Edgar Filing: LENNAR CORP /NEW/

Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2011

Commission file number 1-11749

LOGO

Lennar Corporation

(Exact name of registrant as specified in its charter)

Delaware

95-4337490

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

700 Northwest 107th Avenue, Miami, Florida 33172

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (305) 559-4000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Class A Common Stock, par value 10¢		New York Stock Exchange
Class B Common Stock, par value 10¢		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO x

The aggregate market value of the registrant’s Class A and Class B common stock held by non-affiliates of the registrant (149,469,565 Class A shares and 9,676,616 Class B shares) as of May 31, 2011, based on the closing sale price per share as reported by the New York Stock Exchange on such date, was $2,984,597,504.

As of December 31, 2011, the registrant had outstanding 157,422,897 shares of Class A common stock and 31,303,195 shares of Class B common stock.

DOCUMENTS INCORPORATED BY REFERENCE:


Related Section		Documents
III		Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before March 29, 2012.

PART I

Item 1.

Business.

Overview of Lennar Corporation

We are one of the nation’s largest homebuilders, a provider of financial services and through our Rialto Investments (“Rialto”) segment, an investor in distressed real estate assets. Our homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which we have investments. We have grouped our homebuilding activities into five reportable segments, which we refer to as Homebuilding East, Homebuilding Central, Homebuilding West, Homebuilding Southeast Florida and Homebuilding Houston. Information about homebuilding activities in states in which our homebuilding activities are not economically similar to those in other states in the same geographic area is grouped under “Homebuilding Other.” Our reportable homebuilding segments and Homebuilding Other have operations located in:

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

Central: Arizona, Colorado and Texas⁽²⁾

West: California and Nevada

Southeast Florida: Southeast Florida

Houston: Houston, Texas

Other: Illinois and Minnesota

(1)

Florida in the East reportable segment excludes Southeast Florida, which is its own reportable segment.

(2)

Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.

Our Financial Services reportable segment provides primarily mortgage financing, title insurance and closing services for both buyers of our homes and others. Substantially all of the loans we originate are sold within a short period in the secondary mortgage market 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. Our Financial Services segment operates generally in the same states as our homebuilding operations, as well as in other states.

Our Rialto reportable segment’s objective is to generate superior, risk-adjusted returns by focusing on commercial and residential real estate opportunities arising from dislocation in the United States real estate markets and the expected eventual restructuring and recapitalization of those markets. Our Rialto segment operations include sourcing, underwriting, pricing and ultimately monetizing real estate and real estate related assets, as well as providing similar services to others in markets across the country.

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

A Brief History of Our Company

We are a national homebuilder that operates in various states with deliveries of 10,845 new homes in 2011. Our company was founded as a local Miami homebuilder in 1954. We completed our initial public offering in 1971, and listed our common stock on the New York Stock Exchange in 1972. During the 1980s and 1990s, we entered and expanded operations in some of our current major homebuilding markets including California, Florida and Texas through both organic growth and acquisitions such as Pacific Greystone Corporation in 1997, amongst others. In 1997, we completed the spin-off of our commercial real estate business to LNR Property Corporation. In 2000, we acquired U.S. Home Corporation, which expanded our operations into New Jersey, Maryland, Virginia, Minnesota and Colorado and strengthened our position in other states. From 2002 through 2005, we acquired several regional homebuilders, which brought us into new markets and strengthened our position in several existing markets. During 2010 and 2011, we made several investments through our Rialto segment in distressed real estate assets to take advantage of opportunities arising from dislocation in the United States real estate market. Towards the end of 2011, we started-up operations in Portland, Oregon with purchases of distressed finished homesites and subsequent to November 30, 2011, we expanded our operations into the Seattle market with the acquisition of approximately 650 finished homesites in 20 communities from Premier Communities.

Recent Business Developments

Overview

During 2011, we continued to see a housing market that was trying to stabilize. We have seen demand for home purchases slowly return to the market place driven by a combination of low home prices and low interest rates as evidenced by our increase in new orders of 15% year over year during the second half of 2011.

We reported net earnings attributable to Lennar of $92.2 million, or $0.48 per diluted share, for the year ended November 30, 2011, compared to net earnings attributable to Lennar of $95.3 million, or $0.51 per diluted share, for the year ended November 30, 2010. In 2011, we remained focused on improving our core homebuilding business. We benefitted greatly from our strategic capital investments in new higher margin communities, which are outperforming the gross margins in our other communities. Our intense focus on efficient business practice through our Everything’s Included program, product re-engineering and selling, general and administrative expenses all contributed to a profitable year.

Our strong balance sheet and liquidity will allow us to capitalize on future opportunities as they present themselves. We also ended 2011 with $1.0 billion in Lennar Homebuilding cash and cash equivalents. We extended our debt maturities by issuing $350 million of 3.25% convertible senior notes due 2021 and subsequent to November 30, 2011 issued an additional $50 million to cover over-allotments. In addition, during the year we retired $249.0 million of senior notes and other debt.

During 2011, our Lennar Financial Services segment had operating earnings of $20.7 million, compared to $31.3 million in the same period last year. The decrease in operating earnings was primarily due to decreased volume in the segment’s mortgage operations. In addition, during 2010 our Lennar Financial Services segment received $5.1 million of proceeds from the previous sale of a cable system.

During 2011, our Rialto segment, which invests in distressed real estate opportunities, had operating earnings of $63.5 million (which included $28.9 million of net earnings attributable to noncontrolling interests), compared to $57.3 million (which included $33.2 million of net earnings attributable to noncontrolling interests) in 2010. The segment’s operating earnings came primarily from the FDIC Portfolios that we invested in and the Bank Portfolios that we purchased in 2010.

In 2010, our Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies (“LLCs”), in partnership with the Federal Deposit Insurance Corporation (“FDIC”), for approximately $243 million (net of transaction costs and a $22 million working capital reserve). The LLCs hold performing and non-performing distressed residential and commercial real estate loans (“FDIC Portfolios”). The FDIC retained a 60% equity interest in the LLCs and provided $626.9 million of financing with 0% interest, which is non-recourse to us and the LLCs. As of November 30, 2011, $219.4 million of cash collections on the loans in excess of expenses were deposited in a defeasance account, established for the repayment of the notes payable, under the agreement with the FDIC.

In 2010, our Rialto segment also acquired distressed residential and commercial real estate loans and real estate owned (“REO”) properties from three financial institutions (“Bank Portfolios”). We paid $310 million for the Bank Portfolios of which $124 million was financed through a 5-year senior unsecured note provided by one of the selling institutions.

In 2011, our Rialto segment had equity in earnings (loss) from unconsolidated entities of ($10.2) million related to our investment in the Alliance Bernstein L.P. (“AB”) Public-Private Investment Program (“PPIP”) fund, which included mark-to-market unrealized losses of $21.4 million, partially offset by $11.2 million of interest and other income earned by the AB PPIP fund. As of November 30, 2011 and 2010, the carrying value of our investment in the AB PPIP fund was $65.2 million and $77.3 million, respectively. AB PPIP fund was formed in 2010 under the Federal government’s PPIP to purchase real estate related securities from banks and other financial institutions. Rialto is a sub-advisor to the AB PPIP fund and receives management fees for its sub-advisory services. We committed to invest $75 million in the AB PPIP fund, of which the remaining outstanding commitment as of November 30, 2011 was $7.5 million. During the years ended November 30, 2011 and 2010, we invested $3.7 million and $63.8 million, respectively in the AB PPIP fund. Total equity commitments of approximately $1.2 billion were made by private investors in this fund, and the U.S. Treasury committed to a matching amount of approximately $1.2 billion of equity in the fund, and agreed to extend up to approximately $2.3 billion of debt financing.

In 2011, our Rialto segment also had equity in earnings (loss) from unconsolidated entities of $2.9 million related to the real estate investment fund (the “Fund”) that it closed in 2010 with initial equity commitments of $300 million (including $75 million committed by us). The Fund’s objective during its three-year investment period is to invest in distressed real estate assets and other related investments that fit within the Fund’s investment parameters. During 2011, the Fund acquired distressed real asset portfolios and invested in non-investment grade commercial mortgage-backed securities (“CMBS”) at a discount to par value and we

contributed to the Fund $60.6 million of which $13.4 million was distributed back to us as a return of excess capital contributions as a result of new investors in the Fund. Total investor contributions to the Fund for the year ended November 30, 2011 were $387.8 million. As of November 30, 2011, the carrying value of our investment in the Fund was $50.1 million. As of November 30, 2011, the equity commitments of the Fund were $700 million (including the $75 million committed by us).

Homebuilding Operations

Overview

We primarily sell single-family attached and detached homes in communities targeted to first-time, move-up and active adult homebuyers. The average sales price of a Lennar home was $244,000 in fiscal 2011, compared to $243,000 in both fiscal 2010 and 2009. We operate primarily under the Lennar brand name.

Through our own efforts and those of unconsolidated entities in which Lennar Homebuilding has investments, we are involved in all phases of planning and building in our residential communities, including land acquisition, site planning, preparation and improvement of land and design, construction and marketing of homes. For additional information about our investments in and relationships with unconsolidated entities, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.

Inventory Impairments and Valuation Adjustments related to Lennar Homebuilding Investments in Unconsolidated Entities

We continued evaluating our balance sheet quarterly for possible impairment on an asset-by-asset basis during fiscal 2011. Based on our evaluations and assessments, during the years ended November 30, 2011, 2010 and 2009, we recorded the following inventory impairments:


	Years Ended November 30,
*(In thousands)*	2011		2010		2009
Valuation adjustments to finished homes, CIP and land on which we intend to build homes	$	35,726		44,717		180,239
Valuation adjustments to land we intend to sell or have sold to third parties		456		3,436		95,314
Write-offs of option deposits and pre-acquisition costs		1,784		3,105		84,372

	$	37,966		51,258		359,925

During the years ended November 30, 2011, 2010 and 2009, we recorded the following valuation adjustments related to Lennar Homebuilding investments in unconsolidated entities:


	Years Ended November 30,
*(In thousands)*	2011		2010		2009
Our share of valuation adjustments related to assets of Lennar Homebuilding unconsolidated entities	$	8,869		10,461		101,893
Valuation adjustments to Lennar Homebuilding investments in unconsolidated entities		10,489		1,735		88,972

	$	19,358		12,196		190,865

The inventory impairments and valuation adjustments to Lennar Homebuilding investments in unconsolidated entities recorded above were estimated based on market conditions and assumptions made by management at the time the valuation adjustments were recorded, which may differ materially from actual results if market conditions or our assumptions change.

Lennar Homebuilding Investments in Unconsolidated Entities

For a number of years, we created and participated in joint ventures that acquired and developed land for our homebuilding operations, for sale to third parties or for use in their own homebuilding operations. Through these joint ventures, we reduced the amount we had to invest in order to assure access to potential future homesites, thereby mitigating certain risks associated with land acquisitions, and, in some instances, we obtained access to land to which we could not otherwise have obtained access or could not have obtained access on as favorable terms. Although these ventures initially served their intended purpose of risk mitigation, as the homebuilding market deteriorated and asset impairments resulted in the loss of equity, some of our joint venture partners became financially unable or unwilling to fulfill their obligations. During 2011, we continued to reevaluate all of our joint venture arrangements, with particular focus on those ventures with recourse indebtedness, and reduced the number of joint ventures in which we were participating as well as the recourse indebtedness of those joint ventures. As of November 30, 2011, we had reduced the number of Lennar Homebuilding unconsolidated joint ventures in which we were participating to 35 from 270 joint

ventures at the peak in 2006 and reduced our maximum recourse debt exposure related to Lennar Homebuilding unconsolidated joint ventures to $108.7 million from $1,764.4 million at the peak in 2006. At November 30, 2011, our net recourse exposure related to Lennar Homebuilding unconsolidated entities was $74.9 million.

Management and Operating Structure

We balance a local operating structure with centralized corporate level management. Decisions related to our overall strategy, acquisitions of land and businesses, risk management, financing, cash management and information systems are centralized at the corporate level. Our local operating structure consists of divisions, which are managed by individuals who generally have significant experience in the homebuilding industry and, in most instances, in their particular markets. They are responsible for operating decisions regarding land identification, entitlement and development, the management of inventory levels for our current volume levels, community development, home design, construction and marketing of our homes.

Diversified Program of Property Acquisition

We generally acquire land for development and for the construction of homes that we sell to homebuyers. Land is subject to specified underwriting criteria and is acquired through our diversified program of property acquisition, which may consist of the following:

•

Acquiring land directly from individual land owners/developers or homebuilders;

•

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

•

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

•

Acquiring parcels of land through joint ventures, primarily to reduce and share our risk, among other factors, by limiting the amount of our capital invested in land, while increasing our access to potential future homesites and allowing us to participate in strategic ventures; and

•

Acquiring distressed assets from banks, government sponsored enterprises, opportunity funds and through relationships established by our Rialto segment.

At November 30, 2011, we owned 94,684 homesites and had access through option contracts to an additional 16,702 homesites, of which 8,314 were through option contracts with third parties and 8,388 were through option contracts with Lennar Homebuilding unconsolidated entities in which we have investments. At November 30, 2010, we owned 84,482 homesites and had access through option contracts to an additional 19,974 homesites, of which 8,490 were through option contracts with third parties and 11,484 were through option contracts with Lennar Homebuilding unconsolidated entities in which we had investments.

Construction and Development

We generally supervise and control the development of land and the design and building of our residential communities with a relatively small labor force. We hire subcontractors for site improvements and virtually all of the work involved in the construction of homes. Arrangements with our subcontractors generally provide that our subcontractors will complete specified work in accordance with price schedules and applicable building codes and laws. The price schedules may be subject to change to meet changes in labor and material costs or for other reasons. We believe that the sources and availability of raw materials to our subcontractors are adequate for our current and planned levels of operation. We generally do not own heavy construction equipment. We finance construction and land development activities primarily with cash generated from operations, debt issuances and equity offerings.

Marketing

We offer a diversified line of homes for first-time, move-up and active adult homebuyers available in a variety of environments ranging from urban infill communities to golf course communities. Our Everything’s Included^® marketing program simplifies the homebuying experience by including desirable features as standard items. This marketing program enables us to differentiate our homes from those of our competitors by creating value through standard upgrades and competitive pricing, while reducing construction and overhead costs through a simplified manufacturing process, product standardization and volume purchasing. We sell our homes primarily from models that we have designed and constructed. During 2011, the homes we delivered had an average sales price of $244,000.

We employ sales associates who are paid salaries, commissions or both to complete on-site sales of homes. We also sell homes through independent brokers. We advertise our communities through newspapers, radio advertisements and other local and regional publications, on billboards and on the Internet, including our website, www.lennar.com. In addition, we advertise our active adult communities in areas where prospective active adult homebuyers live.

Quality Service

We strive to continually improve homeowner customer satisfaction throughout the pre-sale, sale, construction, closing and post-closing periods. Through the participation of sales associates, on-site construction supervisors and customer care associates, all working in a team effort, we strive to create a quality homebuying experience for our customers, which we believe leads to enhanced customer retention and referrals. The quality of our homes is substantially affected by the efforts of on-site management and others engaged in the construction process, by the materials we use in particular homes or by other similar factors.

We warrant our new homes against defective materials and workmanship for a minimum period of one year after the date of closing. Although we subcontract virtually all segments of construction to others and our contracts call for the subcontractors to repair or replace any deficient items related to their trades, we are primarily responsible to the homebuyers for the correction of any deficiencies.

Deliveries

The table below indicates the number of deliveries for each of our current reportable homebuilding segments and Homebuilding Other during our last three fiscal years:


	Years Ended November 30,
	2011		2010		2009
East		4,576		4,539		4,095
Central		1,661		1,682		1,796
West		1,846		2,079		2,480
Southeast Florida		904		536		488
Houston		1,411		1,645		2,150
Other		447		474		469

Total		10,845		10,955		11,478

Of the total home deliveries listed above, 99, 96 and 56, respectively, represent deliveries from unconsolidated entities for the years ended November 30, 2011, 2010 and 2009.

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 contracts if they fail to qualify for financing or under certain other circumstances. We experienced a cancellation rate of 19% in 2011, compared to 17% and 18%, respectively, in 2010 and 2009. The cancellation rate for the year ended November 30, 2011 was within a range that is consistent with historical cancellation rates. Substantially all homes currently in backlog will be delivered in fiscal year 2012. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.

The table below indicates the backlog dollar value for each of our current reportable homebuilding segments and Homebuilding Other as of the end of our last three fiscal years:


	Years Ended November 30,
*(Dollars in thousands)*	2011		2010		2009
East	$	220,974		176,588		199,052
Central		65,256		52,923		36,158
West		97,292		58,072		143,868
Southeast Florida		52,013		39,035		13,702
Houston		79,800		58,822		60,876
Other		45,324		21,852		25,915

Total	$	560,659		407,292		479,571

Of the dollar value of homes in backlog listed above, $1.0 million, $2.1 million and $7.2 million, respectively, represent the backlog dollar value from unconsolidated entities at November 30, 2011, 2010 and 2009.

Lennar Financial Services Operations

Mortgage Financing

We primarily originate conforming conventional, FHA-insured, VA-guaranteed residential mortgage loan products and other products to our homebuyers and others through our financial services subsidiaries, Universal American Mortgage Company, LLC and Eagle Home Mortgage, LLC, which are located generally in the same states as our homebuilding operations as well as other states. In 2011, our financial services subsidiaries provided loans to 78% of our homebuyers who obtained mortgage financing in areas where we offered services. Because of the availability of mortgage loans from our financial services subsidiaries, as well as independent mortgage lenders, we believe creditworthy purchasers of our homes have access to financing.

During 2011, we originated approximately 13,800 mortgage loans totaling $2.9 billion, compared to 15,200 mortgage loans totaling $3.3 billion during 2010. Substantially all of the loans we originate are sold within a short period in the secondary mortgage market 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. Therefore, we have limited direct exposure related to the residential mortgages we originate.

We have a corporate risk management policy under which we hedge our interest rate risk on rate-locked loan commitments and loans held-for-sale to mitigate exposure to interest rate fluctuations. We finance our mortgage loan activities with borrowings under our financial services warehouse repurchase facilities or from our operating funds. One of our 364-day warehouse repurchase facilities with a maximum aggregate commitment of $150 million and an additional uncommitted amount of $73 million matures in February 2012, and another 364-day warehouse repurchase facility with a maximum aggregate commitment of $175 million (plus a $25 million temporary accordion feature that expired December 31, 2011) matures in July 2012. We expect the facilities to be renewed or replaced with other facilities when they mature.

Title Insurance and Closing Services

We provide title insurance and closing services to our homebuyers and others. During 2011, we provided title and closing services for approximately 86,400 real estate transactions, and issued approximately 121,800 title insurance policies through our underwriter, North American Title Insurance Company, compared to 102,500 real estate transactions and 107,600 title insurance policies issued during 2010. Title and closing services are provided by agency subsidiaries in Arizona, California, Colorado, District of Columbia, Florida, Illinois, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Jersey, New York, Oklahoma, Pennsylvania, Texas, Utah, Virginia, Wisconsin and Wyoming. Title insurance services are provided in these same states, as well as in Alabama, Delaware, Georgia, Ohio, North Carolina, South Carolina and Tennessee.

Rialto Investments Operations

The Rialto segment is focused on acquisitions of distressed real estate and real estate related assets utilizing Rialto’s abilities to source, underwrite, price, manage and ultimately monetize such assets in markets across the United States. For more detail regarding the acquisitions and investments made by our Rialto segment during 2011, as well as its operations, refer to the Overview of Lennar Corporation section earlier in Item 1 of this Report.

Seasonality

We have historically experienced variability in our results of operations from quarter-to-quarter due to the seasonal nature of the homebuilding business.

Competition

The residential homebuilding industry is highly competitive. We compete for homebuyers in each of the market regions where we operate with numerous national, regional and local homebuilders, as well as with resales of existing homes and with the rental housing market. In recent years, lenders’ efforts to sell foreclosed homes have become an increasingly competitive factor within the homebuilding industry. We compete for homebuyers on the basis of a number of interrelated factors including location, price, reputation, amenities, design, quality and financing. In addition to competition for homebuyers, we also compete with other homebuilders for desirable properties, raw materials and access to reliable, skilled labor. We compete for land buyers with third parties in our efforts to sell land to homebuilders and others. We believe we are competitive in the market regions where we operate primarily due to our:

•

Balance sheet, where we continue to focus on inventory management and liquidity;

•

Access to land, particularly in land-constrained markets;

•

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

•

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

•

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

•

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

•

Everything’s Included^® marketing program, which simplifies the homebuying experience by including desirable features as standard items.

Our financial services operations compete with other mortgage lenders, including national, regional and local mortgage bankers and brokers, banks, savings and loan associations and other financial institutions, in the origination and sale of mortgage loans. Principal competitive factors include interest rates and other features of mortgage loan products available to the consumer. We compete with other title insurance agencies and underwriters for closing services and title insurance. Principal competitive factors include service and price.

Rialto’s business of purchasing distressed assets is highly competitive and fragmented. A number of entities and funds have been formed recently for the purpose of acquiring real estate related assets at prices that reflect the depressed state of the real estate market, and it is likely that additional entities and funds will be formed for this purpose during the next several years. We compete with other purchasers of distressed assets. We compete in the marketplace for distressed asset portfolios based on many factors, including purchase price, representations, warranties and indemnities, timeliness of purchase decisions and reputation. We believe that our major distinction from the competition is that our team is made up of already in place managers who are already working out loans and dealing with similar borrowers. Additionally, because of the high content of loans made to developers, we believe having our homebuilding team participating in the underwriting process provides us with a distinct advantage in our evaluation of these assets. We believe that our experienced team and the infrastructure already in place, including our investment in a service provider, are ahead of our competitors. This has us well positioned for the large pipeline of opportunity that has been building.

