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Investments in Unconsolidated Entities | 12 Months Ended
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Oct. 31, 2020
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] |
Equity Method Investments and Joint Ventures Disclosure | Investments in Unconsolidated EntitiesWe have investments in various unconsolidated entities and our ownership interest in these investments range from 15.8% to 50%. These entities, which are structured as joint ventures (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments, commercial space, and a hotel (“Rental Property Joint Ventures”), which includes our investment in Toll Brothers Realty Trust (the “Trust”); and (iv) invest in distressed loans and real estate and provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”). In fiscal 2020, 2019 and 2018, we recognized income from the unconsolidated entities in which we had an investment of $0.9 million, $24.9 million, and $85.2 million, respectively. The table below provides information as of October 31, 2020, regarding active joint ventures that we are invested in, by joint venture category ($ amounts in thousands):
| Land Development Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  | Gibraltar Joint Ventures |  | Total
Number of unconsolidated entities | 9 |  | 4 |  | 26 |  | 7 |  | 46
Investment in unconsolidated entities | $ | 127,690 |  |  | $ | 33,819 |  |  | $ | 247,049 |  |  | $ | 22,143 |  |  | $ | 430,701 |
Number of unconsolidated entities with funding commitments by the Company | 3 |  | — |  | 10 |  | 1 |  |  | 14
Company’s remaining funding commitment to unconsolidated entities | $ | 33,045 |  |  | $ | — |  |  | $ | 24,343 |  |  | $ | 17,601 |  |  | $ | 74,989 |
Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at October 31, 2020, regarding the debt financing obtained by category ($ amounts in thousands):
| Land Development Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  |  |  | Total
Number of joint ventures with debt financing | 4 |  | 1 |  | 23 |  |  |  | 28
Aggregate loan commitments | $ | 158,823 |  |  | $ | 30,953 |  |  | $ | 1,660,496 |  |  |  |  | $ | 1,850,272 |
Amounts borrowed under commitments | $ | 118,071 |  |  | $ | 30,953 |  |  | $ | 1,217,614 |  |  |  |  | $ | 1,366,638 |
More specific and/or recent information regarding our investments in and future commitments to these entities is provided below. New Joint Ventures The table below provides information on joint ventures entered into during fiscal 2020 ($ amounts in thousands):
| Land Development Joint Ventures | Rental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period | 1 | 7
Investment balance at October 31, 2020 | $ | 24,602 |  | $ | 80,448 |
The table below provides information on joint ventures entered into during fiscal 2019 ($ amounts in thousands):
| Land Development Joint Ventures | Rental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period | 1 | 10
Investment balance at October 31, 2019 | $ | 5,913 |  | $ | 49,691 |
Number of consolidated joint ventures entered into during the period | — |  | 4 |
Carrying value of consolidated joint ventures’ assets at October 31, 2019 | $ | — |  | $ | 124,988 |
Noncontrolling interests in consolidated joint ventures at October 31, 2019 | $ | — |  | $ | 37,832 |
Results of Operations and Intra-entity Transactions In fiscal 2020, 2019 and 2018, certain of our rental property joint ventures sold their underlying assets to unrelated parties or to our joint venture partner. In connection with these sales, we recognized gains of $10.7 million, $3.8 million, and $67.2 million, respectively, which is included in “Income from unconsolidated entities” in our Consolidated Statements of Operations and Comprehensive Income. In fiscal 2020, we recognized other-than-temporary impairment charges on a Home Building Joint Venture of $6.0 million. In fiscal 2019 and 2018, we recognized an other-than-temporary impairment charge on certain Land Development Joint Ventures of $1.0 million and $6.0 