All other schedules are omitted because they are not required, are not applicable, or the information required is included in the Consolidated Financial Statements or the notes thereto.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO FINANCIAL STATEMENTS
The accompanying Consolidated Financial Statements of American Realty Investors, Inc. (“ARL”) and consolidated entities have been prepared in conformity with accounting principles generally accepted in the United States of America, the most significant of which are described in Note 1. “Organization and Summary of Significant Accounting Policies.” The Notes to Consolidated Financial Statements are an integral part of the Consolidated Financial Statements. The data presented in the Notes to Consolidated Financial Statements are as of December 31 of each year and for the year then ended, unless otherwise indicated. Dollar amounts in tables are in thousands, except per share amounts.
Certain balances for 2014 and 2013 have been reclassified to conform to the 2015 presentation.
NOTE 1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Organization and business.
The Company, a Nevada corporation that was formed in 1999, is headquartered in Dallas, Texas and its common stock trades on the New York Stock Exchange (“NYSE”) under the symbol (“ARL”). Approximately 86.7% of ARL’s stock is owned by related party entities. ARL subsidiaries own approximately 80.9% of the outstanding shares of common stock of Transcontinental Realty Investors, Inc. (“TCI”), a Nevada corporation, whose common stock is traded on the NYSE under the symbol (“TCI”).
TCI, a subsidiary of ARL, owns approximately 81.1% of the common stock of Income Opportunity Realty Investors, Inc. (“IOT”). Effective July 17, 2009, IOT’s financial results were consolidated with those of ARL and TCI and their subsidiaries. IOT’s common stock is traded on the New York Stock Exchange Euronext (“NYSE MKT”) under the symbol (“IOT”).
ARL’s Board of Directors is responsible for directing the overall affairs of ARL and for setting the strategic policies that guide the Company. As of April 30, 2011, the Board of Directors delegated the day-to-day management of the Company to Pillar Income Asset Management, Inc. (“Pillar”), a Nevada corporation, under a written Advisory Agreement that is reviewed annually by ARL’s Board of Directors. The directors of ARL are also directors of TCI and IOT. The Chairman of the Board of Directors of ARL also serves as the Chairman of the Board of Directors of TCI and IOT. The officers of ARL also serve as officers of TCI, IOT and Pillar.
Since April 30, 2011, Pillar, the sole shareholder of which is Realty Advisors, LLC, a Nevada limited liability company, the sole member of which is Realty Advisors, Inc. (“RAI”), a Nevada corporation, the sole shareholder of which is May Realty Holdings, Inc. (“MRHI”, formerly known as Realty Advisors Management, Inc. “RAMI”, effective August 7, 2014),
a Nevada corporation, the sole shareholder of which is a trust known as the May Trust, became the Company’s external Advisor and Cash Manager. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges, for the Company’s benefit, debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to TCI and IOT. As the contractual advisor, Pillar is compensated by ARL under an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. ARL has no employees. Employees of Pillar render services to ARL in accordance with the terms of the Advisory Agreement.
Regis Realty Prime, LLC, dba Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial and provides brokerage services. Regis receives property management fees and leasing commissions in accordance with the terms of its property-level management agreement. Regis is also entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement. See Part III, Item 10. “Directors, Executive Officers and Corporate Governance – Property Management and Real Estate Brokerage”. ARL engages third-party companies to lease and manage its apartment properties.
On January 1, 2012, the Company’s subsidiary, TCI, entered into a development agreement with Unified Housing Foundation, Inc. (“UHF”) a non-profit corporation that provides management services for the development of residential apartment projects in the future. This development agreement was terminated December 31, 2013. The Company has also invested in surplus cash notes receivables from UHF and has sold several residential apartment properties to UHF in prior years. Due to this ongoing relationship and the significant investment in the performance of the collateral secured under the notes receivable, UHF has been determined to be a related party.
Our primary business is the acquisition, development and ownership of income-producing residential and commercial real estate properties. In addition, we opportunistically acquire land for future development in in-fill or high-growth suburban markets. From time to time and when we believe it appropriate to do so, we will also sell land and income-producing properties. We generate revenues by leasing apartment units to residents, and leasing office, industrial and retail space to various for-profit businesses as well as certain local, state and federal agencies. We also generate revenues from gains on sales of income-producing properties and land. At December 31, 2015, we owned 48 residential apartment communities comprising of 7,983 units, nine commercial properties comprising an aggregate of approximately 2.2 million rentable square feet, and an investment in 3,812 acres of undeveloped and partially developed land, and a golf course comprising of approximately 96 acres.
Basis of presentation
.
The Company presents its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). The accompanying Consolidated Financial Statements include our accounts, our subsidiaries, generally all of which are wholly-owned, and all entities in which we have a controlling interest. Arrangements that are not controlled through voting or similar rights are accounted for as a Variable Interest Entity (VIE), in accordance with the provisions and guidance of ASC Topic 810 “Consolidation”, whereby we have determined that we are a primary beneficiary of the VIE and meet certain criteria of a sole general partner or managing member as identified in accordance with Emerging Issues Task Force (“EITF”) Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights (“EITF 04-5”). VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders as a group lack adequate decision making ability, the obligation to absorb expected losses or residual returns of the entity, or have voting rights that are not proportional to their economic interests. The primary beneficiary generally is the entity that provides financial support and bears a majority of the financial risks, authorizes certain capital transactions, or makes operating decisions that materially affect the entity’s financial results. All significant intercompany balances and transactions have been eliminated in consolidation.
In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investors’ ability to control or significantly influence key decisions for the VIE; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current future fair values and performance of real estate held by these VIEs and general market conditions.
For entities in which we have less than a controlling financial interest or entities where it is not deemed to be the primary beneficiary, the entities are accounted for using the equity method of accounting. Accordingly, our share of the net earnings or losses of these entities is included in consolidated net income. Our investment in Gruppa Florentina, LLC is accounted for under the equity method. Our investments in LK-Four Hickory, LLC was accounted for under the equity method until January 17, 2012, when the investment was sold.
The Company in accordance with the VIE guidance in ASC 810 “Consolidations” consolidates 48 and 36 multifamily residential properties located throughout the United States at December 31, 2015 and 2014, respectively, ranging from 32 units to 320 units. Assets totaling $384.5 million and $363.5 million at December 31, 2015 and 2014, respectively, are consolidated and included in “Real estate, at cost” on the balance sheet and are all collateral for their respective mortgage notes payable, none of which are recourse to the partnership in which they are in or to the Company.
Real estate, depreciation, and impairment
.
Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and improvements—10-40 years; furniture, fixtures and equipment—5-10 years). We continually evaluate the recoverability of the carrying value of its real estate assets using the methodology prescribed in ASC Topic 360, “Property, Plant and Equipment,” Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under ASC Topic 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value.
Any properties that are treated as “subject to sales contract” on the Consolidated Balance Sheets and are listed in detail in Schedule III, “Real Estate and Accumulated Depreciation” are those in which we have not recognized the legal sale according to the guidance in ASC 360-20 due to various factors, disclosed in each sale transaction under Item 1 Significant Real Estate Acquisitions/Dispositions and Financing. Any sale transaction where the guidance reflects that a sale had not occurred, the asset involved in the transaction, including the debt and property operations, remained on the books of the Company. We continue to charge depreciation to expense as a period costs for the property until such time as the property has been classified as held for sale in accordance with guidance reflected in ASC 360-10-45 “Impairment or Disposal of Long-Lived Assets”.
Real estate held for sale
.
We periodically classify real estate assets as held for sale. An asset is classified as held for sale after the approval of the Company’s board of directors and after an active program to sell the asset has commenced. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying consolidated balance sheets. Upon a decision to no longer market as an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated. The operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying statements of operations. Income from discontinued operations includes the revenues and expenses, including depreciation and interest expense, associated with the assets. This classification of operating results as discontinued operations applies retroactively for all periods presented. Additionally, gains and losses on assets designated as held for sale are classified as part of discontinued operations.
Cost capitalization
.
The cost of buildings and improvements includes the purchase price of property, legal fees and other acquisition costs. Costs directly related to planning, developing, initial leasing and constructing a property are capitalized and classified as Real Estate in the Consolidated Balance Sheets. Capitalized development costs include interest, property taxes, insurance, and other direct project costs incurred during the period of development.
A variety of costs are incurred in the acquisition, development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. Our capitalization policy on development properties is guided by ASC Topic 835-20 “Interest – Capitalization of Interest” and ASC Topic 970 “Real Estate - General”. The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed and held available for occupancy upon the receipt of certificates of occupancy, but no later than one year from cessation of major construction activity. We cease capitalization on the portion (1) substantially completed and (2) occupied or held available for occupancy, and we capitalize only those costs associated with the portion under construction.
We capitalize leasing costs which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable. We allocate these costs to individual tenant leases and amortize them over the related lease term.
Fair value measurement
.
We apply the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures,” to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entity’s own data.
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows:
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Level 1
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—
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Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.
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|
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Level 2
|
—
|
Quoted prices for similar assets and liabilities in active markets, and
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|
|
inputs that are observable for the asset or liability, either directly or
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|
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indirectly, for substantially the full term of the financial instrument.
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|
|
|
Level 3
|
—
|
Unobservable inputs that are significant to the fair value measurement.
|
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Related parties
.
We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests, or affiliates of the entity.
Recognition of revenue.
Our revenues, which are composed largely of rental income, include rents reported on a straight-line basis over the lease term. In accordance with ASC 805 “Business Combinations”, we recognize rental revenue of acquired in-place “above-” and “below-market” leases at their fair values over the terms of the respective leases.
Reimbursements of operating costs, as allowed under most of our commercial tenant leases, consist of amounts due from tenants for common area maintenance, real estate taxes and other recoverable costs, and are recognized as revenue in the period in which the recoverable expenses are incurred. We record these reimbursements on a “gross” basis, since we generally are the primary obligor with respect to purchasing goods and services from third-party suppliers, have discretion in selecting the supplier and have the credit risk with respect to paying the supplier.
Rental income for residential property leases is recorded when due from residents and is recognized monthly as earned, which is not materially different than on a straight-line basis as lease terms are generally for periods of one year or less. For hotel properties, revenues for room sales and guest services are recognized as rooms are occupied and services are rendered. An allowance for doubtful accounts is recorded for all past due rents and operating expense reimbursements considered to be uncollectible.
Sales and the associated gains or losses of real estate assets are recognized in accordance with the provisions of ASC Topic 360-20, “Property, Plant and Equipment – Real Estate Sale”. The specific timing of a sale is measured against various criteria in ASC 360-20 related to the terms of the transaction and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain recognition and accounts for the continued operations of the property by applying the finance, leasing, deposit, installment or cost recovery methods, as appropriate, until the sales criteria are met.
Foreign currency translation
.
Foreign currency denominated assets and liabilities of subsidiaries with local functional currencies are translated to United States dollars at year-end exchange rates. The effects of translation are recorded in the cumulative translation component of shareholders’ equity. Subsidiaries with a United States dollar functional currency re-measure monetary assets and liabilities at year-end exchange rates and non-monetary assets and liabilities at historical exchange rates. The effects of re-measurement are included in income. Exchange gains and losses arising from transactions denominated in foreign currencies are translated at average exchange rates.
Non-performing notes receivable.
ARL considers a note receivable to be non-performing when the maturity date has passed without principal repayment and the borrower is not making interest payments in accordance with the terms of the agreement.
Interest recognition on notes receivable.
We record interest income as earned in accordance with the terms of the related loan agreements.
Allowance for estimated losses
.
We assess the collectability of notes receivable on a periodic basis, of which the assessment consists primarily of an evaluation of cash flow projections of the borrower to determine whether estimated cash flows are sufficient to repay principal and interest in accordance with the contractual terms of the note. We recognize impairments on notes receivable when it is probable that principal and interest will not be received in accordance with the contractual terms of the loan. The amount of the impairment to be recognized generally is based on the fair value of the partnership’s real estate that represents the primary source of loan repayment. See Note 3 “Notes and Interest Receivable” for details on our notes receivable.
Cash equivalents
.
For purposes of the Consolidated Statements of Cash Flows, all highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. Restricted cash consists of cash reserved primarily for specific uses such as insurance, property taxes and replacement reserves.
Concentration of credit risk
.
The Company maintains its cash balances at commercial banks and through investment companies, the deposits of which are insured by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2015 and 2014, the Company maintained balances in excess of the insured amount.
Earnings per share
.
Income (loss) per share is presented in accordance with ASC 620 “Earnings per Share”. Income (loss) per share is computed based upon the weighted average number of shares of common stock outstanding during each year.
Use of estimates.
In the preparation of Consolidated Financial Statements in conformity with GAAP, it is necessary for management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expense for the year ended. Actual results could differ from those estimates.
Income taxes.
The Company is a “C” corporation for U.S. federal income tax purposes. For tax periods ending before August 31, 2012, the Company filed an annual consolidated income tax return with TCI and IOT and their subsidiaries. ARL was the common parent for the consolidated group. After that date, the Company and the rest of the ARL group joined the MRHI consolidated group for tax purposes. The income tax expense (benefit) for the 2012 tax period in the accompanying financial statement was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT. That agreement continued until August 31, 2012, at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and MRHI for the remainder of 2012 and subsequent years. The agreement specifies the manner in which the group will share the consolidated tax liability and also how certain tax attributes are to be treated among members of the group.
Recent accounting pronouncements
.
In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, which changes the criteria for determining which disposals qualify to be accounted for as discontinued operations and modifies related reporting and disclosure requirements.
Disposals representing a strategic shift in operations, such as a change in a major line of business, a major geographical area or major equity investment, that have a major effect on a company’s operations and financial results will be presented as discontinued operations. If the disposal does qualify as a discontinued operation under ASU 2014-08, the Company will be required to expand their disclosures about discontinued operations to provide more information on the assets, liabilities, income and expenses of the disposed component.
The classification of operating results as discontinued operations are applied retroactively for all periods presented. The new standard was effective January 1, 2015. We adopted ASU 2014-08 as of January 1, 2015 and believe future sales of our individual operating properties will no longer qualify as discontinued operations. Adoption of this standard has resulted in substantially fewer of the Company’s dispositions meeting the discontinued operations criteria. See Note 8 below.
In May 2014, Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers,” was issued. This new guidance established a new single comprehensive revenue recognition model and provides for enhanced disclosures. Under the new policy, the nature, timing and amount of revenue recognized for certain transactions could differ from those recognized under existing accounting guidance. This new standard does not affect revenue recognized under lease contracts. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this guidance has on its financial position and results of operations, if any.
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Prior to the issuance of the standard, debt issuance costs were required to be presented in the balance sheet as an asset. The Company has adopted this standard effective June 30, 2015. The accompanying financials have been reclassified to reflect the adoption.
In February 2016, Accounting Standards Update No. 2016-02 (“ASU 2016-02”), “Leases” was issued. This new guidance establishes a new model for accounting for leases and provides for enhanced disclosures. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of this guidance, if any, on its financial position and results of operations.
A summary of our real estate owned as of the end of the year is listed below (dollars in thousands):
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2015
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|
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2014
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|
|
|
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Apartments
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$
|
622,761
|
|
|
$
|
455,602
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|
Apartments under construction
|
|
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18,230
|
|
|
|
1,512
|
|
Commercial properties
|
|
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215,609
|
|
|
|
193,197
|
|
Land held for development
|
|
|
97,790
|
|
|
|
159,903
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|
Real estate held for sale
|
|
|
—
|
|
|
|
—
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|
Real estate subject to sales contract
|
|
|
49,155
|
|
|
|
21,326
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|
Total real estate, at cost, less impairment
|
|
|
1,003,545
|
|
|
|
831,540
|
|
Less accumulated deprecation
|
|
|
(150,038
|
)
|
|
|
(131,777
|
)
|
Total real estate, net of depreciation
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|
$
|
853,507
|
|
|
$
|
699,763
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|
Expenditures for repairs and maintenance are charged to operations as incurred. Significant betterments are capitalized. When assets are sold or retired, their costs and related accumulated depreciation are removed from the accounts with the resulting gains or losses reflected in net income or loss for the period.
