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Variable Interest Entities | 12 Months Ended
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Dec. 31, 2022
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure [Abstract] |
Variable Interest Entities | Variable Interest Entities Lot Purchase Agreements We generally do not engage in land development. Instead, we typically acquire finished building lots from various third party land developers under LPAs. The LPAs require deposits that may be forfeited if we fail to perform under the LPAs. The deposits required under the LPAs are in the form of cash or letters of credit in varying amounts, and typically range up to 10% of the aggregate purchase price of the finished lots. We believe this lot acquisition strategy reduces the financial risks associated with direct land ownership and land development. We may, at our option, choose for any reason and at any time not to perform under these LPAs by delivering notice of our intent not to acquire the finished lots under contract. Our sole legal obligation and economic loss for failure to perform under these LPAs is limited to the amount of the deposit pursuant to the liquidated damage provisions contained within the LPAs. None of the creditors of any of the development entities with which we enter LPAs have recourse to our general credit. We generally do not have any specific performance obligations to purchase a certain number or any of the lots, nor do we guarantee completion of the development by the developer or guarantee any of the developers’ financial or other liabilities. We are not involved in the design or creation of the development entities from which we purchase lots under LPAs. The developer’s equity holders have the power to direct 100% of the operating activities of the development entity. We have no voting rights in any of the development entities. The sole purpose of the development entity’s activities is to generate positive cash flow returns for the equity holders. Further, we do not share in any of the profit or loss generated by the project’s development. The profits and losses are passed directly to the developer’s equity holders. The deposit placed by us pursuant to the LPA is deemed to be a variable interest in the respective development entities. Those development entities are deemed to be variable interest entities (“VIE”). Therefore, the development entities with which we enter into LPAs, including the joint venture limited liability corporations, discussed below, are evaluated for possible consolidation by us. An enterprise must consolidate a VIE when that enterprise has a controlling financial interest in the VIE. An enterprise is deemed to have a controlling financial interest if it has i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, and ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the rights to receive benefits from the VIE that could be significant to the VIE. We believe the activities that most significantly impact a development entity’s economic performance are the operating activities of the entity. Unless and until a development entity completes finished building lots through the development process to be able to sell, the process of which the development entity’s equity investors bear the full risk, the entity does not earn any revenues. The operating development activities are managed solely by the development entity’s equity investors. The development entities with which we contract to buy finished lots typically select the respective projects, obtain the necessary zoning approvals, obtain the financing required with no support or guarantees from us, select who will purchase the finished lots and at what price, and manage the completion of the infrastructure improvements, all for the purpose of generating a cash flow return to the development entity’s equity holders and all independent of us. We possess no more than limited protective legal rights through the LPA in the specific finished lots that we are purchasing, and we possess no participative rights in the development entities. Accordingly, we do not have the power to direct the activities of a developer that most significantly impact the developer’s economic performance. For this reason, we concluded that we are not the primary beneficiary of the development entities with which we enter into LPAs, and therefore we do not consolidate any of these VIEs. As of December 31, 2022, we controlled approximately 125,100 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $543,100 and $6,900, respectively. As noted above, our sole legal obligation and economic loss for failure to perform under these LPAs is limited to the amount of the deposit pursuant to the liquidated damage provisions contained in the LPAs and, in very limited circumstances, specific performance obligations. During 2022, we incurred pre-tax impairment charges on lot deposits of approximately $27,500 based on current market conditions. Our contract land deposit asset is shown net of a $57,060 and $30,041 impairment reserve at December 31, 2022 and December 31, 2021, respectively. In addition, we have certain properties under contract with land owners that are expected to yield approximately 19,300 lots, which are not included in the number of total lots controlled. Some of these properties may require rezoning or other approvals to achieve the expected yield. These properties are controlled with deposits in cash totaling approximately $10,100 as of December 31, 2022, of which approximately $2,500 is refundable if we do not perform under the contract. We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible. Our total risk of loss related to contract land deposits as of December 31, 2022 and 2021 was as follows:
|  | As of December 31,
|  | 2022 |  | 2021
Contract land deposits |  | $ | 553,140 |  |  | $ | 527,180 |
Loss reserve on contract land deposits |  | (57,060) |  |  | (30,041) |
Contract land deposits, net |  | 496,080 |  |  | 497,139 |
Contingent obligations in the form of letters of credit |  | 6,896 |  |  | 10,145 |
Total risk of loss |  | $ | 502,976 |  |  | $ | 507,284 |

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI https://asc.fasb.org/topic&trid=2197479 + Details
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- References No definition available. + Details
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