LENNAR CORPORATION 
By While it is not Lennar's practice to respond to false and scurrilous allegations in the context of litigation, Lennar has a responsibility to its shareholders and the public to respond to their legitimate requests for information. Therefore, Lennar today is providing information pertaining to the personal home loans of its chief operating officer, its outstanding joint ventures and its pending litigation.
In the event that additional false information leads to new investor inquiries, we will continue to respond. In addition, we intend to take appropriate action against the responsible parties.
To protect our investors, the information we are disclosing today confirms the following:
-- Lennar's chief operating officer,
-- Lennar never "treated its joint ventures like a Ponzi scheme."
-- Lennar has never siphoned cash from one joint venture to another.
-- Lennar has never pledged its interest in any joint venture for the benefit of another.
-- Lennar's litigation is accurately reported and reserved for in accordance with generally accepted accounting principles.
-- Lennar never has used lawsuits as a mechanism for avoiding cash payments.
-- LandSource was an arm's-length transaction involving large financial institutions that fully reviewed, vetted and appraised the terms of the venture.
-- No money was ever misdirected in The Bridges project.
-- Lennar's co-member in The Bridges,
-- There have been no reports of any whistleblower complaints concerning these matters to Lennar management, the Board of Directors, independent auditors or an outside employee hotline.
-- Lennar has extensive confidential procedures in place to ensure the free flow of communication by whistleblowers and to ensure their protection from retaliation.
-- Lennar never ordered imported drywall from
-- Lennar has been cited by the media as "the most responsive builder" in dealing with the industry wide issue of imported drywall.
Senior executive
Here are the facts:
In
Jon was referred to Mr. Venneri by Jon's personal attorney, who has never had a relationship with Lennar. The loan Mr. Venneri placed for Jon was the first and only time Mr. Venneri has done so for anyone employed by Lennar. No part of the loan secured by Mr. Venneri for Jon came from funds provided directly or indirectly by Lennar. The funds were sourced from a lender unrelated to Lennar.
Mr. Venneri also secured loans for
Mr. Venneri has a real estate development company called Canyon Capital,
Inc., which acquired, developed and marketed real estate properties in
Jon's
Consistent with Jon's full commitment to and confidence in Lennar and its
future, he made use of the loan to increase his ownership of Lennar's stock.
To date, Jon has drawn down
Documents relating to
JOINT VENTURES
Lennar strategically invests in unconsolidated entities that acquire assets used in its homebuilding operations. Through these entities, Lennar primarily seeks to reduce and share its risk by limiting the amount of its capital invested in land, while obtaining access to potential future homesites and allowing it to participate in strategic ventures. Participants in these joint ventures are land owners/developers, other homebuilders and financial or strategic partners.
Lennar has included extensive financial disclosure regarding its JVs on
its quarterly conference calls with analysts and investors and in its SEC
filings. Since Lennar has not yet filed its Form 10-K for fiscal 2008 that is
due at the end of
-- Each joint venture is governed by an executive committee consisting of members from all of the partners.
-- Lennar does not use its investment in one JV as collateral for debt in another JV.
-- There is no cross collateralization of debt between different unconsolidated entities.
-- Funds are never commingled among Lennar's JVs.
-- The financial position of Lennar's joint ventures is comprised of
substantial equity totaling
-- Lennar's aggregate equity investment in its unconsolidated joint ventures is 29%, compared to its partners' equity of 71%.
-- The joint venture debt is secured by joint venture real estate assets that are adjusted for impairment on a quarterly basis as necessary.
-- The debt financing of Lennar's JVs is primarily non-recourse; in other cases, Lennar and its other partners agree to provide a guarantee.
-- Lennar's maximum recourse exposure related to unconsolidated JVs with
recourse debt is
-- Lennar's consolidated financial statements are audited annually and reviewed quarterly by a top-tier, independent registered public accounting firm.
