Note 5 - Capitalized Interest

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Capitalized Interest [Text Block]

5. Capitalized Interest

Interest is capitalized to inventory and investment in unconsolidated joint ventures during development and other qualifying activities. Interest capitalized as a cost of inventory is included in cost of sales as related homes and land parcels are closed. Interest capitalized to investment in unconsolidated joint ventures is amortized to equity in net income (loss) of unconsolidated joint ventures as related joint venture homes or lots close, or in instances where lots are sold from the unconsolidated joint venture to the Company, the interest is added to the land basis and included in cost of sales when the related lots or homes are sold to third-party buyers. Interest expense is comprised of interest incurred but not capitalized and is reported as interest expense in our condensed consolidated statements of operations.  For the three months ended March 31, 2020 and 2019 interest incurred, capitalized and expensed was as follows:

	Three Months Ended March 31,
	2020			2019
	(Dollars in thousands)
Interest incurred	$	6,380		$	7,761
Interest capitalized to inventory		(5,662	)		(7,761	)
Interest expensed	$	718		$	—
Capitalized interest in beginning inventory	$	26,397		$	25,681
Interest capitalized as a cost of inventory		5,662			7,761
Capitalized interest transferred from investment in unconsolidated joint ventures to inventory upon lot acquisition		—			10
Previously capitalized interest included in cost of home and land sales		(6,146	)		(4,852	)
Previously capitalized interest included in project abandonments costs		(761	)		—
Capitalized interest in ending inventory	$	25,152		$	28,600
Capitalized interest in beginning investment in unconsolidated joint ventures	$	541		$	713
Capitalized interest transferred from investment in unconsolidated joint ventures to inventory upon lot acquisition		—			(10	)
Previously capitalized interest included in equity in net income (loss) of unconsolidated joint ventures		(448	)		(31	)
Capitalized interest in ending investment in unconsolidated joint ventures		93			672
Total capitalized interest in ending inventory and investments in unconsolidated joint ventures	$	25,245		$	29,272
Capitalized interest as a percentage of inventory		6.3	%		5.1	%
Interest included in cost of home sales as a percentage of home sales revenue		6.5	%		4.9	%
Capitalized interest as a percentage of investment in and advances to unconsolidated joint ventures		0.3	%		2.0	%

For the three months ended March 31, 2020, the Company expensed $0.8 million in interest previously capitalized due to the abandonment of the future phases of one of its existing homebuilding communities. For more information, please refer to Note 4.

For the three months ended March 31, 2020, the Company expensed $0.4 million in interest previously capitalized to investments in unconsolidated joint ventures as the result of an other-than-temporary impairment to its investment in one joint venture. For more information, please refer to Note 6.