Regulation

Homes and residential communities that we build must comply with state and local laws and regulations relating to, among other things, zoning, construction permits or entitlements, construction material requirements, density requirements, and requirements relating to building design and property elevation, building codes and handling of waste. These include laws requiring the use of construction materials that reduce the need for energy-consuming heating and cooling systems. These laws and regulations are subject to frequent change and often increase construction costs. In some instances, we must comply with laws that require commitments from us to provide roads and other offsite infrastructure to be in place prior to the commencement of new construction. These laws and regulations are usually administered by counties and municipalities and may result in fees and assessments or building moratoriums. In addition, certain new development projects are subject to assessments for schools, parks, streets and highways and other public improvements, the costs of which can be substantial. Also, some states are attempting to make homebuilders responsible for violations of wage and other labor laws by their subcontractors.

The residential homebuilding industry is also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. These environmental laws include such areas as storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. Environmental laws and existing conditions may result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas.

In recent years, several cities and counties in which we have developments have submitted to voters “slow growth” initiatives and other ballot measures that could impact the affordability and availability of land suitable for residential development within those localities. Although many of these initiatives have been defeated, we believe that if similar initiatives were approved, residential construction by us and others within certain cities or counties could be seriously impacted.

In order to make it possible for some of our homebuyers to obtain FHA-insured or VA-guaranteed mortgages, we must construct the homes they buy in compliance with regulations promulgated by those agencies.

Various states have statutory disclosure requirements relating to the marketing and sale of new homes. These disclosure requirements vary widely from state-to-state. In addition, some states require that each new home be registered with the state at or before the time title is transferred to a buyer (e.g., the Texas Residential Construction Commission Act).

In some states, we are required to be registered as a licensed contractor and comply with applicable rules and regulations. In various states, our new home consultants are required to be registered as licensed real estate agents and to adhere to the laws governing the practices of real estate agents.

Our mortgage and title subsidiaries must comply with applicable real estate laws and regulations. The subsidiaries are licensed in the states in which they do business and must comply with laws and regulations in those states. These laws and regulations include provisions regarding capitalization, operating procedures, investments, lending and privacy disclosures, forms of policies and premiums.

A subsidiary of Newhall, an unconsolidated entity of which we currently indirectly own 15%, provides water to a portion of Los Angeles County, California. This subsidiary is subject to extensive regulation by the California Public Utilities Commission.

Several federal, state and local laws, rules, regulations and ordinances, including, but not limited to, the Federal Fair Debt Collection Practices Act (“FDCPA”) and the Federal Trade Commission Act and comparable state statutes, regulate consumer debt collection activity. Although, for a variety of reasons, we may not be specifically subject to the FDCPA or certain state statutes that govern debt collectors, it is our policy to comply with applicable laws in our collection activities. To the extent that some or all of these laws apply to our collection activities or failure to comply with such laws could have a material adverse effect on us.

Compliance Policy

We have a Code of Business and Ethics that requires every associate (i.e., employee) and officer to at all times deal fairly with the Company’s customers, subcontractors, suppliers, competitors and associates, and states that all our associates, officers and directors are expected to comply at all times with all applicable laws, rules and regulations. Despite this, there are instances in which subcontractors or others through which we do business engage in practices that do not comply with applicable regulations and guidelines. There have been instances in which some of our associates were aware of these practices and did not take adequate steps to prevent them. When we learn of practices relating to homes we build or financing we provide that do not comply with applicable regulations or guidelines, we move actively to stop the non-complying practices as soon as possible and we have taken disciplinary action with regard to our associates who were aware of the practices and did not take steps to remedy them, including in some instances terminating their employment. Our Code of Business and Ethics also has procedures in place that allows whistleblowers to submit their concerns regarding our operations, financial reporting, business integrity or any other related matter anonymously to the Audit Committee of our Board of Directors and/or to the non-management directors of our Board of Directors, which is intended to give potential whistleblowers a means of making their concerns known without a possibility of retaliation.

Associates

At December 31, 2011, we employed 4,062 individuals of whom 2,180 were involved in the Lennar Homebuilding operations, 1,688 were involved in the Lennar Financial Services operations, and 194 were involved in the Rialto operations, compared to November 30, 2010, when we employed 4,108 individuals of whom 2,242 were involved in the Lennar Homebuilding operations and 1,763 were involved in Lennar Financial Services operations, and 103 were involved in the Rialto operations. We do not have collective bargaining agreements relating to any of our associates. However, we subcontract many phases of our homebuilding operations and some of the subcontractors we use have associates who are represented by labor unions.

Relationship with LNR Property Corporation

In 1997, we transferred our commercial real estate investment and management business to LNR Property Corporation (“LNR”), and spun-off LNR to our stockholders. As a result, LNR became a publicly-traded company, and the family of Stuart A. Miller, our Chief Executive Officer and a Director, which had voting control of our company, became the controlling shareholder of LNR.

Since the spin-off, we have entered into a number of joint ventures and other transactions with LNR. Many of the joint ventures were formed to acquire and develop land, part of which was subsequently sold to us or other homebuilders for residential building and part of which was subsequently sold to LNR for commercial development. In February 2005, LNR was acquired by a privately-owned entity. Although Mr. Miller’s family was required to purchase a 20.4% financial interest in that privately-owned entity, this interest was non-voting and neither Mr. Miller nor anyone else in his family was an officer or director, or otherwise was involved in the management, of LNR or its parent. Nonetheless, because the Miller family had a financial interest in LNR’s parent, we adopted a bylaw that required that all significant transactions with LNR, or entities in which it has an interest, be reviewed and approved by an Independent Directors Committee of our Board of Directors. In 2011, the Miller family ceased to have any interest in LNR or its parent. Accordingly, we anticipate that the bylaw requiring Independent Director Committee review of transactions involving LNR will be deleted.

LandSource/Newhall Transactions

In January 2004, a company of which we and LNR each owned 50% acquired The Newhall Land and Farming Company for approximately $1 billion, including $200 million we contributed and $200 million that LNR contributed (the remainder came from borrowings and sales of properties to LNR). Subsequently, we and LNR each transferred our interests in most of our joint ventures to the jointly-owned company that had acquired The Newhall Land and Farming Company, and that company was renamed LandSource Communities Development LLC (“LandSource”).

In February 2007, LandSource admitted a new majority partner and, the joint venture obtained $1.6 billion of new non-recourse financing. The transaction resulted in a cash distribution to us of $707.6 million and a similar distribution to LNR. Our resulting ownership of LandSource was 16%.

In June 2008, LandSource and a number of its subsidiaries commenced proceedings under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Among other things, this resulted in termination of options we had to purchase land from LandSource. In July 2009, the United States Bankruptcy Court for the District of Delaware confirmed a plan of reorganization of LandSource under which LandSource was reorganized into a new company named Newhall Land Development, LLC, (“Newhall”), which emerged from Chapter 11 free of LandSource’s previous bank debt. As part of the reorganization, we invested $140 million in exchange for an approximately 15% equity interest in the reorganized Newhall, ownership in several communities that were formerly owned by LandSource, the settlement and release of any claims that might have been asserted against us and assignment to us of certain claims LandSource had against third parties.

NYSE Certification

We submitted our 2010 Annual CEO Certification to the New York Stock Exchange on April 13, 2011. The certification was not qualified in any respect.

Available Information

Our corporate website is www.lennar.com. We make available on our website, free of charge, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file these documents with, or furnish them to, the Securities and Exchange Commission. Information on our website is not part of this document.

Our website also includes printable versions of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and the charters for each of the Audit, Compensation and Nominating and Corporate Governance Committees of our Board of Directors. Each of these documents is also available in print to any stockholder who requests a copy by addressing a request to:

Lennar Corporation

Attention: Office of the General Counsel

700 Northwest 107^th Avenue

Miami, Florida 33172

Item 1A.

Risk Factors.

The following are what we believe to be the principal risks that might materially affect us and our businesses.

Homebuilding Market and Economic Risks

The homebuilding industry has experienced a significant downturn over the last several years. A continuing reduced demand for new homes could adversely affect our sales volume and pricing even more than has occurred to date.

The homebuilding industry has experienced a significant downturn over the last several years. As a result, we have experienced a significant decline in demand for newly built homes in almost all of our markets. The number of homes we sold in 2011 was only 22% of the number of homes we sold in 2006 and our home sales revenues in 2011 were only 18% of what they were in 2006. This decline in demand, together with an oversupply of alternatives to new homes, such as rental properties and used homes (including foreclosed homes), has depressed prices and, at least through 2009, reduced margins. In 2010 and 2011, our margins improved to closer to their historically normal levels, but demand continued to be weak, in part because of limited availability of mortgage financing for potential homebuyers, and there continued to be a significant stock of used homes, including foreclosed homes. We have no basis for predicting how long demand and supply will remain out of balance in various homebuilding markets or whether sales volumes or pricing will ever return to pre-2007 levels.

Demand for new homes is sensitive to economic conditions over which we have no control, such as the availability of mortgage financing and the level of employment.

Demand for new homes is sensitive to changes in economic conditions such as the level of employment, consumer confidence, consumer income, the availability of financing and interest rate levels. During 2009, 2010 and 2011, the mortgage

lending industry experienced significant instability. As a result of increased default rates, particularly (but not entirely) with regard to sub-prime and other non-conforming loans, and in part because of governmental pressures to improve capital ratios, many lenders have reduced their willingness to make, and tightened their credit requirements with regard to, residential mortgage loans. Fewer loan products, stricter loan qualification standards and higher down payment requirements have made it more difficult for many potential homebuyers to finance the purchase of homes, including those we build. Although our finance company subsidiaries offer mortgage loans to potential buyers of most of the homes we build, we may no longer be able to offer financing terms that are attractive to our potential buyers. Lack of availability of mortgage financing at acceptable rates reduces demand for the homes we build, including in some instances causing potential buyers to cancel contracts they have signed.

There has also been a substantial loss of jobs in the United States during the last several years. People who are not employed or are concerned about loss of their jobs are unlikely to purchase new homes and may be forced to try to sell the homes they own. Therefore, the current employment situation can adversely affect us both by reducing demand for the homes we build and by increasing the supply of homes for sale.

Mortgage defaults, particularly by homebuyers who financed homes using non-traditional financing products, are increasing the number of homes available for resale.

During the period of high demand prior to 2007, many homebuyers financed their purchases using non-traditional adjustable rate or interest only mortgages or other mortgages, including sub-prime mortgages, that involved, at least during initial years, monthly payments that were significantly lower than those required by conventional fixed rate mortgages. As a result, new homes became more affordable. However, as monthly payments for these homes have increased either as a result of increasing adjustable interest rates or as a result of principal payments coming due, some of these homebuyers have defaulted on their payments and had their homes foreclosed, which has increased the inventory of homes available for resale. This is likely to continue. Foreclosure sales and other distress sales may result in further declines in market prices for homes. In an environment of declining home prices, many homebuyers may delay purchases of homes in anticipation of lower prices in the future.

It has become more difficult for potential homebuyers to obtain mortgage financing, which is reducing demand for homes we offer.

Many lenders and other holders of mortgage loans have been adversely affected in recent years by a combination of reduced ability of homeowners to meet mortgage obligations and reduced value of the homes that secure mortgage loans. As a result, lenders and secondary market mortgage purchasers have eliminated most of their non-traditional and sub-prime financing products and increased the qualifications needed to obtain mortgage loans. In addition, if a home appraises for less than the sales price, a greater down-payment may need to be provided by the potential homebuyer in order to meet the lender requirement or the sales price may need to be reduced. Although mortgage interest rates were very low during 2010 and 2011, the factors that have made mortgage loans more difficult to obtain have had a material adverse effect on our sales volume.

We have had to take significant write-downs of the carrying values of land we own and of our investments in unconsolidated entities, and a continuing decline in land values could result in additional write-downs.

Some of the land we currently own was purchased at high prices and had to be written down to reduced values that reflect current market conditions. Also, prior to 2007, we obtained options to purchase land at prices that no longer are attractive, and in connection with those options, we made substantial non-refundable deposits and, in some instances, incurred pre-acquisition costs. When demand fell, we were required to take significant write-downs of the carrying value of our land inventory and we elected not to exercise many high price options, even though that required us to forfeit deposits and write-off pre-acquisition costs.

Additionally, as a result of these market conditions, we recorded significant valuation adjustments to our investments in unconsolidated entities and recorded our share of adjustments made by unconsolidated entities to the carrying values of their assets.

The combination of land inventory impairments, write-offs of option deposits and pre-acquisition costs and valuation adjustments relating to our investments in unconsolidated entities had a material negative effect on our operating results for fiscal 2007, 2008 and 2009, contributing to much of our net losses in those fiscal years. Write downs were significantly lower during 2010 and 2011 and many of the write downs were primarily as a result of changes in strategy and other developments regarding certain of our joint ventures. However, if market conditions deteriorate further or our strategies related to certain assets change, some of our assets may be subject to further write-downs in the future, decreasing the asset values reflected on our balance sheet and adversely affecting our earnings and our stockholders’ equity.

Inflation can adversely affect us, particularly in a period of declining home sale prices.

Inflation can have a long-term impact on us because increasing costs of land, materials and labor require us to attempt to increase the sale prices of homes in order to maintain satisfactory margins. Although the rate of inflation has been low for the last several years, some economists predict that government spending programs and other factors could lead to significant inflation in

the future. An excess of supply over demand for new homes, such as the one we are currently experiencing, requires that we reduce prices, rather than increase them, but it does not necessarily result in reductions, or prevent increases, in the costs of materials and labor. The effect of cost increases that we cannot recover by increasing prices would be to reduce the margins on the homes we sell. That would make it more difficult for us to recover the full cost of previously purchased land, and could lead to significant further reductions in the value of our land inventory.

We face significant competition in our efforts to sell new homes.

The homebuilding industry is highly competitive. We compete in each of our markets with numerous national, regional and local homebuilders. This competition with other homebuilders can reduce the number of homes we deliver or cause us to accept reduced margins in order to maintain sales volume. We also compete with the resale of existing homes, including foreclosed homes (many of which had been owned by housing speculators) and rental housing.

Operational Risks

Homebuilding is subject to warranty and liability claims in the ordinary course of business that can be significant.

As a homebuilder, we are subject to home warranty and construction defect claims arising in the ordinary course of business. We are also subject to liability claims for injuries that occur in the course of construction activities. We record warranty and other reserves for the homes we sell based on historical experience in our markets and our judgment of the qualitative risks associated with the types of homes we built. We have, and many of our subcontractors have, general liability, property, errors and omissions, workers compensation and other business insurance. These insurance policies protect us against a portion of our risk of loss from claims, subject to certain self-insured retentions, deductibles and other coverage limits. However, because of the uncertainties inherent in these matters, we cannot provide assurance that our insurance coverage or our subcontractors’ insurance and financial resources will be adequate to address all warranty, construction defect and liability claims in the future. Additionally, the coverage offered and the availability of general liability insurance for construction defects are currently limited and costly. As a result, an increasing number of our subcontractors are unable to obtain insurance, and we have in many cases waived our customary insurance requirements. There can be no assurance that coverage will not be further restricted and become even more costly.

Things done by subcontractors can expose us to warranty costs and other risks.

We rely on subcontractors to perform the actual construction of our homes, and in many cases, to select and obtain raw materials. Despite our detailed specifications and quality control procedures, in some cases, improper construction processes or defective materials, such as Chinese drywall, were used in the construction of our homes. When we find these issues, we repair them in accordance with our warranty obligations. Defective products widely used by the homebuilding industry can result in the need to perform extensive repairs to large numbers of homes. The cost of complying with our warranty obligations in these cases may be significant if we are unable to recover the cost of repair from subcontractors, materials suppliers and insurers.

We also can suffer reputational damage, and may be exposed to possible liability, if subcontractors fail to comply with all applicable laws, including laws involving things that are not within our control. When we learn about possibly improper practices by subcontractors, we try to cause the subcontractors to discontinue them. However, we are not always able to do that, and even when we can, it may not avoid claims against us relating to what the subcontractors had been doing.

Natural disasters and severe weather conditions could delay deliveries, increase costs and decrease demand for new homes in affected areas.

Many of our homebuilding operations are conducted in areas that are subject to natural disasters and severe weather. The occurrence of natural disasters or severe weather conditions can delay new home deliveries, increase costs by damaging inventories and negatively impact the demand for new homes in affected areas. If our insurance does not fully cover business interruptions or losses resulting from these events, our results of operations could be adversely affected.

Supply shortages and other risks related to the demand for skilled labor and building materials could increase costs and delay deliveries.

Increased costs or shortages of skilled labor and/or lumber, framing, concrete, steel and other building materials could cause increases in construction costs and construction delays. We generally are unable to pass on increases in construction costs to customers who have already entered into sales contracts, as those sales contracts generally fix the price of the homes at the time the contracts are signed, which may be well in advance of the construction of the home. Sustained increases in construction costs may, over time, erode our margins, particularly if pricing competition restricts our ability to pass on any additional costs of materials or labor, thereby decreasing our margins.

Reduced numbers of home sales extend the time it takes us to recover land purchase and property development costs.

We incur many costs even before we begin to build homes in a community. These include costs of preparing land and installing roads, sewers and other utilities, as well as taxes and other costs related to ownership of the land on which we plan to build homes. Reducing the rate at which we build homes extends the length of time it takes us to recover these costs. Also, when we have terminated land purchase options, we have forfeited deposits we made with regard to the options, and in many instances, lost the benefit of pre-acquisition costs we incurred with regard to properties that were the subject of the options. We may never recover those costs.

We do not have a corporate credit line.

Our business requires that we be able to finance the development of our residential communities. In the past we have had a corporate credit facility (with Lennar Corporation as the borrower and most of our wholly-owned subsidiaries, other than finance company subsidiaries, as guarantors) that we used to help finance development activities. However, because of the decline in our land purchasing, development and building activities, and our ability to obtain debt and equity financing through the capital markets, we have had little need for the credit facility in recent years. Therefore, in February 2010, we terminated our $1.1 billion senior unsecured revolving credit facility in order to eliminate the cost of maintaining it (although, we established and continue to maintain letter of credit facilities). While we believe that under current circumstances, the funds we generate through our operations, together with our ability to sell debt and equity securities into capital markets, give us access to all the funds we need, if market conditions lead us to want to increase our homebuilding activities to a level that requires us to incur short-term borrowings, but we are not able to arrange a new credit facility, the absence of a credit facility may prevent us from taking full advantage of market opportunities.

We do not have an investment grade credit rating, which makes it more costly for us to sell debt securities.

Our ability to sell debt securities on favorable terms has been an important factor in financing our business and operations in a profitable manner. In 2007 and 2008, each of the principal credit rating agencies lowered our credit ratings, and as a result we no longer have investment grade ratings. This makes it more costly, and under some circumstances could make it more difficult, for us to access the debt capital markets for funds we may require in order to implement our business plans and achieve our growth objectives.

Despite not having an investment grade rating, during 2010 and 2011, we were able to sell debt securities in capital market transactions at significantly lower interest rates than in previous years. During 2010, we sold $250 million principal amount of 6.95% senior notes due 2018, $276.5 million of 2.00% convertible senior notes and $446 million of 2.75% convertible senior notes, both due in 2020. During 2011, we sold $350 million principal amount of 3.25% convertible senior notes due 2021, and we sold an additional $50 million principal amount shortly after November 30, 2011, when the initial purchasers of the 3.25% notes exercised an option to purchase additional notes to cover over-allotments. Despite the relatively low interest rates with regard to the notes we sold in 2010 and 2011, the rates probably would have been even lower if we had had an investment grade rating. If we were subject to further downgrades, that would exacerbate the cost and difficulty of accessing debt capital markets.

The repurchase warehouse credit facilities of our Financial Services segment will expire in 2012.

Our Lennar Financial Services segment has a 364-day warehouse repurchase facility with a maximum aggregate commitment of $150 million and an additional uncommitted amount of $73 million that matures in February 2012, and another 364-day warehouse repurchase facility with a maximum aggregate commitment of $175 million (plus a $25 million temporary accordion feature that expired December 31, 2011) that matures in July 2012. The Financial Services segment uses these facilities to finance its mortgage lending activities until the mortgage loans are sold to investors and expects both facilities to be renewed or replaced with other facilities when they mature. If we are unable to renew or replace these facilities when they mature, that could seriously impede the activities of our Financial Services segment, unless we are willing and able to provide the funds our Financial Services segment needs to finance its mortgage originations until the mortgages can be sold.

We conduct some of our operations through unconsolidated joint ventures with independent third parties in which we do not have a controlling interest and we can be adversely impacted by joint venture partners’ failure to fulfill their obligations.

Most joint ventures borrowed money to help finance their activities, and although recourse on the loans was generally limited to the joint ventures and their properties, frequently we and our joint venture partners were required to provide maintenance guarantees (guarantees that the values of the joint ventures’ assets would be at least specified percentages of their borrowings) or limited repayment guarantees.

If a joint venture partner does not perform its obligations, we may be required to make significant financial expenditures or otherwise undertake the performance of obligations not satisfied by our partner at significant cost to us. Also, when we have guaranteed joint venture obligations, we have been given the right to be reimbursed by our joint venture partners for any amounts by which we pay more than our pro rata share of the joint ventures’ obligations. However, particularly when our joint venture partners were having financial problems, we often had difficulty collecting the sums they owed us, and therefore, we sometimes were required to pay a disproportionately large portion of the guaranteed amounts. In addition, because we lacked controlling interests in these joint ventures, we were usually unable to require that they sell assets, return invested capital or take any other action without the consent of at least one of our joint venture partners. As a result, without joint venture partner consent, we were unable to liquidate our joint venture investments to generate cash. Even if we were able to liquidate joint venture investments, the amounts received upon liquidation sometimes were insufficient to cover the costs we had incurred in satisfying joint venture obligations.

