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, 2019 . Some of the statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, are "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements typically include the words "anticipate," "believe," "consider," "estimate," "expect," "forecast," "intend," "objective," "plan," "predict," "projection," "seek," "strategy," "target," "will" or other words of similar meaning. Forward-looking statements contained herein may include opinions or beliefs regarding market conditions and similar matters. In many instances, those opinions and beliefs are based upon general observations by members of our management, anecdotal evidence and our experience in the conduct of our businesses, without specific investigation or analyses. Therefore, while they reflect our view of the industries and markets in which we are involved, they should not be viewed as reflecting verifiable views or views that are necessarily shared by all who are involved in those industries or markets. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements. The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to: the potential negative impact to our business of the ongoing coronavirus ("COVID-19") pandemic, the duration, impact and severity of which is highly uncertain; increases in operating costs, including costs related to construction materials, labor, real estate taxes and insurance, and our inability to manage our cost structure, both in our Homebuilding and Multifamily businesses; an extended slowdown in the real estate markets across the nation, including a slowdown in the market for single family homes or the multifamily rental market; reduced availability of mortgage financing or increased interest rates; our inability to successfully execute our strategies, including our land lighter strategy and our strategy to monetize non-core assets; changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit; our inability to acquire land at anticipated prices; the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods; decreased demand for our homes or Multifamily rental properties; the possibility that the benefit from our increasing use of technology will not justify its cost; increased competition for home sales from other sellers of new and resale homes; our inability to pay down debt; whether government actions or other factors related to COVID-19 force us to further delay or terminate our program of repurchasing our stock; a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets; the failure of the participants in various joint ventures to honor their commitments; difficulty obtaining land-use entitlements or construction financing; natural disasters and other unforeseen events for which our insurance does not provide adequate coverage; new laws or regulatory changes that adversely affect the profitability of our businesses; our inability to refinance our debt on terms that are acceptable to us; and changes in accounting conventions that adversely affect our reported earnings. Please see our Form 10-K for the fiscal year endedNovember 30, 2019 , Part II, Item 1A of this quarterly report on Form 10-Q 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. Outlook Our third quarter was a solid quarter for Lennar, reflecting the robust state of the housing market across the country. As a result of the COVID-19 pandemic, the home has become more and more essential to the way we live and to the quality of our lives. Inventories are limited and demand remains strong driven by low interest rates and a customer focus on owning and controlling their lifestyle. Our measured growth strategy in the current market is to focus on selling current inventory, which improves our inventory turn, while being patient with longer-term sales, which enables expected price appreciation to offset future cost escalations to maximize margin. As expected, our closings in the third quarter were limited by the production pause we took in March, April and May as we assessed the impact of COVID-19 on the housing market. We increased production as the market recovered and expect this to generate increased deliveries as we move into 2021. We expect to deliver between 15,500 and 16,000 homes in the fourth quarter of 2020. While community count is difficult to predict, we expect our community count to increase approximately 10% in 2021. 37 -------------------------------------------------------------------------------- For the short term, we are already extremely well positioned to manage costs and meet demand. While we're selling through communities somewhat faster than expected, we are well fortified with strong land positions that will be brought online. And while lumber, in particular, and other costs are rising, we are actively managing sales pace, primarily to started homes in order to manage that cost risk. During the third quarter, our ability to raise prices together with our focus on cost controls enabled us to increase our gross and operating margins by 270 basis points and 310 basis points, respectively. In addition, our laser focus on improving our SG&A leverage combined with the benefits of our increased use of technology helped drive our SG&A to a historical third quarter low of 8.0% of home sale revenues. We believe our strong margins will continue throughout 2021, and we expect our bottom line to grow faster than our top line. For the intermediate term, we are and have been accelerating starts and production of homes under construction, while also accelerating the readiness of new communities that we control wherever possible. And for the longer term, we are focused on ramping up our land purchases for new communities as we believe the industry will have a sustained expansion for the foreseeable future. We have remained focused on our optioned versus owned land strategy and will continue to manage towards a 50%-50% target. At the end of the third quarter, the portion of land we controlled through options or similar agreements was 35%, up from 30% in the third quarter of 2019. In addition, we ended the quarter with a 3.8 year supply of land owned, compared to a 4.4 year supply of land owned in the third quarter of 2019. Among other things, this has increased our cash flow, which enabled us to reduce debt such that our quarter-end homebuilding debt-to-total capital ratio improved to 29.5%. We expect to be in a strong cash and liquidity position, and plan to continue to pay down debt, resume some form of a stock reacquisition program and look at other ways to properly deploy capital to enhance returns. Our financial services segment also had an excellent quarter, benefiting from an increase in volume and margins, as well as technology enabled efficiencies. We are also focused on monetizing non-core assets, including our Multifamily platform, which we view as a blue-chip asset, but does not generate the type of returns we get from our core businesses. With a solid balance sheet, leading positions in almost all of our homebuilding markets and continued execution of our core operating strategies, we believe that we are well positioned to meet demand, drive high margins and cash flow and continue to grow with the market. (1) Results of Operations Overview We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three and nine months endedAugust 31, 2020 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, such as the COVID-19 pandemic, can alter seasonal patterns. Our net earnings attributable to Lennar were$666.4 million , or$2.12 per diluted share ($2.13 per basic share), in the third quarter of 2020, compared to net earnings attributable to Lennar of$513.4 million , or$1.59 per diluted share ($1.60 per basic share), in the third quarter of 2019. Our net earnings attributable to Lennar were$1.6 billion , or$5.03 per diluted share ($5.05 per basic share), in the nine months endedAugust 31, 2020 , compared to net earnings attributable to Lennar of$1.2 billion , or$3.63 per diluted share ($3.64 per basic share), in the nine months endedAugust 31, 2019 . 38
