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 our audited consolidated financial statements and accompanying notes included elsewhere in this Report. It also should be read in conjunction with the disclosure under “Special Note Regarding Forward-Looking Statements” in Part I of this Form 10-K.
Table of Contents
Outlook
Lennar’s fourth quarter and year-end 2025 results reflect what is and continues to be a difficult housing market. However, while our margin has been under pressure as we focus on bringing affordable housing to an affordability-constrained consumer base, the underlying demand is still strong, while supply is short. During the past three years of difficult market conditions, we have maintained volume, grown our market share and re-engineered our operating platform for a better and more efficient future when the market normalizes.
We began the quarter with the expectation that declining interest rates were the start of a market recovery. While mortgage rates drifted marginally lower in the fourth quarter, the customer response remained tepid, suggesting a combination of poor affordability and diminished consumer confidence continued to limit demand. The threat of a government shutdown and ultimate actual shutdown in October and November further eroded already weak consumer confidence. While traffic was consistent, customers were both hesitant and limited by what they could afford to purchase. Clearly, inflation-driven affordability concerns rose to the center of the national conversation, shaping headlines and policy debates across the country. Cost inflation has clearly had a significant impact on the lifestyle of the average American family. At the same time, concerns about job security have become increasingly prominent as advancements in modern technology and artificial intelligence raise important questions about the future of employment for the American workforce.
On a positive note, the federal government has intensified its focus on the national housing crisis, with a strong likelihood of taking decisive action to enhance affordability. Although the specifics of potential programs remain to be seen, it is clear that significant attention is being devoted to developing impactful initiatives, while avoiding unintended negative consequences. This is the first time in decades that the federal government is actively recognizing the vital role that housing plays, not only in the broader national economy, but also in the well-being of American families.
We know that margins will remain under pressure in the first quarter of 2026 and sales and closings will be seasonally light. However, we have a lower cost structure, efficient product offerings and a strong market position that we expect to accommodate pent-up demand as rates moderate and confidence ultimately returns. Our strategy has positioned us for strong cash flow, higher returns on equity and capital, and stronger bottom line growth in the future. Meanwhile, we will remain focused on volume and even-flow production.
Margins are usually lowest during the first quarter of a fiscal year, and we expect our margins in the first quarter of 2026 will be between 15% and 16%, depending on market conditions. We expect that in the first quarter of fiscal 2026, we will sell between 18,000 and 19,000 homes and deliver between 17,000 and 18,000 homes at an average sales price of between $365,000 and $375,000. We expect to deliver approximately 85,000 homes in the full 2026 fiscal year.
As we have driven growth, production and volume, we have created efficiencies and technology that will make us a better company in the future. We have materially reduced our inventory, our construction costs, and our cycle times, and we have increased, and will continue to increase, our inventory turn. We are determined to build more with less capital deployed so that as margins begin to grow, returns on capital and equity will grow faster.
We are also very enthusiastic about our technology initiatives. They have made us, and are continuing to make us, faster and better in the way that we engage with our customers. We are trying to be the best manufacturing model that we can be. The programs that we have in place are helping us absorb the price reductions we are required to give to maintain desired volume levels. They offer us the likelihood of substantially increasing profit levels when market conditions return to normal.
Results of Operations
Overview
Our net earnings attributable to Lennar were $2.1 billion, or $7.98 per diluted and basic share for the year ended November 30, 2025 and $3.9 billion, or $14.31 per diluted and basic share for the year ended November 30, 2024. Excluding mark-to-market gains on technology investments of $130.2 million and one-time loss of $156.1 million on the Millrose Properties, Inc. exchange offer ("Millrose Exchange Offer"), net earnings attributable to Lennar for the year ended November 30, 2025 were $2.1 billion, or $8.06 per diluted share. Excluding mark-to-market gains of $25.2 million on technology investments, one-time items of $90.0 million in our Multifamily segment and a $46.5 million one-time gain on the sale of a technology investment, net earnings attributable to Lennar for the year ended November 30, 2024 were $3.8 billion, or $13.86 per diluted share.
Table of Contents
Financial information relating to our operations was as follows:
For the Year Ended November 30, 2025
(In thousands)
Homebuilding
Financial
Services
Multifamily
Lennar
Other
Corporate
Total
Revenues:
Sales of homes
Sales of land
Other revenues
Total revenues
Costs and expenses:
Costs of homes sold
Costs of land sold
Selling, general and administrative
Other costs and expenses
Total costs and expenses
Equity in earnings (losses) from unconsolidated entities
Other income (expense), net and other gains (losses), net (1)
Lennar Other gains from technology investments
Operating earnings (loss)
Corporate general and administrative expenses
Charitable foundation contribution
Earnings (loss) before income taxes
(1) Homebuilding other income (expense), net and other gains (losses), net included a one-time loss of $156.1 million on the Millrose Exchange Offer for the year ended November 30, 2025.
For the Year Ended November 30, 2024
(In thousands)
Homebuilding
Financial
Services
Multifamily
Lennar
Other
Corporate
Total
Revenues:
Sales of homes
Sales of land
Other revenues
Total revenues
Costs and expenses:
Costs of homes sold
Costs of land sold
Selling, general and administrative
Other costs and expenses
Total costs and expenses
Equity in earnings (losses) from unconsolidated entities
Other income, net and other gains, net
Lennar Other gains from technology investments
Operating earnings (loss)
Corporate general and administrative expenses
Charitable foundation contribution
Earnings (loss) before income taxes
Table of Contents
As previously announced, Lennar Corporation completed our acquisition of Rausch Coleman Homes ("Rausch") in February 2025. Prior year information includes only stand-alone data for Lennar Corporation for the year ended November 30, 2024.
2025 versus 2024
Revenues from home sales decreased 5% in the year ended November 30, 2025 to $32.1 billion from $33.8 billion in the year ended November 30, 2024. Revenues were lower primarily due to a 8% decrease in the average sales price of homes delivered, partially offset by a 3% increase in the number of home deliveries. New home deliveries increased to 82,583 homes in the year ended November 30, 2025 from 80,210 homes in the year ended November 30, 2024. The average sales price of homes delivered was $391,000 in the year ended November 30, 2025, compared to $423,000 in the year ended November 30, 2024. The decrease in average sales price of homes delivered in the year ended November 30, 2025 compared to the same period last year was primarily due to continued weakness in the market and an increased use of sales incentives offered to homebuyers.
Gross margins on home sales were $5.7 billion, or 17.7%, in the year ended November 30, 2025, compared to $7.5 billion, or 22.3%, in the year ended November 30, 2024. During the year ended November 30, 2025, gross margins decreased primarily due to a lower revenue per square foot and higher land costs year over year, which were partially offset by a decrease in construction costs, reflecting our continued focus on cost-saving initiatives.
Selling, general and administrative expenses were $2.7 billion in the year ended November 30, 2025, compared to $2.5 billion in the year ended November 30, 2024. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 8.3% in the year ended November 30, 2025, from 7.3% in the year ended November 30, 2024, primarily due to less leverage as a result of lower revenues and an increase in marketing and selling expenses.
During the years ended November 30, 2025 and 2024, our homebuilding operating earnings included $54.2 million and $164.8 million of interest income, respectively. The decrease in interest income was primarily due to lower cash balances year over year.