During 2007 through 2011, we have significantly reduced the number of joint ventures in which we participate and our exposure to recourse indebtedness of the remaining joint ventures. However, the risks to us from joint ventures in which we are a participant are likely to continue at least as long as the value of residential properties remains low.

The unconsolidated entities in which we have investments may not be able to modify the terms of their debt arrangements.

Some of the unconsolidated entities’ debt arrangements contain financial covenants they may not be able to meet. Additionally, certain joint venture loan agreements have minimum number of homesite takedown requirements in which the joint ventures are required to sell a minimum number of homesites over a stated period of time. Due to the deterioration of the homebuilding market, many of the joint ventures were required to repay, refinance, renegotiate or extend their loans. This action might be required, for example, in the case of an expired maturity date or a failure to comply with the loan’s covenants. There can be no assurance that the joint ventures will be able to finance, refinance, renegotiate or extend, on terms we and our joint venture partners deem acceptable. If joint ventures are unsuccessful in these efforts, we could be required to provide at least a portion of the funds the joint ventures need to be able to repay the loans.

We could be adversely impacted by the loss of key management personnel.

Our future success depends, to a significant degree, on the efforts of our senior management. Our operations could be adversely affected if key members of senior management cease to be active in our company. As a result of a decline in our stock price, previous retention mechanisms, such as equity awards, have diminished in value.

Our Financial Services segment is adversely affected by reduced demand for our homes.

A majority of the mortgage loans made by our Financial Services segment are made to buyers of homes we build. Therefore, a decrease in the demand for our homes adversely affects the financial results of this segment of our business.

If our ability to resell mortgages is impaired, we may be required to reduce home sales unless we are willing to become a long term investor in loans we originate.

Substantially all of the loans we originate are sold within a short period in the secondary mortgage market 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 secondary mortgage market has been severely impacted by the decline in property values over the past several years. To date, our finance company subsidiaries have been able to sell substantially all the mortgages they have originated. If, however we became unable to sell loans into the secondary mortgage market or directly to Fannie Mae and Freddie Mac, we would either have to curtail our origination of mortgage loans, which among other things, could significantly reduce our ability to sell homes, or to commit our own funds to long term investments in mortgage loans, which could, among other things, delay the time when we recognize revenues from home sales on our statements of operations.

Our Financial Services segment has received demands that it repurchase mortgage loans it sold in the secondary mortgage market and we may be required to repurchase loans in excess of amounts reserved.

Particularly during 2009, 2010 and 2011, our Financial Services segment received demands that it repurchase certain loans that it sold to entities in the secondary mortgage market. The demands have related primarily to loans originated during 2005

through 2007 and are frequently based on assertions that information borrowers gave our Financial Services segment was not accurate. In many instances, we have successfully disputed the claims. However, in some instances we have settled claims to maintain our business relationships with the claimants or to avoid litigation costs. In other instances, there are active disputes regarding certain loans. While we believe we have significant defenses against virtually all of the currently unresolved repurchase demands, we have established a reserve based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received, our actual past repurchases and losses through the disposition of affected loans. At November 30, 2011 and 2010, this reserve was $6.1 million and $9.9 million, respectively. If there is an unexpected increase in the amount of repurchase demands we receive, or if we are not able to resolve repurchase demands on a basis consistent with our experience to date, the cost to us with regard to the repurchase demands could exceed the reserve we have established.

Our Rialto segment invests in distressed real estate assets at significant discounts; however, if the real estate markets deteriorate significantly we could suffer losses.

Almost all the investments to date by our Rialto segment have involved acquisitions of portfolios of, or interests in portfolios of, distressed debt instruments and foreclosed properties. That is consistent with the Rialto segment’s objective of focusing on commercial and residential real estate opportunities arising from dislocations in the United States real estate markets and the restructuring and recapitalization of those markets. However, the Rialto segment’s investing in distressed debt and foreclosed properties presents many risks in addition to those inherent in normal lending activities, including the risk that the anticipated restructuring and recapitalization of the United States real estate markets will not take place for many years, the risk that defaults on debt instruments in which the Rialto segment invests will be greater than anticipated and the risk that if the Rialto segment has to liquidate its investments into the market, it will suffer severe losses in doing so. There is also the possibility that, even if the Rialto segment’s investments perform as expected, absence of a liquid market for these investments will result in a need to reduce the values at which they are carried on our financial statements.

If Rialto’s investments in real estate are not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation reserves, our earnings could be reduced.

We obtain a valuation when a loan has been foreclosed upon and we take title to the property. The book value of the loan at the time of foreclosure and thereafter is compared to the updated market value of the foreclosed property less estimated selling costs (fair value). A charge-off is recorded for any excess in the asset’s book value over its fair value. If the valuation we establish for an asset is incorrect, the fair value of that investment in real estate may not be sufficient to recover the book value of such asset, resulting in the need for additional charge-offs. Additional material charge-offs to our investments in real estate could have a material adverse effect on our financial condition and results of operations.

Our operating results can be affected by changes in the value of the assets of a PPIP fund that is controlled by an unrelated third party.

We have an investment in a PPIP Fund regarding which our Rialto segment is a subadvisor, but which is principally advised by a company with which we have no affiliation. Because that PPIP fund is required to revalue its assets quarterly, and because the value of the PPIP fund’s assets fluctuates significantly from quarter to quarter, our operating results for a quarter can be materially affected by changes in value of the Fund’s assets.

There is substantial competition for the types of investments on which our Rialto segment is focused, and this may limit the ability of the Rialto segment to make investments on terms that are attractive to it.

Our Rialto segment, and a distressed real estate asset fund that it created and manages, currently are focused on investments in distressed mortgage debt, foreclosed properties and other real estate related assets that have been adversely affected by the dislocations during the last several years in the markets for real estate, mortgage loans and real estate related securities. Many of the opportunities to acquire these types of assets arise under programs involving co-investments with and financing provided by agencies of the Federal government. There are many firms and investment funds that are trying to acquire the types of assets on which our Rialto segment and the investment fund it manages are focused, and it is likely that a significant number of additional investment funds will be formed in the next year or more with the objective of acquiring those types of assets. At least some of the firms with which the Rialto segment competes, or will compete, for investment opportunities have, or will have, a cost of capital that is lower than that of the Rialto segment or the investment fund it manages, and therefore those firms may be able to pay more for investment opportunities than would be prudent for our Rialto segment or the investment fund it manages.

Our Rialto segment could be adversely affected by court and governmental responses to improper mortgage foreclosure procedures.

During recent years it appears that mortgage lenders and mortgage loan servicers have in a number of instances failed to comply with the requirements for obtaining and foreclosing mortgage loans. Although our Rialto segment owns or manages entities that own large numbers of mortgage loans, those loans all were acquired by our Rialto segment and the entities it manages within the past two years, and our Rialto segment has procedures designed to ensure that any mortgage foreclosures which it undertakes will comply with all applicable requirements. However, even if neither our Rialto segment nor any servicing organization it uses does anything improper in foreclosing mortgages held by the Rialto segment or entities it manages, reaction by courts and regulatory agencies against apparently widespread instances of improper mortgage foreclosure procedures could make it more difficult and more expensive for our Rialto segment to foreclose mortgages that secure loans that it or entities it manages own.

The ability of our Rialto segment to profit from the investments it makes may depend to a significant extent on its ability to manage resolutions related to the distressed mortgages and other real estate related assets.

A principal factor in a prospective purchaser’s decision regarding the price it will pay for a portfolio of mortgage loans or other real estate related assets is the cash flow the prospective purchaser expects the portfolio to generate. The cash flow a portfolio of distressed mortgage loans and related assets will generate can be affected by the way the assets in the portfolio are managed. We believe the backgrounds and experience of the personnel in our Rialto segment will enable the Rialto segment to generate better cash flows from the distressed assets it manages than what is generally expected with regard to similar assets. If it is not able to do that, the Rialto segment probably will not generate the returns it is seeking.

The supply of real estate related assets available at discounts from normal prices will likely decrease if and when the real estate markets improve, which could require our Rialto segment to change its investment strategy.

The current strategy of our Rialto segment is to seek above normal risk adjusted returns by focusing on investments in commercial and residential real estate related assets that are available at below market prices because of the dislocations in the United States real estate markets over the past several years. A recovery of the real estate markets would probably benefit the investments the Rialto segment has made, but it probably would substantially reduce or end the availability of the types of investments the Rialto segment has made and currently is seeking. That would require the Rialto segment to rethink, and probably to change, its investment strategy.

Restrictions in agreements related to a fund that the Rialto segment manages could prevent the Rialto segment from making investments.

The Rialto segment manages the Rialto Real Estate Fund (the “Fund”), a fund that was formed to make investments in, among other things, distressed real estate related debt and foreclosed properties. In order to protect investors in the Fund against the possibility that we would keep attractive investment opportunities for ourselves instead of presenting them to the Fund, we agreed that we would not make investments that are suitable for the Fund except to the extent an Advisory Committee consisting of representatives of Fund investors decides that the Fund should not make particular investments. There is an exception that permits us to purchase properties for use in connection with our homebuilding operations. However, for several years the restrictions will prevent the Rialto segment from making investments in distressed mortgage loans or foreclosed properties other than through the Fund (of which we currently own approximately 10.7 %), except to the extent the Advisory Committee decides the Fund should not make particular investments.

Fees received by our Rialto segment may not be reflected on our income statements.

Our Rialto segment has during the past year begun to focus primarily on managing assets for investment funds, rather than acquiring the assets itself. Under recent changes in generally accepted accounting principles, there is a substantial possibility that we will be required to include some or all of the funds managed by the Rialto segment in our consolidated financial statements, even if we have little or no ownership interest in the funds. To the extent our consolidated financial statements include net assets or net income or losses of funds the Rialto segment manages, they will also show the portion of the net assets or the net income or losses that is allocable to non-controlling interests (i.e., the owners of interests in the funds). However, to the extent our Rialto segment receives fees for managing the funds that are eliminated when the funds’ financial statements are included in our consolidated financial statements, that fee income will not be reflected on our consolidated income statements.

Regulatory Risks

Federal laws and regulations that adversely affect liquidity in the secondary mortgage market could hurt our business.

There have been significant concerns about the continuing viability of Fannie Mae and Freddie Mac and a number of proposals to curtail their activities. These organizations provide significant liquidity to the secondary mortgage market. Any curtailment of their activities could increase mortgage interest rates and increase the effective cost of our homes, which could reduce demand for our homes and adversely affect our results of operations.

Our homebuyers’ ability to qualify for and obtain affordable mortgages could be impacted by changes made by government sponsored entities and private mortgage insurance companies supporting the mortgage market.

Changes made by Fannie Mae, Freddie Mac, FHA/VA sponsored mortgage programs, as well as changes made by private mortgage insurance companies, have reduced the ability of many potential homebuyers to qualify for mortgages. Principal among these have been tighter lending standards such as higher income requirements, larger required down payments, increased reserves and higher required credit scores. Higher income requirements reduce the amounts for which some homebuyers can qualify when buying new homes. Larger down payment requirements and increased asset reserve thresholds appear to be preventing or delaying some homebuyers from entering the market. Increased credit score requirements eliminate a segment of potential homebuyers.

Government entities in regions where we operate have adopted or may adopt, slow or no growth initiatives, which could adversely affect our ability to build or timely build in these areas.

Some state and local governments in areas where we operate have approved, and others where we operate may approve, various slow growth or no growth homebuilding initiatives and other ballot measures that could negatively impact the availability of land and building opportunities within those jurisdictions. Approval of slow growth, no growth or similar initiatives (including the effect of these initiatives on existing entitlements and zoning) could adversely affect our ability to build or timely build and sell homes in the affected markets and/or create additional administrative and regulatory requirements and costs, which, in turn, could have an adverse effect on our future revenues and earnings.

Compliance with federal, state and local regulations related to our business could create substantial costs both in time and money, and some regulations could prohibit or restrict some homebuilding ventures.

We are subject to extensive and complex laws and regulations that affect the land development and homebuilding process, including laws and regulations related to zoning, permitted land uses, levels of density, building design, elevation of properties, water and waste disposal and use of open spaces. In addition, we are subject to laws and regulations related to workers’ health and safety, and there are efforts to subject us to other labor related laws or rules, some of which may make us responsible for things done by our subcontractors over which we have little or no control. We also are subject to a variety of local, state and federal laws and regulations concerning the protection of health and the environment. In some of the markets where we operate, we are required by law to pay environmental impact fees, use energy-saving construction materials and give commitments to municipalities to provide certain infrastructure such as roads and sewage systems. We generally are required to obtain permits, entitlements and approvals from local authorities to commence and carry out residential development or home construction. Such permits, entitlements and approvals may, from time-to-time, be opposed or challenged by local governments, neighboring property owners or other interested parties, adding delays, costs and risks of non-approval to the process. Our obligation to comply with the laws and regulations under which we operate, and our need to ensure that our associates, subcontractors and other agents comply with these laws and regulations, could result in delays in construction and land development, cause us to incur substantial costs and prohibit or restrict land development and homebuilding activity in certain areas in which we operate. Budget reductions by state and local governmental agencies may increase the time it takes to obtain required approvals and therefore may aggregate the delays we could encounter.

We can be injured by failures of persons who act on our behalf to comply with applicable regulations and guidelines.

Although we expect all of our associates (i.e., employees), officers and directors to comply at all times with all applicable laws, rules and regulations, there may be instances in which subcontractors or others through whom we do business engage in practices that do not comply with applicable regulations or guidelines. When we learn of practices relating to homes we build or financing we provide that do not comply with applicable regulations or guidelines, we move actively to stop the non-complying practices as soon as possible and we have taken disciplinary action with regard to associates of ours who were aware of the practices and did not take steps to address them, including in some instances terminating their employment. However, regardless of the steps we take after we learn of practices that do not comply with applicable regulations or guidelines, we can in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices’ having taken place.

Tax law changes could make home ownership more expensive or less attractive.

Significant expenses of owning a home, including mortgage interest expense and real estate taxes, generally are deductible expenses for the purpose of calculating an individual’s federal, and in some cases state, taxable income. If the government were to make changes to income tax laws that eliminate or substantially reduce these income tax deductions, the after-tax cost of owning a home would increase substantially. This could adversely impact demand for, and/or sales prices of, new homes.

Other Risks

We have a stockholder who can exercise significant influence over matters that are brought to a vote of our stockholders.

Stuart A. Miller, our Chief Executive Officer and a Director, has voting control, through personal holdings and family-owned entities, of Class A and Class B common stock that enables Mr. Miller to cast approximately 46% of the votes that may be cast by the holders of our outstanding Class A and Class B common stock combined. That effectively gives Mr. Miller the power to control the election of our directors and the approval of matters that are presented to our stockholders. Mr. Miller’s voting power might discourage someone from acquiring us or from making a significant equity investment in us, even if we needed the investment to meet our obligations and to operate our business. Also, because of his voting power, Mr. Miller may be able to authorize actions that are contrary to our other stockholders’ desires.

We may not be able to benefit from net operating loss (“NOL”) carryforwards.

We suffered significant losses in 2007, 2008 and 2009 for tax (as well as for financial statement) purposes. We were able to carry back 100% of our 2007 tax loss and most of our 2008 tax loss to recover taxes we had paid with regard to prior years. However, we would not have been able to carry back our 2009 fiscal year tax loss without legislation enacted in November 2009 that expanded the NOL carryback to 5 years, but only allowed 50% of taxable income earned in 2004 to be offset with 2009 loss. We will not receive any tax benefits with regard to tax losses we could not carry back, except to the extent we have taxable income in the 20 year NOL carryforward period. In our financial statements, we have fully reserved against all our deferred tax assets due to the possibility that we may not have taxable income that will enable us to benefit from them. However, those reserves will be reversed when it becomes more likely than not that we will have sufficient future taxable income to take advantage of the deferred tax assets.

Trading in our shares could substantially reduce our ability to use tax loss carryforwards.

Under the Internal Revenue Code, if there is a greater than 50% change of ownership of our stock during any three-year period caused by more than 5% shareholders, our ability to utilize NOL carryforwards would be limited to the market value of our company at the time of the change in ownership times the long-term federal tax exempt rate. This change of ownership limitation can occur as a result of purchases and sales in the market by persons who become owners of more than 5% of our stock, even without anybody becoming a new majority owner. During the past three years, there have not been any significant changes in our holdings by 5% shareholders. However, it is possible that as a result of future stock trading, within a three-year period buyers could acquire in the market 5% or greater ownership interests in our stock totaling more than 50%. If that occurred, our ability to apply our tax loss carryforwards could become limited.

Item 1B.

Unresolved Staff Comments.

Not applicable.

Executive Officers of Lennar Corporation

The following individuals are our executive officers as of January 30, 2012:


Name	Position	Age
Stuart A. Miller	Chief Executive Officer		54
Richard Beckwitt	President		52
Jonathan M. Jaffe	Vice President and Chief Operating Officer		52
Bruce E. Gross	Vice President and Chief Financial Officer		53
Diane J. Bessette	Vice President and Treasurer		51
Mark Sustana	Secretary and General Counsel		50
David M. Collins	Controller		42

Mr. Miller is one of our Directors and has served as our Chief Executive Officer since 1997. Mr. Miller served as our President from 1997 to April 2011. Before 1997, Mr. Miller held various executive positions with us.

Mr. Beckwitt served as our Executive Vice President since from March 2006 to 2011. Since April 2011, Mr. Beckwitt has served as our President. As our Executive Vice President and then our President, Mr. Beckwitt has been involved in all operational aspects of our company. Mr. Beckwitt served on the Board of Directors of D.R. Horton, Inc. from 1993 to November 2003. From 1993 to March 2000, he held various executive officer positions at D.R. Horton, including President of the company. From March 2000 to April 2003, Mr. Beckwitt was the owner and principal of EVP Capital, L.P., (a venture capital and real estate advisory company). Mr. Beckwitt retired in May 2003 to design and personally construct a second home in Maine.

Mr. Jaffe has served as Vice President since 1994 and has served as our Chief Operating Officer since December 2004. Before that time, Mr. Jaffe served as a Regional President in our Homebuilding operations. Additionally, prior to his appointment as Chief Operating Officer, Mr. Jaffe was one of our Directors from 1997 through June 2004.

Mr. Gross has served as Vice President and our Chief Financial Officer since 1997. Before that, Mr. Gross was Senior Vice President, Controller and Treasurer of Pacific Greystone Corporation.

Ms. Bessette joined us in 1995 and served as our Controller from 1997 to 2008. Since February 2008, she has served as our Treasurer. She was appointed a Vice President in 2000.

Mr. Sustana has served as our Secretary and General Counsel since 2005.

Mr. Collins joined us in 1998 and has served as our Controller since February 2008. Before becoming Controller, Mr. Collins served as our Executive Director of Financial Reporting.

Item 2.

Properties.

We lease and maintain our executive offices in an office complex in Miami, Florida. Our homebuilding, financial services and Rialto Investments offices are located in the markets where we conduct business, primarily in leased space. We believe that our existing facilities are adequate for our current and planned levels of operation.

Because of the nature of our homebuilding operations, significant amounts of property are held as inventory in the ordinary course of our homebuilding business. We discuss these properties in the discussion of our homebuilding operations in Item 1 of this Report.

Item 3.

Legal Proceedings.

We are party to various claims and lawsuits which arise in the ordinary course of business, but we do not consider the volume of our claims and lawsuits unusual given the number of homes we deliver and the fact that the lawsuits often relate to homes delivered several years before the lawsuits are commenced. Although the specific allegations in the lawsuits differ, they most commonly involve claims that we failed to construct homes in particular communities in accordance with plans and specifications or applicable construction codes and seek reimbursement for sums allegedly needed to remedy the alleged deficiencies, assert contract issues or relate to personal injuries. Lawsuits of these types are common within the homebuilding industry. We are a plaintiff in many cases in which we seek contribution from our subcontractors for home repair costs. The costs incurred by us in construction defect lawsuits are offset by warranty reserves, our third party insurers, subcontractor insurers and indemnity contributions from subcontractors. We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business, financial position, results of operations or cash flows. From time-to-time, we also receive notices from environmental agencies or other regulators regarding alleged violations of environmental or other laws. We typically settle these matters before they reach litigation for amounts that are not material to us.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Class A and Class B common stock are listed on the New York Stock Exchange under the symbols “LEN” and “LEN.B,” respectively. The following table shows the high and low sales prices for our Class A and Class B common stock for the periods indicated, as reported by the NYSE, and cash dividends declared per share:

Class A Common Stock
High/Low Prices

Cash Dividends
Per Class A Share

Fiscal Quarter

2011

2010

2011

2010

First

$21.54 - 15.41

$17.88 - 11.56

4¢

Second

$20.60 - 17.34

$21.79 - 15.86

4¢

Third

$19.10 - 12.39

$17.16 - 11.93

4¢

Fourth

$18.82 - 12.14

$16.61 - 13.42

4¢

Class B Common Stock
High/Low Prices

Cash Dividends
Per Class B Share

Fiscal Quarter

2011

2010

2011

2010

First

$17.40 - 12.43

$14.25 - 8.63

4¢

Second

$16.75 - 14.00

$18.07 - 12.71

4¢

Third

$15.46 - 9.30

$14.18 - 9.25

4¢

Fourth

$14.36 - 8.95

$13.61 - 10.74

4¢

As of December 31, 2011, the last reported sale price of our Class A common stock was $19.65 and the last reported sale price of our Class B common stock was $15.58. As of December 31, 2011, there were approximately 940 and 680 holders of record, respectively, of our Class A and Class B common stock.

