18.	Investments in Unconsolidated Homebuilding and Land Development Joint Ventures

We enter into homebuilding and land development joint ventures from time to time as a means of accessing lot positions, expanding our market opportunities, establishing strategic alliances, managing our risk profile, leveraging our capital base and enhancing returns on capital. Our homebuilding joint ventures are generally entered into with third-party investors to develop land and construct homes that are sold directly to third-party home buyers. Our land development joint ventures include those entered into with developers and other homebuilders as well as financial investors to develop finished lots for sale to the joint venture’s members or other third parties.

In November 2015, the Company entered into a new joint venture to which the company contributed a land parcel that had been mothballed by the company, but on which construction by the joint venture has now begun. Upon formation of the joint venture, the Company received $25.7 million of cash proceeds for the contributed land.

The tables set forth below summarize the combined financial information related to our unconsolidated homebuilding and land development joint ventures that are accounted for under the equity method.

(Dollars in thousands)	April 30, 2016
	Homebuilding			Land Development			Total
Assets:
Cash and cash equivalents		$29,757			$1,642			$31,399
Inventories		400,785			11,692			412,477
Other assets		19,536			-			19,536
Total assets		$450,078			$13,334			$463,412

Liabilities and equity:
Accounts payable and accrued liabilities		$39,591			$992			$40,583
Notes payable		116,852			3,319			120,171
Total liabilities		156,443			4,311			160,754
Equity of:
Hovnanian Enterprises, Inc.		66,300			3,271			69,571
Others		227,335			5,752			233,087
Total equity		293,635			9,023			302,658
Total liabilities and equity		$450,078			$13,334			$463,412
Debt to capitalization ratio		28	%		27	%		28	%

(Dollars in thousands)	October 31, 2015
	Homebuilding			Land Development			Total
Assets:
Cash and cash equivalents		$27,856			$1,755			$29,611
Inventories		314,814			11,767			326,581
Other assets		11,225			-			11,225
Total assets		$353,895			$13,522			$367,417

Liabilities and equity:
Accounts payable and accrued liabilities		$29,994			$669			$30,663
Notes payable		112,554			3,774			116,328
Total liabilities		142,548			4,443			146,991
Equity of:
Hovnanian Enterprises, Inc.		57,336			3,122			60,458
Others		154,011			5,957			159,968
Total equity		211,347			9,079			220,426
Total liabilities and equity		$353,895			$13,522			$367,417
Debt to capitalization ratio		35	%		29	%		35	%

As of April 30, 2016 and October 31, 2015, we had advances outstanding of $0.5 million and $0.8 million, respectively, to these unconsolidated joint ventures, which were included in the “Accounts payable and accrued liabilities” balances in the tables above. On our Condensed Consolidated Balance Sheets, our “Investments in and advances to unconsolidated joint ventures” amounted to $70

.1 million and $61.2 million at April 30, 2016 and October 31, 2015, respectively.

	For the Three Months Ended April 30, 2016
(In thousands)	Homebuilding			Land Development			Total

Revenues		$25,760			$521			$26,281
Cost of sales and expenses		(31,480	)		(96	)		(31,576	)
Joint venture net (loss) income		$(5,720	)		$425			$(5,295	)
Our share of net (loss) income		$(1,353	)		$213			$(1,140	)

	For the Three Months Ended April 30, 2015
(In thousands)	Homebuilding			Land Development			Total

Revenues		$27,648			$1,483			$29,131
Cost of sales and expenses		(29,258	)		(1,722	)		(30,980	)
Joint venture net loss		$(1,610	)		$(239	)		$(1,849	)
Our share of net income (loss)		$1,465			$(119	)		$1,346

	For the Six Months Ended April 30, 2016
(In thousands)	Homebuilding			Land Development			Total

Revenues		$46,026			$1,617			$47,643
Cost of sales and expenses		(55,659	)		(1,319	)		(56,978	)
Joint venture net (loss) income		$(9,633	)		$298			$(9,335	)
Our share of net (loss) income		$(2,849	)		$149			$(2,700	)

	For the Six Months Ended April 30, 2015
(In thousands)	Homebuilding			Land Development			Total

Revenues		$64,774			$2,615			$67,389
Cost of sales and expenses		(59,117	)		(2,807	)		(61,924	)
Joint venture net income (loss)		$5,657			$(192	)		$5,465
Our share of net income (loss)		$2,932			$(96	)		$2,836

“(Loss) income from unconsolidated joint ventures” is reflected as a separate line in the accompanying Condensed Consolidated Statements of Operations and reflects our proportionate share of the income or loss of these unconsolidated homebuilding and land development joint ventures. The difference between our share of the income or loss from these unconsolidated joint ventures in the tables above compared to the Condensed Consolidated Statements of Operations is due primarily to the reclassification of the intercompany portion of management fee income from certain joint ventures and the deferral of income for lots purchased by us from certain joint ventures. To compensate us for the administrative services we provide as the manager of certain joint ventures we receive a management fee based on a percentage of the applicable joint venture’s revenues. These management fees, which totaled $1.1 million and $1.2 million for the three months ended April 30, 2016 and 2015, respectively, and $1.9 million and $2.4 million for the six months ended April 30, 2016 and 2015, respectively, are recorded in “Homebuilding: Selling, general and administrative” on the Condensed Consolidated Statement of Operations.

In determining whether or not we must consolidate joint ventures that we manage, we assess whether the other partners have specific rights to overcome the presumption of control by us as the manager of the joint venture. In most cases, the presumption is overcome because the joint venture agreements require that both partners agree on establishing the operations and capital decisions of the partnership, including budgets in the ordinary course of business.

Typically, our unconsolidated joint ventures obtain separate project specific mortgage financing. The amount of financing is generally targeted to be no more than 50% of the joint venture’s total assets. For some of our joint ventures, obtaining financing was challenging, therefore, some of our joint ventures are capitalized only with equity. The total debt to capitalization ratio of all our joint ventures is currently 28%. Any joint venture financing is on a nonrecourse basis, with guarantees from us limited only to performance and completion of development, environmental warranties and indemnification, standard indemnification for fraud, misrepresentation and other similar actions, including a voluntary bankruptcy filing. In some instances, the joint venture entity is considered a VIE under ASC 810-10 “Consolidation – Overall” due to the returns being capped to the equity holders; however, in these instances, we have determined that we are not the primary beneficiary, and therefore we do not consolidate these entities.