Q3 2024 Lennar Corp Earnings Call

Thank you and good morning everyone. Today's conference call may include forward-looking statements, including statements regarding when I was business, financial condition, results of operations, cashflowers, strategies and prospects.

Operator: and looking statements, including statements regarding Lennar's business, financial condition, results of operations, cashflows, strategies, and prospects.

Operator: Forward-looking statements represent only Lennar's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet been heard, these statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause Lennar's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

So, we're looking statements where every day only one hour's estimates on the data this conference called and are not intended to give any assurance as to actual future results.

The judge followed looking statements related matters that have not yet discovered. These statements are inherently subject to risk zone surgeries.

Many factors could affect future results and may cause winners' actual activities or results, it differ materially from the activities and results anticipated in forward-looking statements.

Operator: These factors include those described in our earnings release and our SEC filings, including those under the caption of risk factors contained in Lennar's annual report on Form 10-K, most recently filed with the US. Please note that Lennar assumes no obligation to update any forward-looking statements.

Leonardo: These factors include those described in our earnings release, and our Etsy C-Files, including those under the captioner risk factors, contained in Leonardo's annual report on Form 10K, most recently filed with the account. Please note that Leonardo seems no obligation to update any forward-looking statements.

Operator: I would now like to introduce your host, Mr. Stuart Miller, Executive Chairman and Co-CEO.

Stuart Miller: I would now like to introduce your host, Mr. Stuart Miller, Executive Chairman and Cole CEO. Sir, you may begin

Operator: Sir, you may begin.

Stuart Miller: Very good, and good morning, everybody. Thank you for joining today. I'm in Miami today together with John Jaffe, our co-CEO and President. Diane Bessette, our chief financial officer, gave a call into you. I just heard from our controller and vice president, Bruce Gross, and Bruce Gross, our CEO of one of our financial services, and a few others are here as well.

Stuart Miller: Very good, and good morning everybody, and thank you for joining today.

Stuart Miller: I'm in Miami today together with John Jaffe, our Coastal EL and President.

Speaker Change: or Chief Financial Officer, David Collins, who you just heard from, are controller and vice president, Bruce Rose and Bruce Rose are CEO of what an financial surface is in a few others are here as well.

Stuart Miller: As usual, I'm going to give a macro and strategic overview of the company. After my introductory remarks, John's going to give an operational overview, updating construction costs, cycle time, and some of our land strategy and position. As usual, Diane's going to give a detailed financial highlight, along with some limited guidance for our fourth quarter and full year, year end, 2024. And then, of course, we'll have question and answer. As usual, I'd like to ask that you please limit yourself to one question, one follow-up, so that we can accommodate as many as possible. So, let me go ahead and begin.

Speaker Change: As usual, I'm going to give a macro and strategic overview of the company. After my introductory remarks, John's going to give an operational overview of dating construction cost, cycle time, and some of our land strategy and position.

Speaker Change: As usual, Diane's going to give a detailed financial highlight along with some limited guidance for our fourth quarter in full year year and 2024. And then of course we'll have a question answer as usual I'd like to ask that you please limit yourself.

Speaker Change: To one question one follow-up so that we can accommodate as many as possible.

Stuart Miller: Overall, the economic environment remains very constructive for home builders. Demand remains very strong, and migration to lower interest rates will further activate that demand. Lower interest rates will enhance affordability, which will enable many more families to access and attain home ownership at the entry level, while growing families will be able to unlock value from existing homes, enabling them to move up to more bedrooms and more living space. More listings for existing homes will provide supply of entry-level homes while driving more demand for move-up product. The dynamics of lower interest rates is likely to accelerate demand for both new and existing homes while expanding access to home ownership.

Diane: So, let me go ahead and begin overall the economic environment remains very constructive for home builders, demand remains very strong and migration to lower interest rates will further activate that demand.

Diane: Lower Interest rates will enhance affordability.

Diane: which will enable many more families to access and attain home ownership at the entry level. While growing families will be able to unlike value.

Diane: from existing homes.

Diane: [inaudible]

Diane: More listings for existing homes will provide supply eventually level homes while driving more demand for move up product.

Diane: The dynamic of lower interest rates is likely to accelerate demand for both new and existing homes while expanding access to home ownership.

Stuart Miller: Of course, affordability has been a limiting factor for demand and access to home ownership to date. Inflations and interest rates have hindered the ability of average families to accumulate a down payment or to qualify for a mortgage. Higher interest rates have also locked households in lower interest rate mortgages and curtailed the natural move up as families expand and need more space. Ray Phydowns and incentives have enabled the man to access the market to date. Additionally, across the business landscape, narratives around challenge consumer confidence have peppered earnings calls. Lower rates and controlled inflation will likely boost that confidence.

Diane: Of course, affordability has been a limiting factor for demand and access to home ownership today. Inflation and interest rates have hindered the ability of average families to accumulate a down payment or to qualify for mortgage.

Speaker Change: Hi, our interest rate has also lost household in lower interest rate mortgages and curtailed the natural move-up as families expand and need more space.

Speaker Change: Reef by-down and incentives have enabled the man to access the market today.

Speaker Change: Additionally, across the business landscape narratives around challenge, narratives around challenged consumer confidence, have peppered earnings calls. Lower rates and controlled inflation will likely boost that confidence.

Stuart Miller: Consumers remain employed; they are generally confident that they will remain employed and they generally believe that their compensation will rise. This is most often the foundation of a very strong housing market, and we believe that while confidence will ebb and flow, lower rates will stabilize confidence and the consumer will prioritize shelter and purchase as affordability enables them to do so. However, we firmly believe that lower rates and controlled inflation will build affordability, enabling more households to access either first-time home ownership or move-up purchase. While strong demand enabled by incentives and mortgage rates buy-down has driven the new home market over the past two years, we fully expect an even stronger and more broad-based demand cycle as rates move lower.

Speaker Change: Consumers remain in play. They are generally confident that they will remain in play. And they generally believe that their compensation will rise.

Speaker Change: This is most often the foundation of a very strong housing market, and we believe that while confidence will ever flow, lower rates will stabilize confidence and the consumer will prioritize shelter and purchase as affordability enables them to do so.

Speaker Change: We firmly believe that lower rates and controlled inflation will go to affordability, enabling more households to access either first-time home ownership or move up purchase.

Speaker Change: While strong demand enabled by incentives in mortgage rate by-down has driven the new home market over the past two years, we fully expect an even stronger and more broad-based demand cycle as rates move lower.

Stuart Miller: While demand has been and should remain strong, the supply of homes remains constrained. The well-documented chronic housing shortage is the result of years of under-production. This shortage has been exacerbated by continually shortfalls in production driven by restrictive land permitting and higher impact fees at local levels, and higher construction costs across the housing landscape. This week's housing starts print at 1.36 million is a continuation of the shortfall in production that is needed for the current population and immigration, let alone catching up on the shortage. Mayors and governors across the country have become acutely aware of the housing shortage and shortfall in their respective geographies.

Speaker Change: While demand has been and should remain strong, the supply of homes remained constrained. The well-documented chronic housing shortage is the result of years of underproduction.

Speaker Change: This shortage has been exacerbated by continuing shortfalls in production driven by restrictive land permitting and higher impacts these at local levels and higher construction costs across the out of the landscape.

Speaker Change: This week's housing starts print at 1.36 million is a continuation of the shortfall in production that is needed for the current population and immigration, let alone catching up on the shortage.

Speaker Change: Mayors and governors across the country have become a cutely aware of the housing shortage and shortfall in their respective geographies.

Stuart Miller: Many have been pounding the table about the need for affordable housing, attainable housing, and workforce housing in their markets. Awareness has begun to give way to the first signs of action, and more recently, even the national narrative has begun to acknowledge the need for programs that activate supply. Greater supply and greater access to home ownership enables the upward mobility and generational wealth building that has long been associated with building the middle class through home ownership. It seems that as we begin to focus on solution, strong demand and strong need will further illuminate the need for supply.

Speaker Change: Many have been pounding the table about the needs for affordable housing, attainable housing, and workforce housing in their markets.

Speaker Change: Awareness has begun to give way to the first signs of action, and more recently, even the national narrative has begun to acknowledge the need for programs that activate supply.

Speaker Change: Greater Supply and Greater Access to Homeownership enables the upward mobility and generational wealth building that has long been associated with building the middle class through home ownership.

Speaker Change: It seems that as we begin to focus on solution, strong demand and strong needs will further illuminate the needs for supply and intensified narratives will pave the way to activate greater production.

Stuart Miller: An intensified narrative will pave the way to activate greater production.

Stuart Miller: On a final note, immigration has been an additional interesting factor in the housing landscape. On one hand, the influx of immigrant population has expanded the labor pool and therefore offset the pressure on construction-caused increases. On the other hand, the increase in population requires more supply of dwelling to house that growing population. with out politicizing this issue at this rather sensitive time, the new immigrant population will add to demand while at the same time help to control production costs. This configuration is an overall positive for the new home builders, and it adds to our optimism as we look ahead.

Speaker Change: On a final note, immigration has been an additional interesting factor in the housing landscape. On one hand, the influx of immigrant population has expanded the labor pool and therefore offset the pressure on construction cost increases.

Speaker Change: On the other hand, the increase in population requires more supply of dwelling to how is that growing population.

Speaker Change: Without politicizing this issue at this rather sensitive time, the new immigrant population will add to demand while at the same time, help to control production cost.

Speaker Change: This configuration is an overall positive for the new home builders and it adds to our optimism as we look ahead.

Stuart Miller: Overall, while there will be seasonality, incentives, and perhaps some adjustments along the way, we are very optimistic that the road ahead appears very positive for our home building business.

Speaker Change: Over all, while there will be seasonality, incentives, and perhaps some adjustments along the way, we are very optimistic that the road ahead appears very positive for our own building business.

Stuart Miller: Against that backdrop, as you can see from our third quarter results, we are adhering to our operating strategy focused on volume while we are sprinting towards the completion of our five-year marathon of migrating our operating platform from an asset-heavy model to a land-like asset light, just-in-time finished home site delivery model. We have executed that migration without breaking stride, without breaking the stride of delivering consistent and growing start, sales, and closing, and while driving the cash flow and bottom-line profitability that market conditions enable. We have literally reorganized the company while we have operated day-to-day and quarter-to-quarter with consistent focus on bottom-line results.

Speaker Change: Against that backdrop, as you can see from our third quarter results.

Speaker Change: We are adhering to our operating strategy focused on volume while we are sprinkling towards the completion of our five-year marathon of migrating our operating platform from an asset heavy model.

Speaker Change: 2A, Landlight, Assetlight, Justin Times, finished home site delivery model.

Speaker Change: We have executed that migration without breaking stride, without breaking the stride of delivering consistent and growing start, sales and closing, and while driving the cash flow and bottom-line profitability that market conditions enable.

Speaker Change: We have literally reorganized the company while we have operated day-to-day and quarter-to-quarter with consistent focus on bottom line results.

Stuart Miller: I want to emphasize that our North Star has been exactly this focus on delivering growing volume with consistent cash flow and bottom-line results while migrating to an asset-light model. This predictable volume and growth has been and will be the key to recasting our business model. First, it has enabled improving operating efficiencies in construction costs, cycle time, customer acquisition costs, and FGNA. Second, it has driven consistent and dependable cash flow and bottom-line results. Third, it has enabled the consistent and predictable take-down of just-in-time delivered, fully developed home sites that has attracted capital to the structured land banking partnerships that have driven the nearly $20 billion of transactions that have enabled our land-like transformation to date.

Speaker Change: I want to emphasize that our North Star has been exactly this focus on delivering growing volume with consistent cash flow and bottom line results while migrating to an asset-light model.

Speaker Change: This predictable volume and growth has been and will be the key to recasting our business model.

Speaker Change: First, it has enabled improving operating efficiencies in construction costs, cycle time, consumer customer acquisition costs, and FGNA.

Speaker Change: Second, it has driven consistent and dependable cash flow and bottom line results.

Speaker Change: and third, it has enabled the consistent and predictable take-down of just-in-time delivered fully-developed home sites.

Speaker Change: That has attracted capital to the structured land banking partnerships that have driven the nearly $20 billion of transactions that have enabled our land-like transformation today.

Stuart Miller: Since 2020, when we began our financial and operating transformation, the results and comparisons have been rather dramatic and are worthy of some reflection. Since 2020, when we began this journey, we have reduced our year supply of land owned from three years supply to an expected 1.1 year at the end of this year. We have increased our controlled home sites from 43 percent control to 81 percent control expected at the end of the year. And we have increased our inventory turn from under a one-times turn to approximately a 1.6-times turn. While our deliveries have gone from approximately 53,000 to a projected 80,581,000 for a 53 percent growth rate, our total owned inventory has actually remained flat.