On January 12, 2012, our Board of Directors declared a quarterly cash dividend of $0.04 per share for both our Class A and Class B common stock, which is payable on February 10, 2012 to holders of record at the close of business on January 27, 2012. Our Board of Directors evaluates each quarter the decision whether to declare a dividend and the amount of the dividend.

In June 2001, our Board of Directors authorized a stock repurchase program to permit future purchases of up to 20 million shares of our outstanding common stock. During the three months and year ended November 30, 2011, there were no shares repurchased under this program. At November 30, 2011, we still had authorization to purchase up to 6.2 million shares under the program.

The information required by Item 201(d) of Regulation S-K is provided in Item 12 of this Report.

Performance Graph

The following graph compares the five-year cumulative total return of our Class A common stock with the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index. The graph assumes $100 invested on November 30, 2006 in our Class A common stock, the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index, and the reinvestment of all dividends.

LOGO


	2006		2007		2008		2009		2010		2011
Lennar Corporation	$	100		28		13		24		29		35
Dow Jones U.S. Home Construction Index	$	100		41		28		34		30		33
Dow Jones U.S. Total Market Index	$	100		108		66		84		95		102

Item 6.

Selected Financial Data.

The following table sets forth our selected consolidated financial and operating information as of or for each of the years ended November 30, 2007 through 2011. The information presented below is based upon our historical financial statements.


	At or for the Years Ended November 30,
*(Dollars in thousands, except per share amounts)*	2011		2010		2009			2008			2007

Results of Operations:
Revenues:
Lennar Homebuilding	$	2,675,124		2,705,639		2,834,285			4,263,038			9,730,252
Lennar Financial Services	$	255,518		275,786		285,102			312,379			456,529
Rialto Investments	$	164,743		92,597		—			—			—
Total revenues	$	3,095,385		3,074,022		3,119,387			4,575,417			10,186,781
Operating earnings (loss):
Lennar Homebuilding (1)	$	109,044		100,060		(676,293	)		(404,883	)		(2,912,072	)
Lennar Financial Services (2)	$	20,729		31,284		35,982			(30,990	)		6,120
Rialto Investments	$	63,457		57,307		(2,528	)		—			—
Corporate general and administrative expenses	$	95,256		93,926		117,565			129,752			173,202
Earnings (loss) before income taxes	$	97,974		94,725		(760,404	)		(565,625	)		(3,079,154	)
Net earnings (loss) attributable to Lennar (3)	$	92,199		95,261		(417,147	)		(1,109,085	)		(1,941,081	)
Diluted earnings (loss) per share	$	0.48		0.51		(2.45	)		(7.01	)		(12.31	)
Cash dividends declared per each - Class A and Class B common stock	$	0.16		0.16		0.16			0.52			0.64

Financial Position:
Total assets	$	9,154,671		8,787,851		7,314,791			7,424,898			9,102,747
Debt:
Lennar Homebuilding	$	3,362,759		3,128,154		2,761,352			2,544,935			2,295,436
Rialto Investments	$	765,541		752,302		—			—			—
Lennar Financial Services	$	410,134		271,678		217,557			225,783			541,437
Stockholders’ equity	$	2,696,468		2,608,949		2,443,479			2,623,007			3,822,119
Total equity	$	3,303,525		3,194,383		2,558,014			2,788,753			3,850,647
Shares outstanding (000s)		188,403		186,636		184,896			160,558			159,887
Stockholders’ equity per share	$	14.31		13.98		13.22			16.34			23.91

Lennar Homebuilding Data (including unconsolidated entities):
Number of homes delivered		10,845		10,955		11,478			15,735			33,283
New Orders		11,412		10,928		11,510			13,391			25,753
Backlog of home sales contracts		2,171		1,604		1,631			1,599			4,009
Backlog dollar value	$	560,659		407,292		479,571			456,270			1,384,137

(1)

Lennar Homebuilding operating earnings (loss) include $38.0 million, $51.3 million, $359.9 million, $340.5 million and $2,445.1 million, respectively, of valuation adjustments for the years ended November 30, 2011, 2010, 2009, 2008 and 2007. In addition, it includes $8.9 million, $10.5 million, $101.9 million, $32.2 million and $364.2 million, respectively, of valuation adjustments related to assets of unconsolidated entities in which we have investments for the years ended November 30, 2011, 2010, 2009, 2008 and 2007, and $10.5 million, $1.7 million, $89.0 million, $172.8 million and $132.2 million, respectively, of valuation adjustments to our investments in unconsolidated entities for the years ended November 30, 2011, 2010, 2009, 2008 and 2007. During the year ended November 30, 2007, Lennar Homebuilding operating loss also includes $190.2 million of goodwill impairments.

(2)	Lennar Financial Services operating loss for the year ended November 30, 2008 includes a $27.2 million impairment of the Lennar Financial Services segment’s goodwill.

(3)

Net earnings (loss) attributable to Lennar for the years ended November 30, 2011 and 2010 include $14.6 million and $25.7 million, respectively, of benefit for income taxes, primarily due to settlements with various taxing authorities. Net earnings (loss) attributable to Lennar for the year ended November 30, 2009 primarily include a partial reversal of our deferred tax asset valuation allowance of $351.8 million, primarily due to a change in tax legislation, which allowed us to carryback our fiscal year 2009 tax loss to recover previously paid income taxes. Net earnings (loss) attributable to Lennar for the year ended November 30, 2008 include a $730.8 million valuation allowance recorded against our deferred tax assets.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Financial Data” and our audited consolidated financial statements and accompanying notes included elsewhere in this Report.

Special Note Regarding Forward-Looking Statements

Some of the statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Annual Report on Form 10-K, are “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption “Risk Factors” in Item 1A of this Report. We do not undertake any obligation to update forward-looking statements, except as required by Federal securities laws.

Outlook

As we closed out fiscal 2011 and commenced operations in 2012, we have seen fundamental shifts and resulting trends that indicate the housing market has started to stabilize. This stabilization has been driven by a combination of low home prices and low interest rates, making the decision for qualified homebuyers to buy a home more attractive than the escalating cost of renting. In many markets, the all-inclusive cost of homeownership including principal, interest, taxes, mortgage and property insurance and community association costs is lower than the rising rental rates for comparable space. Also, buying with a fixed-rate mortgage provides greater living cost stability than renting. Overall, we are experiencing more traffic in our communities, and have seen a more consistent sales pace at stabilized prices during the fourth quarter of fiscal 2011 and into fiscal 2012 as reflected in our fiscal 2011 fourth quarter new orders and sales backlog, which increased 20% and 35%, respectively, from the prior year.

In fiscal 2012, our principal focus in our homebuilding operations will continue to be on maintaining and improving our operating margin on the homes we sell. We have taken steps over the past several years to reduce costs and right-size our overhead structure. We have also repositioned our product offering to target first-time and value-focused homebuyers. In addition, we continue to invest in carefully underwritten strategic land acquisitions in well-positioned markets that will continue to support our homebuilding operations going forward. Our Financial Services segment will continue to transition for recovery while remaining profitable, as it did in fiscal 2011, and our Rialto Investments segment also produced profitability during fiscal 2011 as it continued to grow its business. In addition, the Rialto Investment segment completed raising money for its first fund during the fourth quarter of fiscal 2011, and ended fiscal 2011 with a $700 million pool of capital that is being invested in strategic assets and is expected to drive future profitability.

As we enter fiscal 2012, we believe that all the segments of our company are well positioned. Our homebuilding operations are on track to achieve profitability in 2012 as the housing market stabilizes and ultimately recovers and our financial services and Rialto Investments segments will continue to enhance our earnings.

Results of Operations

Overview

Our net earnings attributable to Lennar in 2011 were $92.2 million, or $0.48 per basic and diluted share, compared to $95.3 million, or $0.51 per basic and diluted share, in 2010.

The following table sets forth financial and operational information for the years indicated related to our operations.


	Years Ended November 30,
*(Dollars in thousands)*	2011			2010			2009
Lennar Homebuilding revenues:
Sales of homes	$	2,624,785			2,631,314			2,776,850
Sales of land		50,339			74,325			57,435

Total Lennar Homebuilding revenues		2,675,124			2,705,639			2,834,285

Lennar Homebuilding costs and expenses:
Cost of homes sold		2,101,414			2,113,393			2,524,850
Cost of land sold		42,611			52,968			236,277
Selling, general and administrative		384,798			376,962			449,259

Total Lennar Homebuilding costs and expenses		2,528,823			2,543,323			3,210,386

Lennar Homebuilding operating margins		146,301			162,316			(376,101	)
Lennar Homebuilding equity in loss from unconsolidated entities		(62,716	)		(10,966	)		(130,917	)
Lennar Homebuilding other income (expense), net		116,109			19,135			(98,425	)
Other interest expense		(90,650	)		(70,425	)		(70,850	)

Lennar Homebuilding operating earnings (loss)	$	109,044			100,060			(676,293	)

Lennar Financial Services revenues	$	255,518			275,786			285,102
Lennar Financial Services costs and expenses		234,789			244,502			249,120

Lennar Financial Services operating earnings	$	20,729			31,284			35,982

Rialto Investments revenues	$	164,743			92,597			—
Rialto Investments costs and expenses		132,583			67,904			2,528
Rialto Investments equity in earnings (loss) from unconsolidated entities		(7,914	)		15,363			—
Rialto Investments other income, net		39,211			17,251			—

Rialto Investments operating earnings (loss)	$	63,457			57,307			(2,528	)

Total operating earnings (loss)	$	193,230			188,651			(642,839	)
Corporate general administrative expenses		95,256			93,926			117,565

Earnings (loss) before income taxes	$	97,974			94,725			(760,404	)


Net earnings (loss) attributable to Lennar	$	92,199			95,261			(417,147	)


Gross margin as a % of revenue from home sales		19.9	%		19.7	%		9.1	%

S,G&A expenses as a % of revenues from home sales		14.7	%		14.3	%		16.2	%

Operating margin as a % of revenues from home sales		5.3	%		5.4	%		(7.1	)%

Gross margin as a % of revenue from home sales excluding valuation adjustments (1)		21.3	%		21.4	%		15.6	%

Operating margin as a % of revenues from home sales excluding valuation adjustments (1)		6.6	%		7.1	%		(0.6	)%

Average sales price	$	244,000			243,000			243,000

(1)

Gross margin as a percentage of revenues from home sales excluding valuation adjustments and operating margin as a percentage of revenues from home sales excluding valuation adjustments are non-GAAP financial measures disclosed by certain of our competitors and have been presented because we find it useful in evaluating our performance and believe that it helps readers of our financial statements compare our operations with those of our competitors. See the Non-GAAP Financial Measures section.

2011 versus 2010

For both the years ended November 30, 2011 and 2010, revenues from home sales were $2.6 billion. There was a 1% increase in the average sales price of homes delivered, offset by a 1% decrease in the number of home deliveries, excluding unconsolidated entities. New home deliveries, excluding unconsolidated entities, decreased to 10,746 homes in the year ended November 30, 2011 from 10,859 homes last year. The decrease in home deliveries was primarily in our Homebuilding Houston and Homebuilding West segments and Homebuilding Other as a result of the absence of the Federal homebuyer tax credit, partially offset by an increase in home deliveries in our Homebuilding Southeast Florida segment. The increase in deliveries in our

Homebuilding Southeast Florida segment was the result of an increase in home deliveries from communities acquired in the prior year that had sales but only a small amount of deliveries during the year ended November 30, 2010. The average sales price of homes delivered increased to $244,000 in the year ended November 30, 2011 from $243,000 in the same period last year, driven primarily by an increase in the average sales price of home deliveries in all of our Homebuilding segments and Homebuilding Other, except for our Homebuilding West segment, primarily due to a higher percentage of home deliveries in higher priced communities. This increase was partially offset by a reduction in average sales price in our Homebuilding West segment due to a shift to smaller square footage homes generating a lower average sales price. Sales incentives offered to homebuyers were $33,700 per home delivered in the year ended November 30, 2011, or 12.1% as a percentage of home sales revenue, compared to $32,800 per home delivered in the same period last year, or 11.9% as a percentage of home sales revenue. Currently, our biggest competition is from the sales of existing and foreclosed homes. We differentiate our new homes from those homes by issuing new home warranty, and in certain markets emphasizing energy efficiency and new technology such as keyless door locks and lighting and thermostats controlled remotely from outside the home.

Gross margins on home sales were $523.4 million, or 19.9%, in the year ended November 30, 2011, which included $35.7 million of valuation adjustments, compared to gross margins on home sales of $517.9 million, or 19.7%, in the year ended November 30, 2010, which included $44.7 million of valuation adjustments. Gross margins on home sales, excluding valuation adjustments, were $559.1 million, or 21.3%, in the year ended November 30, 2011, compared to $562.6 million, or 21.4%, in the year ended November 30, 2010. Gross margins on home sales excluding valuation adjustments is a non-GAAP financial measure, which is discussed in the Non-GAAP Financial Measures section.

Gross profits on land sales totaled $7.7 million in the year ended November 30, 2011, net of $0.5 million of valuation adjustments and $1.8 million in write-offs of deposits and pre-acquisition costs, compared to gross profits on land sales of $21.4 million in the year ended November 30, 2010, primarily due to a $14.1 million reduction of an obligation related to a profit participation agreement. Gross profits on land sales for the year ended November 30, 2010 were net of $3.4 million of valuation adjustments and $3.1 million in write-offs of deposits and pre-acquisition costs.

Selling, general and administrative expenses were $384.8 million in the year ended November 30, 2011, which included $8.4 million related to additional expenses associated with remedying pre-existing liabilities of a previously acquired company, offset by $8.0 million related to the receipt of a settlement discussed below. Selling, general and administrative expenses were $377.0 million in the year ended November 30, 2010. Selling, general and administrative expenses as a percentage of revenues from home sales increased to 14.7% in the year ended November 30, 2011, from 14.3% in 2010.

Lennar Homebuilding equity in loss from unconsolidated entities was $62.7 million in the year ended November 30, 2011, which primarily included our share of valuation adjustments of $57.6 million related to an asset distribution from a Lennar Homebuilding unconsolidated entity as the result of a linked transaction. This was offset by a pre-tax gain of $62.3 million included in Lennar Homebuilding other income (expense), net, related to that unconsolidated entity’s net asset distribution. The transaction resulted in a net pre-tax gain of $4.7 million. In addition, Lennar Homebuilding equity in loss from unconsolidated entities included $8.9 million of valuation adjustments related to assets of Lennar Homebuilding’s unconsolidated entities, offset by our share of a gain on debt extinguishment at one of Lennar Homebuilding’s unconsolidated entities totaling $15.4 million. In the year ended November 30, 2010, Lennar Homebuilding equity in loss from unconsolidated entities was $11.0 million, which included $10.5 million of valuation adjustments related to assets of Lennar Homebuilding unconsolidated entities, partially offset by a net pre-tax gain of $7.7 million as a result of a transaction by one of Lennar Homebuilding’s unconsolidated entities.

Lennar Homebuilding other income (expense), net, totaled $116.1 million in the year ended November 30, 2011, which included the $62.3 million pre-tax gain discussed above and $29.5 million related to the receipt of a settlement. The parties to certain litigation in which the Company was plaintiff entered into a settlement agreement in which they agreed the Company may make the following statement: “Lennar recently settled litigation against a third party in connection with Lennar’s ongoing dispute with Nicolas Marsch, III and his affiliates. As a result of the settlement, the third party paid Lennar total cash consideration of $37.5 million and that the terms are confidential.” Lennar Homebuilding other income (expense), net, in the year ended November 30, 2011 also included $5.1 million related to the favorable resolution of a joint venture and the recognition of $10.0 million of deferred management fees related to management services previously performed for one of Lennar Homebuilding’s unconsolidated entities. These amounts were partially offset by $10.5 million of valuation adjustments to our investments in Lennar Homebuilding’s unconsolidated entities. In the year ended November 30, 2010, Lennar Homebuilding other income (expense), net, was $19.1 million, which included a $19.4 million pre-tax gain on the extinguishment of other debt and other income, partially offset by a pre-tax loss of $10.8 million related to the repurchase of senior notes through a tender offer.

Homebuilding interest expense was $163.0 million in the year ended November 30, 2011 ($70.7 million was included in cost of homes sold, $1.6 million in cost of land sold and $90.7 million in other interest expense), compared to $143.9 million in the year ended November 30, 2010 ($71.5 million was included in cost of homes sold, $2.0 million in cost of land sold and $70.4 million in other interest expense). Interest expense increased primarily due to an increase in our outstanding debt compared to the same period last year.

Operating earnings for our Lennar Financial Services segment were $20.7 million in the year ended November 30, 2011, compared to operating earnings of $31.3 million in the same period last year. The decrease in profitability was due primarily to decreased volume in the segment’s mortgage operations. In addition, in the year ended November 30, 2010, our Lennar Financial Services segment received $5.1 million of proceeds from the previous sale of a cable system.

In the year ended November 30, 2011, operating earnings in our Rialto Investments segment were $63.5 million (which included $28.9 million of net earnings attributable to noncontrolling interests), compared to operating earnings of $57.3 million (which included $33.2 million of net earnings attributable to noncontrolling interests) in the same period last year. In the year ended November 30, 2011, revenues in this segment were $164.7 million, which consisted primarily of accretable interest income associated with the segment’s portfolio of real estate loans and fees for managing and servicing assets, compared to revenues of $92.6 million in the same period last year. In the year ended November 30, 2011, Rialto Investments other income, net, was $39.2 million, which consisted primarily of gains from acquisition of real estate owned (“REO”) through foreclosure, as well as gains from real estate sales, partially offset by expenses related to owning and maintaining those assets, and a $4.7 million gain on the sale of investment securities. In the year ended November 30, 2010, Rialto Investments other income, net, was $17.3 million, which consisted primarily of gains from acquisition of real estate owned through foreclosure as well as gains from real estate sales.

The segment also had equity in earnings (loss) from unconsolidated entities of ($7.9) million in the year ended November 30, 2011, consisting primarily of $21.4 million of unrealized losses related to our share of the mark-to-market adjustments of the investment portfolio underlying the AllianceBernstein L.P. (“AB”) fund formed under the Federal government’s Public-Private Investment Program (“PPIP”), partially offset by interest and other income earned by the AB PPIP fund and $2.9 million of equity in earnings related to the Rialto Investments Real Estate Fund (the “Fund”). This compares to equity in earnings (loss) from unconsolidated entities of $15.4 million in the same period last year, which included $9.3 million of unrealized gains related to our share of the mark-to-market adjustments of AB PPIP investments. In the year ended November 30, 2011, expenses in this segment were $132.6 million, which consisted primarily of costs related to its portfolio operations, due diligence expenses related to both completed and abandoned transactions, and other general and administrative expenses, compared to expenses of $67.9 million in the same period last year.

Corporate general and administrative expenses were $95.3 million, or 3.1% as a percentage of total revenues, in the year ended November 30, 2011, compared to $93.9 million, or 3.1% as a percentage of total revenues, in the year ended November 30, 2010.

Net earnings (loss) attributable to noncontrolling interests were $20.3 million and $25.2 million, respectively, in the year ended November 30, 2011 and 2010. Net earnings attributable to noncontrolling interests during both the years ended November 30, 2011 and 2010 were primarily related to the FDIC’s interest in the portfolio of real estate loans that we acquired in partnership with the FDIC.

At November 30, 2011, we owned 94,684 homesites and had access to an additional 16,702 homesites through either option contracts with third parties or agreements with unconsolidated entities in which we have investments. At November 30, 2011, 1% of the homesites we owned were subject to home purchase contracts. Our backlog of sales contracts was 2,171 homes ($560.7 million) at November 30, 2011, compared to 1,604 homes ($407.3 million) at November 30, 2010.

2010 versus 2009

Revenues from home sales decreased 5% in the year ended November 30, 2010 to $2.6 billion from $2.8 billion in 2009. Revenues were lower primarily due to a 5% decrease in the number of home deliveries, excluding unconsolidated entities. New home deliveries, excluding unconsolidated entities, decreased to 10,859 homes in the year ended November 30, 2010 from 11,422 homes in 2009. The decrease in home deliveries was primarily in our Homebuilding West and Homebuilding Houston segments as a result of reduced demand due to expiration of the Federal homebuyer tax credit at the end of April 2010, partially offset by an increase in home deliveries in our Homebuilding East and Homebuilding Southeast Florida segments as a result of an increase in active community count. The average sales price of homes delivered for both the years ended November 30, 2010 and 2009 was $243,000. Sales incentives offered to homebuyers were $32,800 per home delivered in the year ended November 30, 2010, or 11.9% as a percentage of home sales revenue, compared to $44,800 per home delivered in the year ended November 30, 2009, or 15.6% as a percentage of home sales revenue.

Gross margins on home sales were $517.9 million, or 19.7%, in the year ended November 30, 2010, which included $44.7 million of valuation adjustments, compared to gross margins on home sales of $252.0 million, or 9.1%, in the year ended November 30, 2009, which included $180.2 million of valuation adjustments. Gross margins on home sales excluding valuation adjustments were $562.6 million, or 21.4%, in the year ended November 30, 2010, compared to $432.2 million, or 15.6%, in 2009. Gross margin percentage on home sales, excluding valuation adjustments, improved compared to 2009, due primarily to reduced valuation adjustments, reduced sales incentives offered to homebuyers as a percentage of revenues from home sales, reduced construction costs and product re-engineering, as well as third-party recoveries related to Chinese drywall. Gross margins on home sales excluding valuation adjustments is a non-GAAP financial measure, which is discussed in the Non-GAAP Financial Measures section.

Selling, general and administrative expenses were reduced by $72.3 million, or 16%, in the year ended November 30, 2010, compared to 2009, primarily due to reductions in legal, personnel and occupancy expenses. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 14.3% in the year ended November 30, 2010, from 16.2% in 2009.

