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Homebuilding debt and other affiliate debt | 12 Months Ended
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Dec. 31, 2024
Debt Disclosure [Abstract] |
Homebuilding debt and other affiliate debt | Note 9 - Debt The following table and descriptions summarize the amounts outstanding under the Company’s Homebuilding debt and other affiliate debt, and Term Loan as of December 31, 2024 and 2023:
| December 31, 2024
| Weighted average interest rate |  | Outstanding Balance |  |  |  |
Homebuilding debt and other affiliate debt |  |  |  |  |  |  |
Wells Fargo Bank | 8.41 | % |  | $ | 13,594,807 |  |  |  |  |
Regions Bank | 8.41 | % |  | 11,503,298 |  |  |  |  |
Flagstar Bank | 8.41 | % |  | 10,457,543 |  |  |  |  |
United Bank | 8.41 | % |  | 8,366,035 |  |  |  |  |
Third Coast Bank | 8.41 | % |  | 6,274,525 |  |  |  |  |
Total homebuilding debt and other affiliate debt |  |  | $ | 50,196,208 |  |  |  |  |
Term Loan, net | 11.70 | % |  | $ | 67,150,116 |  |  |  |  |
| December 31, 2023
| Weighted average interest rate |  | Homebuilding Debt - Wells Fargo Syndication |  | Private Investor Debt |  | Total
Wells Fargo Bank | 8.13 | % |  | $ | 20,907,306 |  |  | $ | — |  |  | $ | 20,907,306 |
Regions Bank | 8.13 | % |  | 17,690,798 |  |  | — |  |  | 17,690,798 |
Flagstar Bank | 8.13 | % |  | 16,082,543 |  |  | — |  |  | 16,082,543 |
United Bank | 8.13 | % |  | 12,866,035 |  |  | — |  |  | 12,866,035 |
Third Coast Bank | 8.13 | % |  | 9,649,526 |  |  | — |  |  | 9,649,526 |
Other Notes Payable |  |  | — |  |  | 3,255,221 |  |  | 3,255,221 |
Total homebuilding debt and other affiliate debt |  |  | $ | 77,196,208 |  |  | $ | 3,255,221 |  |  | $ | 80,451,429 |
Homebuilding debt and Other Affiliate debt Homebuilding Debt - Wells Fargo Syndication Prior to the Business Combination, Legacy UHG, jointly with its Other Affiliates considered to be under common control, entered into debt arrangements with financial institutions. These debt arrangements were in the form of revolving lines of credit and were generally secured by land (developed lots and undeveloped land) and homes (under construction and finished). Legacy UHG and certain related Other Affiliates were collectively referred to as the Nieri Group. The Nieri Group entities were jointly and severally liable for the outstanding balances under the revolving lines of credit, however, Legacy UHG was deemed the primary obligor. Legacy UHG was considered the primary legal obligor of such debt as it was the sole cash generating entity and responsible for repayment of the debt. A portion of the revolving lines of credit were drawn down for the sole operational benefit of the Nieri Group and Other Affiliates outside of Legacy UHG (“Other Affiliates’ debt”). During years ended December 31, 2024 and 2023, Other Affiliates borrowed zero and $136,773, respectively. These amounts are presented on the Consolidated Statements of Cash Flows, financing activities section, with borrowings presented as Proceeds from Other Affiliate debt and repayments as Repayments of Other Affiliate debt. On February 27, 2023, Legacy UHG paid off Wells Fargo debt associated with Other Affiliates in the amount of $8,340,545 and on February 28, 2023, Legacy UHG was released as a co-obligor from the Anderson Brothers debt associated with Other Affiliates in anticipation of the Business Combination. As a result there is no remaining debt balance associated with Other Affiliates as of December 31, 2024 and 2023. Post Business Combination, the Company no longer enters into debt arrangements with Other Affiliates of Legacy UHG. As discussed further below, in connection with the Business Combination, the Wells Fargo Syndication line was amended and restated to exclude any members of the Nieri Group and Other Affiliates of Legacy UHG from the borrower list. In July 2021, the Nieri Group entities entered into a $150,000,000 Syndicated Credit Agreement (“Syndicated Line”) with Wells Fargo Bank, National Association (“Wells Fargo”). The Syndicated Line was a three-year revolving credit facility with a maturity date of July 2024, and an option to extend the maturity date for one year that could be exercised upon approval from Wells Fargo. The Syndicated Line also included a $2,000,000 letter of credit as a sub-facility subjected to the same terms and conditions as the Syndicated Line. The Syndicated Line was amended and restated (“First Amendment”) on March 30, 2023 (“Amendment Date”) in connection with the Business Combination and made GSH the sole borrower of the Syndicated Line. An additional amendment and restatement (“Second Amendment”) was entered into on August 10, 2023 in which UHG became a co-borrower of the Syndicated Line, the maximum borrowing capacity was increased to $240,000,000, and the maturity date was extended to August 10, 2026. In addition, Wells Fargo Bank and Regions Bank increased their participation in the Syndicated Line, three lenders exited the Syndicated Line, and three lenders joined as new participants of the Syndicated Line. On December 22, 2023 the