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DEBT ASSOCIATED WITH THE SINGLE-FAMILY RENTAL HOME NOTE PAYABLE AND OTHER LONG-TERM OBLIGATIONS | 3 Months Ended
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Nov. 30, 2021
DEBT ASSOCIATED WITH THE SINGLE-FAMILY RENTAL HOME NOTE PAYABLE AND OTHER LONG-TERM OBLIGATIONS [Abstract] |
DEBT ASSOCIATED WITH THE SINGLE-FAMILY RENTAL HOME NOTE PAYABLE AND OTHER LONG-TERM OBLIGATIONS | NOTE 6 – DEBT ASSOCIATED WITH THE SINGLE-FAMILY RENTAL HOME NOTE PAYABLE AND OTHER LONG-TERM OBLIGATIONS Single-Family Rental Home Note Payable On November 29, 2021, PCY Holdings, LLC a wholly owned subsidiary of the Company entered a Promissory Note (SFR Note) to reimburse amounts expended for the construction of the first three single-family rental units. The SFR note has the following terms:
| ● | Initial principal amount of $1.0 million
| ● | Floating per annum interest rate equal to the Western Edition of the “Wall Street Journal” Prime Rate plus 0.5% (3.75% as of November 30, 2021), which has a floor of 3.75% and a ceiling of 4.25%. In the event of default, the interest rate on the SFR Note would be increased by adding an additional 2.0%
| ● | Maturity date of December 1, 2026
| ● | Six interest only payments beginning January 1, 2022
| ● | Fifty-three principal and interest payments each month beginning July 1, 2022 in the amount of $4,633.05 each
| ● | Estimated final principal and interest balloon payment of $916,239.49 payable on December 1, 2026
| ● | Secured by the three single-family rental homes
| ● | Required minimum debt service coverage ratio of 1.10, measured annually based on audited financial statements, calculated as net operating income less distributions divided by required principal and interest payments, with net operating income defined as net income plus interest, depreciation, and amortization.
​ The scheduled maturities of the SFR Note for each of the twelve-month periods ending November 30 are as follows (in thousands):
​ | ​ | ​
​ | ​ | Scheduled principal payments
2022 | $ | 7
2023 | ​ | 19
2024 | ​ | 19
2025 | ​ | 20
2026 | ​ | 19
Thereafter | ​ | 916
​ | $ | 1,000
​ | ​ | ​
​ Lot Construction Obligations In October 2020, November 2020, and February 2021, the Company entered separate contracts with KB Home, Melody (a DR Horton Company), Challenger Homes, and Lennar Colorado, LLC to sell 804 single-family attached and detached residential lots at Sky Ranch. This is the second development phase of Sky Ranch which incorporates approximately 250 acres, will be completed in four sub-phases, and is platted to include a total of 850 residential lots. The 46 lots not currently under contract to home builders are being retained for use in the Company’s single-family rental business. Pursuant to the contracts with the homebuilders, the Company and the Sky Ranch CAB are obligated to complete all construction activities required to deliver finished lots (i.e. lots ready for home construction) to the builders, including but not limited to grading, construction of wet and dry utilities, streets, curbs, and landscaping. In February 2021, the Company began construction on the first subphase of the second development phase, which includes a total of 229 lots, 10 of which are being retained for use in the single-family rental business, and 219 of which are sold under contracts to the four homebuilders listed above. As of November 30, 2021, the Company received plats for all 229 lots and has substantially completed grading and all wet utilities, with construction of streets, sidewalks, and dry utilities underway. We expect to deliver the first 219 completed lots to the homebuilders during the summer of 2022. From the start of the second development phase through November 30, 2021, the Company has spent $8.8 million on construction activities in the second development phase, of which $6.8 million was for public improvements which the Company expects to be reimbursed by the Sky Ranch CAB. In the next eighteen months the Company anticipates spending an additional $11.7 million to complete 229 finished lots, including the 10 lots for the single-family rental business, in the first subphase of the second development phase, of which $10.4 million is estimated to be for public improvements which the Company believes will be reimbursed by the Sky Ranch CAB. The Company believes it will take three years to complete construction for all 850 lots included in the four subphases of the second development phase and sell the 804 finished lots depending on the market conditions and permitting process.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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