Gross profits on land sales totaled $21.4 million in the year ended November 30, 2010, primarily due to the reduction of an obligation related to a profit participation agreement. Gross profits on land sales were net of $3.4 million of valuation adjustments and $3.1 million in write-offs of deposits and pre-acquisitions costs. Losses on land sales totaled $178.8 million in the year ended November 30, 2009, which included $108.9 million of valuation adjustments and $84.4 million in write-offs of deposits and pre-acquisition costs.

Lennar Homebuilding equity in loss from unconsolidated entities was $11.0 million in the year ended November 30, 2010, which included $10.5 million of valuation adjustments related to assets of unconsolidated entities in which we have investments. In the year ended November 30, 2009, Lennar Homebuilding equity in loss from unconsolidated entities was $130.9 million, which included $101.9 million of valuation adjustments related to assets of unconsolidated entities in which we have investments.

Lennar Homebuilding other income (expense), net, totaled $19.1 million in the year ended November 30, 2010, which included a $19.4 million pre-tax gain on the extinguishment of other debt and other income, partially offset by a $10.8 million pre-tax loss related to the repurchase of senior notes through a tender offer and $1.7 million of valuation adjustments to our investments in unconsolidated entities. Lennar Homebuilding other income (expense), net, totaled ($98.4) million in the year ended November 30, 2009, which included $89.0 million of valuation adjustments to our investments in unconsolidated entities and $9.7 million of write-offs of notes and other receivables.

Homebuilding interest expense was $143.9 million in the year ended November 30, 2010 ($71.5 million was included in cost of homes sold, $2.0 million in cost of land sold and $70.4 million in other interest expense), compared to $147.4 million in the year ended November 30, 2009 ($67.4 million was included in cost of homes sold, $9.2 million in cost of land sold and $70.9 million in other interest expense). Despite an increase in debt, interest expense decreased primarily due to an increase in qualifying assets eligible for interest capitalization and savings resulting from the termination of our senior unsecured revolving credit facility during the first quarter of 2010.

Operating earnings for the Lennar Financial Services segment were $31.3 million in the year ended November 30, 2010, compared to $36.0 million in 2009. The decrease in operating earnings was primarily due to decreased volume in the segment’s mortgage and title operations.

In the year ended November 30, 2010, operating earnings in our Rialto Investments segment were $57.3 million (which included $33.2 million of net earnings attributable to noncontrolling interests), compared to an operating loss of $2.5 million in 2009. In the year ended November 30, 2010, revenues in this segment were $92.6 million, which consisted primarily of accretable interest income associated with the portfolios of real estate loans acquired in partnership with the FDIC. In the year ended November 30, 2010, other income, net was $17.3 million, which consisted primarily of gains from acquisition of REO through foreclosure, as well as gains from real estate sales. The segment also had equity in earnings from unconsolidated entities of $15.4 million during the year ended November 30, 2010, consisting primarily of $9.3 million of unrealized gains related to our share of the mark-to-market adjustments of AB PPIP investments. In the year ended November 30, 2010, expenses in this segment were $67.9 million, which consisted primarily of costs related to its portfolio operations, management of investments for others, due diligence expenses related to both completed and abandoned transactions, and other general and administrative expenses.

Corporate general and administrative expenses were reduced by $23.6 million, or 20%, in the year ended November 30, 2010, compared to 2009 primarily due to our cost reduction initiatives implemented during the downturn. As a percentage of total revenues, corporate general and administrative expenses decreased to 3.1% in the year ended November 30, 2010, from 3.8% in 2009.

Net earnings (loss) attributable to noncontrolling interests were $25.2 million and ($28.9) million, respectively, in the years ended November 30, 2010 and 2009. Net earnings attributable to noncontrolling interests during the year ended November 30, 2010 were primarily related to the FDIC’s interest in the portfolio of real estate loans that we acquired in partnership with the FDIC.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if based on available evidence, it is more likely than not that such assets will not be realized. Based upon an evaluation of all available evidence, during the year ended November 30, 2010, we recorded a reversal of the deferred tax asset valuation allowance of $37.9 million, primarily due to the recording of a deferred tax liability from the issuance of 2.75% convertible senior notes due 2020 and the net earnings generated during the year. The reversal of the deferred tax asset valuation allowance related to the issuance of the 2.75% convertible senior notes due 2020 was recorded as an adjustment to additional paid-in capital. At November 30, 2010, the deferred tax asset valuation allowance was $609.5 million.

At November 30, 2010, we owned 84,482 homesites and had access to an additional 19,974 homesites through either option contracts with third parties or agreements with unconsolidated entities in which we have investments. At November 30, 2010, 2% of the homesites we owned were subject to home purchase contracts. Our backlog of sales contracts was 1,604 homes ($407.3 million) at November 30, 2010, compared to 1,631 homes ($479.6 million) at November 30, 2009.

Non-GAAP Financial Measures

Gross margins on home sales excluding valuation adjustments and operating margins on home sales excluding valuation adjustments are non-GAAP financial measures, and are defined by us as sales of homes revenue less cost of homes sold excluding valuation adjustments recorded during the period and sales of homes revenue less cost of homes sold excluding valuation adjustments recorded during the period less selling, general and administrative expenses, respectively. Management finds these to be important and useful measures in evaluating our performance because it discloses the profit we generate on homes we actually delivered during the period, as our valuation adjustments generally relate to inventory that we did not deliver during the period. Gross margins as a percentage of revenue on home sales excluding valuation adjustments and operating margins as a percentage of revenues from home sales excluding valuation adjustments also are important to our management because they assist our management in making strategic decisions regarding our construction pace, product mix and product pricing based upon the profitability we generated on homes we actually delivered during previous periods. We believe investors also find gross margins and operating margins on home sales excluding valuation adjustments, and gross margins and operating margins on home sales as a percentage of revenues from home sales excluding valuation adjustments to be important and useful because each of them discloses a profitability measure on homes we actually delivered in a period that can be compared to the profitability on homes we delivered in a prior period without regard to the variability of valuation adjustments recorded from period to period. In addition, to the extent that our competitors provide similar information, disclosure of our gross margins and operating margins on home sales excluding valuation adjustments and gross margins and operating margins on home sales as a percentage of revenues from home sales excluding valuation adjustments helps readers of our financial statements compare our ability to generate profits with regard to the homes we deliver in a period to our competitors’ ability to generate profits with regard to the homes they deliver in the same period.

Although management finds gross margins and operating margins on home sales excluding valuation adjustments and gross margins and operating margins on home sales as a percentage of revenues from home sales excluding valuation adjustments to be important measures in conducting and evaluating our operations, each of these measures has limitations as an analytical tool as it is not reflective of the actual profitability generated by our company during the period. This is because they exclude charges we recorded relating to inventory that was impaired during the period. In addition, because gross margins and operating margins on home sales excluding valuation adjustments and gross margins and operating margins as a percentage of revenues from home sales excluding valuation adjustments are financial measures that are not calculated in accordance with generally accepted accounting principles (“GAAP”), they may not be completely comparable to similarly titled measures of our competitors due to differences in methods of calculation and charges being excluded. Our management compensates for the limitations of using gross margins and operating margins on home sales excluding valuation adjustments and gross and operating margins as a percentage of revenues from home sales excluding valuation adjustments by using these non-GAAP measures only to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our operations. In order to analyze our overall performance and actual profitability relative to our homebuilding operations, we also compare our gross margins and operating margins on home sales during the period and gross margins and operating margins as a percentage of revenues from home sales, inclusive of valuation adjustments, with the same measures during prior comparable periods. Due to the limitations discussed above, gross margins and operating margins on home sales excluding valuation adjustments and gross margins and operating margins as a percentage of revenues from home sales excluding valuation adjustments should not be viewed in isolation as they are not substitutes for GAAP measures of gross margins and operating margins.

The table set forth below reconciles our gross margins on home sales excluding valuation adjustments and our operating margins as a percentage of revenues from home sales excluding valuation adjustments for the years ended November 30, 2011, 2010 and 2009 to our gross margins and operating margins on home sales for the years ended November 30, 2011, 2010 and 2009:


	Years Ended November 30,
*(In thousands)*	2011			2010			2009
Sales of homes	$	2,624,785			2,631,314			2,776,850
Cost of homes sold		2,101,414			2,113,393			2,524,850

Gross margins on home sales		523,371			517,921			252,000
Valuation adjustments to finished homes, CIP and land on which we intend to build homes		35,726			44,717			180,239

Gross margins on home sales excluding valuation adjustments	$	559,097			562,638			432,239
Selling, general and administrative expenses		384,798			376,962			449,259

Operating margins on home sales excluding valuation adjustments	$	174,299			185,676			(17,020	)

Gross margin as a % of revenue from home sales excluding valuation adjustments		21.3	%		21.4	%		15.6	%

Operating margin as a % of revenues from home sales excluding valuation adjustments		6.6	%		7.1	%		(0.6	)%

Homebuilding Segments

Our Homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennar brand name. In addition, our homebuilding operations also purchase, develop and sell land to third parties. In certain circumstances, we diversify our operations through strategic alliances and attempt to minimize our risks by investing with third parties in joint ventures.

We have disaggregated our Homebuilding Southeast Florida division from our Homebuilding East reportable segment and have presented Homebuilding Southeast Florida as a separate reportable segment due to the division currently achieving one of the quantitative thresholds set forth in Accounting Standards Codification Topic 280, Segment Reporting, (“ASC 280”). In addition, we reclassified the homebuilding activities in the states of Georgia, North Carolina and South Carolina from Homebuilding Other to our Homebuilding East reportable segment because these states currently meet the reportable segment aggregation criteria in ASC 280. All prior year segment information has been restated to conform with the 2011 presentation. The change in reportable segments and Homebuilding Other had no effect on our consolidated financial position, results of operations or cash flows for the periods presented.

As of and for the year ended November 30, 2011, we have grouped our homebuilding activities into five reportable segments, which we refer to as Homebuilding East, Homebuilding Central, Homebuilding West, Homebuilding Southeast Florida and Homebuilding Houston. Information about homebuilding activities in which our homebuilding activities are not economically similar to other states in the same geographic area is grouped under “Homebuilding Other,” which is not considered a reportable segment. Reference in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to homebuilding segments are to those reportable segments.

At November 30, 2011, our reportable homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in:

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

Central: Arizona, Colorado and Texas⁽²⁾

West: California and Nevada

Southeast Florida: Southeast Florida

Houston: Houston, Texas

Other: Illinois and Minnesota

(1)	Florida in the East reportable segment excludes Southeast Florida, which is its own reportable segment.

(2)	Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.

The following tables set forth selected financial and operational information related to our homebuilding operations for the years indicated:

Selected Financial and Operational Data


	Years Ended November 30,
*(In thousands)*	2011		2010		2009
Revenues:
East:
Sales of homes	$	1,009,750		970,355		906,979
Sales of land		11,062		16,623		23,509

Total East		1,020,812		986,978		930,488

Central:
Sales of homes		355,350		348,486		361,273
Sales of land		9,907		9,246		5,910

Total Central		365,257		357,732		367,183

West:
Sales of homes		531,984		650,844		810,459
Sales of land		8,879		32,646		15,778

Total West		540,863		683,490		826,237

Southeast Florida:
Sales of homes		239,608		131,091		100,550
Sales of land		—		—		4,060

Total Southeast Florida		239,608		131,091		104,610

Houston:
Sales of homes		321,908		357,590		429,127
Sales of land		19,802		8,348		5,691

Total Houston		341,710		365,938		434,818

Other
Sales of homes		166,185		172,948		168,462
Sales of land		689		7,462		2,487

Total Other		166,874		180,410		170,949

Total homebuilding revenues	$	2,675,124		2,705,639		2,834,285


	Years Ended November 30,
*(In thousands)*	2011			2010			2009
Operating earnings (loss):
East:
Sales of homes	$	98,822			114,061			(17,241	)
Sales of land		233			1,108			(67,675	)
Equity in loss from unconsolidated entities		(518	)		(602	)		(3,691	)
Other income (expense), net (1)		4,568			3,772			(7,846	)
Other interest expense		(22,755	)		(19,113	)		(22,660	)

Total East		80,350			99,226			(119,113	)

Central:
Sales of homes (2)		(16,109	)		(7,910	)		(39,309	)
Sales of land		2,129			(353	)		406
Equity in loss from unconsolidated entities		(922	)		(4,727	)		(8,143	)
Other expense, net		(1,082	)		(2,261	)		(13,371	)
Other interest expense		(15,184	)		(10,661	)		(10,223	)

Total Central		(31,168	)		(25,912	)		(70,640	)

West:
Sales of homes (2)		(3,071	)		4,019			(80,294	)
Sales of land		749			16,502			(48,125	)
Equity in loss from unconsolidated entities (3)		(57,215	)		(6,113	)		(114,373	)
Other income (expense), net (4)		117,066			5,451			(66,568	)
Other interest expense		(31,479	)		(25,720	)		(21,710	)

Total West		26,050			(5,861	)		(331,070	)

Southeast Florida:
Sales of homes		34,096			16,793			(51,514	)
Sales of land		—			—			(25,293	)
Equity in loss from unconsolidated entities		(1,152	)		(269	)		(2,092	)
Other income (expense), net		2,488			9,460			(4,154	)
Other interest expense		(8,004	)		(4,979	)		(4,001	)

Total Southeast Florida		27,428			21,005			(87,054	)

Houston:
Sales of homes		16,115			25,138			25,854
Sales of land		4,617			1,683			(3,424	)
Equity in earnings (loss) from unconsolidated entities		46			766			(1,801	)
Other income (expense), net		965			1,413			(900	)
Other interest expense		(4,563	)		(2,970	)		(3,287	)

Total Houston		17,180			26,030			16,442

Other
Sales of homes		8,720			(11,142	)		(34,755	)
Sales of land		—			2,417			(34,731	)
Equity in loss from unconsolidated entities		(2,955	)		(21	)		(817	)
Other income (expense), net		(7,896	)		1,300			(5,586	)
Other interest expense		(8,665	)		(6,982	)		(8,969	)

Total Other		(10,796	)		(14,428	)		(84,858	)

Total homebuilding operating earnings (loss)	$	109,044		$	100,060		$	(676,293	)

(1)	Other income (expense), net, for the year ended November 30, 2011 includes $5.1 million of income related to the favorable resolution of a joint venture.

(2)

Sales of homes in our Homebuilding Central segment for the year ended November 30, 2011 includes $8.4 million of additional expenses associated with remedying pre-existing liabilities of a previously acquired company. Sales of homes in our Homebuilding West segment for the year ended November 30, 2011 includes an $8.1 million benefit related to changes in our cost-to-complete estimates for homebuilding communities in the close-out phase.

(3)

Equity in loss from unconsolidated entities includes a $57.6 million valuation adjustment related to an asset distribution from a Lennar Homebuilding unconsolidated entity that resulted from a linked transaction where there was also a pre-tax gain of $62.3 million related to the distribution of assets of the unconsolidated entity. The pre-tax gain of $62.3 million was included in Lennar Homebuilding other income (expense), net for the year ended November 30, 2011.

(4)

For the year ended November 30, 2011, other income (expense), net, includes a pre-tax gain of $62.3 million related to the distribution of assets of a Lennar Homebuilding unconsolidated entity, $29.5 million related to the receipt of a litigation settlement, discussed previously in the Overview section, and the recognition of $10.0 million of deferred management fees related to management services previously performed by us for one of the Lennar Homebuilding unconsolidated entities.

Summary of Homebuilding Data

Deliveries:


	Years Ended November 30,
	Homes
	2011		2010		2009
East		4,576		4,539		4,095
Central		1,661		1,682		1,796
West		1,846		2,079		2,480
Southeast Florida		904		536		488
Houston		1,411		1,645		2,150
Other		447		474		469

Total		10,845		10,955		11,478

Of the total home deliveries above, 99, 96 and 56, respectively, represent deliveries from unconsolidated entities for the years ended November 30, 2011, 2010 and 2009.


	Years Ended November 30,
	Dollar Value (In thousands)						Average Sales Price
	2011		2010		2009		2011		2010		2009
East	$	1,009,750		970,355		907,529	$	221,000		214,000		222,000
Central		355,350		348,486		361,273		214,000		207,000		201,000
West		598,202		711,822		856,285		324,000		342,000		345,000
Southeast Florida		239,607		131,091		100,550		265,000		245,000		206,000
Houston		321,908		357,590		429,127		228,000		217,000		200,000
Other		166,186		172,948		168,462		372,000		365,000		359,000

Total	$	2,691,003		2,692,292		2,823,226	$	248,000		246,000		246,000

Of the total dollar value of home deliveries above, $66.2 million, $61.0 million and $46.4 million, respectively, represent the dollar value of home deliveries from unconsolidated entities for the years ended November 30, 2011, 2010 and 2009. The home deliveries from unconsolidated entities had an average sales price of $669,000, $635,000 and $828,000, respectively, for the years ended November 30, 2011, 2010 and 2009.

Sales Incentives (1):


	Years Ended November 30,
	(In thousands)
	2011		2010		2009
East	$	148,424		127,592		183,408
Central		52,117		53,034		65,448
West		54,000		65,988		129,476
Southeast Florida		33,092		22,248		32,132
Houston		54,680		63,255		72,480
Other		19,421		24,370		29,090

Total	$	361,734		356,487		512,034

		$32,400		$32,400		$32,400		$32,400			$32,400			$32,400
	Years Ended November 30,
	Average Sales Incentives Per Home Delivered						Sales Incentives as a % of Revenue
	2011		2010		2009		2011			2010			2009
East	$	32,400		28,110	$	44,800		12.8	%		11.6	%		16.8	%
Central		31,400		31,500		36,400		12.8	%		13.2	%		15.4	%
West		30,900		33,300		53,400		9.2	%		9.2	%		13.8	%
Southeast Florida		36,600		41,500		65,800		12.0	%		14.5	%		24.2	%
Houston		38,800		38,500		33,700		14.5	%		15.0	%		14.4	%
Other		43,400		51,400		62,000		10.5	%		12.3	%		14.7	%

Total	$	33,700		32,800	$	44,800		12.1	%		11.9	%		15.6	%

(1)	Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.

New Orders (2):


	Years Ended November 30,
	Homes
	2011		2010		2009
East		4,769		4,509		4,060
Central		1,716		1,769		1,840
West		1,965		1,922		2,569
Southeast Florida		947		614		479
Houston		1,521		1,641		2,130
Other		494		473		432

Total		11,412		10,928		11,510

Of the new orders above, 98, 90 and 58, respectively, represent new orders from unconsolidated entities for the years ended November 30, 2011, 2010 and 2009.


	Years Ended November 30,
	Dollar Value (In thousands)						Average Sales Price
	2011		2010		2009		2011		2010		2009
East	$	1,051,624		954,255		904,705	$	221,000		212,000		223,000
Central		367,274		365,667		373,084		214,000		207,000		203,000
West		638,418		625,469		892,002		325,000		325,000		347,000
Southeast Florida		254,632		156,424		93,139		269,000		255,000		194,000
Houston		342,836		355,771		432,380		225,000		217,000		203,000
Other		189,658		169,025		151,223		384,000		357,000		350,000

Total	$	2,844,442		2,626,611		2,846,533	$	249,000		240,000		247,000

Of the total dollar value of new orders above, $65.1 million, $55.9 million and $41.5 million, respectively, represent the dollar value of new orders from unconsolidated entities for the years ended November 30, 2011, 2010 and 2009. The new orders from unconsolidated entities had an average sales price of $664,000, $621,000 and $716,000, respectively, for the years ended November 30, 2011, 2010 and 2009.

(2)	New orders represent the number of new sales contracts executed by homebuyers, net of cancellations, during the years ended November 30, 2011, 2010 and 2009.

Backlog:


	Years Ended November 30,
	Homes
	2011		2010		2009
East		948		755		785
Central		309		254		167
West		298		179		336
Southeast Florida		166		123		45
Houston		355		245		249
Other		95		48		49

Total		2,171		1,604		1,631

Of the total homes in backlog above, 2 homes, 3 homes and 9 homes, respectively, represent homes in backlog from unconsolidated entities at November 30, 2011, 2010 and 2009.


	Dollar Value (In thousands)						Average Sales Price
	2011		2010		2009		2011		2010		2009
East	$	220,974		176,588		199,052	$	233,000		234,000		254,000
Central		65,256		52,923		36,158		211,000		208,000		217,000
West		97,292		58,072		143,868		326,000		324,000		428,000
Southeast Florida		52,013		39,035		13,702		313,000		317,000		304,000
Houston		79,800		58,822		60,876		225,000		240,000		244,000
Other		45,324		21,852		25,915		477,000		455,000		529,000

Total	$	560,659		407,292		479,571	$	258,000		254,000		294,000

Of the total dollar value of homes in backlog above, $1.0 million, $2.1 million and $7.2 million, respectively, represent the dollar value of homes in backlog from unconsolidated entities at November 30, 2011, 2010 and 2009. The homes in backlog from unconsolidated entities had an average sales price of $506,000, $716,000 and $804,000, respectively, at November 30, 2011, 2010 and 2009.


	Years Ended November 30,
	2011			2010			2009
East		18	%		17	%		21	%
Central		23	%		18	%		17	%
West		18	%		18	%		15	%
Southeast Florida		13	%		18	%		16	%
Houston		21	%		18	%		19	%
Other		8	%		11	%		16	%

Total		19	%		17	%		18	%

During the fourth quarter of 2011, our cancellation rate was 20%. Our cancellation rate during 2011 was within a range that is consistent with historical cancellation rates. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.