Depreciation is computed on a straight line basis over the estimated useful lives of the assets as follows:
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|
Land improvements
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25 to 40 years
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Buildings and improvements
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10 to 40 years
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Tenant improvements
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Shorter of useful life or terms of related lease
|
Furniture, fixtures and equipment
|
3 to 7 years
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Provision for Impairment Losses
For the year ended December 31, 2015, the Company provided an impairment of $5.3 million for the golf course and related assets located in the U.S. Virgin Islands. This impairment relates to the decision to sell the development parcels in the U.S. Virgin Islands and the resultant decrease in the estimated fair value of the remaining assets. There was no provision for impairment for the year ended December 31, 2014. In 2013, impairment was recorded as an additional loss in the commercial portfolio of $9.6 million, the land portfolio of $1.6 million and the remaining $7.8 million was related to a provision for losses taken on our notes receivable. A recent appraisal done during the refinance of an office building in Dallas, Texas, resulted in a fair value lower than book basis. The impairment in our land portfolio was due to a potential sale of land at a value lower than the book basis as well as a disposal of another property due to bankruptcy.
Fair Value Measurement
The Company applies the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures,” to the valuation of real estate assets.
The Company is required to assess the fair value of its consolidated real estate assets with indicators of impairment. The value of impaired real estate assets is determined using widely accepted valuation techniques, including discounted cash flow analyses on the expected cash flow of each asset, as well as the income capitalization approach, which considers prevailing market capitalization rates, analyses of recent comparable sales transactions, information from actual sales negotiations and bona fide purchase offers received from third parties. The methods used to measure fair value may produce an amount that may not be indicative of net realizable value or reflective of future values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The fair value measurements used in these evaluations are considered to be Level 2 and 3 valuations within the fair value hierarchy in the accounting rules, as there are significant observable (Level 2) and unobservable inputs (Level 3). Examples of Level 2 inputs the Company utilizes in its fair value calculations are appraisals and bona fide purchase offers from third parties. Examples of Level 3 inputs the Company utilizes in its fair value calculations are discount rates, market capitalization rates, expected lease rental rates, timing of new leases, an estimate of future sales prices and comparable sales prices of similar assets, if available. All of the impairment charges outlined above were recorded in the statements of operations, either in continuing operations or discontinued operations.
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|
|
|
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|
Fair Value Measurements Using (dollars in thousands):
|
|
December 31, 2015
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|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
$
|
3,000
|
|
|
$
|
—
|
|
|
$
|
---
|
|
|
$
|
3,000
|
|
A commercial
property (golf course) with a carrying value of approximately $8.3 million was written down to its fair value of $3.0 million
resulting in an impairment charge of $5.3 million. The method used to determine fair value was an analysis of the discounted cash
flow of the asset.
There was
no provision for impairment for the year ended December 31, 2014
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|
|
|
|
|
Fair Value Measurements Using (dollars in thousands):
|
|
December 31, 2013
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
$
|
4,899
|
|
|
$
|
—
|
|
|
$
|
4,899
|
|
|
$
|
---
|
|
|
Commercial
|
|
|
$
|
26,194
|
|
|
$
|
—
|
|
|
$
|
26,194
|
|
|
$
|
—
|
|
Land with a carrying amount of $6.5 million was written down to its fair value of $4.9 million resulting in an impairment charge of $1.6 million in 2013. Level 2 inputs used to determine the fair values above included third party appraisals and taking the debt balance on the collateralized acres plus the book value of the uncollateralized acres.
A commercial building with a carrying amount of $35.8 million was written down to its fair value of $26.2 million resulting in an impairment charge of $9.6 million in 2013. The Level 2 input used to determine the fair value above was a third party appraisal.
The following is a brief description of the more significant property acquisitions and sales in 2015:
Purchases
For the year ended December 31, 2015, the Company acquired five income-producing apartment complexes from third parties in the states of Texas (3), Tennessee (1) and Alabama (1), increasing the total number of units by 990, for a combined purchase price of $82.9 million. In addition, the Company acquired six income-producing apartment complexes from related parties in the states of Texas (2) Florida (2), Tennessee (1) and Mississippi (1) increasing the total number of units by 835, for a combined purchase price of $29.3 million. The Company also purchased a commercial office building in Texas, comprised of 92,723 square feet, for $16.8 million.
Sales
For the year ended December 31, 2015, the Company sold approximately 595 acres of land located in Texas to independent third parties for a total sales price of $107.3 million. We recorded a total gain of $18.9 million from the sales. In addition we recognized $2.7 million in deferred gain from prior years land sales. In November 2015, the Company sold approximately 88 acres of land located in the U.S. Virgin Islands to an unrelated party. The sales represents most of the development land owned by the Company in the U.S. Virgin Islands. Total cash consideration for the sale was $33.9 million. We recorded a gain of $12.0 million related to the transaction.
In November 2015, the Company entered into a sales contract with an unrelated party. The contract was for most of the developable land owned by the Company in the Mercer Crossing Development located in Farmers Branch, Texas. In addition, TCI, IOT and RAI also sold land in this transaction. Total consideration for the sale was $75 million. The ultimate allocation of sales proceeds to the parties involved is yet to be determined and will be complete when the final use of the land, certain development commitments are completed and the note is collected. The agreement between TCI and the other parties related to this transaction provides for TCI to hold the subordinated note from the buyer in the amount of $50 million. At the closing, the note payable to related parties of $16.1 million was paid off. Due to an inadequate down payment from the buyer and the level of seller financing involved, the transaction is being accounted for under the deposit method. Under the deposit method, no revenue is recognized and the asset sold remains on the books until the criteria for full revenue recognition is met.
In addition, one income-producing apartment complex consisting of 200 units located in Ohio was foreclosed upon. The Company recorded a gain of $0.7 million related to the extinguishment of debt.
As of December 31, 2015, the Company has approximately 91acres of land, at various locations that were sold to related parties in multiple transactions. These transactions are treated as “subject to sales contract” on the Consolidated Balance Sheets. Due to the related party nature of the transactions TCI has deferred the recording of the sales in accordance with ASC 360-20.
NOTE 3.
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NOTES AND INTEREST RECEIVABLE
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|
|
A portion of our assets are invested in mortgage notes receivable, principally secured by real estate. We may originate mortgage loans in conjunction with providing purchase money financing of property sales. Notes receivable are generally collateralized by real estate or interests in real estate and personal guarantees of the borrower and, unless noted otherwise, are so secured. Management intends to service and hold for investment the mortgage notes in our portfolio. A majority of the notes receivable provide for principal to be paid at maturity (dollars in thousands).
|
|
Maturity
|
|
Interest
|
|
|
|
|
|
Borrower
|
|
Date
|
|
Rate
|
|
Amount
|
|
Security
|
Performing loans:
|
|
|
|
|
|
|
|
|
|
H198, LLC (Las Vegas Land)
|
|
01/20
|
|
12.00%
|
|
|
5,907
|
|
Secured
|
Leman Development, Ltd
(2)
|
|
N/A
|
|
0.00%
|
|
|
1,500
|
|
Unsecured
|
One Realco Corporation
(1,2)
|
|
01/17
|
|
3.00%
|
|
|
7,000
|
|
Unsecured
|
Realty Advisors Management, Inc.
(1)
|
|
12/16
|
|
2.28%
|
|
|
20,387
|
|
Unsecured
|
Unified Housing Foundation, Inc. (Cliffs of El Dorado)
(1)
|
|
12/32
|
|
12.00%
|
|
|
2,097
|
|
Secured
|
Unified Housing Foundation, Inc. (Echo Station)
(1)
|
|
12/32
|
|
12.00%
|
|
|
1,481
|
|
Secured
|
Unified Housing Foundation, Inc. (Inwood on the Park)
(1)
|
|
12/32
|
|
12.00%
|
|
|
5,059
|
|
Secured
|
Unified Housing Foundation, Inc. (Kensington Park)
(1)
|
|
12/32
|
|
12.00%
|
|
|
3,933
|
|
Secured
|
Unified Housing Foundation, Inc. (Lakeshore Villas)
(1)
|
|
12/32
|
|
12.00%
|
|
|
2,000
|
|
Secured
|
Unified Housing Foundation, Inc. (Lakeshore Villas)
(1)
|
|
12/32
|
|
12.00%
|
|
|
9,100
|
|
Secured
|
Unified Housing Foundation, Inc. (Limestone Canyon)
(1)
|
|
12/32
|
|
12.00%
|
|
|
2,653
|
|
Secured
|
Unified Housing Foundation, Inc. (Limestone Canyon)
(1)
|
|
12/32
|
|
12.00%
|
|
|
4,640
|
|
Secured
|
Unified Housing Foundation, Inc. (Limestone Ranch)
(1)
|
|
12/32
|
|
12.00%
|
|
|
1,953
|
|
Secured
|
Unified Housing Foundation, Inc. (Limestone Ranch)
(1)
|
|
12/32
|
|
12.00%
|
|
|
6,000
|
|
Secured
|
Unified Housing Foundation, Inc. (Parkside Crossing)
(1)
|
|
12/32
|
|
12.00%
|
|
|
2,272
|
|
Secured
|
Unified Housing Foundation, Inc. (Reserve at White Rock Phase I)
(1)
|
|
12/32
|
|
12.00%
|
|
|
2,485
|
|
Secured
|
Unified Housing Foundation, Inc. (Reserve at White Rock Phase II)
(1)
|
|
12/32
|
|
12.00%
|
|
|
2,555
|
|
Secured
|
Unified Housing Foundation, Inc. (Sendero Ridge)
(1)
|
|
12/32
|
|
12.00%
|
|
|
4,491
|
|
Secured
|
Unified Housing Foundation, Inc. (Sendero Ridge)
(1)
|
|
12/32
|
|
12.00%
|
|
|
4,812
|
|
Secured
|
Unified Housing Foundation, Inc. (Timbers of Terrell)
(1)
|
|
12/32
|
|
12.00%
|
|
|
1,323
|
|
Secured
|
Unified Housing Foundation, Inc. (Tivoli)
(1)
|
|
12/32
|
|
12.00%
|
|
|
7,966
|
|
Secured
|
Unified Housing Foundation, Inc. (Trails at White Rock)
(1)
|
|
12/32
|
|
12.00%
|
|
|
3,815
|
|
Secured
|
Unified Housing Foundation, Inc.
(1)
|
|
06/17
|
|
12.00%
|
|
|
1,261
|
|
Unsecured
|
Unified Housing Foundation, Inc.
(1)
|
|
12/17
|
|
12.00%
|
|
|
1,207
|
|
Unsecured
|
Unified Housing Foundation, Inc.
(1)
|
|
12/18
|
|
12.00%
|
|
|
3,994
|
|
Unsecured
|
Unified Housing Foundation, Inc.
(1)
|
|
12/18
|
|
12.00%
|
|
|
6,407
|
|
Unsecured
|
Unified Housing Foundation, Inc.
(1)
|
|
12/15
|
|
12.00%
|
|
|
2,665
|
|
Unsecured
|
Unified Housing Foundation, Inc.
(1)
|
|
12/16
|
|
12.00%
|
|
|
3,657
|
|
Unsecured
|
Other related party notes
|
|
Various
|
|
Various
|
|
|
1,349
|
|
Various secured interests
|
Other related party notes
|
|
Various
|
|
Various
|
|
|
1,420
|
|
Various unsecured interests
|
Other non-related party notes
|
|
Various
|
|
Various
|
|
|
3,166
|
|
Various secured interests
|
Other non-related party notes
|
|
Various
|
|
Various
|
|
|
503
|
|
Various unsecured interests
|
Accrued interest
|
|
|
|
|
|
|
8,222
|
|
|
Total Performing
|
|
|
|
|
|
$
|
137,280
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for estimated losses
|
|
|
|
|
|
|
(17,037
|
)
|
|
Total
|
|
|
|
|
|
$
|
120,243
|
|
|
|
(2)
|
An allowance was taken for estimated losses at full value of note.
|
As of December 31, 2015, the obligors on $118 million or 91.4% of the mortgage notes receivable portfolio were due from related parties. The Company recognized $10.9 million of interest income from these related party notes receivables.
As of December 31, 2015 none of the mortgage notes receivable portfolio were non-performing.
The Company has various notes receivable from Unified Housing foundation, Inc. (“UHF”). UHF is determined to be a related party due to our significant investment in the performance of the collateral secured under the notes receivable. Payments are due from surplus cash flow from operations, sale or refinancing of the underlying properties. These notes are cross collateralized to the extent that any surplus cash available from any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes. Furthermore, any surplus cash available from any of the properties UHF owns, besides the properties underlying these notes, can be used to repay outstanding interest and principal for these notes. The allowance on the notes was a purchase allowance that was netted against the notes when acquired.
NOTE 4.
ALLOWANCE FOR ESTIMATED LOSSES
The allowance account for receivables was reviewed and decreased in 2015. The decrease was due to a note that was paid off, and a note that was written off, both of which were fully reserved. The decrease in 2014 was due to a note that was paid off, and a note that was written off, both of which were fully reserved. The decrease in 2013 was due to an allowance amount on a fully reserved note that was adjusted by the amount of a payment received. This decrease was offset by a reserve amount taken on a related party note receivable due to questionable recovery. The table below shows our allowance for estimated losses (dollars in thousands):
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1,
|
|
$
|
18,279
|
|
|
$
|
19,600
|
|
|
$
|
21,704
|
|
Increase (decrease) in provision
|
|
|
(1,242
|
)
|
|
|
(1,321
|
)
|
|
|
(2,104
|
)
|
Balance December 31,
|
|
$
|
17,037
|
|
|
$
|
18,279
|
|
|
$
|
19,600
|
|
NOTE 5.
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES
Investments in unconsolidated subsidiaries, jointly owned companies and other investees in which we have a 20% to 50% interest or otherwise exercise significant influence are carried at cost, adjusted for the Company’s proportionate share of their undistributed earnings or losses, via the equity method of accounting.
Investments accounted for via the equity method consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage ownership as of December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gruppa Florentina, LLC
(1)
|
|
|
20.00
|
%
|
|
|
20.00
|
%
|
|
|
20.00
|
%
|
The market values, other than unconsolidated subsidiaries, as of the year ended December 31, 2015, 2014 and 2013 were not determinable as there were no readily traded markets for these entities. The following is a summary of the financial position and results of operations from our investees (dollars in thousands):
|
|
For the Twelve Months Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Other Investees
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net of accumulated depreciation
|
|
$
|
13,899
|
|
|
$
|
11,647
|
|
|
$
|
10,823
|
|
Notes receivable
|
|
|
8,457
|
|
|
|
7,326
|
|
|
|
6,526
|
|
Other assets
|
|
|
30,834
|
|
|
|
30,291
|
|
|
|
32,131
|
|
Notes payable
|
|
|
(10,883
|
)
|
|
|
(10,429
|
)
|
|
|
(11,022
|
)
|
Other liabilities
|
|
|
(7,967
|
)
|
|
|
(7,192
|
)
|
|
|
(8,134
|
)
|
Shareholders’ equity/partners capital
|
|
|
(34,340
|
)
|
|
|
(31,643
|
)
|
|
|
(30,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
51,650
|
|
|
$
|
48,893
|
|
|
$
|
46,276
|
|
Depreciation
|
|
|
(1,150
|
)
|
|
|
(1,151
|
)
|
|
|
(1,166
|
)
|
Operating expenses
|
|
|
(47,143
|
)
|
|
|
(45,590
|
)
|
|
|
(42,330
|
)
|
Interest expense
|
|
|
(805
|
)
|
|
|
(901
|
)
|
|
|
(1,022
|
)
|
Income (loss) from continuing operations
|
|
$
|
2,552
|
|
|
$
|
1,251
|
|
|
$
|
1,758
|
|
Income (loss) from discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net income (loss)
|
|
$
|
2,552
|
|
|
$
|
1,251
|
|
|
$
|
1,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company’s proportionate share of earnings
(1)
|
|
$
|
510
|
|
|
$
|
250
|
|
|
$
|
352
|
|
|
(1)
|
Earnings represent continued and discontinued operations
|
NOTE 6.