Operating earnings for our Financial Services segment were $609.9 million in the year ended November 30, 2025, compared to operating earnings of $574.2 million in the year ended November 30, 2024. The increase in operating earnings was primarily due to higher profit per locked loan in the mortgage business.
Operating loss for the Multifamily segment was $75.0 million in the year ended November 30, 2025, compared to operating earnings of $43.0 million in the year ended November 30, 2024. The operating earnings for the year ended November 30, 2024, included a $179.0 million one-time net gain from the sale of assets in our LMV Fund I, partially offset by a one-time $90.0 million write-down of noncore assets as we focus on monetizing these assets.
Operating loss for the Lennar Other segment was $19.1 million in the year ended November 30, 2025, compared to an operating loss of $46.9 million in the year ended November 30, 2024. The Lennar Other operating loss for the year ended November 30, 2025 was primarily related to operating losses from certain strategic investments, partially offset by mark-to-market gains of $130.2 million on our technology investments. The Lennar Other operating loss for the year ended November 30, 2024 was primarily related to operating losses from certain strategic investments, partially offset by $25.2 million of mark-to-market gains on our technology companies and a $46.5 million one-time gain on the sale of a technology investment.
In November, we completed the Millrose Exchange Offer in a non-cash transaction, accepting 8,049,594 shares of Lennar Class A common stock in exchange for 33,298,754 shares of Millrose Class A common stock, which represented approximately 20% of Millrose's outstanding shares. The exchange resulted in a $1.1 billion reduction in investments in unconsolidated entities and stockholders' equity as of November 30, 2025 and a one-time loss of $156.1 million in Homebuilding other income (expense), net, in our consolidated statements of operations and comprehensive income.
For the years ended November 30, 2025 and 2024, we had a tax provision of $705.6 million and $1.2 billion, which resulted in an overall effective income tax rate of 25.3% and 23.6%, respectively. For both periods, our effective income tax rate included state income tax expense and non-deductible executive compensation, partially offset by tax credits. The increase in the effective tax rate for the year ended November 30, 2025 compared to the prior period was primarily due to the loss related to the Millrose Exchange Offer not being recognized for tax purposes. On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was enacted, introducing various changes to U.S. federal tax law. The Act did not have a material impact on our consolidated financial statements for the fiscal year ended November 30, 2025, and we are still evaluating the potential impact of the Act on future periods.
Table of Contents
Homebuilding Segments
At November 30, 2025, our Homebuilding operating segments and Homebuilding Other consisted of homebuilding divisions located in:
East: Florida, New Jersey and Pennsylvania
Central: Alabama, Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, South Carolina, Tennessee
and Virginia
South Central: Arkansas, Kansas, Missouri, Oklahoma and Texas
West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington
Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint Holdings, LLC ("FivePoint").
The following tables set forth selected financial and operational information related to our homebuilding operations for the years indicated:
Selected Financial and Operational Data
For the Year Ended November 30, 2025
Gross Margins
Operating Earnings (Loss)
(Dollars in thousands)
Sales of Homes
Revenue
Costs of Sales
of Homes
Gross Margin (Loss) %
Net Margins (Losses) on Sales of Homes (1)
Gross Margins (Losses) on Sales of Land (2)
Other Revenues
Equity in Earnings (Losses) from Unconsolidated Entities
Other Income (Expense), net
Operating Earnings
East
Central
South Central
West
Other (3)
Total
For the Year Ended November 30, 2024
Gross Margins
Operating Earnings (Loss)
(Dollars in thousands)
Sales of Homes
Revenue
Costs of Sales
of Homes
Gross Margin (Loss)%
Net Margins (Losses) on Sales of Homes (1)
Gross Margins (Losses) on Sales of Land (2)
Other Revenues
Equity in Earnings (Losses) from Unconsolidated Entities
Other Income, net
Operating Earnings
East
Central
South Central
West
Other (3)
Total
(1) Net margins (losses) on sales of homes include selling, general and administrative expenses.
(2) For the years ended November 30, 2025 and 2024, gross margins (losses) on sales of land included $23.1 million and $5.1 million of deposit write-offs as we walked away from 15,500 and 6,300 controlled homesites, respectively.
(3) Negative gross and net margins were due to period costs in Urban divisions that impact costs of homes sold without sufficient sales of homes revenue to offset those costs.
Table of Contents
Summary of Homebuilding Data
Deliveries:
For the Years Ended November 30,
Homes
Dollar Value (In thousands)
Average Sales Price
East
Central
South Central
West
Other
Total
Of the total homes delivered listed above, 442 homes with a dollar value of $210.7 million and an average sales price of $477,000 represent homes from unconsolidated entities for the year ended November 30, 2025, compared to 383 homes with a dollar value of $186.4 million and an average sales price of $487,000 for the year ended November 30, 2024.
Sales Incentives (1):
Average Sales Incentives Per
Home Delivered
Sales Incentives
as a % of Revenues
For the Years Ended November 30,
East
Central
South Central
West
Other
Total
(1) Sales incentives relate to homes delivered during the years ended November 30, 2025 and 2024, excluding homes delivered by unconsolidated entities.
New Orders (2):
At November 30,
For the Years Ended November 30,
Active Communities
Homes
Dollar Value (In thousands)
Average Sales Price
East
Central
South Central
West
Other
Total
Of the total new orders listed above, 442 homes with a dollar value of $233.0 million and an average sales price of $527,000 represent homes from unconsolidated entities for the year ended November 30, 2025, compared to 315 homes with a dollar value of $175.7 million and an average sales price of $558,000 for the year ended November 30, 2024.
(2) New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the years ended November 30, 2025 and 2024.
Table of Contents
We experienced cancellation rates in our Homebuilding segments and Homebuilding other as follows:
For the Years Ended November 30,
East
Central
South Central
West
Other
Total
Backlog (3):
At November 30,
Homes
Dollar Value (In thousands)
Average Sales Price
East
Central
South Central
West
Other
Total
Of the total homes in backlog listed above, 79 homes with a backlog dollar value of $86.0 million and an average sales price of $1,089,000 represent the backlog from unconsolidated entities at November 30, 2025, compared to 79 homes with a backlog dollar value of $63.8 million and an average sales price of $807,000 at November 30, 2024.
(3) During the year ended November 30, 2025, backlog includes 908 acquired homes of which 181,716 and 11 homes were in the Central,
South Central and West homebuilding segments, respectively.
Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales if they fail to qualify for financing or under certain other circumstances. Various state and federal laws and regulations may sometimes give purchasers a right to cancel contracts homes in backlog. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.
Homebuilding East: Revenues from home sales decreased in 2025 compared to 2024, primarily due to decreases in the number of homes delivered and the average sales price of homes delivered in all the states of the segment except in New Jersey. The overall decrease in the number of homes delivered was primarily due to a decrease in the number of homes delivered per active community due to the timing of homes delivered. The overall decrease in the average sales price of homes delivered was primarily due to pricing to market through an increased use of sales incentives. For the year ended November 30, 2025, gross margin percentage of homes delivered decreased due to lower revenue per square foot and higher land costs year over year, partially offset by a decrease in construction costs.
