Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 26, 2014 | Jun. 30, 2013 | |
Document and Entity Information | ' | ' | ' |
Entity Registrant Name | 'AMERICAN REALTY INVESTORS INC | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Entity Central Index Key | '0001102238 | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 11,525,389 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Current Reporting Status | 'Yes | ' | ' |
Entity Voluntary Filers | 'No | ' | ' |
Entity Well-known Seasoned Issuer | 'No | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Entity Public Float | ' | ' | $10,136,570 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
ASSETS | ' | ' |
Real estate, at cost | $799,698 | $1,031,632 |
Real estate held for sale at cost, net of depreciation ($2,390 in 2013 and $4,393 in 2012 ) | 16,427 | 17,040 |
Real estate subject to sales contracts at cost, net of depreciation ($1,949 in 2013 and $15,948 in 2012) | 27,598 | 42,286 |
Less accumulated depreciation | -143,429 | -160,525 |
Total real estate | 700,294 | 930,433 |
Notes and interest receivable | ' | ' |
Performing (including $145,754 in 2013 and $114,275 in 2012 from related parties) | 153,275 | 120,998 |
Non-performing | 3,140 | 4,175 |
Less allowance for estimated losses (including $15,809 in 2013 and $18,962 in 2012 from related parties) | -19,600 | -21,704 |
Total notes and interest receivable | 136,815 | 103,469 |
Cash and cash equivalents | 16,437 | 13,399 |
Restricted cash | 32,929 | 34,518 |
Investments in unconsolidated subsidiaries and investees | 3,789 | 8,168 |
Receivable from related party | 14,086 | 0 |
Other assets | 38,972 | 45,358 |
Total assets | 943,322 | 1,135,345 |
Liabilities: | ' | ' |
Notes and interest payable | 618,930 | 794,966 |
Notes related to assets held for sale | 17,100 | 18,915 |
Notes related to subject to sales contracts | 23,012 | 55,976 |
Payable to related parties | 0 | 10,922 |
Deferred revenue (including $74,303 in 2013 and $71,303 in 2012 from sales to related parties) | 76,148 | 73,148 |
Accounts payable and other liabilities (including $15,394 in 2013 and $13,553 in 2012 to related parties) | 73,271 | 96,314 |
Total Liabilities | 808,461 | 1,050,241 |
Shareholders' equity: | ' | ' |
Preferred stock, Series A: $2.00 par value, authorized 15,000,000 shares, issued and outstanding 3,353,954 shares in 2013 and 2012 (liquidation preference $10 per share), including 900,000 shares in 2013 and 2012 held by subsidiaries. Series K: $2.00 par value, authorized, issued and outstanding 135,000 and 0 shares in 2013 and 2012, respectively (liquidation preference $22 per share), held by TCI (consolidated) | 4,908 | 4,908 |
Common stock, $.01 par value, authorized 100,000,000 shares; issued 11,941,174 and outstanding 11,525,389 shares in 2013 and in 2012 | 115 | 115 |
Treasury stock at cost; 415,785 shares in 2013 and 2012 and 229,214 shares held by TCI (consolidated) as of 2013 and 2012 | -6,395 | -6,395 |
Paid-in capital | 102,974 | 105,700 |
Retained earnings | -11,795 | -53,071 |
Accumulated other comprehensive income | 0 | -786 |
Total American Realty Investors, Inc. shareholders' equity | 89,807 | 50,471 |
Non-controlling interest | 45,054 | 34,633 |
Total equity | 134,861 | 85,104 |
Total liabilities and equity | $943,322 | $1,135,345 |
CONSOLIDATED_BALANCE_SHEETS_PA
CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
PARENTHETICALS | ' | ' |
Depreciation of Real Estate held for sale at cost | $2,390 | $4,393 |
Depreciation of Real Estate subject to sales contracts at cost | 1,949 | 15,948 |
Performing from related parties | 145,754 | 114,275 |
Non-performing allowance for doubtful accounts | 15,809 | 18,962 |
Deferred Gain from sales to related parties | 74,303 | 71,303 |
Accounts payable and other liabilities to related parties | $15,394 | $13,553 |
Preferred stock Series A, par value | $2 | $2 |
Preferred stock Series A, shares authorized | 15,000,000 | 15,000,000 |
Preferred stock Series A, shares issued | 3,353,954 | 3,353,954 |
Preferred stock Series A, shares outstanding | 3,353,954 | 3,353,954 |
Preferred stock Series A, liquidation preference per share | $10 | $10 |
