Investments in Unconsolidated Entities (Tables)

9 Months Ended

Jul. 31, 2022

Investments in and Advances to Affiliates, Schedule of Investments [Abstract]

The table below provides information as of July 31, 2022, regarding active joint ventures that we are invested in, by joint venture category ($ amounts in thousands):


	Land Development Joint Ventures		Home Building Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures		Total
Number of unconsolidated entities	15		1		41		4		61
Investment in unconsolidated entities (1)	$	320,263	$	3,972	$	426,850	$	16,481	$	767,566
Number of unconsolidated entities with funding commitments by the Company	12		—		16		1		29
Company’s remaining funding commitment to unconsolidated entities (2)	$	121,728	$	—	$	103,108	$	13,326	$	238,162

(1) Our total investment includes $97.6 million related to 13 unconsolidated joint venture-related variable interests in VIEs and our maximum exposure to losses related to these VIEs is approximately $199.9 million as of July 31, 2022. Our ownership interest in such unconsolidated Joint Venture VIEs ranges from 20% to 50%.

(2) Our remaining funding commitment includes approximately $104.9 million related to our unconsolidated joint venture-related variable interests in VIEs.

Summary of Joint Ventures Borrowing information

Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at July 31, 2022, regarding the debt financing obtained by category ($ amounts in thousands):


	Land Development Joint Ventures		Rental Property Joint Ventures		Total
Number of joint ventures with debt financing	8		34		42
Aggregate loan commitments	$	532,685	$	3,262,234	$	3,794,919
Amounts borrowed under loan commitments	$	419,031	$	1,646,157	$	2,065,188

New joint venture formations

The table below provides information on joint ventures entered into during the nine-months ended July 31, 2022 ($ amounts in thousands):


	Land Development Joint Ventures		Rental Property Joint Ventures		Gibraltar Joint Ventures
Number of unconsolidated joint ventures entered into during the period	3		11		1
Investment balance at July 31, 2022	$	44,500	$	118,600	$	2,400

In the first quarter of fiscal 2022, we entered into a joint venture with an unrelated party to develop a luxury for-rent residential apartment project in Washington, D.C. on land which we contributed to the venture. Under the terms of the joint venture agreement, our partner had the right to put their interest back to us if certain conditions were not satisfied. Accordingly, the land we contributed and subsequent additional spend, which had a carrying value of $60.1 million, was previously recorded on our balance sheet under “Receivables, prepaid expenses, and other assets.” During our third quarter of fiscal 2022, the put option lapsed and we deconsolidated this land and recognized the land sale.

The table below provides information on joint ventures entered into during the nine-months ended July 31, 2021 ($ amounts in thousands):


	Land Development Joint Ventures		Rental Property Joint Ventures
Number of unconsolidated joint ventures entered into during the period	4		4
Investment balance at July 31, 2021	$	102,700	$	51,300

Subsequent event

In August 2022, we entered into two joint ventures with an unrelated party to develop two luxury condominium communities in the New York City metropolitan area. Prior to the formation of these ventures, we capitalized approximately $106.5 million of land and land development costs. Our partner acquired a 55% interest in these ventures for approximately $51.6 million, which equaled our pro-rata cost basis. We received cash of $61.2 million as a result of these formations, which included a combination of partner and loan proceeds, resulting in our initial investment in these ventures of $45.5 million. Concurrent with their formation, the joint ventures entered into construction loan agreements aggregating $219.7 million to finance the remaining development of these projects, of which $17.6 million was borrowed at the closing of the ventures. We, and an affiliate of our partner, provided certain guarantees under the construction loan agreements. We estimate that our maximum exposure under recourse guarantees, if the full amount of the loan commitments were borrowed, would be $44.9 million without taking into account any recoveries from the underlying collateral or any reimbursement from our partner.