Company entered into the First Amendment to the Second Amended and Restated Credit Agreement and amended two financial covenants. On January 26, 2024, the Company entered into the Second Amendment to the Second Amended and Restated Credit Agreement. As a result of this amendment the Company established a process for the joinder of additional subsidiary borrowers of the Company, and Rosewood was joined, jointly and severally with the Company and GSH, as a borrower to the Syndicated Line. On August 2, 2024 (the “Third Amendment Effective Date”), the Company entered into the Third Amendment to the Second Amended and Restated Credit Agreement and Omnibus Amendment to Loan Documents (“Third Amendment”) which extended the maturity date to August 2, 2027 except with respect to two non-extending lenders (representing $73,333,333 of the committed amount), reduced the borrowing capacity to $220,000,000, and amended three financial covenants. No other significant terms of the arrangements were changed as a result of these amendments other than those relating to the interest rate terms described below. The financial covenants referenced below are reflective of these amendments. The advances from the revolving construction line, reflected as Homebuilding debt - Wells Fargo Syndication, are used to build homes and are repaid incrementally upon individual home sales. The revolving construction line is collateralized by the homes under construction and developed lots. The revolving construction line is fully secured, and the availability of funds is based on the inventory value at the time of the draw request. Interest is accrued based on the total syndication balance and is paid monthly. As the average construction time for homes is less than one year, the Syndicated Line debt is considered short-term as of December 31, 2024 and 2023. The interest rates on the borrowings under the Syndicated Line vary based on the Company’s leverage ratio. In connection with the First Amendment, the benchmark interest rate was converted from a London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”), with no changes in the applicable rate margins. The interest rate is based on the greater of either LIBOR prior to Amendment Date or SOFR post Amendment Date plus an applicable margin (ranging from 275 basis points to 350 basis points) based on the Company’s leverage ratio as determined in accordance with a pricing grid, or the base rate plus the aforementioned applicable margin. The remaining availability to be drawn down, calculated in accordance with the Syndicated Line, was $96,425,200 as of December 31, 2024 and $24,398,576 as of December 31, 2023. The Company pays a fee ranging between 15 and 30 basis points per annum depending on the unused amount of the Syndicated Line. The fee is computed on a daily basis and paid quarterly in arrears. The Syndicated Line contains financial covenants, including (a) a minimum tangible net worth of no less than the sum of (i) $70 million, plus (ii) 25% of positive actual consolidated earnings earned in any fiscal quarter end, (iii) 100% of new equity contributed to the Company, (iv) 100% of any increase in tangible net worth resulting from an equity issuance upon the conversion or exchange of any security constituting indebtedness that is convertible or exchangeable, or is being converted or exchanged, for equity interests; and (v) 100% of the amount of any repurchase of equity interests in the Company, (b) a maximum leverage covenant that prohibits the leverage ratio from exceeding 2.25 to 1.00, except for up to two quarterly measurement periods in which the ratio shall not exceed 2.50 to 1.00 during the period beginning on the Third Amendment Effective Date and ending on December 31, 2025, (c) a minimum debt service coverage ratio of no less than 1.50 to 1.00 for the period from and after June 30, 2024 until June 30, 2025, and a minimum of 2.00 to 1.00 thereafter, and permits a minimum Debt Service Coverage Ratio of no less than 1.35 to 1.00 for up to two quarterly measurement periods during the period beginning on the Third Amendment Effective Date and ending on June 30, 2025, (d) a minimum liquidity amount of not less the greater of $37,500,000 from and after June 30, 2024, provided that during any period in which the debt service coverage ratio is less than 1.50 to 1.00, the minimum liquidity threshold will be at least (i) $45,000,000, or (ii) an amount equal to 1.50x the trailing twelve month interest incurred and (e) unrestricted cash of not less than $15,000,000 at all times. The Company was in compliance with all debt covenants as of December 31, 2024 and December 31, 2023. In connection with the amendments of the Syndicated Line, the Company incurred debt issuance costs, of which $1,846,473 has been deferred and is being amortized over the remaining life of the Syndicated Line. The amendments are accounted for as modifications of an existing line of credit under ASC 470, Debt, for any lenders that continue to participate in the Syndicated Line. As a result, any previously unamortized deferred costs related