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Investments in Unconsolidated Entities | 9 Months Ended
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Jul. 31, 2024
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] |
Investments in Unconsolidated Entities | Investments in Unconsolidated Entities We have investments in various unconsolidated entities and our ownership interest in these investments ranges from 5.0% to 50%. These entities are structured as joint ventures and either: (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 and single family homes, commercial space, and a hotel (“Rental Property Joint Ventures”); or (iv) provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”). The table below provides information as of July 31, 2024, regarding active joint ventures that we were 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 | 15 |  | 2 |  | 42 |  | 2 |  | 61
Investment in unconsolidated entities (1) | $ | 373,025 |  |  | $ | 59,259 |  |  | $ | 539,587 |  |  | $ | 11,721 |  |  | $ | 983,592 |
Number of unconsolidated entities with funding commitments by the Company | 6 |  | — |  | 24 |  | 1 |  |  | 31
Company’s remaining funding commitment to unconsolidated entities (2) | $ | 157,809 |  |  | $ | — |  |  | $ | 85,678 |  |  | $ | 4,132 |  |  | $ | 247,619 |
(1) Our total investment includes $147.9 million related to nine unconsolidated joint venture-related variable interests in VIEs and our maximum exposure to losses related to these VIEs is approximately $366.7 million as of July 31, 2024, inclusive of our investment in these joint ventures. Our ownership interest in such unconsolidated Joint Venture VIEs ranges from 25% to 50%. (2) Our remaining funding commitment includes approximately $116.5 million related to our unconsolidated joint venture-related variable interests in VIEs. The table below provides information as of October 31, 2023, regarding active joint ventures that we were invested in, by joint venture category ($ amounts in thousands):
| Land Development Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  | Gibraltar Joint Ventures |  | Total
Number of unconsolidated entities | 16 |  | 2 |  | 43 |  | 3 |  | 64
Investment in unconsolidated entities (1) | $ | 351,154 |  |  | $ | 65,285 |  |  | $ | 531,823 |  |  | $ | 10,779 |  |  | $ | 959,041 |
Number of unconsolidated entities with funding commitments by the Company | 9 |  | — |  | 19 |  | 1 |  |  | 29
Company’s remaining funding commitment to unconsolidated entities (2) | $ | 204,438 |  |  | $ | — |  |  | $ | 184,266 |  |  | $ | 12,066 |  |  | $ | 400,770 |
(1) Our total investment includes $121.6 million related to 11 unconsolidated joint venture-related variable interests in VIEs and our maximum exposure to losses related to these VIEs is approximately $329.3 million as of October 31, 2023, inclusive of our investment in joint ventures. Our ownership interest in such unconsolidated Joint Venture VIEs ranges from 25% to 50%. (2) Our remaining funding commitment includes approximately $105.4 million related to our unconsolidated joint venture-related variable interests in VIEs. Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at July 31, 2024, regarding the debt financing obtained by category ($ amounts in thousands):
| Land Development Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |  |  |  | Total
Number of joint ventures with debt financing | 9 |  | 1 |  | 39 |  |  |  | 49
Aggregate loan commitments | $ | 539,589 |  |  | $ | 98,150 |  |  | $ | 3,603,148 |  |  |  |  | $ | 4,240,887 |
Amounts borrowed under loan commitments | $ | 384,172 |  |  | $ | 77,141 |  |  | $ | 2,655,333 |  |  |  |  | $ | 3,116,646 |
The table below provides information at October 31, 2023, 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 | 12 |  | 2 |  | 42 |  |  |  | 56
Aggregate loan commitments | $ | 610,758 |  |  | $ | 219,650 |  |  | $ | 3,731,847 |  |  |  |  | $ | 4,562,255 |
Amounts borrowed under loan commitments | $ | 445,506 |  |  | $ | 135,723 |  |  | $ | 2,152,872 |  |  |  |  | $ | 2,734,101 |
More specific and/or recent information regarding our investments in, advances to, and future commitments to these entities is provided below. New Joint Ventures
There were no new joint ventures entered into during the nine-months ended July 31, 2024. The table below provides information on joint ventures entered into during the nine-months ended July 31, 2023 ($ amounts in thousands):
| Land Development Joint Ventures |  | Home Building Joint Ventures |  | Rental Property Joint Ventures |
Number of unconsolidated joint ventures entered into during the period | 1 |  | $ | — |  |  | 3 |  |