2011 versus 2010

East: Homebuilding revenues increased in 2011, compared to 2010, primarily due to an increase in the average sales price of homes delivered in all of the states in the segment, except New Jersey. The increase in the average sales price of homes delivered was primarily due to a higher percentage of home deliveries in higher priced communities. Gross margins on home sales were $230.2 million, or 22.8%, in 2011 including valuation adjustments of $5.6 million, compared to gross margins on home sales of $236.0 million, or 24.3%, in 2010 including $6.2 million of valuation adjustments. Although gross margin percentage on home sales in this segment remained above average compared to the rest of our homebuilding operations, gross margin percentage on

home sales decreased compared to prior year primarily due to an increase in sales incentives offered to homebuyers as a percentage of revenues from home sales (12.8% in 2011, compared to 11.6% in 2010) and because gross margin on homes sales for the year ended November 30, 2010 included third-party recoveries related to Chinese drywall.

Central: Homebuilding revenues increased in 2011, compared to 2010, primarily due to an increase in the average sales price of homes delivered in Texas, excluding Houston, as a result of the introduction of new higher-end homes at a higher average sales price. Gross margins on home sales were $42.0 million, or 11.8%, in 2011 including valuation adjustments of $13.7 million, compared to gross margins on home sales of $44.2 million, or 12.7%, in 2010 including $9.2 million of valuation adjustments. Gross margin percentage on home sales decreased compared to last year primarily due to adjustments to pre-existing home warranties in Texas, excluding Houston and an increase in valuation adjustments, partially offset by a decrease in sales incentives offered to homebuyers as a percentage of revenues from home sales (12.8% in 2011, compared to 13.2% in 2010).

West: Homebuilding revenues decreased in 2011, compared to 2010, primarily due to a decrease in the number of home deliveries and the averages sales price of homes delivered in California. The decrease in the number of home deliveries in California resulted from a decrease in demand for new homes primarily driven by the absence of the Federal homebuyer tax credit during the entire year in 2011. The decrease in the average sales price of homes delivered in California was due to shift to smaller square footage homes generating a lower average sales price during the year ended November 30, 2011. Gross margins on home sales were $105.1 million, or 19.7%, in 2011 including valuation adjustments of $7.8 million, compared to gross margins on home sales of $125.5 million, or 19.3%, in 2010 including $7.1 million of valuation adjustments. Gross margin percentage on home sales improved compared to last year primarily due to an $8.1 million benefit related to changes in our cost-to-complete estimates for homebuilding communities in the close-out phase, partially offset by a higher percentage of home deliveries in lower price point communities and reduced pricing as the segment focused on reducing its completed unsold inventory. Sales incentives offered to homebuyers as a percentage of revenues from home sales were (9.2% in both 2011 and 2010). Gross profit on land sales were $0.7 million in 2011, compared to gross profits on land sales of $16.5 million in 2010, primarily due to a $14.1 million reduction of an obligation related to a profit participation agreement in 2010.

Southeast Florida: Homebuilding revenues increased in 2011, compared to 2010, primarily due to an increase in the number of home deliveries in this segment as a result of home deliveries from communities acquired in prior year that had sales, but only a few deliveries, during the year ended November 30, 2010. Southeast Florida also had an increase in the average sales price of homes delivered as a result of closing out lower price point communities in the beginning of 2011 and introducing new communities at a higher price point during the year. Gross margins on home sales were $57.5 million, or 24.0%, in 2011 including valuation adjustments of $5.6 million, compared to gross margins on home sales of $32.5 million, or 24.8%, in 2010 including $4.4 million of valuation adjustments. Although gross margin percentage on home sales in this segment remained above average compared to the rest of our homebuilding operations, gross margin percentage on home sales decreased compared to prior year primarily due to increased valuation adjustments in 2011 and because gross margin on homes sales for the year ended November 30, 2010 included third-party recoveries related to Chinese drywall. This decrease was partially offset by a decrease in sales incentives offered to homebuyers as a percentage of revenues from home sales (12.0% in 2011, compare to 14.5% in 2010)

Houston: Homebuilding revenues decreased in 2011, compared to 2010, primarily due to a decrease in the number of home deliveries resulting from a decrease in demand for new homes primarily driven by the absence of the Federal homebuyer tax credit during the entire year in 2011, partially offset by an increase in the average sales price of homes delivered as a result of the close out of lower average sales priced communities in 2010. Gross margins on home sales were $58.9 million, or 18.3%, in 2011, compared to gross margins on home sales of $68.1 million, or 19.0%, in 2010. Gross margin percentage on home sales decreased compared to last year primarily due to reduced pricing in some lower price point communities in an effort to reduce its completed unsold inventory, partially offset by a decrease in sales incentives offered to homebuyers as a percentage of revenues from home sales (14.5% in 2011, compared to 15.0% in 2010). Gross profits on land sales were $4.6 million in 2011, compared to profits on land sales of $1.7 million in 2010.

Other: Homebuilding revenues decreased in 2011, compared to 2010, primarily due to a decrease in the number of home deliveries in Illinois primarily driven by the absence of the Federal homebuyer tax credit during the entire year in 2011. Gross margins on home sales were $29.7 million, or 17.9%, in 2011 including valuation adjustments of $2.5 million, compared to gross margins on home sales of $11.6 million, or 6.7%, in 2010 including $17.5 million of valuation adjustments. Gross margin percentage on home sales improved compared to last year primarily due to a reduction of valuation adjustments and a decrease in sales incentives offered to homebuyers as a percentage of revenues from home sales (10.5% in 2011, compared to 12.3% in 2010). There was no gross profit on land sales in 2011, compared to profits on land sales of $2.4 million in 2010.

2010 versus 2009

East: Homebuilding revenues increased in 2010, compared to 2009, primarily due to an increase in the number of home deliveries in all of the states in this segment, except New Jersey, resulting primarily from an increase in the number of active communities in Florida, excluding Southeast Florida. Gross margins on home sales were $236.0 million, or 24.3%, in 2010 including valuation adjustments of $6.2 million, compared to gross margins on home sales of $100.5 million, or 11.1%, in 2009

including $43.4 million of valuation adjustments. Gross margins on home sales excluding valuation adjustments were $242.3 million, or 25.0%, in 2010, compared to $143.9 million, or 15.9%, in 2009. In 2010, gross margin percentage on home sales, excluding valuation adjustments, improved compared to 2009 primarily due third-party recoveries related to Chinese drywall and reduced sales incentives offered to homebuyers as a percentage of revenues from home sales (11.6% in 2010, compared to 16.8% in 2009).

Gross profits on land sales were $1.1 million in 2010 (net of $2.7 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $0.1 million of valuation adjustments), compared to losses on land sales of $67.7 million in 2009 (including $61.3 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $14.6 million of valuation adjustments).

Central: Homebuilding revenues decreased in 2010, compared to 2009, primarily due to a decrease in the number of home deliveries in all of the states in this segment, except Colorado, resulting primarily from the expiration of the Federal homebuyer tax credit at the end of April 2010. Gross margins on home sales were $44.2 million, or 12.7%, in 2010 including valuation adjustments of $9.2 million, compared to gross margins on home sales of $29.2 million, or 8.1%, in 2009 including $13.6 million of valuation adjustments. Gross margins on home sales, excluding valuation adjustments, were $53.4 million, or 15.3%, in 2010, compared to $42.8 million, or 11.9%, in 2009. In 2010, gross margin percentage on home sales, excluding valuation adjustments, improved compared to 2009 primarily due to reduced sales incentives offered to homebuyers as a percentage of revenues from home sales (13.2% in 2010 and 15.4% in 2009).

West: Homebuilding revenues decreased in 2010, compared to 2009, primarily due to a decrease in the number of home deliveries and average sales price of homes delivered in all of the states in this segment. The decrease in the number of home deliveries and the average sales price of homes delivered in this segment resulted primarily from the expiration of the Federal homebuyer tax credit at the end of April 2010. Gross margins on home sales were $125.5 million, or 19.3%, in 2010 including valuation adjustments of $7.1 million, compared to gross margins on home sales of $92.8 million, or 11.5%, in 2009 including $64.1 million of valuation adjustments. Gross margins on home sales, excluding valuation adjustments, were $132.7 million, or 20.4%, in 2010, compared to $156.9 million, or 19.4%, in 2009. In 2010, gross margin percentage on home sales, excluding valuation adjustments, improved compared to 2009 primarily due to reduced sales incentives offered to homebuyers as a percentage of revenues from home sales (9.2% in 2010, compared to 13.8% in 2009).

Gross profits on land sales were $16.5 million in 2010, primarily due to a $14.1 million reduction of an obligation related to a profit participation agreement. Losses on land sales were $48.1 million in 2009 (including $13.9 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $38.7 million of valuation adjustments).

Southeast Florida: Homebuilding revenues increased in 2010, compared to 2009, primarily due to an increase in the number of home deliveries and averages sales price of homes delivered in this segment, primarily as a result of an increase in active communities. Gross margins on home sales were $32.5 million, or 24.8%, in 2010 including valuation adjustments of $4.4 million, compared to gross margins on home sales of ($38.4) million, or (38.2%), in 2009 including $31.1 million of valuation adjustments. Gross margins on home sales excluding valuation adjustments were $36.9 million, or 28.1%, in 2010, compared to ($7.3) million, or (7.3%), in 2009. In 2010, gross margin percentage on home sales, excluding valuation adjustments, improved compared to 2009 primarily due third-party recoveries related to Chinese drywall and reduced sales incentives offered to homebuyers as a percentage of revenues from home sales (14.5% in 2010, compared to 24.2% in 2009).

There was no gross profit on land sales in 2010, compared to losses on land sales of $25.3 million in 2009 (including $2.8 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $22.5 million of valuation adjustments).

Houston: Homebuilding revenues decreased in 2010, compared to 2009, primarily due to a decrease in the number of home deliveries in this segment, resulting primarily from the expiration of the Federal homebuyer tax credit at the end of April 2010. Gross margins on home sales were $68.1 million, or 19.0%, in 2010, compared to gross margins on home sales of $75.3 million, or 17.5%, in 2009. In 2010, gross margin percentage on home sales improved compared to 2009 primarily due to an increase in average sales price and reduced valuation adjustments.

Other: Homebuilding revenues increased in 2010, compared to 2009, primarily due to an increase in the number of home deliveries in all of the states in Homebuilding Other except Illinois. The increase in the number of home deliveries resulted from new communities in certain of the states in this segment. Gross margins on home sales were $11.6 million, or 6.7%, in 2010 including valuation adjustments of $17.5 million, compared to gross margins on home sales of ($7.5) million, or (4.4%), in 2009 including $27.0 million of valuation adjustments. Gross margins on home sales excluding valuation adjustments were $29.1 million, or 16.8%, in 2010, compared to $19.5 million, or 11.6%, in 2009. In 2010, gross margin percentage on home sales, excluding valuation adjustments, improved compared to 2009 primarily due to reduced sales incentives offered to homebuyers as a percentage of revenues from home sales (12.3% in 2010, compared to 14.7% in 2009).

Gross profits on land sales were $2.4 million in 2010, compared to losses on land sales of $34.7 million in 2009 (including $3.8 million of write-offs of deposits and pre-acquisition costs related to land under option that we do not intend to purchase and $17.6 million of valuation adjustments).

Gross margins on home sales excluding valuation adjustments is a non-GAAP financial measure that is discussed previously under “Non-GAAP Financial Measure.” The table set forth below reconciles our gross margins on home sales excluding valuation adjustments for the years ended November 30, 2011, 2010 and 2009 for each of our reportable homebuilding segments and Homebuilding Other to our gross margins on home sales for the three respective years:


	Years Ended November 30,
*(In thousands)*	2011		2010		2009
East:
Sales of homes	$	1,009,750		970,355		906,979
Cost of homes sold		779,538		734,328		806,451

Gross margins on home sales		230,212		236,027		100,528
Valuation adjustments to finished homes, CIP and land on which we intend to build homes		5,649		6,233		43,353

Gross margins on home sales excluding valuation adjustments		235,861		242,260		143,881

Central:
Sales of homes		355,350		348,486		361,273
Cost of homes sold		313,311		304,329		332,040

Gross margins on home sales		42,039		44,157		29,233
Valuation adjustments to finished homes, CIP and land on which we intend to build homes		13,685		9,205		13,603

Gross margins on home sales excluding valuation adjustments		55,724		53,362		42,836

West:
Sales of homes		531,984		650,844		810,459
Cost of homes sold		426,922		525,310		717,631

Gross margins on home sales		105,062		125,534		92,828
Valuation adjustments to finished homes, CIP and land on which we intend to build homes		7,784		7,139		64,095

Gross margins on home sales excluding valuation		112,846		132,673		156,923

Southeast Florida:
Sales of homes		239,608		131,091		100,550
Cost of homes sold		182,155		98,634		138,943

Gross margins on home sales		57,453		32,457		(38,393	)
Valuation adjustments to finished homes, CIP and land on which we intend to build homes		5,621		4,434		31,059

Gross margins on home sales excluding valuation		63,074		36,891		(7,334	)

Houston:
Sales of homes		321,908		357,590		429,127
Cost of homes sold		263,037		289,474		353,838

Gross margins on home sales		58,871		68,116		75,289
Valuation adjustments to finished homes, CIP and land on which we intend to build homes		520		219		1,116

Gross margins on home sales excluding valuation		59,391		68,335		76,405

Other
Sales of homes		166,185		172,948		168,462
Cost of homes sold		136,451		161,318		175,947

Gross margins on home sales		29,734		11,630		(7,485	)
Valuation adjustments to finished homes, CIP and land on which we intend to build homes		2,467		17,487		27,013

Gross margins on home sales excluding valuation		32,201		29,117		19,528

Total gross margins on home sales	$	523,371		517,921		252,000
Total valuation adjustments	$	35,726		44,717		180,239

Total gross margins on home sales excluding valuation adjustments	$	559,097		562,638		432,239

Lennar Financial Services Segment

We have one Lennar Financial Services reportable segment that provides primarily mortgage financing, title insurance and closing services for both buyers of our homes and others. Substantially all of the loans the Lennar Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, 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 relating to the Lennar Financial Services segment:


	Years Ended November 30,
*(Dollars in thousands)*	2011			2010			2009
Revenues	$	255,518			275,786			285,102
Costs and expenses		234,789			244,502			249,120

Operating earnings	$	20,729			31,284			35,982

Dollar value of mortgages originated	$	2,896,000			3,272,000			4,020,000

Number of mortgages originated		13,800			15,200			17,900

Mortgage capture rate of Lennar homebuyers		78	%		85	%		87	%

Number of title and closing service transactions		86,400			102,500			120,500

Number of title policies issued		121,800			107,600			92,500

Rialto Investments Segment

Rialto’s objective is to generate superior, risk-adjusted returns by focusing on commercial and residential real estate opportunities arising from dislocations in the United States real estate markets and the eventual restructure and recapitalization of those markets. Rialto believes it will be able to deliver these returns through its abilities to source, underwrite, price, manage and ultimately monetize real estate assets, as well as providing similar services to others in markets across the country.

The following table presents the results of operations of our Rialto segment for the periods indicated:


	Years Ended November 30,
*(In thousands)*	2011			2010		2009
Revenues	$	164,743			92,597		—
Costs and expenses		132,583			67,904		2,528
Rialto Investments equity in earnings (loss) from unconsolidated entities		(7,914	)		15,363		—
Rialto Investments other income, net		39,211			17,251		—

Operating earnings (loss) (1)	$	63,457			57,307		(2,528	)

(1)	Operating earnings (loss) for the year ended November 30, 2011 and 2010 include $28.9 million and $33.2 million, respectively, of net earnings attributable to noncontrolling interests.

Distressed Asset Portfolios

In February 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies (“LLCs”), in partnership with the FDIC, for approximately $243 million (net of transactions costs and a $22 million working capital reserve). The LLCs hold performing and non-performing loans formerly owned by 22 failed financial institutions. The two portfolios originally consisted of more than 5,500 distressed residential and commercial real estate loans with an aggregate unpaid principal balance of approximately $3 billion and an initial fair value of approximately $1.2 billion. The FDIC retained a 60% equity interest in the LLCs and provided $626.9 million of notes with 0% interest, which are non-recourse to us. In accordance with GAAP, interest has not been imputed because the notes are with, and guaranteed by, a governmental agency. The notes are secured by the loans held by the LLCs. Additionally, if the LLCs exceed expectations and meet certain internal rate of return and distribution thresholds, our equity interest in the LLCs could be reduced from 40% down to 30%, with a corresponding increase to the FDIC’s equity interest from 60% up to 70%. Although our equity interest could decrease, we believe we would most likely yield a higher return on our investment if the thresholds are met. As of both November 30, 2011 and 2010, the notes payable balance was $626.9 million; however, as of November 30, 2011 and 2010, $219.4 million and $101.3 million, respectively, of cash collections on loans in excess of expenses were deposited in a defeasance account, established for the repayment of the notes payable, under the agreement with the FDIC. The funds in the defeasance account will be used to retire the notes payable upon their maturity.

The LLCs met the accounting definition of variable interest entities (“VIEs”) and since we were determined to be the primary beneficiary, we consolidated the LLCs. We determined that we were the primary beneficiary because we have the power to direct the activities of the LLCs that most significantly impact the LLCs’ performance through our management and servicer contracts. At November 30, 2011, these consolidated LLCs had total combined assets and liabilities of $1.4 billion and $0.7 billion, respectively.

In September 2010, the Rialto segment acquired approximately 400 distressed residential and commercial real estate loans and over 300 REO properties from three financial institutions. We paid $310 million for the distressed real estate assets of which, $124 million was financed through a 5-year senior unsecured note provided by one of the selling institutions.

The loans consisted primarily of non-performing residential and commercial acquisition development and construction loans. The largest concentration of collateral for these loans was finished/partially-finished homesites, undeveloped land and completed/partially-completed homes. The real estate properties primarily consisted of land, homesites, and single-family and multi-family residential communities at varying stages of completion. In the combined portfolio, 65% of the assets were residential and 35% were commercial. The acquired assets were located in 17 states, primarily in the Mid-Atlantic and Southeast regions of the United States with the largest concentration of assets in Florida, Georgia and North Carolina.

Investments

An affiliate in the Rialto segment is a sub-advisor to the AB PPIP fund and receives management fees for sub-advisory services. We also made a commitment to invest $75 million in the AB PPIP fund, of which the remaining commitment as of November 30, 2011 was $7.5 million. During the years ended November 30, 2011 and 2010, we invested $3.7 million and $63.8 million, respectively, in the AB PPIP fund. As of November 30, 2011 and 2010, the carrying value of our investment in the AB PPIP fund was $65.2 million and $77.3 million, respectively.

In November 2010, the Rialto segment completed the first closing of its Fund with initial equity commitments of approximately $300 million (including $75 million committed by us). The Fund’s objective during its three-year investment period is to invest in distressed real estate assets and other related investments that fit within the Fund’s investment parameters. During the year ended November 30, 2011, we contributed $60.6 million of which $13.4 million was distributed back to us as a return of excess capital contributions as a result of new investors in the Fund. Total investor contributions to the Fund for the year ended November 30, 2011 were $387.8 million. During the year ended November 30, 2011, the Fund acquired distressed real estate asset portfolios and invested in commercial mortgage backed securities (“CMBS”) at a discount to par value. As of November 30, 2011, the carrying value of our investment in the Fund was $50.1 million. As of November 30, 2011, the equity commitments of the Fund were $700 million (including the $75 million committed by us). Since the Fund’s inception, our share of earnings as of November 30, 2011 was $2.9 million.

In addition, during the year ended November 30, 2010, the Rialto segment also invested in approximately $43 million of non-investment grade CMBS for $19.4 million, representing a 55% discount to par value. During the year ended November 30, 2011, the Rialto segment sold a portion of its CMBS for $11.1 million, resulting in a gain on sale of CMBS of $4.7 million. The carrying value of the investment securities as of November 30, 2011 and 2010 was $14.1 million and $19.5 million, respectively.

Additionally, another subsidiary in the Rialto segment also has approximately a 5% investment in a service and infrastructure provider to the residential home loan market (the “Service Provider”), which provides services to the consolidated LLCs, among others. At November 30, 2011 and 2010, the carrying value of our investment in the Servicer Provider was $8.8 million and $7.3 million, respectively.

Financial Condition and Capital Resources

At November 30, 2011, we had cash and cash equivalents related to our homebuilding, financial services and Rialto operations of $1.2 billion, compared to $1.4 billion and $1.5 billion, respectively, at November 30, 2010 and 2009.

We finance our land acquisition and development activities, construction activities, financial services activities, Rialto activities and general operating needs primarily with cash generated from our operations, debt issuances and equity offerings, as well as cash borrowed under our warehouse lines of credit.

Operating Cash Flow Activities

During 2011 and 2010, cash (used in) provided by operating activities totaled ($259.1) million and $274.2 million, respectively. During 2011, cash used in operating activities were impacted by a decrease in accounts payable and other liabilities, an increase in inventories due to strategic land purchases, an increase in receivables, an increase in other assets and an increase in Lennar Financial Services loans held-for-sale, partially offset by our net earnings.

During 2010, cash provided by operating activities was positively impacted by the receipt of tax refunds of $343.0 million generated primarily from losses incurred prior to fiscal 2010 and our net earnings. This was partially offset by a net increase in inventories of $115.2 million, primarily due to a higher level of land purchases in strategic markets during the year ended November 30, 2010 and a decrease in accounts payable and other liabilities.

Investing Cash Flow Activities

During 2011 and 2010, cash used in investing activities totaled $136.2 million and $673.4 million, respectively. During 2011, we received $74.9 million of principal payments on Rialto Investments loans receivable, $91.0 million of proceeds from the sale of REO and $31.1 million of distributions of capital from Lennar Homebuilding unconsolidated entities. This was offset by $98.5 million of cash contributions to Lennar Homebuilding unconsolidated entities primarily for working capital and debt reduction, $64.4 million of cash contributions to Rialto Investments’ unconsolidated entities, $118.1 million increase in Rialto Investments defeasance cash and $53.6 million to purchase held-to-maturity investment securities that mature at various dates within one year by Lennar Financial Services.

