Note 6 - Investments in and Advances to Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

6. Investments in and Advances to Unconsolidated Joint Ventures

As of  March 31, 2020 and December 31, 2019, the Company had ownership interests in 10 unconsolidated joint ventures with ownership percentages that generally ranged from 5% to 35%. The condensed combined balance sheets for our unconsolidated joint ventures accounted for under the equity method were as follows:

	March 31,			December 31,
	2020			2019
	(Dollars in thousands)
Cash and cash equivalents	$	30,514		$	31,484
Restricted cash		13,237			13,852
Real estate inventories		234,460			241,416
Other assets		4,108			3,843
Total assets	$	282,319		$	290,595
Accounts payable and accrued liabilities	$	16,570		$	16,778
Notes payable		21,910			28,665
Total liabilities		38,480			45,443
The New Home Company's equity(1)		28,403			27,722
Other partners' equity		215,436			217,430
Total equity		243,839			245,152
Total liabilities and equity	$	282,319		$	290,595
Debt-to-capitalization ratio		8.2	%		10.5	%
Debt-to-equity ratio		9.0	%		11.7	%

(1) Balance represents the Company's interest, as reflected in the financial records of the respective joint ventures. This balance differs from the investment in and advances to unconsolidated joint ventures balance reflected in the Company's consolidated balance sheets by$0.8 million due an other-than-temporary impairment charge to the Company's investment, interest capitalized to the Company's investment in joint ventures and certain other differences in outside basis.

The condensed combined statements of operations for our unconsolidated joint ventures accounted for under the equity method were as follows:

	Three Months Ended March 31,
	2020			2019
	(Dollars in thousands)
Revenues	$	31,647		$	42,287
Cost of sales and expenses		30,285			41,774
Net income of unconsolidated joint ventures	$	1,362		$	513
Equity in net income (loss) of unconsolidated joint ventures reflected in the accompanying condensed consolidated statements of operations	$	(1,937	)	$	184

The Company reviews its investments in and advances to unconsolidated joint ventures for other-than-temporary declines in value in accordance with ASC  820 . To the extent we deem any declines in value of our investment in and advances to unconsolidated joint ventures to be other-than-temporary, we impair our investment accordingly. For the three months ended March 31, 2020 and 2019, the Company recorded other-than-temporary, noncash impairment charges of $2.3 million and $0, respectively.  The 2020 impairment charge related to our investment in the Arantine Hills Holdings LP ("Bedford") joint venture and is included in equity in net income (loss) of unconsolidated joint ventures in the accompanying condensed consolidated statements of operations.  The Company has agreed in principle to sell our interest in this joint venture to our partner, and we are currently in the process of drafting definitive agreements associated with our exit from the joint venture and the sale of our interest for less than our current carrying value. This transaction is expected to close around the end of the 2020 second quarter.  We are expected to receive $5.1 million in cash for our anticipated sale of our partnership interest and expect to have an option to purchase at market 30% of the lots from the masterplan community owned by the joint venture.

As a smaller reporting company, the Company is subject to the provisions of Rule 8-03(b)(3) of Regulation S-X which requires the disclosure of certain financial information for equity investees that constitute 20% or more of the Company's consolidated net income (loss).  For the three months ended March 31, 2019, no profit or loss allocations from the Company's unconsolidated joint ventures accounted for under the equity method exceeded 20% of the Company's consolidated net loss.  For the three months ended March 31, 2020, the loss allocation from one of the Company's unconsolidated joint ventures accounted for under the equity method exceeded 20% of the Company's consolidated net loss. The table below presents financial information for this joint venture for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020			2019
	(Dollars in thousands)
Revenues	$	4,624		$	3,698
Cost of land sales		3,065			3,375
Gross margin	$	1,559		$	323
Expenses		674			636
Net income (loss)	$	885		$	(313	)
Equity in net loss of unconsolidated joint ventures reflected in the accompanying condensed consolidated statements of operations	$	(2,226	)	$	(30	)

In the above table, the Company's $2.2 million loss included in equity in net income (loss) of unconsolidated joint ventures for the three months ended March 31, 2020 includes a $2.3 million other-than-temporary impairment charge related to its interest in this joint venture.

For the three months ended March 31, 2020 and 2019, the Company earned $0.4 million and $0.5 million respectively, in management fees from its unconsolidated joint ventures. For additional detail regarding management fees, please see Note 12.