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Lennar Multifamily Segment
6 Months Ended
May 31, 2017
Segment Reporting [Abstract]  
Operating and Reporting Segments
Operating and Reporting Segments
The Company’s operating segments are aggregated into reportable segments, based primarily upon similar economic characteristics, geography and product type. The Company’s reportable segments consist of:
(1) Homebuilding East
(2) Homebuilding Central
(3) Homebuilding West
(4) Lennar Financial Services
(5) Rialto
(6) Lennar Multifamily
Information about homebuilding activities in states which are not economically similar to other states in the same geographic area is grouped under "Homebuilding Other," which is not considered a reportable segment.
Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s homebuilding segments primarily 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 the Company’s unconsolidated entities. Operating earnings (loss) for the homebuilding segments consist of revenues generated from the sales of homes and land, equity in earnings (loss) from unconsolidated entities and other income (expense), net, less the cost of homes sold and land sold, selling, general and administrative expenses incurred by the segment and loss due to litigation.
The Company’s reportable homebuilding segments and all other homebuilding operations not required to be reported separately have homebuilding divisions located in:
East: Florida(1), Georgia, Maryland, New Jersey, North Carolina, South Carolina and Virginia
Central: Arizona, Colorado and Texas
West: California and Nevada
Other: Illinois, Minnesota, Oregon, Tennessee and Washington
(1)
Florida includes information related to WCI from the date of acquisition (February 10, 2017) to May 31, 2017.
Operations of the Lennar Financial Services segment include primarily mortgage financing, title insurance and closing services for both buyers of the Company’s homes and others. It also includes a real estate brokerage business acquired as part of the WCI transaction. The Lennar Financial Services segment sells substantially all of the 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, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Lennar Financial Services’ operating earnings consist of revenues generated primarily from mortgage financing, title insurance, closing services and real estate brokerage, less the cost of such services and certain selling, general and administrative expenses incurred by the segment. The Lennar Financial Services segment operates generally in the same states as the Company’s homebuilding operations as well as in other states.
Operations of the Rialto segment include raising, investing and managing third-party capital, originating and securitizing commercial mortgage loans as well as investing its own capital in real estate related mortgage loans, properties and related securities. Rialto utilizes its vertically-integrated investment and operating platform to underwrite, diligence, acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and real estate related securities as well as providing strategic real estate capital. Rialto’s operating earnings consist of revenues generated primarily from gains from securitization transactions and interest income from the Rialto Mortgage Finance ("RMF") business, interest income associated with portfolios of real estate loans acquired and other portfolios of real estate loans and assets acquired, asset management, due diligence and underwriting fees derived from the real estate investment funds managed by the Rialto segment, fees for sub-advisory services, other income (expense), net and equity in earnings (loss) from unconsolidated entities, less the costs incurred by the segment for managing portfolios, costs related to RMF and other general and administrative expenses.
Operations of the Lennar Multifamily segment include revenues generated from the sales of land, revenue from construction activities and management fees generated from joint ventures and equity in earnings (loss) from unconsolidated entities, less the cost of sales of land, expenses related to construction activities and general and administrative expenses.
Each reportable segment follows the same accounting policies described in Note 1 – "Summary of Significant Accounting Policies" to the consolidated financial statements in the Company’s Form 10-K for the year ended November 30, 2016. Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented.
Financial information relating to the Company’s operations was as follows:
(In thousands)
May 31,
2017
 
November 30,
2016
Assets:
 
 
 
Homebuilding East (1)
$
4,764,611

 
3,512,990

Homebuilding Central
2,032,627

 
1,993,403

Homebuilding West
4,684,956

 
4,318,924

Homebuilding Other
903,137

 
907,523

Rialto
1,364,421

 
1,276,210

Lennar Financial Services
1,444,294

 
1,754,672

Lennar Multifamily
653,229

 
526,131

Corporate and unallocated
907,230

 
1,071,928

Total assets
$
16,754,505

 
15,361,781

Lennar Homebuilding goodwill (2)
$
136,633

 

Rialto goodwill
$
5,396

 
5,396

Lennar Financial Services goodwill (2)
$
59,838

 
39,838


(1)
Homebuilding East segment includes the provisional fair values of homebuilding assets acquired as part of the WCI acquisition.
(2)
In connection with the WCI acquisition, the Company allocated $136.6 million of goodwill to the Lennar Homebuilding East reportable segment and $20.0 million to the Lennar Financial Services segment. These amounts are provisional pending completion of the fair value analysis of acquired assets and liabilities.
 
