Note 5 - Capitalized Interest

12 Months Ended

Dec. 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 consolidated statements of operations.  For the years ended December 31, 2020, 2019 and 2018 interest incurred, capitalized and expensed was as follows:

	Year Ended December 31,
	2020			2019			2018
	(Dollars in thousands)
Interest incurred	$	23,936		$	28,819		$	28,377
Interest capitalized to inventory		(20,281	)		(28,819	)		(27,393	)
Interest capitalized to investment in unconsolidated joint ventures		—			—			(984	)
Interest expensed	$	3,655		$	—		$	—
Capitalized interest in beginning inventory	$	26,397		$	25,681		$	16,453
Interest capitalized as a cost of inventory		20,281			28,819			27,393
Capitalized interest transferred from investment in unconsolidated joint ventures to inventory upon lot acquisition		—			31			513
Previously capitalized interest included in cost of home and land sales		(23,864	)		(28,134	)		(18,678	)
Previously capitalized interest included in project abandonment costs		(761	)		—			—
Capitalized interest in ending inventory	$	22,053		$	26,397		$	25,681
Capitalized interest in beginning investment in unconsolidated joint ventures	$	541		$	713		$	1,472
Interest capitalized to investment in unconsolidated joint ventures		—			—			984
Capitalized interest transferred from investment in unconsolidated joint ventures to inventory upon lot acquisition		—			(31	)		(513	)
Previously capitalized interest included in equity in net loss of unconsolidated joint ventures		(541	)		(141	)		(1,230	)
Capitalized interest in ending investment in unconsolidated joint ventures		—			541			713
Total capitalized interest in ending inventory and investments in unconsolidated joint ventures	$	22,053		$	26,938		$	26,394
Capitalized interest as a percentage of inventory		7.0	%		6.1	%		4.5	%
Interest included in cost of home sales as a percentage of home sales revenue		5.6	%		4.9	%		3.7	%
Capitalized interest as a percentage of investment in and advances to unconsolidated joint ventures		—	%		1.8	%		2.1	%

For the year ended December 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 the year ended December 31, 2019, the Company expensed $0.9 million in interest previously capitalized to inventory with the land impairment recorded during the year. For more information, please refer to Note 4. 

For the years ended December 31, 2020, 2019 and 2018, the Company expensed $0.4 million, $0 and $1.1 million, respectively, in interest previously capitalized to investments in unconsolidated joint ventures as the result of other-than-temporary impairments to investments in two separate joint ventures. For more information, please refer to Note 6.