Preferred stock Series A, liquidation preference shares | 900,000 | 900,000 |
Preferred stock Series K, par value | $2 | $2 |
Preferred stock Series K, shares issued | 135,000 | 0 |
Preferred stock Series K, shares outstanding | 135,000 | 0 |
Preferred stock Series K, liquidation preference per share | $22 | $22 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 11,941,174 | 11,941,174 |
Common stock, shares outstanding | 11,525,389 | 11,525,389 |
Treasury stock, shares | 415,785 | 415,785 |
Shares held by TCI | 229,214 | 229,214 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Revenues: | ' | ' | ' |
Rental and other property revenues (including $670, $587 and $223 for the year ended 2013, 2012 and 2011, respectively, from related parties) | $89,636 | $90,086 | $80,075 |
Expenses: | ' | ' | ' |
Property operating expenses (including $804, $985 and $998 for the year ended 2013, 2012 and 2011, respectively, from related parties) | 43,597 | 44,484 | 43,959 |
Depreciation | 17,286 | 16,201 | 13,668 |
General and administrative (including $3,646, $3,539 and $4,264 for the year ended 2013, 2012 and 2011, respectively, from related parties) | 7,934 | 6,051 | 13,157 |
Provision on impairment of notes receivable and real estate assets | 18,980 | 2,330 | 42,409 |
Net income fee to related party | 4,089 | 180 | 54 |
Advisory fee to related party | 10,166 | 10,182 | 13,225 |
Total operating expenses | 102,052 | 79,428 | 126,472 |
Operating income (loss) | -12,416 | 10,658 | -46,397 |
Other income (expense): | ' | ' | ' |
Interest income (including $19,110, $14,182 and $10,122 for the year ended 2013, 2012 and 2011, respectively, from related parties) | 19,445 | 14,612 | 10,948 |
Other income (including $0, $6 and $0 for the year ended 2013, 2012 and 2011, respectively, from related parties) | 10,179 | 7,763 | 2,684 |
Mortgage and loan interest (including $3,927, $3,692 and $2,190 for the year ended 2013, 2012 and 2011, respectively, from related parties) | -38,101 | -40,095 | -43,247 |
Deferred borrowing costs amortization | -2,959 | -688 | -1,896 |
Loan charges and prepayment penalties | -5,557 | -3,574 | -439 |
Gain (loss) on the sale of investments | -283 | -118 | 91 |
Earnings from unconsolidated subsidiaries and investees | 391 | 372 | 79 |
Litigation settlement | -20,313 | -175 | -225 |
Total other expenses | -37,198 | -21,903 | -32,005 |
Loss before gain (loss) on land sales, non-controlling interest, and taxes | -49,614 | -11,245 | -78,402 |
Gain (loss) on land sales | -455 | 5,475 | 34,247 |
Loss from continuing operations before tax | -50,069 | -5,770 | -44,155 |
Income tax benefit (expense) | 40,049 | -329 | 13,100 |
Net loss from continuing operations | -10,020 | -6,099 | -31,055 |
Discontinued operations: | ' | ' | ' |
Loss from discontinued operations | -3,960 | -9,826 | -19,479 |
Gain on sale of real estate from discontinued operations | 98,951 | 8,885 | 56,907 |
Income tax benefit (expense) from discontinued operations | -33,247 | 329 | -13,100 |
Net income (loss) from discontinued operations | 61,744 | -612 | 24,328 |
Net income (loss) | 51,724 | -6,711 | -6,727 |
Net (income) loss attributable to non-controlling interests | -10,448 | 1,126 | 7,017 |
Net income (loss) attributable to American Realty Investors, Inc. | 41,276 | -5,585 | 290 |
Preferred dividend requirement | -2,452 | -2,452 | -2,456 |
Net income (loss) applicable to common shares | 38,824 | -8,037 | -2,166 |
Earnings per share - basic | ' | ' | ' |
Loss from continuing operations | ($1.99) | ($0.65) | ($2.30) |
Income (loss) from discontinued operations | $5.36 | ($0.05) | $2.11 |
Net income (loss) applicable to common shares | $3.37 | ($0.70) | ($0.19) |
Earnings per share - diluted | ' | ' | ' |
Loss from continuing operations | ($1.99) | ($0.65) | ($2.30) |
Income (loss) from discontinued operations | $5.36 | ($0.05) | $2.11 |
Net income (loss) applicable to common shares | $3.37 | ($0.70) | ($0.19) |
Weighted average common shares used in computing earnings per share | 11,525,389 | 11,525,389 | 11,517,431 |
