Annual report pursuant to Section 13 and 15(d)

Real Estate and Capitalized Interest

v2.4.0.6
Real Estate and Capitalized Interest
12 Months Ended
Dec. 31, 2011
Real Estate and Capitalized Interest [Abstract]  
REAL ESTATE AND CAPITALIZED INTEREST

NOTE 2 — REAL ESTATE AND CAPITALIZED INTEREST

Real estate at December 31 consists of the following (in thousands):

 

      September 30,       September 30,  
    2011     2010  

Homes under contract under construction (1)

  $ 101,445     $ 97,002  

Unsold homes, completed and under construction (1)

    97,246       87,011  

Model homes (1)

    49,892       37,027  

Finished home sites and home sites under development (2)

    467,867       435,473  

Land held for development (2) (3)

    69,067       59,692  

Land held for sale

    29,908       22,723  
   

 

 

   

 

 

 
    $ 815,425     $ 738,928  
   

 

 

   

 

 

 

 

(1) Also includes the allocated land and land development costs associated with each lot for these homes.

 

(2) Includes communities where we have decided to cease operations (mothball) as we have determined that their economic performance would be maximized by deferring development. In the future, some of these communities may be re-opened while others may be sold to third parties. If we deem our carrying value to not be fully recoverable, we adjust our carrying value for these assets to fair value at the time they are placed into mothball. We do not capitalize interest for such mothballed assets, and all ongoing costs of land ownership (i.e., property taxes, homeowner association dues, etc.) are expensed as incurred.

 

(3) Land held for development primarily reflects land and land development costs related for land where development activity is not currently underway but is expected to begin or resume in the future. We may cease development activity on certain land holdings, as they represent a portion of a large land parcel that we plan to build out over several years.

 

As previously noted, in accordance with ASC 360-10, each of our land inventory and related real estate assets is reviewed for recoverability when impairment indicators are present, as our inventory is considered “long-lived” in accordance with GAAP. Due to the current environment, we evaluate all of our real estate assets for impairment on a quarterly basis. ASC 360-10 requires impairment charges to be recorded if the asset is not deemed recoverable and the fair value of such assets is less than their carrying amounts. Our determination of fair value is based on projections and estimates. We also evaluate alternative product offerings in communities where impairment indicators are present and other strategies for the land exist, such as selling or holding the land for sale. Based on these reviews of all our communities, we recorded the following real-estate and joint-venture impairment charges during the years ended December 31, 2011, 2010 and 2009 (in thousands):

 

      September 30,       September 30,       September 30,  
    Years Ended December 31,  
    2011     2010     2009  

Terminated option/purchase contracts:

                       

West

  $ 863     $ 0     $ 7,038  

Central

    1,904       1,030       60,645  

East

    0       0       3,270  
   

 

 

   

 

 

   

 

 

 

Total

  $ 2,767     $ 1,030     $ 70,953  
   

 

 

   

 

 

   

 

 

 
       

Real estate inventory impairments (1):

                       

West

  $ 3,797     $ 274     $ 18,459  

Central

    1,610       4,809       16,744  

East

    696       321       5,334  
   

 

 

   

 

 

   

 

 

 

Total

  $ 6,103     $ 5,404     $ 40,537  
   

 

 

   

 

 

   

 

 

 
       

Impairments of joint venture investments:

                       

West

  $ 0     $ 295     $ 274  

Central

    0       0       2,558  

East

    0       0       0  
   

 

 

   

 

 

   

 

 

 

Total

  $ 0     $ 295     $ 2,832  
   

 

 

   

 

 

   

 

 

 
       

Impairments of land held for sale:

                       

West

  $ 5,928     $ 0     $ 7,815  

Central

    127       17       6,911  

East

    399       0       0  
   

 

 

   

 

 

   

 

 

 

Total

  $ 6,454     $ 17     $ 14,726  
   

 

 

   

 

 

   

 

 

 
       

Total impairments:

                       

West

  $ 10,588     $ 569     $ 33,586  

Central

    3,641       5,856       86,858  

East

    1,095       321       8,604  
   

 

 

   

 

 

   

 

 

 

Total

  $ 15,324     $ 6,746     $ 129,048  
   

 

 

   

 

 

   

 

 

 

 

(1) Included in the real estate inventory impairments are impairments of individual homes in a community where the underlying community was not also impaired, as follows (in thousands):

 

      September 30,       September 30,       September 30,  
    Years Ended December 31,  
    2011     2010     2009  

Individual home impairments:

                       

West

  $ 700     $ 274     $ 7,969  

Central

    1,149       2,912       6,136  

East

    341       321       3,208  
   

 

 

   

 

 

   

 

 

 

Total

  $ 2,190     $ 3,507     $ 17,313  
   

 

 

   

 

 

   

 

 

 

 

The tables below reflect the number of communities with real estate inventory impairments for the years ended December 31, 2011, 2010 and 2009, excluding home-specific impairments (as noted above) and the fair value of these communities (dollars in thousands):

 

      September 30,       September 30,       September 30,  
    Number of  Communities
Impaired
    Impairment
Charges
    Fair Value of  Communities
Impaired
(Carrying Value less Impairments)
 
    Year Ended December 31, 2011  
       

West

    5     $ 3,097     $ 19,963  

Central

    8       461       17,104  

East

    1       355       2,006  
   

 

 

   

 

 

   

 

 

 

Total

    14     $ 3,913     $ 39,073  
   

 

 

   

 

 

   

 

 

 
   
    Year Ended December 31, 2010  

West

    0     $ 0     $ N/A  

Central

    7       1,897       13,073  

East

    0       0       N/A  
   

 

 

   

 

 

   

 

 

 

Total

    7     $ 1,897     $ 13,073  
   

 

 

   

 

 

   

 

 

 
   
    Year Ended December 31, 2009  

West

    12     $ 10,490     $ 43,542  

Central

    17       10,608       28,845  

East

    6       2,126       7,476  
   

 

 

   

 

 

   

 

 

 

Total

    35     $ 23,224     $ 79,863  
   

 

 

   

 

 

   

 

 

 

Subject to sufficient qualifying assets, we capitalize our development period interest costs incurred in connection with the development and construction of real estate. Capitalized interest is allocated to real estate when incurred and charged to cost of closings when the related property is delivered. A summary of our capitalized interest is as follows (in thousands):

 

      September 30,       September 30,  
    Years Ended December 31,  
    2011     2010  

Capitalized interest, beginning of year

  $ 11,679     $ 14,187  

Interest incurred

    43,393       43,442  

Interest expensed

    (30,399     (33,722

Interest amortized to cost of home, land closings and impairments

    (9,863     (12,228
   

 

 

   

 

 

 

Capitalized interest, end of year (1)

  $ 14,810     $ 11,679  
   

 

 

   

 

 

 

 

(1) Approximately $750,000 of the capitalized interest is related to our joint venture investments and is a component of “Investments in unconsolidated entities” in our consolidated balance sheet as of December 31, 2011 and 2010.