Investments in Unconsolidated Joint Ventures

As of March 31, 2012, we participated in certain land development joint ventures in which Beazer Homes had less than a controlling interest. The following table presents our investment in our unconsolidated joint ventures, the total equity and outstanding borrowings of these joint ventures, and our guarantees of these borrowings, as of March 31, 2012 and September 30, 2011:



(In thousands)	March 31, 2012		September 30, 2011
Beazer’s investment in joint ventures	$	21,391	$	9,467
Total equity of joint ventures	303,510		96,966
Total outstanding borrowings of joint ventures	65,520		394,414
Beazer’s estimate of its maximum exposure to our repayment guarantees	696		17,916

For the three and six months ended March 31, 2012 and 2011, our income (loss) from joint venture activities, the impairments of our investments in certain of our unconsolidated joint ventures, and the overall equity in income (loss) of unconsolidated joint ventures is as follows:



	Three Months Ended						Six Months Ended
	March 31,						March 31,
(In thousands)	2012			2011			2012			2011
Continuing operations:
Income (loss) from joint venture activity	$	4		$	71		$	(73	)	$	401
Impairment of joint venture investment	—			—			—			(92		)
Equity in income (loss) of unconsolidated joint ventures	$	4		$	71		$	(73	)	$	309
Reported in loss from discontinued operations, net of tax:
Loss from joint venture activity	$	—		$	(17	)	$	—		$	(17	)
Impairment of joint venture investment	(7		)	(157		)	(36		)	(332		)
Equity in loss of unconsolidated joint ventures - discontinued operations	$	(7	)	$	(174	)	$	(36	)	$	(349	)

South Edge/Inspirada

On December 9, 2010,lenders filed an involuntary bankruptcy petition against the South Edge joint venture (South Edge), which was granted by the court in February 2011. Effective June 10, 2011, the Company and certain other joint venture members (the Participating Members) entered into a settlement agreement with the lenders. Based on the terms of the agreement, the Company paid the lenders $15.9 million during the six months ended March 31, 2012 under the plan of reorganization.

The plan of reorganization resulted in the formation of a new joint venture called Inspirada, LLC (Inspirada), with the Participating Members constituting the members of the new venture. Inspirada took title to the South Edge assets including its real property and lien rights, and the debt to the lenders was extinguished upon payment by the Inspirada members, including the Company, of their obligations under the plan of reorganization. In connection with these payments by the Inspirada members, all the South Edge repayment guarantees were released. The Participating Members also acquired all claims of the lender and South Edge against the non-Participating Members. As a result of the plan of reorganization and the formation of Inspirada, our right to future land purchases is a component of our investment in Inspirada. As such, we have recorded an investment in Inspirada, which includes the $11.7 million we previously estimated for our future right to purchase land and our cash contributions to the joint venture, primarily for organization costs. For the six months ended March 31, 2012, there was no impact to our net income related to these transactions. In addition to our initial payment, we, as a member of the Inspirada joint venture, will have obligations for future infrastructure and other development costs. At this time, these costs cannot be quantified due to, among other things, uncertainty over the future development configuration of the project and the related costs, market conditions, uncertainty over the remaining infrastructure deposits and previously filed bankruptcies of other joint venture members. In addition, there are uncertainties with respect to the location and density of the land we will receive as a result of our investment in Inspirada, the products we will build on such land and the estimated selling prices of such homes. Because there are uncertainties with respect to development costs, the value of the lien rights or title to our share of the underlying property, we may be required to record adjustments to the carrying value of this Inspirada investment in future periods as better information becomes available.

Guarantees

Our joint ventures typically obtain secured acquisition, development and construction financing. Generally, Beazer and our joint venture partners provide varying levels of guarantees of debt and other obligations for our unconsolidated joint ventures. At March 31, 2012, these guarantees included, for certain joint ventures, repayment guarantees and environmental indemnities.

As of March 31, 2012, we and our joint venture partners have a repayment guarantee related to one of our joint venture’s borrowings. This repayment guarantee requires the repayment of all or a portion of the debt of the unconsolidated joint venture in the event the joint venture defaults on its obligations under the borrowing. Our estimate of Beazer’s maximum exposure to this repayment guarantee related to the outstanding debt of the unconsolidated joint venture was $0.7 million at March 31, 2012. As of March 31, 2012, $0.7 million has been recorded in Other Liabilities related to our repayment guarantee. We and our joint venture partners also generally provide unsecured environmental indemnities to joint venture project lenders. In each case, we have performed due diligence on potential environmental risks. These indemnities obligate us to reimburse the project lenders for claims related to environmental matters for which they are held responsible. During the six months ended March 31, 2012 and 2011, we were not required to make any payments related to environmental indemnities.

In assessing the need to record a liability for the contingent aspect of these guarantees, we consider our historical experience in being required to perform under the guarantees, the fair value of the collateral underlying these guarantees and the financial condition of the applicable unconsolidated joint ventures. In addition, we monitor the fair value of the collateral of these unconsolidated joint ventures to ensure that the related borrowings do not exceed the specified percentage of the value of the property securing the borrowings. We have recorded a liability for guarantees we determined were probable and reasonably estimable, but we have not recorded a liability for the contingent aspects of any guarantees that we determined were reasonably possible but not probable.