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Financial information relating to our operations was as follows:
Three Months Ended August 31, 2020 Financial (In thousands) Homebuilding Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 5,467,364 - - - - 5,467,364 Sales of land 34,323 - - - - 34,323 Other revenues 3,433 237,068 115,170 12,896 - 368,567 Total revenues 5,505,120 237,068 115,170 12,896 - 5,870,254 Costs and expenses: Costs of homes sold 4,204,814 - - - - 4,204,814 Costs of land sold 32,395 - - - - 32,395 Selling, general and administrative expenses 435,949 - - - - 435,949 Other costs and expenses - 101,989 118,786 2,062 - 222,837 Total costs and expenses 4,673,158 101,989 118,786 2,062 - 4,895,995 Equity in loss from unconsolidated entities and Multifamily other gain (6,431 ) - (1,532 ) (2,189 ) - (10,152 ) Other expense, net (11,787 ) - - (646 ) - (12,433 ) Operating earnings (loss)$ 813,744 135,079 (5,148 ) 7,999 - 951,674 Corporate general and administrative expenses - - - - 92,661 92,661 Earnings (loss) before income taxes$ 813,744 135,079 (5,148 ) 7,999 (92,661 ) 859,013 Three Months Ended August 31, 2019 Financial Lennar (In thousands) Homebuilding Services Multifamily Other Corporate Total Revenues: Sales of homes$ 5,330,694 - - - - 5,330,694 Sales of land 104,338 - - - - 104,338 Other revenues 3,966 224,502 183,958 9,600 - 422,026 Total revenues 5,438,998 224,502 183,958 9,600 - 5,857,058 Costs and expenses: Costs of homes sold 4,245,061 - - - - 4,245,061 Costs of land sold 92,151 - - - - 92,151 Selling, general and administrative expenses 444,720 - - - - 444,720 Other costs and expenses - 149,804 181,616 2,734 - 334,154 Total costs and expenses 4,781,932 149,804 181,616 2,734 - 5,116,086 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (10,459 ) - 7,883 8,903 - 6,327 Other income, net 12,375 - - 24 - 12,399 Operating earnings$ 658,982 74,698 10,225 15,793 - 759,698 Corporate general and administrative expenses - - - - 92,615 92,615 Earnings (loss) before income taxes$ 658,982 74,698 10,225 15,793 (92,615 ) 667,083 39
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Nine Months Ended August 31, 2020 Financial (In thousands) Homebuilding Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 14,533,212 - - - - 14,533,212 Sales of land 81,023 - - - - 81,023 Other revenues 12,485 631,992 370,904 33,348 - 1,048,729 Total revenues 14,626,720 631,992 370,904 33,348 - 15,662,964 Costs and expenses: Costs of homes sold 11,359,364 - - - - 11,359,364 Costs of land sold 102,899 - - - - 102,899 Selling, general and administrative expenses 1,222,032 - - - - 1,222,032 Other costs and expenses - 363,688 379,607 3,564 - 746,859 Total costs and expenses 12,684,295 363,688 379,607 3,564 - 13,431,154 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (20,077 ) - 4,702 (28,712 ) - (44,087 ) Financial Services gain on deconsolidation - 61,418 - - - 61,418 Other expense, net (16,845 ) - (10,195 ) - (27,040 ) Operating earnings (loss)$ 1,905,503 329,722 (4,001 ) (9,123 ) - 2,222,101 Corporate general and administrative expenses - - - - 262,959 262,959 Earnings (loss) before income taxes$ 1,905,503 329,722 (4,001 ) (9,123 ) (262,959 ) 1,959,142 Nine Months Ended August 31, 2019 Financial (In thousands) Homebuilding Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes$ 14,114,939 - - - - 14,114,939 Sales of land 134,576 - - - - 134,576 Other revenues 8,803 572,029 428,764 28,919 - 1,038,515 Total revenues 14,258,318 572,029 428,764 28,919 - 15,288,030 Homebuilding costs and expenses: Costs of homes sold 11,264,640 - - - - 11,264,640 Costs of land sold 119,685 - - - - 119,685 Selling, general and administrative 1,223,701 - - - - 1,223,701 Other costs and expenses - 422,142 431,510 7,550 861,202 Total costs and expenses 12,608,026 422,142 431,510 7,550 - 13,469,228 Equity in earnings (loss) from unconsolidated entities and Multifamily other gain (4,601 ) - 15,446 12,255 - 23,100 Other expense, net (35,325 ) - - (12,900 ) - (48,225 ) Operating earnings$ 1,610,366 149,887 12,700 20,724 - 1,793,677 Corporate general and administrative expenses - - - - 248,071 248,071 Earnings (loss) before income taxes$ 1,610,366 149,887
12,700 20,724 (248,071 ) 1,545,606
Three Months EndedAugust 31, 2020 versus Three Months EndedAugust 31, 2019 Revenues from home sales increased 3% in the third quarter of 2020 to$5.5 billion from$5.3 billion in the third quarter of 2019. Revenues were higher primarily due to a 2% increase in the number of home deliveries, excluding unconsolidated entities, and a 1% increase in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, increased to 13,809 homes in the third quarter of 2020 from 13,513 homes in the third quarter of 2019. The average sales price of homes delivered was$396,000 in the third quarter of 2020, compared to$394,000 in the third quarter of 2019. Gross margin on home sales were$1.3 billion , or 23.1%, in the third quarter of 2020, compared to$1.1 billion , or 20.4%, in the third quarter of 2019. The gross margin percentage on home sales increased primarily due to our focus on reducing construction costs. 40 -------------------------------------------------------------------------------- Selling, general and administrative expenses were$435.9 million in the third quarter of 2020, compared to$444.7 million in the third quarter of 2019. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.0% in the third quarter of 2020, from 8.3% in the third quarter of 2019 as we focused on improving our leverage combined with the benefits of our technology efforts. Operating earnings for our Financial Services segment were$135.1 million in the third quarter of 2020, compared to$74.7 million ($78.8 million net of noncontrolling interests) in the third quarter of 2019. Operating earnings increased due to an improvement in the mortgage business as a result of an increase in volume and margin. Additionally, operating earnings of our title business increased primarily due to an increase in volume. Operating loss for our Multifamily segment was$5.1 million in the third quarter of 2020, compared to operating earnings of$10.2 million ($10.5 million net of noncontrolling interests) in the third quarter of 2019, which included the sale of an operating property. Operating earnings for our Lennar Other segment were$8.0 million in the third quarter of 2020, compared to$15.8 million ($15.9 million net of noncontrolling interests) in the third quarter of 2019. Nine Months EndedAugust 31, 2020 versus Nine Months EndedAugust 31, 2019 Revenues from home sales increased 3% in the nine months endedAugust 31, 2020 to$14.5 billion from$14.1 billion in the nine months endedAugust 31, 2019 . Revenues were higher primarily due to a 5% increase in the number of home deliveries, excluding unconsolidated entities. New home deliveries, excluding unconsolidated entities, increased to 36,775 homes in the nine months endedAugust 31, 2020 from 35,021 homes in the nine months endedAugust 31, 2019 . The average sales price of homes delivered was$395,000 in the nine months endedAugust 31, 2020 , compared to$403,000 in the nine months endedAugust 31, 2019 . The decrease in average sales price primarily resulted from continuing to shift to lower-priced communities and regional product mix due to COVID-19 stay-at-home orders in certain higher priced markets. Gross margin on home sales were$3.2 billion , or 21.8%, in the nine months endedAugust 31, 2020 , compared to$2.9 billion or 20.2%, in the nine months endedAugust 31, 2019 . The gross margin percentage on home sales increased primarily due to our continued focus on reducing construction costs. Loss on land sales in the nine months endedAugust 31, 2020 was$21.9 million , primarily due to a write-off of costs in the second quarter of 2020 as a result of us not moving forward with a naval base development inConcord, California , northeast ofSan Francisco . Gross margin on land sales were$14.9 million in the nine months endedAugust 31, 2019 . Selling, general and administrative expenses were$1.2 billion in both the nine months endedAugust 31, 2020 and 2019. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.4% in the nine months endedAugust 31, 2020 , from 8.7% in the nine months endedAugust 31, 2019 . Operating earnings for our Financial Services segment were$329.7 million ($343.8 million net of noncontrolling interests) in the nine months endedAugust 31, 2020 , compared to$149.9 million ($163.0 million net of noncontrolling interests) in the nine months endedAugust 31, 2019 . Operating earnings increased due to an improvement in our mortgage and title businesses as a result of an increase in volume and margin, as well as reductions in loan origination costs. Additionally, in the second quarter of 2020, our Financial Services segment recorded a$61.4 million gain on the deconsolidation of a previously consolidated entity. Operating loss for our Multifamily segment was$4.0 million in the nine months endedAugust 31, 2020 , compared to operating earnings of$12.7 million ($13.4 million net of noncontrolling interests) in the nine months endedAugust 31, 2019 . Operating loss for our Lennar Other segment was$9.1 million in the nine months endedAugust 31, 2020 , compared to operating earnings of$20.7 million ($21.2 million net of noncontrolling interests) in the nine months endedAugust 31, 2019 . For the nine months endedAugust 31, 2020 and 2019, we had a tax provision of$382.5 million and$374.7 million , respectively, which resulted in an overall effective income tax rate of 19.5% and 24.2%, respectively. The reduction in the overall effective income tax rate is primarily due to the extension of the new energy efficient home tax credit during the first quarter of 2020. Homebuilding Segments AtAugust 31, 2020 , our reportable Homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in: East:Florida ,New Jersey ,Pennsylvania andSouth Carolina Central:Georgia ,Illinois ,Indiana ,Maryland ,North Carolina ,Minnesota ,Tennessee andVirginia Texas :Texas West:Arizona ,California ,Colorado ,Nevada ,Oregon ,Utah andWashington 41 -------------------------------------------------------------------------------- Other: Urban divisions and other homebuilding related investments primarily inCalifornia , including FivePoint Holdings, LLC ("FivePoint") The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated: Selected Financial and Operational Data
Three Months Ended
Gross Margins Operating Earnings (Loss) Equity in Earnings (Loss) Costs of Net Margins on Gross Margins from Operating Sales of Homes Sales of Sales of
Homes on Sales of Other Unconsolidated Other Income
Earnings
(In thousands) Revenue Homes Gross Margin % (1) Land Revenue Entities (Expense), net (Loss) East$ 1,477,273 1,112,035 24.7 % 241,904 (103 ) 638 897 853 244,189 Central 1,062,799 842,764 20.7 % 134,395 (57 ) 1,341 70 (3,071 ) 132,678 Texas 719,467 538,480 25.2 % 114,954 2,016 203 242 (1,304 ) 116,111 West 2,205,235 1,706,530 22.6 % 343,353 72 1,145 48 (1,784 ) 342,834 Other (2) 2,590 5,005 (93.2 )% (8,005 ) - 106 (7,688 ) (6,481 ) (22,068 ) Totals$ 5,467,364 4,204,814 23.1 %$ 826,601 1,928 3,433 (6,431 ) (11,787 ) 813,744 Three Months Ended August 31, 2019
Gross Margins Operating Earnings (Loss) Equity in Gross Earnings (Loss) Costs of Net Margins on Margins from Operating Sales of Homes Sales of Gross Sales of Homes
on Sales Other Unconsolidated Other Income Earnings (In thousands) Revenue Homes Margin %
(1) of Land Revenue Entities (Expense), net (Loss) East$ 1,500,056 1,167,440 22.2 % 209,610 119 1,083 (184 ) 8,707 219,335 Central 1,054,715 858,434 18.6 % 108,564 4,113 699 14 3,199 116,589 Texas 696,903 555,561 20.3 % 75,213 3,322 253 176 (666 ) 78,298 West 2,060,740 1,646,254 20.1 % 253,844 727 1,336 655 2,862 259,424 Other (2) 18,280 17,372 5.0 % (6,318 ) 3,906 595 (11,120 ) (1,727 ) (14,664 ) Totals$ 5,330,694 4,245,061 20.4 %$ 640,913 12,187 3,966 (10,459 ) 12,375 658,982
Nine Months Ended
Gross Margins Operating Earnings (Loss) Equity in Earnings (Loss) Costs of Net Margins on Gross Margins from Operating Sales of Homes Sales of Sales of Homes on Sales of Other Unconsolidated Other Income Earnings (In thousands) Revenue Homes Gross Margin % (1) Land Revenue Entities (Expense), net (Loss) East$ 3,904,268 2,971,929 23.9 % 581,923 (1,681 ) 3,913 1,474 475 586,104 Central 2,833,745 2,300,783 18.8 % 291,672 (703 ) 2,209 642 (1,789 ) 292,031 Texas 1,877,374 1,428,758 23.9 % 266,647 5,213 970 446 (4,205 ) 269,071 West 5,894,183 4,619,334 21.6 % 841,369 (1,267 ) 4,873 3,948 (1,088 ) 847,835 Other (2) 23,642 38,560 (63.1 )% (29,795 ) (23,438 ) 520 (26,587 ) (10,238 ) (89,538 ) Totals$ 14,533,212 11,359,364 21.8 %$ 1,951,816 (21,876 ) 12,485 (20,077 ) (16,845 ) 1,905,503 42
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Nine Months Ended
Gross Margins Operating Earnings (Loss) Equity in Earnings (Loss) Costs of Net Margins on Gross Margins from Operating Sales of Homes Sales of Sales of Homes on Sales of Other Unconsolidated Other Income Earnings (In thousands) Revenue Homes Gross Margin % (1) Land Revenue Entities (Expense), net (Loss) East$ 3,828,659 2,998,113 21.7 % 491,322 3,854 2,802 (418 ) 6,243 503,803 Central 2,723,292 2,230,857 18.1 % 254,422 4,957 975 152 3,732 264,238 Texas 1,796,343 1,435,311 20.1 % 182,257 5,597 508 334 (2,746 ) 185,950 West 5,738,881 4,569,646 20.4 % 718,061 (3,422 ) 2,743 158 5,449 722,989 Other (2) 27,764 30,713 (10.6 )% (19,464 ) 3,905 1,775 (4,827 ) (48,003 ) (66,614 ) Totals$ 14,114,939 11,264,640 20.2 %$ 1,626,598 14,891 8,803 (4,601 ) (35,325 ) 1,610,366
(1) Net margins on sales of homes include selling, general and administrative
expenses.