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 11,525,389 | 11,517,431 |
Amounts attributable to American Realty Investors, Inc. | ' | ' | ' |
Loss from continuing operations | -20,468 | -4,973 | -24,038 |
Income (loss) from discontinued operations | 61,744 | -612 | 24,328 |
Net income (loss) | $41,276 | ($5,585) | $290 |
CONSOLIDATED_STATEMENTS_OF_OPE1
CONSOLIDATED STATEMENTS OF OPERATIONS PARENTHETICALS (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
OPERATIONS PARENTHETICALS | ' | ' | ' |
Rental and other property revenues, affiliates and related parties | $670 | $587 | $223 |
Property operating expenses, affiliates and related parties | 804 | 985 | 998 |
General and administrative expenses, affiliates and related parties | 3,646 | 3,539 | 4,264 |
Interest income from affiliates and related parties | 19,110 | 14,182 | 10,122 |
Other Income from affiliates and related parties | 0 | 6 | 0 |
Mortgage and loan interest, affiliates and related parties | $3,927 | $3,692 | $2,190 |
CONSOLIDATED_STATEMENTS_OF_SHA
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) | Total Capital | Comprehensive Income (Loss) | Preferred Stock | Common Stock Shares | Common Stock Amount | Treasury Stock | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non - controlling Interest |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | ||
Balance at Dec. 31, 2010 | 106,265 | -130,713 | 4,979 | 11,874,138 | 114 | -6,333 | 110,419 | -47,776 | -786 | 45,648 |
Net income (loss) | ($6,727) | ($6,727) | $0 | ' | $0 | $0 | $0 | $290 | $0 | ($7,017) |
Acquisition of non-controlling interest | -195 | 0 | 0 | ' | 0 | 0 | -145 | 0 | 0 | -50 |
Distribution to non-controlling interests | -808 | 0 | 0 | ' | 0 | 0 | -325 | 0 | 0 | -483 |
Sale of controlling interest | -791 | 0 | 0 | ' | 0 | 0 | -2,206 | 0 | 0 | 1,415 |
Repurchase of treasury stock | -62 | 0 | 0 | ' | 0 | -62 | 0 | 0 | 0 | 0 |
Conversion of preferred stock into common stock | 31 | 0 | -71 | 67,036 | 1 | 0 | 101 | 0 | 0 | 0 |
Series A preferred stock cash dividend ($1.00 per share) | -2,456 | 0 | 0 | ' | 0 | 0 | -2,456 | 0 | 0 | 0 |
Balance at Dec. 31, 2011 | 95,257 | -137,440 | 4,908 | 11,941,174 | 115 | -6,395 | 105,388 | -47,486 | -786 | 39,513 |
Net loss | -6,711 | -6,711 | 0 | ' | 0 | 0 | 0 | -5,585 | 0 | -1,126 |
Acquisition of non-controlling interest | -523 | 0 | 0 | ' | 0 | 0 | 1,660 | 0 | 0 | -2,183 |
Distribution to non-controlling interests | -338 | 0 | 0 | ' | 0 | 0 | -330 | 0 | 0 | -8 |
Sale of controlling interest | 1,339 | 0 | 0 | ' | 0 | 0 | 0 | 0 | 0 | 1,339 |
Sale of non-controlling interests | -1,468 | 0 | 0 | ' | 0 | 0 | 1,434 | 0 | 0 | -2,902 |
Series A preferred stock cash dividend ($1.00 per share) | -2,452 | 0 | 0 | ' | 0 | 0 | -2,452 | 0 | 0 | 0 |
Balance at Dec. 31, 2012 | 85,104 | -144,151 | 4,908 | 11,941,174 | 115 | -6,395 | 105,700 | -53,071 | -786 | 34,633 |
Acquisition of non-controlling interest | 0 | 0 | 0 | ' | 0 | 0 | 0 | 0 | 0 | 0 |
Distribution to non-controlling interests | -345 | 0 | 0 | ' | 0 | 0 | -330 | 0 | 0 | -15 |
Sale of controlling interest | 56 | 0 | 0 | ' | 0 | 0 | 56 | 0 | 0 | 0 |
Sale of non-controlling interests | 774 | -786 | 0 | ' | 0 | 0 | 0 | 0 | 786 | -12 |
Series A preferred stock cash dividend ($1.00 per share) | -2,452 | 0 | 0 | ' | 0 | 0 | -2,452 | 0 | 0 | 0 |
Net income | $51,724 | $51,724 | $0 | ' | $0 | $0 | $0 | $41,276 | $0 | $10,448 |
Balance at Dec. 31, 2013 | 134,861 | -93,213 | 4,908 | 11,941,174 | 115 | -6,395 | 102,974 | -11,795 | 0 | 45,054 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Cash flows from operating activities: | ' | ' | ' |
Net Income (loss) | $51,724 | ($6,711) | ($6,727) |
Adjustments to reconcile net loss applicable to common shares to net cash used in operating activities: | ' | ' | ' |
(Gain) loss on sale of land | 455 | -5,475 | -34,247 |
Gain on sale of income producing properties | -98,951 | -8,885 | -56,907 |
Depreciation and amortization | 21,518 | 22,563 | 24,255 |
Provision on impairment of notes receivable and real estate assets | 18,980 | 4,730 | 50,027 |
Amortization of deferred borrowing costs | 1,442 | 2,478 | 2,816 |