Three Months Ended
 
Six Months Ended
 
May 31,
 
May 31,
(In thousands)
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Homebuilding East
$
1,194,890

 
954,298

 
1,962,616

 
1,613,352

Homebuilding Central
682,342

 
608,987

 
1,198,523

 
1,022,827

Homebuilding West
770,194

 
718,059

 
1,322,992

 
1,269,398

Homebuilding Other
238,315

 
169,541

 
420,304

 
331,789

Lennar Financial Services
208,363

 
175,940

 
356,406

 
299,896

Rialto
67,988

 
44,838

 
149,994

 
88,549

Lennar Multifamily
99,800

 
74,152

 
188,485

 
113,668

Total revenues (1)
$
3,261,892

 
2,745,815

 
5,599,320

 
4,739,479

Operating earnings (loss):
 
 
 
 
 
 
 
Homebuilding East (2)
$
153,707

 
142,938

 
97,998

 
227,644

Homebuilding Central
75,944

 
68,762

 
128,802

 
101,957

Homebuilding West
71,224

 
113,807

 
124,584

 
202,641

Homebuilding Other
31,705

 
17,189

 
52,534

 
31,092

Lennar Financial Services
43,727

 
44,088

 
64,391

 
59,019

Rialto
(6,462
)
 
(18,086
)
 
(7,305
)
 
(16,476
)
Lennar Multifamily
6,529

 
14,943

 
25,712

 
27,125

Total operating earnings
376,374

 
383,641

 
486,716

 
633,002

Corporate general and administrative expenses
66,774

 
55,802

 
127,473

 
103,470

Earnings before income taxes
$
309,600

 
327,839

 
359,243

 
529,532

(1)
Total revenues were net of sales incentives of $174.5 million ($22,700 per home delivered) and $298.1 million ($22,700 per home delivered) for the three and six months ended May 31, 2017, respectively, compared to $146.1 million ($21,800 per home delivered) and $249.8 million ($21,700 per home delivered) for the three and six months ended May 31, 2016, respectively.
(2)
Homebuilding East operating earnings for the six months ended May 31, 2017 included a $140 million loss due to litigation (see Note 17).
Lennar Financial Services Segment
The assets and liabilities related to the Lennar Financial Services segment were as follows:
(In thousands)
May 31,
2017
 
November 30,
2016
Assets:
 
 
 
Cash and cash equivalents
$
107,436

 
123,964

Restricted cash
13,311

 
17,053

Receivables, net (1)
213,550

 
409,528

Loans held-for-sale (2)
820,443

 
939,405

Loans held-for-investment, net
32,691

 
30,004

Investments held-to-maturity
54,824

 
41,991

Investments available-for-sale (3)
56,005

 
53,570

Goodwill (4)
59,838

 
39,838

Other (5)
86,196

 
99,319

 
$
1,444,294

 
1,754,672

Liabilities:
 
 
 
Notes and other debts payable
$
792,623

 
1,077,228

Other (6)
245,040

 
241,055

 
$
1,037,663

 
1,318,283

(1)
Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of May 31, 2017 and November 30, 2016, respectively.
(2)
Loans held-for-sale related to unsold loans carried at fair value.
(3)
Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss).
(4)
As of May 31, 2017, goodwill included $20.0 million of goodwill related to the WCI acquisition. The amount provided herein is provisional, pending completion of the fair value analysis of WCI's acquired assets and liabilities assumed (see Note 2).
(5)
As of May 31, 2017 and November 30, 2016, other assets included mortgage loan commitments carried at fair value of $18.4 million and $7.4 million, respectively, and mortgage servicing rights carried at fair value of $27.4 million and $23.9 million, respectively. In addition, other assets also included forward contracts carried at fair value of $26.5 million as of November 30, 2016.
(6)
As of May 31, 2017 and November 30, 2016, other liabilities included $58.4 million and $57.4 million, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. Other liabilities also included forward contracts carried at fair value of $6.8 million as of May 31, 2017.
At May 31, 2017, the Lennar Financial Services segment warehouse facilities were as follows:
(In thousands)
Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures June 2017 (1)
$
600,000