(2) Negative gross and net margins were due to period costs in Urban divisions
that impact costs of homes sold without sufficient sales of homes revenue to
offset those costs.
Summary of Homebuilding Data Deliveries: Three Months Ended Homes Dollar Value (In thousands) Average Sales Price August 31, August 31, August 31, 2020 2019 2020 2019 2020 2019 East 4,309 4,521$ 1,488,022 1,502,780$ 345,000 332,000 Central 2,767 2,809 1,062,799 1,054,715 384,000 375,000 Texas 2,598 2,260 719,467 696,904 277,000 308,000 West 4,165 3,908 2,205,235 2,060,740 529,000 527,000 Other 3 24 2,590 18,280 863,000 762,000 Total 13,842 13,522$ 5,478,113 5,333,419$ 396,000 394,000 Of the total homes delivered listed above, 33 homes with a dollar value of$10.7 million and an average sales price of$326,000 represent home deliveries from unconsolidated entities for the three months endedAugust 31, 2020 , compared to nine home deliveries with a dollar value of$2.7 million and an average sales price of$303,000 for the three months endedAugust 31, 2019 . Nine Months Ended Homes Dollar Value (In thousands) Average Sales Price August 31, August 31, August 31, 2020 2019 2020 2019 2020 2019 East 11,511 11,502$ 3,924,289 3,838,124$ 341,000 334,000 Central 7,389 7,193 2,833,745 2,723,291 384,000 379,000 Texas 6,637 5,660 1,877,374 1,796,344 283,000 317,000 West 11,273 10,667 5,894,183 5,738,881 523,000 538,000 Other 25 49 23,642 43,312 946,000 884,000 Total 36,835 35,071$ 14,553,233 14,139,952$ 395,000 403,000 Of the total homes delivered listed above, 60 homes with a dollar value of$20.0 million and an average sales price of$334,000 represent home deliveries from unconsolidated entities for the nine months endedAugust 31, 2020 , compared to 50 home deliveries with a dollar value of$25.0 million and an average sales price of$500,000 for the nine months endedAugust 31, 2019 . 43 --------------------------------------------------------------------------------
New Orders (1): Three Months Ended Active Communities Homes Dollar
Value (In thousands) Average Sales Price
August 31, August 31, August 31, August 31, 2020 2019 2020 2019 2020 2019 2020 2019 East 340 361 4,655 4,530$ 1,631,349 1,462,210$ 350,000 323,000 Central 297 338 3,375 2,632 1,298,792 1,003,818 385,000 381,000 Texas 217 235 2,746 2,221 743,553 660,304 271,000 297,000 West 341 362 4,786 3,949 2,580,328 2,049,404 539,000 519,000 Other 3 4 2 37 1,452 33,896 726,000 916,000 Total 1,198 1,300 15,564 13,369$ 6,255,474 5,209,632$ 402,000 390,000 Of the total new orders listed above, 34 homes with a dollar value of$9.7 million and an average sales price of$286,000 represent new orders in four active communities from unconsolidated entities for the three months endedAugust 31, 2020 , compared to 21 new orders with a dollar value of$7.3 million and an average sales price of$349,000 in five active communities for the three months endedAugust 31, 2019 . Nine Months Ended Homes Dollar Value (In thousands) Average Sales Price August 31, August 31, August 31, 2020 2019 2020 2019 2020 2019 East 12,512 12,756$ 4,266,221 4,242,708$ 341,000 333,000 Central 8,741 7,974 3,341,959 3,020,328 382,000 379,000 Texas 7,327 6,069 1,986,770 1,861,849 271,000 307,000 West 12,359 11,481 6,508,509 5,977,758 527,000 521,000 Other 16 70 15,189 60,447 949,000 864,000 Total 40,955 38,350$ 16,118,648 15,163,090$ 394,000 395,000 Of the total new orders listed above, 85 homes with a dollar value of$26.8 million and an average sales price of$316,000 represent new orders from unconsolidated entities for the nine months endedAugust 31, 2020 , compared to 68 new orders with a dollar value of$32.1 million and an average sales price of$472,000 for the nine months endedAugust 31, 2019 . (1) New orders represent the number of new sales contracts executed with
homebuyers, net of cancellations, during the three and nine months ended
Backlog: Homes Dollar Value (In thousands) Average Sales Price August 31, August 31, August 31, 2020 2019 2020 2019 2020 2019 East 6,691 6,999$ 2,368,300 2,419,795$ 354,000 346,000 Central 4,502 4,110 1,752,180 1,597,944 389,000 389,000 Texas 2,860 2,557 822,734 826,226 288,000 323,000 West 5,644 5,215 2,922,743 2,726,329 518,000 523,000 Other - 27 - 26,123 - 968,000 Total 19,697 18,908$ 7,865,957 7,596,417$ 399,000 402,000 Of the total homes in backlog listed above, 56 homes with a backlog dollar value of$17.0 million and an average sales price of$303,000 represent the backlog from unconsolidated entities atAugust 31, 2020 , compared to 25 homes with a backlog dollar value of$9.8 million and an average sales price of$391,000 atAugust 31, 2019 . (1) During the nine months endedAugust 31, 2019 , we acquired 13 homes in
backlog.
