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. 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, according to our respective equity interests. The obligations to make capital contributions are governed by each such unconsolidated joint venture’s respective operating agreement and related governing documents.

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 (losses) until a home sale is closed and title passes to a homebuyer, at which time we account for those earnings (losses) as a reduction (increase) to the cost of purchasing the land from the unconsolidated joint venture. We defer recognition of our share of such unconsolidated joint venture losses only to the extent profits are to be generated from the sale of the home to a homebuyer.

We share in the earnings (losses) of these unconsolidated joint ventures generally in accordance with our respective equity interests. In some instances, we recognize earnings (losses) related to our investment in an unconsolidated joint venture that differ from our equity interest in the unconsolidated joint venture. This typically arises from our deferral of the unconsolidated joint venture’s earnings (losses) from land sales to us, or other items.

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



	Three Months Ended August 31,						Nine Months Ended August 31,
	2018			2017			2018			2017
Revenues	$	35,391		$	12,802		$	52,015		$	39,604
Construction and land costs	(22,211		)	(12,832		)	(38,866		)	(37,625		)
Other expense, net	(226		)	(1,294		)	(2,209		)	(3,547		)
Income (loss)	$	12,954		$	(1,324	)	$	10,940		$	(1,568	)

The year-over-year growth in combined revenues and income for three months and nine months ended August 31, 2018 mainly reflected the sale of land by an unconsolidated joint venture in Arizona, and contingent consideration (profit participation revenues) earned by an unconsolidated joint venture in California.

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



	August 31, 2018		November 30, 2017
Assets
Cash	$	10,466	$	21,193
Receivables	26		688
Inventories	131,512		145,519
Other assets	740		1,398
Total assets	$	142,744	$	168,798

Liabilities and equity
Accounts payable and other liabilities	$	9,856	$	25,426
Notes payable (a)	11,407		20,040
Equity	121,481		123,332
Total liabilities and equity	$	142,744	$	168,798

(a)

As of November 30, 2017, two of our unconsolidated joint ventures had separate construction loan agreements with different third-party lenders to finance their respective land development activities, with the outstanding debt secured by the corresponding underlying property and related project assets and non-recourse to us. The secured debt of one of these unconsolidated joint ventures was repaid in August 2018 upon maturity. All of the outstanding secured debt at August 31, 2018 is scheduled to mature in February 2020. None of our other unconsolidated joint ventures had outstanding debt at August 31, 2018 or November 30, 2017.

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



	August 31, 2018		November 30, 2017
Number of investments in unconsolidated joint ventures	6		7
Investments in unconsolidated joint ventures	$	62,436	$	64,794
Number of unconsolidated joint venture lots controlled under land option contracts and other similar contracts	46		377

We and our partner in the unconsolidated joint venture that has the above-noted outstanding construction loan agreement at August 31, 2018 provide certain guarantees and indemnities to the lender, including a guaranty to complete the construction of improvements for the project; a guaranty against losses the lender suffers due to certain bad acts or failures to act by the unconsolidated joint venture or its partners; and an indemnity of the lender from environmental issues. In each instance, our actual responsibility under the foregoing guaranty and indemnity obligations is limited to our pro rata interest in the unconsolidated joint venture. We do not have a guaranty or any other obligation to repay or to support the value of the collateral underlying the outstanding secured debt. However, various financial and non-financial covenants apply with respect to the outstanding secured debt and the related guaranty and indemnity obligations, and a failure to comply with such covenants could result in a default and cause the lender to seek to enforce such guaranty and indemnity obligations, if and as may be applicable. As of August 31, 2018, we were in compliance with the applicable terms of our relevant covenants with respect to the construction loan agreement. We do not believe that our existing exposure under our guaranty and indemnity obligations related to the outstanding secured debt is material to our consolidated financial statements.

We are committed to purchase all 46 unconsolidated joint venture lots controlled under land option and other similar contracts at August 31, 2018 from one of our unconsolidated joint ventures. The purchase will be made in quarterly takedowns over the next two years for an aggregate purchase price of $21.1 million under agreements that we entered into with the unconsolidated joint venture in 2016.