As of
November 30,
2008 2007
(In thousands)
Assets:
Cash and cash equivalents $ 135,081 301,468
Inventories 7,115,360 7,941,835
Other assets 541,984 827,208
$7,792,425 9,070,511
Liabilities and equity:
Accounts payable and other liabilities $1,042,002 1,214,374
Debt 4,062,058 5,116,670
Equity of:
Lennar 766,752 934,271
Others 1,921,613 1,805,196
Total equity of unconsolidated entities 2,688,365 2,739,467
$7,792,425 9,070,511
Lennar's equity in its unconsolidated entities 29% 34%
Debt to total capital of Lennar's unconsolidated entities is calculated as
follows:
November 30,
2008 2007
(Dollars in thousands)
Debt $4,062,058 5,116,670
Equity 2,688,365 2,739,467
Total capital $6,750,423 7,856,137
Debt to total capital of Lennar's
unconsolidated entities 60.2% 65.1%
Debt to total capital of Lennar's
unconsolidated entities (excluding LandSource) 49.8% 61.1%
The total debt of the unconsolidated entities in which Lennar has
investments was as follows:
November 30,
2008 2007
(In thousands)
Lennar's net recourse exposure $ 392,450 794,934
Reimbursement agreements from partners 127,428 238,692
Partner several recourse 285,519 465,641
Non-recourse land seller debt or other debt 90,519 202,048
Non-recourse debt with completion guarantees 820,435 1,432,880
Non-recourse debt without completion guarantees 2,345,707 1,982,475
Total debt $4,062,058 5,116,670
The summary of Lennar's net recourse exposure related to the unconsolidated entities in which it has investments was as follows:
November 30,
2008 2007
(In thousands)
Several recourse debt-repayment $ 78,547 123,022
Several recourse debt-maintenance 167,941 355,513
Joint and several recourse debt-repayment 138,169 263,364
Joint and several recourse debt-maintenance 123,051 291,727
Land seller debt recourse exposure 12,170 -
Lennar's maximum recourse exposure 519,878 1,033,626
Less joint and several reimbursement
agreements with Lennar's partners -127,428 -238,692
Lennar's net recourse exposure $392,450 794,934
The recourse debt exposure in the table above represents Lennar's maximum exposure to loss from guarantees and does not take into account the underlying value of the collateral.
Although Lennar, in some instances, guarantees the indebtedness of unconsolidated entities in which it has an investment, its unconsolidated entities that have recourse debt have a significant amount of assets and equity. The summarized balance sheets of its unconsolidated entities with recourse debt were as follows:
November 30,
2008 2007
(In thousands)
Assets $ 2,846,819 3,220,695
Liabilities 1,565,148 2,311,216
Equity 1,281,671 909,479
LITIGATION
During the past decade, Lennar has delivered more than 250,000 homes. The
construction of those homes resulted in tens of millions of underlying
payments and contracts. In that context, as of
THE BRIDGES LAWSUIT
This is a lawsuit filed in 2006 by
The proceeds were used by and for the benefit of the venture to pay for construction and operation costs. Marsch and his advisors attributed zero value to the judgment and achieved tax benefits from this position.
Contrary to the allegations, Marsch has received significant proceeds from
the Bridges venture. To date, payments made to or on his behalf exceed
Also contrary to the allegations, Lennar has provided substantial information from inception. Lennar regularly provided balance sheets and reports to Marsch for more than 10 years, in addition to annual financial statements audited by an outside independent accounting firm.
Lennar has never pledged The Bridges' assets for the obligations of any other joint venture. Nor does The Bridges have a "bankrupt partner" as a result of the LandSource bankruptcy.
Marsch has been involved in several lawsuits with Lennar. In 2006, Marsch
also filed another lawsuit against Lennar in connection with a different
project in
LANDSOURCE
In 2003, Lennar and others formed LandSource to acquire and hold various
real estate interests. In
The claim that Lennar caused the other investors and lenders to lose
approximately
CHINESE DRYWALL
Lennar has never specified imported drywall from
WHISTLEBLOWER
Lennar has created two mechanisms for the public, investors, associates and other interested parties to communicate their concerns directly to the company's Board of Directors. First, Lennar has retained an independent firm, The Network, to receive complaints anonymously and report those complaints directly to the Audit Committee of the Board of Directors, in addition to management. The Audit Committee receives a report of the investigation of each communication submitted.
In addition, Lennar provides an email address which can be used to communicate directly with the independent members of the Board of Directors. Our Lead Director, who is also the chairperson of the Independent Directors Committee, receives all messages sent to this email address. Both of these reporting systems are described in our annual proxy statement, and are regularly communicated to our associates. These reporting systems have been in place for more than four years as required by law and by the rules of the New York Stock Exchange.
For more information, contact
Lennar Corporation, founded in 1954, is one of the nation's leading builders of quality homes for all generations. The Company builds affordable, move-up and retirement homes primarily under the Lennar brand name. Lennar's Financial Services segment provides primarily mortgage financing, title insurance and closing services for both buyers of the Company's homes and others. Previous press releases and further information about the Company may be obtained at the "Investor Relations" section of the Company's website, www.lennar.com.
SOURCE Lennar Corporation