NOTES AND INTEREST PAYABLE
Below is a summary of our notes and interest payable as of December 31, 2015 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
Accrued
|
|
|
|
|
|
|
Payable
|
|
|
Interest
|
|
|
Total Debt
|
|
Apartments
|
|
$
|
507,498
|
|
|
$
|
1,499
|
|
|
$
|
508,997
|
|
Apartment under construction
|
|
|
11,139
|
|
|
|
—
|
|
|
|
11,139
|
|
Commercial
|
|
|
109,269
|
|
|
|
509
|
|
|
|
109,778
|
|
Land held for development
|
|
|
44,417
|
|
|
|
116
|
|
|
|
44,533
|
|
Real estate subject to sales contract
|
|
|
5,953
|
|
|
|
469
|
|
|
|
6,422
|
|
Mezzanine financing
|
|
|
122,900
|
|
|
|
—
|
|
|
|
122,900
|
|
Other
|
|
|
20,334
|
|
|
|
727
|
|
|
|
21,061
|
|
Total
|
|
$
|
821,510
|
|
|
$
|
3,320
|
|
|
$
|
824,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized deferred borrowing costs
|
|
|
(20,070
|
)
|
|
|
—
|
|
|
|
(20,070
|
)
|
Total
|
|
|
801,440
|
|
|
|
3,320
|
|
|
|
804,760
|
|
The following table schedules the principal payments on the notes payable for the next five years and thereafter (dollars in thousands):
|
|
|
|
|
|
Year
|
|
|
Amount
|
|
2016
|
|
|
$
|
96,535
|
|
2017
|
|
|
|
31,236
|
|
2018
|
|
|
|
43,890
|
|
2019
|
|
|
|
34,623
|
|
2020
|
|
|
|
127,370
|
|
Thereafter
|
|
|
|
487,856
|
|
Total
|
|
|
$
|
821,510
|
|
Interest payable at December 31, 2015, was $3.6 million. Interest accrues at rates ranging from 2.5% to 12.0% per annum, and mature between 2016 and 2055. The mortgages were collateralized by deeds of trust on real estate having a net carrying value of $678 million.
During the year the Company refinanced or modified ten loans with a total principal balance of $136 million. The refinancing resulted in lower interest rates and the extension of the term of the loan. The modifications resulted in lower interest rates. The transactions provide for lower monthly payments over the term of the loans.
On May 28, 2015, the Company secured additional financing of $120.0 million from an independent third party. At closing $84.4 million was advanced to the Company. The financing can be used for general corporate purposes, acquisition of multi-family apartment complexes and to reduce debt. The note has a term of five years at an interest rate of 30 day Libor plus 10.75%. The note is interest only, payable monthly, with the principal due at the end of the five years. The loan is secured by various equity interests in certain residential apartments. In November 2015 the note was amended to cap the loan amount at $84.4 million in order to allow for a construction loan of $50 million on an apartment complex being developed in Rowlett, Texas. All other terms and conditions of the loan remained the same.
The note contains customary restrictions, representations, covenants, corporate and officer guarantees, events of default and require the Company to meet certain financial covenants. The Company believes it is in compliance with these financial covenants at December 31, 2015.
Simultaneous with the closing of the above financing, the Company amended its existing financing of $40.0 million from an independent third party. The note has a term of five years at an interest rate of 12.0%. The note is interest only for the first year with quarterly principal payments due of $0.5 million starting April 1, 2015. As of December 31, 2015, the outstanding balance on the loan was $38.5 million. The loan is secured by various equity interests in residential apartments and can be prepaid at a penalty rate of 4% for year 1 with the penalty declining by 1% each year thereafter. The note contains customary restrictions, representations, covenants, corporate and officer guarantees, events of default and require the Company to meet certain financial covenants. The Company believes it is in compliance with these financial covenants at December 31, 2015.
There are various land mortgages, secured by the property, that are in the process of a modification or extension to the original note due to expiration of the loan. We are in constant contact with these lenders, working together in order to modify the terms of these loans and we anticipate a timely resolution that is similar to the existing agreement or subsequent modification.
In conjunction with the development of various apartment projects and other developments, we drew down $9.9 million in construction loans during the twelve months ended December 31, 2015.
NOTE 7.
RELATED PARTY TRANSACTIONS AND FEES
We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests, or affiliates of the entity.
The Company has historically engaged in and may continue to engage in certain business transactions with related parties, including but not limited to asset acquisition and dispositions. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest.
Since April 30, 2011, Pillar, the sole shareholder of which is Realty Advisors, LLC, a Nevada limited liability company, the sole member of which is RAI, a Nevada corporation, the sole shareholder of which is MRHI, a Nevada corporation, the sole shareholder of which is a trust known as the May Trust, became the Company’s external Advisor and Cash Manager. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges, for the Company’s benefit, debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to TCI and IOT. As the contractual advisor, Pillar is compensated by ARL under an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. ARL has no employees. Employees of Pillar render services to ARL in accordance with the terms of the Advisory Agreement.
Regis Realty Prime, LLC, dba Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial and provides brokerage services. Regis receives property management fees and leasing commissions in accordance with the terms of its property-level management agreement. Regis is also entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement. See Part III, Item 10. “Directors, Executive Officers and Corporate Governance – Property Management and Real Estate Brokerage”. Regis Hotel I, LLC, managed the Company’s hotel investments. ARL engages third-party companies to lease and manage its apartment properties.
Below is a description of the related party transactions and fees between Pillar and Regis:
Fees, expenses, and revenue paid to and/or received from our advisor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
(dollars in thousands)
|
|
Fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory
|
|
$
|
9,775
|
|
|
$
|
8,943
|
|
|
$
|
10,166
|
|
Mortgage brokerage and equity refinancing
|
|
|
1,612
|
|
|
|
1,152
|
|
|
|
1,878
|
|
Net income
|
|
|
492
|
|
|
|
3,669
|
|
|
|
4,089
|
|
Property acquisition and sales
|
|
|
921
|
|
|
|
177
|
|
|
|
—
|
|
|
|
$
|
12,800
|
|
|
$
|
13,941
|
|
|
$
|
16,133
|
|
Other Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost reimbursements
|
|
$
|
3,675
|
|
|
$
|
3,449
|
|
|
$
|
3,466
|
|
Interest paid (received)
|
|
|
(1,233
|
)
|
|
|
(1,043
|
)
|
|
|
431
|
|
|
|
$
|
2,442
|
|
|
$
|
2,406
|
|
|
$
|
3,897
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
726
|
|
|
$
|
701
|
|
|
$
|
670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees paid to Regis and related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
|
(dollars in thousands)
|
|
Fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property acquisition
|
|
$
|
1,932
|
|
|
$
|
348
|
|
|
$
|
—
|
|
Property management, construction manaement and leasing commissions
|
|
|
717
|
|
|
|
583
|
|
|
|
474
|
|
Real estate brokerage
|
|
|
1,105
|
|
|
|
2,848
|
|
|
|
4,081
|
|
|
|
$
|
3,754
|
|
|
$
|
3,779
|
|
|
$
|
4,555
|
|
The Company received rental revenue of $0.7 million in 2015, $0.7 million in 2014, and $0.7 million in 2013 from Pillar and its related parties for properties owned by the Company.
As of December 31, 2015, the Company had notes and interest receivables, net of allowances, of $102.5 million and $7.9 million, respectively, due from UHF, a related party. See Part 2, Item 8. Note 3. “Notes and Interest Receivable”. During the current period, the Company recognized interest income of $10.9 million, originated $11.6 million, received principal payments of $4.7 million and received interest payments of $11.8 million from these related party notes receivables.
On January 1, 2012, the Company’s subsidiary, TCI, entered into a development agreement with UHF, a non-profit corporation that provides management services for the development of residential apartment projects in the future. This development agreement was terminated December 31, 2013. The Company has also invested in surplus cash notes receivables from UHF and has sold several residential apartment properties to UHF in prior years. Due to this ongoing relationship and the significant investment in the performance of the collateral secured under the notes receivable, UHF has been determined to be a related party.
The Company is the primary guarantor, on a $60.35 million mezzanine loan between UHF and a lender. In addition, ARL, and an officer of the Company are limited recourse guarantors of the loan. As of December 31, 2015 UHF was in compliance with the covenants to the loan agreement.
The Company is part of a tax sharing and compensating agreement with respect to federal income taxes between ARL, TCI and IOT and their subsidiaries that was entered into in July of 2009. The expense (benefit) in each year was calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory tax rate of 35%.
The following table reconciles the beginning and ending balances of accounts receivable from and (accounts payable) to related parties as of December 31, 2015 (dollars in thousands):
|
|
Pillar
|
|
Related party receivable, December 31, 2014
|
|
$
|
21,414
|
|
Cash transfers
|
|
|
66,824
|
|
Advisory fees
|
|
|
(9,775
|
)
|
Net income fee
|
|
|
(492
|
)
|
Cost reimbursements
|
|
|
(3,675
|
)
|
Interest income
|
|
|
1,233
|
|
Notes receivable purchased
|
|
|
(18,221
|
)
|
Fees and commissions
|
|
|
(5,571
|
)
|
Expenses paid by Advisor
|
|
|
(6,302
|
)
|
Financing (mortgage payments)
|
|
|
(1,831
|
)
|
Sales/purchases transactions
|
|
|
(15,457
|
)
|
|
|
|
|
|
Related party receivable, December 31, 2015
|
|
$
|
28,147
|
|
Below are transactions that involve a related party:
As of December 31, 2015, the Company has approximately 91 acres of land, at various locations that were sold to related parties in multiple transactions. These transactions are treated as “subject to sales contract” on the Consolidated Balance Sheets. Due to the related party nature of the transactions TCI has deferred the recording of the sales in accordance with ASC 360-20.
NOTE 8.
DIVIDENDS
ARL’s Board of Directors established a policy that dividend declarations on common stock would be determined on an annual basis following the end of each year. In accordance with that policy, no dividends on ARL’s common stock were declared for 2015, 2014, or 2013. Future distributions to common stockholders will be determined by the Board of Directors in light of conditions then existing, including the Company’s financial condition and requirements, future prospects, restrictions in financing agreements, business conditions and other factors deemed relevant by the Board.
NOTE 9.
PREFERRED STOCK
There are 15,000,000 shares of Series A 10.0% Cumulative Convertible Preferred Stock authorized, with a par value of $2.00 per share and liquidation preference of $10.00 per share plus accrued and unpaid dividends. Dividends are payable at the annual rate of $1.00 per share or $.25 per share quarterly to stockholders of record on the last day of each March, June, September and December when and as declared by the Board of Directors. The Series A Preferred Stock may be converted into ARL common stock at 90.0% of the average daily closing price of ARL’s common stock for the prior 20 trading days. At December 31, 2015, 2,000,614 shares of Series A Preferred Stock were outstanding. Of the outstanding shares, 900,000 are held by ARL. Dividends are not paid on the shares owned by ARL.
Prior to July 17, 2014, RAI owned 2,451,435 shares of the outstanding Series A 10.0.0% convertible preferred stock and had accrued dividends unpaid of $15.1 million. On July 17, 2014, RAI converted 890,797 shares, including $6.3 million in accumulated dividends unpaid for these shares, into the requisite number of shares of common stock. This conversion resulted in the issuance of 2,502,230 new shares of ARL common stock. On April 9, 2015, RAI converted 460,638 shares including $2.3 million in accumulated dividends unpaid for these shares, into the requisite number of shares of common stock. This conversion resulted in the issuance of 1,486,741 new shares of ARL common stock. As of December 31, 2015, RAI owns 1,100,000 shares of the outstanding Series A convertible preferred stock and has accrued dividends unpaid of $8.6 million.
There are 91,000 shares of Series D 9.50% Cumulative Preferred Stock authorized, with a par value of $2.00 per share, and a liquidation preference of $20.00 per share. Dividends are payable at the annual rate of $1.90 per year or $.475 per quarter to stockholders of record on the last day of each March, June, September and December when and as declared by the Board of Directors. The Series D Preferred Stock is reserved for the conversion of the Class A limited partner units of Ocean Beach Partners, L.P. The Class A units may be exchanged for Series D Preferred Stock at the rate of 20 Class A units for each share of Series D Preferred Stock. Between June 1, 2001 and May 31, 2006, all unexchanged Class A units are exchangeable. At December 31, 2015, no shares of Series D Preferred Stock were outstanding.
There are 500,000 shares of Series E 6.0% Cumulative Preferred Stock authorized, with a par value $2.00 per share and a liquidation preference of $10.00 per share. Dividends are payable at the annual rate of $0.60 per share or $0.15 per quarter to stockholders of record on the last day of each March, June, September and December when and as declared by the Board of Directors. At December 31, 2015, no shares of Series E Preferred Stock were outstanding.
100,000 shares of Series J 8% Cumulative Convertible Preferred Stock have been designated pursuant to a Certificate of Designation filed March 16, 2006, as an instrument amendatory to ARL’s Amended Articles of Incorporation, with a par value of $2.00 per share, and a liquidation preference of $1,000 per share. Dividends are payable at the annual rate of $80 per share, or $20 per quarter, to stockholders of record on the last day of each of March, June, September and December, when and as declared by the Board of Directors. Although the Series J 8% Cumulative Convertible Preferred Stock has been designated, no shares have been issued as of December 31, 2015.
The Company had 135,000 shares of Series K convertible preferred stock, which were held by TCI and used as collateral on a note. The note has been paid in full and the Series K preferred stock was cancelled May 7, 2014.
NOTE 10.
STOCK OPTIONS
In January 1999, stockholders approved the Director’s Stock Option Plan (the “Director’s Plan”) which provided for options to purchase up to 40,000 shares of common stock. In December 2005, the Director’s Plan was terminated. Options granted pursuant to the Director’s Plan were immediately exercisable and expire on the earlier of the first anniversary of the date on which a Director ceases to be a Director or ten years from the date of grant. Each Independent Director was granted an option to purchase 1,000 common shares. As of December 31, 2014, there were 1,000 shares of stock options outstanding which were exercisable at $9.70 per share. These options expired unexercised January 1, 2015.
NOTE 11.
INCOME TAXES
For 2015 ARL, TCI, and IOT all had taxable income. For 2014 ARL, TCI and IOT had a combined net taxable loss and ARL recorded no current tax (benefit) or expense. For 2013 ARL consolidated with TCI and IOT had a net taxable loss resulting in a tax (benefit) to ARL. The expense (benefit) in each year was calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory rate of 35%.
Current expense (benefit) is attributable to (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
517
|
|
|
$
|
(1,169
|
)
|
|
$
|
(24,217
|
)
|
Income (loss) from discontinued operations
|
|
|
483
|
|
|
|
1,169
|
|
|
|
17,415
|
|
The full 2013 tax (benefit) to ARL comes from MRHI
|
|
$
|
1,000
|
|
|
$
|
—
|
|
|
$
|
(6,802
|
)
|
The Federal income tax expense differs from the amount computed by applying the corporate tax rate of 35% to the income before income taxes as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed “expected” income tax (benefit) expense
|
|
$
|
1,465
|
|
|
$
|
14,061
|
|
|
$
|
15,684
|
|
Book to tax differences in gains on sale of property
|
|
|
(12,463
|
)
|
|
|
(2,350
|
)
|
|
|
(20,373
|
)
|
Book to tax differences from entities not consolidated for tax purposes
|
|
|
13,721
|
|
|
|
(23,900
|
)
|
|
|
(33,565
|
)
|
Book to tax differences of depreciation and amortization
|
|
|
(490
|
)
|
|
|
1,415
|
|
|
|
1,250
|
|
Valuation allowance against current net operating loss benefit
|
|
|
20,615
|
|
|
|
20,125
|
|
|
|
17,415
|
|
Other book to tax differences
|
|
|
(22,498
|
)
|
|
|
(9,351
|
)
|
|
|
17,208
|
|
Total
|
|
$
|
350
|
|
|
$
|
—
|
|
|
$
|
(2,381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative minimum tax
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred income taxes reflect the tax effects of temporary timing differences between carrying amounts of assets and liabilities reflected on the financial statements and the amounts used for income tax purposes. ARL’s tax basis in its net assets differs from the amount at which its net assets are reported for financial statement purposes, principally due to the accounting for gains and losses on property sales, and depreciation on owned properties. The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
67,112
|
|
|
$
|
74,357
|
|
|
$
|
88,486
|
|
AMT credits
|
|
|
2,751
|
|
|
|
2,201
|
|
|
|
2,201
|
|
Basis difference of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate holdings and equipment
|
|
|
(11,197
|
)
|
|
|
10,337
|
|
|
|
11,959
|
|
Notes receivable
|
|
|
6,475
|
|
|
|
6,946
|
|
|
|
7,448
|
|
Investments
|
|
|
(14,966
|
)
|
|
|
(14,950
|
)
|
|
|
(14,960
|
)
|
Notes payable
|
|
|
3,455
|
|
|
|
8,189
|
|
|
|
13,360
|
|
Deferred gains
|
|
|
19,868
|
|
|
|
18,086
|
|
|
|
18,746
|
|
Total
|
|
$
|
73,498
|
|
|
$
|
105,166
|
|
|
$
|
127,240
|
|
Deferred tax valuation allowance
|
|
|
(73,498
|
)
|
|
|
(105,166
|
)
|
|
|
(127,240
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
At December 31, 2015, 2014 and 2013 ARL had a net deferred tax asset due to tax deductions available to it in future years. However, as management could not determine that it was more likely than not that ARL would realize the benefit of the deferred tax asset, a 100% valuation allowance was established.