million, respectively. In fiscal 2020, 2019 and 2018, purchases from unconsolidated entities principally related to our acquisition of lots from our Land Development Joint Ventures and were $17.6 million, $137.1 million, and $153.2 million, respectively. Our share of income from the lots we acquired was insignificant in each period. Sales to unconsolidated entities principally related to land sales to our Rental Property Joint Ventures for which we recognized gains in land sales and other revenues of $1.2 million, $9.4 million and $1.0 million in our fiscal 2020, 2019 and 2018, Consolidated Statements of Operations and Comprehensive Income, respectively. Guarantees The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we have guaranteed debt of unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity. In some instances, we and our joint venture partner have provided joint and several guarantees in connection with loans to unconsolidated entities. In these situations, we generally seek to implement a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed upon share of the guarantee; however, we are not always successful. In addition, if the joint venture partner does not have adequate financial resources to meet its obligations under such a reimbursement agreement, we may be liable for more than our proportionate share. We believe that, as of October 31, 2020, in the event we become legally obligated to perform under a guarantee of an obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the venture. Information with respect to certain of the Company’s unconsolidated entities’ outstanding debt obligations, loan commitments and our guarantees thereon are as follows ($ amounts in thousands):
| October 31, 2020 |  |  |
Loan commitments in the aggregate | $ | 1,508,300 |  |  |  |
Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed | $ | 229,300 |  |  |  |
Debt obligations borrowed in the aggregate | $ | 1,024,700 |  |  |  |
Our maximum estimated exposure under repayment and carry cost guarantees of the debt obligations borrowed | $ | 179,100 |  |  |  |
Estimated fair value of guarantees provided by us related to debt and other obligations | $ | 6,100 |  |  |  |
Terms of guarantees | 1 month - 3.5 years |  |  |
The maximum exposure estimates presented above do not take into account any recoveries from the underlying collateral or any reimbursement from our partners. We have not made payments under any of the guarantees, nor have we been called upon to do so. Variable Interest Entities The table below provide information as of October 31, 2020 and 2019, regarding our unconsolidated joint venture-related variable interests in VIEs ($ amounts in thousands):
| October 31, 2020 | October 31, 2019
Number of Joint Venture VIEs that the Company is not the Primary Beneficiary (“PB”) | 12 |  | 13 |
Investment balance in unconsolidated Joint Venture VIEs included in Investments in unconsolidated entities in our Consolidated Balance Sheets | $ | 63,100 |  | $ | 37,000 |
Our maximum exposure to losses related to loan guarantees and additional commitments provided to unconsolidated Joint Venture VIEs | $ | 122,100 |  | $ | 84,300 |
Our ownership interest in the above unconsolidated Joint Venture VIEs ranges from 20% to 50%. The table below provide information as of October 31, 2020 and 2019, regarding our consolidated joint venture-related variable interests in VIEs ($ amounts in thousands):
| Balance Sheet Classification | October 31, 2020 | October 31, 2019
Number of Joint Venture VIEs that the Company is the PB and consolidates |  | 5 |  | 5 |
Carrying value of consolidated VIEs assets | Receivables prepaid expenses, and other assets | $ | 163,000 |  | $ | 145,800 |
Our partners’ interests in consolidated VIEs | Noncontrolling interest | $ | 46,200 |  | $ | 41,000 |