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. 44 -------------------------------------------------------------------------------- Three Months EndedAugust 31, 2020 versus Three Months EndedAugust 31, 2019 Homebuilding East: Revenues from home sales decreased in the third quarter of 2020 compared to the third quarter of 2019, primarily due to a decrease in the number of home deliveries in all the states of the segment except inNew Jersey , partially offset by an increase in the average sales price of homes delivered in all the states of the segment except inPennsylvania . The decrease in the number of home deliveries was primarily due to the effects of COVID-19 and the economic shutdown. The increase in the number of home deliveries inNew Jersey was primarily due to higher demand as the number of deliveries per active community increased during the quarter. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered inPennsylvania was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. Gross margin percentage on home deliveries in the third quarter of 2020 increased compared to the same period last year primarily due to reducing our construction costs and an increase in the average sales price of homes delivered. Homebuilding Central: Revenues from home sales increased in the third quarter of 2020 compared to the third quarter of 2019, primarily due to an increase in the average sales price of homes delivered in all the states of the segment except inIndiana ,North Carolina andTennessee , partially offset by a decrease in the number of home deliveries in all the states in the segment except inMaryland ,Minnesota andTennessee . The decrease in the number of home deliveries was primarily due to the effects of COVID-19 and the economic shutdown. The increase in the average sales price of homes delivered was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the third quarter of 2020 increased compared to the same period last year primarily due to reducing our construction costs and an increase in the average sales price of homes delivered. Homebuilding Texas: Revenues from home sales increased in the third quarter of 2020 compared to the third quarter of 2019, primarily due to an increase in the number of home deliveries, partially offset by a decrease in the average sales price of homes delivered. The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in average sales price of homes delivered was primarily due to closing out higher priced communities and shifting into lower priced communities. Gross margin percentage on home deliveries in the third quarter of 2020 increased compared to the same period last year primarily due to reducing our construction costs. Homebuilding West: Revenues from home sales increased in the third quarter of 2020 compared to the third quarter of 2019, primarily due to an increase in the number of home deliveries in all states of the segment exceptArizona andOregon . The increase in the number of home deliveries in all states of the segment exceptArizona andOregon was primarily due to higher demand as the number of deliveries per active community increased during the quarter. The decrease in the number of home deliveries inArizona andOregon was primarily due to the effects of COVID-19 and the economic shutdown. Gross margin percentage on home deliveries in the third quarter of 2020 increased compared to the same period last year primarily due to reducing our construction costs. Nine Months EndedAugust 31, 2020 versus Nine Months EndedAugust 31, 2019 Homebuilding East: Revenues from home sales increased in the nine months endedAugust 31, 2020 compared to the nine months endedAugust 31, 2019 , primarily due to an increase in the average sales price of homes delivered inFlorida andNew Jersey , partially offset by a decrease in the average sales price of homes delivered inPennsylvania andSouth Carolina . The increase in the average sales price of homes delivered inFlorida andNew Jersey was primarily due to favorable market conditions. The decrease in the average sales price of homes delivered in theSouth Carolina andPennsylvania was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. Gross margin percentage on home deliveries in the nine months endedAugust 31, 2020 increased compared to the same period last year primarily due to reducing our construction costs and an increase in the average sales price of homes delivered. Homebuilding Central: Revenues from home sales increased in the nine months endedAugust 31, 2020 compared to the nine months endedAugust 31, 2019 , primarily due to an increase in the number of home deliveries in all the states in the segment except inNorth Carolina andVirginia . The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of homes deliveries inNorth Carolina andVirginia was primarily due to the effects of COVID-19 and the economic shutdown. Gross margin percentage on home deliveries in the nine months endedAugust 31, 2020 increased compared to the same period last year primarily due to reducing our construction costs, partially offset by valuation adjustments taken in a few communities. Homebuilding Texas: Revenues from home sales increased in the nine months endedAugust 31, 2020 compared to the nine months endedAugust 31, 2019 , primarily due to an increase in the number of home deliveries, partially offset by a decrease in the average sales price of homes delivered. The increase in the number of deliveries was primarily due to higher demand as the number of deliveries per active community increased. The decrease in average sales price of homes delivered was primarily due to closing out higher priced communities and shifting into lower priced communities. Gross margin 45 -------------------------------------------------------------------------------- percentage on home deliveries in the nine months endedAugust 31, 2020 increased compared to the same period last year primarily due to reducing our construction costs. Homebuilding West: Revenues from home sales increased in the nine months endedAugust 31, 2020 compared to the nine months endedAugust 31, 2019 , primarily due to an increase in the number of home deliveries in all the states of the segment exceptOregon ,Washington andUtah , partially offset by a decrease in the average sales price of homes delivered in all the states of the segment exceptArizona . The increase in the number of home deliveries in all the states of the segment exceptOregon ,Washington andUtah was primarily due to higher demand as the number of deliveries per active community increased. The decrease in the number of home deliveries inOregon ,Washington andUtah was primarily due to the effects of COVID-19 and the economic shutdown. The decrease in the average sales price of homes delivered in all the states of the segment exceptArizona was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities. The increase in the average sales price of homes delivered inArizona was primarily due to favorable market conditions. Gross margin percentage on home deliveries in the nine months endedAugust 31, 2020 increased compared to the same period last year primarily due to reducing our construction costs. Financial Services Segment Our Financial Services reportable segment provides mortgage financing, title and closing services primarily for buyers of our homes. The segment also originates and sells into securitizations commercial mortgage loans through its LMF 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 Nine Months Ended August 31, August 31, (Dollars in thousands) 2020 2019 2020 2019 Dollar value of mortgages originated$ 3,529,000 2,883,000 9,007,000 7,440,000 Number of mortgages originated 10,800 9,200 27,800 23,700 Mortgage capture rate of Lennar homebuyers 82 % 77 % 80 % 75 % Number of title and closing service transactions 16,400 14,300
42,000 42,400