ARL has prior tax net operating losses and capital loss carryforwards of approximately $54.0 million expiring through the year 2033. The alternative minimum tax credit balance increased in 2015 to approximately $2.8 million. The credit has no expiration date..
ARL is subject to routine audits by taxing jurisdictions; however, there are currently no audits in progress for any tax periods. Management believes ARL is no longer subject to income tax examinations for years prior to 2012.
NOTE 12.
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES
ARL’s operations include the leasing of commercial properties (office buildings, industrial warehouses and retail centers). The leases, thereon, expire at various dates through 2025. The following is a schedule of minimum future rents due to ARL under non-cancelable operating leases as of December 31, 2015 (dollars in thousands):
|
|
|
|
|
|
Year
|
|
|
Amount
|
|
2016
|
|
|
$
|
23,448
|
|
2017
|
|
|
|
21,350
|
|
2018
|
|
|
|
19,418
|
|
2019
|
|
|
|
14,727
|
|
2020
|
|
|
|
11,212
|
|
Thereafter
|
|
|
|
24,717
|
|
Total
|
|
|
$
|
114,872
|
|
NOTE 13.
OPERATING SEGMENTS
Our segments are based on management’s method of internal reporting which classifies its operations by property type. The segments are commercial, apartments, land and other. Significant differences among the accounting policies of the operating segments as compared to the Consolidated Financial Statements principally involve the calculation and allocation of administrative and other expenses. Management evaluates the performance of each of the operating segments and allocates resources to them based on their net operating income and cash flow.
Items of income that are not reflected in the segments are interest, other income, gain on debt extinguishment, gain on condemnation award, equity in partnerships, and gains on sale of real estate. Expenses that are not reflected in the segments are provision for losses, advisory, net income and incentive fees, general and administrative, non-controlling interests, foreign currency transaction loss and net loss from discontinued operations before gains on sale of real estate.
The segment labeled as “Other” consists of revenue and operating expenses related to the notes receivable and corporate debt.
Presented below is the operating income of each operating segment and each segment’s assets for 2015, 2014 and 2013 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended December 31, 2015
|
|
Properties
|
|
|
Apartments
|
|
|
Land
|
|
|
Other
|
|
|
Total
|
|
Operating revenue
|
|
$
|
30,540
|
|
|
$
|
73,543
|
|
|
$
|
—
|
|
|
$
|
105
|
|
|
$
|
104,188
|
|
Operating expenses
|
|
|
(17,761
|
)
|
|
|
(34,955
|
)
|
|
|
(1,029
|
)
|
|
|
(257
|
)
|
|
|
(54,002
|
)
|
Depreciation and amortization
|
|
|
(8,993
|
)
|
|
|
(12,498
|
)
|
|
|
—
|
|
|
|
73
|
|
|
|
(21,418
|
)
|
Mortgage and loan interest
|
|
|
(6,919
|
)
|
|
|
(18,767
|
)
|
|
|
(4,694
|
)
|
|
|
(17,132
|
)
|
|
|
(47,512
|
)
|
Loan charges and prepayment penalties
|
|
|
|
|
|
|
(4,932
|
)
|
|
|
|
|
|
|
(33
|
)
|
|
|
(4,965
|
)
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,674
|
|
|
|
16,674
|
|
Gain on land sales
|
|
|
|
|
|
|
|
|
|
|
21,648
|
|
|
|
|
|
|
|
21,648
|
|
Segment operating income (loss)
|
|
$
|
(3,133
|
)
|
|
$
|
2,391
|
|
|
$
|
15,925
|
|
|
$
|
(570
|
)
|
|
$
|
14,613
|
|
Capital expenditures
|
|
|
8,133
|
|
|
|
506
|
|
|
|
2,621
|
|
|
|
—
|
|
|
|
11,260
|
|
Assets
|
|
|
155,147
|
|
|
|
551,415
|
|
|
|
146,945
|
|
|
|
—
|
|
|
|
853,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
$
|
—
|
|
|
$
|
11,129
|
|
|
$
|
107,298
|
|
|
$
|
—
|
|
|
$
|
118,427
|
|
Cost of sale
|
|
|
—
|
|
|
|
(10,394
|
)
|
|
|
(88,387
|
)
|
|
|
—
|
|
|
|
(98,781
|
)
|
Recognized prior deferred gain
|
|
|
—
|
|
|
|
—
|
|
|
|
2,737
|
|
|
|
—
|
|
|
|
2,737
|
|
Gain on sale
|
|
$
|
—
|
|
|
$
|
735
|
|
|
$
|
21,648
|
|
|
$
|
—
|
|
|
$
|
22,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended December 31, 2014
|
|
Properties
|
|
|
Apartments
|
|
|
Land
|
|
|
Other
|
|
|
Total
|
|
Operating revenue
|
|
$
|
20,476
|
|
|
$
|
58,882
|
|
|
$
|
1
|
|
|
$
|
53
|
|
|
$
|
79,412
|
|
Operating expenses
|
|
|
(13,127
|
)
|
|
|
(27,588
|
)
|
|
|
(1,397
|
)
|
|
|
(12
|
)
|
|
|
(42,124
|
)
|
Depreciation and amortization
|
|
|
(7,413
|
)
|
|
|
(10,270
|
)
|
|
|
—
|
|
|
|
90
|
|
|
|
(17,593
|
)
|
Mortgage and loan interest
|
|
|
(6,026
|
)
|
|
|
(16,778
|
)
|
|
|
(4,618
|
)
|
|
|
(10,550
|
)
|
|
|
(37,972
|
)
|
Loan charges and prepayment penalties
|
|
|
(113
|
)
|
|
|
(2,625
|
)
|
|
|
(66
|
)
|
|
|
(50
|
)
|
|
|
(2,854
|
)
|
Interest income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,054
|
|
|
|
20,054
|
|
Gain on land sales
|
|
|
—
|
|
|
|
—
|
|
|
|
561
|
|
|
|
—
|
|
|
|
561
|
|
Segment operating income (loss)
|
|
$
|
(6,203
|
)
|
|
$
|
1,621
|
|
|
$
|
(5,519
|
)
|
|
$
|
9,585
|
|
|
$
|
(516
|
)
|
Capital expenditures
|
|
|
4,874
|
|
|
|
320
|
|
|
|
2,436
|
|
|
|
—
|
|
|
|
7,630
|
|
Assets
|
|
|
142,118
|
|
|
|
390,366
|
|
|
|
167,279
|
|
|
|
—
|
|
|
|
699,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
$
|
19,182
|
|
|
$
|
115,273
|
|
|
$
|
8,091
|
|
|
$
|
—
|
|
|
$
|
142,546
|
|
Cost of sale
|
|
|
(9,168
|
)
|
|
|
(63,408
|
)
|
|
|
(7,530
|
)
|
|
|
—
|
|
|
|
(80,106
|
)
|
Deferred current gain
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Recognized prior deferred gain
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gain on sale
|
|
$
|
10,014
|
|
|
$
|
51,865
|
|
|
$
|
561
|
|
|
$
|
—
|
|
|
$
|
62,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended December 31, 2013
|
|
Properties
|
|
|
Apartments
|
|
|
Land
|
|
|
Other
|
|
|
Total
|
|
Operating revenue
|
|
$
|
24,215
|
|
|
$
|
56,369
|
|
|
$
|
39
|
|
|
$
|
127
|
|
|
$
|
80,750
|
|
Operating expenses
|
|
|
(11,623
|
)
|
|
|
(26,223
|
)
|
|
|
(1,431
|
)
|
|
|
(41
|
)
|
|
|
(39,318
|
)
|
Depreciation and amortization
|
|
|
(5,938
|
)
|
|
|
(10,188
|
)
|
|
|
—
|
|
|
|
172
|
|
|
|
(15,954
|
)
|
Mortgage and loan interest
|
|
|
(5,865
|
)
|
|
|
(18,474
|
)
|
|
|
(6,412
|
)
|
|
|
(8,359
|
)
|
|
|
(39,110
|
)
|
Loan charges and prepayment penalties
|
|
|
(150
|
)
|
|
|
(3,937
|
)
|
|
|
(1,080
|
)
|
|
|
(390
|
)
|
|
|
(5,557
|
)
|
Interest income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,445
|
|
|
|
19,445
|
|
Loss on land sales
|
|
|
—
|
|
|
|
—
|
|
|
|
(455
|
)
|
|
|
—
|
|
|
|
(455
|
)
|
Segment operating income (loss)
|
|
$
|
639
|
|
|
$
|
(2,453
|
)
|
|
$
|
(9,339
|
)
|
|
$
|
10,954
|
|
|
$
|
(199
|
)
|
Capital expenditures
|
|
|
6,964
|
|
|
|
315
|
|
|
|
387
|
|
|
|
—
|
|
|
|
7,666
|
|
Assets
|
|
|
141,200
|
|
|
|
394,397
|
|
|
|
164,697
|
|
|
|
—
|
|
|
|
700,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
$
|
26,974
|
|
|
$
|
239,676
|
|
|
$
|
7,186
|
|
|
$
|
—
|
|
|
$
|
273,836
|
|
Cost of sale
|
|
|
(14,914
|
)
|
|
|
(152,785
|
)
|
|
|
(7,641
|
)
|
|
|
—
|
|
|
|
(175,340
|
)
|
Deferred current gain
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Recognized prior deferred gain
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gain (loss) on sale
|
|
$
|
12,060
|
|
|
$
|
86,891
|
|
|
$
|
(455
|
)
|
|
$
|
—
|
|
|
$
|
98,496
|
|
The table below reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations (dollars in in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For Twelve Months Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Segment operating income (loss)
|
|
$
|
14,613
|
|
|
$
|
(516
|
)
|
|
$
|
(199
|
)
|
Other non-segment items of income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
(6,893
|
)
|
|
|
(10,282
|
)
|
|
|
(7,919
|
)
|
Provision on impairment of notes receivable and real estate assets
|
|
|
(5,300
|
)
|
|
|
—
|
|
|
|
(18,980
|
)
|
Net income fee to related party
|
|
|
(492
|
)
|
|
|
(3,669
|
)
|
|
|
(4,089
|
)
|
Advisory fee to related party
|
|
|
(9,775
|
)
|
|
|
(8,943
|
)
|
|
|
(10,166
|
)
|
Other income
|
|
|
4,106
|
|
|
|
1,415
|
|
|
|
10,163
|
|
Loss on sale of investments
|
|
|
(1
|
)
|
|
|
(92
|
)
|
|
|
(283
|
)
|
Earnings from unconsolidated joint ventures and investees
|
|
|
428
|
|
|
|
347
|
|
|
|
391
|
|
Litigation settlement
|
|
|
(352
|
)
|
|
|
3,591
|
|
|
|
(20,313
|
)
|
Income tax benefit (expense)
|
|
|
(517
|
)
|
|
|
20,413
|
|
|
|
40,513
|
|
Gain (loss) from continuing operations
|
|
$
|
(4,183
|
)
|
|
$
|
2,264
|
|
|
$
|
(10,882
|
)
|
SEGMENT ASSET RECONCILIATION TO TOTAL ASSETS
The table below reconciles the segment information to the corresponding amounts in the Consolidated Balance Sheets (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Segment assets
|
|
$
|
853,507
|
|
|
$
|
699,763
|
|
|
$
|
700,294
|
|
Investments in unconsolidated subsidiaries and investees
|
|
|
8,365
|
|
|
|
4,279
|
|
|
|
3,789
|
|
Notes and interest receivable
|
|
|
120,243
|
|
|
|
134,366
|
|
|
|
136,815
|
|
Other assets and receivables
|
|
|
135,253
|
|
|
|
127,090
|
|
|
|
102,424
|
|
Total assets
|
|
$
|
1,117,368
|
|
|
$
|
965,498
|
|
|
$
|
943,322
|
|
NOTE 14.
DISCONTINUED OPERATIONS
Prior to January 1, 2015, we applied the provisions of ASC 360, “Property, Plant and Equipment”, which requires that long-lived assets that are to be disposed of by sale be measured at the lesser of (1) book value or (2) fair value less cost to sell. In addition, it requires that one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions.
Effective January 1, 2015, the Company adopted the provisions of ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, which changes the criteria of ASC 360 related to determining which disposals qualify to be accounted for as discontinued operations and modifies related reporting and disclosure requirements.
Disposals representing a strategic shift in operations that have a major effect on a company’s operations and financial results will be presented as discontinued operations. Companies will be required to expand their disclosures about discontinued operations to provide more information on the assets, liabilities, income and expenses of the discontinued operations. The new standard was effective January 1, 2015. Adoption of this standard will result in substantially fewer of the Company’s dispositions meeting the discontinued operations criteria.
Amounts included in
discontinued operations represent the residual amounts from sales classified as discontinued operations prior to January 1,
2015.
Discontinued operations relates to properties that were either sold or repositioned as held for sale as of the year ended 2014 and 2013. Income from discontinued operations relates to 5 and 19 properties that were sold or repositioned in 2014 and 2013, respectively. The following table summarizes revenue and expense information for these properties sold and held for sale (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues
|
|
$
|
355
|
|
|
$
|
5,612
|
|
|
$
|
34,922
|
|
|
|
|
355
|
|
|
|
5,612
|
|
|
|
34,922
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
|
(345
|
)
|
|
|
2,350
|
|
|
|
16,479
|
|
Depreciation
|
|
|
—
|
|
|
|
751
|
|
|
|
5,563
|
|
General and administrative
|
|
|
99
|
|
|
|
451
|
|
|
|
966
|
|
Total operating expenses
|
|
$
|
(246
|
)
|
|
$
|
3,552
|
|
|
$
|
23,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
45
|
|
|
|
(507
|
)
|
|
|
45
|
|
Mortgage and loan interest
|
|
|
(2
|
)
|
|
|
(3,204
|
)
|
|
|
(11,097
|
)
|
Loan charges and prepayment penalties
|
|
|
—
|
|
|
|
(1,656
|
)
|
|
|
(3,246
|
)
|
Litigation settlement
|
|
|
—
|
|
|
|
(250
|
)
|
|
|
(250
|
)
|
Total other expenses
|
|
$
|
43
|
|
|
$
|
(5,617
|
)
|
|
$
|
(14,548
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations before gain on sale of real estate and taxes
|
|
|
644
|
|
|
|
(3,557
|
)
|
|
|
(2,634
|
)
|
Gain on sale of real estate from discontinued operations
|
|
|
735
|
|
|
|
61,879
|
|
|
|
98,951
|
|
Income tax benefit (expense)
|
|
|
(483
|
)
|
|
|
(20,413
|
)
|
|
|
(33,711
|
)
|
Income (loss) from discontinued operations
|
|
$
|
896
|
|
|
$
|
37,909
|
|
|
$
|
62,606
|
|
The Company’s application of ASC Topic 360 in 2014 and 2013 results in the presentation of the net operating results of these qualifying properties sold or held for sale during 2014 and 2013 as income from discontinued operations. The application of ASC Topic 360 does not have an impact on net income available to common shareholders. ASC Topic 360 only impacts the presentation of these properties within the Consolidated Statements of Operations.
NOTE 15.