Our ownership interest in the above consolidated Joint Venture VIEs ranges from 50% to 98%. As shown above, we have concluded we are the PB of certain VIEs due to our controlling financial interest in such ventures as we have the power to direct the activities that most significantly impact the joint ventures’ performance and the obligation to absorb expected losses or receive benefits from the joint ventures. The assets of these VIEs can only be used to settle the obligations of the VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to be funded to the joint ventures prior to the admission of any additional investor at a future date, we will fund 100% of such contributions, including our partner’s pro rata share, which we expect would be funded through an interest-bearing loan. For other VIEs, we have concluded that we are not the PB because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and such VIEs’ other partners or such activities were controlled by our partner. For VIEs where the power to direct significant activities is shared, business plans, budgets, and other major decisions are required to be unanimously approved by all members. Management and other fees earned by us are nominal and believed to be at market rates, and there is no significant economic disproportionality between us and other members. Subsequent events In November 2020, we entered into a joint venture with an unrelated party to develop a for-rent residential apartment project in Cambridge, Massachusetts. Prior to the formation of this venture, we acquired the property and incurred approximately $60.1 million of land and land development costs. Our partner acquired a 75% interest in this entity for approximately $49.2 million, of which $44.0 million was distributed to us. Our initial investment is $16.4 million. Concurrent with its formation, the joint venture entered into a $141.7 million construction loan agreement to finance the development of this project. We and an affiliate of our partner provided certain guarantees under the construction loan agreement. We estimate that our maximum exposure under recourse guarantees, if the full amount of the loan commitment was borrowed, would be the $28.3 million without taking into account any recoveries from the underlying collateral or any reimbursement from our partner. In December 2020, a Rental Property Joint Venture that we previously formed in fiscal 2018 secured a $160.0 million construction loan to finance the development of a project located in Washington, D.C. We and an affiliate of our partner provided certain guarantees under the construction loan agreement. We estimate that our maximum exposure under recourse guarantees, if the full amount of the loan commitment was borrowed, would be $24.0 million without taking into account any recoveries from the underlying collateral or any reimbursement from our partner. Joint Venture Condensed Financial Information The Condensed Balance Sheets, as of the dates indicated, and the Condensed Statements of Operations and Comprehensive Income, for the periods indicated, for the unconsolidated entities in which we have an investment, aggregated by type of business, are included below (in thousands). Condensed Balance Sheets:
| October 31, 2020
| Land Develop- ment Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  | Gibraltar Joint Ventures |  | Total
Cash and cash equivalents | $ | 24,330 |  |  | $ | 18,106 |  |  | $ | 64,244 |  |  | $ | 2,798 |  |  | $ | 109,478 |
Inventory | 303,960 |  |  | 198,260 |  |  | — |  |  | 8,780 |  |  | 511,000 |
Loan receivables, net | — |  |  | — |  |  | — |  |  | 78,576 |  |  | 78,576 |
Rental properties | — |  |  | — |  |  | 1,244,911 |  |  | — |  |  | 1,244,911 |
Rental properties under development | — |  |  | — |  |  | 666,386 |  |  | — |  |  | 666,386 |
Real estate owned | — |  |  | — |  |  | — |  |  | 6,752 |  |  | 6,752 |
Other assets | 108,289 |  |  | 21,930 |  |  | 38,851 |  |  | 298 |  |  | 169,368 |
Total assets | $ | 436,579 |  |  | $ | 238,296 |  |  | $ | 2,014,392 |  |  | $ | 97,204 |  |  | $ | 2,786,471 |
Debt, net of deferred financing costs | $ | 117,342 |  |  | $ | 30,116 |  |  | $ | 1,220,607 |  |  | $ | — |  |  | $ | 1,368,065 |
Other liabilities | 54,714 |  |  | 12,768 |  |  | 113,282 |  |  | 6,053 |  |  | 186,817 |