Earnings from unconsolidated subsidiaries and investees | -391 | -372 | -80 |
(Increase) decrease in assets: | ' | ' | ' |
Accrued interest receivable | -12,895 | -6,117 | -8,663 |
Other assets | -2,242 | -5,854 | 181 |
Prepaid expense | -1,722 | -351 | 2,321 |
Escrow | 3,532 | 2,216 | 21,594 |
Earnest money | -535 | 235 | 1,414 |
Rent receivables | 3,807 | -286 | 7,253 |
Increase (decrease) in liabilities: | ' | ' | ' |
Accrued interest payable | -5,116 | -8,467 | 2,202 |
Related party payables | -25,008 | 623 | -1,924 |
Other liabilities | 3,240 | -17,180 | 20,038 |
Net cash provided by (used in) operating activities | -42,162 | -26,853 | 23,553 |
Cash Flow From Investing Activities: | ' | ' | ' |
Proceeds from notes receivables | 2,855 | 16,055 | 18,621 |
Originations of notes receivables | -21,202 | -10,189 | -21,921 |
Acquisition of land held for development | -83 | -8,503 | 0 |
Proceeds from sales of income producing properties | 259,115 | 42,874 | 38,883 |
Proceeds from sale of land | 14,806 | 39,766 | 21,698 |
Proceeds from sale of investments | 0 | 132 | 0 |
Investment in unconsolidated real estate entities | 4,770 | 2,654 | 581 |
Improvement of land held for development | -399 | -184 | -2,995 |
Improvement of income producing properties | -7,681 | -2,507 | -4,191 |
Investment in marketable securities | 0 | 0 | 0 |
Acquisition of non-controlling interest | -75 | -355 | -195 |
Sale of non-controlling interest | 774 | -1,468 | 0 |
Sale of controlling interest | 50 | 1,339 | 961 |
Construction and development of new properties | -1,153 | -5,790 | -47,317 |
Net cash provided by investing activities | 251,777 | 73,824 | 4,125 |
Cash Flow From Financing Activities: | ' | ' | ' |
Proceeds from notes payable | 203,885 | 143,449 | 156,821 |
Recurring amortization of principal on notes payable | -18,232 | -23,022 | -19,052 |
Payments on maturing notes payable | -390,941 | -167,771 | -155,893 |
Deferred financing costs | 1,837 | -3,750 | -887 |
Stock-secured borrowings | -411 | 0 | 2,291 |
Distributions to non-controlling interests | -263 | -338 | -808 |
Preferred stock dividends - Series A | -2,452 | -2,452 | -2,456 |
Repurchase/sale of treasury stock | 0 | 0 | -62 |
Issuance of common stock | 0 | 0 | 30 |
Conversion of preferred stock into common stock | 0 | 0 | 1 |
Net cash used in financing activities | -206,577 | -53,884 | -20,015 |
Net increase (decrease) in cash and cash equivalents | 3,038 | -6,913 | 7,663 |
Cash and cash equivalents, beginning of period | 13,399 | 20,312 | 12,649 |
Cash and cash equivalents, end of period | 16,437 | 13,399 | 20,312 |
Supplemental disclosures of cash flow information: | ' | ' | ' |
Cash paid for interest | 44,240 | 48,606 | 62,609 |
Schedule of noncash investing and financing activities: | ' | ' | ' |
Note receivable received from affiliate | $0 | $9,279 | $20,387 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
COMPREHENSIVE INCOME (LOSS) DURING | ' | ' | ' |
Net income (loss) | $51,724 | ($6,711) | ($6,727) |
Unrealized income (loss) on foreign currency translation | 786 | 0 | 0 |
Unrealized loss on investment securities | 0 | 0 | 0 |
Total other comprehensive loss | 786 | 0 | 0 |
Comprehensive income (loss) | 52,510 | -6,711 | -6,727 |
Comprehensive income (loss) attributable to non-controlling interest | -10,448 | 1,126 | 7,017 |
Comprehensive income (loss) attributable to American Realty Investors, Inc. | $42,062 | ($5,585) | $290 |
ORGANIZATION_AND_SUMMARY_OF_SI
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||
Dec. 31, 2013 | |||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
FASB Accounting Standards Codification. The Company presents its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). In June 2009, the Financial Accounting Standards Board (“FASB”) completed its accounting guidance codification project. The FASB Accounting Standards Codification (“ASC”) became effective for the Company’s financial statements issued subsequent to June 30, 2009 and is the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. As of the effective date, the company refers to the ASC Codification as the sole source of authoritative literature. | |||
