Meritage Homes Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INVESTMENTS IN UNCONSOLIDATED ENTITIES

INVESTMENTS IN UNCONSOLIDATED ENTITIES

12 Months Ended

Dec. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

We may enter into joint ventures as a means of accessing larger parcels of land, expanding our market opportunities, managing our risk profile, optimizing deal structure for the impacted parties and leveraging our capital. While purchasing land through a joint venture can be beneficial, currently we do not view joint ventures as critical to the success of our homebuilding operations. Our joint venture partners generally are other homebuilders, land sellers or other real estate investors. We generally do not have a controlling interest in these ventures, which means our joint venture partners could cause the venture to take actions we disagree with, or fail to take actions we believe should be undertaken, including the sale of the underlying property to repay debt or recoup all or part of the partners' investments. Based on the structure of these joint ventures, they may or may not be consolidated into our results. As of December 31, 2023, we had two active equity-method land joint ventures and one mortgage joint venture, which is engaged in mortgage activities and primarily provides services to our homebuyers.

Summarized condensed combined financial information related to unconsolidated joint ventures that are accounted for using the equity method was as follows (in thousands):


	At December 31,
	2023		2022
Assets:
Cash	$	3,546	$	3,389
Real estate	28,395		17,965
Other assets	6,514		11,653
Total assets	$	38,455	$	33,007
Liabilities and equity:
Accounts payable and other liabilities	$	6,537	$	11,397

Equity of:
Meritage (1)	16,279		10,356
Other	15,639		11,254
Total liabilities and equity	$	38,455	$	33,007


	Years Ended December 31,
	2023		2022		2021
Revenue	$	46,842	$	46,264	$	41,929
Costs and expenses	(37,666)		(36,565)		(34,693)
Net earnings of unconsolidated entities	$	9,176	$	9,699	$	7,236
Meritage’s share of pre-tax earnings (1) (2)	$	6,371	$	6,140	$	4,667

(1)Balance represents Meritage’s interest, as reflected in the financial records of the respective joint ventures. This balance may differ from the balance reported in our consolidated financial statements due to the following reconciling items: (i) timing differences for revenue and distributions recognition, (ii) step-up basis and corresponding amortization, (iii) capitalization of interest on qualified assets, (iv) income deferrals as discussed in Note (2) below and (v) the cessation of allocation of losses from joint ventures in which we have previously written down our investment balance to zero and where we have no commitment to fund additional losses.

(2)Our share of pre-tax (loss)/earnings from our mortgage joint venture is recorded in (Loss)/earnings from financial services unconsolidated entities and other, net on the accompanying consolidated income statements. Our share of pre-tax (loss)/earnings from all other joint ventures is recorded in Other income, net, on the accompanying consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures, if any. Such profit is deferred until homes are delivered by us and title passes to a homebuyer.

Our total investment in all of these joint ventures is $17.2 million as of December 31, 2023. We believe these ventures are in compliance with their respective debt agreements, if applicable, and such debt is non-recourse to us.