Speaker Change: Since 2020, when we began our financial and operating transformation, the results and comparison have been rather dramatic and are worthy of some reflection.

Speaker Change: Since 2020, when we began this journey, we have reduced our year supply of land owned from 3 years supply to an expected 1.1 year at the end of this year.

Speaker Change: We have increased our control home sites from 43% control to 81% control expected at the end of the year.

Speaker Change: and we have increased our inventory turn from under a one-time turn to approximately a 1.6-time turn.

Speaker Change: While our delivery has gone from approximately 53,000 to a projected 80,581,000 for a 53% growth rate, our total owned inventory has actually remained flat.

Stuart Miller: We are clearly doing a lot more with a lot less, as our return on inventory has grown from 16% in 2020 to a forecasted 30% plus at year end this year. But perhaps even more importantly, we have paid down approximately $4.9 billion of debt. By year-end, we will have repurchased approximately 50 million shares of stock for approximately $5.7 billion. And by year-end, we will have distributed approximately $1.9 billion in dividends since 2020. And after all of that, we have a debt to total capital ratio of 7.6%, down from approximately 25% in 2020. And currently, we have $4 billion of cash on book.

Speaker Change: We are clearly doing a lot more with a lot less as a return on inventory has grown from 16% 2020 to a forecasted 30% plus at year end this year.

Speaker Change: But perhaps even more importantly, we have paid down approximately $4.9 billion of debt.

Speaker Change: By year-end, we will have repurchased approximately 50 million shares of stock for approximately $5.7 billion. And by year-end, we will have distributed approximately $1.9 billion in dividends since 2020.

Speaker Change: And after all of that, we have a debt to total capital ratio of 7.6% down from approximately 25% in 2020. And currently, we have $4 billion of cash on book.

Stuart Miller: So how did we do that? Well, first, we consistently adhere to our strategy that starts with the results, like our third quarter focused on growth and volume. And second, we attracted capital with our produces that purchases and develops land and delivers fully developed homesites on a just and time basis for about one half of our needed homesites. And now, and third, we will complete this transaction for the other one half of our land needs and enhance what we have started with our spin-off.

Speaker Change: So how did we do that?

Speaker Change: Well, first, we consistently adhere to our strategy that starts with a result like our third quarter, focused on growth and volume.

Speaker Change: And second, we attracted capital with our consistent volumes and built capital and operating infrastructure that produces, that purchases and develops land and delivers fully developed homesite on a Justin time basis.

Speaker Change: for about one half of our needed home site.

Speaker Change: and now and third, we will complete this transaction for the other one half of our land needs and enhance what we have started with our spin-off, no ropes. Let me break this down.

Stuart Miller: No roads. Let me break this down.

Stuart Miller: First of all, we are very pleased with our third quarter results as they represent another consistent and strategic quarter of operating results and execution for land. The market for new homes remained consistent with strong demand challenged by affordability. As mortgage rates remained higher around 7% through the first half of our quarter, we added volume with starts while we incentivized sales to enable affordability, as we know that consistent volume and resulting operating efficiencies will continue to attract capital to our asset light strategy, which will be our greatest strength as interest rates decline. In our third quarter, we increased starts by 8% year over year to almost 20,250.

Speaker Change: First of all, we are very pleased with our third quarter result, as they represent another consistent and strategic quarter of operating results and executions for Lenard.

Speaker Change: The Market for New Homes remained consistent with strong demand challenged by affordability.

Speaker Change: As mortgage rates remain higher around 7% through the first half of our quarter, we added volume with starts.

Speaker Change: While we incentivize the sale to enable affordability as we know that consistent volume and resulting operating efficiencies will continue to attract capital to our asset-light strategy.

Speaker Change: which will be our greatest strength as interest rates decline.

Speaker Change: In our third quarter, we increased starts by 8% year over year to almost 20,250.

Stuart Miller: We increased new waters by 5% year over year to 20,000, almost 20,600, and we increased deliveries by 16% year over year to just over 21,500. As we have focused on volume, however, we have hit the bump of some community selling out and closing out faster than expected, and others facing entitlement and development delays to expected start dates. As community counts fell, we adjusted and pushed volume with greater absorption levels and existing communities, which naturally impacted our market. We still expect to deliver between 80,500 and 81,000 homes in 2024, more than a 10% increase over 2023.

Speaker Change: We increased new waters by 5% year over year to 20,000, almost 20,600 and we increased over year to just over 21,500.

Speaker Change: As we have focused on volume, however, with hit the bump of some community selling out and closing out faster than expected, and others facing entitlement and development delays to expected start dates.

Speaker Change: At Community Count Sal, we adjusted and pushed volume with greater absorption levels in existing communities which naturally impacted our margin.

Speaker Change: We still expect to deliver between 80,500 and 81,000 homes in 2024, more than a 10% increase over 2023.

Stuart Miller: We also expect to continue into 2025 with an expected 10% growth rate as we increased community count somewhat in the third quarter to 1,283 communities, and we expect to be above 1,400 communities by year by year and 24. We expect the impact of the community count lag to correct over the next couple of quarters. During the quarter, sales incentives rose to just over 10% as interest rates remain high, and we addressed affordability and the community count lag. As an offset, we were able to reduce construction costs and cycle time, and John will detail that shortly, and we reduced our customer acquisition costs in our FGNA to 6.7% versus an expected 7.3% as we leverage our volume to increase efficiencies in our operating platform.

Speaker Change: We also expect to continue into 2025 with an expected 10% growth rate as we increased community count somewhat in the third quarter to 1,283 communities.

Speaker Change: and we expect to be above 1400 communities by the year by year and 24.

Speaker Change: We expect an impact of the community count lag to correct over the next couple of quarters.

Speaker Change: During the quarter, sales incentives rose to just over 10%, as interest rates remain high, and we address affordability and the community count lag.

Speaker Change: As an offset, we were able to reduce construction costs and cycle time, and John will detail that shortly.

John Jaffe: and we've reduced our customer acquisition costs in our SGAA to 6.7% versus an expected 7.3% as we leverage our volume to increase efficiencies in our operating platform.

Stuart Miller: While our gross margin came in lower than we expected at 22.5%, our net margin was higher than expected at 15.8%, driven by operating efficiencies, and we ended the quarter with earnings for shares excluding one-time items of $3.90. As we look ahead to the fourth quarter, given seasonality and customers adjusting to a changing interest rate environment, we expect our gross margin to remain flat as customers build confidence in the changing economic and interest rate landscape. We also expect to see further improvement in our operating efficiencies. As we have driven production pace and sync with sales pace, we have used our margin as a point of adjustment to enable consistent production as market conditions have continued to adjust.

John Jaffe: Well, our gross margin came in lower than we expected at 22.5% are net margin with higher than expected at 15.8% driven by operating efficiency.

John Jaffe: and we ended this quarter with earnings for share, excluding one-time item of $3.53.

John Jaffe: As we look ahead to the fourth quarter given seasonality in customers' adjusting to a changing interest rate environment, which factor our gross margin to remain flat as customers build confidence in the changing economic and interest rate in landscape.

John Jaffe: We also expect to see further improvement in our operating efficiencies.

John Jaffe: As we have driven production pace in sync with sales pace, we have used our margin as a point of adjustment to enable consistent production as market conditions have continued to adjust.

Stuart Miller: Our strategy has enabled us to repurchase another 3,400,000 shares of stock for $519 million, and end the quarter with $4,000,000 of cash on both and a 7.6% debt to total capital ratio.

Speaker Change: Our strategy has enabled us to re-purchase another $3,400,000 shares of stock for $519,000,000, and end the quarter with $4 billion of cash on both and a 7.6% get the total capital ratio.

Stuart Miller: We have driven excellent operating results today, and we continue to be excellently positioned as a company from balance sheet to operating strategy to execution to be able to adjust and address the market as it unfolds for the remainder of 2024 and beyond. With a growth and production strategy driving our core business, we embarked on a program to develop a structured and durable land strategies model to sustainably purchase and develop land with an option program to purchase fully developed home sites just in time and as needed. While we had always executed option land deals with third-party developers, and we still do, those deals were not always available, and there were simply no developers in many. We knew that we could only become structurally and durably land light and asset light by both negotiating options deals with landowners and developers and also creating structured land option contracts with private equity capital or permanent capital.

Speaker Change: We have driven excellent operating results today and we continue to be excellently positioned as a company.

Speaker Change: from Balance Sheet.

Speaker Change: to operating strategy to execution.

Speaker Change: to be able to adjust and address the market as it unfolds with a remainder of 2024 and beyond.

Speaker Change: So with a growing, with a growth and production strategy driving our core business.

Speaker Change: We embarked on a program to develop a structured and durable land strategy model to sustainably purchase and develop land with an option program to purchase fully developed homesite just in time and as needed.

Speaker Change: While we had always executed option land deals with third-party developers, and we still do, those deals were not always available, and were simply no developers in many of our markets.

Speaker Change: We knew that we could only become structurally and durable land light and asset light by both negotiating options with landowners and developers and also creating structured land option contracts with private equity capital or permanent capital.

Stuart Miller: Our drive to build an asset light manufacturing model has been a five-year marathon that has required a slow but steady attraction of capital to the concept, supported by an operational plumbing system to support the flow of capital and the delivery of home sites. Additionally, there needed to be a fiduciary for that capital that would oversee the generation of attractive returns to capital at market-competitive risk-adjusted returns while also allowing for appropriate profitability for the manufacturer, namely us. Additionally, the notion of land risk needed to be reconsidered. Not all land has the same risk. Short-term land, which is entitled and mostly developed, is left riskier than unentitled farmland.

Speaker Change: Our drive to build an asset-like manufacturing model has been a five-year marathon that is required a slow, but steady attraction of capital to the concept.

Speaker Change: Supported by an operational plumbing system to support the flow of capital and the delivery of home sites.

Speaker Change: Additionally, there needed to be a fiduciary for that capital that would oversee the generation of attractive returns to capital at market competitive risk adjusted returns while also allowing for appropriate profitability for the manufacturer namely us.

Speaker Change: Additionally, the notion of land risk needed to be reconsidered.

Speaker Change: Not all land has the same risk, short-term land which is entitled and mostly developed is left with key than unantitled farmland.

Stuart Miller: Next, risk profiles have historically and would always provide a price to the most risky part of the pool. Accordingly, we have worked with a series of private equity partners to create homogeneous risk profile land assets. These assets are priced for their risk profile and are professionally managed through a home site purchase platform, which we call the hopper. The hopper is where land is acquired, held, and developed, and ultimately delivered just in time on a rolling option basis with contractually controlled and limited risk to the manufacturer home builder as homes are ready to be started. Over time, the management of these land relationships has become second nature to our division management, and it's actually driven greater efficiency and effectiveness in the management of our land assets.

Speaker Change: Next risk profiles have historically and would always provide for the most risky part of the pool.

Speaker Change: Accordingly, we have worked with a series of private equity partners to create homogeneous risk profile land assets.

Speaker Change: These assets are priced for their risk profile and are professionally managed to a home-site purchase platform which we call the Hopper.

Speaker Change: The Hawthor is where land is acquired, held and developed, and ultimately delivered just in time on a rolling option basis, with contractuality controlled and limited breadth to the manufacturer home builder, as homes are ready to be started.

Speaker Change: Over time, the management of these land relationships has become second nature to our division management and has actually driven greater efficiency and effectiveness in the management of our land asset.

Stuart Miller: The assignment of risk profile defines the cost of capital. The orchestration of just-in-time delivery of home becomes as visible and critical as the delivery of lumber and appliances, and the process is becoming increasingly automated for efficiency.

Speaker Change: The Assignment of Risk Profile defines the cost of capitalism.

Speaker Change: The orchestration of Justin Times' delivery of poems becomes as visible and critical as the delivery of lumber and appliances.

Speaker Change: and the process is becoming increasingly automated for efficiency.

Stuart Miller: But by driving volume through these programs, we have gained advantage insights into the unique values of these structures are now bringing to the overall company. Aside from the financial improvements outlined earlier, five additional insights immediately come to mind. First, as capital markets become familiar and comfortable with a term-based risk, more capital comes to that understood rent, and that expands the capital that is available for these types of terms of land. Second, capital markets get comfortable with a particular risk profile, and the cost of capital can go down as capital is matched with associated risk. Third, the availability of strategic capital for smaller M&A transactions does not tie up corporate capital while home production is ramped up, and this promotes growth strategies.

Speaker Change: But by driving volume through these programs, we have gained advanced insight into the unique values of these structures are now bringing to the overall company. Aside from the financial improvements outlined earlier, five additional insights immediately come to mind.

Speaker Change: First, as capital markets become familiar and comfortable with a term-based risk, more capital comes to that understood risk and that expands the capital that is available to these types of terms of land.

Speaker Change: Second.

Speaker Change: Capital Markets, get comfortable with a particular risk profile, and the cost of capital can go down as capital is matched with associated risk.