364-day warehouse repurchase facility that matures September 2017
300,000

364-day warehouse repurchase facility that matures December 2017 (2)
400,000

364-day warehouse repurchase facility that matures March 2018 (3)
150,000

Total
$
1,450,000


(1)
Subsequent to May 31, 2017, the warehouse repurchase facility maturity date was extended to June 2018.
(2)
Maximum aggregate commitment includes an uncommitted amount of $250 million.
(3)
Maximum aggregate commitment includes an uncommitted amount of $75 million.
The Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature. Borrowings under the facilities and their prior year predecessors were $792.4 million and $1.1 billion at May 31, 2017 and November 30, 2016, respectively, and were collateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $824.1 million and $1.1 billion at May 31, 2017 and November 30, 2016, respectively. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the mortgage loans held-for-sale to investors and by collecting on receivables on loans sold but not yet paid for. Without the facilities, the Lennar Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.
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, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Over the last several years there has been an industry-wide effort by purchasers to defray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan sale agreements. Mortgage investors could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors. The Company establishes accruals for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements. While the Company believes that it has adequately reserved for known losses and projected repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations, additional recourse expense may be incurred. Loan origination liabilities are included in Lennar Financial Services’ liabilities in the Company's condensed consolidated balance sheets.
The activity in the Company’s loan origination liabilities was as follows:
 
Three Months Ended
 
Six Months Ended
 
May 31,
 
May 31,
(In thousands)
2017
 
2016
 
2017
 
2016
Loan origination liabilities, beginning of period
$
25,003

 
20,108

 
24,905

 
19,492

Provision for losses
1,066

 
1,110

 
1,944

 
1,898

Payments/settlements
(157
)
 
(224
)
 
(937
)
 
(396
)
Loan origination liabilities, end of period
$
25,912

 
20,994

 
25,912

 
20,994

Rialto Segment
The assets and liabilities related to the Rialto segment were as follows:
(In thousands)
May 31,
2017
 
November 30,
2016
Assets:
 
 
 
Cash and cash equivalents
$
119,592

 
148,827

Restricted cash (1)
6,026

 
9,935

Receivables, net (2)
415,285

 
204,518

Loans held-for-sale (3)
106,615

 
126,947

Loans receivable, net
65,326

 
111,608

Real estate owned, net
160,452

 
243,703

Investments in unconsolidated entities
244,301

 
245,741

Investments held-to-maturity
112,452

 
71,260

Other
134,372

 
113,671

 
$
1,364,421

 
1,276,210

Liabilities:
 
 
 
Notes and other debts payable (4)
$
781,845

 
622,335

Other
78,767

 
85,645

 
$
860,612

 
707,980


(1)
Restricted cash primarily consists of upfront deposits and application fees RMF receives before originating loans and is recognized as income once the loan has been originated, as well as cash held in escrow by the Company’s loan servicer provider on behalf of customers and lenders and is disbursed in accordance with agreements between the transacting parties.
(2)
Receivables, net primarily related to loans sold but not settled as of May 31, 2017 and November 30, 2016, respectively.
(3)
Loans held-for-sale related to unsold loans originated by RMF carried at fair value and loans in the FDIC Portfolios carried at lower of cost or market.
(4)
As of May 31, 2017 and November 30, 2016, notes and other debts payable primarily included $349.0 million and $348.7 million, respectively, related to Rialto's 7.00% senior notes due 2018, and $363.6 million and $223.5 million, respectively, related to Rialto's warehouse repurchase facilities.
Rialto Mortgage Finance - loans held-for-sale
During the six months ended May 31, 2017, RMF originated loans with a total principal balance of $837.7 million of which $823.7 million were recorded as loans held-for-sale and $14.1 million were recorded as accrual loans within loans receivable, net, and sold $870.4 million of loans into five separate securitizations. During the six months ended May 31, 2016, RMF originated loans with a total principal balance of $670.3 million of which $654.0 million were recorded as loans held-for-sale and $16.3 million as accrual loans within loans receivable, net, and sold $766.4 million of loans into five separate securitizations. As of May 31, 2017 and November 30, 2016, originated loans with an unpaid principal balance of $392.7 million and $199.8 million, respectively, were sold into a securitization trust but not settled and thus were included as receivables, net.
FDIC Portfolios
In 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies ("LLCs") in partnership with the FDIC ("FDIC Portfolios"). The LLCs met the accounting definition of VIEs and since the Company was determined to be the primary beneficiary, the Company consolidated the LLCs. The Company was determined to be the primary beneficiary because it has the power to direct the activities of the LLCs that most significantly impact the LLCs' performance through Rialto's management and servicer contracts.
In February 2017, the FDIC exercised its “clean-up call rights” under the Amended and Restated Limited Liability Company Agreement. As a result, Rialto has until July 10, 2017 to liquidate and sell the assets in the FDIC Portfolios. After July 10, 2017, the FDIC can, at its discretion, sell any remaining assets. At May 31, 2017, the consolidated LLCs had total combined assets of $117.5 million, which primarily included $80.3 million of real estate owned, net and $23.8 million of loans held-for-sale.
Warehouse Facilities
At May 31, 2017, Rialto warehouse facilities were as follows:
(In thousands)
Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures October 2017
$
500,000