Members’ equity | 264,523 |  |  | 195,412 |  |  | 680,503 |  |  | 90,735 |  |  | 1,231,173 |
Noncontrolling interest | — |  |  | — |  |  | — |  |  | 416 |  |  | 416 |
Total liabilities and equity | $ | 436,579 |  |  | $ | 238,296 |  |  | $ | 2,014,392 |  |  | $ | 97,204 |  |  | $ | 2,786,471 |
Company’s net investment in unconsolidated entities (1) | $ | 127,690 |  |  | $ | 33,819 |  |  | $ | 247,049 |  |  | $ | 22,143 |  |  | $ | 430,701 |
| October 31, 2019
| Land Develop- ment Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  | Gibraltar Joint Ventures |  | Total
Cash and cash equivalents | $ | 23,669 |  |  | $ | 38,115 |  |  | $ | 20,647 |  |  | $ | 3,388 |  |  | $ | 85,819 |
Inventory | 247,866 |  |  | 313,991 |  |  | — |  |  | 17,369 |  |  | 579,226 |
Loan receivables, net | — |  |  | — |  |  | — |  |  | 56,545 |  |  | 56,545 |
Rental properties | — |  |  | — |  |  | 1,021,848 |  |  | — |  |  | 1,021,848 |
Rental properties under development | — |  |  | — |  |  | 535,197 |  |  | — |  |  | 535,197 |
Real estate owned | — |  |  | — |  |  | — |  |  | 12,267 |  |  | 12,267 |
Other assets | 96,602 |  |  | 78,916 |  |  | 36,879 |  |  | 364 |  |  | 212,761 |
Total assets | $ | 368,137 |  |  | $ | 431,022 |  |  | $ | 1,614,571 |  |  | $ | 89,933 |  |  | $ | 2,503,663 |
Debt, net of deferred financing costs | $ | 88,050 |  |  | $ | 132,606 |  |  | $ | 1,006,201 |  |  | $ | — |  |  | $ | 1,226,857 |
Other liabilities | 49,302 |  |  | 33,959 |  |  | 84,735 |  |  | 7,831 |  |  | 175,827 |
Members’ equity | 230,785 |  |  | 264,457 |  |  | 523,635 |  |  | 81,686 |  |  | 1,100,563 |
Noncontrolling interest | — |  |  | — |  |  | — |  |  | 416 |  |  | 416 |
Total liabilities and equity | $ | 368,137 |  |  | $ | 431,022 |  |  | $ | 1,614,571 |  |  | $ | 89,933 |  |  | $ | 2,503,663 |
Company’s net investment in unconsolidated entities (1) | $ | 110,306 |  |  | $ | 60,512 |  |  | $ | 174,292 |  |  | $ | 21,142 |  |  | $ | 366,252 |
(1) Differences between our net investment in unconsolidated entities and our underlying equity in the net assets of the entities amounted to $29.4 million and $30.9 million as of October 31, 2020 and 2019, respectively, and are primarily a result of other than temporary impairments related to our investments in unconsolidated entities; interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; unrealized gains on our retained joint venture interests; gains recognized from the sale of our ownership interests; and distributions from entities in excess of the carrying amount of our net investment. Condensed Statements of Operations and Comprehensive Income:
| For the year ended October 31, 2020
| Land Develop- ment Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  | Gibraltar Joint Ventures |  | Total
Revenues | $ | 87,174 |  |  | $ | 139,587 |  |  | $ | 111,122 |  |  | $ | 26,781 |  |  | $ | 364,664 |
Cost of revenues | 64,810 |  |  | 124,899 |  |  | 37,770 |  |  | 15,762 |  |  | 243,241 |
Other expenses | 2,948 |  |  | 15,731 |  |  | 117,419 |  |  | 1,505 |  |  | 137,603 |
Total expenses | 67,758 |  |  | 140,630 |  |  | 155,189 |  |  | 17,267 |  |  | 380,844 |
Gain on disposition of loans and REO | — |  |  | — |  |  | — |  |  | 1,053 |  |  | 1,053 |
Income (loss) from operations | 19,416 |  |  | (1,043) |  |  | (44,067) |  |  | 10,567 |  |  | (15,127) |
Other income (loss) | 3,061 |  |  | 536 |  |  | (448) |  |  | — |  |  | 3,149 |
Income (loss) before income taxes | 22,477 |  |  | (507) |  |  | (44,515) |  |  | 10,567 |  |  | (11,978) |
Income tax provision (benefit) | 188 |  |  | (254) |  |  | — |  |  | — |  |  | (66) |
Net income (loss) including earnings from noncontrolling interests | 22,289 |  |  | (253) |  |  | (44,515) |  |  | 10,567 |  |  | (11,912) |
Plus: loss attributable to noncontrolling interest | — |  |  | — |  |  | — |  |  | 48 |  |  | 48 |
Net income (loss) attributable to controlling interest | $ | 22,289 |  |  | $ | (253) |  |  | $ | (44,515) |  |  | $ | 10,615 |  |  | $ | (11,864) |