Speaker Change: Third, the availability of strategic capital for smaller M&A transactions does not tie up corporate capital while home production is ramped up and this promotes road strategies.

Stuart Miller: Fourth, M&A transactions can be absorbed with fewer complicated accounting implications. And fifth, organic growth and existing markets and into new markets can be facilitated with limited balance sheet impact, where there's no existing land developers.

Speaker Change: Fourth, M&A transactions can be absorbed with fewer complicated accounting implications.

Speaker Change: and Seth, organic growth in existing markets and into new markets can be facilitated with limited balance sheet impact, where there's no existing land developers.

Stuart Miller: As I mentioned in our last call, I do want to specifically highlight our unique and very important relationship with TPG, Angelo Gordon, and Ryan Millet. We began this journey together back in 2020, and we learned together that we're significantly better for having endured the bumps and bruises of learning and growing. They have continued to be our single biggest land partner, and we look forward to much more learning and growing as we grow into the future.

Speaker Change: As I mentioned in our last call, I do want to specifically highlight our unique and very important relationship with PPG, Angela Gordon, and Ryan Bellet.

Speaker Change: We began this journey together back in 2020, and we learned together that we're significantly better for having endured the bumps and bruises of learning and growing.

Speaker Change: They have come to, as they continue to be our single biggest land partner and we look forward to much more learning and growing as we grow into the future.

Stuart Miller: Bottom line, our asset light, land light strategy is evolving, and we're getting better at understanding all the benefits.

Speaker Change: Bottom line, our asset light, land light strategy is evolving and we are getting better of understanding all the benefits.

Stuart Miller: Finally, in the very near future, the spin-off, which we call Milrose, will generally complete this now almost five-year migration to an asset-light operating model. Not surprisingly, we've received a lot of questions about the plan spin-off. We announced during the second quarter earnings call. We're still going through the FCC confidential review process, so I'm limited in what I can say about the spin-off. However, I can tell you a little bit about what it will entail and how it will affect Lanar. We have formed a company called Milrose Properties Inc., which we expect to qualify as a real-estate investment trust for REIT.

Speaker Change: Finally, in the very near future, the spin-off, which we call Milrose, will generally complete this now almost five year migration to an asset-like operating model.

Speaker Change: Not surprisingly, we've received a lot of questions about the plant spin-off. We announced during the second quarter earnings call.

Speaker Change: We're still going through the SEC confidential review process, so I'm limited in what I can say about this been off. However, I can tell you a bit about what it will entail and how it will affect Leonardo.

Speaker Change: We have formed a company called No Rose Properties Inc., which we expect to qualify as a real estate investment trust for Greece.

Stuart Miller: Milrose will acquire and develop land for Lanar and other home builders, as and will deliver fully developed home sites under a land option contract. The acquisition, development, and delivery of home sites will be similar to other partners of partnerships that I've just described a little earlier. The REIT structure, however, is unique and will be detailed in the S-11 SEC registration statement when it is made public soon. We are going to contribute to Milrose in exchange for its stock, essentially all of our undeveloped, partially developed, and some of our fully developed land, along with cash. The stock will be distributed as a stock dividend of Milrose stock to Lanar shareholders, and it will accordingly reduce inventory on Lanar's book.

Speaker Change: Milleros will acquire and develop land for Lenore and other homebuilders, as and will deliver fully developed home sites under a land-option contract.

Speaker Change: The acquisition, development and delivery of home sites will be similar to other partners of partnerships that I've just described a little earlier.

Speaker Change: The Reef Structure, however, is unique and will be detailed in the S11 SEC Registration Statement when it is made public soon.

Speaker Change: We are going to contribute to Nero's and exchange for its stock. Essentially all of our undeveloped, partially developed, and some of our fully developed land, along with cash.

Speaker Change: The soft will be distributed as a stock dividend of Melrose stock to linar shareholders and what it will accordingly reduce inventory on linar's books.

Stuart Miller: That capital, as it cycles within Milrose, will continue to be permanent, dependable capital available to Lennar for future land options as further described in the S11 registration statement when it is made public. Milrose will be responsible for advancing the capital for developing the land contributed, using Lennar as a contractor for consistent execution. And Lennar will have option contracts entitling it to repurchase finished home sites on a just-in-time basis and as it needs them for home-building activities. Proceeds from the brief purchase finished home site will be reinvested by Milrose in new land and development transactions for Lennar.

Speaker Change: That capital, as it cycles with a mill rose, will continue to be permanent dependable capital available to Lenore for future land options as further described in the S11 registration statement when it is made public.

Speaker Change: Miller's will be responsible for advancing the capital for developing the land contributed.

Speaker Change: Using Linoire as a contractor for consistent execution.

Speaker Change: And when our will have option contracts entitling it to repurchase, finished home sites on a just-in-time basis, and as needs, as it needs them, for home-building activities.

Speaker Change: Proceeds from the Greek-Purchase-Cinish Home site will be re-invested by millrose in new land and development transactions for the North.

Stuart Miller: Additionally, after the spinoff, the new company would be another additive bucket of capital, consistent and compatible with other relationships that have existed and will continue to thrive alongside Lennar. Of course, the completion of our spin will drive significantly higher returns on inventory and equity as both inventory and equity are reduced by the amount of assets contributed to Milrose in exchange for stock. Given Lennar's balance sheet strength with a debt to total capital ratio of 7.6%, Lennar's balance sheet will remain very strong after the spinoff with, we believe, consistent earnings and cash flow to continue to pay down debt and repurchase stock.

Speaker Change: Additionally, after the spent off, the new company would be another additive bucket of capital, consistent and compatible with other relationships that have existed, and will continue to thrive alongside Lenin.

Speaker Change: Of course, the completion of our spin will drive significantly higher returns on inventory and equity, as both inventory and equity are reduced by the amount of assets contributed to mill rows in exchange for success.

Speaker Change: Given Lennard's balance sheet strength with a death-to-to-to-to-to-to-to-to-to ratio of 7.6%. Lennard's balance sheet will remain very strong after the spin-off, with, we believe, consistent earnings and cash flow.

Stuart Miller: Because Lennar's inventory is constantly changing, we don't know exactly how much land Lennar will contribute to Milrose, but we expect that it will be land and cash with the book value of between $6 and $8 billion. And we expect that Milrose will seek to enter into land transactions with other builders as well as an independent company. Since the landing cash contributed to Milrose will be debt-free, Milrose will be completely independent of every company with zero Lennar ownership and will be responsible for arranging credit facilities and sources of any debt or equity financing it needs or wants to support its own activities.

Speaker Change: to continue to pay down debt and re-purchase stock.

Speaker Change: Because Lenard's inventory is constantly changing, we don't know exactly how much land Lenard will contribute to Milrose, but we expect that it will be land and cash with the book value of between $6 and $8 billion.

Speaker Change: and we expect that Miller will seek to enter into land transactions with other builders as well as an independent company.

Speaker Change: Since the landing cash contributed to Miller's will be death free.

Speaker Change: No Rose will be completely independent of the company with zero-lanar ownership and will be responsible for arranging credit facilities and sources of any debt or equity financing, it needs or wants to support its own activities.

Stuart Miller: Lennar will have option purchase arrangements to purchase back finished home site on a just-in-time basis. Unlike other land companies that rely on land appreciation for returns, Milrose will receive contractual option fees for maintaining options in effect. It will use these fees to pay its expenses and to make regular distributions to stockholders. In addition to option fees, Milrose will also receive the return of invested capital associated with the option exercise. Unlike traditional private equity-based land banking funds, Milrose will not be required to distribute or return invested capital to investors. Instead, Milrose will repeatedly reinvest the invested capital as it is returned in future land transactions.

Speaker Change: Leonardo will have option purchase arrangements to purchase back finished home site on a Justin time basis.

Speaker Change: Unlike other land companies that rely on land appreciation for return, Miller's will receive contractual option fees for maintaining options in effect.

Speaker Change: It will use these to pay its expenses and to make regular distributions to stockholders.

Speaker Change: In addition to option fees, no rows will also receive the return of invested capital associated with the option exercises.

Speaker Change: Unlike traditional private equity based land banking funds, Milrose will not be required to distribute or return invested capital to investors.

Speaker Change: Instead, no rose will repeatedly reinvest the invested capital as it is returned in future land transactions.

Stuart Miller: Therefore, Milrose will be for Lennar and probably other home-modeers, essentially a self-renewing permanent source of land acquisition and development capital.

Speaker Change: Therefore, Milrose will be for Lenar and probably other homeowners, essentially a self-renuant.

Speaker Change: Permanent source of land acquisition and development capital.

Stuart Miller: Now, while I'd like to go into more detail about the plan spin-off, as I noted earlier, we're still limited in what we can say until our S-11 FCC registration statement is made public, so more information should become publicly available very soon.

Speaker Change: Now, what while I'd like to go into more detail about the plant spin-off?

Speaker Change: As I noted earlier, we're still limited in what we can say until our S11FCC registration statement is made public. So more information should become publicly available very soon.

Stuart Miller: So, in conclusion, let me say that this is a very exciting time for Lennar. At Lennar, we're continuing to upgrade the Lennar financial and operating-flash platform as we drive consistent production and sales. Our third quarter, 2024, has been another strong strategic and operational success for our company. As we focus on driving consistent value and growth, adjust community count for that growth and complete our company's financial and operational restructure. We are, in fact, nearing the end of a five-year marathon that will have restructured our entire operating platform for long-term success and greater returns on capital and equity.

Speaker Change: So, in conclusion, let me say that this is a very exciting time for Lenore.

Lanar: At Lanar, we're continuing to upgrade the Lanar Financial and Operating Flash Platform as we drive consistent production and sales.

Lanar: Our third quarter 2024 has been another strong, strategic and operational success for our company as we focus on driving consistent, volume and growth, adjust community count for that growth.

Lanar: and complete our company's financial and operational restructure.

Lanar: We are in fact nearing the end of a five-year marathon that will have restructured our entire operating platform for long-term success and greater returns on capital and equity.

Stuart Miller: We have continued to drive production to meet the housing shortage that we know persists across the market. With that said, as interest rates subside and normalize, and now that the Fed has boldly begun to cut rates, we believe that pent-up demand will be activated, and we are well prepared with growing community count and growing volume. Strong pent-up demand has found ways to access the housing market and higher interest rates. As rates drift down, giving consistent execution, we are extremely well-positioned for even greater success as strong demand for affordable offerings continues to seek short supply in a more affordable interest rate environment.

Lanar: We have continued to drive production to meet the housing shortage that we know for such across the market.

Lanar: With that said, as interest rates subside and normalize, and now that the Fed has boldly begun to be done to cut rates, we believe that tent up the man will be activated and we are well-prepared with growing community count and growing volume.

Lanar: Strong pence of demand has found ways to access the housing market and higher interest rates.

Speaker Change: as rake strip down.

Speaker Change: Giving Consistent Execution.

Speaker Change: We are...

Speaker Change: Extremely well positioned for even greater success as strong demand for affordable offerings continues to seek short supply in a more affordable, and in a more affordable, interest rate environment.

Stuart Miller: Perhaps most importantly, our strong balance sheet affords us flexibility and opportunity to consider and execute upon thoughtful growth for our future. In that regard, we will focus on our manufacturing model and continue to use our land partnerships to grow with a focus on high returns on capital and equity. We will also continue to focus on our pure-play business model and reduce exposure to non-core assets. We will continue to drive just-in-time home-site delivery and an asset-like balance sheet, and we will continue to allocate capital to growth, debt retirement, and stock repurchases as a process. As we complete our asset-like transformation, we will continue to execute in the short term while we return capital to our shareholders through dividend and stock buyback, while we also pursue strategic growth.

Speaker Change: For perhaps most importantly, our strong balance sheet affords us flexibility and opportunity to consider and execute the insightful growth for our future.

Speaker Change: In that regard, we will focus on our manufacturing model and continue to use our land partnerships to grow with the focus on high returns on capital and equity.

Speaker Change: We will also continue to focus on our pure play business model and reduce exposure to non-core assets.

Speaker Change: We'll continue to drive Justin time home site delivery and an asset light balance sheet and we'll continue to allocate capital to growth, debt retirement and stock repurchases as appropriate.

Speaker Change: As we complete our asset-like transformation, we will continue to execute in the short term while we return capital to our shareholders through dividend and stock buyback, while we also pursue strategic growth.

Stuart Miller: As we look ahead to completing a successful 2024, we're well positioned for and expect to see much more of the same in the years ahead. We are confident that by design we will continue to grow, perform, and drive Lennar to new levels of consistent and predictable performance. For now, we are guiding to 22,500 to 23,000 clothing's next quarter with a margin that is flat with the third quarter. And we expect to deliver approximately 80,500 to 81,000 homes this year. We also expect to repurchase an excess of $2 billion of stock this year as we continue to drive very strong cash flow.

