ALJ/MFG/jt2 Date of Issuance 9/21/2007

Decision 07-09-026 September 20, 2007

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Lennar Corporation, LNR Property Corporation, LNR NWHL Holdings, Inc., Lennar Holmes of California, Inc., LNR Land Partners Sub, LLC, MW Housing Partners III, L.P., MW Housing Management III, LLC, MacFarlane Housing, LLC, MacFarlane Partners Investment Management, LLC, MacFarlane Partners, LLC, WRI CP Investments III LLC, Weyerhaeuser Realty Investors, Inc., LandSource Holding Company, LLC, and Valencia Water Company (U-342-W) for Authority for MW Housing Partners III, L.P., MW Housing Management III, LLC, MacFarlane Housing, LLC, MacFarlane Partners Investment Management, LLC, MacFarlane Partners, LLC, WRI CP Investments III LLC, Weyerhaeuser Realty Investors, Inc., Lennar Homes of California, Inc., LNR Land Partners Sub, LLC, and LandSource Holding Company, LLC to Obtain Indirect Control over Valencia Water Company.

Application 07-02-019 (Filed February 16, 2007)

ORDER GRANTING APPROVAL OF INDIRECT TRANSFER OF CONTROL

TABLE OF CONTENTS

Title Page

ORDER GRANTING APPROVAL OF INDIRECT TRANSFER OF CONTROL 22

1. Summary 22

2. Jurisdiction 22

2.1. Section 854(a) 22

2.2. Section 854(b) and (c) 33

2.3. Section 854(d) 33

3. The Primary Parties 33

3.1. Lennar 44

3.2. LNR 44

3.3. LandSource 55

3.4. Newhall 55

3.5. Valencia 55

3.6. MWHP 66

4. Proposed Transaction 66

5. Reason for Transfer of Indirect Control 77

6. Protests 77

6.1. Prehearing Conference (PHC) 77

6.2. Issues 88

6.2.1. Valencia's Operating Agreement 88

6.2.2. Financial Statements 99

6.2.3. Affiliated Transaction Rules & Conditions 1010

7. Public Interest 1212

8. Environmental Assessment 1212

9. Categorization and Need for Hearing 1313

10. Comments on Proposed Decision 1313

11. Assignment of Proceeding 1313

Findings of Fact 1313

Conclusions of Law 1414

Appendix A: Post Transaction Lines of Voting Control

Appendix B: Conditions of Approval of Transfer of Control

Appendix C: Affiliated Interest Transaction Rules

Appendix D: Pre-Transaction Lines of Voting Control

ORDER GRANTING APPROVAL OF INDIRECT TRANSFER OF CONTROL

1. Summary

This decision authorizes MW Housing Partners III, L.P. (MWHP) to acquire a 50% indirect control over Valencia Water Company (Valencia) through a transfer of half of Lennar Corporation (Lennar) and half of LNR Property Corporation's (LNR) respective 50% indirect control over Valencia to MWHP.