MIAMI, Jan. 12 /PRNewswire-FirstCall/ -- The dissemination of false
statements about our company last Friday resulted in the selling of
an unprecedented 58 million shares of Lennar Corp. (NYSE: LEN;
LEN.B) stock and a 20 percent decline in our stock price. This has
prompted numerous inquiries from investors, analysts and the media.
While it is not Lennar's practice to respond to false and
scurrilous allegations in the context of litigation, Lennar has a
responsibility to its shareholders and the public to respond to
their legitimate requests for information. Therefore, Lennar today
is providing information pertaining to the personal home loans of
its chief operating officer, its outstanding joint ventures and its
pending litigation. In the event that additional false information
leads to new investor inquiries, we will continue to respond. In
addition, we intend to take appropriate action against the
responsible parties. To protect our investors, the information we
are disclosing today confirms the following: -- Lennar's chief
operating officer, Jon Jaffe, did not receive a mortgage on his
home or any other indebtedness connected to the company. -- Lennar
never "treated its joint ventures like a Ponzi scheme." -- Lennar
has never siphoned cash from one joint venture to another. --
Lennar has never pledged its interest in any joint venture for the
benefit of another. -- Lennar's litigation is accurately reported
and reserved for in accordance with generally accepted accounting
principles. -- Lennar never has used lawsuits as a mechanism for
avoiding cash payments. -- LandSource was an arm's-length
transaction involving large financial institutions that fully
reviewed, vetted and appraised the terms of the venture. -- No
money was ever misdirected in The Bridges project. -- Lennar's
co-member in The Bridges, Nicolas Marsch III, has received the
benefit of more than $50 million, notwithstanding statements to the
contrary. -- There have been no reports of any whistleblower
complaints concerning these matters to Lennar management, the Board
of Directors, independent auditors or an outside employee hotline.
-- Lennar has extensive confidential procedures in place to ensure
the free flow of communication by whistleblowers and to ensure
their protection from retaliation. -- Lennar never ordered imported
drywall from China and never received a discount for its use as a
substitute material. -- Lennar has been cited by the media as "the
most responsive builder" in dealing with the industry wide issue of
imported drywall. JON JAFFE'S LOAN Senior executive Jon Jaffe's
personal loan has nothing to do with Lennar. Jon's loan was
obtained from sources wholly independent from Lennar and with no
assistance from Lennar or any of its business partners. There is
not one point of connection between Jon's loan and Lennar's
business. Here are the facts: In September 2007, Jon obtained a $5
million line of credit secured by Jon's personal residence. Jon
obtained the loan from an independent loan broker named Robert
Venneri and his company Canyon Finance Inc. Neither Jon nor Lennar
is associated with Mr. Venneri, Canyon Finance or any other company
owned by Mr. Venneri. Mr. Venneri has a California real estate
broker's license, as did Canyon Finance, which later transferred
its license to Gulfstream Finance, also owned by Mr. Venneri. These
brokers' licenses permit the making of loans secured by real
estate. Jon was referred to Mr. Venneri by Jon's personal attorney,
who has never had a relationship with Lennar. The loan Mr. Venneri
placed for Jon was the first and only time Mr. Venneri has done so
for anyone employed by Lennar. No part of the loan secured by Mr.
Venneri for Jon came from funds provided directly or indirectly by
Lennar. The funds were sourced from a lender unrelated to Lennar.
Mr. Venneri also secured loans for Bruce Elieff, a SunCal employee.
Mr. Venneri has informed us that Mr. Elieff's loans were sourced
from a different lender than Jon's loan and had nothing to do with
Jon's loan or Lennar. Neither SunCal nor Mr. Elieff played any role
in connection with Jon's loan. Mr. Venneri has a real estate
development company called Canyon Capital, Inc., which acquired,
developed and marketed real estate properties in Kern County. There
is no connection between these properties and Jon's loan or Lennar,
nor is there a connection to SunCal. Likewise, there is no
connection between Frank and Norma Fugitt or John Balfanz and Jon
or Lennar. Also, Lennar has never been a joint venture partner with
SunCal on any properties in Kern County. Jon's $5 million line of
credit was fully secured by a third mortgage on Jon's house. The
loan comes due in September 2012, accrues simple interest at the
rate of 8% per annum, and requires quarterly interest payments. Jon
has made all such payments. By any measure, the loan was made on
the basis of conservative underwriting guidelines. There was
substantial equity in Jon's house to fully secure the loan. At the
time of the loan, the house was appraised at $18 million by an
independent appraiser on behalf of the lender. The first mortgage
was for $3 million; the second mortgage was a line of credit for
$2.1 million. Together with the $5 million loan, the total equaled
$10 million, a loan-to-value ratio of 55%. Consistent with Jon's
full commitment to and confidence in Lennar and its future, he made
use of the loan to increase his ownership of Lennar's stock. To
date, Jon has drawn down $4 million of the $5 million line. Jon
drew down $3 million in November 2007 and used $1,562,560 of these
funds to pay for the exercise of options on Lennar stock and the
associated income tax. Jon acquired 107,858 shares of "A" shares at
$8.235 per share and received 10,785 shares of "B" shares. The
market price of the stock at the time was $21.33 per share. The