Homebuilding Central: Revenues from home sales decreased in 2025 compared to 2024, primarily due to a decrease in the average sales price of homes delivered in Alabama, Illinois, Maryland, North Carolina and Virginia, partially offset by an increase in the number of homes delivered in Alabama, Illinois, South Carolina and Virginia. The overall decrease in the average sales price of homes delivered was primarily due to pricing to market through an increased use of sales incentives. The overall increase in the number of homes delivered was primarily due to an increase in the number of active communities. For the year ended November 30, 2025, gross margin percentage of homes delivered decreased due to lower revenue per square foot and higher land costs year over year, partially offset by a decrease in construction costs.
Homebuilding South Central: Revenues from home sales increased in 2025 compared to 2024, primarily due to the Rausch acquisition which resulted in an increase in the number of homes delivered in all states in the segment, partially offset by a decrease in the average sales price of homes delivered in Texas. The overall increase in the number of homes delivered was primarily due to an increase in the number of active communities including communities acquired from Rausch. The decrease in the average sales price of homes delivered was primarily due to pricing to market through an increased use of sales incentives. For the year ended November 30, 2025, gross margin percentage of homes delivered decreased due to lower revenue per square foot and higher land costs year over year, partially offset by a decrease in construction costs.
Homebuilding West: Revenues from home sales decreased in 2025 compared to 2024, primarily due to decreases in the number of homes delivered in all states in the segment except in Idaho and Utah and the average sales price of homes delivered in all the states in the segment except in Idaho. The overall decrease in the number of homes delivered was primarily
Table of Contents
due to a decrease in the number of deliveries per active community due to the timing of homes delivered. The overall decrease in the average sales price of homes delivered was primarily due to pricing to market through an increased use of sales incentives. For the year ended November 30, 2025, gross margin percentage of homes delivered decreased due to lower revenue per square foot and higher land costs year over year, partially offset by a decrease in construction costs.
Financial Services Segment
Our Financial Services reportable segment primarily provides mortgage financing, title and closing services primarily for buyers of our homes, as well as property and casualty insurance. The segment also originates and sells into securitizations commercial mortgage loans through its LMF Commercial business. Our Financial Services segment sells substantially all of the residential loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a servicing-released, non-recourse basis. After the loans are sold, we retain potential liability for possible claims by purchasers that we breached certain limited industry-standard representations and warranties in the loan sale agreements.
The following table sets forth selected financial and operational information related to the residential mortgage and title activities of our Financial Services segment:
For the Years Ended November 30,
(Dollars in thousands)
Dollar value of mortgages originated
Number of mortgages originated
Mortgage capture rate of Lennar homebuyers
Number of title and closing service transactions
At November 30, 2025 and 2024, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $132.9 million and $135.6 million, respectively. Details of these securities and related debt are within Note 3 of the Notes to Consolidated Financial Statements.
LMF Commercial
LMF Commercial originates and sells into securitizations first mortgage loans, which are secured by income producing commercial properties. LMF Commercial originated commercial loans as follows:
For the Years Ended November 30,
(Dollars in thousands)
Originations
Sold
Securitizations
Multifamily Segment
We have been actively involved, primarily through unconsolidated entities, in the development and construction of multifamily rental properties. Our Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.
Originally, our Multifamily segment focused on building multifamily properties and selling them shortly after they were completed. However, more recently we have focused on creating and participating in funds that build multifamily properties with the intention of retaining them after they are completed.
The following table provides information related to our investment in the Multifamily segment:
At November 30,
(Dollars in thousands)
Multifamily investments in unconsolidated entities
Lennar's net investment in Multifamily
Number of operating properties/investments sold through joint ventures/wholly-owned
Lennar's share of gains on the sale of operating properties/investments
The Multifamily segment manages and has investments in Multifamily Venture Fund I (the "LMV I") and Multifamily Venture Fund II LP (the "LMV II"), which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties. Details of LMV I and LMV II and the Institutional JV are included below:
Table of Contents
At November 30, 2025
(In thousands)
LMV I
LMV II
Lennar's carrying value of investments
Equity commitments
Equity commitments called
Lennar's equity commitments
Lennar's equity commitments called
Lennar's remaining commitments (1)
Distributions to Lennar during the year ended November 30, 2025
(1) While there are remaining commitments with LMV I and LMV II, there are no plans for additional capital calls.
During the second half of fiscal 2024, the LMV I partners decided to liquidate and sell all of its 38 rental operation projects of LMV I as the fund has come to the end of its contractual life. During the year ended November 30, 2024, 33 LMV I rental operation projects were sold to various third-party buyers. During the year ended November 30, 2025, two additional LMV I rental operation projects were sold to third-party buyers.
In December 2025, we sold a majority interest in Quarterra Group, Inc ("Quarterra"), a subsidiary of our Multifamily segment, to TPG Real Estate (“TPG”), thus retaining a minority interest. TPG’s acquisition of Quarterra and its $1.0 billion strategic commitment, combined with Lennar’s insights, will accelerate Quarterra’s development pipeline and strengthen its platform for delivering thoughtfully designed rental communities in high-growth markets. The sale of Quarterra to TPG did not have a material impact on our consolidated financial statements.
Our Multifamily segment had equity investments in unconsolidated entities. The breakout of the Multifamily segment's equity investments in unconsolidated entities and the development activities by stage were as follows:
(Dollars in thousands)
At November 30, 2025
Under construction/owned
Partially completed and leasing
Completed and operating
Total unconsolidated joint ventures
Total development costs
As of November 30, 2025, our Multifamily segment also had a pipeline of potential future projects, which were under contract or had letters of intent, totaling approximately $2.8 billion in anticipated development costs across a number of states that will be developed primarily by unconsolidated entities.
Lennar Other Segment
Our Lennar Other segment includes fund investments we retained subsequent to our sale of the Rialto investment and asset management platform as well as strategic investments in various types of technology and other companies that are looking to improve the homebuilding and financial services industries to better serve homebuyers and homeowners and increase efficiencies. As of November 30, 2025 and 2024, our balance sheet had $897.6 million and $894.9 million, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $368.0 million and $379.4 million, respectively.
We have investments in several publicly traded technology companies, which are held at market and the carrying value of which will therefore change depending on the value of our shareholdings in those entities on the last day of each quarter. All the investments are accounted for as investments in equity securities which are held at fair value and the changes in fair values are recognized through earnings. During the year ended November 30, 2025 and 2024, we recorded mark-to-market gains of $130.2 million and $25.2 million on our publicly traded technology investments and other assets, respectively.
At November 30, 2025 and 2024, Lennar Other owned CMBS with carrying values of $39.1 million and $40.6 million, respectively. These securities were purchased at discount rates ranging from 33% to 55% with coupon rates ranging from 3.0% to 3.4%, stated and assumed final distribution dates between September 2025 and March 2026, and stated maturity dates between September 2058 and March 2059. We review changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on our CMBS. Based on management’s assessment, no impairment charges were recorded during the years ended November 30, 2025 and 2024. We classify these securities as held-for-sale at November 30, 2025 and 2024.
Table of Contents
Financial Condition and Capital Resources
At November 30, 2025, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $3.8 billion, compared to $5.0 billion at November 30, 2024.