QUARTERLY RESULTS OF OPERATIONS
The following is a tabulation of quarterly results of operations for the years 2015, 2014, and 2013. Quarterly results presented differ from those previously reported in ARL’s Form 10-Q due to the reclassification of the operations of properties sold or held for sale to discontinued operations in accordance with ASC topic 360:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended 2015
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
(dollars in thousands, except share and per share amounts)
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
23,156
|
|
|
$
|
24,241
|
|
|
$
|
27,826
|
|
|
$
|
28,965
|
|
Total operating expenses
|
|
|
21,155
|
|
|
|
20,388
|
|
|
|
25,741
|
|
|
|
30,596
|
|
Operating income (loss)
|
|
|
2,001
|
|
|
|
3,853
|
|
|
|
2,085
|
|
|
|
(1,631
|
)
|
Other expense
|
|
|
(2,338
|
)
|
|
|
(5,139
|
)
|
|
|
(11,152
|
)
|
|
|
(12,993
|
)
|
Loss before gain on land sales, non-contolling interest, and taxes
|
|
|
(337
|
)
|
|
|
(1,286
|
)
|
|
|
(9,067
|
)
|
|
|
(14,624
|
)
|
Gain (loss) on land sales
|
|
|
2,876
|
|
|
|
3,027
|
|
|
|
1,958
|
|
|
|
13,787
|
|
Income tax benefit (expense)
|
|
|
103
|
|
|
|
(12
|
)
|
|
|
274
|
|
|
|
(882
|
)
|
Net income (loss) from continued operations
|
|
|
2,642
|
|
|
|
1,729
|
|
|
|
(6,835
|
)
|
|
|
(1,719
|
)
|
Net income from discontinued operations
|
|
|
190
|
|
|
|
(22
|
)
|
|
|
508
|
|
|
|
220
|
|
Net income (loss)
|
|
|
2,832
|
|
|
|
1,707
|
|
|
|
(6,327
|
)
|
|
|
(1,499
|
)
|
Less: net income (loss) attributable to non-controlling interest
|
|
|
508
|
|
|
|
(540
|
)
|
|
|
1,164
|
|
|
|
195
|
|
Preferred dividend requirement
|
|
|
(390
|
)
|
|
|
(275
|
)
|
|
|
(275
|
)
|
|
|
(276
|
)
|
Net income (loss) applicable to common shares
|
|
$
|
2,950
|
|
|
$
|
892
|
|
|
$
|
(5,438
|
)
|
|
$
|
(1,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
0.20
|
|
|
$
|
0.06
|
|
|
$
|
(0.38
|
)
|
|
$
|
(0.12
|
)
|
Income from discontinued operations
|
|
|
0.01
|
|
|
|
—
|
|
|
|
0.03
|
|
|
|
0.01
|
|
Net income (loss) applicable to common shares
|
|
$
|
0.21
|
|
|
$
|
0.06
|
|
|
$
|
(0.35
|
)
|
|
$
|
(0.11
|
)
|
Weighted average common shares used in computing earnings per share
|
|
|
14,027,619
|
|
|
|
15,367,320
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
0.16
|
|
|
$
|
0.05
|
|
|
$
|
(0.38
|
)
|
|
$
|
(0.12
|
)
|
Income from discontinued operations
|
|
|
0.01
|
|
|
|
—
|
|
|
|
0.03
|
|
|
|
0.01
|
|
Net income (loss) applicable to common shares
|
|
$
|
0.17
|
|
|
$
|
0.05
|
|
|
$
|
(0.35
|
)
|
|
$
|
(0.11
|
)
|
Weighted average common shares used in computing diluted earnings per share
|
|
|
17,426,707
|
|
|
|
17,844,339
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended 2014
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
(dollars in thousands, except share and per share amounts)
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
19,159
|
|
|
$
|
19,500
|
|
|
$
|
19,326
|
|
|
$
|
21,427
|
|
Total operating expenses
|
|
|
18,957
|
|
|
|
19,914
|
|
|
|
18,858
|
|
|
|
24,882
|
|
Operating income (loss)
|
|
|
202
|
|
|
|
(414
|
)
|
|
|
468
|
|
|
|
(3,455
|
)
|
Other expense
|
|
|
(2,440
|
)
|
|
|
(3,630
|
)
|
|
|
(4,274
|
)
|
|
|
(5,167
|
)
|
Loss before gain on land sales, non-contolling interest, and taxes
|
|
|
(2,238
|
)
|
|
|
(4,044
|
)
|
|
|
(3,806
|
)
|
|
|
(8,622
|
)
|
Gain (loss) on land sales
|
|
|
753
|
|
|
|
(159
|
)
|
|
|
40
|
|
|
|
(73
|
)
|
Income tax benefit
|
|
|
2,049
|
|
|
|
2,195
|
|
|
|
786
|
|
|
|
15,383
|
|
Net income (loss) from continued operations
|
|
|
564
|
|
|
|
(2,008
|
)
|
|
|
(2,980
|
)
|
|
|
6,688
|
|
Net income from discontinued operations
|
|
|
3,805
|
|
|
|
4,077
|
|
|
|
1,461
|
|
|
|
28,566
|
|
Net income (loss)
|
|
|
4,369
|
|
|
|
2,069
|
|
|
|
(1,519
|
)
|
|
|
35,254
|
|
Less: net income (loss) attributable to non-controlling interest
|
|
|
(819
|
)
|
|
|
(551
|
)
|
|
|
200
|
|
|
|
(8,118
|
)
|
Preferred dividend requirement
|
|
|
(613
|
)
|
|
|
(613
|
)
|
|
|
(427
|
)
|
|
|
(390
|
)
|
Net income (loss) applicable to common shares
|
|
$
|
2,937
|
|
|
$
|
905
|
|
|
$
|
(1,746
|
)
|
|
$
|
26,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
(0.08
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.13
|
)
|
Income from discontinued operations
|
|
|
0.33
|
|
|
|
0.35
|
|
|
|
0.11
|
|
|
|
2.04
|
|
Net income (loss) applicable to common shares
|
|
$
|
0.25
|
|
|
$
|
0.07
|
|
|
$
|
(0.13
|
)
|
|
$
|
1.91
|
|
Weighted average common shares used in computing earnings per share
|
|
|
11,525,389
|
|
|
|
11,525,389
|
|
|
|
13,619,647
|
|
|
|
14,027,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
(0.08
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.13
|
)
|
Income from discontinued operations
|
|
|
0.33
|
|
|
|
0.35
|
|
|
|
0.11
|
|
|
|
2.04
|
|
Net income (loss) applicable to common shares
|
|
$
|
0.25
|
|
|
$
|
0.07
|
|
|
$
|
(0.13
|
)
|
|
$
|
1.91
|
|
Weighted average common shares used in computing diluted earnings per share
|
|
|
11,525,389
|
|
|
|
11,525,389
|
|
|
|
13,619,647
|
|
|
|
14,027,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended 2013
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
(dollars in thousands, except share and per share amounts)
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
19,088
|
|
|
$
|
19,193
|
|
|
$
|
19,530
|
|
|
$
|
22,939
|
|
Total operating expenses
|
|
|
17,838
|
|
|
|
18,640
|
|
|
|
20,071
|
|
|
|
39,877
|
|
Operating income (loss)
|
|
|
1,250
|
|
|
|
553
|
|
|
|
(541
|
)
|
|
|
(16,938
|
)
|
Other expense
|
|
|
(9,245
|
)
|
|
|
(5,401
|
)
|
|
|
(8,533
|
)
|
|
|
(12,085
|
)
|
Loss before gain on land sales, non-contolling interest, and taxes
|
|
|
(7,995
|
)
|
|
|
(4,848
|
)
|
|
|
(9,074
|
)
|
|
|
(29,023
|
)
|
Gain (loss) on land sales
|
|
|
(35
|
)
|
|
|
—
|
|
|
|
598
|
|
|
|
(1,018
|
)
|
Income tax benefit
|
|
|
2,807
|
|
|
|
5,352
|
|
|
|
402
|
|
|
|
31,952
|
|
Net income (loss) from continued operations
|
|
|
(5,223
|
)
|
|
|
504
|
|
|
|
(8,074
|
)
|
|
|
1,911
|
|
Net income from discontinued operations
|
|
|
5,212
|
|
|
|
9,940
|
|
|
|
745
|
|
|
|
46,709
|
|
Net income (loss)
|
|
|
(11
|
)
|
|
|
10,444
|
|
|
|
(7,329
|
)
|
|
|
48,620
|
|
Less: net income (loss) attributable to non-controlling interest
|
|
|
385
|
|
|
|
(2,090
|
)
|
|
|
903
|
|
|
|
(9,646
|
)
|
Preferred dividend requirement
|
|
|
(613
|
)
|
|
|
(613
|
)
|
|
|
(613
|
)
|
|
|
(613
|
)
|
Net income (loss) applicable to common shares
|
|
$
|
(239
|
)
|
|
$
|
7,741
|
|
|
$
|
(7,039
|
)
|
|
$
|
38,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
(0.47
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
(0.72
|
)
|
Income from discontinued operations
|
|
|
0.45
|
|
|
|
0.86
|
|
|
|
0.06
|
|
|
|
4.05
|
|
Net income (loss) applicable to common shares
|
|
$
|
(0.02
|
)
|
|
$
|
0.67
|
|
|
$
|
(0.62
|
)
|
|
$
|
3.33
|
|
Weighted average common shares used in computing earnings per share
|
|
|
11,525,389
|
|
|
|
11,525,389
|
|
|
|
11,525,389
|
|
|
|
11,525,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
(0.47
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
(0.72
|
)
|
Income from discontinued operations
|
|
|
0.45
|
|
|
|
0.86
|
|
|
|
0.06
|
|
|
|
4.05
|
|
Net income (loss) applicable to common shares
|
|
$
|
(0.02
|
)
|
|
$
|
0.67
|
|
|
$
|
(0.62
|
)
|
|
$
|
3.33
|
|
Weighted average common shares used in computing diluted earnings per share
|
|
|
11,525,389
|
|
|
|
11,525,389
|
|
|
|
11,525,389
|
|
|
|
11,525,389
|
|
NOTE 16.
COMMITMENTS, CONTINGENCIES, AND LIQUIDITY
In conjunction with its sale of Four Hickory in November 2007, the Company agreed to fund amounts to satisfy its commitment to compensate LK-Four Hickory, LLC for move-in discounts and other concessions to existing tenants at the time of sale. The Company also has various agreements with LK-Four Hickory, LLC related to the funding of projection shortfalls, which, to date, they have not had to provide any additional funding. In addition, related parties of the Company have active lease agreements with LK-Four Hickory, LLC and the Company has since guaranteed amounts related to certain of these leases.
On December 17, 2007, both Limkwang Nevada, Inc., the majority owner of LK-Four Hickory, LLC, and ARL unconditionally guaranteed the punctual payment when due, whether at stated maturity, by acceleration or hereafter, including all fees and expenses incurred by the bank on collection of a $28.0 million note payable for LK-Four Hickory, LLC, which has a current outstanding balance of $21.5 million.
The Company’s investment in LK-Four Hickory, LLC at January 17, 2012 was sold and the Company has additional reserves for estimated potential amounts it could be looked to if various related parties are not able to meet their obligations to LK Four Hickory, LLC. The Company will continue to evaluate these potential estimates and also the likelihood of having to fund any of these and adjust their reserves accordingly.
Liquidity.
Management believes that ARL will generate excess cash flow from property operations in 2016, such excess however, will not be sufficient to discharge all of ARL’s obligations as they became due. Management intends to sell land and income producing real estate, refinance real estate and obtain additional borrowings primarily secured by real estate to meet its liquidity requirements.
Guarantees.
TCI is a primary guarantor, on a $60.35 million mezzanine loan between UHF and a lender. In addition, ARL, and an officer of the Company are limited recourse guarantors of the loan. As of December 31, 2015 UHF was in compliance with the covenants to the loan agreement.
Partnership Buyouts
. ARL is the limited partner in various partnerships related to the construction of residential properties. As permitted in the respective partnership agreements, ARL intends to purchase the interests of the general and any other limited partners in these partnerships subsequent to the completion of these projects. The amounts paid to buyout the nonaffiliated partners are limited to development fees earned by the nonaffiliated partners, and are set forth in the respective partnership agreements.
ART and ART Midwest, Inc
.
While the Company and all entities in which the Company has a direct or indirect equity interest are not parties to or obligated in any way for the outcome, a formerly owned entity (American Realty Trust, Inc.) and its former subsidiary (ART Midwest, Inc.) have been engaged since 1999 in litigation with Mr. David Clapper and entities related to Mr. Clapper (collectively, the “Clapper Parties”). The matter originally involved a transaction in 1998 in which ART Midwest, Inc. was to acquire eight residential apartment complexes from the Clapper Parties. Through the years, a number of rulings, both for and against American Realty Trust, Inc. (“ART”) and ART Midwest, Inc., were issued. In October 2011, a ruling was issued under which the Clapper Parties received a judgment for approximately $74 million, including $26 million in actual damages and $48 million interest. The ruling was against ART and ART Midwest, Inc., but no other entity. During February 2014, the court of Appeals affirmed a portion of the judgment in favor of the Clapper Parties, but also ruled that a double counting of a significant portion of the damages had occurred and remanded the case back to the trial court to recalculate the damage award, as well as pre and post-judgment interest thereon. ART was also a significant owner of a partnership interest in the partnership that was awarded the initial damages in this matter.
In 2005, ART filed suit against a major national law firm over the initial transaction. That action has been abated, while the principle case with the Clapper Parties was pending, but it is likely that the action against the law firm will now continue in the near future. The only defendants in the litigation involving the Clapper Parties are ART and ART Midwest, Inc., which, together, had total assets and net worth, as of December 31, 2012, of approximately $10 million. In January 2012, the Company sold all of the issued and outstanding stock of ART to an unrelated party for a promissory note in the amount of $10 million. At December 31, 2012, the Company fully reserved and valued such note at zero.
In August 2014, David M. Clapper and two entities related to Mr. Clapper (all, collectively, the “Clapper Parties”) filed a complaint in the U. S. District Court against the Company, its directors and certain of its officers alleging purported transactions to the detriment of the Clapper Parties and others by transferring assets, cash and diverting property. Management of the Company believes there is no basis for this action against the Company, its officers and directors, and intends to vigorously defend itself. The complaint does not allege any facts relating to the Company, except that the Company is a Nevada corporation, with its headquarters/principal place of business in Dallas, Texas.
As a result of a final Memorandum Opinion and Order issued by the court on January 25, 2016 all claims against the officers and directors of the Company were dismissed.
Management believes that the Company has no liability for any ultimate judgment in the proceeding involving the Clapper Parties; however, Management of the Company has serious reservations about the current collectability of the $10 million note and, accordingly, has reserved the full amount of the note.
Port Olpenitz
ARL, through a foreign subsidiary, was involved in developing a maritime harbor town on the 420 acre site of the former naval base of Olpenitz in Kappeln, Germany. Disputes with the local partner related to his mismanagement of the project resulted in his being replaced as the managing partner which was followed by a filing for bankruptcy protection in Germany to completely remove him from the project. An insolvency manager was placed in control of the project in order to protect the creditors and as of December 31, 2013, had sold the vast majority of assets (almost all land) of the project. The Company no longer has any financial responsibility for the obligations of the creditors related to the project and has claims filed for loans relating to our investment in the project. Due to the questionable collectability of these loans from the proceeds of the project, the Company has written off the unreserved balance of $5.3 million in the project. As of December 13, 2013, ARL had filed two lawsuits in Germany to recover funds invested in the project. The lawsuits are against: 1) the former German partner and his company, and 2) against the law firm in Hamburg originally hired to protect ARL’s investment in the project. At this time it is unknown how much can be recovered or how successful the litigation will be.
Dynex Capital, Inc.
On July 20, 2015, the 68
th
Judicial District Court in Dallas County, Texas issued its Final Judgment in Cause No. DC-03-00675, styled Basic Capital Management, Inc., American Realty Trust, Inc., Transcontinental Realty Investors, Inc., Continental Poydras Corp., Continental Common, Inc. and Continental Baronne, Inc. v. Dynex Commercial, Inc. The case, which was litigated for more than a decade, had its origin with Dynex Commercial making loans to Continental Poydras Corp., Continental Common, Inc. and Continental Baronne, Inc. (subsidiaries of Continental Mortgage & Equity Trust (“CMET”), an entity which merged into TCI in 1999 after the original suit was filed). Under the original loan commitment, $160 million in loans were to be made to the entities. The loans were conditioned on the execution of a commitment between Dynex Commercial and Basic Capital Management, Inc. (“Basic”).
An original trial in 2004, which also included Dynex Capital, Inc. as a defendant, resulted in a jury awarding damages in favor of Basic for “lost opportunity,” as well as damages in favor of ART and in favor of TCI and its subsidiaries for “increased costs” and “lost opportunity.” The original Trial Court judge ignored the jury’s findings, however, and entered a “Judgment Notwithstanding the Verdict” (“JNOV”) in favor of the Dynex entities (the judge held the Plaintiffs were not entitled to any damages from the Dynex entities). After numerous appeals by all parties, Dynex Capital, Inc. was ultimately dismissed from the case and the remaining claims against Dynex Commercial were remanded to the Trial Court for a new judgment consistent with the jury’s findings. The Court entered the new Final Judgment against Dynex Commercial, Inc. on July 20, 2015.