remaining funds were used to reduce the balance of Jon's brokerage
account which at that time held 395,791 "A" shares and 48,151 "B"
shares. As of this date Jon has 442,243 "A" shares and 48,151 "B"
shares in this brokerage account. Jon has consistently retained the
Lennar shares he has acquired in recent years. In April 2008, Jon
drew down $1 million to acquire a passive investment in a
technology company unrelated to Lennar. Documents relating to Jon
Jaffe's loan are available at:
http://www.lennar.com/Campaigns/PR/default.htm JOINT VENTURES
Lennar strategically invests in unconsolidated entities that
acquire assets used in its homebuilding operations. Through these
entities, Lennar primarily seeks to reduce and share its risk by
limiting the amount of its capital invested in land, while
obtaining access to potential future homesites and allowing it to
participate in strategic ventures. Participants in these joint
ventures are land owners/developers, other homebuilders and
financial or strategic partners. Lennar has included extensive
financial disclosure regarding its JVs on its quarterly conference
calls with analysts and investors and in its SEC filings. Since
Lennar has not yet filed its Form 10-K for fiscal 2008 that is due
at the end of January 2009, Lennar has provided below preliminary
information for fiscal 2008 and 2007. Lennar will be working with
analysts and investors in the coming weeks to provide additional
information regarding its joint ventures. Some other facts
regarding its joint ventures are as follows: -- Each joint venture
is governed by an executive committee consisting of members from
all of the partners. -- Lennar does not use its investment in one
JV as collateral for debt in another JV. -- There is no cross
collateralization of debt between different unconsolidated
entities. -- Funds are never commingled among Lennar's JVs. -- The
financial position of Lennar's joint ventures is comprised of
substantial equity totaling $2.7 billion. -- Lennar's aggregate
equity investment in its unconsolidated joint ventures is 29%,
compared to its partners' equity of 71%. -- The joint venture debt
is secured by joint venture real estate assets that are adjusted
for impairment on a quarterly basis as necessary. -- The debt
financing of Lennar's JVs is primarily non-recourse; in other
cases, Lennar and its other partners agree to provide a guarantee.
-- Lennar's maximum recourse exposure related to unconsolidated JVs
with recourse debt is $520 million. In these ventures, there are
$2.8 billion of assets and $1.3 billion of equity. -- Lennar's
consolidated financial statements are audited annually and reviewed
quarterly by a top-tier, independent registered public accounting
firm. As of November 30, 2008, Lennar had equity investments in 116
unconsolidated entities, compared to 214 unconsolidated entities on
November 30, 2007. Summarized financial information on a combined
100% basis related to unconsolidated entities in which Lennar had
investments that are accounted for by the equity method was as
follows: November 30, 2008 2007 (In thousands) Assets: Cash and
cash equivalents $ 135,081 301,468 Inventories 7,115,360 7,941,835
Other assets 541,984 827,208 $7,792,425 9,070,511 Liabilities and
equity: Accounts payable and other liabilities $1,042,002 1,214,374
Debt 4,062,058 5,116,670 Equity of: Lennar 766,752 934,271 Others
1,921,613 1,805,196 Total equity of unconsolidated entities
2,688,365 2,739,467 $7,792,425 9,070,511 Lennar's equity in its
unconsolidated entities 29% 34% Debt to total capital of Lennar's
unconsolidated entities is calculated as follows: November 30, 2008
2007 (Dollars in thousands) Debt $4,062,058 5,116,670 Equity
2,688,365 2,739,467 Total capital $6,750,423 7,856,137 Debt to
total capital of Lennar's unconsolidated entities 60.2% 65.1% Debt
to total capital of Lennar's unconsolidated entities (excluding
LandSource) 49.8% 61.1% The total debt of the unconsolidated
entities in which Lennar has investments was as follows: November
30, 2008 2007 (In thousands) Lennar's net recourse exposure $
392,450 794,934 Reimbursement agreements from partners 127,428
238,692 Partner several recourse 285,519 465,641 Non-recourse land
seller debt or other debt 90,519 202,048 Non-recourse debt with
completion guarantees 820,435 1,432,880 Non-recourse debt without
completion guarantees 2,345,707 1,982,475 Total debt $4,062,058
5,116,670 The summary of Lennar's net recourse exposure related to
the unconsolidated entities in which it has investments was as
follows: November 30, 2008 2007 (In thousands) Several recourse
debt-repayment $ 78,547 123,022 Several recourse debt-maintenance
167,941 355,513 Joint and several recourse debt-repayment 138,169
263,364 Joint and several recourse debt-maintenance 123,051 291,727
Land seller debt recourse exposure 12,170 - Lennar's maximum
recourse exposure 519,878 1,033,626 Less joint and several
reimbursement agreements with Lennar's partners -127,428 -238,692
Lennar's net recourse exposure $392,450 794,934 The recourse debt
exposure in the table above represents Lennar's maximum exposure to
loss from guarantees and does not take into account the underlying
value of the collateral. Although Lennar, in some instances,
guarantees the indebtedness of unconsolidated entities in which it
has an investment, its unconsolidated entities that have recourse
debt have a significant amount of assets and equity. The summarized
balance sheets of its unconsolidated entities with recourse debt
were as follows: November 30, 2008 2007 (In thousands) Assets $
2,846,819 3,220,695 Liabilities 1,565,148 2,311,216 Equity
1,281,671 909,479 LITIGATION During the past decade, Lennar has
delivered more than 250,000 homes. The construction of those homes
resulted in tens of millions of underlying payments and contracts.
