % Homebuilding debt$ 4,645,791 4,652,338 5,894,342 Less: Homebuilding cash and cash equivalents 1,314,741 2,735,213 2,581,583 Net Homebuilding debt$ 3,331,050 1,917,125 3,312,759 Net Homebuilding debt to total capital (1) 13.4 % 8.4 % 14.5 % (1)Net homebuilding debt to total capital is a non-GAAP financial measure defined as net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity). We believe the ratio of net homebuilding debt to total capital is a relevant and a useful financial measure to investors in understanding the leverage employed in homebuilding operations. However, because net homebuilding debt to total capital is not calculated in accordance with GAAP, this financial measure should not be considered in isolation or as an alternative to financial measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement our GAAP results. AtMay 31, 2022 , Homebuilding debt to total capital was lower compared toNovember 30, 2021 , primarily as a result of an increase in stockholders' equity due to net earnings, partially offset by share repurchases. AtMay 31, 2022 , Homebuilding debt to total capital was lower compared toMay 31, 2021 , primarily as a result of a decrease in Homebuilding debt due to debt pay downs and an increase in stockholders' equity due to net earnings, partially offset by share repurchases. We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings. These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives. In connection with some of our non-homebuilding businesses, we are also considering other types of transactions such as sales, restructurings, joint ventures, spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company. We have announced an intention to spin-off to our stockholders our asset management businesses (Lennar Multifamily and Lennar Single Family Rental) and some of our other non-core assets. We expect the spin-off to take place by the end of 2022. 39 -------------------------------------------------------------------------------- Our Homebuilding senior notes and other debts payable as well as letters of credit and surety bonds are summarized within Note 7 of the Notes to Condensed Consolidated Financial Statements. Our Homebuilding average debt outstanding and the average rates of interest was as follows: Six Months Ended May 31, (Dollars in thousands) 2022 2021 Homebuilding average debt outstanding$ 5,087,360 $ 5,981,490 Average interest rate 4.6 % 4.9 % Interest incurred$ 121,732 142,517 InMay 2022 , we amended the credit agreement governing our unsecured revolving credit facility (the "Credit Facility") to increase the commitment from$2.5 billion to$2.575 billion and extended the maturity toMay 2027 , except for$350 million which matures inApril 2024 . The Credit Facility has a$425 million accordion feature, subject to additional commitments, thus the maximum borrowings are$3.0 billion . The proceeds available under the Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes. The credit agreement also provides that up to$500 million in commitments may be used for letters of credit. Under our Credit Facility agreement, we are required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio. These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures. We believe we were in compliance with our debt covenants as ofMay 31, 2022 . The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Facility agreement as ofMay 31, 2022 : Level Achieved as of (Dollars in thousands) Covenant Level May 31, 2022 Minimum net worth test$ 10,919,391 15,123,049 Maximum leverage ratio 65.0 % 19.5 % Liquidity test 1.00 15.15
Financial Services Warehouses
Our 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 us and are expected to be renewed or replaced with other facilities when they mature. TheLMF Commercial facilities financeLMF Commercial loan origination and securitization activities and were secured by up to an 80% interest in the originated commercial loans financed. These facilities and the related borrowings and collateral are detailed in Note 2 of the Notes to Condensed Consolidated Financial Statements.
Changes in capital structure
InOctober 2021 , the Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to the lesser of an additional$1 billion in value, or 25 million in shares, of our outstanding Class A or Class B common stock. As a result of prior authorizations being almost exhausted, inMarch 2022 , our Board of Directors approved an additional authorization for us to repurchase up to the lesser of$2 billion in value, or 30 million in shares, of our outstanding Class A or Class B common stock. The repurchase authorization has no expiration date. The details of our Class A and Class B common stock repurchases under the authorized repurchase programs for the three and six months endedMay 31, 2022 and 2021 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements. During the six months endedMay 31, 2022 , treasury stock decreased due to our retirement of 46.7 million and 2.8 million treasury shares of Class A and Class B common stock, respectively, as authorized by our Board of Directors. The retirement of Class A and Class B common stock in treasury resulted in a reclass between treasury shares and additional paid-in capital within stockholders' equity. This decrease in treasury shares was partially offset by our repurchase of 8.2 million and 1.1 million shares of Class A and Class B common stock, respectively, through our stock repurchase program. During the six months endedMay 31, 2021 , treasury shares increased due to our repurchase of 1.9 million shares of Class A and Class B common stock primarily due to our repurchase of 1.5 million shares of Class A and Class B common stock through our stock repurchase program. OnJune 22, 2022 , our Board of Directors declared a quarterly cash dividend of$0.375 per share on both our Class A and Class B common stock, payable onJuly 21, 2022 to holders of record at the close of business onJuly 7, 2022 . OnMay 10, 2022 , we paid cash dividends of$0.375 per share on both our Class A and Class B common stock to holders of record at the close of business onApril 26, 2022 , as declared by our Board of Directors onApril 12, 2022 . We approved and paid cash dividends of$0.250 per share for each of the four quarters of 2021 on both its Class A and Class B common stock. 40 -------------------------------------------------------------------------------- Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity.
