Investments in Unconsolidated Joint Ventures

We have investments in unconsolidated joint ventures that conduct land acquisition, land development and/or other homebuilding activities in various markets where our homebuilding operations are located. Our partners in these unconsolidated joint ventures are unrelated homebuilders, and/or land developers and other real estate entities, or commercial enterprises. These investments are designed primarily to reduce market and development risks and to increase the number of lots we own or control. In some instances, participating in unconsolidated joint ventures has enabled us to acquire and develop land that we might not otherwise have had access to due to a project’s size, financing needs, duration of development or other circumstances. While we consider our participation in unconsolidated joint ventures as potentially beneficial to our homebuilding activities, we do not view such participation as essential.

We typically have obtained rights to acquire portions of the land held by the unconsolidated joint ventures in which we currently participate. When an unconsolidated joint venture sells land to our homebuilding operations, we defer recognition of our share of such unconsolidated joint venture’s earnings until a home sale is closed and title passes to a homebuyer, at which time we account for those earnings as a reduction of the cost of purchasing the land from the unconsolidated joint venture.

We and our unconsolidated joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures, typically on a pro rata basis, equal to our respective equity interests. The obligations to make capital contributions are governed by each unconsolidated joint venture’s respective operating agreement and related governing documents.

Each unconsolidated joint venture is obligated to maintain financial statements in accordance with GAAP. We share in the profits and losses of these unconsolidated joint ventures generally in accordance with our respective equity interests. In some instances, we recognize profits and losses related to our investment in an unconsolidated joint venture that differ from our equity interest in the unconsolidated joint venture. This may arise from impairments that we recognize related to our investment that differ from the impairments the unconsolidated joint venture recognizes with respect to the unconsolidated joint venture’s assets; differences between our basis in assets we have transferred to the unconsolidated joint venture and the unconsolidated joint venture’s basis in those assets; our deferral of the unconsolidated joint venture’s profits from land sales to us; or other items.

With respect to our investments in unconsolidated joint ventures, our equity in loss of unconsolidated joint ventures included impairment charges of $53.7 million in 2011. There were no such impairment charges in 2013 or 2012. In 2011, the impairment charge reflected the write off of our remaining investment in South Edge, a residential development joint venture in our Southwest homebuilding reporting segment. We wrote off our remaining investment based on our determination that South Edge was no longer able to perform its originally intended activities following a 2011 court decision to enter an order for relief on a Chapter 11 involuntary bankruptcy petition filed against South Edge.

The following table presents combined condensed information from the statements of operations of our unconsolidated joint ventures (in thousands):



	Years Ended November 30,
	2013			2012			2011
Revenues	$	17,446		$	31,772		$	230
Construction and land costs	(10,709		)	(21,467		)	(54		)
Other expenses, net	(4,042		)	(2,009		)	(4,506		)
Income (loss)	$	2,695		$	8,296		$	(4,330	)

For the years ended November 30, 2013 and 2012, combined revenues, construction and land costs, and income from our unconsolidated joint ventures primarily reflected land sales completed by an unconsolidated joint venture in Maryland.

The following table presents combined condensed balance sheet information for our unconsolidated joint ventures (in thousands):



	November 30,
	2013		2012
Assets
Cash	$	18,752	$	29,721
Receivables	4,902		6,104
Inventories	381,195		352,791
Other assets	1,183		1,175
Total assets	$	406,032	$	389,791
Liabilities and equity
Accounts payable and other liabilities	$	85,386	$	88,027
Equity	320,646		301,764
Total liabilities and equity	$	406,032	$	389,791

The following table presents information relating to our investments in unconsolidated joint ventures (dollars in thousands):



	November 30,
	2013		2012
Number of investments in unconsolidated joint ventures	9		8
Investments in unconsolidated joint ventures	$	130,192	$	123,674
Number of unconsolidated joint venture lots controlled under land option contracts or other similar contracts	5,367		4,940

As of November 30, 2013 and 2012, our total amount of investments in unconsolidated joint ventures was largely comprised of investments in Inspirada Builders, LLC, as described below, and a joint venture in California.

Our unconsolidated joint ventures finance land and inventory investments for a project through a variety of arrangements, and certain of our unconsolidated joint ventures have obtained loans from third-party lenders that are secured by the underlying property and related project assets. However, none of our unconsolidated joint ventures had outstanding debt at November 30, 2013 or 2012.

In 2011, we recognized an aggregate loss on loan guaranty charge of $30.8 million in our consolidated statements of operations related to our investment in South Edge, which underwent a bankruptcy reorganization in that year. This charge resulted from our recording a probable obligation related to a contingent payment guaranty that we had provided to the administrative agent for the lenders to South Edge and the bankruptcy court’s confirmation of the consensual plan of reorganization for South Edge, and took into account accruals we had previously established with respect to our investment in South Edge. The loss on loan guaranty charge was in addition to the joint venture impairment charge of $53.7 million that we recognized in 2011 to write off our remaining investment in South Edge. In connection with the reorganization plan for South Edge and the resolution of other matters surrounding South Edge, we made payments of $251.9 million in the fourth quarter of 2011, including a payment to the administrative agent, which satisfied the respective liens of the administrative agent and most of the South Edge lenders on the land South Edge owned. Accordingly, our obligations under the contingent payment guaranty were eliminated.

Our investments in unconsolidated joint ventures as of November 30, 2013 and 2012 included our investment of $75.9 million and $71.0 million, respectively, in Inspirada Builders, LLC, an unconsolidated joint venture that was formed in 2011 in connection with the consensual plan of reorganization plan for South Edge, and in which a subsidiary that is 100% owned by us is a member. As part of the terms of the reorganization plan for South Edge, land previously owned by the South Edge joint venture, including our share that consists of approximately 600 developable acres, was acquired by Inspirada Builders, LLC in November 2011. We anticipate that we will acquire our share of the land from Inspirada Builders, LLC through a future distribution.