Warehouse repurchase facility that matures December 2017
200,000

364-day warehouse repurchase facility that matures January 2018
250,000

Total - Loan origination and securitization business (RMF)
$
950,000

Warehouse repurchase facility that matures August 2018 (two - one year extensions) (1)
100,000

Total
$
1,050,000

(1)
Rialto uses this warehouse repurchase facility to finance the origination of floating rate accrual loans, which are reported as accrual loans within loans receivable, net. Borrowings under this facility were $43.3 million as of both May 31, 2017 and November 30, 2016.
Borrowings under the facilities that finance RMF's loan originations and securitization activities were $320.3 million and $180.2 million as of May 31, 2017 and November 30, 2016, respectively, and were secured by a 75% interest in the originated commercial loans financed. The facilities require immediate repayment of the 75% interest in the secured commercial loans when the loans are sold in a securitization and the proceeds are collected. These warehouse repurchase facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the loans held-for-sale to investors and by collecting on receivables on loans sold, but not yet paid for. Without the facilities, the Rialto segment would have to use cash from operations and other funding sources to finance its lending activities.
Investments in Unconsolidated Entities
Generally, all of Rialto's investments in funds have the attributes of an investment company in accordance with ASC 946, Financial Services – Investment Companies, as amended by ASU 2013-08, Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, the attributes of which are different from the attributes that would cause a company to be an investment company for purposes of the Investment Company Act of 1940. As a result, the assets and liabilities of the funds in which Rialto has investments in are recorded at fair value with increases/decreases in fair value recorded in their respective statements of operations and the Company’s share is recorded in Rialto equity in earnings from unconsolidated entities in the Company's statement of operations.
The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and other investments:
 
 
 
 
 
 
 
 
 
May 31,
2017
 
May 31,
2017
 
November 30,
2016
(Dollars in thousands)
Inception Year
 
Equity Commitments
 
Equity Commitments Called
 
Commitment to Fund by the Company
 
Funds Contributed by the Company
 
Investment
Rialto Real Estate Fund, LP
2010
 
$
700,006

 
$
700,006

 
$
75,000

 
$
75,000

 
$
48,519

 
58,116

Rialto Real Estate Fund II, LP
2012
 
1,305,000

 
1,305,000

 
100,000

 
100,000

 
84,862

 
96,192

Rialto Mezzanine Partners Fund, LP
2013
 
300,000

 
300,000

 
33,799

 
33,799

 
21,188

 
23,643

Rialto Capital CMBS Funds
2014
 
119,174

 
119,174

 
52,474

 
52,474

 
50,948

 
50,519

Rialto Real Estate Fund III
2015
 
1,887,000

 
362,242

 
140,000

 
25,318

 
25,520

 
9,093

Rialto Credit Partnership, LP
2016
 
220,000

 
121,225

 
19,999

 
11,020

 
11,182

 
5,794

Other investments
 
 
 
 
 
 
 
 
 
 
2,082

 
2,384

 
 
 
 
 
 
 
 
 
 