The Final Judgment entered against Dynex Commercial, Inc. on July 20, 2015 awarded Basic $.256 million in damages, plus pre-judgment interest of $.192 million for a total amount of $.448 million. The Judgment awarded ART $14.2 million in damages, plus pre-judgment interest of $10.6 million for a total amount of $24.8 million. The Judgment awarded TCI $11.1 million, plus pre-judgment interest of $8.4 million for a total amount of $19.5 million. The Judgment also awarded Basic, ART, and TCI post-judgment interest at the rate of 5% per annum from April 25, 2014 until the date their respective damages are paid. Lastly, the Judgement awarded Basic, ART, and TCI $1.6 million collectively in attorneys’ fees from Dynex Commercial, Inc.
The Company is reviewing the Final Judgment with counsel to determine the appropriate steps moving forward now that they have obtained this Final Judgment against Dynex Commercial, Inc.
ARL is also involved in various other lawsuits arising in the ordinary course of business. Management is of the opinion that the outcome of these lawsuits will have no material impact on ARL’s financial condition, results of operations or liquidity.
Other Litigation.
The ownership of property and provision of services to the public as tenants entails an inherent risk of liability. Although the Company and its subsidiaries are involved in various items of litigation incidental to and in the ordinary course of its business, in the opinion of Management, the outcome of such litigation will not have a material adverse impact upon the Company’s financial condition, results of operation or liquidity, unless notes otherwise above.
NOTE 17.
EARNINGS PER SHARE
Earnings per share (“EPS”) have been computed pursuant to the provisions of ASC Topic 260 “
Earnings Per Share.”
The computation of basic EPS is calculated by dividing net income available to common shareholders from continuing operations, adjusted for preferred dividends, by the weighted-average number of common shares outstanding during the period. Shares issued during the period shall be weighted for the portion of the period that they were outstanding.
As of December 31, 2015, we have 2,000,614 shares of Series A 10.0% cumulative convertible preferred stock, which are outstanding. These shares may be converted into common stock at 90% of the average daily closing price of the common stock for the prior 20 trading days. These are considered in the computation of diluted earnings per share if the effect of applying the if-converted method is dilutive. Of the outstanding 2,000,614 shares, 900,000 are held by ARL. Dividends are not paid on the shares owned by ARL.
Prior to July 17, 2014, RAI owned 2,451,435 shares of the outstanding Series A 10.0% convertible preferred stock and had accrued dividends unpaid of $15.1 million. On July 17, 2014, RAI converted 890,797 shares, including $6.3 million in accumulated dividends unpaid for these shares, into the requisite number of shares of common stock. This conversion resulted in the issuance of 2,502,230 new shares of ARL common stock. On April 9, 2015, RAI converted 460,638 shares including $2.3 million in accumulated dividends unpaid for these shares, into the requisite number of shares of common stock. This conversion resulted in the issuance of 1,486,741 new shares of ARL common stock. As of December 31, 2015, RAI owns 1,100,000 shares of the outstanding Series A convertible preferred stock and has accrued dividends unpaid of $8.6 million.
The Company had 135,000 shares of Series K convertible preferred stock, which were held by TCI and used as collateral on a note. The note has been paid in full and the Series K preferred stock was cancelled May 7, 2014.
Prior to January 1, 2015, the Company had 1,000 shares of stock options outstanding. These options expired unexercised January 1, 2015. The options are no longer included in the dilutive earnings per share calculation for the current period, but are considered in the computation for the prior periods if applying the “treasury stock” method is dilutive.
As of December 31, 2015, the Series A convertible preferred stock and the stock options were anti-dilutive and therefore not included in the EPS calculation.
NOTE 18.
SUBSEQUENT EVENTS
The date to which events occurring after December 31, 2015, the date of the most recent balance sheet, have been evaluated for possible adjustment to the financial statements or disclosure is March 30, 2016, which is the date on which the financial statements were available to be issued.
The Company has determined that there are no subsequent events that need to be reported.
Schedule III
AMERICAN REALTY INVESTORS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent to
|
|
Asset
|
|
Gross Amounts of Which
|
|
|
|
|
|
|
|
Life on Which
|
|
|
|
|
Initial Cost
|
|
Acquisition
|
|
Impairment
|
|
Carried at End of Year
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Latest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
|
|
|
|
|
|
|
Building &
|
|
|
|
Asset
|
|
|
|
Building &
|
|
|
|
Accumulated
|
|
Date of
|
|
Date
|
|
of Operation
|
Property/Location
|
|
Encumbrances
|
|
Land
|
|
Improvements
|
|
Improvements
|
|
Impairment
|
|
Land
|
|
Improvements
|
|
Total
|
|
Depreciation
|
|
Construction
|
|
Acquired
|
|
is Computed
|
|
|
(dollars in thousands)
|
Properties Held for Investment Apartments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anderson Estates, Oxford, MS
|
|
|
822
|
|
|
378
|
|
|
2,683
|
|
|
313
|
|
|
—
|
|
|
378
|
|
|
2,996
|
|
|
3,373
|
|
|
665
|
|
|
2003
|
|
|
01/06
|
|
|
40 years
|
Blue Lake Villas I, Waxahachie, TX
|
|
|
10,725
|
|
|
526
|
|
|
10,784
|
|
|
(601
|
)
|
|
—
|
|
|
526
|
|
|
10,184
|
|
|
10,710
|
|
|
3,274
|
|
|
2003
|
|
|
01/02
|
|
|
40 years
|
Blue Lake Villas II, Waxahachie, TX
|
|
|
3,894
|
|
|
287
|
|
|
4,451
|
|
|
45
|
|
|
—
|
|
|
287
|
|
|
4,496
|
|
|
4,783
|
|
|
907
|
|
|
2004
|
|
|
01/04
|
|
|
40 years
|
Breakwater Bay, Beaumont, TX
|
|
|
9,427
|
|
|
740
|
|
|
10,435
|
|
|
63
|
|
|
—
|
|
|
740
|
|
|
10,498
|
|
|
11,238
|
|
|
2,856
|
|
|
2004
|
|
|
05/03
|
|
|
40 years
|
Bridgewood Ranch, Kaufman, TX
|
|
|
6,444
|
|
|
762
|
|
|
6,856
|
|
|
9
|
|
|
—
|
|
|
762
|
|
|
6,865
|
|
|
7,627
|
|
|
1,377
|
|
|
2007
|
|
|
04/08
|
|
|
40 years
|
Capitol Hill, Little Rock, AR
|
|
|
9,043
|
|
|
1,860
|
|
|
7,948
|
|
|
55
|
|
|
—
|
|
|
1,860
|
|
|
8,002
|
|
|
9,862
|
|
|
2,300
|
|
|
2003
|
|
|
03/03
|
|
|
40 years
|
Centennial, Oak Ridge, TN
|
|
|
21,061
|
|
|
2,570
|
|
|
22,588
|
|
|
—
|
|
|
—
|
|
|
2,570
|
|
|
22,588
|
|
|
25,159
|
|
|
235
|
|
|
2011
|
|
|
07/14
|
|
|
40 years
|
Curtis Moore Estates, Greenwood, MS
|
|
|
1,486
|
|
|
186
|
|
|
5,733
|
|
|
886
|
|
|
—
|
|
|
186
|
|
|
6,618
|
|
|
6,805
|
|
|
1,606
|
|
|
2003
|
|
|
01/06
|
|
|
40 years
|
Crossing at Opelika, Opelika, AL
|
|
|
13,790
|
|
|
1,579
|
|
|
14,215
|
|
|
—
|
|
|
—
|
|
|
1,579
|
|
|
14,215
|
|
|
15,794
|
|
|
—
|
|
|
2015
|
|
|
12/15
|
|
|
40 years
|
Dakota Arms, Lubbock, TX
|
|
|
12,514
|
|
|
921
|
|
|
12,644
|
|
|
231
|
|
|
—
|
|
|
921
|
|
|
12,875
|
|
|
13,796
|
|
|
3,538
|
|
|
2004
|
|
|
01/04
|
|
|
40 years
|
David Jordan Phase II, Greenwood, MS
|
|
|
574
|
|
|
51
|
|
|
1,521
|
|
|
269
|
|
|
—
|
|
|
51
|
|
|
1,790
|
|
|
1,841
|
|
|
417
|
|
|
1999
|
|
|
01/06
|
|
|
40 years
|
David Jordan Phase III, Greenwood, MS
|
|
|
588
|
|
|
83
|
|
|
2,115
|
|
|
420
|
|
|
—
|
|
|
83
|
|
|
2,535
|
|
|
2,618
|
|
|
530
|
|
|
2003
|
|
|
01/06
|
|
|
40 years
|
Desoto Ranch, DeSoto, TX
|
|
|
15,352
|
|
|
1,472
|
|
|
17,856
|
|
|
(1,130
|
)
|
|
—
|
|
|
1,472
|
|
|
16,725
|
|
|
18,197
|
|
|
4,977
|
|
|
2002
|
|
|
05/02
|
|
|
40 years
|
Falcon Lakes, Arlington, TX
|
|
|
12,739
|
|
|
1,438
|
|
|
15,094
|
|
|
(836
|
)
|
|
—
|
|
|
1,438
|
|
|
14,258
|
|
|
15,696
|
|
|
4,860
|
|
|
2001
|
|
|
10/01
|
|
|
40 years
|
Heather Creek, Mesquite, TX
|
|
|
11,342
|
|
|
1,326
|
|
|
12,015
|
|
|
69
|
|
|
—
|
|
|
1,326
|
|
|
12,084
|
|
|
13,410
|
|
|
3,321
|
|
|
2003
|
|
|
03/03
|
|
|
40 years
|
Holland Lake, Weatherford, TX
|
|
|
11,823
|
|
|
1,449
|
|
|
14,612
|
|
|
—
|
|
|
—
|
|
|
1,449
|
|
|
14,612
|
|
|
16,061
|
|
|
244
|
|
|
2004
|
|
|
05/14
|
|
|
40 years
|
Lake Forest, Houston, TX
|
|
|
12,199
|
|
|
335
|
|
|
12,267
|
|
|
1,553
|
|
|
—
|
|
|
335
|
|
|
13,820
|
|
|
14,155
|
|
|
3,568
|
|
|
2004
|
|
|
01/04
|
|
|
40 years
|
Legacy at Pleasant Grove, Texarkana, TX
|
|
|
15,009
|
|
|
2,005
|
|
|
17,892
|
|
|
—
|
|
|
—
|
|
|
2,005
|
|
|
17,892
|
|
|
19,897
|
|
|
485
|
|
|
2006
|
|
|
12/14
|
|
|
40 years
|
Lodge at Pecan Creek, Denton, TX
|
|
|
16,383
|
|
|
1,349
|
|
|
16,180
|
|
|
—
|
|
|
—
|
|
|
1,349
|
|
|
16,180
|
|
|
17,529
|
|
|
1,685
|
|
|
2011
|
|
|
10/05
|
|
|
40 years
|
Mansions of Mansfield, Mansfield, TX
|
|
|
15,604
|
|
|
977
|
|
|
17,799
|
|
|
54
|
|
|
—
|
|
|
977
|
|
|
17,853
|
|
|
18,829
|
|
|
3,014
|
|
|
2009
|
|
|
09/05
|
|
|
40 years
|
Mission Oaks, San Antonio, TX
|
|
|
14,900
|
|
|
1,266
|
|
|
16,627
|
|
|
212
|
|
|
—
|
|
|
1,266
|
|
|
16,839
|
|
|
18,105
|
|
|
3,659
|
|
|
2005
|
|
|
05/05
|
|
|
40 years
|
Monticello Estate, Monticello, AR
|
|
|
458
|
|
|
36
|
|
|
1,493
|
|
|
263
|
|
|
—
|
|
|
36
|
|
|
1,756
|
|
|
1,793
|
|
|
385
|
|
|
2001
|
|
|
01/06
|
|
|
40 years
|
Northside on Travis, Sherman, TX
|
|
|
13,319
|
|
|
1,301
|
|
|
14,560
|
|
|
—
|
|
|
—
|
|
|
1,301
|
|
|
14,560
|
|
|
15,861
|
|
|
2,305
|
|
|
2009
|
|
|
10/07
|
|
|
40 years
|
Oak Hollow, Sequin, TX
|
|
|
10,885
|
|
|
1,435
|
|
|
12,405
|
|
|
—
|
|
|
|
|
|
1,435
|
|
|
12,405
|
|
|
13,840
|
|
|
155
|
|
|
2011
|
|
|
07/14
|
|
|
40 years
|
Overlook at Allensville, Sevierville, TN
|
|
|
11,487
|
|
|
1,228
|
|
|
12,297
|
|
|
|
|
|
|
|
|
1,228
|
|
|
12,297
|
|
|
13,524
|
|
|
252
|
|
|
2012
|
|
|
10/15
|
|
|
40 years
|
Parc at Clarksville, Clarksville, TN
|
|
|
12,869
|
|
|
571
|
|
|
14,300
|
|
|
118
|
|
|
—
|
|
|
571
|
|
|
14,419
|
|
|
14,990
|
|
|
2,658
|
|
|
2007
|
|
|
06/02
|
|
|
40 years
|
Parc at Denham Springs, Denham Springs, LA
|
|
|
18,780
|
|
|
1,022
|
|
|
20,188
|
|
|
8
|
|
|
—
|
|
|
1,022
|
|
|
20,195
|
|
|
21,218
|
|
|
2,506
|
|
|
2011
|
|
|
07/07
|
|
|
40 years
|
Parc at Maumelle, Little Rock, AR
|
|
|
15,942
|
|
|
1,153
|
|
|
17,688
|
|
|
542
|
|
|
—
|
|
|
1,153
|
|
|
18,230
|
|
|
19,383
|
|
|
4,252
|
|
|
2006
|
|
|
12/04
|
|
|
40 years
|
Parc at Metro Center, Nashville, TN
|
|
|
10,478
|
|
|
960
|
|
|
12,226
|
|
|
543
|
|
|
—
|
|
|
960
|
|
|
12,769
|
|
|
13,729
|
|
|
3,047
|
|
|
2006
|
|
|
05/05
|
|
|
40 years
|
Parc at Rogers, Rogers, AR
|
|
|
20,750
|
|
|
1,482
|
|
|
22,993
|
|
|
286
|
|
|
(3,180
|
)
|
|
1,482
|
|
|
20,100
|
|
|
21,582
|
|
|
3,823
|
|
|
2007
|
|
|
04/04
|
|
|
40 years
|
Preserve at Pecan Creek, Denton, TX
|
|
|
14,489
|
|
|
885
|
|
|
16,626
|
|
|
59
|
|
|
—
|
|
|
885
|
|
|
16,685
|
|
|
17,570
|
|
|
3,054
|
|
|
2008
|
|
|
10/05
|
|
|
40 years
|
Preserve at Prairie Pointe, Lubbock, TX
|
|
|
10,181
|
|
|
1,074
|
|
|
10,603
|
|
|
178
|
|
|
|
|
|
1,074
|
|
|
10,782
|
|
|
11,856
|
|
|
182
|
|
|
2005
|
|
|
04/15
|
|
|
40 years
|
Riverwalk Phase I, Greenville, MS
|
|
|
292
|
|
|
23
|
|
|
1,537
|
|
|
180
|
|
|
—
|
|
|
23
|
|
|
1,718
|
|
|
1,741
|
|
|
425
|
|
|
2003
|
|
|
01/06
|
|
|
40 years
|
Riverwalk Phase II, Greenville, MS
|
|
|
1,123
|
|
|
52
|
|
|
4,007
|
|
|
376
|
|
|
—
|
|
|
52
|
|
|
4,383
|
|
|
4,435
|
|
|
1,364
|
|
|
2003
|
|
|
01/06
|
|
|
40 years
|
Sonoma Court, Rockwall, TX
|
|
|
10,754
|
|
|
941
|
|
|
11,074
|
|
|
|
|
|
—
|
|
|
941
|
|
|
11,074
|
|
|
12,014
|
|
|
1,223
|
|
|
2011
|
|
|
07/10
|
|
|
40 years
|
Sugar Mill, Baton Rouge, LA
|
|
|
11,396
|
|
|
1,437
|
|
|
13,367
|
|
|
160
|
|
|
—
|
|
|
1,437
|
|
|
13,527
|
|
|
14,964
|
|
|
2,160
|
|
|
2009
|
|
|
08/08
|
|
|
40 years
|
Toulon, Gautier, MS
|
|
|
20,600
|
|
|
1,621
|
|
|
20,107
|
|
|
372
|
|
|
—
|
|
|
1,621
|
|
|
20,479
|
|
|
22,099
|
|
|
2,262
|
|
|
2011
|
|
|
09/09
|
|
|
40 years
|
Tradewinds, Midland, TX
|
|
|
15,601
|
|
|
3,542
|
|
|
19,939
|
|
|
|
|
|
|
|
|
3,542
|
|
|
19,939
|
|
|
23,481
|
|
|
249
|
|
|
2015
|
|
|
06/15
|
|
|
40 years
|
Treehouse, Irving, TX
|
|
|
5,642
|
|
|
312
|
|
|
2,807
|
|
|
286
|
|
|
—
|
|
|
312
|
|
|
3,093
|
|
|
3,405
|
|
|
831
|
|
|
1974
|
|
|
05/04
|
|
|
40 years
|
Villager, Ft. Walton, FL
|
|
|
753
|
|
|
156
|
|
|
1,408
|
|
|
|
|
|
|
|
|
156
|
|
|
1,408
|
|
|
1,564
|
|
|
21
|
|
|
1972
|
|
|
06/15
|
|
|
40 years
|
Villas at Park West I, Pueblo, CO
|
|
|
10,565
|
|
|
1,171
|
|
|
10,453
|
|
|
|
|
|
—
|
|
|
1,171
|
|
|
10,453
|
|
|
11,624
|
|
|
283
|
|
|
2005
|
|
|
12/14
|
|
|
40 years
|
Villas at Park West II, Pueblo, CO
|
|
|
9,554
|
|
|
1,463
|