Speaker Change: As we look ahead to completing a successful 2024, we're well positioned for and expect to see much more of the same in the years ahead.

Speaker Change: We are confident that by design we will continue to grow, perform, and drive linar to new levels of consistent and predictable performance.

Speaker Change: For now, we are guiding to 22,523,000 closing next quarter with a margin that is flat with the third quarter. And we expected to deliver approximately 80,581,000 homes this year.

Speaker Change: We also expect to repurchase an excess of $2 billion of stock this year as we continue to drive very strong cash flow. We look forward to a strong finish to 2024.

Stuart Miller: We look forward to a strong finish to 2024.

Stuart Miller: And for that, I want to thank the extraordinary associates of Lennar for their tremendous focus, effort, and talent.

Speaker Change: and for that, I want to thank the extraordinary socios of Lenore for their tremendous focus, effort and talent. And with that, let me turn over to John.

John Jaffe: And with that, let me turn over to John.

John Jaffe: Good morning. As you heard from Stuart, our operational teams of Lennar continue to focus on executing or operating strategies while responding in real time to market fluctuations throughout the quarter. This intense focus creates a continuous learning and refinement loop, which in turn continuously improves the execution of these strategies.

John Jaffe: Good morning. As you heard from Stuart, our operational teams of the North continue to focus on executing our operating strategies over spawning in real time to market fluctuations throughout the quarter.

John Jaffe: This intense focus creates a continuous learning and refinement loop, which in turn continuously improves the execution of these strategies. I will discuss our third quarter performance in cost reduction, cycle time reduction, and improve path to light land position.

John Jaffe: I will discuss the third quarter performance and cost reduction, cycle time reduction, and improved asset-like land position. Our focus on improvement in these areas begins with sales pace. Knowingly can produce a rate of sale by design creates a confidence for the production side of the business. We work on improving on our machines to produce the needed volume of high quality leads. This starts at the top of the fall of the testing the effectiveness of targeting to various sources such as SEM or social media and messaging such as rate and payment or lifestyle. All the way through to the ultimate result of a purchase and sale agreement.

John Jaffe: Our focus on improvement in these areas begins with sales pace. Knowing we can produce a rate of sale by design, create the confidence for the production side of the business.

Speaker Change: We work on improving O'Narmage change, produced a needed volume of high quality leads. This started the top of the follow-up testing the effectiveness of targeting to various sources, such as FDM or social media and messaging, such as rate and payment or lifestyle.

John Jaffe: Every day, our divisions learn from their engagement with a large machine, constantly adjusting and testing new tactics. This by design approach drives efficiency and customer acquisition costs while also improving the customer experience. We utilize incentives and interest rate buy-down as needed to enable us to address affordability and consumer competence challenges in order to achieve the desired sales pace. This process against the backdrop of higher interest rates and the impact on consumer firm inflation informed us as to where we needed to buy down the interest rates and or other incentives to achieve the desired pace. As noted, our third quarter sales pace of 5.5 homes per community per month matched our start pace of 5.4.

Speaker Change: All the way through to the ultimate result of a purchase in the sailor agreement.

Speaker Change: Every day our evisions learn from their engagement with the board arm machine constantly adjusting and testing new tactics.

Speaker Change: This by-designed approach to our efficiency and customer acquisition costs while also improving the customer experience.

Speaker Change: We utilize incentives to interest rate by now as needed to enable us to address affordability and consumer confidence challenges in order to achieve the desired sales pace.

Speaker Change: This process, against the backdrop of higher interest rates and the impact on consumer from inflation in the form that does to where we need to divide down the interest rates and or other incentives to achieve the desired pace.

Speaker Change: has noted a third quarter sales pace of 5.5 homes per community per month, not start

John Jaffe: Achieving the sales pace also resulted in an ending of quarter with an average of just more than one unsolved completed home per community. The resulting confidence from considerably producing the desired sales pace enables planning for an even flow start pace related production levels. Argole of the main manufacturing process derived from this predictability, which drives improvements in direct construction cost and cycle time. All participants and our operations, train partners, and supply chain partners benefit from the combination of this predictability along with our high volume. This manufacturing approach, along with the maximize efficiencies of our production strategy, will allow us to continue to drive down costs in cycle time into 2025.

Speaker Change: The cheating in the sales pays also result in the end-in-quarter with an average of just more than one unsolved and clean its home per community.

Speaker Change: Result be confidence from consistently producing the desired sales pace, enables planning for an even flow start pace related production levels.

Speaker Change: Our goal of a manufacturing process to rise from this predictability, the strides improvements in direct construction cost and cycle time.

Speaker Change: All participants and our operations, training partners and supply chain partners benefit from the combination of this predictability along with our high-value.

Speaker Change: This may be back to your approach, along with the maximized efficiencies of a technological strategy, while that was to continue to drive down cost and cycle time into 2020.

John Jaffe: The third quarter of construction cost decreased sequentially from Q2 by over 1%, not a year-over-year basis by over 6%. Accomplishing a 6% cost reduction during the inflationary environment of the past year demonstrates the effectiveness of our strategy and affirms the benefits of our builder of choice approach. This manufacturing strategy resulted in continued testing gains in cycle time. Our third quarter of cycle time decreased by 10 days sequentially from Q2 down to 140 calendar days on average for single family home, which is a 23% decrease year over year and a material contributor to our inventory turn improvement.

Speaker Change: The third quarter I can structure cost me increased sequentially from Q2 by over 1% none of you over your cases by over 6%.

Speaker Change: A accomplishing a 6% cost reduction during the inflationary virus in the past year, demonstrate the effectiveness of our strategy in a first event of our build-up choice approach.

Speaker Change: This Manufacturing Strategy resulted in continues to escape game from cycle time.

Speaker Change: and our third quarter cycle time decrease by 10 days sequentially from Q2 down to 140 calendar days on average for single family homes, which is a 23% decrease year over year, and material contributor to our inventory trend improvement.

John Jaffe: Next, I'll discuss the execution of our land light strategy. In the third quarter, we continue to effectively work with our strategic land developers and land bank partners, where they purchased land on our behalf and then delivered just-in-time finished home sites to a home building machine. In the third quarter, about 82% of our $2 billion, or approximately 17,000 home sites acquired in the quarter, were finished home sites purchased from these various land structures. During the quarter, our land banks acquired on our behalf about 15,000 home sites for around $800 million in land acquisition and a commitment of about $650 million in land development.

Speaker Change: Next, I'll discuss the execution of our land life strategy. In the third quarter, we continue to effectively work with our strategic land developers and land bank partners, where they've purchased land on our behalf and then delivered jobs in time finished home sites to our home building machine.

Speaker Change: In the third quarter, about 82% of our $2 billion, or approximately 70,000 homesite to quark in the quarter, or finish home sites purchased from these various land structures.

Speaker Change: During the quarter of land-based acquired on our behalf, about 15,000 homesites for around $800 million in land acquisition and a commitment of about $615 million in land development.

John Jaffe: With its focus on the asset light, our supply of home sites to create to 1.1 years, down from 1.5 years in control home site percentage can create to 81%, that was 73% year over year. These improvements in the execution of our operating strategies enable reduced cycle time and less land owned, resulting in improved inventory turn, which now stands at 1.6 versus 1.4 last year, the 14% increase. As in prior quarters, the third quarter shows continued progress in the execution of each of these strategies that Stuart Knight reviewed. We started with a focus on our marketing sales machines, leading to even flow manufacturing like production and asset light land strategies.

Speaker Change: With his focus on the asset light, our supply of own homesite to create to 1.1 years now for 1.5 years in control homesite percentage in create to 81%, that will never be 3% year over year.

Speaker Change: These improvements and execution of our operating strategies enable reduce cycle time and let's land on resulting in improved inventory churn, which now stands at 1.6 versus 1.4 last year, the 14% increase.

Speaker Change: As new prior quarters, the first quarter show continued progress in execution of each of these strategies of Stuart Knight reviewed. We started with a focus on what our marketing failed machines, leading to even plumbing and factory-like production and asset-light land strategies.

John Jaffe: We focused on improving and connecting these strategies together, driving you to more consistency and improvement.

Speaker Change: We've focused on improving and connecting the strategies together, driving you to more consistency and improvement.

John Jaffe: In our third quarter, at the interest rates fluctuated to preserve the pressure of inflation, we manned an employee with the aid of new technology driven tools in the form of real-time data dashboards. The consistent digestion and critical review of the data allows for quick action and improved execution.

Speaker Change: and our third quarter at the interest rates fluctuated in the first half of the pressure inflation, we met Nimbly with the aid of new technology driven tools in the form of real-time data dashboard.

Speaker Change: We can sit and digest an incredible review of the data, allow us for quick action and improved execution.

John Jaffe: I want to have my thanks to the associates for their commitment to implementing and executing these strategies.

Diane Bessette: Now I'd like to turn it over to Diana. Thank you, John, and good morning, everyone. So Stuart and John have provided a great deal of color regarding our home building performance.

Diane: I want to have my thanks to the Associates for their commitment to implementing and executing these strategies, now I'd like to turn it over to Diane.

Diane: Thank you, John and good morning everyone. So Stuart and John have provided a great deal of color regarding our home building performance. So therefore, in going to spend a few minutes on the results of our other business segment, we'll together again our balance sheet highlight and then provide guidance for Q4.

Diane Bessette: Therefore, I'm going to spend a few minutes on the results of our other business segments. Pull together again our balance sheet highlights and then provide guide instruments.

Diane Bessette: Q4. So starting with financial purposes. So the third quarter, our financial services team had operating earnings of 144 million. These earnings were fairly consistent with the prior year. While we had lower lock volume and neck secondary margins in our mortgage business, this was partially offset by higher delivery volume and lower costs in our title business. Our financial services team is intently dedicated to providing the great customer experience for each home buyer and has created true partnerships with our home building teams to accomplish that goal. That partnership is reflected in their solid results. Moving into multi-family, for the quarter, our multi-family segment had operating earnings of 79 million.

Diane: So starting with financial crevices, so the third quarter of financial services team had operating earnings of 144 million.

Diane: He is our needs for a fairly consistent with the prior year. While we had lower lock volume and net secondary margins in our mortgage business, this was partially not just that I hired delivery volume and lower cost in our title business.

Speaker Change: Our financial services team is intently dedicated to providing the great customer experience for each home buyer and has created two partnerships with our home building teams to accomplish that goal. That partnership is reflected in their solid results.

Speaker Change: Moving to Maltag family, so the quarter, our Maltag family segment has operating earnings of $79 million.

Diane Bessette: The primary driver of earnings was the gain on sale of assets in our LMV Fund One. As we noted last quarter, we are under contract to sell the assets to multiple buyers. In the third quarter, we closed about 70% of the anticipated sale. We recorded a neck gain of 179 million and received about a 140 million of cash. We expect most of the remaining assets to be sold in the first quarter. A second component for the quarter was a $90 million write down of non-core assets that are held on book as we focus on immediately monetizing these assets.

Speaker Change: The primary driver of earnings was the gain on sale of assets in our LMV fund 1. As we noted last quarter, we are under contract to sell the assets to multiple buyers.

Speaker Change: In the third quarter, we closed about 70% of the anticipated sales. We recorded a neckgain of 179 million and received about 140 million of cash. We expect most of the remaining assets to be sold in the third quarter.

Speaker Change: A second component for the quarter was a 90 million dollar right down of non-core assets that are held on book as we focus on immediately monetizing these assets.

Diane Bessette: This is consistent with our pure play asset-like strategy, with the ultimate goal of increasing returns.

Speaker Change: This is consistent with our pure play, asset-like strategy with the ultimate goal of increasing returns.

Diane Bessette: The turning to the balance sheet, this quarter once again, we adhere to our strategy of maximizing return on inventory by turning our inventory at the appropriate market margin. The results of these actions was that we drove cash flow and ended the quarter with $4 billion of cash and no borrowing on our $2.2 billion revolving credit facility. This provided total liquidity of $6.2 billion. As a result of our continued focus on balance sheet efficiency and reducing our capital investment, we once again made significant progress on our goal of becoming land-like. As John mentioned at quarter-end, our years-owned improved to 1.1 years with 1.5 years in the prior year, and our home site's control increased to 81% from 73% in the prior year.

Speaker Change: The turning to the balance sheet, this quarter once again, we are here to our strategy of maximizing maternal inventory by turning our inventory at the appropriate market margin.

Speaker Change: The results of these actions was that we drove cash flow, and it is a quarter with four billion cash and no borrowings on our $2.2 billion revolving credit facility that's provided total liquidity of $6.2 billion.

Speaker Change: As a result of our continued focus on balance sheet efficiency and reducing our capital investment, we once again make significant progress on our goal of becoming land life.