 
$
244,301

 
245,741


During the three and six months ended May 31, 2017, Rialto received $2.2 million and $3.1 million, respectively, of advance distributions with regard to Rialto's carried interests in its real estate funds in order to cover income tax obligations resulting from allocations of taxable income to Rialto's carried interests in these funds. In addition, during the three and six months ended May 31, 2017, Rialto received $8.8 million and $18.8 million, respectively, of distributions with regard to its carried interest in Rialto Real Estate Fund, LP. During the three and six months ended May 31, 2016, Rialto received $2.5 million and $7.4 million, respectively, of such advanced distributions.
During 2015, Rialto adopted a Carried Interest Incentive Plan (the "Plan"), under which participating employees in the aggregate may receive up to 40% of the equity units of a limited liability company (a "Carried Interest Entity") that is entitled to carried interest distributions made by a fund or other investment vehicle (a "Fund") managed by a subsidiary of Rialto. As such, those employees receiving equity units in a Carried Interest Entity may benefit from distributions made by a Fund to the extent the Carried Interest Entity makes distributions to its equity holders. The units issued to employees are equity awards and are subject to vesting schedules and forfeiture or repurchase provisions in the case of a termination of employment.
Summarized condensed financial information on a combined 100% basis related to Rialto’s investments in unconsolidated entities that are accounted for by the equity method was as follows:
Balance Sheets
(In thousands)
May 31,
2017
 
November 30,
2016
Assets:
 
 
 
Cash and cash equivalents
$
77,047

 
230,229

Loans receivable
434,771

 
406,812

Real estate owned
360,337

 
439,191

Investment securities
1,543,517

 
1,379,155

Investments in partnerships
415,316

 
398,535

Other assets
190,885

 
29,036

 
$
3,021,873

 
2,882,958

Liabilities and equity:
 
 
 
Accounts payable and other liabilities
$
44,989

 
36,131

Notes payable (1)
617,587

 
532,264

Equity
2,359,297

 
2,314,563

 
$
3,021,873

 
2,882,958

(1)
Notes payable are net of debt issuance costs of $4.1 million and $2.9 million, as of May 31, 2017 and November 30, 2016, respectively.
Statements of Operations
 
Three Months Ended
 
Six Months Ended
 
May 31,
 
May 31,
(In thousands)
2017
 
2016
 
2017
 
2016
Revenues
$
61,030

 
51,240

 
118,186

 
95,536

Costs and expenses
29,000

 
20,704

 
57,001

 
41,603

Other income, net (1)
9,321

 
26,710

 
9,648

 
11,548

Net earnings of unconsolidated entities
$
41,351

 
57,246

 
70,833

 
65,481

Rialto equity in earnings from unconsolidated entities
$
5,730

 
6,864

 
6,452

 
8,361

(1)
Other income, net, included realized and unrealized gains (losses) on investments.
Investments held-to-maturity
At May 31, 2017 and November 30, 2016, the carrying value of Rialto's commercial mortgage-backed securities ("CMBS") was $112.5 million and $71.3 million, respectively. These securities were purchased at discounts ranging from 9% to 78% with coupon rates ranging from 1.3% to 4.4%, stated and assumed final distribution dates between November 2020 and February 2027, and stated maturity dates between November 2043 and March 2059. The Rialto segment reviews changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on its CMBS. Based on the Rialto segment’s assessment, no impairment charges were recorded during either the three and six months ended May 31, 2017 or May 31, 2016. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.)
Lennar Multifamily Segment
The Company is actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties. The Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.
The assets and liabilities related to the Lennar Multifamily segment were as follows:
(In thousands)
May 31,
2017
 
November 30,
2016
Assets:
 
 
 
Cash and cash equivalents
$
9,288

 
6,600

Receivables (1)
64,740

 
58,929

Land under development
171,066

 
139,713

Investments in unconsolidated entities
377,265

 
318,559

Other assets
30,870

 
2,330

 
$
653,229

 
526,131

Liabilities:
 
 
 
