Fitch Affirms Lennar's 'BBB' Senior Unsecured Debt; Revises Outlook To Positive.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 19, 2004

Fitch Ratings affirms Lennar Corp.'s (NYSE: LEN) 'BBB' senior unsecured debt and unsecured bank credit facility ratings, as well as the 'BBB-' rating on LEN's senior subordinate convertible notes. The Rating Outlook has been revised to Positive from Stable.

This change reflects LEN's recent solid financial performance and the expectation that the company's credit profile will be maintained as it executes its business model and continues to grow. The ratings also reflect LEN's very strong track record over the past 30 years and through many past homebuilding cycles, management's sound operating and financial policies, the company's well positioned, low-basis land holdings in attractive growth markets, and its capacity to withstand a meaningful housing downturn.

LEN's extensive balance sheet liquidity and external liquidity sources position the company to weather a meaningful cyclical downturn and to absorb acquisitions, consistent with its diversified growth strategy. Under a severe housing contraction scenario, LEN is expected to generate sufficient cash relative to its financial obligations, allowing the company to manage its capital structure easily within its investment grade rating.

The rating incorporates the expectations that leverage may periodically spike outside of management's targeted range of 35-45% as a result of opportunistic acquisitions and that it will be prudently and quickly managed down within that range thereafter (as was the case with the large U.S. Home acquisition in May 2000). The rating also considers the off-balance sheet financing of its longer-dated land supply and the concentration of deliveries in Florida, Texas and California (the three largest state markets in the country).

Fitch views LEN's partnerships to be strategically and financially material to the company's operations. However, the manageable leverage levels and the extensive supply of land in attractive markets held in the partnerships mitigate this risk to some extent. In addition, pulling the off-balance sheet debt back on balance sheet does not materially alter LEN's consolidated capital structure. Although LEN derives approximately 65% of deliveries from California, Florida and Texas, the many significant metropolitan markets within those states with their own unique economic and demographic characteristics reduce the state geographic risk.

LEN has been active in improving homebuilding margins, return on capital, and to a lesser degree inventory turnover during much of this up-cycle for housing and especially during the past half dozen years, ranking near the top of its industry peer group with regard to most financial and operating metrics. LEN's predominantly build-to-order strategy minimizes speculative inventory and allows management the opportunity to adapt its land reinvestment decisions relative to fluctuation in demand levels in its markets.

As this relatively robust housing cycle continues, creditors benefit from LEN's financial flexibility supported by $1.58 billion in liquidity as of Feb. 29, 2004 (zero outstanding on its $1.027 billion revolver and $545.52 million in cash and equivalents). Debt to capitalization was 31.8% at the end of the first quarter of fiscal-year 2004, while net debt to capitalization was 23.1%.