Speaker Change: As John mentioned, at Quotter Ant, our years' own improved to 1.1 years, but 1.5 years in the prior year. And our whole site's control increased to 81% from 73% in the prior year. Our lowest year's owns in highest control percentage in our history.

Diane Bessette: Our lowest year zones and highest control percentage in our history. At quarter-end, we owned 87,000 home sites and controlled 369,000 home sites for a total of 456,000 home sites. We believe this portfolio provides us with a strong competitive position to continue to grow market share in a capital-efficient way. We spent $2 billion on land purchases this quarter. However, over 80% will finish home sites where vertical construction will soon begin. This is consistent with our manufacturing model of buying land on a just-in-time basis, which is less capital intensive. Of the homes close during the quarter, approximately 64% were from our third-party land structures when we purchased those home sites on a finished basis.

John Jaffe: At quarter-end, we owned 87,000 homesites and controlled 369,000 homesites for a total of 456,000 homesites. We believe this portfolio provides us with a strong competitive position to continue to grow market share in a capital efficient way.

Speaker Change: We set $2 billion on land purchases this quarter, however 80% will finish home sites where vertical construction will soon begin. This is consistent with our manufacturing model of buying land on a Justin time basis which is less capital intensive.

Speaker Change: of the homes close during the quarter of approximately 64 percent were from our third party land structures when we purchased those home sites on a finished basis.

Diane Bessette: As we continue to reduce our ownership in land and purchase home sites on a just-in-time basis, our running should more consistently approximate cash flow. And over time, it would be up all to align capital returns to shareholders more closely with that cash flow. Finally, our inventory turn was 1.6 times, up from 1.4 times last year. And our return on inventory was 31.3%, up 324 basis points in life. last year. During the quarter, it consisted with our production focus, we started about 20,200 homes and ended the quarter with about 40,000 homes in the inventory. This inventory number includes approximately 1,750 homes that were completed unsolved, which is slightly more than one home for community as we successfully managed our finished inventory levels.

Speaker Change: As we continue to reduce our ownership in land and purchase on sites on the Justin time basis.

Speaker Change: are making sure more consistently across the main cash flow, and over time it would be up all to a line capital return to shareholders more closely with that cash flow. Finally, our inventory turn was 1.6 times up from 1.4 times last year.

Speaker Change: and I return on inventory with 31.3% of 324 basis points in last year.

Speaker Change: During the quarter-a consistent with our production focus, we started about 20,200 homes, and ended the quarter with about 40,000 homes in New York.

Speaker Change: This inventory number includes approximately 1,750 homes that were completed on sold, which is slightly more than one home for community, as we successfully managed to finish inventory levels.

Diane Bessette: Looking at our debt maturity profile, we had no redemption or repurchases of senior notes quarter. Our next debt maturity is not until May of 2025. We continue to benefit from our previous paydowns of senior notes and strong earnings generation, which brought our debt to total capital down to 7.6 quarter-end, our lowest ever and strong improvement from 11.5 in the prior year. The significant decrease in leverage is one of the factors that allowed us to receive an upgrade in our debt ratings from Fitch, from triple B to triple B plus. We have placed to achieve this accomplishment that recognized the strength of our balance sheets and our operating platform.

Speaker Change: Looking at our debt maturity profile, we had no redemption or repurchases us to announce this quarter. Our next debt maturity is not until May of 2025.

Speaker Change: We continue to demonstrate from our previous paydowns of senior notes and strong learning generation, which brought our death total capital down to 7.6 at quarter end, our lowest Albert

Speaker Change: and a strong improvement from the 11.5 in the frame here.

Speaker Change: The significant decrease in leverage is one of the factors that allowed us to receive an upgrade in our debt ratings from fish from triple B to triple B plus. We are pleased to achieve as a accomplishment that recognize the strength of our balance and our operating platform.

Diane Bessette: Incident with our commitment to increasing shareholder returns, we repurchased 3.4 million of our outstanding shares for $519 million. Additionally, we paid total dividends of quarter of 136 million. Finally, our stockholders' equity increased to over 27 billion, and our book value per share increased to just over 101.

Speaker Change: Assistant with our commitment to increasing shareholder returns, we repurchase 3.4 million of our outstanding shares, with 519 million. Additionally, we pay total debtors as quarter of 136 million.

Speaker Change: Finally, up stockholders equity increased to over 27 billion in our book value per share, increased to just over 101.

Diane Bessette: In summary, the strength of our balance sheet, strong locality, and low leverage provides us with significant confidence and financial flexibility as we move through the remainder of 2024 and beyond.

Speaker Change: In summary, the transfer of our balance sheet, strong locality and low leverage provides us with significant confidence and financial flexibility as we move through those we major of 2024 and beyond.

Diane Bessette: With that brief overview, I would like to turn to Q4 and provide some guidance estimates, starting with new orders. We expect Q4 new orders to be in the range of 19,000 to 19,300 homes, which approximates a 10% year-over-year group. We also expect our year-end community count to be about 10% to 12% greater than last year. We anticipate our Q4 deliveries to be in the range of 22,500 to 23,000 homes, with a continued manufacturing focus on turning image writing to cash. Our Q4 average sales price on those deliveries should be about 425,000 as we continue to price to market to reach affordability.

Speaker Change: So with that brief overview, I'd like to turn to two four and provide some guidance management.

Speaker Change: Starting with New Waters.

Speaker Change: We expect Q4 new orders to be in the range of 19,000 to 19,300 homes, which approximates a 10% year of year growth.

Speaker Change: We also expect our year-end treaty account to be about 10% to 12% greater than last year.

Speaker Change: We anticipate our two four deliveries to be in the range of 22,500 to 23,000 homes with a continued manufacturing focus on turning into cash.

Speaker Change: A Q4 average sales price on most delivery should be about 425,000 as we continue to price to market to reach affordability.

Diane Bessette: We expect close margins to be flat with Q3 in our S-GNA to be in the range of 6.7% to 6.8%, with both estimates dependent on market conditions. For the combined home building joint venture, land sales, and other categories, we expect to generate earnings of about 25 million. We anticipate our financial services earnings to be approximately 140 million, and we expect to be about great even in our multi-family business. Starting to learn our other, we expect a loss of about 5 million, excluding the impact of any potential market adjustment to our public technology investment. Our Q4 corporate GNA should be about 1.7% of total revenues, and our charitable foundation contribution will be based on $1,000 per home delivery.

Speaker Change: We expect those margins to be flat with two three in our edge DNA to be in the range of 60.6% to 6.8% with both estimates dependent on market conditions.

Speaker Change: For the combined home-building joint venture, Diane Stales and other categories, we expect to generate earnings of about 25 million. We anticipate our financial services earnings to be approximately 140 million.

Speaker Change: and we expect to be about free-teas and I'm also a family business.

Jenny Till: Jenny Till on our other week's set of laws of about 5 million, excluding the impact of any potential more to market adjustment to our public technology investment.

Jenny Till: are the Q4 corporate DNA should be about 1.7% of total revenues and our charitable foundation contribution will be based on $1,000 per whole delivery. We expect our Q4.

Diane Bessette: We expect our Q4 could tax rate to be approximately 24.25%, and the weighted average share count should be approximately 267 million shares. And so, on a combined basis, these estimates should produce an EPS range of approximately $4.10 to $4.25 per share for the quarter. And also, we remain confident with our cash flow of generation. As such, as Stuart mentioned, we are still targeting a minimum of $2 billion of share repurchases for fiscal 2024.

Jenny Till: Good tax rate to be approximately 24.25% and the weighted average share count should be approximately 267 million shares.

Jenny Till: and so on a combining basis, these estimates choose to produce an EPA's range of approximately $4.10 to $4.25 per share for the course.

Stuart: and also we also remain confident with our cash flow of generation as such as Stuart mentioned. We are still targeting a minimum of $2 billion of shared reproaches this 4th fiscal 2024. And with that, let me turn it over to the authoritative.

Operator: And with that, let me turn it over to the operator. Thank you at this time. We'll begin our question and answer session. If you like to ask a question, please press star, then one. Remember to unmute your phone and record your name and organization clearly when prompted. We ask that you please let me yourself to one question and one follow up. If you'd like to withdraw that question, you may press star two.

Speaker Change: Thank you at this time, we'll begin our crescent answer session. If you like to ask a question, please press star then one. Remember to unmute your phone and record your name and organization clearly when prompted. We ask that you please limit yourselves to one question and one follow up. If you like to withdraw that question, you may press star too.

Alan Ratner: Now, first question comes from Alan Ratner with Zellman and Associates. Your line is open. Hey guys, good morning. Wow. Thank you for all of that detail. Still digesting everything, Stuart, but sounds like you guys are definitely busy. And it's a lot to take in, no question. Yeah.

Speaker Change: and our first question comes from Alan Ratter with Zellman Associates, your line is open.

Alan Ratter: Hey, guys, good morning. Wow, thank you for all of that detail. Still still digesting everything, Stuart, but sounds like he hasn't done a good busy and it's a lot to take. Yeah, so I guess, you know, recognizing, you know, you might be limited in what you could say on Melrose, but you know, just because you gave some some color there, I'll start on that front.

Stuart Miller: So I guess, you know, recognizing, you know, you might be limited on what you could say on Milrose, but you know, just because you gave some color there, I'll start on that front. You know, I'm curious as you kind of went through this process or are going through the process and maybe comparing and contrasting the various structures you had over the years on the land side and kind of come up with how you envision Milrose going forward. I think one of the things you mentioned that sounds a little bit different is just kind of like the fees that the business or the company will earn on these option deals.

Speaker Change: I'm curious as you kind of went through this process or are going through the process and maybe comparing and contrasting the various

Speaker Change: Structures you've had over the years on the landside and come up with how you envision Melrose going forward.

Speaker Change: I think one of the things he mentioned that sounds a little bit different is just kind of like the fees that the business or the company will earn.

Stuart Miller: And I'm curious from your perspective as the manufacturer and it's the builder. What either margin impact would you expect that to have relative to the current land banking structures you currently have? Is it going to be materially different? You know, it sounds like it might be more beneficial to Milrose, or at least more predictable to them, if you will, but I might be misinterpreting that. So, within the boundaries of what I can and can't say, let me, let me say it this way, Alan. It's a good question. So what I tried to detail in my comments is that think about Milrose as being a mirror image of our other structures. The single biggest differential is the capital component, which is a permanent capital structure versus one where the capital has to be raised repeatedly.

Speaker Change: on this option of the old and I'm curious from your perspective as the manufacturer and as the builder.

Speaker Change: What either margin impact would you expect that to have relative to the current land banking structures you currently have is going to be materially different, you know, it sounds like it might be more beneficial to Miller or at least more predictable to them if you will, but I might be misinterpreting that.

Speaker Change: So within the boundaries of what I can and can't say, let me say it this way, Alan, it's a good question. So what I try to detail in my comments is that

Miller: Think about Miller's being a mirror image of our other structures that single, biggest differential is the...

Miller: Capital Component, which is a permanent capital structure versus one where the capital has to be raised repeatedly.

Stuart Miller: So we structure this as a rate, as I said, and it's structured through it being a public company as permanent capital that does with a capital itself does not get returned. But aside from that, as we look at what we have done with our, with the first half, let's say it's more or less half of our developed home sites has been used in production. As we've migrated over the past years, we expect that the impact will be basically similar. And it's been a relatively small impact on our margin as we have absorbed, you know, option costs which exist in all of those relationships.

Miller: So, we structured this as a read, as I said, and it's structured through it being a public company as turning capital that does what a capital itself does not get returned.

Miller: but aside from that, as we look at...

Miller: What we have done with our...

Speaker Change: It was the first half, let's say, it was more or less half.

Speaker Change: of our developed home sites has been used in production as we've migrated over the past years.

Speaker Change: We expect that the impact will be basically similar and it's been a relatively small impact on our margin as we had absorbed, you know, option costs.

Alan Ratner: And we have included or benefited from efficiencies that have come from the way that we've managed land and the way that we're managing our overall business. Now, can I point to specifics as how the offsets actually happen? It's not quite that linear, but we think that the impact is going to be relevant. I appreciate that, and that's helpful.

Speaker Change: which exists in all of those relationships and we have included or benefited from efficiencies that have come from the way that we've managed land and the way that we're managing our overall business.

Speaker Change: Now, can I point the specifics as how the offset actually happened? It's not quite that linear, but we think that the impact is going to be relatively small.

Alan Ratner: So looking forward to seeing it all unfold.

Alan Ratner: Second, just on the gross margin, I'm sure you're expecting lots of questions on this, but relative to where you were three months ago, six months ago, kind of expecting more of a ramp this year as opposed to now more kind of fish through the year on gross margin. Just curious, you know, what I guess surprised you relative to what you would have expected three months ago because it doesn't seem, if anything, you know, rates have come down about 100 basis points since June. It seems like August was a pretty decent month based on some of the macro data and commentary from other builders.