In that context, as of November 30, 2008, Lennar was defending or
prosecuting approximately 620 lawsuits that fall into the following
categories: homeowner construction, premises liability, personal
injury, contract and subcontract disputes, employment,
environmental and land use, insurance coverage, advertising,
collections, intellectual property, automobile liability, tax
matters and others. Reserves for litigation matters are established
and adjusted consistent with the guidelines set forth in Financial
Accounting Standards No. 5 (Reserves for Loss Contingencies) and
audited by Lennar's outside independent accounting firm. THE
BRIDGES LAWSUIT This is a lawsuit filed in 2006 by Nicolas Marsch
concerning The Bridges project in San Diego County, California.
Contrary to the allegations, Lennar did not divert a $37.5 million
judgment contributed by Marsch to the venture. Lennar and Marsch
had a 50-50 interest in the judgment, and no part of the judgment
or proceeds from the judgment was misdirected. The proceeds were
used by and for the benefit of the venture to pay for construction
and operation costs. Marsch and his advisors attributed zero value
to the judgment and achieved tax benefits from this position.
Contrary to the allegations, Marsch has received significant
proceeds from the Bridges venture. To date, payments made to or on
his behalf exceed $50 million. Also contrary to the allegations,
Lennar has provided substantial information from inception. Lennar
regularly provided balance sheets and reports to Marsch for more
than 10 years, in addition to annual financial statements audited
by an outside independent accounting firm. Lennar has never pledged
The Bridges' assets for the obligations of any other joint venture.
Nor does The Bridges have a "bankrupt partner" as a result of the
LandSource bankruptcy. Marsch has been involved in several lawsuits
with Lennar. In 2006, Marsch also filed another lawsuit against
Lennar in connection with a different project in San Diego. That
case was ordered dismissed in its entirety by the California court
in November 2008 without a trial. LANDSOURCE In 2003, Lennar and
others formed LandSource to acquire and hold various real estate
interests. In February 2007, Lennar reduced its interest from 50%
to 16%. In June 2008, LandSource filed bankruptcy as a result of
the collapse of the real estate market. The claim that Lennar
caused the other investors and lenders to lose approximately $1
billion in connection with LandSource is false. The LandSource
bankruptcy is a matter of public record with complete financial
disclosures. The lenders and investors are large institutional
entities who conducted their own extensive due diligence with the
aid of independent experts. The LandSource bankruptcy was the
product of unprecedented market shifts. CHINESE DRYWALL Lennar has
never specified imported drywall from China for installation in its
homes and never received a discount when it was substituted for
domestic products. Lennar has been working diligently with its
homeowners in an effort to address this industry-wide defective
product issue. In part, these efforts are reflected in today's Wall
Street Journal article concerning Chinese drywall in Florida. On
Sunday, the Sarasota Herald-Tribune characterized Lennar as "[t]he
most responsive builder so far" on the issue of Chinese drywall. In
addition, Lennar fully intends to seek remedies from the
manufacturer and other responsible parties. WHISTLEBLOWER Lennar
has created two mechanisms for the public, investors, associates
and other interested parties to communicate their concerns directly
to the company's Board of Directors. First, Lennar has retained an
independent firm, The Network, to receive complaints anonymously
and report those complaints directly to the Audit Committee of the
Board of Directors, in addition to management. The Audit Committee
receives a report of the investigation of each communication
submitted. In addition, Lennar provides an email address which can
be used to communicate directly with the independent members of the
Board of Directors. Our Lead Director, who is also the chairperson
of the Independent Directors Committee, receives all messages sent
to this email address. Both of these reporting systems are
described in our annual proxy statement, and are regularly
communicated to our associates. These reporting systems have been
in place for more than four years as required by law and by the
rules of the New York Stock Exchange. For more information, contact
Glenn Bunting () or Maya Pogoda () at 310-788-2850. Lennar
Corporation, founded in 1954, is one of the nation's leading
builders of quality homes for all generations. The Company builds
affordable, move-up and retirement homes primarily under the Lennar
brand name. Lennar's Financial Services segment provides primarily
mortgage financing, title insurance and closing services for both
buyers of the Company's homes and others. Previous press releases
and further information about the Company may be obtained at the
"Investor Relations" section of the Company's website,
http://www.lennar.com/. DATASOURCE: Lennar Corporation CONTACT:
Scott Shipley, Investor Relations, Lennar Corporation,
+1-305-485-2054; or Glenn Bunting or Maya Pogoda of Sitrick and
Company, +1-310-788-2850 Web site: http://www.lennar.com/
http://www.lennar.com/Campaigns/PR/default.htm Company News
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