Alan Ratner: Got it. That’s helpful to hear your thoughts there. Second, I guess circling back to the ROA conversation, it has been a few quarters I think since you’ve talked publicly about the SpinCo plans and recognizing that’s seemingly on hold for the time being, you still have about 10% of your assets right now not generating returns, which is clearly, I think, impacting the overall return calculation. So, just curious if you care to provide any updated thoughts on ways to monetize that more quickly, recognizing the capital markets may not be most advantageous right now.
Stuart Miller: Yeah, I think that you’ve laid it out well, that it has been some time, and the capital markets continue to be not very constructive for executing a plan. It does sit in the background, in the ring, and I think it’s something that will come back into light at another point in time. It’s very much at the front of our mind. We think about how we’re going to configure some of those assets that can be positioned differently and there will be a moment in time when we come forward with a plan. It’s not something that we’ve stopped thinking about. It is something that we’ve stopped talking about because we just don’t think that the capital markets are constructive for a program right now.
Alan Ratner: Understood. Appreciate the update, guys. Thanks a lot.
Stuart Miller: Okay, next.
Operator: Thank you. Next, we’ll go to the line of Ken Zener from Seaport Research Partners. Please go ahead.
Ken Zener: Good afternoon, everybody.
Stuart Miller: Good afternoon.
Ken Zener: So, I have two questions. They might have some subparts to them, so bear with me. But first question is, broadly speaking, the prioritization of returns versus growth. And I ask, because this is basically a balance that you’re striking between even flow and gross margins. So, first item is, it seems like even flow is in this 19,000 plus or minus range. The word even would suggest less variance in seasonality. So quarterly, I mean, do you think variance is, let’s say, about 10% sequentially in that start number? Or how is your machine working? Because it’s obviously not set to the larger variance of normal seasonality. And then, related to that, it doesn’t appear that we’re seeing your focus on pace affecting gross margins, right, at 24%. So, could you maybe kind of talk to that? I haven’t heard you really talk about the dynamics of gross margins much, but the pace relative to the margins and what you think your start pace can be on a variance basis?
Stuart Miller: So, Ken, we’ve been fairly unapologetic about saying that pace is our core focus. We’re looking at even flow. We’re using even flow to drive efficiencies, whether it’s in SG&A or whether it’s in construction costs, you can expect, as we’ve said before, that, that consistent drumbeat of production is going to prevail and we’re going to use margin as shock absorber or moderator to enable us to maintain production pace. Your numbers are by and large correct. There will be some adjustments for seasonality, which is anticipated. You see this in our fourth quarter projections or guidance. But with that said, you can expect that you’re going to see an even flow production model that within boundaries, we recognize that if the market really moves dramatically one way or another, we’ll adjust those production levels. But within boundaries, you’re going to see us focus on that constant production pace, defining a constant sales pace.
Ken Zener: Okay. And then, the second question, I didn’t hear the necessarily gross margin, which seems to be in a positive position versus your implied 20% return on capital. But the second question, and I think this is the most important issue that investors are overlooking for Lennar. Even flow tied to capital light, less capital intensities, 85% finished. Homesites acquired in the quarter, one-and-a-half years of land. If that were to fall to one year, which if you keep buying finished lots, it doesn’t seem crazy, it’s hypothetical, but one-and-a-half down to one year, that would be almost a third decline in land requirement on a land base of nearly $7 billion, equivalent to nearly $3 billion of decapitalization. I ask as EPS, right, as you get smoother, your EPS is increasingly going to be a cashflow metric, which affects valuation, but it also, right, if you’re going to be generating earnings plus this $3 billion or so in land and whatever comes through WIP, it seems as though you will be forced into a systematic buyback program, which is an okay problem.
I’m just thinking of some of your peers have gotten deeply into a negative leverage position. Is that something that you’re thinking about avoiding and comment on the cash flow from less owned land? Thank you.
Stuart Miller: Jon, did you want to add something?
Jon Jaffe: Yeah, just on the gross margin question, everything we’re doing, as Stuart mentioned, is really driving to efficiencies. A big part of that efficiency is all aimed around how do we bring construction costs down for the benefit of affordability and for margins. And so, if we try to look at direct construction costs as percent of revenues, they are falling and that is helping support our margins even though we are aggressively managing the pace.
Stuart Miller: Okay. And to your more recent question, we think about the size of our stock buyback. We’re very focused on continuing to drive cash flow. You are correct. Our land owned and controlled relationship is an area of focus. The year supply is very much an area of focus. You’ve seen these numbers migrate from much higher to the point that they’re at now and we’re not finished. We recognize that there will be an additional level of cash that comes into the company. We don’t think it puts us in a bad position to end up with negative net to total cap — negative net debt to total cap. And we recognize that we will continue to be cash generative. We fully expect that. We think that at year-end, we’ll probably be in a better position than we are right now.
And so, without projecting, let me say, that we are very focused on stock buyback and using our capital strategically to position the company well, to have flexibility, to have liquidity for the opportunities that might present themselves for us as markets kind of adjust. But at the same time, our stock buyback program is front and center of the way that we’re thinking about our future.
Diane Bessette: And I guess I’d add, Ken, that just operationally we are focused on getting to the point where net income equals cash flow. We’re not there yet, but it is a focus. And then, what we do with that capital — cash flow is [indiscernible] answer, but I think it is a real goal for us to have those two equate. Not there yet, but it’s a goal.
Ken Zener: Thank you so much.
Stuart Miller: Why don’t we now take one last question.
Operator: Thank you. And our final question comes from John Lovallo from UBS. Please go ahead.
John Lovallo: Hi, guys. Thank you for fitting me in here. Maybe the first one, just going back to the 10% growth target for next year, curious how you’re thinking about community count in the context of that 10%. Are you expecting high-single digits, maybe low-double digits community count growth? Is this really going to be driven more by absorptions?