We finance all of our activities including homebuilding, financial services, multifamily, other and general operating needs primarily with cash generated from our operations, debt issuances and investor funds as well as cash borrowed under our warehouse lines of credit, Credit Facility and Delayed Draw Term Loan Facility (both defined below). At November 30, 2025, we had $3.4 billion of Homebuilding cash and cash equivalents and ended the year of 2025 with total liquidity of $6.6 billion.
Operating Cash Flow Activities
During 2025 and 2024, cash provided by operating activities totaled $217 million and $2.4 billion, respectively. During 2025, cash provided by operating activities was positively impacted by our net earnings and a decrease in loans held-for-sale of $124 million primarily related to the sale of loans originated by our Financial Services segment. This was offset by (1) an increase in inventories due to our growth strategy, strategic land purchases and construction costs of $151 million; (2) an increase in deposits and pre-acquisition costs on real estate of $1.5 billion as we increased the percentage of controlled homesites primarily as a result of option contracts with Millrose; (3) an increase in other assets of $186 million; and (4) a decrease in accounts payable and other liabilities of $691 million.
During 2024, cash provided by operating activities was positively impacted by our net earnings and an increase in accounts payable and other liabilities of $380 million. This was offset by (1) an increase in inventories due to our growth strategy, strategy land purchases, land development and construction costs of $285 million; (2) an increase in deposits and pre-acquisition costs on real estate of $1.6 billion as we increased the percentage of controlled homesites; and (3) an increase in loans held-for-sale of $218 million primarily related to the sale of loans by our Financial Services segment.
Investing Cash Flow Activities
During 2025 and 2024, cash provided by (used in) investing activities totaled $222 million and ($303) million, respectively. During 2025, our cash provided by investing activities was primarily due to $259 million received from the sale of investments in two joint ventures, $100 million proceeds from the sale of investments, $115 million proceeds from the sale of notes receivable, and distributions of capital from unconsolidated entities of $282 million, which primarily included (1) $130 million from Multifamily unconsolidated entities, (2) $130 million from Homebuilding unconsolidated entities, and (3) $22 million from our Lennar Other unconsolidated entities. This was partially offset by the $254 million acquisition of Rausch, net of cash acquired and $189 million net additions of operating properties and equipment. In addition, we had cash contributions of $254 million to unconsolidated entities, which primarily included (1) $208 million to Homebuilding unconsolidated entities, (2) $13 million to Lennar Other unconsolidated entities, and (3) $32 million to Multifamily unconsolidated entities.
During 2024, our cash used in investing activities was primarily due to cash contributions of $426 million to unconsolidated entities, which primarily included (1) $222 million to Homebuilding unconsolidated entities, (2) $182 million to Lennar Other unconsolidated entities, and (3) $21 million to Multifamily unconsolidated entities. This was partially offset by distributions of capital from unconsolidated entities of $231 million, which primarily included (1) $117 million from Multifamily unconsolidated entities (2) $61 million from Homebuilding unconsolidated entities, and (3) $54 million from our Lennar Other unconsolidated entities.
Financing Cash Flow Activities
During 2025 and 2024, our cash used in financing activities totaled $1.6 billion and $3.7 billion, respectively. During 2025, our cash used in financing activities was primarily due to the (1) $1.8 billion of repurchases of our common stock, which included $1.7 billion of repurchases under our share repurchase program and $66 million of repurchases related to our equity compensation plan; (2) $521 million of dividend payments; (3) $141 million of net repayments under our Financial Services' warehouse facilities; (4) $416 million net cash in connection with the Millrose spin-off; (5) redemption of $500 million aggregate principal amount of our 4.75% senior notes due May 2025; and (6) $564 million of net payments from liabilities related to consolidated inventory not owned due to activity with land banks. The cash used in financing activities was partially offset by the receipt of proceeds of the sale of $700 million aggregate principal amount of our 5.20% senior notes due 2030 and $1.7 billion of net borrowings under our Delayed Draw Term Loan Facility (defined below).
During 2024, our cash used in financing activities was primarily due to the (1) $2.3 billion of repurchases of our common stock, which included $2.2 billion of repurchases under our repurchase program and $87 million of repurchases related to our equity compensation plan; (2) $549 million of dividend payments; (3) $233 million of net repayments under our Financial Services' warehouse facilities; (4) redemptions of $454 million aggregate principal amount of our 4.50% senior notes due April 2024; (5) $100 million of partial repurchase of our 4.75% senior notes due 2027; and (6) $14 million of net payments from liabilities related to consolidated inventory not owned due to activity with land banks.
Table of Contents
Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our Homebuilding operations. Homebuilding debt to total capital and net Homebuilding debt to total capital were calculated as follows:
At November 30,
(Dollars in thousands)
Homebuilding debt
Stockholders’ equity
Total capital
Homebuilding debt to total capital
Homebuilding debt
Less: Homebuilding cash and cash equivalents
Net Homebuilding debt
Net Homebuilding debt to total capital (1)
(1) Net homebuilding debt to total capital is a non-GAAP financial measure defined as net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity). Our management believes the ratio of net homebuilding debt to total capital is a relevant and a useful financial measure to investors in understanding the leverage employed in our homebuilding operations. However, because net homebuilding debt to total capital is not calculated in accordance with GAAP, this financial measure should not be considered in isolation or as an alternative to financial measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement our GAAP results.
At November 30, 2025, Homebuilding debt to total capital was higher compared to November 30, 2024, primarily as a result of a decrease in stockholders' equity due to the spin-off of Millrose, share repurchases, an increase in Homebuilding debt due to issuance of senior notes and outstanding borrowings under our Delayed Draw Term Loan Facility (defined below), partially offset by net earnings.
We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings. These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives. In connection with some of our non-homebuilding businesses, we are also considering other types of transactions such as sales, restructurings, joint ventures, spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company.
In February 2025, we completed the taxable spin-off of Millrose through a distribution of approximately 80% of Millrose's total outstanding stock to our stockholders (the “Millrose Spin-Off”). We temporarily retained the remaining approximately 20% of the total outstanding shares of Millrose common stock, exclusively in the form of Millrose Class A common stock. In connection with the Spin-Off, certain Lennar employees received shares of Millrose Class A common stock or Millrose Class B common stock (at their election) on their unvested Lennar restricted stock awards. From time to time, following the Millrose Spin-Off, Lennar has received and may continue to receive additional shares of Millrose Class A common stock and Millrose Class B common stock that are forfeited back to Lennar from employees in connection with their forfeiture of the underlying unvested Lennar restricted stock awards (the “Forfeitures”). We do not exercise our voting rights with respect to any Millrose common stock we hold. As described further below, on November 26, 2025, we subsequently disposed of approximately 20% of Millrose’s total outstanding stock, all in the form of Class A common stock, through a non-cash exchange offer for Lennar Class A common stock. Lennar retains an immaterial amount of Millrose Class A common stock and Millrose Class B common stock from the Forfeitures and may dispose of such shares, along with any additional Millrose common stock shares received from future Forfeitures, through one or more future dispositions.
In connection with the Millrose Spin-off, we contributed to Millrose $5.6 billion in land assets, representing approximately 87,000 homesites, and cash of $1.0 billion, which included $584.0 million of cash deposits related to option contracts. The Millrose Spin-Off accelerated Lennar's longstanding strategy of becoming a pure-play, asset-light, new home manufacturing company.