During the year ended November 30, 2010, our Rialto segment contributed $243 million of cash (net of a $22 million working capital reserve) to acquire indirectly 40% managing member interests in two LLCs in partnership with the FDIC. Upon consolidation of the LLCs that hold the two portfolios of real estate loans acquired in the FDIC transaction, we consolidated $93.7 million of cash, resulting in net contributions to consolidated entities by the Rialto segment of $171.4 million during the year ended November 30, 2010. In addition, during 2010 cash collections of $101.3 million on loans in excess of expenses were deposited in a defeasance account established for the repayment of the notes payable under the agreement with the FDIC. In September 2010, our Rialto segment used $183.4 million of cash to acquire portfolios of distressed loans and real estate assets, in separate transactions, from three financial institutions. The Rialto segment also contributed $64.3 million of cash to unconsolidated entities related primarily to the AB PPIP fund.

Additionally, during 2010 we contributed $209.3 million of cash to Lennar Homebuilding unconsolidated entities of which $113.5 million was to retire and extend debt of the Lennar Homebuilding unconsolidated entities thereby decreasing leverage at the Lennar Homebuilding unconsolidated entities and $95.8 million was for working capital. Specifically, we contributed $69.6 million to one Lennar Homebuilding unconsolidated entity of which $50.3 million was a loan paydown, representing both our and our partner’s share, in return for a 4-year loan extension and the rights to obtain preferred returns and priority distributions at that unconsolidated entity. We also made a $19.3 million payment to extinguish debt at a discount and buy out the partner of a Lennar Homebuilding unconsolidated entity resulting in a net pre-tax gain of $7.7 million.

We are always evaluating the possibility of acquiring homebuilders and other companies. However, at November 30, 2011, we had no agreements or understandings regarding any significant transactions.

Financing Cash Flow Activities

During 2011, our cash provided by financing activities of $164.8 million was primarily attributed to the issuance of new debt, partially offset by principal payments on other borrowings and the repayment of our 5.95% senior notes due 2011. During 2010, our cash provided by financing activities of $335.8 million was primarily attributable to the redemption of senior notes and principal payments on other borrowings, offset by the issuance of new debt.

During 2011 and 2010, we exercised certain land option contracts from a land investment venture that we sold land to in 2007, reducing the liabilities reflected on our consolidated balance sheet related to consolidated inventory not owned by $41.0 million and $39.3 million, respectively. Due to our continuing involvement, the transaction did not qualify as a sale under GAAP; thus, the inventory remained on our balance sheet in consolidated inventory not owned.

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 Lennar Homebuilding operations. Management believes providing a measure of leverage of our Lennar Homebuilding operations enables management and readers of our financial statements to better understand our financial position and performance. Lennar Homebuilding debt to total capital and net Lennar Homebuilding debt to total capital are calculated as follows:


	November 30,
*(Dollars in thousands)*	2011			2010
Lennar Homebuilding debt	$	3,362,759			3,128,154
Stockholders’ equity		2,696,468			2,608,949

Total capital	$	6,059,227			5,737,103

Lennar Homebuilding debt to total capital		55.5	%		54.5	%

Lennar Homebuilding debt	$	3,362,759			3,128,154
Less: Lennar Homebuilding cash and cash equivalents		1,024,212			1,207,247

Net Lennar Homebuilding debt	$	2,338,547			1,920,907

Net Lennar Homebuilding debt to total capital (1)		46.4	%		42.4	%

(1)	Net Lennar Homebuilding debt to total capital consists of net Lennar Homebuilding debt (Lennar Homebuilding debt less Lennar Homebuilding cash and cash equivalents) divided by total capital (net Lennar Homebuilding debt plus total stockholders’ equity).

At November 30, 2011, net Lennar Homebuilding debt to total capital was higher compared to prior year, due to the increase in Lennar Homebuilding debt as a result of an increase in senior notes and a decrease in Lennar Homebuilding cash and cash equivalents, partially offset by an increase in stockholders’ equity primarily related to our net earnings.

In addition to the use of capital in our homebuilding, financial services and Rialto operations, we actively evaluate various other uses of capital, which fit into our homebuilding, financial services and Rialto strategies and appear to meet our profitability and return on capital goals. This may include acquisitions of, or investments in, other entities, the payment of dividends or repurchases of our outstanding common stock or debt. These activities may be funded through any combination of our warehouse lines of credit, cash generated from operations, sales of assets or the issuance into capital markets of debt, common stock or preferred stock.

The following table summarizes our Lennar Homebuilding senior notes and other debts payable:


	November 30,
*(Dollars in thousands)*	2011		2010
5.95% senior notes due 2013	$	266,855		266,319
5.50% senior notes due 2014		248,967		248,657
5.60% senior notes due 2015		500,999		501,216
6.50% senior notes due 2016		249,819		249,788
12.25% senior notes due 2017		393,700		393,031
6.95% senior notes due 2018		247,598		247,323
2.00% convertible senior notes due 2020		276,500		276,500
2.75% convertible senior notes due 2020		388,417		375,875
3.25% convertible senior notes due 2021		350,000		—
5.95% senior notes due 2011		—		113,189
Mortgages notes on land and other debt		439,904		456,256

	$	3,362,759		3,128,154

Our Lennar Homebuilding average debt outstanding was $3.1 billion in 2011, compared to $2.8 billion in 2010. The average rate for interest incurred was 5.7% and 6.1%, respectively in 2011 and 2010. Interest incurred related to Lennar Homebuilding debt for the year ended November 30, 2011 was $201.4 million, compared to $181.5 million in 2010. The majority of our short-term financing needs, including financings for land acquisition and development activities and general operating needs, are met with cash generated from operations and proceeds of debt issuances.

In November 2011, we issued $350.0 million aggregate principal amount of 3.25% convertible senior notes due 2021, at a price of 100% in a private placement. Subsequent to November 30, 2011, the initial purchasers of the 3.25% convertible senior notes due 2021 purchased an additional $50.0 million aggregate principal amount of the 3.25% convertible senior notes due 2021 to cover over-allotments. The total aggregate principal amount of the 3.25% convertible senior notes due 2021 (“3.25% Convertible Senior Notes”) is $400.0 million. As of November 30, 2011, proceeds from the offering, after payment of expenses, were $342.6 million. Subsequent to November 30, 2011, we received the proceeds from the over-allotments of $49.0 million, after payment of

expenses. The net proceeds have been or will be used for general corporate purposes, including repayments or repurchases of existing senior notes or other indebtedness, acquisitions of land suitable for residential development and purchases of, or investments in portfolios of, distressed real estate assets and foreclosed real estate assets. The 3.25% Convertible Senior Notes are convertible into shares of Class A common stock at any time prior to maturity or redemption at the initial conversion rate of 42.5555 shares of Class A common stock per $1,000 principal amount of the 3.25% Convertible Senior Notes or 17,022,200 Class A common shares if all the 3.25% Convertible Senior Notes are converted, which is equivalent to an initial conversion price of approximately $23.50 per share of Class A common stock, subject to anti-dilution adjustments. The shares are included in the calculation of diluted earnings per share. Holders of the 3.25% Convertible Senior Notes have the right to require us to repurchase them for cash equal to 100% of their principal amount, plus accrued but unpaid interest on November 15, 2016. We have the right to redeem the 3.25% Convertible Senior Notes at any time on or after November 20, 2016 for 100% of their principal amount, plus accrued but unpaid interest. Interest on the 3.25% Convertible Senior Notes is due semi-annually beginning May 15, 2012. The 3.25% Convertible Senior Notes are unsecured and unsubordinated. At November 30, 2011, the carrying amount of the 3.25% Convertible Senior Notes was $350.0 million. Subsequent to November 30, 2011, the carrying amount of the 3.25% Convertible Senior Notes was increased to $400.0 million.

In November 2010, we issued $446.0 million of 2.75% convertible senior notes due 2020 (the “2.75% Convertible Senior Notes”) at a price of 100% in a private placement. Proceeds from the offering, after payment of expenses, were $436.4 million. The net proceeds were used for general corporate purposes, including repayments or repurchases of existing senior notes or other indebtedness. The 2.75% Convertible Senior Notes are convertible into cash, shares of Class A common stock or a combination of both, at our election. However, it is our intent to settle the face value of the 2.75% Convertible Senior Notes in cash. Holders may convert the 2.75% Convertible Senior Notes at the initial conversion rate of 45.1794 shares of Class A common stock per $1,000 principal amount or 20,150,012 Class A common shares if all the 2.75% Convertible Senior Notes are converted, which is equivalent to an initial conversion price of approximately $22.13 per share of Class A common stock, subject to anti-dilution adjustments. The shares are not included in the calculation of diluted earnings per share primarily because it is our intent to settle the face value of the 2.75% Convertible Senior Notes in cash and our stock price does not exceed the conversion price.

Holders of the 2.75% Convertible Senior Notes have the right to convert them, during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day. Holders of the 2.75% Convertible Senior Notes have the right to require us to repurchase them for cash equal to 100% of their principal amount, plus accrued but unpaid interest, on December 15, 2015. We have the right to redeem the 2.75% Convertible Senior Notes at any time on or after December 20, 2015 for 100% of their principal amount, plus accrued but unpaid interest. Interest on the 2.75% Convertible Senior Notes is due semi-annually beginning June 15, 2011. The 2.75% Convertible Senior Notes are unsecured and unsubordinated.

For our 2.75% Convertible Senior Notes, we will be required to pay contingent interest with regard to any interest period beginning with the interest period commencing December 20, 2015 and ending June 14, 2016, and for each subsequent six-month period commencing on an interest payment date to, but excluding, the next interest payment date, if the average trading price of the 2.75% Convertible Senior Notes during the five consecutive trading days ending on the second trading day immediately preceding the first day of the applicable interest period exceeds 120% of the principal amount of the 2.75% Convertible Senior Notes. The amount of contingent interest payable per $1,000 principal amount of notes during the applicable interest period will equal 0.75% per year of the average trading price of such $1,000 principal amount of 2.75% Convertible Senior Notes during the five trading day reference period.

Certain provisions under ASC Topic 470, Debt, require the issuer of certain convertible debt instruments that may be settled in cash on conversion to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. We have applied these provisions to our 2.75% Convertible Senior Notes. We estimated the fair value of the 2.75% Convertible Senior Notes using similar debt instruments at issuance that did not have a conversion feature and allocated the residual value to an equity component that represents the estimated fair value of the conversion feature at issuance. The debt discount of the 2.75% Convertible Senior Notes is being amortized over five years and the annual effective interest rate is 7.1% after giving effect to the amortization of the discount and deferred financing costs. At both November 30, 2011 and 2010, the principal amount of the 2.75% Convertible Senior Notes was $446.0 million. At November 30, 2011 and 2010, the carrying amount of the equity component included in stockholders’ equity was $57.6 million and $70.1 million, respectively, and the net carrying amount of the 2.75% Convertible Senior Notes included in Lennar Homebuilding Senior Notes and other notes payable was $388.4 million and $375.9 million, respectively. During the years ended November 30, 2011 and 2010, the amount of interest recognized relating to both the contractual interest and amortization of the discount was $24.8 million and $1.7 million, respectively.

In May 2010, we issued $250 million of 6.95% senior notes due 2018 (the “6.95% Senior Notes”) at a price of 98.929% in a private placement. Proceeds from the offering, after payment of initial purchaser’s discount and expenses, were $243.9 million. We

used the net proceeds of the sale of the 6.95% Senior Notes to fund purchases pursuant to our tender offer for our 5.125% senior notes due October 2010, our 5.95% senior notes due 2011 and our 5.95% senior notes due 2013. Interest on the 6.95% Senior Notes is due semi-annually. The 6.95% Senior Notes are unsecured and unsubordinated. Subsequently, most of the privately placed 6.95% Senior Notes were exchanged for substantially identical 6.95% senior notes that had been registered under the Securities Act of 1933. At November 30, 2011 and 2010, the carrying amount of the 6.95% Senior Notes was $247.6 million and $247.3 million, respectively.

In May 2010, we issued $276.5 million of 2.00% convertible senior notes due 2020 (the “2.00% Convertible Senior Notes”) at a price of 100% in a private placement. Proceeds from the offering, after payment of expenses, were $271.2 million. The net proceeds were to be used for general corporate purposes, including repayments or repurchases of existing senior notes or other indebtedness. The 2.00% Convertible Senior Notes are convertible into shares of Class A common stock at the initial conversion rate of 36.1827 shares of Class A common stock per $1,000 principal amount of the 2.00% Convertible Senior Notes or 10,004,517 Class A common shares if all the 2.00% Convertible Senior Notes are converted, which is equivalent to an initial conversion price of approximately $27.64 per share of Class A common stock, subject to anti-dilution adjustments. The shares are included in the calculation of diluted earnings per share. Holders of the 2.00% Convertible Senior Notes have the right to require us to repurchase them for cash equal to 100% of their principal amount, plus accrued but unpaid interest, on each of December 1, 2013 and December 1, 2015. We have the right to redeem the 2.00% Convertible Senior Notes at any time on or after December 1, 2013 for 100% of their principal amount, plus accrued but unpaid interest. Interest on the 2.00% Convertible Senior Notes is due semi-annually. The 2.00% Convertible Senior Notes are unsecured and unsubordinated. At both November 30, 2011 and 2010, the carrying amount of the 2.00% Convertible Senior Notes was $276.5 million.

For our 2.00% Convertible Senior Notes, we will be required to pay contingent interest with regard to any interest period commencing with the six-month interest period beginning December 1, 2013, if the average trading price of the 2.00% Convertible Senior Notes during the five consecutive trading days ending on the second trading day immediately preceding the first day of the applicable six-month interest period equals or exceeds 120% of the principal amount of the 2.00% Convertible Senior Notes. The amount of contingent interest payable per $1,000 principal amount of notes during the applicable six-month interest period will equal 0.50% per year of the average trading price of such $1,000 principal amount of the 2.00% Convertible Senior Notes during the five trading-day reference period.

In May 2010, we repurchased $289.4 million aggregate principal amount of our senior notes due 2010, 2011 and 2013 through a tender offer, resulting in a pre-tax loss of $10.8 million. Through the tender offer, we repurchased $76.4 million principal amount of our 5.125% senior notes due October 2010, $130.8 million principal amount of our 5.95% senior notes due 2011 and $82.3 million principal amount of our 5.95% senior notes due 2013.

During the years ended November 30, 2010 and 2009, we redeemed $150.8 million (including amount redeemed through the tender offer) and $50.0 million, respectively, of our 5.125% senior notes due October 2010. In October 2010, we retired the remaining $99.2 million of our 5.125% senior notes due October 2010 for 100% of the outstanding principal amount plus accrued and unpaid interest as of the maturity date.

During the years ended November 30, 2010 and 2009, we redeemed $131.8 million (including amount redeemed through the tender offer) and $5.0 million, respectively, of our 5.95% senior notes due 2011. In October 2011, we retired the remaining $113.2 million of our 5.125% senior notes due October 2011 for 100% of the outstanding principal amount plus accrued and unpaid interest as of the maturity date.

During the year ended November 30, 2010, we redeemed $82.3 million (including the amount redeemed through the tender offer) of our 5.95% senior notes due 2013. At November 30, 2011 and 2010, the carrying amount of our 5.95% senior notes due 2013 was $266.9 million and $266.3 million, respectively.

Currently, substantially all of our wholly-owned homebuilding subsidiaries are guaranteeing all our Senior Notes (the “Guaranteed Notes”). The guarantees are full and unconditional. The principal reason our wholly-owned homebuilding subsidiaries guaranteed the Guaranteed Notes is so holders of the Guaranteed Notes will have rights at least as great with regard to our subsidiaries as any other holders of a material amount of our unsecured debt. Therefore, the guarantees of the Guaranteed Notes will remain in effect only while the guarantor subsidiaries guarantee a material amount of the debt of Lennar Corporation, as a separate entity, to others. At any time when a guarantor subsidiary is no longer guaranteeing at least $75 million of Lennar Corporation’s debt other than the Guaranteed Notes, either directly or by guaranteeing other subsidiaries’ obligations as guarantors of Lennar Corporation’s debt, the guarantor subsidiaries’ guarantee of the Guaranteed Notes will be suspended. Therefore, if the guarantor subsidiaries cease guaranteeing Lennar Corporation’s obligations under its letter of credit facility and are not guarantors of any new debt, the guarantor subsidiaries’ guarantees of the Guaranteed Notes will be suspended until such time, if any, as they again are guaranteeing at least $75 million of Lennar Corporation’s debt other than the Guaranteed Notes.

If our guarantor subsidiaries are guaranteeing a revolving credit lines totaling at least $75 million, we will treat the guarantees of the Guaranteed Notes as remaining in effect even during periods when Lennar Corporation’s borrowings under the revolving credit lines are less than $75 million.

In 2010, we entered into cash-collateralized letter of credit agreements with two banks with a capacity totaling $225 million. In November 2010, we terminated our cash-collateralized letter of credit agreements and simultaneously entered into a $150 million Letter of Credit and Reimbursement Agreement (“LC Agreement”) with certain financial institutions. The LC Agreement may be increased to $200 million, although there are currently no commitments for the additional $50 million. In addition, in October 2011, we entered into a $50 million Letter of Credit and Reimbursement Agreement with certain financial institutions that has a $50 million accordion for which there are currently no commitments. We also have a $200 million Letter of Credit Facility with a financial institution. We believe we were in compliance with our debt covenants at November 30, 2011.

Our performance letters of credit outstanding were $68.0 million and $78.9 million, respectively, at November 30, 2011 and 2010. Our financial letters of credit outstanding were $199.3 million and $195.0 million, respectively, at November 30, 2011 and 2010. Performance letters of credit are generally posted with regulatory bodies to guarantee our performance of certain development and construction activities, and financial letters of credit are generally posted in lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral.

At November 30, 2011, our Lennar Financial Services segment had a 364-day warehouse repurchase facility with a maximum aggregate commitment of $150 million and an additional uncommitted amount of $73 million that matures in February 2012, and another 364-day warehouse repurchase facility with a maximum aggregate commitment of $175 million (plus a $25 million temporary accordion feature that expired December 31, 2011) that matures in July 2012. As of November 30, 2011, the maximum aggregate commitment and uncommitted amount under these facilities totaled $350 million and $73 million, respectively.

Our Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage loans are sold to investors and expects the facilities to be renewed or replaced with other facilities when they mature. Borrowings under the facilities were $410.1 million and $271.6 million, respectively, at November 30, 2011 and 2010, and were collateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $431.6 million and $286.0 million, respectively, at November 30, 2011 and 2010. These facilities have several interest rate-pricing options, which fluctuate with market rates. The combined effective interest rate on the facilities at November 30, 2011 was 3.4%.

Since our Lennar Financial Services segment’s borrowings under the warehouse repurchase facilities are generally repaid with the proceeds from the sale of mortgage loans and receivables on loans that secure those borrowings, the facilities are not likely to be a call on our current cash or future cash resources. If the facilities are not renewed, the borrowings under the lines of credit will be paid off by selling the mortgage loans held-for-sale and by collecting on receivables on loans sold but not yet paid. Without the facilities, our Lennar Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.

Our Lennar Financial Services segment, in the normal course of business, uses derivative financial instruments to reduce its exposure to fluctuations in interest rates. Our Lennar Financial Services segment enters into forward commitments and, to a lesser extent, option contracts to protect the value of loans held-for-sale from increases in market interest rates. We do not anticipate that we will suffer credit losses from counterparty non-performance.

Changes in Capital Structure

We have a stock repurchase program which permits the purchase of up to 20 million shares of our outstanding common stock. During the years ended November 30, 2011, 2010 and 2009, there were no share repurchases of common stock under the stock repurchase program. As of November 30, 2011, 6.2 million shares of common stock can be repurchased in the future under the program.

During the years ended November 30, 2011 and November 30, 2010, treasury stock increased by 0.3 million Class A common shares and 0.1 million Class A common shares, respectively, due to activity related to our equity compensation plan and forfeitures of restricted stock.

In April 2009, we entered into distribution agreements with J.P Morgan Securities, Inc., Citigroup Global Markets Inc., Merril Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., relating to an offering of our Class A common stock into the market from time to time for an aggregate of up to $275 million. As of November 30, 2009, we had sold a total of 21.0 million shares of our Class A common stock under the equity offering for gross proceeds of $225.5 million, or an average of $10.76 per share. After compensation to the distributors of $4.5 million, we received net proceeds of $221.0 million. We used the proceeds from the offering for general corporate purposes. There was no activity related to these distribution agreements during both the years ended November 30, 2011 and 2010.

During 2011, 2010 and 2009, Class A and Class B common stockholders received a per share annual dividend of $0.16.

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.

Off-Balance Sheet Arrangements

Lennar Homebuilding - Investments in Unconsolidated Entities

At November 30, 2011, we had equity investments in 35 unconsolidated entities (of which 10 had recourse debt, 8 had non-recourse debt and 17 had no debt), compared to 42 unconsolidated entities at November 30, 2010 and 270 unconsolidated entities at November 30, 2006. Historically, we invested in unconsolidated entities that acquire and develop 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 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, 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 partner. Each joint venture is governed by an executive committee consisting of members from the partners.

Although the strategic purposes of our joint ventures and the nature of our joint ventures partners vary, the joint ventures are generally designed to acquire, develop and/or sell specific assets during a limited life-time. The joint ventures are typically structured through non-corporate entities in which control is shared with our venture partners. Each joint venture is unique in terms of its funding requirements and liquidity needs. We and the other joint venture participants typically make pro-rata cash contributions to the joint venture. In many cases, our risk is limited to our equity contribution and potential future capital contributions. Additionally, most joint ventures obtain third-party debt to fund a portion of the acquisition, development and construction costs of their communities. The joint venture agreements usually permit, but do not require, the joint ventures to make additional capital calls in the future. However, capital calls relating to the repayment of joint venture debt under payment or maintenance guarantees generally is required.