Company’s equity (deficit) in earnings of unconsolidated entities (2) | $ | 11,412 |  |  | $ | (3,424) |  |  | $ | (9,389) |  |  | $ | 2,349 |  |  | $ | 948 |
| For the year ended October 31, 2019
| Land Develop- ment Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  | Gibraltar Joint Ventures |  | Total
Revenues | $ | 261,677 |  |  | $ | 374,587 |  |  | $ | 99,401 |  |  | $ | 21,377 |  |  | $ | 757,042 |
Cost of revenues (3) | 246,980 |  |  | 323,764 |  |  | 68,502 |  |  | 13,234 |  |  | 652,480 |
Other expenses (3) | 4,752 |  |  | 24,633 |  |  | 58,928 |  |  | 1,880 |  |  | 90,193 |
Total expenses | 251,732 |  |  | 348,397 |  |  | 127,430 |  |  | 15,114 |  |  | 742,673 |
Gain on disposition of loans and REO | — |  |  | — |  |  | — |  |  | 4,383 |  |  | 4,383 |
Income (loss) from operations | 9,945 |  |  | 26,190 |  |  | (28,029) |  |  | 10,646 |  |  | 18,752 |
Other income | 3,079 |  |  | 6,144 |  |  | 16,651 |  |  | 12,793 |  |  | 38,667 |
Income (loss) before income taxes | 13,024 |  |  | 32,334 |  |  | (11,378) |  |  | 23,439 |  |  | 57,419 |
Income tax provision | 193 |  |  | 457 |  |  | — |  |  | — |  |  | 650 |
Net income (loss) including earnings from noncontrolling interests | 12,831 |  |  | 31,877 |  |  | (11,378) |  |  | 23,439 |  |  | 56,769 |
Less: income attributable to noncontrolling interest | — |  |  | — |  |  | — |  |  | (9,593) |  |  | (9,593) |
Net income (loss) attributable to controlling interest | $ | 12,831 |  |  | $ | 31,877 |  |  | $ | (11,378) |  |  | $ | 13,846 |  |  | $ | 47,176 |
Company’s equity (deficit) in earnings of unconsolidated entities (2) | $ | 6,160 |  |  | $ | 17,004 |  |  | $ | (824) |  |  | $ | 2,528 |  |  | $ | 24,868 |
| For the year ended October 31, 2018
| Land Develop- ment Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  | Gibraltar Joint Ventures |  | Total
Revenues | $ | 351,397 |  |  | $ | 148,002 |  |  | $ | 121,276 |  |  | $ | 19,592 |  |  | $ | 640,267 |
Cost of revenues (3) | 317,103 |  |  | 109,357 |  |  | 74,946 |  |  | 17,817 |  |  | 519,223 |
Other expenses (3) | 9,385 |  |  | 11,742 |  |  | 61,502 |  |  | 3,201 |  |  | 85,830 |
Total expenses | 326,488 |  |  | 121,099 |  |  | 136,448 |  |  | 21,018 |  |  | 605,053 |
Gain on disposition of loans and REO | — |  |  | — |  |  | — |  |  | 53,192 |  |  | 53,192 |
Income (loss) from operations | 24,909 |  |  | 26,903 |  |  | (15,172) |  |  | 51,766 |  |  | 88,406 |
Other income | 5,939 |  |  | 2,134 |  |  | 222,744 |  |  | 1,937 |  |  | 232,754 |
Income before income taxes | 30,848 |  |  | 29,037 |  |  | 207,572 |  |  | 53,703 |  |  | 321,160 |
Income tax provision | 86 |  |  | 767 |  |  | — |  |  | — |  |  | 853 |
Net income including earnings from noncontrolling interests | 30,762 |  |  | 28,270 |  |  | 207,572 |  |  | 53,703 |  |  | 320,307 |
Less: income attributable to noncontrolling interest | — |  |  | — |  |  | — |  |  | (28,297) |  |  | (28,297) |
Net income attributable to controlling interest | 30,762 |  |  | 28,270 |  |  | 207,572 |  |  | 25,406 |  |  | 292,010 |
Company’s equity in earnings of unconsolidated entities (2) | $ | 3,392 |  |  | $ | 14,069 |  |  | $ | 62,204 |  |  | $ | 5,575 |  |  | $ | 85,240 |
(2) Differences between our equity in earnings of unconsolidated entities and the underlying net income (loss) of the entities are primarily a result of distributions from entities in excess of the carrying amount of our investment; other than temporary impairments related to our investments in unconsolidated entities; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gained recognized from the sale of our investment to our joint venture partner; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired. (3) Effective October 31, 2020, we reclassified sales commissions paid to third-party brokers from home sales cost of revenues to selling, general and administrative expense. Prior year periods have been reclassified to conform to the 2020 presentation.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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