Speaker Change: I appreciate that and that's helpful so looking forward to seeing it all unfold.

Speaker Change: Second, you know, just on the gross margin, I'm sure you're expecting lots of questions on this, but, you know, relative to where you were three months ago, six months ago, you know, kind of expecting more of the ramp this year as opposed to now more of kind of flat-ish through the year on gross margin.

Speaker Change: Just curious, you know, what I guess?

Speaker Change: surprised you relative to what you would have expected three months ago because it doesn't seem, if anything, you know, rates have come down about a hundred basis points since June. It seems like August was a pretty decent month based on some of the macro data and commentary from other builders.

Stuart Miller: Yet, you know, you are expecting a lower margin in Q4 than you, you know, maybe you articulated three months ago. So what was the main driver for that, you know, revised outlook? Well, first of all, let's say, let's start by recognizing that really rates did not start coming down until later into our quarter. For the first half or more of the quarter, rates were kind of sticky up at a seven percent kind of range. And that cast a pretty tough affordability cloud on what was happening in the market. And consumer confidence has been slow to kind of kick in as rates have kind of fallen over the second part of the quarter.

Speaker Change: Yes, you know, you are expecting a lower margin in Q4 than you, you know, maybe articulated pretty months ago. So what was the main driver for that, you know, revised outlook?

Speaker Change: Well, first of all, let's say, let's start by record guys and it really raced it not start coming down until later into our quarter.

Speaker Change: for the first half or more of the quarter rates were kind of sticky up at a 7% kind of range.

Speaker Change: and that cast a pretty tough...

Speaker Change: Affordableability cloud on what was happening in the market. And consumer confidence has been slow to kind of kick in as rates have kind of fallen over the second part of the quarter.

Stuart Miller: So I think that that's stickiness has kind of been a differentiating factor, and that's market driven. I think that there is the confluence within our environment of managing the relationship between our reduced cycle time and the fall off of community and community talent. And some communities not coming on as quickly as we had hoped. And that driving in our world a need given our drive to volume and growth, our need and desire to keep the volume up at a time when and infrastructure high consumer confidence hasn't really kicked in and our community count kind of falls, increasing our absorption rate.

Speaker Change: So, I think that that's sticking as kind of been a differentiating factor and that's market-driven.

Speaker Change: I think that there is the confluence with an hour environment of managing the relationship between our reduced cycle time.

Speaker Change: and the fall-off of community and community talent. And some communities not coming on as quickly as we are hoped. And that's driving an hour-of-world a need.

Speaker Change: Given our drive to volume and growth

Speaker Change: Our need and desire to keep the volume up at a time when interest rates are high, consumer confidence hasn't really kicked in, and our community can't kind of fall.

Stuart Miller: So that's what's kind of come as a differentiating fact as we have continued to migrate towards our restructuring. And maybe that's what's different between us and others is that we're focused on keeping that volume up so that we can facilitate where we're headed and to a program that we think is going to put us in a much better set for the future. And that's driven us forward to drive volume at a time when infrastructure, high consumer confidence has been waning a little bit and our community count dropped a little bit.

Speaker Change: Increasing our absorption rate.

Speaker Change: So that's what's kind of come as a differentiating fact as we have continued to migrate towards our restructuring and maybe that's what's different between us and others is that we're focused on keeping that volume up.

Speaker Change: So that we can facilitate where we're headed and to a program that we think is going to put us in much better stead for the future and that's driven us forward too.

Speaker Change: Drive volume at a time when the interest rates are high, consumer confidence has been waning a little bit, and our community can't drop a little bit. We think that's self-correcting over the next quarter, and we think it's solving till greater good.

Stuart Miller: But we think that's self-correcting over the next quarter, and we think it's solving to a greater good.

Alan Ratner: Thank you. Thanks for all the info. Thank you.

Stephen Kim: Next question comes from Stephen Kim with Evacore at ISI. Your line is open. Yeah, thanks a lot, guys. It's obvious you've been busy this summer, so I appreciate all the information you've given so far. I wanted to piggyback a little bit on your most recent answer to Alan. With respect to volume growth, I know you're guiding to 10% volume growth next year, but I think you just sort of indicated that some of this is in an effort to make sure that you progress toward your restructuring in a helpful manner or in a smooth manner as you can.

Speaker Change: Sheated, thanks for all the info.

Speaker Change: Thank you, that next question comes from Stephen Kim with Evercore ISI, your line is open.

Stephen Kim: Yeah, thanks a lot guys. It's obviously been busy this summer so I appreciate all the information you've given so far. I wanted to take you back a little bit on your most recent year answer to Alan with respect to volume growth.

Speaker Change: I know you're guiding to 10% volume growth next year

Speaker Change: But I think you just sort of indicated that some of this is...

Speaker Change: in an effort to make sure that you progress towards your restructuring in a helpful manner, or in a smooth manner as you can. So maintaining volume, maybe when others tweak the down their volume, can be explained in a way near-term and in this past quarter, by the fact that you're progressing towards this mill rose, a reaper.

Stephen Kim: So maintaining volume, maybe when others tweak to down their volume can be explained in a way near term, and in this past quarter, by the fact that you're progressing towards this milrose rate, the launching of that rate.

Stephen Kim: So my question relates to the longer term. If we move beyond, you know, when you've, let's say you've accomplished your goals with Milrose, longer term, others in the industry have seemingly been moderating their long-term targets to more of a 5% to 10% volume range. And I'm curious, can you talk about what you think is the proper long-term rate of growth for lanar, longer term that is, and is that dependent upon a certain rate of national housing starts growth, or mortgage rates staying below a certain level or something like that? Just kind of give us a sense of long-term where you think volume growth should be.

Speaker Change: and the launching of that week.

Speaker Change: Um...

Speaker Change: So my question relates to the longer term.

Speaker Change: If we move beyond, you know, when you, let's say you've accomplished your goals with Miller's, longer term, others in the industry have seemingly been moderating their long-term targets to more of a 5 to 10% volume range. And I'm curious.

Speaker Change: Can you talk about what you think is the proper long-term rate of growth for Lenar, a longer-term that is, and is that dependent upon a certain rate of national housing starts growth, or mortgage rates staying below a certain level, or something like that? Just, you know, it kind of give us a sense of long-term where you think volume growth should be.

Stuart Miller: So right now, we're kind of solving to a 10% steady state growth rate. And part of that seems relates to our view of what our land strategy has become. The more we are focused on our asset-like model, the more we are seeing that we can dovetail a combination of organic growth and strategic new market growth that is facilitated by the structure of the way that our operations will be configured as we go forward. So we're kind of looking at more of a steady state 10%. Now this kind of dovetails with what we think has to happen in terms of building a healthier housing market.

Speaker Change: So right now we're kind of solving

Speaker Change: to a 10% steady state work rate.

Speaker Change: and part of that series relates to our view of what our...

Speaker Change: Land Strategy has become...

Speaker Change: The more we are focused.

Speaker Change: on our asset-like model.

Speaker Change: New Market Growth

Speaker Change: that is facilitated by the structure of the way that our operations will be configured as we go forward.

Speaker Change: So we're kind of looking at more of a steady state 10%, now this kind of deltails with what we think has to happen in terms of building a healthier housing market.

Stuart Miller: Remember that nationally we're supply constraint at local markets; their supply constraints, and the market is going to need additional supply of homes, particularly as interest rates drift down, particularly as at the local and at the national level, the world's focus is on greater volume and greater supply to accommodate the population as it sits right now. Now we're seeing and hearing that narrative come across pretty loudly, even at the national level. And we think that we're positioned to dovetail with what has to be a growth in production levels.

Speaker Change: Remember that nationally we're supply constraint at local markets they're supply constraint and the market is going to need additional supply of homes.

Speaker Change: Particularly as interest rates drift down, particularly as at the local and at the national level, the low focuses on greater volume and greater supply to accommodate the population of the right now.

Speaker Change: Now, we're seeing and hearing that narrative come across pretty loudly even at the national level.

Speaker Change: and we think that we're positioned to does tell with what has to be a growth.

Stuart Miller: And I don't know what new normal is. The print more recently was 1.36 million that seems white and it doesn't seem like we're catching up on the supply side. So we're building a model that we think facilitates our ability to participate in growing a healthier housing market, which means greater supply accommodating the demand that is pumped up and limited by affordability. Okay, yeah, that's fair enough. Appreciate that.

Speaker Change: and um

Speaker Change: and production level.

Speaker Change: and I don't know what new normal is, we're, you know, the print.

Speaker Change: More recently was 1.36 million that seems white and it doesn't seem like we're catching up on the supply side.

Speaker Change: So we're building a model that we think facilitates our ability to participate in growing healthier housing market, which means greater supply, accommodating the demand that is up and rendered by affordability.

Stephen Kim: Second half of my question relates to operating margins. You know, I think that maybe the story for some investors this quarter was that you made a, you know, you brought the trade off between volume and margin a little bit more into sharper relief. And so, with respect to the operating margin, and I'm talking about your operating margin after corporate expense, it seems, based on your guidance, that you're going to be coming in somewhere a little north of 13% this year. Which is quite a bit below some of your bigger cap peers, and I'm curious if you could share why you think this is the case.

Speaker Change: Okay, yeah, that's fair enough. Appreciate that.

Speaker Change: Second half of my question relates to operating margins, you know, I think that maybe the story for some investors as quarter was that you made it, you know, you brought the trade between volume and margin a little bit more into sharper relief And so with respect to the operating margin and I'm talking about your operating margin after corporate expense

Speaker Change: It seems based on your guidance that you're going to be coming in somewhere a little north of 13% this year, which is

Speaker Change: Right, quite a bit below some of your Bayer cap peers and I'm curious if you could share why you think this is the case and whether this level is in line with where you think you're operating profitability is going to be over the long term, yeah I guess we'll stop there.

Stuart Miller: And whether this level is in line with where you think your operating profitability is going to be over the long term. Yeah, I guess we'll stop there. So I think you started by saying it sounds like we had a busy summer. In actual fact, the biggest part of the busy summer has been focused on the operations and efficiencies that we inject as we migrate our business to asset light. But more importantly, as we grow volume, using that volume to build efficiencies in the way that we execute and drive a net margin and operating margin that starts to grow into where we're headed as an operating model.

Speaker Change: So, I...

Speaker Change: I think you started by saying it sounds like we have a busy summer.

Speaker Change: Um...

Speaker Change: in actual fact.

Speaker Change: Biggest part of the busy summer has been focused on...

Speaker Change: The Operations and the Fistions seeds that we inject as we...

Speaker Change: My Greater Business to ask it like

Speaker Change: But more importantly, as we grow volume using that volume, the build efficiency is in the way that we execute and drive.

Speaker Change: A net margin, an operating margin that starts to grow into where we're headed as an operating model.

Stephen Kim: So I can't lay out the pathway to where we're going in specificity, but I think that we believe, I know that we believe that our operating margins are going to grow as we go forward. And as we settle into what becomes a normalized full body asset light approach, rather than the building of the approach, actually executing it will enable us to get more and more efficient. Well, great. We'll be waiting for that, but appreciate all the color in the meantime. Thanks, guys. Very good. Thanks. Thank you.

Speaker Change: So I can't lay out the pathway to where we're going.

Speaker Change: and Specificity. But I think that we believe, I know that we believe, that are already margins are going to grow as we go forward. And as we settle into what becomes a normalized.

Speaker Change: Bold body, asset light approach, rather than the building of the approach, actually executing it, will enable us to get more and more efficient.

Speaker Change: Well great, we'll be waiting for that, but appreciate all the color in the meantime. Thanks, guys. Very good, thanks.

Susan Mcclary: Our next question comes from Susan McClary with Goldman Sachs. Your line is open. Yes, thank you, everyone. Thanks for taking the questions. My question is, you know, Stuart, give in the commentary that you gave around the strategic shifts that's coming through, as well as John's comments on the operational improvements that you're focused on. Can you talk a bit about the upside to those inventory turns, which obviously moved really nicely this quarter already? And what that means for the cash generation of the businesses we think about the next year? Well, we've seen it. We've seen this kick in over these past few years, and that is, as we improve our inventory turn, it just accelerates our cash flow and enables us to be far more efficient in the way that we run our business.

Speaker Change: Thank you, and next question comes from Susan McClary with Goldman Sachs Online's Open.

Susan Mcclary: Yes, thank you everyone. Thanks for taking the question.

Susan Mcclary: Give in the commentary that you gave around the strategic shift that's coming through as well as John's comments on the operational improvement that you're focused on. Can you talk a bit about the upside to those inventory terms, which obviously moved really nicely this quarter already? And what that means for the cash generation of the businesses we think about the next year?

John Jaffe: Well, we've seen this kick-in over these past few years, and that is as we improve our inventory turn, it just accelerates our cash flow and enables us to be far more efficient in the way that we don't have this now.