Under the terms of our joint venture agreements, we generally have the right to share in earnings and distributions of the entities on a pro-rata basis based on our ownership percentage. Some joint venture agreements provide for a different allocation of profit and cash distributions if and when the cumulative results of the joint venture exceed specified targets (such as a specified internal rate of return). Lennar Homebuilding equity in loss from unconsolidated entities excludes our pro-rata share of joint ventures’ earnings resulting from land sales to our homebuilding divisions. Instead, we account for those earnings as a reduction of our costs of purchasing the land from the joint ventures. This in effect defers recognition of our share of the joint ventures’ earnings related to these sales until we deliver a home and title passes to a third-party homebuyer.

In some instances, we are designated as the manager under the direction of a management committee that has shared power amongst the partners of the unconsolidated entity and receive fees for such services. In addition, we often enter into option contracts to acquire properties from our joint ventures, generally for market prices at specified dates in the future. Option contracts generally require us to make deposits using cash or irrevocable letters of credit toward the exercise price. These option deposits are generally negotiated by management on a case by case basis.

We regularly monitor the results of our unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations. Joint ventures in which we have investments are subject to a variety of financial and non-financial debt covenants related primarily to equity maintenance, fair value of collateral and minimum homesite takedown or sale requirements. We 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.

Our arrangements with joint ventures generally do not restrict our activities or those of the other participants. However, in certain instances, we agree not to engage in some types of activities that may be viewed as competitive with the activities of these ventures in the localities where the joint ventures do business.

As discussed above, the joint ventures in which we invest generally supplement equity contributions with third-party debt to finance their activities. In some instances, the debt financing is non-recourse, thus neither we nor the other equity partners are a party to the debt instruments. In other cases, we and the other partners agree to provide credit support in the form of repayment or maintenance guarantees.

Material contractual obligations of our unconsolidated joint ventures primarily relate to the debt obligations described above. The joint ventures generally do not enter into lease commitments because the entities are managed either by us, or another of the joint venture participants, who supply the necessary facilities and employee services in exchange for market-based management fees. However, they do enter into management contracts with the participants who manage them. Some joint ventures also enter into agreements with developers, which may be us or other joint venture participants, to develop raw land into finished homesites or to build homes.

The joint ventures often enter into option agreements with buyers, which may include us or other joint venture participants, to deliver homesites or parcels in the future at market prices. Option deposits are recorded by the joint ventures as liabilities until the exercise dates at which time the deposit and remaining exercise proceeds are recorded as revenue. Any forfeited deposit is recognized as revenue at the time of forfeiture. Our unconsolidated joint ventures generally do not enter into off-balance sheet arrangements.

As described above, the liquidity needs of joint ventures in which we have investments vary on an entity-by-entity basis depending on each entity’s purpose and the stage in its life cycle. During formation and development activities, the entities generally require cash, which is provided through a combination of equity contributions and debt financing, to fund acquisition and development of properties. As the properties are completed and sold, cash generated is available to repay debt and for distribution to the joint venture’s members. Thus, the amount of cash available for a joint venture to distribute at any given time is primarily a function of the scope of the joint venture’s activities and the stage in the joint venture’s life cycle.

We track our share of cumulative earnings and cumulative distributions of our joint ventures. For purposes of classifying distributions received from joint ventures in our statements of cash flows, cumulative distributions are treated as returns on capital to the extent of cumulative earnings and included in our consolidated statements of cash flows as operating activities. Cumulative distributions in excess of our share of cumulative earnings are treated as returns of capital and included in our consolidated statements of cash flows as investing activities.

Summarized financial information on a combined 100% basis related to Lennar Homebuilding’s unconsolidated entities that are accounted for by the equity method was as follows:


Statement of Operations and Selected Information
	Years Ended November 30,
*(Dollars in thousands)*	2011			2010			2009
Revenues	$	301,843			236,752			339,993
Costs and expenses		451,272			378,997			1,212,866
Other income		123,007			—			—

Net loss of unconsolidated entities (1)	$	(26,422	)		(142,245	)		(872,873	)

Our share of net loss	$	(41,275	)		(13,301	)		(131,138	)
Lennar Homebuilding equity in loss from unconsolidated entities (2)	$	(62,716	)		(10,966	)		(130,917	)
Our cumulative share of net earnings - deferred at November 30	$	3,362			8,689			12,052
Our investments in unconsolidated entities	$	545,760			626,185			599,266
Equity of the unconsolidated entities	$	2,055,966			2,148,610			2,248,289

Our investment % in the unconsolidated entities		27	%		29	%		27	%

(1)

The net loss of unconsolidated entities for the years ended November 30, 2010 and 2009 was primarily related to valuation adjustments and operating losses recorded by the unconsolidated entities. Our exposure to such losses was significantly lower as a result of its small ownership interests in the respective unconsolidated entities or its previous valuation adjustments recorded to its investments in Lennar Homebuilding’s unconsolidated entities.

(2)

For the year ended November 30, 2011, Lennar Homebuilding equity in loss includes a $57.6 million valuation adjustment related to an asset distribution from a Lennar Homebuilding unconsolidated entity that resulted from a linked transaction where there was also a pre-tax gain of $62.3 million, included in Lennar Homebuilding other income (expense), net, related to the distribution of assets of the unconsolidated entity. In addition, for the year ended November 30, 2011, Lennar Homebuilding equity in loss from unconsolidated entities includes $8.9 million of valuation adjustments related to the assets of Lennar Homebuilding unconsolidated entities, offset by a $15.4 million gain related to our share of a $123.0 million gain on debt extinguishment at a Lennar Homebuilding unconsolidated

entity. For the year ended November 30, 2010, we recorded a net pre-tax gain of $7.7 million from a transaction related to one of Lennar Homebuilding’s unconsolidated entities. In addition, for the years ended November 30, 2010 and 2009, Lennar Homebuilding equity in loss from unconsolidated entities includes $10.5 million and $101.9 million, respectively, of valuation adjustments related to assets of Lennar Homebuilding unconsolidated entities.


Balance Sheets
	November 30,
*(In thousands)*	2011		2010
Assets:
Cash and cash equivalents	$	90,584		82,573
Inventories		2,895,241		3,371,435
Other assets		277,152		307,244

	$	3,262,977		3,761,252

Liabilities and equity:
Account payable and other liabilities	$	246,384		327,824
Debt		960,627		1,284,818
Equity		2,055,966		2,148,610

	$	3,262,977		3,761,252

As of November 30, 2011, our recorded investments in Lennar Homebuilding unconsolidated entities were $545.8 million while the underlying equity in the Lennar Homebuilding unconsolidated entities partners’ net assets was $628.1 million, primarily as a result of us buying out at a discount the Lennar Homebuilding unconsolidated entities partners’ equity. As of November 30, 2010, our recorded investments in Lennar Homebuilding unconsolidated entities were $626.2 million while the underlying equity in the Lennar Homebuilding unconsolidated entities’ net assets was $666.0 million, primarily as a result of us buying out at a discount the Lennar Homebuilding unconsolidated entities partner’s equity.

In 2007, we sold a portfolio of land to a strategic land investment venture with Morgan Stanley Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., in which we have a 20% ownership interest and 50% voting rights. Due to our continuing involvement, the transaction did not qualify as a sale under GAAP; thus, the inventory has remained on our consolidated balance sheet in consolidated inventory not owned. As of November 30, 2011 and 2010, the portfolio of land (including land development costs) of $372.0 million and $424.5 million, respectively, is reflected as inventory in the summarized condensed financial information related to Lennar Homebuilding’s unconsolidated entities.

In June 2008, LandSource Communities Development LLC (“LandSource”), in which we had a 16% ownership interest, and a number of its subsidiaries commenced proceedings under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. In July 2009, the United States Bankruptcy Court for the District of Delaware confirmed the plan of reorganization for LandSource. As a result of the bankruptcy proceedings, LandSource was reorganized into a new company called Newhall Land Development, LLC, (“Newhall”). The reorganized company emerged from Chapter 11 free of its previous bank debt. As part of the reorganization plan, in 2009, we invested $140 million in exchange for approximately a 15% equity interest in the reorganized Newhall, ownership in several communities that were formerly owned by LandSource, the settlement and release of all claims that might have been asserted against us and certain other claims LandSource had against third parties.

Debt to total capital of the Lennar Homebuilding unconsolidated entities in which we have investments was calculated as follows:


	November 30,
*(Dollars in thousands)*	2011			2010
Debt	$	960,627			1,284,818
Equity		2,055,966			2,148,610

Total capital	$	3,016,593			3,433,428

Debt to total capital of our unconsolidated entities		31.8	%		37.4	%

Our investments in Lennar Homebuilding unconsolidated entities by type of venture were as follows:


	November 30,
*(In thousands)*	2011		2010
Land development	$	461,077		530,004
Homebuilding		84,683		96,181

Total investments	$	545,760		626,185

We recorded $10.5 million and $1.7 million, respectively, of valuation adjustments to our investments in unconsolidated entities for the years ended November 30, 2011 and 2010. We will continue to monitor our investments in joint ventures and the recoverability of assets owned by those joint ventures.

The summary of our net recourse exposure related to the Lennar Homebuilding unconsolidated entities in which we have investments was as follows:


	November 30,
*(In thousands)*	2011			2010
Several recourse debt - repayment	$	62,408			33,399
Several recourse debt - maintenance		—			29,454
Joint and several recourse debt - repayment		46,292			48,406
Joint and several recourse debt - maintenance		—			61,591

Lennar’s maximum recourse exposure		108,700			172,850
Less: joint and several reimbursement agreements with our partners		(33,795	)		(58,878	)

Lennar’s net recourse exposure	$	74,905			113,972

During the year ended November 30, 2011, our maximum recourse exposure related to indebtedness of Lennar Homebuilding unconsolidated entities decreased by $100.4 million as a result of $17.9 million paid by us primarily through capital contributions to unconsolidated entities, a $43.5 million debt reduction as a result of a transaction in which we received a net asset distribution from Platinum Triangle Partners, one of Lennar Homebuilding’s unconsolidated entities, and $39.0 million primarily related to the restructuring of a guarantee, the consolidation of a joint venture in 2011 and the joint ventures selling inventory. The decrease in our maximum recourse exposure was partially offset by a $36.3 million increase in the maximum recourse exposure for consideration given in the form of a several repayment guarantee in connection with the favorable debt maturity extension until 2018 and principal reduction at Heritage Fields El Toro, one of Lennar Homebuilding’s unconsolidated entities as discussed in the note to the following table.

As of November 30, 2011, we had no obligation guarantees accrued. At November 30, 2010, we had $10.2 million of obligation guarantees accrued as a liability on our consolidated balance sheet. During the year ended November 30, 2011, the liability was reduced by $10.2 million, of which $7.6 million were cash payments related to obligation guarantees previously recorded and $2.6 million related to a change in estimate of an obligation guarantee. The obligation guarantees are estimated based on current facts and circumstances and any unexpected changes may lead us to incur additional liabilities under our obligation guarantees in the future.

Indebtedness of an unconsolidated entity is secured by its own assets. Some Lennar Homebuilding unconsolidated entities own multiple properties and other assets. There is no cross collateralization of debt to different unconsolidated entities. We also do not use our investment in one unconsolidated entity as collateral for the debt in another unconsolidated entity or commingle funds among Lennar Homebuilding unconsolidated entities.

In connection with loans to a Lennar Homebuilding unconsolidated entity, we and our partners often guarantee to a lender either jointly and severally or on a several basis, any, or all of the following: (i) the completion of the development, in whole or in part, (ii) indemnification of the lender from environmental issues, (iii) indemnification of the lender from “bad boy acts” of the unconsolidated entity (or full recourse liability in the event of an unauthorized transfer or bankruptcy) and (iv) that the loan to value and/or loan to cost will not exceed a certain percentage (maintenance or remargining guarantee) or that a percentage of the outstanding loan will be repaid (repayment guarantee).

In connection with loans to an unconsolidated entity where there is a joint and several guarantee, we generally have a reimbursement agreement with our partner. The reimbursement agreement provides that neither party is responsible for more than its proportionate share of the guarantee. However, if our joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share, up to our maximum exposure, which is the full amount covered by the joint and several guarantee.

The recourse debt exposure in the previous table represents our maximum exposure to loss from guarantees and does not take into account the underlying value of the collateral or the other assets of the borrowers that are available to repay debt or to reimburse us for any payments on our guarantees. The Lennar Homebuilding unconsolidated entities that have recourse debt have a significant amount of assets and equity. The summarized balance sheets of the Lennar Homebuilding unconsolidated entities with recourse debt were as follows.


	November 30,
*(In thousands)*	2011		2010
Assets (1)	$	1,865,144		990,028
Liabilities (1)	$	815,815		487,606
Equity (1)	$	1,049,329		502,422

(1)

In 2011, Heritage Fields El Toro, one of Lennar Homebuilding’s unconsolidated entities, extended the maturity of its $573.5 million debt until 2018, which at the time was without recourse to Lennar. In exchange for the extension and partial debt extinguishment, which reduced the outstanding debt balance to $481.0 million in the first quarter of 2011, all the partners agreed to provide a limited several repayment guarantee on the outstanding debt, which resulted in a $36.3 million increase to our maximum recourse exposure and a subsequent increase to assets, liabilities and equity of Lennar Homebuilding unconsolidated entities that have recourse debt. In addition, we recognized a $15.4 million gain for our share of the $123.0 million gain on debt extinguishment, including a reduction in the accrued interest payable, in 2011.

In addition, in most instances in which we have guaranteed debt of a Lennar Homebuilding unconsolidated entity, our partners have also guaranteed that debt and are required to contribute their share of the guarantee payment. Some of our guarantees are repayment guarantees and some are maintenance guarantees. 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 the event of default, if our venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share, up to our maximum recourse exposure, which is the full amount covered by the joint and several guarantee. The maintenance guarantees only apply if the value of the collateral (generally land and improvements) is less than a specified percentage of the loan balance. If we are required to make a payment under a maintenance guarantee to bring the value of the collateral above the specified percentage of the loan balance, the payment would generally constitute a capital contribution or loan to the Lennar Homebuilding unconsolidated entity and increase our share of any funds the unconsolidated entity distributes.

In connection with many of the loans to Lennar 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.

During the year ended November 30, 2011, there were: (1) payments of $1.7 million under our maintenance guarantees, and (2) other loan paydowns of $16.3 million, a portion of which related to amounts paid under our repayment guarantees. During the year ended November 30, 2010, there were: (1) payments of $10.0 million under our maintenance guarantees, (2) at our election, a loan paydown of $50.3 million, representing both our and our partner’s share, in return for 4-year loan extension and the rights to obtain preferred returns and priority distributions at one of our unconsolidated entities, and (3) a $19.3 million payment to extinguish debt at a discount and buy out the partner of one of our unconsolidated entities resulting in a net pre-tax gain of $7.7 million. In addition, during the year ended November 30, 2010, there were other loan paydowns of $28.1 million, a portion of which related to amounts paid under our repayment guarantees. During the years ended November 30, 2011 and 2010, there were no payments under completion guarantees.

As of November 30, 2011, the fair values of the maintenance guarantees, repayment guarantees and completion guarantees were not material. We believe that as of November 30, 2011, in the event we become legally obligated to perform under a guarantee of the obligation of a Lennar Homebuilding unconsolidated entity due to a triggering event under a guarantee, most of the time the collateral should be sufficient to repay at least a significant portion of the obligation or we and our partners would contribute additional capital into the venture.

The total debt of Lennar Homebuilding unconsolidated entities in which we have investments was as follows:


	November 30,
*(In thousands)*	2011			2010
Lennar’s net recourse exposure	$	74,905			113,972
Reimbursement agreements from partners		33,795			58,878

Lennar’s maximum recourse exposure	$	108,700			172,850

Non-recourse bank debt and other debt (partner’s share of several recourse)	$	149,937			79,921
Non-recourse land seller debt or other debt		26,391			58,604
Non-recourse debt with completion guarantees		441,770			600,297
Non-recourse debt without completion guarantees		233,829			373,146

Non-recourse debt to Lennar		851,927			1,111,968

Total debt	$	960,627			1,284,818

Lennar’s maximum recourse exposure as a % of total JV debt		11	%		13	%

In view of current credit market conditions, it is not uncommon for lenders to real estate developers, including joint ventures in which we have interests, to assert non-monetary defaults (such as failure to meet construction completion deadlines or declines in the market value of collateral below required amounts) or technical monetary defaults against the real estate developers. In most instances, those asserted defaults are resolved by modifications of the loan terms, additional equity investments or other concessions by the borrowers. In addition, in some instances, real estate developers, including joint ventures in which we have interests, are forced to request temporary waivers of covenants in loan documents or modifications of loan terms, which are often, but not always obtained. However, in some instances developers, including joint ventures in which we have interests, are not able to meet their monetary obligations to lenders, and are thus declared in default. Because we sometimes guarantee all or portions of the obligations to lenders of joint ventures in which we have interests, when these joint ventures default on their obligations, lenders may or may not have claims against us. Normally, we do not make payments with regard to guarantees of joint venture obligations while the joint ventures are contesting assertions regarding sums due to their lenders. When it is determined that a joint venture is obligated to make a payment that we have guaranteed and the joint venture will not be able to make that payment, we accrue the amounts probable to be paid by us as a liability. Although we generally fulfill our guarantee obligations within a reasonable time after we determine that we are obligated with regard to them, at any point in time it is likely that we will have some balance of unpaid guarantee liability. At November 30, 2011, we had no liabilities accrued for unpaid guarantees of joint venture indebtedness on our consolidated balance sheet. At November 30, 2010, the liability for unpaid guarantees of joint venture indebtedness on our consolidated balance sheet totaled $10.2 million.

The following table summarizes the principal maturities of our Lennar Homebuilding unconsolidated entities (“JVs”) debt as per current debt arrangements as of November 30, 2011 and 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.


			Principal Maturities of Unconsolidated JVs by Period
*(In thousands)*	Total JV Assets (1)		Total JV Debt		2012		2013		2014		Thereafter		Other Debt (2)
Net recourse debt to Lennar	$			74,905		3,698		25,750		4,743		40,714		—
Reimbursement agreements				33,795		—		8,286		—		25,509		—

Maximum recourse debt exposure to Lennar	$	1,865,144		108,700		3,698		34,036		4,743		66,223		—
Debt without recourse to Lennar		1,074,910		851,927		146,138		94,314		30,276		553,292		27,907

Total	$	2,940,054		960,627		149,836		128,350		35,019		619,515		27,907

(1)	Excludes unconsolidated joint venture assets where the joint venture has no debt.

(2)	Represents land seller debt and other debt.

The following table is a breakdown of the assets, debt and equity of the Lennar Homebuilding unconsolidated joint ventures by partner type as of November 30, 2011:


*(Dollars in thousands)*	Total JV Assets		Maximum Recourse Debt Exposure to Lennar		Reimbursement Agreements		Net Recourse Debt to Lennar		Total Debt Without Recourse to Lennar		Total JV Debt		Total JV Equity		JV Debt to Total Capital Ratio			Remaining Homes/ Homesites in JV
Partner Type:
Financial	$	2,418,039		64,593		25,509		39,084		622,753		687,346		1,486,495		32	%		40,752
Land Owners/Developers		404,548		20,470		—		20,470		99,162		119,632		272,147		31	%		14,515
Strategic		100,598		4,565		—		4,565		24,091		28,656		70,916		29	%		3,276
Other Builders		339,792		19,072		8,286		10,786		78,014		97,086		226,408		30	%		5,570

Total	$	3,262,977		108,700		33,795		74,905		824,020		932,720		2,055,966		31	%		64,113

Land seller debt and other debt	$			—		—		—		27,907		27,907

Total JV debt	$			108,700		33,795		74,905		851,927		960,627

The table below indicates the assets, debt and equity of our 10 largest Lennar Homebuilding unconsolidated joint venture investments as of November 30, 2011:


*(Dollars in thousands)*	Lennar’s Investment		Total JV Assets		Maximum Recourse Debt Exposure to Lennar		Reimbursement Agreements		Net Recourse Debt to Lennar		Total Debt Without Recourse to Lennar		Total JV Debt		Total JV Equity		JV Debt to Total Capital Ratio
Top Ten JVs (1):
Heritage Fields El Toro	$	125,192		1,363,190		36,250		—		36,250		465,490		501,740		824,163		38	%
Central Park West Holdings		65,681		166,866		28,343		25,509		2,834		85,030		113,373		51,141		69	%
Newhall Land Development		45,125		451,074		—		—		—		—		—		262,130		—
Runkle Canyon		38,283		77,920		—		—		—		—		—		76,608		—
Ballpark Village		38,227		129,700		—		—		—		52,910		52,910		76,124		41	%
MS Rialto Residential Holdings		35,224		381,819		—		—		—		72,233		72,233		298,313		19	%
LS College Park		28,835		59,426		—		—		—		—		—		56,451		—
Treasure Island Community Development		26,732		54,156		—		—		—		—		—		53,494		—
Rocking Horse Partners		20,740		49,733		—		—		—		7,348		7,348		41,467		15	%
Krome Groves Land Trust		18,633		87,731		12,350		—		12,350		26,217		38,567		47,465		45	%

10 largest JV investments		442,672		2,821,615		76,943		25,509		51,434		709,228		786,171		1,787,356		31	%

Other JVs		103,088		441,362		31,757		8,286		23,471		114,792		146,549		268,610		35	%

Total	$	545,760		3,262,977		108,700		33,795		74,905		824,020		932,720		2,055,966		31	%

Land seller debt and other debt	$					—		—