AtAugust 31, 2020 andNovember 30, 2019 , the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was$164.6 million and$166.0 million , respectively. These securities were purchased at discounts ranging from 6% to 84% with coupon rates ranging from 2.0% to 5.3%, stated and assumed final distribution dates betweenOctober 2027 andDecember 2028 , and stated maturity dates betweenOctober 2050 andDecember 2051 . Our Financial Services segment classifies these securities as held-to-maturity based on its intent and ability to hold the securities until maturity. LMF Commercial LMF Commercial originates and sells into securitizations five, seven and ten year commercial first mortgage loans, which are secured by income producing properties. During the nine months endedAugust 31, 2020 , LMF Commercial originated commercial loans with a total principal balance of$582.0 million , all of which were recorded as loans held-for-sale and sold$622.3 million of commercial loans into four separate securitizations. As ofAugust 31, 2020 , there were no unsettled transactions. During the nine months endedAugust 31, 2019 , LMF Commercial originated commercial loans with a total principal balance of$984.5 million , all of which were recorded as loans held-for-sale, and sold$848.3 million of loans into seven separate securitizations. 46 -------------------------------------------------------------------------------- Multifamily Segment The following tables provide information related to our investment in the Multifamily segment: Balance Sheets August 31, 2020 November 30, 2019 (Dollars in thousands) Multifamily investments in unconsolidated entities $ 656,012 561,190 Lennar's net investment in Multifamily 930,213 829,537 Statements of Operations Three Months Ended Nine Months Ended August 31, August 31, (Dollars in thousands) 2020 2019 2020 2019 Number of operating properties/investments sold through joint ventures - 1 2 3 Lennar's share of gains on the sale of operating properties/investments $ - 12,620 $
3,001
Despite widespread reductions in economic activity due to the COVID-19 pandemic, the properties in which the Multifamily segment has investments did not, overall, experience significant increases in vacancies or in delinquent rent payments to date. (2) Financial Condition and Capital Resources AtAugust 31, 2020 , we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of$2.2 billion , compared to$1.5 billion atNovember 30, 2019 and$1.1 billion atAugust 31, 2019 . We finance all of our activities, including homebuilding, financial services, multifamily, other and general operating needs, primarily with cash generated from our operations, debt issuances and cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility (the "Credit Facility"). Operating Cash Flow Activities During the nine months endedAugust 31, 2020 and 2019, cash provided by operating activities totaled$2.9 billion and$298.3 million , respectively. During the nine months endedAugust 31, 2020 , cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of$557.8 million primarily related to the sale of loans originated by Financial Services, a decrease in receivables of$264.6 million and an increase in accounts payable and other liabilities of$165.6 million , partially offset by an increase in other assets of$124.6 million . During the nine months endedAugust 31, 2019 , cash provided by operating activities was impacted primarily by our net earnings, a decrease in receivables of$528.0 million , partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of$1.6 billion . Investing Cash Flow Activities During the nine months endedAugust 31, 2020 and 2019, cash used in investing activities totaled$267.5 million and$39.4 million , respectively. During the nine months endedAugust 31, 2020 , our cash used in investing activities was primarily due to cash contributions of$412.5 million to unconsolidated entities and deconsolidation of a previously consolidated entity, which included (1)$86.9 million to Homebuilding unconsolidated entities, (2)$122.7 million to Multifamily unconsolidated entities, (3)$50.3 million to the strategic technology investments included in the Lennar Other segment; and (4) the derecognition of$152.5 million of cash as of the date of deconsolidation of a previously consolidated Financial Services entity. This was partially offset by distributions of capital from unconsolidated entities of$135.7 million , which primarily included (1)$58.3 million from Homebuilding unconsolidated entities, (2)$39.1 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment; and (3)$38.3 million from Multifamily unconsolidated entities. During the nine months endedAugust 31, 2019 , cash used in investing activities was primarily due to cash contributions of$329.9 million to unconsolidated entities, which included (1)$196.4 million to Homebuilding unconsolidated entities, (2)$80.2 million to Multifamily unconsolidated entities primarily for working capital; and (3)$52.9 million to the unconsolidated Rialto real estate funds and strategic investments included in our Lennar Other segment; and$69.6 million of net addition to operating properties and equipment. This was partially offset by distributions of capital from unconsolidated and consolidated entities of$250.3 million , which included (1)$107.2 million from Multifamily unconsolidated entities; (2)$78.7 million from Homebuilding unconsolidated entities; (3)$41.6 million from the unconsolidated Rialto real estate funds and strategic investments included in our Lennar Other segment; and (4)$22.9 million from Financial Services consolidated entities. In addition, cash used in investing activities was also offset by$50.0 million of proceeds from the sale of two Homebuilding operating properties and other assets, and$41.6 million of proceeds from the sales of available-for-sale securities. 47 -------------------------------------------------------------------------------- Financing Cash Flow Activities During the nine months endedAugust 31, 2020 and 2019, cash used in financing activities totaled$1.9 billion and$785.1 million , respectively. During the nine months endedAugust 31, 2020 , cash used in financing activities was primarily impacted by (1)$789.3 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities; (2)$550.3 million of principal payments on notes payable and other borrowings; (3) the redemption of$313 million aggregate principal amount of our senior notes; and (4) repurchases of our common stock for$319.0 million , which included$288.5 million of repurchases under our repurchase program and$30.3 million of repurchases related to our equity compensation plan. These were partially offset by$175.6 million of receipts related to noncontrolling interests. During the nine months endedAugust 31, 2019 , cash used in financing activities was primarily impacted by (1) payment at maturity of$500.0 million aggregate principal amount of our 4.50% senior notes dueJune 2019 ; (2)$423.1 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities; (3)$154.7 million principal payment on other borrowings; and (4) repurchases of our common stock for$419.3 million , which included$394.7 million of repurchases of our stock under our repurchase program and$24.6 million of repurchases related to our equity compensation plan. These were partially offset by (1)$700 million of net borrowings under our Credit Facility; and (2)$62.6 million proceeds from other borrowings. Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our homebuilding operations. Homebuilding debt to total capital and net Homebuilding debt to total capital are calculated as follows: August 31, November 30, August 31, (Dollars in thousands) 2020 2019 2019 Homebuilding debt$ 7,180,274 7,776,638 9,075,016 Stockholders' equity 17,172,103 15,949,517 15,371,938 Total capital$ 24,352,377 23,726,155 24,446,954 Homebuilding debt to total capital 29.5 % 32.8 % 37.1 % Homebuilding debt$ 7,180,274 7,776,638 9,075,016 Less: Homebuilding cash and cash equivalents 1,966,796 1,200,832 795,405 Net Homebuilding debt$ 5,213,478 6,575,806 8,279,611 Net Homebuilding debt to total capital (1) 23.3 %
29.2 % 35.0 %
(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.
