Meritage Homes Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS IN UNCONSOLIDATED ENTITIES

INVESTMENTS IN UNCONSOLIDATED ENTITIES

9 Months Ended

Sep. 30, 2024

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. 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 September 30, 2024, we had one active equity-method land joint venture and one mortgage joint venture. The mortgage joint venture is engaged in mortgage activities and primarily provides mortgage 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):


	As of
	September 30, 2024		December 31, 2023
Assets:
Cash	$	4,348	$	3,546
Real estate	31,021		28,395
Other assets	5,383		6,514
Total assets	$	40,752	$	38,455
Liabilities and equity:
Accounts payable and other liabilities	$	7,357	$	6,537

Equity of:
Meritage (1)	17,128		16,279
Other	16,267		15,639
Total liabilities and equity	$	40,752	$	38,455


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	12,469	$	12,715	$	35,798	$	33,941
Costs and expenses	(10,352)		(9,937)		(29,940)		(27,387)
Net earnings of unconsolidated entities	$	2,117	$	2,778	$	5,858	$	6,554
Meritage’s share of pre-tax earnings/(loss) (1) (2)	$	1,298	$	1,770	$	3,925	$	4,652

(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 the accompanying unaudited 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 earnings/(loss) from our mortgage joint venture is recorded in (Loss)/earnings from financial services unconsolidated entities and other, net on the accompanying unaudited consolidated income statements. Our share of pre-tax earnings/(loss) from all other joint ventures is recorded in Other income, net on the accompanying unaudited 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.