|
|
13,060
|
|
|
—
|
|
|
—
|
|
|
1,463
|
|
|
13,060
|
|
|
14,523
|
|
|
354
|
|
|
2010
|
|
|
12/14
|
|
|
40 years
|
Vista Ridge, Tupelo, MS
|
|
|
10,786
|
|
|
1,339
|
|
|
13,398
|
|
|
|
|
|
|
|
|
1,339
|
|
|
13,398
|
|
|
14,737
|
|
|
501
|
|
|
2009
|
|
|
10/15
|
|
|
40 years
|
Vistas of Vance Jackson, San Antonio, TX
|
|
|
15,310
|
|
|
1,265
|
|
|
16,540
|
|
|
189
|
|
|
—
|
|
|
1,265
|
|
|
16,728
|
|
|
17,993
|
|
|
4,308
|
|
|
2004
|
|
|
01/04
|
|
|
40 years
|
Waterford, Roseberg, TX
|
|
|
16,069
|
|
|
2,349
|
|
|
20,880
|
|
|
|
|
|
|
|
|
2,349
|
|
|
20,880
|
|
|
23,229
|
|
|
261
|
|
|
2013
|
|
|
06/14
|
|
|
40 years
|
Westwood, Mary Ester, FL
|
|
|
4,244
|
|
|
692
|
|
|
6,650
|
|
|
|
|
|
|
|
|
692
|
|
|
6,650
|
|
|
7,343
|
|
|
97
|
|
|
1972
|
|
|
06/15
|
|
|
40 years
|
Whispering Pines, Topeka, KS
|
|
|
8,720
|
|
|
289
|
|
|
4,831
|
|
|
1,274
|
|
|
|
|
|
289
|
|
|
6,105
|
|
|
6,393
|
|
|
5,674
|
|
|
1974
|
|
|
04/15
|
|
|
40 years
|
Windsong, Fort Worth, TX
|
|
|
10,734
|
|
|
790
|
|
|
11,526
|
|
|
69
|
|
|
—
|
|
|
790
|
|
|
11,595
|
|
|
12,385
|
|
|
3,429
|
|
|
2002
|
|
|
07/03
|
|
|
40 years
|
Total Apartments Held for Investment
|
|
$
|
507,498
|
|
$
|
50,150
|
|
$
|
569,276
|
|
$
|
6,515
|
|
$
|
(3,180
|
)
|
$
|
50,150
|
|
$
|
572,611
|
|
$
|
622,761
|
|
$
|
89,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments Under Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parc at Mansfield, Mansfield, TX
|
|
|
9,544
|
|
|
543
|
|
|
—
|
|
|
10,457
|
|
|
—
|
|
|
543
|
|
|
10,457
|
|
|
11,001
|
|
|
—
|
|
|
—
|
|
|
12/14
|
|
|
—
|
Terra Lago, Rowlett, TX
|
|
|
136
|
|
|
(1,142
|
)
|
|
|
|
|
3,329
|
|
|
|
|
|
(1,142
|
)
|
|
3,329
|
|
|
2,186
|
|
|
|
|
|
—
|
|
|
11/15
|
|
|
—
|
Eagle Crossing, Dallas, TX
|
|
|
1,459
|
|
|
4,380
|
|
|
|
|
|
663
|
|
|
|
|
|
4,380
|
|
|
663
|
|
|
5,043
|
|
|
|
|
|
—
|
|
|
11/15
|
|
|
—
|
Total Apartments Under Construction
|
|
$
|
11,139
|
|
$
|
3,781
|
|
$
|
—
|
|
$
|
14,449
|
|
$
|
—
|
|
$
|
3,781
|
|
$
|
14,449
|
|
$
|
18,230
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Schedule III
AMERICAN REALTY INVESTORS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent to
|
|
Asset
|
|
Gross Amounts of Which
|
|
|
|
|
|
|
|
Life on Which
|
|
|
|
|
Initial Cost
|
|
Acquisition
|
|
Impairment
|
|
Carried at End of Year
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Latest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
|
|
|
|
|
|
|
Building &
|
|
|
|
Asset
|
|
|
|
Building &
|
|
|
|
Accumulated
|
|
Date of
|
|
Date
|
|
of Operation
|
Property/Location
|
|
Encumbrances
|
|
Land
|
|
Improvements
|
|
Improvements
|
|
Impairment
|
|
Land
|
|
Improvements
|
|
Total
|
|
Depreciation
|
|
Construction
|
|
Acquired
|
|
is Computed
|
|
|
(dollars in thousands)
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600 Las Colinas, Las Colinas, TX
|
|
|
39,836
|
|
|
5,751
|
|
|
51,759
|
|
|
15,149
|
|
|
—
|
|
|
5,751
|
|
|
66,908
|
|
|
72,659
|
|
|
20,869
|
|
|
1984
|
|
|
08/05
|
|
|
40 years
|
770 South Post Oak, Houston, TX
|
|
|
12,700
|
|
|
1,755
|
|
|
15,834
|
|
|
26
|
|
|
|
|
|
1,755
|
|
|
15,860
|
|
|
17,615
|
|
|
233
|
|
|
1970
|
|
|
07/15
|
|
|
40 years
|
Bridgeview Plaza, LaCrosse, WI
|
|
|
5,813
|
|
|
—
|
|
|
—
|
|
|
976
|
|
|
—
|
|
|
—
|
|
|
976
|
|
|
976
|
|
|
437
|
|
|
1979
|
|
|
03/03
|
|
|
40 years
|
Browning Place (Park West I), Farmers Branch, TX
|
|
|
22,459
|
|
|
5,096
|
|
|
45,868
|
|
|
13,228
|
|
|
—
|
|
|
5,096
|
|
|
59,096
|
|
|
64,192
|
|
|
18,754
|
|
|
1984
|
|
|
04/05
|
|
|
40 years
|
Cross County Mall, Matoon, IL
|
|
|
—
|
|
|
608
|
|
|
4,891
|
|
|
8,549
|
|
|
—
|
|
|
608
|
|
|
13,440
|
|
|
14,048
|
|
|
12,165
|
|
|
1971
|
|
|
08/79
|
|
|
40 years
|
Mahogany Run Golf Course, US Virgin Islands
|
|
|
43
|
|
|
7,168
|
|
|
5,942
|
|
|
5
|
|
|
(5,300
|
)
|
|
7,168
|
|
|
647
|
|
|
7,815
|
|
|
173
|
|
|
1981
|
|
|
11/14
|
|
|
40 years
|
Fruitland Plaza, Fruitland Park, FL
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
77
|
|
|
—
|
|
|
23
|
|
|
77
|
|
|
100
|
|
|
37
|
|
|
—
|
|
|
05/92
|
|
|
40 years
|
Senlac VHP, Farmers Branch, TX
|
|
|
—
|
|
|
622
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
622
|
|
|
142
|
|
|
765
|
|
|
128
|
|
|
—
|
|
|
08/05
|
|
|
40 years
|
Stanford Center, Dallas, TX
|
|
|
28,000
|
|
|
3,878
|
|
|
34,862
|
|
|
6,447
|
|
|
(9,600
|
)
|
|
3,878
|
|
|
31,709
|
|
|
35,587
|
|
|
7,464
|
|
|
—
|
|
|
06/08
|
|
|
40 years
|
Thermalloy, Farmers Branch, TX
|
|
|
42
|
|
|
791
|
|
|
1,061
|
|
|
—
|
|
|
|
|
|
791
|
|
|
1,061
|
|
|
1,852
|
|
|
201
|
|
|
—
|
|
|
05/08
|
|
|
40 years
|
Total Commercial Held for Investment
|
|
$
|
108,893
|
|
$
|
25,693
|
|
$
|
160,217
|
|
$
|
44,600
|
|
$
|
(14,900
|
)
|
$
|
25,693
|
|
$
|
189,916
|
|
$
|
215,609
|
|
$
|
60,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2427 Valley View Ln, Farmers Branch, TX
|
|
|
—
|
|
|
76
|
|
|
|
|
|
—
|
|
|
—
|
|
|
76
|
|
|
—
|
|
|
76
|
|
|
—
|
|
|
—
|
|
|
07/12
|
|
|
—
|
Audubon, Adams County, MS
|
|
|
—
|
|
|
519
|
|
|
—
|
|
|
297
|
|
|
—
|
|
|
815
|
|
|
—
|
|
|
815
|
|
|
—
|
|
|
—
|
|
|
03/07
|
|
|
—
|
Bonneau Land, Farmers Branch, TX
|
|
|
—
|
|
|
1,309
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,309
|
|
|
—
|
|
|
1,309
|
|
|
—
|
|
|
—
|
|
|
12/14
|
|
|
—
|
Cooks Lane, Fort Worth, TX
|
|
|
604
|
|
|
1,094
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,094
|
|
|
—
|
|
|
1,094
|
|
|
—
|
|
|
—
|
|
|
06/04
|
|
|
—
|
Dedeaux, Gulfport, MS
|
|
|
—
|
|
|
1,612
|
|
|
—
|
|
|
46
|
|
|
(38
|
)
|
|
1,620
|
|
|
—
|
|
|
1,620
|
|
|
—
|
|
|
—
|
|
|
10/06
|
|
|
—
|
Denham Springs, Denham Springs, LA
|
|
|
234
|
|
|
339
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
339
|
|
|
—
|
|
|
339
|
|
|
—
|
|
|
—
|
|
|
08/08
|
|
|
—
|
Gautier Land, Gautier, MS
|
|
|
—
|
|
|
202
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
—
|
|
|
202
|
|
|
—
|
|
|
—
|
|
|
07/98
|
|
|
—
|
GNB Land, Farmers Branch, TX
|
|
|
8,695
|
|
|
4,385
|
|
|
—
|
|
|
32
|
|
|
—
|
|
|
4,418
|
|
|
—
|
|
|
4,418
|
|
|
—
|
|
|
—
|
|
|
07/06
|
|
|
—
|
Hollywood Casino Land Tract II, Farmers Branch, TX
|
|
|
2,814
|
|
|
3,192
|
|
|
—
|
|
|
1,024
|
|
|
—
|
|
|
4,217
|
|
|
—
|
|
|
4,217
|
|
|
—
|
|
|
—
|
|
|
03/08
|
|
|
—
|
Lacy Longhorn Land, Farmers Branch, TX
|
|
|
—
|
|
|
1,169
|
|
|
—
|
|
|
(760
|
)
|
|
—
|
|
|
408
|
|
|
—
|
|
|
408
|
|
|
—
|
|
|
—
|
|
|
06/04
|
|
|
—
|
Lake Shore Villas, Humble, TX
|
|
|
—
|
|
|
81
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
84
|
|
|
—
|
|
|
84
|
|
|
—
|
|
|
—
|
|
|
03/02
|
|
|
—
|
Lubbock Land, Lubbock, TX
|
|
|
—
|
|
|
234
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
234
|
|
|
—
|
|
|
234
|
|
|
—
|
|
|
—
|
|
|
01/04
|
|
|
—
|
Luna Ventures, Farmers Branch TX
|
|
|
—
|
|
|
2,934
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,934
|
|
|
—
|
|
|
2,934
|
|
|
—
|
|
|
—
|
|
|
04/08
|
|
|
—
|
Mandahl Bay Land
|
|
|
—
|
|
|
667
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
667
|
|
|
|
|
|
667
|
|
|
—
|
|
|
—
|
|
|
01/05
|
|
|
—
|
Manhattan Land, Farmers Branch, TX
|
|
|
—
|
|
|
4,799
|
|
|
—
|
|
|
5,703
|
|
|
—
|
|
|
10,502
|
|
|
—
|
|
|
10,502
|
|
|
—
|
|
|
—
|
|
|
02/00
|
|
|
—
|
McKinney 36, Collin County, TX
|
|
|
1,523
|
|
|
1,564
|
|
|
—
|
|
|
123
|
|
|
(46
|
)
|
|
1,641
|
|
|
—
|
|
|
1,641
|
|
|
—
|
|
|
—
|
|
|
01/98
|
|
|
—
|
McKinney Ranch Land, McKinney, TX
|
|
|
—
|
|
|
8,537
|
|
|
—
|
|
|
271
|
|
|
(1,363
|
)
|
|
7,445
|
|
|
—
|
|
|
7,445
|
|
|
—
|
|
|
—
|
|
|
12/05
|
|
|
—
|
Meloy/Portage Land, Kent OH
|
|
|
1,160
|
|
|
5,119
|
|
|
—
|
|
|
—
|
|
|
(1,069
|
)
|
|
4,050
|
|
|
—
|
|
|
4,050
|
|
|
—
|
|
|
—
|
|
|
02/04
|
|
|
—
|
Minivest Land, Dallas, TX
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
04/13
|
|
|
—
|
Mira Lago, Farmers Branch, TX
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
68
|
|
|
—
|
|
|
68
|
|
|
—
|
|
|
—
|
|
|
05/01
|
|
|
—
|
Nakash, Malden, MO
|
|
|
—
|
|
|
113
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
103
|
|
|
—
|
|
|
103
|
|
|
—
|
|
|
—
|
|
|
01/93
|
|
|
—
|
Nashville, Nashville, TN
|
|
|
—
|
|
|
1,256
|
|
|
—
|
|
|
(271
|
)
|
|
—
|
|
|
986
|
|
|
—
|
|
|
986
|
|
|
—
|
|
|
—
|
|
|
06/02
|
|
|
—
|
Nicholson Croslin, Dallas, TX
|
|
|
—
|
|
|
184
|
|
|
—
|
|
|
(118
|
)
|
|
—
|
|
|
66
|
|
|
—
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
10/98
|
|
|
—
|
Nicholson Mendoza, Dallas, TX
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
10/98
|
|
|
—
|
Ocean Estates, Gulfport, MS
|
|
|
—
|
|
|
1,418
|
|
|
—
|
|
|
390
|
|
|
—
|
|
|
1,808
|
|
|
—
|
|
|
1,808
|
|
|
—
|
|
|
—
|
|
|
10/07
|
|
|
—
|
Senlac Land Tract II, Farmers Branch, TX
|
|
|
—
|
|
|
656
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
656
|
|
|
—
|
|
|
656
|
|
|
—
|
|
|
—
|
|
|
08/05
|
|
|
—
|
Sugar Mill Land, Baton Rouge, LA
|
|
|
178
|
|
|
445
|
|
|
—
|
|
|
242
|
|
|
—
|
|
|
687
|
|
|
—
|
|
|
687
|
|
|
—
|
|
|
—
|
|
|
08/13
|
|
|
—
|
Texas Plaza Land, Irving, TX
|
|
|
—
|
|
|
1,738
|
|
|
—
|
|
|
—
|
|
|
(238
|
)
|
|
1,500
|
|
|
—
|
|
|
1,500
|
|
|
—
|
|
|
—
|
|
|
12/06
|
|
|
—
|
Travis Ranch Land, Kaufman County, TX
|
|
|
757
|
|
|
1,030
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,030
|
|
|
—
|
|
|
1,030
|
|
|
—
|
|
|
—
|
|
|
08/08
|
|
|
—
|
Travis Ranch Retail, Kaufman City, TX
|
|
|
—
|
|
|
1,517
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,517
|
|
|
—
|
|
|
1,517
|
|
|
—
|
|
|
—
|
|
|
08/08
|
|
|
—
|
Union Pacific Railroad Land, Dallas, TX
|
|
|
—
|
|
|
130
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130
|
|
|
—
|
|
|
130
|
|
|
—
|
|
|
—
|
|
|
03/04
|
|
|
—
|
Valley View 34 (Mercer Crossing), Farmers Branch, TX
|
|
|
—
|
|
|
1,173
|
|
|
—
|
|
|
(945
|
)
|
|
—
|
|
|
228
|
|
|
—
|
|
|
228
|
|
|
—
|
|
|
—
|
|
|
08/08
|
|
|
—
|
Waco Swanson, Waco, TX
|
|
|
—
|
|
|
173
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
173
|
|
|
—
|
|
|
173
|
|
|
—
|
|
|
—
|
|
|
08/06
|
|
|
—
|
Willowick Land, Pensacola, FL
|
|
|
—
|
|
|
137
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
137
|
|
|
—
|
|
|
137
|
|
|
—
|
|
|
—
|
|
|
01/95
|
|
|
—
|
Windmill Farms Land, Kaufman County, TX
|
|
|
26,732
|
|
|
50,428
|
|
|
—
|
|
|
17,192
|
|
|
(21,009
|
)
|
|
46,611
|
|
|
—
|
|
|
46,611
|
|
|
—
|
|
|
—
|
|
|
11/11
|
|
|
—
|
Total Land Held for Investment
|
|
$
|
42,698
|
|
$
|
98,377
|
|
$
|
—
|
|
$
|
23,176
|
|
$
|
(23,763
|
)
|
$
|
97,790
|
|
$
|
—
|
|
$
|
97,790
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Schedule III
AMERICAN REALTY INVESTORS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent to
|
|
Asset
|
|
Gross Amounts of Which
|
|
|
|
|
|
|
|
Life on Which
|
|
|
|
|
Initial Cost
|
|
Acquisition
|
|
Impairment
|
|
Carried at End of Year
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Latest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
|
|
|
|
|
|
|
Building &
|
|
|
|
Asset
|
|
|
|
Building &
|
|
|
|
Accumulated
|
|
Date of
|
|
Date
|
|
of Operation
|
Property/Location
|
|
Encumbrances
|
|
Land
|
|
Improvements
|
|
Improvements
|
|
Impairment
|
|
Land
|
|
Improvements
|
|
Total
|
|
Depreciation
|
|
Construction
|
|
Acquired
|
|
is Computed
|
|
|
(dollars in thousands)
|
Corporate Departments/Investments/Misc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCI - Corporate
|
|
|
130,170
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
ARI - Corporate
|
|
|
13,064
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Total Corporate Debt
|
|
$
|
143,234
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Properties Held for Investment/Corporate Debt
|
|
$
|
813,462
|
|
$
|
178,001
|
|
$
|
729,492
|
|
$
|
88,740
|
|
$
|
(41,843
|
)
|
$
|
177,414
|
|
$
|
776,976
|
|
$
|
954,391
|
|
$
|
150,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties Held for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dunes Plaza, Michigan City, IN
|
|
|
376
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1978
|
|
|
03/92
|
|
|
40 years
|
Total Commercial Held for Sale
|
|
$
|
376
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Properties Held for Sale
|
|
$
|
376
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties Subject to Sales Contract Apartments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Apartments Subject to Sales Contract
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
Total Commercial Subject to Sales Contract
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Tract, Dallas, TX
|
|
$
|
3,419
|
|
$
|
2,440
|
|
$
|
—
|
|
$
|
(304
|
)
|
|
(133
|
)
|
$
|
2,003
|
|
$
|
—
|
|
$
|
2,003
|
|
$
|
—
|
|
|
—
|
|
|
03/99
|
|
|
—
|
Hollywood Casino Tract I, Farmers Branch, TX
|
|
|
1,502
|
|
|
3,350
|
|
|
—
|
|
|
(866
|