In connection with the Millrose Exchange Offer, we accepted 8,049,594 shares of Lennar Class A common stock in exchange for 33,298,754 shares of Millrose Class A common stock. The Millrose Exchange Offer reduced investments in unconsolidated entities and stockholders' equity by $1.1 billion as of November 30, 2025 and resulted in a one-time loss of $156.1 million recorded in Other income (expense), net and other gains (losses), net, in our consolidated statements of operations and comprehensive income (loss).
Table of Contents
On February 10, 2025, we acquired Rausch, a residential homebuilder based in Fayetteville, Arkansas. We acquired Rausch’s homebuilding operations while Millrose acquired Rausch's land assets and we have options on the land. With this acquisition, we have expanded our footprint into new markets in Arkansas (Bentonville/Fayetteville, Little Rock and Jonesboro), Oklahoma (Tulsa and Stillwater), Alabama (Birmingham and Tuscaloosa), and Kansas/Missouri (Kansas City), while adding to our existing footprint in Texas (Houston and San Antonio), Oklahoma (Oklahoma City), Alabama (Huntsville) and Florida (Gulf Coast).
Our Homebuilding senior notes and other debts payable are summarized within Note 5 of the Notes to Consolidated Financial Statements.
In May 2025, we entered into a new unsecured delayed draw term loan facility with an initial committed borrowing availability of approximately $1.6 billion (the “Delayed Draw Term Loan Facility”), which can be increased by an additional $500 million via an accordion feature. In July 2025, the total commitment under the Delayed Draw Term Loan Facility was increased by $100 million, thereby increasing the borrowing available capacity to $1.7 billion. The credit agreement governing our new unsecured Delayed Draw Term Loan Facility permits us to draw up to six times in the first 180 days after the effective date of the credit agreement. Once drawn, we may at any time prepay the loan, in whole or in part, without premium or penalty. The term loan’s maturity date is three years from the initial effectiveness date of the credit agreement or May 2028, and at our discretion, it can be extended for an additional year until May 2029, subject to the satisfaction of certain conditions. Under the Delayed Draw Term Loan Facility, interest rates are equal to the adjusted term SOFR determined for the interest period plus the applicable margin. As of November 30, 2025, we had outstanding borrowings of approximately $1.7 billion under the credit agreement governing our new unsecured Delayed Draw Term Loan Facility.
In November 30, 2025, we amended and restated the credit agreement governing our unsecured revolving credit facility (the "Credit Facility"). In the first quarter of 2025, we received an additional $150 million in commitments. In the third quarter of 2025, we secured an additional $100 million in commitments. The maximum available borrowings on the Credit Facility were as follows:
(In thousands)
At November 30, 2025
Commitments - maturing in May 2027
Commitments - maturing in November 2029
Total commitments
Accordion feature
Total maximum borrowings capacity
The proceeds available under the Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes. The credit agreement also provides that up to $477.5 million in commitments may be used for letters of credit. As of both November 30, 2025 and 2024, we had no outstanding borrowings under the Credit Facility. In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions.
We often post letters of credit instead of making cash deposits for option contracts and for similar purposes. We often are required to post surety bonds to guarantee completion of projects, particularly when municipal authorities are involved. Our outstanding letters of credit and surety bonds are described below:
At November 30,
(In thousands)
Performance letters of credit
Financial letters of credit
Surety bonds
Anticipated future costs primarily for site improvements related to performance surety bonds
Our Homebuilding average debt outstanding and the average rates of interest were as follows:
At November 30,
(Dollars in thousands)
Homebuilding average debt outstanding
Average interest rate
Interest incurred
Under the Credit Facility agreement (the "Credit Facility Agreement") and Delayed Draw Term Loan Facility, we are required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest
Table of Contents
coverage ratio. These ratios are calculated per the Credit Facility and Delayed Draw Term Loan Facility agreements, which involve adjustments to GAAP financial measures. As of the end of each fiscal quarter, we are required to maintain minimum consolidated tangible net worth of $10.0 billion. As of the end of each fiscal quarter, we are required to maintain a maximum leverage ratio that shall not exceed 60%. As of the end of each fiscal quarter, we are also required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended. We were in compliance with our debt covenants at November 30, 2025.
The following summarizes our required debt covenants and our actual levels or ratios with respect to those covenants as calculated per the Credit Facility and Delayed Draw Term Loan Facility agreements as of November 30, 2025:
(Dollars in thousands)
Covenant Level
Level Achieved as of November 30, 2025
Minimum net worth test
Maximum leverage ratio
Liquidity test (1)
(1) We are only required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio of equal to or greater than 1.50:1.00 for the last twelve months then ended. Although we are in compliance with our debt covenants for both calculations, we have only disclosed our liquidity test.
At November 30, 2025, the Financial Services segment had warehouse facilities, all of which were 364-day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows:
Maximum Aggregate Commitment
(In thousands)
Committed Amount
Uncommitted Amount
Total
Residential facilities maturing:
March 2026
May 2026
July 2026
September 2026
November 2026
December 2026
Total residential facilities
LMF commercial facilities maturing:
December 2025 (1)
January 2026
Total LMF commercial facilities
Total
(1) Subsequent to November 30, 2025, the maturity date was extended to December 2027.
Our Financial Services segment uses residential mortgage loan warehouse facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature. The LMF Commercial facilities finance LMF Commercial loan originations and securitization activities and were secured by up to 80% interests in the originated commercial loans financed.
Borrowings and collateral under the facilities were as follows:
At November 30,
(In thousands)
Borrowings under the residential facilities
Collateral under the residential facilities
Borrowings under the LMF Commercial facilities
If the facilities are not renewed or replaced, the borrowings under the lines of credit will be repaid by selling the mortgage loans held-for-sale to investors and by collecting receivables on loans sold but not yet paid for. Without the facilities, the Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.
Table of Contents
Changes in Capital Structure
In January 2024, our Board authorized an increase to our stock repurchase program to enable us to repurchase up to an additional $5.0 billion in value of our outstanding Class A or Class B common stock. Repurchases are authorized to be made in open-market or private transactions. The repurchase authorization has no expiration date. At November 30, 2025, we have a remaining authorization to repurchase $1.7 billion in value of our Class A or B common stock. Repurchases are authorized to be made in open-market or private transactions. The repurchase authorization has no expiration date.
The following table provides information about our repurchases of Class A and Class B common stock:
For the Years Ended November 30,
(Dollars in thousands, except price per share)
Class A
Class B
Class A
Class B
Shares repurchased (1)
Total purchase price
Average price per share
(1) Shares repurchased do not include 8,049,594 shares of Lennar Class A common stock accepted through a non-cash exchange for shares of Millrose Class A common stock, which was completed in November 2025.
During the year ended November 30, 2025, treasury stock increased by 22.8 million shares primarily due to our repurchase of 14.1 million shares of Class A and Class B common stock through our stock repurchase program and a non-cash Millrose Exchange Offer , accepting 8.0 million shares of Lennar Class A common stock in exchange for 33.3 million shares of Millrose Class A common stock, which represented 20% of Millrose's outstanding shares . During the year ended November 30, 2024, treasury stock increased by 14.2 million shares primarily due to our repurchase of 13.6 million shares of Class A and Class B common stock through our stock repurchase program .