Summary of Unconsolidated Entities Debt Obligations, Loan Commitments and Guarantees

Information with respect to certain of the Company’s unconsolidated entities’ outstanding debt obligations, loan commitments and our guarantees thereon are as follows ($ amounts in thousands):


	July 31, 2022
Loan commitments in the aggregate	$	2,623,200
Our maximum estimated exposure under repayment and carry cost guarantees if the full amount of the debt obligations were borrowed (1)	$	544,600

Debt obligations borrowed in the aggregate	$	980,600
Our maximum estimated exposure under repayment and carry cost guarantees of the debt obligations borrowed	$	306,500

Estimated fair value of guarantees provided by us related to debt and other obligations	$	15,300
Terms of guarantees	1 month - 3.9 years

(1) Our maximum estimated exposure under repayment and carry cost guarantees includes approximately $95.0 million related to our unconsolidated Joint Venture VIEs.

Condensed balance sheet

Condensed Combined Balance Sheets:


	July 31, 2022		October 31, 2021
Cash and cash equivalents	$	233,544	$	153,582
Inventory	1,062,469		964,962
Loans receivable – net	38,666		86,727
Rental properties	1,581,268		1,496,355
Rental properties under development	1,303,236		697,659
Other assets	296,201		227,579
Total assets	$	4,515,384	$	3,626,864
Debt – net of deferred financing costs	$	2,040,702	$	1,677,619
Other liabilities	308,845		248,545
Members’ equity	2,165,837		1,700,700
Total liabilities and equity	$	4,515,384	$	3,626,864
Company’s net investment in unconsolidated entities (1)	$	767,566	$	599,101

(1) Our underlying equity in the net assets of the unconsolidated entities was (less) more than our net investment in unconsolidated entities by $(5.4) million and $16.5 million as of July 31, 2022 and October 31, 2021, respectively, and these differences are primarily a result of other than temporary impairments we have recognized; interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; unrealized gains on our retained joint venture interests; gains recognized from the sale of our ownership interests; and distributions from entities in excess of the carrying amount of our net investment.

Condensed statements of operations and comprehensive income

Condensed Combined Statements of Operations:


	Three months ended July 31,				Nine months ended July 31,
	2022		2021		2022		2021
Revenues	$	114,542	$	89,304	$	401,065	$	268,257
Cost of revenues	60,566		52,414		256,256		209,273
Other expenses	45,967		37,497		128,742		107,968
Total expenses	106,533		89,911		384,998		317,241
Loss on disposition of loans and real estate owned	—		(2,575)		(113)		(2,785)
Income (loss) from operations	8,009		(3,182)		15,954		(51,769)
Other income (2)	3,919		44,065		44,156		79,398
Income before income taxes	11,928		40,883		60,110		27,629
Income tax expense (benefit)	37		27		194		(1,632)
Net income including earnings from noncontrolling interests	11,891		40,856		59,916		29,261
Less: income attributable to noncontrolling interest	—		—		—		(174)
Net income attributable to controlling interest	$	11,891	$	40,856	$	59,916	$	29,087


Company’s equity in earnings of unconsolidated entities (3)	$	2,984	$	16,636	$	27,954	$	28,313

(2) The nine months ended July 31, 2022 includes $29.9 million related to the sale of an asset by one Rental Property Joint Venture. The three months and nine months ended July 31, 2021 includes $42.3 million and $74.9 million, respectively, related to the sale of assets by our Rental Property Joint Ventures.

(3) Differences between our equity in earnings of unconsolidated entities and the underlying net income (loss) of the entities are primarily a result of distributions from entities in excess of the carrying amount of our investment; promote earned on the gains recognized by joint ventures and those promoted cash flows being distributed; other than temporary impairments we have recognized; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; gains recognized from the sale of our investment to our joint venture partner; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.

Consolidated Joint Venture Related Variable Interest Entities

The table below provides information as of July 31, 2022 and October 31, 2021, regarding our consolidated joint venture-related variable interests in VIEs ($ amounts in thousands):


	Balance Sheet Classification	July 31, 2022		October 31, 2021
Number of Joint Venture VIEs that the Company is the primary beneficiary and consolidates		5		5
Carrying value of consolidated VIEs assets	Receivables prepaid expenses, and other assets and Investments in unconsolidated entities	$	82,000	$	90,800
Our partners’ interests in consolidated VIEs	Noncontrolling interest	$	9,700	$	39,400

Our ownership interest in the above consolidated Joint Venture VIEs ranges from 82% to 98%.