Susan Mcclary: Now, you know, creating these efficiencies and embedding them in 40 divisions across the country right now takes a little bit of time to get all of these things operating in consistent flow through all the divisions. But the vision by division, that's exactly what we're doing. We're focusing on that inventory turn, and we think over time it will trend significantly higher than it is right now. Part of the time that it takes to get there is that we've only affected about half of our delivery system at this point. And as we get more proficient with a full-body approach to an asset-light approach, we think that that inventory turn is going to continue to climb.

John Jaffe: Lep.

Speaker Change: Creating new deficiencies and embedding them in 40 divisions across the country right now.

Speaker Change: takes a little bit of time to get all of these things operating in.

Speaker Change: Consistent Flow through all the divisions, but the vision by division that's exactly what we're doing, focusing on that inventory turn, and we think over time it will trend significantly higher than it is right now.

Speaker Change: Part of the time that it takes to get there is that we've only affected about half of our delivery system at this point. And as we get more proficient with a full body to approach, to an asset lighter approach, we think that that inventory turns going to continue to climb.

Stuart Miller: And so I would just say, just to think about it supistically, as we've said, the goal really is to have our cash flow generation equal our net earnings. and as you think about the usage of that cash, our debt maturity ladder that definitely been reducing with our pay down and not refinancing, so that leads a fair amount of cash to the deployed back into shareholders. Yes, okay, and building on that perhaps, you know, you did end the quarter; you had four billion dollars of cash on the balance sheet. How are you thinking about the amount of cash if you need to hold going forward, given the strategy that you'll be operating under and the uses of that extra cash?

Speaker Change: Since then, I would just add just to think about it, who's pushed away as we've said, the goal really is to have our capsule generation equal our net earnings.

Speaker Change: and as you think about the usage of that cash, our debt maturity ladder that's definitely been reducing with our pay down and not refinancing. So that leaves a fair amount of cash to be deployed back into the shoulders.

Speaker Change: Yes, okay, in building on that, perhaps, you did in the quarter, you had four billion dollars of cash on the balance sheet. How are you thinking about the amount of cash that you need to hold going forward, giving the strategy that you'll be operating under, and the uses of that extra cash?

Stuart Miller: So, as I've said in past calls, one of the big questions from many of our investors and analysts has been, you know, it's not just carrying a little bit more cash or maybe even materially more cash than you need. And we've said that we are carrying that as we evolve our business program and think about exactly what the configuration of mill rows is going to look like. I know it seems like we've been taking a lot of time on this. This is hard work, and harder than some might think getting this configuration right actually is.

Speaker Change: So, as I said in past calls, one of the big questions from many of our investors and analysts has been, you know,

Mortash: Mortash and you need. And we've said that we aren't carrying that.

Speaker Change: As we evolved our business program and think about exactly what the configuration of mill rose is going to look like.

Speaker Change: I know it seems like we've been taking a lot of time on this. This is hard work and harder than some might think getting this configuration right actually is.

Stuart Miller: So, the cash that we're holding is what I would call safety stock relative to cash in terms of defining exactly what we're spinning off because it is a moving target, exactly what we're spinning off and what component of cash actually goes into mill rows as well. And that is a matter of strategy that we'll discuss further as we file our S11 in a public format in the near future and as we have further conversation. So, I just have to say it's kind of trust me. Right now, we're holding the cash right now with safety stock.

Speaker Change: So the cash that we're holding is what I would call safety stock relative to cash

Speaker Change: in terms of defining exactly what we're spinning off because it is a moving target.

Speaker Change: Exactly what we're spinning off and what components of cash actually goes into mill roads as well.

Speaker Change: and that is a matter of strategy that will discuss further as we file our S11 in a public format in the near future and as we have further conversation.

Speaker Change: So, I just have to say it's kind of trust me right now, we're holding the cash right now, it's safety stuff. It's not needed for the operations of the business, but it is needed for consideration as to how we move forward.

Susan Mcclary: It's not needed for the operations or the business, but it is needed for consideration as to how we move forward. Yeah. Okay. I appreciate that color. Thank you, and good luck with everything. Okay. Thank you.

Speaker Change: Yeah, okay, I appreciate that color. Thank you and good luck with everything. Okay, thank you

Michael Rahat: The next question comes from Michael Rahat with JP Morgan. Your line is open. Good afternoon, Stuart. Right. This would show up. So, you know, wanted to delve in a little bit more on the landspin. I know, obviously, you remain a little limited on fully what you can say, but you know, I think that there's a lot of devil in detail here that will be interested in kind of to gauge. He talked about, you know, I think last quarter, six eight billion of land. I think, you know, the language this quarter was six eight billion of land and cash. I was hoping to get any kind of rough sense of how much of the cash portion of that, you know, the cash portion would represent also roughly, you know, the stock received in exchange.

Speaker Change: Thank you to the next question comes from Michael Rahat with JP Morgan, your line is open

Michael Rahat: Good afternoon, Stuart. Alright, that's what you'll see.

Michael Rahat: So, you know...

Michael Rahat: I wanted to delve in a little bit more on the Lanspin I know obviously you remain a little limited and fully what you can say but You know I think there's a lot of devil and details here that will be interested in kind of to gauge

Speaker Change: He talked about, you know, I think last quarter, six-eight billion of land, I think, you know, the language, this quarter was six-eight billion of land in cash, was hoping to get any kind of rough sense of how much of the cash portion of that.

Speaker Change: You know, the cash portion will represent, also roughly, you know, the stock received an exchange.

Stuart Miller: You know, if there's any kind of, again, you know, range or, you know, degree of magnitude that we should think about. And lastly, if it would affect your cost structure at all by spinning off all of these assets. And I don't know if there's also any associated personnel that might result in a reduction of corporate GNA or your FGNA.

Speaker Change: You know, if there's any kind of, again, you know, range or, you know, degree of magnitude that we should think about.

Speaker Change: And lastly, if it would affect your cost structure at all by spinning off all of these assets. And I don't know if there's also any associated personnel that might result in a reduction of corporate GNA or your SGANA.

Stuart Miller: Okay, so let me start by saying that the words that we would spend $68 billion of land versus $68 billion of land in cash might have been a foot fault on my part. It really hasn't changed. The notion has not changed from quarter to quarter. It was always that there would be a cash component. And exactly what that is, is, as I said, it's moving around. Remember that we're contributing to Milrose, a moving set of assets that are constantly coming in, some going out on a rotating basis. And that's where, until we kind of get to the end, we won't know exactly what the numbers are.

Speaker Change: Okay, so let me start by saying that

Speaker Change: The Words.

Speaker Change: that we would spend $68 billion of land versus $68 billion of land in cash.

Speaker Change: Might have been a football on my part. It really has changed. The notion has not changed from quarter to quarter.

Speaker Change: It was always that there would be a cash component, you know, and exactly what that is, as I said, it's moving around, you know, remember that we're contributing to no rows.

Speaker Change: A moving set of assets that are constantly, some coming in, some going out on a rotating basis. And that's where, you know, until we kind of get to the end, we won't know exactly what the numbers are.

Stuart Miller: There's also a strategic component of how we're configuring Milrose. But again, that falls into the category of what I can't talk about. You might have noticed that our discussion has been almost exclusively on impacts to Lennar, rather than too much information on the configuration of Milrose. I can't quite go there yet, but this is going to come to market pretty soon. So I just would say, be patient on that. And I think that a lot of the rest of your questions falls into that category as well. There will be very limited personnel movement relative to Milrose.

Speaker Change: There's also a strategic component of how we're configuring millrose, but again, that falls into the category of what I can't talk about. You might have noticed that our discussion has been almost exclusively on impacts to Lanar.

Speaker Change: Rather than too much information on the configuration of Milrose. So I can't quite go there yet, but this is going to come to market pretty soon.

Speaker Change: So I just would say, you know, the patients on that. And I think that a lot of the rest of your questions fall into that category as well, there will be very limited.

Stuart Miller: So the impact to Lennar on SG&A will only be in the context of efficiencies in how we run our business, not in terms of personnel migrating outside of the Lennar environment.

Speaker Change: Alright.

Speaker Change #100: Personnel Movement.

Speaker Change #100: Relative to Nell Rose.

Speaker Change #100: So the impact to one or on SGNA

Speaker Change #100: will only be in the context of efficiencies in how we run our business, not in terms of personnel migrating outside of the lunar environment.

Stuart Miller: And my just one clarification: that sounds like there might be a little confusion. As we contribute our assets to Milrose, that will be in exchange for Milrose stock, but we're not going to be holding that Milrose stock. That will be the stock dividend that is distributed to our shareholders. So it sounds like a little confusion on that. Just want to clarify.

Speaker Change #101: and my just one clarification that sounds like there might be a little confusion. As we contribute our assets to Miller's, that will be in exchange for Miller's stock. But we're not going to be holding that Miller's stock. That will be stock dividend that is distributed to our shareholders.

Michael Rahat: Okay, no, that's very helpful. I appreciate that.

Speaker Change #101: So it sounds like it may be a little confusion on that just once it goes by.

Michael Rahat: Secondly, again, it just wasn't fully, I guess, appreciate maybe the answer earlier on, the gross margin question around last quarter. The arrows were pointing close to 25%, or so. Now you're looking at closer to a 22.5%. And just wanted to better appreciate, again, kind of what's changed in the last 90 days and kind of alluded to a couple of different factors. I don't want to put words in your mouth, but seemingly a pretty different degree of magnitude shift here. And if this is also something that is even more temporary given some of the factors perhaps around Milrose relative to, you know, kind of initially at least how we should think about fiscal 25 on the ongoing bid.

Speaker Change #103: Okay, no, that's very helpful. I appreciate that. You know, secondly, again, it just wasn't fully, I guess, kind of appreciate maybe the answer earlier on the gross margin question around, you know.

Speaker Change #104: Last quarter, you know, kind of the the arrows were pointing close to the 25% or so now you're looking at close to the 22.5%. And just wanted to better appreciate again kind of what changed.

Speaker Change #105: in the last 90 days, and he kind of alluded to a couple of different factors that I want to put words in your mouth, but you know, seemingly a pretty different...

Speaker Change #106: you know, degree of magnitude shift here and if this is also something that you know, is, is, is, you view more temporary given some of the factors perhaps around Bill Rose relative to.

Speaker Change #106: You know, kind of initially at least how we should think about fiscal 25 on the ongoing business.

Stuart Miller: Yes, I think, as I've said, all of this kind of melts into one kind of articulation, and that is, you know, our margin story derives from number one, interest rates staying higher for a little bit longer through this quarter, consumer confidence, kind of waning. We've heard this in a lot of conference calls, you know, even as interest rates have come down, the consumer's been a little sticky in terms of, you know, they're jumping back into the housing market and the changes in community count driving at a time when, you know, demand has been limited by affordability and then pushing volume by increasing absorption rates within communities has kind of pushed on margin. We said clearly in our last earnings call that, look, we're going to focus on volume generating a consistent volume and growth trajectory, and we are going to use our margin as that shock absorber. The confluence of these pieces together with the spin-off and the asset light approach that we've taken has reflected exactly that way, and we've been irreverent about using our margin to make sure that we're maintaining the volume and projecting to where we think the long term benefit is for the company.

Speaker Change #107: Yeah, I think as I said, all of this kind of melting to one kind of...

Speaker Change #107: Articulation and that is

Speaker Change #108: are our margin story derived from number one, interest rates staying higher for a little bit longer through this quarter.

Speaker Change #109: Consumer Confidence, kind of waning. We've heard this in a lot of conference calls. You know, even as interest rates have come down, the consumer's been a little sticky in terms of, you know.

Speaker Change #109: there.

Speaker Change #109: Jumping back into the housing market and the changes in community count driving at a time when the man has been limited by affordability and then pushing volume.

Speaker Change #109: by increasing absorption rates within communities.

Speaker Change #109: has kind of pushed on margin. And we said clearly in our last earnings call that look, we're going to focus on volume, generating a consistent volume and growth trajectory.

Speaker Change #109: and we are going to use our margin as that soft shock absorber and the compliments of these pieces together with

Speaker Change #110: and the, uh, the, uh,

Speaker Change #110: Asset Light approach that we've taken has reflected exactly that way and we've been a reverent about using our margin to make sure that we're maintaining the volume and projecting to where we think the long-term benefit is for the company.

Michael Rahat: Okay, I appreciate it. Thank you for getting back. Thank you.

Trevor Allenson: Our next question comes from Trevor Allenson with Wolf Research; your line is open. Good morning. Good afternoon. Thank you for taking my question. One to follow up on, SGNA, you had really good SGNA control in the quarter. It sounds like some of your internal efficiencies are driving tangible results. You called out the technology benefits.

Speaker Change #111: Okay, appreciate it. Thank you.

Kennedy: and Kennedy.