Investment balance at July 31, 2023 | $ | 12,808 |  |  | $ | — |  |  | $ | 7,096 |  |
Number of consolidated joint ventures entered into during the period | — |  |  | 1 |  |  | 1 |  |
Carrying value of consolidated joint ventures’ assets at July 31, 2023 | $ | — |  |  | $ | 5,000 |  |  | $ | 10,604 |  |
Noncontrolling interests in consolidated joint ventures at July 31, 2023 | $ | — |  |  | $ | 835 |  |  | $ | 2,651 |  |
Results of Operations and Intra-entity Transactions From time to time, certain of our land development and rental property joint ventures sell assets to unrelated parties or to our joint venture partners. In the nine-month period ended July 31, 2024, one of our Rental Property Joint Ventures sold its assets and we recognized $21.0 million in “Income (loss) from unconsolidated entities” on our Condensed Consolidated Statements of Operations and Comprehensive Income. No similar transactions occurred in the three-month period ended July 31, 2024. In the three-month and nine-month periods ended July 31, 2023, one of our joint ventures sold its assets and we recognized $35.0 million in “Income (loss) from unconsolidated entities” on our Condensed Consolidated Statements of Operations and Comprehensive Income In the three-month periods ended July 31, 2024 and 2023, we purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling $29.8 million and $25.7 million, respectively. In the nine-month periods ended July 31, 2024 and 2023, we purchased land from unconsolidated entities, principally related to our acquisition of lots from our Land Development Joint Ventures, totaling $91.7 million and $94.8 million, respectively. Our share of income from the lots we acquired was insignificant in each period. In the nine-month periods ended July 31, 2023, we sold land to unconsolidated entities, which principally involved land sales to our Rental Property Joint Ventures, for $8.2 million. This amount is included in “Land sales and other revenue” on our Condensed Consolidated Statements of Operations and Comprehensive Income and are generally sold at or near our land basis. No similar land sales to unconsolidated entities occurred in the three-month or nine-month periods ended July 31, 2024 or the three-month period ended July 31, 2023. 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 portions of the 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 or its partners. 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 July 31, 2024, 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):
| July 31, 2024 | October 31, 2023 |  |  |
Loan commitments in the aggregate | $ | 3,099,500 |  | $ | 3,341,700 |  |  |  |
Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed (1) | $ | 665,500 |  | $ | 688,000 |  |  |  |
Debt obligations borrowed in the aggregate | $ | 2,118,100 |  | $ | 1,643,600 |  |  |  |
Our maximum estimated exposure under repayment and carry cost guarantees of the debt obligations borrowed | $ | 569,500 |  | $ | 544,100 |  |  |  |
Estimated fair value of guarantees provided by us related to debt and other obligations | $ | 18,000 |  | $ | 19,500 |  |  |  |
Terms of guarantees | 1 month - 3.3 years | 1 month - 4.0 years |  |  |
(1) At July 31, 2024 and October 31, 2023, our maximum estimated exposure under repayment and carry cost guarantees includes approximately $102.3 million related to our unconsolidated joint venture VIEs. The maximum exposure estimates presented above do not take into account any recoveries from the underlying collateral or any reimbursement from our partners, nor do they include any potential exposures related to project completion guarantees or the indemnities noted above, which are not estimable. We have not made payments under any of the outstanding guarantees, nor have we been called upon to do so. Variable Interest Entities We have both unconsolidated and consolidated joint venture-related variable interests in VIEs. Information regarding our involvement in unconsolidated joint-venture related variable interests in VIEs has been disclosed throughout information presented above. The table below provides information as of July 31, 2024 and October 31, 2023, regarding our consolidated joint venture-related variable interests in VIEs ($ amounts in thousands):
| Balance Sheet Classification | July 31, 2024 | October 31, 2023
Number of Joint Venture VIEs that the Company is the primary beneficiary and consolidates |  | 5 |  | 5 |
Carrying value of consolidated VIEs assets | Receivables, prepaid expenses and other assets and Investments in unconsolidated entities | $ | 104,600 |  | $ | 89,600 |