AtAugust 31, 2020 , Homebuilding debt to total capital improved compared toAugust 31, 2019 andNovember 30, 2019 , primarily as a result of a decrease in Homebuilding debt and an increase in stockholders' equity due to net earnings. We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings. These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives. In connection with some of our non-homebuilding businesses, we are also considering other types of transactions such as sales, restructurings, joint ventures, spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company. Our Homebuilding senior notes and other debts payable are summarized within Note 7 of the Notes to the Condensed Consolidated Financial Statements. AtAugust 31, 2020 , we had an unsecured revolving credit facility (the "Credit Facility") with maximum borrowings of$2.4 billion maturing in 2024. The Credit Facility agreement (the "Credit Agreement") provides that up to$500 million in commitments may be used for letters of credit. Under the Credit Agreement, as of the end of the fiscal quarter, we are subject to debt covenants. The maturity, details and debt covenants of the Credit Facility are unchanged from the disclosure in the Financial Condition and Capital Resources section of our Form 10-K for the year endedNovember 30, 2019 . In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions. Our outstanding letters of credit and surety bonds are described below: 48 --------------------------------------------------------------------------------
August 31, November 30, 2020 2019 (In thousands) Performance letters of credit$ 770,527 715,793 Financial letters of credit 258,703 184,075 Surety bonds 3,041,946 2,946,167 Anticipated future costs primarily for site improvements related to performance surety bonds 1,498,173
1,427,145
Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes (the "Guaranteed Notes"). The guarantees are full and unconditional. However, they will terminate as to a subsidiary any time it is not directly or indirectly guaranteeing at least$75 million ofLennar Corporation debt or when the subsidiary is sold. These guarantees are outlined in Note 13 of the Notes to the Condensed Consolidated Financial Statements. Our Homebuilding average debt outstanding and the average rates of interest was as follows: Nine Months Ended August 31, August 31, (Dollars in thousands) 2020 2019
Homebuilding average debt outstanding
4.9 % 4.8 % Interest incurred 272,347 320,960 Under the amended Credit Facility agreement executed inApril 2019 (the "Credit Agreement"), as of the end of each fiscal quarter, we are required to maintain minimum consolidated tangible net worth of approximately$7.1 billion plus the sum of 50% of the cumulative consolidated net income for each completed fiscal quarter subsequent toFebruary 28, 2019 , if positive, and 50% of the net cash proceeds from any equity offerings from and afterFebruary 28, 2019 , minus the lesser of 50% of the amount paid afterApril 11, 2019 to repurchase common stock and$375.0 million . We are required to maintain a leverage ratio that shall not exceed 65% and may be reduced by 2.5% per quarter if our interest coverage ratio is less than 2.25:1.00 for two consecutive fiscal calendar quarters. The leverage ratio will have a floor of 60%. If our interest coverage ratio subsequently exceeds 2.25:1.00 for two consecutive fiscal calendar quarters, the leverage ratio we will be required to maintain will be increased by 2.5% per quarter to a maximum of 65%. As of the end of each fiscal quarter, we are also required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended. We believe that we were in compliance with our debt covenants atAugust 31, 2020 . The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Agreement as ofAugust 31, 2020 : Level Achieved as of (Dollars in thousands) Covenant Level August 31, 2020 Minimum net worth test$ 8,370,211 11,621,827 Maximum leverage ratio 65.0 % 27.8 % Liquidity test 1.00 5.68 49
-------------------------------------------------------------------------------- AtAugust 31, 2020 , the Financial Services warehouse facilities were all 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: January 2021 $ 500,000 March 2021 300,000 June 2021 600,000 July 2021 200,000 Total - Residential facilities $ 1,600,000 LMF Commercial facilities maturing November 2020 $ 200,000 December 2020 (1) 700,000 Total - LMF Commercial facilities $ 900,000 Total $ 2,500,000
(1) Includes
finance the origination of floating rate accrual loans, which are reported as
accrual loans within loans held-for-investment, net. There were borrowings
under this facility of
Our Financial Services segment uses the residential facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature. The LMF Commercial facilities finance LMF Commercial loan originations and securitization activities and were secured by a 75% interest in the originated commercial loans financed. Borrowings and collateral under the facilities and their prior year predecessors were as follows: (In thousands) August 31, 2020 November 30, 2019 Borrowings under the residential facilities $ 699,016 1,374,063 Collateral under the residential facilities 727,319 1,423,650 Borrowings under the LMF Commercial facilities 103,667 216,870 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. Changes in Capital Structure InJanuary 2019 , our Board of Directors authorized the repurchase of up to the lesser of$1.0 billion in value, or 25 million in shares, of our outstanding Class A and Class B common stock. The repurchase authorization has no expiration date. The following table represents the repurchase of our Class A and Class B common stocks, under this program, for the three and nine months endedAugust 31, 2020 and 2019: Three Months Ended Nine Months Ended August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019 (Dollars in thousands, except price per share) Class A Class B Class A Class
B Class A Class B Class A Class
- - 6,110,000 - 4,250,000 115,000 8,110,000 -
Principal $ - $ -
During the nine months endedAugust 31, 2020 , treasury stock increased primarily due to our repurchase of 4.4 million shares of Class A and Class B common stock through our stock repurchase program. During the nine months endedAugust 31, 2019 , treasury stock increased due to our repurchase of 8.1 million shares of Class A common stock during the nine months endedAugust 31, 2019 through our stock repurchase program and 0.6 million shares of Class A common stock primarily due to activity related to our equity compensation plan. OnOctober 1, 2020 , our Board of Directors increased our annual dividend to$1.00 per share from$0.50 per share resulting in a quarterly cash dividend of$0.25 per share on both our Class A and Class B common stock, payable onOctober 30, 2020 to holders of record at the close of business onOctober 16, 2020 . OnJuly 24, 2020 , we paid cash dividends of$0.125 per share on both our Class A and Class B common stock to holders of record at the close of business onJuly 10, 2020 , as 50 -------------------------------------------------------------------------------- declared by our Board of Directors onJune 25, 2020 . We declared and paid cash dividends of$0.04 per share on both our Class A and Class B common stock in each quarter for the year endedNovember 30, 2019 . Based on our current financial condition and credit relationships, we believe that, assuming the effects of the COVID-19 pandemic and resulting governmental actions on our operations do not significantly worsen for a protracted period, our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity. Off-Balance Sheet Arrangements Homebuilding: Investments in Unconsolidated Entities AtAugust 31, 2020 , we had equity investments in 39 active homebuilding and land unconsolidated entities (of which three had recourse debt, nine had non-recourse debt and 27 had no debt) compared to 36 active homebuilding and land unconsolidated entities atNovember 30, 2019 . 