Additional financial information
Currently, certain of our wholly-owned subsidiaries, which are primarily residential construction subsidiaries, guarantee all of our senior obligations. The guarantees are complete and unconditional.
The indentures governing our senior notes require that, if any of our 100% owned subsidiaries, other than our finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least$75 million principal amount of debt ofLennar Corporation (other than senior notes), those subsidiaries must also guaranteeLennar Corporation's obligations with regard to its senior notes. Included in the following tables as part of "Obligors" together withLennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because atMay 31, 2022 they were guaranteeingLennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes to Condensed Consolidated Financial Statements. The guarantees are full, unconditional and joint and several and the guarantor subsidiaries are 100% directly or indirectly owned byLennar Corporation . A subsidiary's guarantee of Lennar senior notes will be suspended at any time when it is not directly or indirectly guaranteeing at least$75 million principal amount of debt ofLennar Corporation (other than senior notes), and a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed. Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, atMay 31, 2022 is included in the following tables. Intercompany balances and transactions within the Obligors have been eliminated and amounts attributable to the Obligors' investment in consolidated subsidiaries that have not issued or guaranteed the senior notes have been excluded. Amounts due from and transactions with nonobligor subsidiaries and related parties are separately disclosed: (In thousands) May 31, 2022 November 30, 2021 Due from non-guarantor subsidiaries$ 15,629,491 4,187,044 Equity method investments 1,031,783 937,920 Total assets 34,808,404 30,750,296 Total liabilities 9,990,538 9,631,796 Six Months Ended (In thousands) May 31, 2022 Total revenues$ 12,489,613 Operating earnings 2,719,162 Earnings before income taxes 2,475,436 Net earnings attributable to Lennar 1,862,647
Off-balance sheet arrangements
Residential construction: investments in non-consolidated entities
As ofMay 31, 2022 , we had equity investments in 47 active homebuilding and land unconsolidated entities (of which three had recourse debt, 14 had non-recourse debt and 30 had no debt) compared to 41 active homebuilding and land unconsolidated entities atNovember 30, 2021 . Historically, we have invested in unconsolidated entities that acquired and developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers. Through these entities, we have primarily sought to reduce and share our risk by limiting the amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures. The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner. Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategic partners. Joint ventures with land owners/developers have given us access to homesites owned or controlled by our partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for large land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with access to our partners' capital. Joint ventures with strategic partners have allowed us to combine our homebuilding expertise with the specific expertise (e.g. commercial or infill experience) of our partners. Each joint venture is governed by an executive committee consisting of members from the partners. Details regarding these investments, balances and debt are included in Note 3 of the Notes to Condensed Consolidated Financial Statements. 41 -------------------------------------------------------------------------------- The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as ofMay 31, 2022 . It does not represent estimates of future cash payments that will be made to reduce debt balances. Many JV loans have extension options in the loan agreements that would allow the loans to be extended into future years.
Main non-consolidated JV maturities by period (in thousands)
Total JV Debt 2022 2023 2024 Thereafter
Other
Debt without recourse to Lennar$ 1,222,548 83,023 108,857 374,337 656,331 - Land seller and other debt 13,508 - - - - 13,508 Maximum recourse debt exposure to Lennar 3,303 - - - 3,303 - Debt issuance costs (13,828) - - - - (13,828) Total$ 1,225,531 83,023 108,857 374,337 659,634 (320)
Multifamily: Investments in non-consolidated entities
AtMay 31, 2022 , Multifamily had equity investments in 19 unconsolidated entities that are engaged in multifamily residential developments (of which 12 had non-recourse debt and 7 had no debt), compared to 17 unconsolidated entities atNovember 30, 2021 . We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties. Through these entities, we are focusing on developing a geographically diversified portfolio of institutional quality multifamily rental properties in selectU.S. markets. Initially, we participated in building multifamily developments and selling them soon after they were completed. Recently, however, we have been focused on developing properties with the intention of retaining them. Participants in these joint ventures have been financial partners. Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners' capital. Each joint venture is governed by an operating agreement that provides significant substantive participating voting rights on major decisions to our partners. The Multifamily segment includes LMV I, LMV II and a newMultifamily Fund , which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets. Details of each as of and during the six months endedMay 31, 2022 are included in Note 3 of the Notes to Condensed Consolidated Financial Statements. We regularly monitor the results of both our Homebuilding and Multifamily unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations. We also monitor the performance of joint ventures in which we have investments on a regular basis to assess compliance with debt covenants. For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment. We believe all of the joint ventures were in compliance with applicable debt covenants atMay 31, 2022 .