Speaker Change #113: Thank you. Next question comes from Trevor Alinson with Wolf Research, your line is open.

Trevor Alinson: Good morning afternoon and thank you for taking my questions.

Trevor Alinson: I want to follow up on SGA, you had really good SGA control on the quarters, sounds like some of your internal efficiency.

Trevor Allenson: You also mentioned your press release, lower broker costs driving the SGNA. The NAR settlement just went into effect a long ago, so hoping you could talk about maybe some of the changes you're making with brokers, if any, whether that's moving more to PLAT-V, adjusting the rate you're paying, any impact from those, and then perhaps maybe your views more generally on broker usage. Yeah, a number of people have asked us about our strategy relative to Realtors. I put this under the heading of Building a Healthier Housing Market. Our focus has been on trying to take out as many unnecessary costs from the housing transaction in order to build affordability for our customers.

Trevor Alinson: are driving tangible results.

Speaker Change #115: He called out the technology that you've got to fit, you also mentioned you press release, lower broker costs.

Speaker Change #116: Driving the S-June ADNAR settlement just went into effect on long ago. So, so, but you could talk about maybe some of the changes you're making with brokers, if any, you know, whether that's moving more to a flat fee, adjusting the rate you're paying, any net impact from those and then perhaps maybe you'll be using more generally on brokerage.

Speaker Change #117: Yeah, a number of people that ask us about our strategy relative to realtors. I put this under the heading of building a healthier housing market. Our focus has been on trying to take out as many unnecessary costs.

Speaker Change #117: from the Housing Transaction in order to build affordability for our customers.

Stuart Miller: You know, Realtors, we have great respect for the Realtors that bring us business, and we cooperate and work with Realtors. But at the same time, we've been focused on bringing down that Realtor costs where it is not necessary because, conceptually, it just adds to the cost of the home. And to the extent that we can repurpose that where Realtor really isn't involved to bring down the cost of the home for customers, we think we're building a better housing market. If you look at our production, our volume, we are able, with a more robust marketing program, digital marketing program, we are able to maintain our volume and accommodate a lower price home for our customer.

Speaker Change #117: You know, realtors, we have great respect to the realtors, they bring us business and we cooperate and work with realtors, but at the same time we've been focused on bringing down that realtors' cost.

Speaker Change #117: where it is not necessary.

Speaker Change #117: because it can actually just add to the cost of the home. And to the extent that we can repurpose that.

Wilter: where Wilter really isn't involved.

Wilter: to bring down the cost of the home for customers. We think we're building a better housing market. If you look at our production, our volume, we are able with a more robust marketing program, digital marketing program.

Wilter: We are able to maintain our volume and accommodate a lower price tone for our customer. So we've been working with realtors to come up with plans that actually work for their clients.

Trevor Allenson: So we've been working with Realtors to come up with plans that actually work for their clients, where they are engaged and at the same time trying to maintain and bring down the cost of the home for the customer. Thank you. Okay, it makes a lot of sense.

Wilter: where they are engaged, and at the same time trying to maintain and bring down the cost of the home border customer.

Stuart Miller: And then, given where we are in the election cycle, housing clearly got a lot of attention politically recently. Stuart, I think you alluded to some of the proposals on the supply side, but there's also a proposal for buyers in terms of down payment assistance. I was hoping to just get your thoughts on the down payment proposal. Are you still seeing down payments as a key head when the homeownership or the primarily DTIs, and then what are your views on potential demand impacts if that were to eventually go into play? Thanks. You know, great question. You know, inflation has been a difficult component in enabling our customer base to accumulate a down payment, and there's no question that the down payment is a hurdle and has been and continues to be a hurdle for four customers looking to acquire specifically at first home, whether it's attainable housing or affordable housing. The down payment is definitely a hurdle.

Wilter: [inaudible]

Stuart: Okay, next a lot of sense, and then given where we are in the election cycle, housing has clearly gotten a lot of attention, politically, recently, Stuart. I think you alluded to some of the proposals on the supply side, but there's also a proposal for buyers in terms of down payment assistance.

Speaker Change #119: I told him to just get your thoughts on the down the systems of Puzzle. Are you still seeing down payments as a key head when the home ownership or is it primarily DTIs and then, you know, what are your views on potential demand impacts if that were to eventually go into place? Thanks.

Speaker Change #120: You know, a great question, you know, inflation has been a difficult component in enabling our customer base to accumulate a down payment.

Speaker Change #121: and there's no question that the down payment is a hurdle and...

Speaker Change #121: has been and continues to be a hurdle for...

Speaker Change #122: Ford customers looking to acquire specifically a first-home, whether it's attainable housing or affordable housing of the down payment is definitely infertile.

Stuart Miller: I think that there are a lot of and programs out there. Will see where they shake out. I think there's a tightrope that has to be walked. Number one, we've got to remember back to the Great Recession. We certainly don't want to get to that no down payment kind of programming. It might feel good for a short period of time, but we want a durable housing market. I think we also have to think about inflationary pressures. The balance between additional supply and additional demand is something that's going to have to be walked through. What has me most invigorated is the fact that what we've been hearing from mayors and governors and talking to mayors and governors for a very long time is now starting to reflect in the national narrative.

Speaker Change #123: I think there's a lot of thoughts and programs out there. We'll see where they shake out. I think there's a type of that has to be walked.

Speaker Change #124: Number one, we've got to remember back to the great recession, we certainly don't want to get to that no down payment.

Speaker Change #124: kind of programming. It might feel good for short period of time, but we want a durable housing market.

Speaker Change #124: I think we also have to think about inflationary pressures to the balance between additional supply and additional demand as something that's going to have to be walked through. What has me most indigrated is the fact that what we've been hearing.

Speaker Change #125: from Mayers and Governors, and talking to Mayers and Governors for a very long time, is now starting to reflect the national narrative and the fact that

Trevor Allenson: And the fact that the nuanced programs are not perfected yet, but the discussion is starting to activate thinking as to how do we get better and build a healthier housing market is going to in order for the benefit of our housing business. All right. Thank you. Appreciate your views. Good luck. Let me import. Okay.

Speaker Change #126: The new one's programs are not perfect again, but the discussion is starting to activate thinking as to how do we get better and build a healthier housing market is going to in order to the benefit of our housing business.

Operator: And why don't we take one more question?

Speaker Change #126: All right, thank you. Appreciate your views. Good luck, me and Ford.

John LeVolo: Okay. And our last question comes from John LeVolo with UBS. Your line is open. Hey, guys. Thanks for fitting me in here. I wanted to actually dovetail off a Trevor's question to start. You know, SGNA as a percentage of sales was 70 basis points below the midpoint of your outlook. You know, on a slight revenue beat versus your expectations, you talked about pulling back on brokers, but was that pullback on brokers incremental? Is that what the driver was? And, you know, the lack of, you know, broker use for, I guess one way to say it is that, you know, the lack of broker use relative to some of your competitors.

Speaker Change #127: Okay, and why don't we take one more question?

Speaker Change #128: Okay, and our last question comes from John LeVolo with UBS, your line is open.

John LeVolo: Hey guys, thanks for fitting me in here. I wanted to actually double tell off a Trevor's question.

John LeVolo: to start, you know, SG&A's at the percentage of sales was with 70 basis points below the midpoint of your outlook.

Speaker Change #130: You know on a flight revenue bead versus your expectations, you talked about pulling back on brokers, but with that pull back on brokers incremental, is that what the driver was? And you know, the lack of broker use for, for I guess one way to say it is, you know,

John LeVolo: Does that mean that, you know, fewer folks are coming through your communities? And because of that, you need more incentives to, you know, to drive that volume that you're looking to keep me. Are you taking costs that are one bucket and put it into the other is the simple way of putting it?

Speaker Change #131: The lack of broker use relative to some of your competitors, does that mean that fewer folks are coming through your communities and because of that you need more incentives to drive that volume that you're looking to keep me, are you taking costs that a one bucket and put it in so that others is the simple way of putting it.

Stuart Miller: So, good question. And one that we think about a lot, it's, you know, it is counterintuitive to us that, you know, first of all, we have not seen a reduction in our traffic. And what we're doing is not something that's new. This is basically a program that we've had in place for a very long time relative to what we call the machine, the digital marketing programming, and the way that we're executing our marketing and sales program. So, our realtor costs have been migrating downward. It has not been a reduction in traffic or people coming through our offices.

Speaker Change #132: So, good question and one that we think about it was, it's, you know, it is counter intuitive to us.

Speaker Change #133: that you know.

Speaker Change #134: First of all, we have not seen a reduction in our trackings and what we're doing is not something that's new. This is basically a program that we've had in place for a very long time relative to what we call the machine, the digital marketing programming, and the way that we're executing our marketing and sales program.

Speaker Change #134: So, our Realtor-Cons have been migrating downward. It has not been a reduction in traffic or people coming through our offices.

Stuart Miller: It's counterintuitive to us that by adding a cost, we would also be adding a pricing power. And it's probably just not the way that we think about building a healthier housing market. To the extent that a realtor is actively involved in becoming a procuring cause and finding a customer and bringing them to us, we want to pay appropriately and participate with the realtor community. On the other hand, there's also a lot of realtor engagement that is kind of ancillary to the active engagement. We try to bleed that out of the system because we are trying to reduce costs.

Speaker Change #135: is counterintuitive to us that by adding a cost we would also be adding a pricing power and it.

Speaker Change #136: is probably just not the way that we think about building a healthier housing market.

Speaker Change #137: To the extent that a realtor is actively involved in becoming a procuring cause and finding a customer and bringing them to us.

Speaker Change #137: We want to pay appropriately and participate with the Realtor community. On the other hand, there's an awful lot of realtor engagement that is kind of

Stuart Miller: Are we taking it from a more-active realtor engagement and putting it into incentives. I guess I'd like to say that I think I hope the answer is kind of yes, but I don't think it's greater incentives outside relative to the realtor cost that we're saving. And you know I'd like to think that if we're taking cost out, we're actually able to sell it at a lower price and still produce a better margin. So we're still working with that. It's a tough balance; it's a complicated balance, and it's something that we focus on, frankly, every day. Most definitely, as John and I go out to our operations reviews, it's something that we're very close to and watch regularly.

Speaker Change #138: Are we taking it from 8 more?

Speaker Change #139: Active Realtor Engagement and putting it into incentives. I guess I'd like to say that I think I hope the answer is kind of yes, but I don't think it's greater incentives.

Speaker Change #140: Outside relative to the realtor cost that we're saving and you know I'd like to think that if we're taking a cost out what actually able to sell it a lower price and still produce a better margin.

Speaker Change #140: So we're still working with that. It's a tough balance, it's a complicated balance and it's something that we focus on frankly every day and it's most definitely as John and I go out to our operations reviews, it's something that we're very close to and much regular.

Stuart Miller: Okay, that's helpful color, and then the last one is, you know, as you mentioned, REITs have to distribute the vast majority of their income to shareholders. So I'm curious sort of what the pros and cons of a REIT structure for the spin would be, and the reason I ask is, you know, why don't private land-based structure themselves like REITs. I mean it's just going to limit the ability to grow, you know, with Lennar if it has to distribute the earnings. Well, as I noted, we've had to focus our discussion on around Milrose as it relates to these impacts on Lennar rather than the explicit discussion of how the Milrose structure will actually work.

Speaker Change #141: Okay, that's helpful color, and then the last one is, you know, as you mentioned, re-tap the distributive, you know, the vast majority of their income, the shareholders.

Speaker Change #142: Some curious sort of what the pros and cons of a re-structure for the skin would be. And the reason I ask is, you know, why don't private land-based structures themselves like reads? I mean, is this going to limit the ability to grow with a linar if necessary to distribute the earnings?

Speaker Change #143: Well, as I noted, we've had to focus our discussion on around no rows.

Speaker Change #144: as it relates to the impacts on the norm, rather than the explicit.

Stuart Miller: We're going to have to wait on that one for the filing of the S-11.

Speaker Change #144: and the discussion of how...

Stuart Miller: I think it is a unique structure, and you know every good book is worth waiting until the next chapter, so you're just going to have to wait for the next chapter, and I appreciate the question.

Speaker Change #145: The Miller-Structure will actually work. We're going to have to wait on that one for the filing of the S11.

Speaker Change #146: I think it is a unique structure, and every good book is worth waiting until the next chapter. So you're just going to have to wait for the next chapter, and I appreciate the question.

Operator: All right, thank you guys. Good luck.

Operator: Okay, thanks very much, and as always, we appreciate everyone's attention. Thanks for joining our earnings call, and we look forward to continuing to describe detail our progress as we move forward. We'll see all disconnect at this time.

Speaker Change #147: Alright, thank you, guys. Good luck. Okay, thanks very much. And as always, we appreciate everyone's attention. Thanks for joining our earnings call and we look forward to continuing to describe detail our progress as we move forward. We'll see if the end of the year.