to those lenders will continue to be amortized over the remaining life of the Syndicated Line. For lenders that no longer participate or did not renew as of the Third Amendment Date, the Company expensed all or some of the remaining unamortized deferred costs associated with their portion of the Syndicated Line. The Company recognized $1,360,528 and $981,675 of amortized deferred financing costs within Other expense, net for the years ended December 31, 2024 and 2023, respectively. Outstanding deferred financing costs related to the Company’s Homebuilding debt were $3,456,314 and $2,970,369 as of December 31, 2024 and December 31, 2023, respectively, and are included in Prepaid expenses and other assets on the Consolidated Balance Sheets as the debt is a revolving arrangement. Private Investor Debt The Company had other borrowings with private investors totaling zero and $3,255,221 as of December 31, 2024 and December 31, 2023, respectively, which were comprised of other notes payable and mortgage loans acquired in the normal course of business. During the second quarter of 2024, the Company settled the remaining private investor debt and recognized a loss on extinguishment of debt amounting to $103,754. Term Loan Kennedy Lewis Credit Agreement On December 11, 2024, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, GSH, Kennedy Lewis Agency Partners, LLC, as administrative agent, and the lenders party thereto (the “Lenders”) pursuant to which the Lenders thereunder funded a $70,000,000 subordinated loan, the proceeds of which were used to redeem the outstanding Convertible Notes. See “Note 14 - Convertible Notes payable” for further details. The Credit Agreement provides for a Term Loan of $70,000,000 (the “Term Loan”) maturing on the earlier of (a) (i) December 11, 2030, or (ii) the maturity date as defined in the Company’s Second Amended and Restated Credit Agreement, dated as of August 10, 2023, as amended and (iii) the date on which the indebtedness pursuant to the Syndicated Line is accelerated in accordance with the terms of the WF Credit Agreement. As of December 31, 2024, the effective maturity date based on these provisions is August 2, 2027. At the election of the Company, the Term Loan will either be (i) a SOFR Loan or (ii) an Alternate Base Rate (“ABR”) Loan. Each SOFR Loan will bear interest for each day during each Interest Period at a rate per annum equal to (a) Adjusted Term SOFR (as defined by the Credit Agreement), plus (b) the applicable margin (ranging from 675 basis points to 775 basis points) based on the Company’s leverage ratio as determined in accordance with the pricing grid set forth in the Credit Agreement. The Company may elect from time to time to convert SOFR Loans to ABR Loans; provided that such conversion be made on the last day of an Interest Period with respect thereto. Additionally, the Company may elect from time to time to convert ABR Loans to SOFR Loans; provided that no such conversion can take place when any Event of Default has occurred and is continuing. As of December 31, 2024, the Term Loan under the Credit Agreement is classified as a SOFR Loan. The effective interest rate of the Credit Agreement is 12.67%. The Credit Agreement contains certain financial covenants, including (a) that the Company must maintain a minimum Tangible Net Worth of at least $70,000,000; (b) a maximum leverage covenant that prohibits the Consolidated Total Leverage Ratio of the Company and its Subsidiaries from exceeding 2.50 to 1.00 for any Fiscal Quarter (as determined on the last day of each Fiscal Quarter); provided that the Company may exceed such ratio in two instances from December 11, 2024 until December 31, 2025 so long as the Consolidated Total Leverage Ratio does not exceed 2.625 to 1.00 as of the last day of such Fiscal Quarter; (c) a minimum Debt Service Coverage Ratio of the Company and its Subsidiaries (as determined on the last day of each Fiscal Quarter) of (x) not less than 1.35 to 1.00 until June 30, 2025 and (y) thereafter to be greater than 1.50 to 1.00, provided that the Company and its Subsidiaries may allow such Debt Service Coverage Ratio to be less than 1.35 to 1.00 in two instances from December 11, 2024 until June 30, 2025 so long as the Debt Service Coverage Ratio is greater than or equal to 1.20 to 1.00 as of the last day of such Fiscal Quarter; and (d) that the Company maintain minimum Liquidity of not less than $20,000,000 and Unrestricted Cash of not less than $10,000,000 at all times. The Obligations of the Company under the Credit Agreement are guaranteed by the Company and secured by granting the Administrative Agent a security interest in 100% of Capital Stock of the Company. The Company was in compliance with all debt covenants as of December 31, 2024. The Term Loan was issued at an original issuance discount of $2,100,000, and the Company incurred debt issuance costs of $767,395 that were allocated to the Term Loan, resulting in net cash proceeds of $67,132,605.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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