In February 2025, we distributed a stock dividend consisting of 120,980,401 shares of Millrose Class A common stock and 11,819,811 shares of Millrose Class B common stock (representing approximately 80% of the total outstanding shares of Millrose common stock) to the holders of Lennar Class A or Class B common stock as of the close of business on January 21, 2025, the record date of the Millrose Spin-Off.
During the years ended November 30, 2025 and 2024 , our Class A and Class B common stockholders received an aggregate per share annual dividend of $2.00 and $2.00, respectively. On January 21, 2026, our Board declared a quarterly cash dividend of $0.50 per share on both our Class A and Class B common stock, payable on February 19, 2026 to holders of record at the close of business on February 4, 2026.
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.
Supplemental Financial Information
Our outstanding senior notes are guaranteed by certain of our wholly-owned subsidiaries, which are primarily homebuilding subsidiaries. These guarantees are full and unconditional. The guarantors of our senior notes are currently those subsidiaries that also guarantee Lennar Corporation's letter of credit facilities, Credit Facility and Delayed Draw Term Loan Facility, which are disclosed in Note 5 of the Notes to Consolidated Financial Statements. Under the indentures governing our senior notes, guarantees may be suspended or released under certain circumstances.
Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at November 30, 2025 is included in the following tables. Intercompany balances and transactions within the Obligors have been eliminated and amounts attributable to the Obligors' investment in consolidated subsidiaries that have not issued or guaranteed the senior notes have been excluded. Amounts due from and transactions with nonobligor subsidiaries and related parties are separately disclosed:
At November 30,
(In thousands)
Due from non-guarantor subsidiaries
Equity method investments
Total assets
Total liabilities
Table of Contents
(In thousands)
For the Year Ended November 30, 2025
Total revenues
Operating earnings
Earnings before income taxes
Net earnings attributable to Lennar
Off-Balance Sheet Arrangements
Homebuilding - Investments in Unconsolidated Entities
We regularly monitor the results of our Homebuilding unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations. We also monitor the performance of Homebuilding 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 their debt covenants, we evaluate and assess possible impairment of our investments. We believe that substantially all of the joint ventures were in compliance with their debt covenants at November 30, 2025.
At November 30, 2025, we had equity investments in 50 active Homebuilding and land unconsolidated entities (of which 4 had recourse debt, 14 had non-recourse debt and 32 had no debt), compared to 51 active Homebuilding and land unconsolidated entities at November 30, 2024. Historically, we have invested in unconsolidated entities that acquired and developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers. Through these entities, we have primarily sought to reduce and share our risk by limiting the amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures. The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner. Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategic partners. Joint ventures with land owners/developers have given us access to homesites owned or controlled by our partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for large land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with access to our partners’ capital. Joint ventures with strategic partners have allowed us to combine our homebuilding expertise with the specific expertise (e.g. commercial or infill experience) of our partner. Each joint venture is governed by an executive committee consisting of members from the partners. Details regarding these investments, balances and debt are included in Note 4 of the Notes to Consolidated Financial Statements.
The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of November 30, 2025. It does not represent estimates of future cash payments that will be made to reduce debt balances. Many JV loans have extension options in the loan agreements that would allow the loans to be extended into future years.
Principal Maturities of Homebuilding Unconsolidated JVs Debt by Period
(In thousands)
Total JV Debt
Thereafter
Other
Debt without recourse to Lennar
Land seller and other debt without recourse to Lennar
Maximum recourse debt exposure to Lennar
Debt issuance costs
Total
Multifamily - Investments in Unconsolidated Entities
At November 30, 2025, Multifamily had equity investments in 25 active unconsolidated entities that are engaged in multifamily residential developments (of which 18 had non-recourse debt and 7 had no debt), and 23 active unconsolidated entities at November 30, 2024. We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties. Through these entities, we are focusing on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets. Participants in these joint ventures have been financial partners. Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners’ capital. Each joint venture is governed by an operating agreement that provides significant substantive
Table of Contents
participating voting rights on major decisions to our partners.
The Multifamily segment manages and has investments in LMV I, LMV II and Canada Pension Plan Investments (the "CPPIB Fund") and a new joint venture with an institutional investor (the "Institutional JV"), which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily assets. Details of each as of and during the year ended November 30, 2025 are included in Note 4 of the Notes to Consolidated Financial Statements.
We regularly monitor the results of our Multifamily unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations. We also monitor the performance of Multifamily joint ventures in which we have investments on a regular basis to assess compliance with debt covenants. For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment. We believe all of the joint ventures were in compliance with their debt covenants at November 30, 2025.
The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of November 30, 2025. It does not represent estimates of future cash payments that will be made to reduce debt balances.
Principal Maturities of Multifamily Unconsolidated JVs Debt by Period
(In thousands)
Total JV Debt
Thereafter
Other
Debt without recourse to Lennar
Debt issuance costs
Total
Lennar Other - Investments in Unconsolidated Entities
As part of the sale of the Rialto investment and asset management platform, we retained the right to receive a portion of payments with regard to carried interests if certain funds meet specified performance thresholds. We periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable income to the carried interests. These distributions are not subject to clawbacks but reduce future carried interest payments to which we become entitled from the applicable funds and were recorded as equity in earnings (losses) in the consolidated statement of operations. Our investment in the Rialto funds totaled $133.0 million and $140.1 million as of November 30, 2025 and 2024, respectively.
As of November 30, 2025 and 2024, we had strategic technology investments in unconsolidated entities of $235.0 million and $239.3 million respectively, accounted for under the equity method of accounting. Our strategic technology investments through our LEN X business help to enhance the homebuying and home ownership experience, and help us stay at the forefront of homebuilding innovation.
Option Contracts
We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land banks) and unconsolidated entities until we have determined whether to exercise the options. Since fiscal year 2020, we have been increasing the percentage of our total homesites that we control through options rather than own.
As part of our focus on strategic relationships to further enhance our land-lighter strategy, at the end of fiscal year 2020 we entered into an arrangement with various land bank investor groups. Under the arrangement, in most instances when we want to acquire a property for use in our for-sale single-family home business, we will offer the investor group the opportunity to acquire the property and give us an option to purchase all or a portion of it back in the future, if it is mutually beneficial to both parties. To the extent the investor group does not elect to purchase properties we identify, we can utilize our other investor relationships to have other investor groups purchase the land or we can purchase it directly. The arrangement with the investor group, together with existing and other strategic partnerships we are discussing, are significant steps in our strategy to migrate to a higher percentage of our homesites which we control but do not own, which we expect will result in greater cash flow and higher returns on assets and equity.
Table of Contents
The table below indicates the number of homesites to which we had access through option contracts with third parties or unconsolidated JVs (i.e., controlled homesites) and homesites owned at November 30, 2025 and 2024:
November 30, 2025
Controlled Homesites
Owned
Homesites
Total
Homesites
Years of Supply Owned (1)
East
Central
South Central
West
Other
Total homesites
% of total homesites
November 30, 2024
Controlled Homesites
Owned
Homesites
Total
Homesites
Years of Supply Owned (1)
East
Central
South Central
West
Other
Total homesites
% of total homesites
(1) Based on trailing twelve months of home deliveries.
Details on option contracts and related consolidated inventory not owned and exposure are included in Note 1 and Note 9 of the Notes to Consolidated Financial Statements.
