Commitments and Contingencies

The Company’s commitments and contingent liabilities include the usual obligations incurred by real estate developers in the normal course of business. In the opinion of management, these matters will not have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

The Company is a defendant in various lawsuits related to its normal business activities. We believe that the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are adequate and that, as of March 31, 2018, it was not reasonably possible that an additional material loss had been incurred in an amount in excess of the estimated amounts already recognized on our condensed consolidated financial statements. We evaluate our accruals for litigation and regulatory proceedings, and as appropriate, adjust them to reflect (i) the facts and circumstances known to us at the time, including information regarding negotiations, settlements, rulings and other relevant events and developments; (ii) the advice and analyses of counsel; and (iii) the assumptions and judgment of management. Similar factors and considerations are used in establishing new accruals for proceedings as to which losses have become probable and reasonably estimable at the time an evaluation is made. The outcome of any of these proceedings, including the defense and other litigation-related costs and expenses we may incur, however, is inherently uncertain and could differ significantly from the estimate reflected in a related accrual, if made. Therefore, it is possible that the ultimate outcome of any proceeding, if in excess of a related accrual or if no accrual had been made, could be material to our consolidated financial statements.

The Company had outstanding performance and surety bonds of $239.0 million at March 31, 2018, related principally to its obligations for site improvements at various projects. The Company does not believe that draws upon these bonds, if any, will have a material effect on the Company’s financial position, results of operations or cash flows. As of March 31, 2018, the Company had $453.8 million of project commitments relating to the construction of projects.

See Note 7 for additional information relating to the Company’s guarantee arrangements.

In addition to the land bank agreement discussed below, the Company has entered into various purchase option agreements with third parties to acquire land. As of March 31, 2018, the Company has made non-refundable deposits of $92.1 million. The Company is under no obligation to purchase the land, but would forfeit remaining deposits if the land were not purchased. The total remaining purchase price under the option agreements is $996.4 million as of March 31, 2018.

Land Banking Arrangements

The Company enters into purchase agreements with various land sellers. As a method of acquiring land in staged takedowns, thereby minimizing the use of funds from the Company’s available cash or other corporate financing sources and limiting the Company’s risk, the Company transfers the Company’s right in such purchase agreements to entities owned by third parties (“land banking arrangements”). These entities use equity contributions and/or incur debt to finance the acquisition and development of the land. The entities grant the Company an option to acquire lots in staged takedowns. In consideration for this option, the Company makes a non-refundable deposit of 15% to 25% of the total purchase price. The Company is under no obligation to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to penalties if the lots were not purchased. The Company does not have legal title to these entities or their assets and has not guaranteed their liabilities. These land banking arrangements help the Company manage the financial and market risk associated with land holdings. As discussed above, with exception of the arrangement discussed below, these amounts are included in the total remaining purchase price mentioned above.

The Company participated in one land banking arrangement during the three months ended March 31, 2018, which was not a VIE in accordance with ASC 810, but which is consolidated in accordance with FASB ASC Topic 470, Debt (“ASC 470”). Under the provisions of ASC 470, the Company had determined it is economically compelled, based on certain factors, to purchase the land in the land banking arrangement. Therefore, the Company has recorded the remaining purchase price of the land of $282.2 million as of March 31, 2018, which was included in Real estate inventories not owned and Liabilities from inventories not owned in the accompanying balance sheet.

Summary information with respect to the Company’s land banking arrangements is as follows as of the period presented (dollars in thousands):



	March 31, 2018
Total number of land banking projects	1
Total number of lots	3,053
Total purchase price	$	316,452
Balance of lots still under option and not purchased:
Number of lots	3,053
Purchase price	$	316,452
Forfeited deposits if lots are not purchased	$	34,283

Lease Obligations

Lease obligations, as included in Accrued expenses on the consolidated balance sheets, were $14.8 million as of March 31, 2018 and $14.5 million as of December 31, 2017. The Company has non-cancelable operating leases primarily associated with office facilities, real estate and office equipment, in addition to one related sublease for an office facility. The determination of which discount rate to use when measuring the lease obligation was deemed a significant judgment. Lease cost, as included in general and administrative expense in our consolidated statements of operations for the respective periods, and additional information regarding lease terms are as follows (dollars in thousands):



	Three Months Ended March 31, 2018			Three Months Ended March 31, 2017
Lease cost
Operating lease cost	$	2,009		$	959
Sublease income	(29		)	(29		)
Total lease cost	$	1,980		$	930

Other information
Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows	$	1,767		$	873
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,696		$	4,650
Weighted-average discount rate	6.4		%	6.6		%



	March 31, 2018	December 31, 2017
Weighted-average remaining lease term (in years)	3.34	3.58

The table below shows the future minimum payments under non-cancelable operating leases at March 31, 2018 (in thousands).



Year Ending December 31,
Remaining in 2018	$	6,093
2019	5,352
2020	4,031
2021	3,733
2022	2,476
Thereafter	1,992
Total	$	23,677