Our partners’ interests in consolidated VIEs | Noncontrolling interest | $ | 10,200 |  | $ | 10,200 |
Our ownership interest in the above consolidated Joint Venture VIEs ranges from 75% to 98%. As shown above, we are the primary beneficiary 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 are not the primary beneficiary because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and such VIE’s 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 partners. 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 partners. Joint Venture Condensed Combined Financial Information The Condensed Combined Balance Sheets, as of the dates indicated, and the Condensed Combined Statements of Operations, for the periods indicated, for the unconsolidated entities in which we have an investment are included below (in thousands): Condensed Combined Balance Sheets:
| July 31, 2024 |  | October 31, 2023
Cash and cash equivalents | $ | 217,515 |  |  | $ | 161,274 |
Inventory | 1,266,323 |  |  | 1,425,145 |
Loans receivable – net | 26,355 |  |  | 17,024 |
Rental properties | 2,827,765 |  |  | 1,907,604 |
Rental properties under development | 1,565,392 |  |  | 1,804,664 |
Other assets | 473,781 |  |  | 385,197 |
Total assets | $ | 6,377,131 |  |  | $ | 5,700,908 |
Debt – net of deferred financing costs | $ | 3,120,781 |  |  | $ | 2,711,986 |
Other liabilities | 480,102 |  |  | 498,866 |
Partners’ equity | 2,776,248 |  |  | 2,490,056 |
Total liabilities and equity | $ | 6,377,131 |  |  | $ | 5,700,908 |
Company’s net investment in unconsolidated entities (1) | $ | 983,592 |  |  | $ | 959,041 |
(1) Our underlying equity in the net assets of the unconsolidated entities was less than our net investment in unconsolidated entities by $9.7 million and $40.9 million as of July 31, 2024 and October 31, 2023, respectively, and these differences are primarily a result of interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; distributions from entities in excess of the carrying amount of our net investment; unrealized gains on our retained joint venture interests; other than temporary impairments we have recognized; and gains recognized from the sale of our ownership interests. Condensed Combined Statements of Operations:
| Three months ended July 31, |  | Nine months ended July 31,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 286,981 |  |  | $ | 186,669 |  |  | $ | 571,512 |  |  | $ | 429,647 |
Cost of revenues | 199,012 |  |  | 124,414 |  |  | 365,813 |  |  | 266,593 |
Other expenses | 71,271 |  |  | 67,195 |  |  | 210,670 |  |  | 187,336 |
Total expenses | 270,283 |  |  | 191,609 |  |  | 576,483 |  |  | 453,929 |
Income (loss) from operations | 16,698 |  |  | (4,940) |  |  | (4,971) |  |  | (24,282) |
Other income (2) | 45,543 |  |  | 79,857 |  |  | 155,452 |  |  | 76,251 |
Income before income taxes | 62,241 |  |  | 74,917 |  |  | 150,481 |  |  | 51,969 |
Income tax expense | 4,468 |  |  | 1,195 |  |  | 2,119 |  |  | 1,030 |
Net income | 57,773 |  |  | 73,722 |  |  | 148,362 |  |  | 50,939 |
Company’s (loss) income from unconsolidated entities (3) | $ | (10,514) |  |  | $ | 30,548 |  |  | $ | (13,799) |  |  | $ | 20,813 |
(2) The nine months ended July 31, 2024 includes $112.7 million related to the gain on the sale of assets by one of our Rental Property Joint Ventures. The three and nine months ended July 31, 2023 includes gains of $78.8 million related to the sale of assets by one of our Rental Property Joint Ventures. (3) Differences between our loss from unconsolidated entities and our percentage interest in the underlying net income (loss) of the entities are generally a result of distributions from entities in excess of the carrying amount of our investment; promote earned on the gains recognized by joint ventures and those promoted cash flows being distributed; other than temporary impairments we have recognized; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gains recognized from the sale of our investment to our joint venture partner; our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired; and amortization of other basis differences.

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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/recommendedDisclosureRef -Topic 740 -SubTopic 323 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478156/740-323-50-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481687/323-10-50-3 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481687/323-10-50-3 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 323 -Publisher FASB -URI https://asc.fasb.org/323/tableOfContent + Details
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