Contractual Obligations and Commercial Commitments
The following table summarizes certain of our contractual obligations at November 30, 2025:
Payments Due by Period
(In thousands)
Total
Less than
1 year
years
years
More than
5 years
Homebuilding - senior notes and other debts payable (1)
Land purchase contract obligations (2)
Financial Services - notes and other debts payable
Interest commitments under interest bearing debt (3)
Operating lease obligations
Total contractual obligations
(1) The amounts presented in the table above exclude debt issuance costs and any discounts/premiums and purchase accounting adjustments.
(2) Amount represents purchase commitments due to land banks upon maturity of the contracts. Our intention is to have a land bank close on the land purchase commitments and we will option land from the land bank.
(3) Interest commitments on variable interest-bearing debt are determined based on the interest rate as of November 30, 2025.
We are subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate in the routine conduct of our business. Option contracts for the purchase of land generally reduce our financial risk and costs of capital associated with land holdings. At November 30, 2025, we had access to 496,250 homesites through option contracts with third parties and unconsolidated entities in which we have investments. At November 30, 2025, we had $6.3 billion of non-refundable option deposits and pre-acquisition costs related to certain of these homesites and had posted $443.3 million of letters of credit in lieu of cash deposits under certain land and option contracts.
At November 30, 2025, we had letters of credit outstanding in the amount of $2.9 billion (which included the $443.3 million of letters of credit discussed above). Details on our letters of credit outstanding and outstanding surety bonds are included in Note 5 of the Notes to Consolidated Financial Statements.
Our Financial Services segment had a pipeline of loan applications in process of $3.3 billion at November 30, 2025. Loans in process for which interest rates were committed to the borrowers totaled approximately $1.6 billion as of November 30, 2025. A significant portion of these commitments had a remaining period of 60 days or less. Since a portion of
Table of Contents
these commitments is expected to expire without being exercised by the borrowers or borrowers may not meet certain criteria at the time of closing, the total commitments do not necessarily represent future cash requirements.
Our Financial Services segment uses mandatory mortgage-backed securities ("MBS") forward commitments, option contracts, futures contracts and investor commitments to hedge our mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk associated with MBS forward commitments, option contracts, futures contracts and loan sales transactions is managed by limiting our counterparties to investment banks, federally regulated bank affiliates and other investors meeting our credit standards. Our risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and the option contracts. At November 30, 2025, we had open commitments amounting to $3.0 billion to sell forward contracts, which include MBS and interest rate swaps, with varying settlement dates through February 2026 and open future contracts in the amount of $1.4 million with the varying settlement dates through May 2026.
The following sections discuss market and financing risk, seasonality and interest rates and changing prices that may have an impact on our business:
Market and Financing Risk
We finance our contributions to JVs, land acquisition and development activities, construction activities, financial services activities, Multifamily activities and general operating needs primarily with cash generated from operations and debt, as well as borrowings under our Credit Facility and warehouse repurchase facilities. We also purchase land under option agreements, which enables us to control homesites until we have determined whether to exercise the options. We try to manage the financial risks of adverse market conditions associated with land holdings by what we believe to be prudent underwriting of land purchases in areas we view as desirable growth markets, careful management of the land development process and limitation of risks by using partners to share the costs of purchasing and developing land as well as obtaining access to land through option contracts. Although we believe our land underwriting standards are conservative, we do not anticipate a severe decline in land values and the sharply reduced demand for new homes in the near future.
Seasonality
We historically have experienced, and expect to continue to experience, variability in quarterly results. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second and third fiscal quarters and increased deliveries in the second half of our fiscal year. However, a variety of factors can alter seasonal patterns.
Interest Rates and Changing Prices
Inflation can have a long-term impact on us because increasing costs of land, materials and labor result in a need to increase the sales prices of homes. In addition, inflation is often accompanied by higher interest rates, which can have a negative impact on housing demand and increase the costs of financing land development activities and housing construction. Rising interest rates as well as increased material and labor costs, may reduce gross margins. An increase in materials and labor costs would be particularly a problem during a period of declining home prices. Conversely, deflation can impact the value of real estate and make it difficult for us to recover our land costs. Therefore, either inflation or deflation could adversely impact our future results of operations.
New Accounting Pronouncements
See Note 1 of the Notes to Consolidated Financial Statements for a comprehensive list of new accounting pronouncements.
Critical Accounting Policies and Estimates
Our accounting policies are more fully described in Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this document. As discussed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such differences may be material to our consolidated financial statements. Listed below are those policies and estimates that we believe are critical and require the use of significant judgment in their application.
Goodwill
We recorded a significant amount of goodwill in connection with the 2018 acquisition of CalAtlantic. We record goodwill associated with acquisitions of businesses when the purchase price of the business exceeds the fair value of the net tangible and identifiable assets acquired. In accordance with ASC Topic 350, Intangibles-Goodwill and Other , we evaluate
Table of Contents
goodwill for potential impairment on at least an annual basis. We have the option to perform a qualitative or quantitative assessment to determine whether the fair value of a reporting unit exceeds its carrying value. Qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting units and other entity and reporting unit specific events. We believe that the accounting estimate for goodwill is a critical accounting estimate because of the judgment required in assessing the fair value of each of our reporting units. We estimate fair value through various valuation methods, including the use of discounted expected future cash flows of each reporting unit. The expected future cash flows for each segment are significantly impacted by current market conditions. If these market conditions and resulting expected future cash flows for each reporting unit decline significantly, the actual results for each segment could differ from our estimate, which would cause goodwill to be impaired. Our accounting for goodwill represents our best estimate of future events.
Homebuilding Revenue Recognition
Homebuilding revenues and related profits from sales of homes are recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the homebuyer. In order to promote sales of the homes, we may offer sales incentives to homebuyers. The types of incentives vary on a community-by-community basis and home-by-home basis. They include primarily price discounts on individual homes and financing incentives, all of which are reflected as a reduction of home sales revenues. Our performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date. Cash proceeds from home closings held in escrow for our benefit, typically for approximately three days, are included in Homebuilding cash and cash equivalents in the Consolidated Balance Sheets and disclosed in the notes to consolidated balance sheets. Contract liabilities include customer deposit liabilities related to sold but undelivered homes that are included in other liabilities in the Consolidated Balance Sheets. We periodically elect to sell parcels of land to third parties. Cash consideration from land sales is typically due on the closing date, which is generally when performance obligations are satisfied, and revenue is recognized as title to and possession of the property are transferred to the buyer.
Multifamily Revenue Recognition
Our Multifamily segment provides management services with respect to the development and construction of rental projects in joint ventures in which we have investments. As a result, our Multifamily segment earns and receives fees, which are generally based upon a stated percentage of development and construction costs and a percentage of gross rental collections. These fees are recorded over the period in which the services are performed using an input method, which properly depicts the level of effort required to complete the management services. In addition, our Multifamily segment provides general contractor services for the construction of some of its rental projects and recognizes the revenue over the period in which the services are performed using an input method, which properly depicts the level of effort required to complete the construction services. These customer contracts require us to provide management and general contractor services which represents a performance obligation that we satisfy over time. Management fees and general contractor services in the Multifamily segment are included in Multifamily revenue. When the Multifamily segment acts as general contractor, it treats the entire construction cost as revenue and treats payments to subcontractors as expenses.