)
|
|
(176
|
)
|
$
|
2,308
|
|
|
—
|
|
$
|
2,308
|
|
|
—
|
|
|
—
|
|
|
06/02
|
|
|
—
|
LaDue Land, Farmers Branch, TX
|
|
|
—
|
|
|
1,845
|
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
1,845
|
|
|
—
|
|
$
|
1,845
|
|
|
—
|
|
|
—
|
|
|
07/98
|
|
|
—
|
Three Hickory Land, Farmers Branch, TX
|
|
|
—
|
|
|
1,202
|
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
1,202
|
|
|
—
|
|
$
|
1,202
|
|
|
—
|
|
|
—
|
|
|
03/14
|
|
|
—
|
Travelers Land, Farmers Branch, TX
|
|
|
—
|
|
|
21,511
|
|
|
—
|
|
|
4
|
|
|
—
|
|
$
|
21,515
|
|
|
—
|
|
$
|
21,515
|
|
|
—
|
|
|
—
|
|
|
11/06
|
|
|
—
|
Travelers Land, Farmers Branch, TX
|
|
|
—
|
|
|
6,891
|
|
|
—
|
|
|
(4,978
|
)
|
|
—
|
|
$
|
1,913
|
|
|
—
|
|
$
|
1,913
|
|
|
—
|
|
|
—
|
|
|
11/06
|
|
|
—
|
Valwood Land, Farmers Branch, TX
|
|
|
—
|
|
|
3,332
|
|
|
—
|
|
|
—
|
|
|
—
|
|
$
|
3,332
|
|
|
—
|
|
$
|
3,332
|
|
|
—
|
|
|
|
|
|
03/14
|
|
|
|
Walker Land, Dallas County, TX
|
|
|
—
|
|
|
19,167
|
|
|
—
|
|
|
(5,993
|
)
|
|
—
|
|
$
|
13,174
|
|
|
—
|
|
$
|
13,174
|
|
|
—
|
|
|
—
|
|
|
09/06
|
|
|
—
|
Whorton Land, Bentonville, AR
|
|
|
1,032
|
|
|
4,291
|
|
|
—
|
|
|
568
|
|
|
(2,997
|
)
|
$
|
1,862
|
|
|
—
|
|
$
|
1,862
|
|
|
—
|
|
|
—
|
|
|
06/05
|
|
|
—
|
Total Land Subject to Sales Contract
|
|
$
|
5,953
|
|
$
|
64,028
|
|
$
|
—
|
|
$
|
(11,568
|
)
|
$
|
(3,305
|
)
|
$
|
49,155
|
|
$
|
—
|
|
$
|
49,155
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Properties Subject to Sales Contract
|
|
$
|
5,953
|
|
$
|
64,028
|
|
$
|
—
|
|
$
|
(11,568
|
)
|
$
|
(3,305
|
)
|
$
|
49,155
|
|
$
|
—
|
|
$
|
49,155
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pioneer Crossing Tract I, Austin, TX
|
|
$
|
1,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Red Cross Land
|
|
$
|
(25
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Total Land Subject to Sales Contract
|
|
$
|
1,719
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL: Real Estate
|
|
$
|
821,510
|
|
$
|
242,029
|
|
$
|
729,492
|
|
$
|
77,172
|
|
$
|
(45,149
|
)
|
$
|
226,569
|
|
$
|
776,976
|
|
$
|
1,003,545
|
|
$
|
150,038
|
|
|
|
|
|
|
|
|
|
SCHEDULE II
(Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
As of December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
(dollars in thousansds)
|
|
Reconciliation of Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
831,540
|
|
|
$
|
848,062
|
|
|
$
|
1,111,299
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, improvements and construction
|
|
|
216,090
|
|
|
|
75,945
|
|
|
|
(22,346
|
)
|
Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real estate
|
|
|
(38,785
|
)
|
|
|
(92,467
|
)
|
|
|
(229,661
|
)
|
Asset impairments
|
|
|
(5,300
|
)
|
|
|
—
|
|
|
|
(11,230
|
)
|
Balance at December 31,
|
|
$
|
1,003,545
|
|
|
$
|
831,540
|
|
|
$
|
848,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
131,777
|
|
|
$
|
147,768
|
|
|
$
|
180,866
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
20,386
|
|
|
|
18,077
|
|
|
|
21,816
|
|
Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real estate
|
|
|
(2,125
|
)
|
|
|
(34,068
|
)
|
|
|
(54,914
|
)
|
Balance at December 31,
|
|
$
|
150,038
|
|
|
$
|
131,777
|
|
|
$
|
147,768
|
|
SCHEDULE IV
AMERICAN REALTY INVESTORS, INC.
MORTGAGE LOANS
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Interest
Rate
|
|
Final
Maturity
Date
|
|
Periodic Payment Terms
|
|
Prior Liens
|
|
Face Amount
of Mortgage
|
|
Carrying
Amount of
Mortgage
|
|
Principal or
Loans Subject
to Delinquent
Principal or
Interest
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christine Tunney
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
49
|
|
48
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compton Partners
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
289
|
|
289
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Monier
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
97
|
|
97
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earl Samson III
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
96
|
|
96
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Samson III
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
96
|
|
96
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H198, LLC
|
|
12.00%
|
|
01/20
|
|
|
|
|
|
5,907
|
|
5,907
|
|
|
Las Vegas Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hammon Operating Corporation
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
193
|
|
193
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold Wolfe
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
193
|
|
193
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herrick Partners
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
91
|
|
91
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Anna MacLean
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
193
|
|
193
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Monier
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
304
|
|
304
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michale Witte
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
96
|
|
96
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palmer Brown Madden
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
96
|
|
96
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Schmaltz
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
203
|
|
203
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Baylis
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
193
|
|
193
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sherman Bull
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
193
|
|
193
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Cliffs of El Dorado/UH of McKinney,LLC)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
12,663
|
|
2,469
|
|
2,097
|
|
—
|
100% Interest in UH of Mckinney, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Echo Station)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
9,719
|
|
1,809
|
|
1,481
|
|
—
|
100% Interest in UH of Temple, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE IV
(Continued)
AMERICAN REALTY INVESTORS, INC.
MORTGAGE LOANS
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Interest
Rate
|
|
Final
Maturity
Date
|
|
Periodic Payment Terms
|
|
Prior Liens
|
|
Face Amount
of Mortgage
|
|
Carrying
Amount of
Mortgage
|
|
Principal or
Loans Subject
to Delinquent
Principal or
Interest
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
Unified Housing Foundation, Inc. (Inwood on the Park/UH of Inwood,LLC)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
22,227
|
|
5,462
|
|
5,059
|
|
—
|
100% Interest in UH of Inwood, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Kensington Park/UH of Kensington,LLC)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
18,723
|
|
4,310
|
|
3,933
|
|
—
|
100% Interest in UH of Kensington, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Lakeshore Villas/HFS of Humble,LLC)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
15,756
|
|
8,836
|
|
6,368
|
|
—
|
Interest in Unified Housing Foundation Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Lakeshore Villas/HFS of Humble,LLC)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
15,965
|
|
2,959
|
|
2,732
|
|
—
|
100% Interest in HFS of Humble, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Limestone Canyon)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
13,621
|
|
9,216
|
|
7,293
|
|
—
|
100% Interest in UH of Austin, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Limestone Ranch)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
18,641
|
|
12,335
|
|
7,953
|
|
—
|
100% Interest in UH of Vista Ridge, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Parkside Crossing)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
11,544
|
|
2,772
|
|
2,272
|
|
—
|
100% Interest in UH of Parkside Crossing, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Reserve at White Rock I)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
15,640
|
|
2,794
|
|
2,485
|
|
—
|
100% Interest in UH of Harvest Hill I, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Reserve at White Rock II)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
14,026
|
|
2,843
|
|
2,555
|
|
—
|
100% Interest in UH of Harvest Hill, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Sendero Ridge)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
22,984
|
|
12,663
|
|
9,303
|
|
—
|
100% Interest in UH of Sendero Ridge, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Timbers of Terrell)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
7,294
|
|
1,702
|
|
1,323
|
|
—
|
100% Interest in UH of Terrell, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Tivoli)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
10,398
|
|
12,761
|
|
7,966
|
|
—
|
100% Interest in UH of Tivoli, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Trails at White Rock)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
21,712
|
|
4,245
|
|
3,815
|
|
—
|
100% Interest in UH of Harvest Hill III, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William H. Ingram
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
96
|
|
96
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William S. Urkiel
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
97
|
|
97
|
|
—
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Willingham Revocable Trust
|
|
10.00%
|
|
09/17
|
|
Interest only paid quarterly.
|
|
—
|
|
96
|
|
96
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A limited partnership interests in Edina Park Plaza Associates, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Various related party notes
|
|
various
|
|
various
|
|
Excess cash flow
|
|
|
|
1,349
|
|
1,349
|
|
|
Various non-related party notes
|
|
various
|
|
various
|
|
|
|
—
|
|
496
|
|
496
|
|
—
|
SCHEDULE IV
(Continued)
AMERICAN REALTY INVESTORS, INC.
MORTGAGE LOANS
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Interest
Rate
|
|
Final
Maturity
Date
|
|
Periodic Payment Terms
|
|
Prior Liens
|
|
Face Amount
of Mortgage
|
|
Carrying
Amount of
Mortgage
|
|
Principal or
Loans Subject
to Delinquent
Principal or
Interest
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Leman Development, Ltd.
(1)
|
|
0.00%
|
|
N/A
|
|
|
|
—
|
|
1,500
|
|
|
1,500
|
|
—
|
One Realco Corporation
(1)
|
|
3.00%
|
|
01/17
|
|
Interest and principal due at
maturity.
|
|
—
|
|
10,000
|
|
|
7,000
|
|
—
|
Realty Advisors Management, Inc.
|
|
2.28%
|
|
12/16
|
|
Interest only paid quarterly.
|
|
—
|
|
20,387
|
|
|
20,387
|
|
—
|
Unified
Housing Foundation, Inc.
(Lakeshore Villas/HFS of Humble, LLC)
|
|
12.00%
|
|
12/32
|
|
Excess cash flow
|
|
15,965
|
|
2,189
|
|
|
2,000
|
|
—
|
Unified Housing Foundation, Inc.
|
|
12.00%
|
|
12/15
|
|
Excess cash flow
|
|
|
|
2,665
|
|
|
2,665
|
|
—
|
Unified Housing Foundation, Inc.
|
|
12.00%
|
|
12/16
|
|
Excess cash flow
|
|
|
|
3,657
|
|
|
3,657
|
|
—
|
Unified Housing Foundation, Inc.
|
|
12.00%
|
|
12/17
|
|
Excess cash flow
|
|
|
|
1,207
|
|
|
1,207
|
|
—
|
Unified Housing Foundation, Inc.
|
|
12.00%
|
|
06/17
|
|
Excess cash flow
|
|
|
|
1,261
|
|
|
1,261
|
|
—
|
Unified Housing Foundation, Inc.
|
|
12.00%
|
|
12/18
|
|
Excess cash flow
|
|
|
|
3,994
|
|
|
3,994
|
|
|
Unified Housing Foundation, Inc.
|
|
12.00%
|
|
12/18
|
|
Excess cash flow
|
|
|
|
6,407
|
|
|
6,407
|
|
|
Various related party notes
|
|
various
|
|
various
|
|
Excess cash flow
|
|
—
|
|
1,420
|
|
|
1,420
|
|
—
|
Various non-related party notes
|
|
various
|
|
various
|
|
|
|
|
|
503
|
|
|
503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
129,059
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
8,221
|
|
|
|
|
|
|
|
|
|
|
Allowance for estimated losses
|
|
|
(17,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
120,243
|
|
|
(1) Fully reserved
SCHEDULE IV
(Continued)
AMERICAN REALTY INVESTORS, INC.
MORTGAGE LOANS
As of December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
152,645
|
|
|
$
|
156,415
|
|
|
$
|
125,173
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
New mortgage loans
|
|
|
18,055
|
|
|
|
32,380
|
|
|
|
—
|
|
Funding of existing loans
|
|
|
—
|
|
|
|
—
|
|
|
|
22,445
|
|
Increase (decrease) of interest receivable on mortgage loans
|
|
|
11,130
|
|
|
|
(10,097
|
)
|
|
|
13,267
|
|
Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts received
|
|
|
(16,486
|
)
|
|
|
(25,492
|
)
|
|
|
(3,327
|
)
|
Non-cash reductions
|
|
|
(28,064
|
)
|
|
|
(561
|
)
|
|
|
(1,143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
|
|
$
|
137,280
|
|
|
$
|
152,645
|
|
|
$
|
156,415
|
|