Note 4 - Real Estate Inventories

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Real Estate Disclosure [Text Block]

4. Real Estate Inventories

Real estate inventories are summarized as follows:

	March 31,		December 31,
	2020		2019
	(Dollars in thousands)
Deposits and pre-acquisition costs	$	16,880	$	17,865
Land held and land under development		168,672		180,823
Homes completed or under construction		154,430		183,711
Model homes		58,991		51,539
	$	398,973	$	433,938

All of our deposits and pre-acquisition costs are nonrefundable, except for refundable deposits of $0.1 million and $0.1 million as of  March 31, 2020 and December 31, 2019, respectively.

Land held and land under development includes land costs and costs incurred during site development such as development, indirects, and permits. Homes completed or under construction and model homes include all costs associated with home construction, including allocated land, development, indirects, permits, materials and labor (except for capitalized selling and marketing costs, which are classified in other assets).

In accordance with ASC 360, inventory is stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to its fair value. We review each real estate asset at the community-level on a quarterly basis or whenever indicators of impairment exist.  For the three months ended March 31, 2020 and 2019, the Company recognized no real estate-related impairments. 

During the 2020 first quarter, the Company terminated its option agreement for a luxury condominium project in Scottsdale, Arizona. Due to the lower demand levels experienced at this community coupled with the substantial investment required to build out the remainder of the project, the Company decided to abandon the future acquisition, development, construction and sale of future phases of the project that were under option. In accordance with ASC 970-360-40-1, the capitalized costs related to the project are expensed and not allocated to other components of the project that the Company did develop. For the three months ended March 31, 2020, the Company recorded an abandonment charge of $14.0 million representing the capitalized costs that have accumulated related to the portion of the project that is being abandoned.  This charge is included within project abandonment costs in the accompanying condensed consolidated statement of operations.