Company: SDHC
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0001628280-25-049591
Chunk: 28

Company: Smith Douglas Homes Corp.
Filing Date: 2025-11-05
Form: 10-Q
Item: Part I, Item 1
Chunk 28
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$73,352 Homes under construction, completed homes and model homes247,754 204,482 Total real estate inventory$314,524 $277,834 The Company capitalizes into real estate inventory interest costs incurred on homes under construction during the construction period until substantial completion. The Company does not capitalize interest on homes where construction has been suspended.A summary of capitalized interest is as follows (in thousands): Three months endedSeptember 30,Nine months endedSeptember 30, 2025202420252024Capitalized interest, beginning of period$833 $827 $253 $1,338 Interest incurred1,828 1,025 4,367 2,857 Interest expensed(898)(614)(2,336)(1,903)Interest charged to cost of home closings(698)(351)(1,219)(1,405)Capitalized interest, end of period$1,065 $887 $1,065 $887 

Note 3 ‑ Variable interest entities:

The Company enters into lot option agreements to procure finished lots for the construction of homes in the future. Pursuant to these option agreements, the Company generally provides a deposit to the seller as consideration for the right to purchase lots at different times in the future at predetermined prices. Such contracts enable the Company to defer acquiring portions of properties owned by third parties or unconsolidated entities until the Company has determined whether and when to exercise the option, which may serve to reduce the Company’s financial risks associated with long‑term land holdings.Based on the provisions of the relevant accounting guidance, the Company has concluded that when it enters into an option or purchase agreement to acquire lots from an entity, a variable interest entity (VIE) may be created. The Company evaluates all option and purchase agreements and amendments for land to determine if the related entity is a VIE. As required by ASC Topic 810, Consolidation, the Company assesses whether it is the primary beneficiary for each VIE. In 

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order to determine if the Company is the primary beneficiary, the Company must first assess whether it has the ability to control the activities of the VIE that most significantly impact its economic performance. Such activities include, but are not limited to, the ability to determine the budget and scope of land development work, if any; the ability to control financing decisions for the VIE; the ability to acquire additional land into the VIE or dispose of land in the VIE not under