Company: UHG
Filing Date: 2025-05-14
Form Type: 10-Q
Source: 0001830188-25-000036
Chunk: 125

Company: United Homes Group, Inc.
Filing Date: 2025-05-14
Form: 10-Q
Item: Part I, Item 2
Chunk 125
---
 bank option contracts. The risk of loss pertaining to the aggregate purchase price of contractual commitments resulting from non-performance under finished lot purchase agreements is limited to approximately $46.9 million in lot deposits and $6.2 million of capitalized pre-acquisition costs as of March 31, 2025. 

Surety bonds and letters of credit

During the ordinary course of business, the Company enters into surety bonds and letters of credit arrangements with local municipalities, government agencies, and land developers. These arrangements relate to certain performance-related obligations and serve as security for certain land option agreements. 

30

As of March 31, 2025, the Company had outstanding surety bonds and letters of credit totaling $8.2 million and $1.3 million, respectively. The Company believes it will fulfill its obligations under the related contracts and does not anticipate any material losses under these surety bonds or letters of credit.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

UHG’s operations are interest rate sensitive. As overall housing demand is adversely affected by increases in interest rates, a significant increase in interest rates may negatively affect the ability of homebuyers to secure adequate financing. Higher interest rates could adversely affect UHG’s revenues, gross profits and net income. 

UHG is subject to market risk on its debt instruments primarily due to fluctuations in interest rates. The Company currently utilizes variable-rate debt. For variable-rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but may affect the Company’s future earnings and cash flows. UHG has not entered into, nor does it intend to enter into in the future, derivative financial instruments for trading or speculative purposes or to hedge against interest rate fluctuations.

The interest rate on the borrowings under the syndicated line of credit is based upon adjusted daily simple SOFR plus an applicable margin ranging between 275 basis points and 350 basis points, based upon UHG’s leverage ratio. In addition, the interest rate on the borrowings under the term loan is based upon adjusted simple SOFR plus an applicable margin ranging between 675 basis points and 775 basis points, based upon UHG’s leverage ratio. Therefore, UHG is exposed to market risks related to fluctuations in interest rates on its outstanding debt under the syndicated line of credit and the term loan. As of March 31, 2025, UHG had $53.2 million and $67.2 million outstanding under the syndicated line of credit