Inventories
Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value. Inventory costs include land, land development and home construction costs, real estate taxes and interest related to development and construction. We review our inventory for indicators of impairment by evaluating each community during each reporting period. If the undiscounted cash flows expected to be generated by a community are less than its carrying amount, an impairment charge is recorded to write down the carrying amount of such community to its estimated fair value.
In conducting our review for indicators of impairment on a community level, we evaluate, among other things, the margins on homes that have been delivered, margins on homes under sales contracts in backlog, projected margins with regard to future home sales over the life of the community, projected margins with regard to future land sales, and the estimated fair value of the land itself.
We estimate the fair value of our communities using a discounted cash flow model. The projected cash flows for each community are significantly impacted by estimates related to market supply and demand, product type by community, homesite sizes, sales pace, sales prices, sales incentives, construction costs, sales and marketing expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors for that particular community. We evaluate the historical performance of each of our communities as well as current trends in the market and economy impacting the community and its surrounding areas. These trends are analyzed for each of the estimates listed above.
Table of Contents
Since the estimates and assumptions included in our cash flow models are based upon historical results and projected trends, they do not anticipate unexpected changes in market conditions or strategies that may lead to us incurring additional impairment charges in the future.
Using all the available information, we calculate our best estimate of projected cash flows for each community. While many of the estimates are calculated based on historical and projected trends, all estimates are subjective and change from market to market and community to community as market and economic conditions change. The determination of fair value also requires discounting the estimated cash flows at a rate we believe a market participant would determine to be commensurate with the inherent risks associated with the assets and related estimated cash flow streams. The discount rate used in determining each asset’s fair value depends on the community’s projected life and development stage.
We estimate the fair value of inventory evaluated for impairment based on market conditions and assumptions made by management at the time the inventory is evaluated, which may differ materially from actual results if market conditions or our assumptions change.
We believe that the accounting related to inventory valuation and impairment is a critical accounting policy because: (1) assumptions inherent in the valuation of our inventory are highly subjective and susceptible to change and (2) the impact of recognizing impairments on our inventory could be material to our consolidated financial statements.
Product Warranty
Although we subcontract virtually all aspects 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 homebuyers to correct any deficiencies. Additionally, in some instances, we may be held responsible for the actions of or losses incurred by subcontractors. Warranty and similar reserves for homes are established at an amount estimated to be adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Reserves are determined based upon historical data and trends with respect to similar product types and geographical areas. We believe the accounting estimate related to the reserve for warranty costs is a critical accounting estimate because the estimate requires a large degree of judgment. While we believe that the reserve for warranty costs is adequate, there can be no assurances that historical data and trends will accurately predict our actual warranty costs. Additionally, there can be no assurances that future economic or financial developments might not lead to a significant change in the reserve.
Investments in Unconsolidated Entities
We strategically invest in unconsolidated entities that acquire and develop land (1) for our homebuilding operations or for sale to third parties, (2) for construction of homes for sale to third-party homebuyers or (3) for the construction and sale of multifamily rental properties. Our Homebuilding partners generally are unrelated homebuilders, land owners/developers and financial or other strategic partners. Additionally, in recent years, we have invested in technology companies that are looking to improve the homebuilding and financial services industry in order to better serve homebuyers and homeowners and increase efficiencies. Our Multifamily partners are all financial partners.
Most of the unconsolidated entities through which we acquire and develop land are accounted for by the equity method of accounting because we are not the primary beneficiary or a de-facto agent, and we have a significant, but less than controlling, interest in the entities. We record our investments in these entities in our consolidated balance sheets as Investments in Unconsolidated Entities and our pro-rata share of the entities’ earnings or losses in our consolidated statements of operations as equity in earnings (losses) from unconsolidated entities within each of the respective segments. For most unconsolidated entities, we generally have the right to share in earnings and distributions on a pro-rata basis based upon ownership percentages. However, certain Homebuilding unconsolidated entities and all of our Multifamily unconsolidated entities provide for a different allocation of profit and cash distributions if and when cumulative results of the joint venture exceed specified targets (such as a specified internal rate of return). Advances to these entities are included in the investment balance.
Management looks at specific criteria and uses its judgment when determining if we are the primary beneficiary of, or have a controlling interest in, an unconsolidated entity. Factors considered in determining whether we have significant influence, or we have control include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and continuing involvement. The accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the judgment required in determining whether the entity is a variable interest entity ("VIE") or a voting interest entity and then whether we are the primary beneficiary or have control or significant influence. We believe that the equity method of accounting is appropriate for our investments in unconsolidated entities where we are not the primary beneficiary and we do not have a controlling interest, but rather share control with our partners.
We evaluate the long-lived assets in unconsolidated entities for indicators of impairment during each reporting period. A series of operating losses of an investee or other factors may indicate that a decrease in the fair value of our investment in the
Table of Contents
unconsolidated entity below its carrying amount has occurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying amount over its estimated fair value.
The evaluation of our investment in unconsolidated entities for other-than-temporary impairment includes certain critical assumptions: (1) projected future distributions from the unconsolidated entities, (2) discount rates applied to the future distributions, (3) the length of the time and the extent to which the market value has been less than cost, and (4) various other factors. Our assumptions on the projected future distributions from unconsolidated entities are dependent on market conditions.
We believe our assumptions on discount rates are critical accounting policies because the selection of the discount rates affects the estimated fair value of our investments in unconsolidated entities. A higher discount rate reduces the estimated fair value of our investments in unconsolidated entities, while a lower discount rate increases the estimated fair value of our investments in unconsolidated entities. Because of changes in economic conditions, actual results could differ materially from management’s assumptions and may require material valuation adjustments to our investments in unconsolidated entities to be recorded in the future.
Consolidation of Variable Interest Entities
GAAP requires the assessment of whether an entity is a VIE and, if so, if we are the primary beneficiary at the inception of the entity or at a reconsideration event. Additionally, GAAP requires the consolidation of VIEs in which we have a controlling financial interest. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Our variable interest in VIEs may be in the form of (1) equity ownership, (2) contracts to purchase assets, (3) management services and development agreements between us and a VIE, (4) loans provided by us to a VIE or other partner and/or (5) guarantees provided by members to banks and other third parties. We examine specific criteria and use our judgment when determining if we are the primary beneficiary of a VIE. Factors considered in determining whether we are the primary beneficiary include risk and reward sharing, experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights or voting rights, level of economic disproportionality between us and the other partner(s) and contracts to purchase assets from VIEs.
Generally, all major decision making in our joint ventures is shared among all partners. In particular, business plans and budgets are generally required to be unanimously approved by all partners. Usually, management and other fees earned by us are nominal and believed to be at market and there is no significant economic disproportionality between us and other partners. Generally, we purchase less than a majority of the JV’s assets and the purchase prices under our option contracts are believed to be at market.
Generally, our unconsolidated entities become VIEs and consolidate if the other partner(s) lack the intent and financial wherewithal to remain in the entity. As a result, we continue to fund operations and debt paydowns through partner loans or substituted capital contributions. The accounting policy relating to variable interest entities is a critical accounting policy because the determination of whether an entity is a VIE and, if so, whether we are primary beneficiary may require us to exercise significant judgment.