The following table summarizes the major maturities of our unconsolidated multifamily entity debt under current debt agreements as of
Principal Maturities of Unconsolidated JVs by Period (In thousands) Total JV Debt 2022 2023 2024 Thereafter Other Debt without recourse to Lennar$ 3,962,022 347,265 1,230,742 893,349 1,490,666 - Debt issuance costs (23,426) - - - - (23,426) Total$ 3,938,596 347,265 1,230,742 893,349 1,490,666 (23,426) Lennar Other: Investments in Unconsolidated Entities As part of the sale of the Rialto investment and asset management platform in 2018, we retained our ability to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds. We periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable income to the carried interests. These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled from the applicable funds and have been recorded as revenues. Our investment in the Rialto funds and investment vehicles totaled$200.1 million and$200.6 million as ofMay 31, 2022 andNovember 30, 2021 , respectively. As ofMay 31, 2022 andNovember 30, 2021 , we had strategic technology investments in unconsolidated entities of$123.7 million and$145.6 million , respectively. Our strategic technology investments through LENX business help to enhance the homebuying and home ownership experience, and help us stay at the forefront of homebuilding innovation. We own an approximately 40% interest in FivePoint Holdings, LLC., a NYSE listed company, and companies it manages, which own three large multi-use properties inCalifornia . 42 --------------------------------------------------------------------------------
We manage and invest in
Option contracts
We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options.
The table below shows the number of residential sites owned and residential sites we have had access to through option agreements with third parties (“option”) or unconsolidated joint ventures (i.e. say, controlled residential sites):
Controlled Homesites Years of
May 31, 2022 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1)
East 109,986 - 109,986 54,610 164,596
Central 42,281 - 42,281 41,674 83,955
Texas 90,443 - 90,443 44,388 134,831
West 70,434 - 70,434 49,997 120,431
Other - 5,758 5,758 2,028 7,786
Total homesites 313,144 5,758 318,902 192,697 511,599 3.1
% of total homesites 62 % 38 %
Controlled Homesites Years of
May 31, 2021 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1)
East 55,537 5,750 61,287 55,218 116,505
Central 24,283 92 24,375 41,816 66,191
Texas 43,447 - 43,447 38,332 81,779
West 52,347 3,444 55,791 51,336 107,127
Other 4 7,569 7,573 2,235 9,808
Total homesites 175,618 16,855 192,473 188,937 381,410 3.3
% of total homesites 50 % 50 %
(1) Based on rolling twelve months of home deliveries.
Details of option contracts and related consolidated inventory not held and exposure are included in Note 10 of the Notes to the Condensed Consolidated Financial Statements.
Contractual obligations and commercial commitments
Our contractual obligations and business commitments have not changed materially from those disclosed in the MD&A of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended
(3) Recently Adopted Accounting Pronouncements
See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in Section 1 of this report for a discussion of recently adopted accounting pronouncements.
(4) Critical Accounting Principles
We believe that there have been no significant changes to our critical accounting policies during the six months endedMay 31, 2022 as compared to those we disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year endedNovember 30, 2021 . While our critical accounting policies have not significantly changed during the six months endedMay 31, 2022 , the following provides additional disclosures about our revenue recognition accounting policy.
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. We typically offer sales incentives to
homebuyers that consist primarily of price discounts on individual homes,
financing incentives and optional upgrades (such as upgraded appliances,
cabinetry and flooring) without charge. These incentives are accounted for as a
reduction in the sales price of the homes. The optional upgrades may be the only
sales incentive offered for a particular home, or they may be offered
collectively with a discount on the base price of the home. The cost we include
for the optional upgrades is included in our cost of home
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sales. Because the upgrades are provided without additional charge, no revenue is recognized related to the upgrade(s). See Note 1 of the Notes to Condensed Consolidated Financial Statements.
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