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. As ofAugust 31, 2020 andNovember 30, 2019 , our recorded investments in Homebuilding unconsolidated entities were$940.7 million and$1.0 billion , respectively, while the underlying equity related to our investments in Homebuilding unconsolidated entities partners' net assets as ofAugust 31, 2020 andNovember 30, 2019 were$1.2 billion and$1.3 billion , respectively. The basis difference is primarily as a result of us contributing our 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 us. Included in our recorded investments in Homebuilding unconsolidated entities is our 40% ownership of FivePoint. As ofAugust 31, 2020 andNovember 30, 2019 , the carrying amounts of our investment in FivePoint were$376.4 million and$374.0 million , respectively. The total debt of the Homebuilding unconsolidated entities in which we have investments was$1.1 billion as of bothAugust 31, 2020 andNovember 30, 2019 , of which our maximum recourse exposure was$4.9 million and$10.8 million as ofAugust 31, 2020 andNovember 30, 2019 , respectively. In most instances in which we have guaranteed debt of a Homebuilding unconsolidated entity, our partners have also guaranteed that debt and are required to contribute their share of the guarantee payment. In a repayment guarantee, we and our venture partners guarantee repayment of a portion or all of the debt in the event of a default before the lender would have to exercise its rights against the collateral. In connection with many of the loans to Homebuilding unconsolidated entities, we and our joint venture partners (or entities related to them) 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. If the construction is to be done in phases, the guarantee generally is limited to completing only the phases as to which construction has already commenced and for which loan proceeds were used. If we are 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 our share of any funds the unconsolidated entity distributes. As ofAugust 31, 2020 andNovember 30, 2019 , the fair values of the repayment, maintenance, and completion guarantees were not material. We believe that as ofAugust 31, 2020 , in the event we become 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 would be sufficient to repay at least a significant portion of the obligation or we and our partners would contribute additional capital into the venture. In certain instances, we have placed performance letters of credit and surety bonds with municipalities with regard to obligations of our joint ventures (see Note 7 of the Notes to Condensed Consolidated Financial Statements). The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as ofAugust 31, 2020 and it does not represent estimates of future cash payments that will be made to reduce debt balances. Many JV loans have extension options in the loan agreements that would allow the loans to be 51 -------------------------------------------------------------------------------- extended into future years. Principal Maturities of Unconsolidated JVs by Period (In thousands) Total JV Debt 2020 2021 2022 Thereafter Other Debt without recourse to Lennar$ 1,088,048 49,497 211,460 164,396 662,695 - Land seller and CDD debt 8,200 - -
- - 8,200 Maximum recourse debt exposure to Lennar 4,932 - - 4,932 - - Debt issuance costs (11,930 ) - -
- - (11,930 ) Total$ 1,089,250 49,497 211,460 169,328 662,695 (3,730 ) Multifamily: Investments in Unconsolidated Entities AtAugust 31, 2020 , Multifamily had equity investments in 21 unconsolidated entities that are engaged in multifamily residential developments (of which seven had non-recourse debt and 14 had no debt), compared to 19 unconsolidated entities atNovember 30, 2019 . We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties. Through these entities, we are focusing on developing a geographically diversified portfolio of institutional quality multifamily rental properties in selectU.S. markets. Initially, we participated in building multifamily developments and selling them soon after they were completed. Recently, however, we have been focused on developing properties with the intention of retaining them. Participants in these joint ventures have been financial partners. Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners' capital. Each joint venture is governed by an operating agreement that provides significant substantive participating voting rights on major decisions to our partners. The Multifamily segment includes LMV I and LMV II, which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets. Details of each as of and during the nine months endedAugust 31, 2020 are included below: August 31, 2020 (In thousands) LMV I LMV II Lennar's carrying value of investments$ 348,561 250,777 Equity commitments 2,204,016 1,257,700 Equity commitments called 2,137,746 861,508 Lennar's equity commitments 504,016 381,000 Lennar's equity commitments called 496,082
259,886
Lennar's remaining commitments 7,934
121,114
Distributions to Lennar during the nine months endedAugust 31, 2020 23,822
-
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 their debt covenants atAugust 31, 2020 . The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as ofAugust 31, 2020 and it does not represent estimates of future cash payments that will be made to reduce debt balances. Principal Maturities of Unconsolidated JVs by Period (In thousands) Total JV Debt 2020 2021 2022 Thereafter Other Debt without recourse to Lennar$ 2,466,461 92,629 676,916 478,041 1,218,875 - Debt issuance costs (28,246 ) - - - - (28,246 ) Total$ 2,438,215 92,629 676,916 478,041 1,218,875 (28,246 ) Lennar Other: Investments in Unconsolidated Entities As part of the sale of the Rialto investment and asset management platform, we retained our ability to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds. We periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable 52 -------------------------------------------------------------------------------- income to the carried interests. These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled from the applicable funds and have been recorded as revenues. As ofAugust 31, 2020 andNovember 30, 2019 , we had strategic technology investments in unconsolidated entities of$196.1 million and$124.3 million , respectively. Option Contracts We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options. The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties ("optioned") or unconsolidated JVs (i.e., controlled homesites) atAugust 31, 2020 andAugust 31, 2019 : Controlled Homesites Years of Total Supply August 31, 2020 Optioned JVs Total Owned Homesites Homesites Owned (1) East 30,683 12,718 43,401 62,256 105,657 Central 14,504 122 14,626 42,785 57,411 Texas 25,556 - 25,556 35,560 61,116 West 14,911 2,854 17,765 59,475 77,240 Other 1,137 7,544 8,681 2,068 10,749 Total homesites 86,791 23,238 110,029 202,144 312,173 3.8 % of total homesites 35 % 65 % Controlled Homesites Years of Total Supply August 31, 2019 Optioned JVs Total Owned Homesites Homesites Owned (1) East 24,269 16,613 40,882 68,308 109,190 Central 14,760 132 14,892 43,802 58,694 Texas 24,049 - 24,049 37,603 61,652 West 8,193 3,304 11,497 64,627 76,124 Other - 1,310 1,310 3,234 4,544 Total homesites 71,271 21,359 92,630 217,574 310,204 4.4 % of total homesites 30 % 70 %
(1) Based on trailing twelve months of home deliveries.
We evaluate certain option contracts for land to determine whether they are VIEs and, if so, whether we are the primary beneficiary of certain of these option contracts. Although we do not have legal title to the optioned land, if we are deemed to be the primary beneficiary or make a significant deposit for optioned land, we may need to consolidate the land under option at the purchase price of the optioned land. Consolidated land purchase options are reflected in the accompanying condensed consolidated balance sheets as consolidated inventory not owned. Over the next several years, we plan to increase the controlled homesites to 50% of our entire homesite inventory from approximately 35% as ofAugust 31, 2020 . Recently, we have undertaken several strategic land initiatives which include acquiring fully developed homesites from regional developers and may also include building homes in bulk for landowners who will retain them as rental properties. During the nine months endedAugust 31, 2020 , consolidated inventory not owned increased by$82.4 million with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as ofAugust 31, 2020 . The increase was primarily due to the consolidation of option contracts, partially offset by us exercising our options to acquire land under previously consolidated contracts. To reflect the purchase price of the inventory consolidated, we had a net reclass related to option deposits from consolidated inventory not owned to land under development in the accompanying condensed consolidated balance sheet as ofAugust 31, 2020 . The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and our cash deposits. Our exposure to losses related to option contracts with third parties and unconsolidated entities consisted of non-refundable option deposits and pre-acquisition costs totaling$325.4 million and$320.5 million atAugust 31, 2020 andNovember 30, 2019 , respectively. Additionally, we had posted$76.8 million and$75.0 million of letters of credit in lieu of cash deposits under certain land and option contracts as ofAugust 31, 2020 andNovember 30, 2019 , respectively. 53 -------------------------------------------------------------------------------- Contractual Obligations and Commercial Commitments Our contractual obligations and commercial commitments have not changed materially from those reported in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year endedNovember 30, 2019 . There were no outstanding borrowings under our Credit Facility as ofAugust 31, 2020 . (3) New Accounting Pronouncements See Note 12 of the Notes to Condensed Consolidated Financial Statements included under Item 1 of this Report for a discussion of new accounting pronouncements applicable to our company. (4) Critical Accounting Policies We believe that there have been no significant changes to our critical accounting policies during the nine months endedAugust 31, 2020 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, 2019 . 54
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