Accounts payable and other liabilities
$
123,166

 
117,973

(1)
Receivables primarily related to general contractor services and management fee income receivables due from unconsolidated entities as of May 31, 2017 and November 30, 2016, respectively.
The unconsolidated entities in which the Lennar Multifamily segment has investments usually finance their activities with a combination of partner equity and debt financing. In connection with many of the loans to Lennar Multifamily unconsolidated entities, the Company (or entities related to them) has been required to give guarantees of completion and cost over-runs to the lenders and partners. Those completion guarantees may require that the guarantors complete the construction of the improvements for which the financing was obtained. Additionally, the Company guarantees the construction costs of the project as construction cost over-runs would be paid by the Company. Generally, these payments would be increases to the Company's investment in the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds. As of both May 31, 2017 and November 30, 2016, the fair value of the completion guarantees was immaterial. Additionally, as of May 31, 2017 and November 30, 2016, the Lennar Multifamily segment had $15.2 million and $32.0 million, respectively, of letters of credit outstanding primarily for credit enhancements for the bank debt of certain of its unconsolidated entities and deposits on land purchase contracts. These letters of credit outstanding are included in the disclosure in Note 12 related to the Company's performance and financial letters of credit. As of May 31, 2017 and November 30, 2016, Lennar Multifamily segment's unconsolidated entities had non-recourse debt with completion guarantees of $744.2 million and $589.4 million, respectively.
In many instances, the Lennar Multifamily segment is appointed as the construction, development and property manager for certain of its Lennar Multifamily unconsolidated entities and receives fees for performing this function. During the three and six months ended May 31, 2017, the Lennar Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $15.2 million and $28.1 million, respectively. During the three and six months ended May 31, 2016, the Lennar Multifamily segment recorded fee income, net of deferrals, from its unconsolidated entities of $9.3 million and $17.4 million, respectively.
The Lennar Multifamily segment also provides general contractor services for construction of some of the rental properties owned by unconsolidated entities in which the Company has an investment. During the three and six months ended May 31, 2017, the Lennar Multifamily segment provided general contractor services totaling $84.6 million and $160.4 million, respectively, which were partially offset by costs related to those services of $83.3 million and $157.0 million, respectively. During the three and six months ended May 31, 2016, the Lennar Multifamily segment provided general contractor services totaling $53.5 million and $84.9 million, respectively, which were partially offset by costs related to those services of $51.7 million and $82.3 million, respectively.
The Lennar Multifamily Venture (the "Venture") is a long-term multifamily development investment vehicle involved in the development, construction and property management of class-A multifamily assets with $2.2 billion in equity commitments, including a $504 million co-investment commitment by Lennar comprised of cash, undeveloped land and preacquisition costs. During the six months ended May 31, 2017, $334.5 million in equity commitments were called, of which the Company contributed $76.0 million representing the Company's pro-rata portion of the called equity. During the six months ended May 31, 2017, the Company received no distributions as a return of capital from the Venture, except for distributions of capital related to land contributions to the Venture. As of May 31, 2017, $1.3 billion of the $2.2 billion in equity commitments had been called, of which the Company had contributed $291.9 million, representing its pro-rata portion of the called equity, resulting in a remaining equity commitment for the Company of $212.1 million. As of May 31, 2017 and November 30, 2016, the carrying value of the Company's investment in the Venture was $268.1 million and $198.2 million, respectively.
Summarized condensed financial information on a combined 100% basis related to Lennar Multifamily's investments in unconsolidated entities that are accounted for by the equity method was as follows:
Balance Sheets
(In thousands)
May 31,
2017
 
November 30,
2016
Assets:
 
 
 
Cash and cash equivalents
$
44,765

 
43,658

Operating properties and equipment
2,658,080

 
2,210,627

Other assets
38,160

 
33,703

 
$
2,741,005

 
2,287,988

Liabilities and equity:
 
 
 
Accounts payable and other liabilities
$
223,061

 
196,617

Notes payable (1)
727,070

 
577,085

Equity
1,790,874

 
1,514,286

 
$
2,741,005

 
2,287,988

(1)
Notes payable are net of debt issuance costs of $17.1 million and $12.3 million, as of May 31, 2017 and November 30, 2016, respectively.
Statements of Operations
 
Three Months Ended
 
Six Months Ended
 
May 31,
 
May 31,
(In thousands)
2017
 
2016
 
2017
 
2016
Revenues
$
13,975

 
9,649

 
25,592

 
17,963

Costs and expenses
24,477

 
14,058

 
46,823

 
25,730

Other income, net
28,190

 
30,272

 
78,729

 
70,394

Net earnings of unconsolidated entities
$
17,688

 
25,863

 
57,498

 
62,627

Lennar Multifamily equity in earnings from unconsolidated entities (1)
$
9,427

 
14,008

 
32,574

 
33,694

(1)
During three and six months ended May 31, 2017, the Lennar Multifamily segment sold one and three operating properties, respectively, through its unconsolidated entities resulting in the segment's $11.4 million and $37.4 million share of gains, respectively. During the three and six months ended May 31, 2016, the Lennar Multifamily segment sold one and two operating properties, respectively, through its unconsolidated entities resulting in the segment's $15.4 million and $35.8 million share of gains, respectively.