Investments in Unconsolidated Entities

As of December 31, 2013, we participated in certain land development joint ventures and other unconsolidated entities in which Beazer Homes had less than a controlling interest. The following table presents our investment in our unconsolidated entities, the total equity and outstanding borrowings of these unconsolidated entities, and our guarantees of these borrowings, as of December 31, 2013 and September 30, 2013:



(In thousands)	December 31, 2013		September 30, 2013
Beazer’s investment in unconsolidated entities	$	47,424	$	44,997
Total equity of unconsolidated entities	387,913		385,040
Total outstanding borrowings of unconsolidated entities	96,549		85,938

For the three months ended December 31, 2013 and 2012, our income from unconsolidated entity activities, the impairments of our investments in certain of our unconsolidated entities, and the overall equity in income of unconsolidated entities is as follows:



	Three Months Ended
	December 31,
(In thousands)	2013		2012
Continuing operations:
Income from unconsolidated entity activity	$	319	$	36
Impairment of unconsolidated entity investment	—		—
Equity in income of unconsolidated entities - continuing operations	$	319	$	36

South Edge/Inspirada

The Company holds a minority (less than 10%) interest in Inspirada Builders LLC which was formed in connection with the bankruptcy and subsequent plan of reorganization of the South Edge joint venture. During the quarter ended December 31, 2011, we paid $15.9 million in connection with this plan of reorganization. Our right to acquire land in Las Vegas, Nevada from Inspirada is a component of our investment. 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. In addition to our initial payment, we, as a member of the Inspirada joint venture, will have obligations for a portion of future infrastructure and other development costs which are currently estimated at $6.7 million. In the next several months, we expect to receive land for our investment in Inspirada; however, there are still uncertainties with respect to the development density related to the land we will receive, 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, in future periods, we may be required to record adjustments to the carrying value of this Inspirada investment as better information becomes available.

Pre-Owned Rental Homes

Effective May 3, 2012, we contributed $0.3 million in cash and our Pre-Owned Homes business at cost, including 190 homes in Arizona and Nevada, of which 187 were leased, for an initial 23.5% equity method investment in an unconsolidated real estate investment trust (the REIT). The Company also received grants of restricted units in the REIT, of which a portion vested during the year ended September 30, 2012. As of December 31, 2013, we held a 15.0% investment in the REIT.

Periodically we provide services including treasury operations, cash management, accounting and financial reporting support, legal services, human resources support, environmental and safety services, and tax support to the REIT on an as needed basis.

Guarantees

Historically, Beazer and our land development joint venture partners provide varying levels of guarantees of debt and other obligations for these unconsolidated entities. As of December 31, 2013 and September 30, 2013, we had no outstanding guarantees or other obligations related to our unconsolidated entities.

During the fiscal year ended September 30, 2013, we entered into a settlement agreement related to one repayment guarantee, paid $0.5 million to settle our liability and recognized the remaining $0.2 million as other income.

We and our joint venture partners generally provide unsecured environmental indemnities to land development 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 three months ended December 31, 2013 and 2012, 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 entities. In addition, we monitor the fair value of the collateral of these unconsolidated entities to ensure that the related borrowings do not exceed the specified percentage of the value of the property securing the borrowings. We have not recorded a liability for the contingent aspects of any guarantees that we determined were reasonably possible but not probable.