Organization and business. ARL was organized in 1999. In August 2000, the Company acquired American Realty Trust, Inc., a Georgia corporation (“ART”) and National Realty L.P.; a Delaware limited partnership (“NRLP”). ART was the successor to a District of Columbia business trust organized in 1961. The business trust was merged into ART in 1988. NRLP was organized in 1987 and subsequently acquired all of the assets and assumed all of the liabilities of several public and private limited partnerships. NRLP also owned a portfolio of real estate and mortgage loan investments. ARL is a “C” corporation for U.S. federal income tax purposes. | |||
The Company is headquartered in Dallas, Texas and its common stock trades on the New York Stock Exchange (“NYSE”) under the symbol (“ARL”). Approximately 87.4% of ARL’s stock is owned by related party entities. ARL subsidiaries own approximately 83.8% of the outstanding shares of common stock of Transcontinental Realty Investors, Inc., a Nevada corporation (“TCI”) whose common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol (“TCI”). ARL has consolidated TCI’s accounts and operations since March 2003. | |||
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. | |||
Effective 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 Realty Advisors Management, Inc. (“RAMI”), 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. Prime Income Asset Management, LLC (“Prime”) served as the Company’s contractual Advisor prior to April 30, 2011. | |||
Effective since January 1, 2011, Regis Realty Prime, LLC, dba Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial and hotel properties, 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, and renting hotel rooms to guests. We also generate revenues from gains on sales of income-producing properties and land. At December 31, 2013, we owned 47 residential apartment communities comprising of 6,398 units, ten commercial properties comprising an aggregate of approximately 2.6 million square feet, and an investment in 4,198 acres of undeveloped and partially developed land. | |||
Basis of presentation. 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 Garden Centura, L.P. and LK-Four Hickory, LLC were accounted for under the equity method until December 28, 2011and January 17, 2012, respectively, when the investments were sold. | |||
The Company in accordance with the VIE guidance in ASC 810 “Consolidations” consolidates 34 and 45 multifamily residential properties located throughout the United States at December 31, 2013 and December 31, 2012, respectively, ranging from 32 units to 332 units. Assets totaling $345,188,000 and $505,071,000 at December 31, 2013 and 2012, 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. Assets totaling $16,427,000 and $18,077,000 at December 31, 2013 and 2012, respectively, are consolidated and included in “Real estate held for sale 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: | |||
Level 1 | — | Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets. | |
Level 2 | — | Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
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. Prior to January 1, 2012, on cash flow notes where payments are based upon surplus cash from operations, accrued but unpaid interest income was only recognized to the extent that cash was received. As of January 1, 2012, due to the consistency of cash received on the surplus cash notes, we are recording interest as earned. | |||
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. | |||
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 accounting principles generally accepted in the United States of America, 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 RAMI consolidated group for tax purposes. The income tax expense (benefit) for the 2011 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 RAMI for the remainder of 2012. 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. There were no recent accounting pronouncements that our company has not implemented that materially affect our financial statements. |
REAL_ESTATE_ACTIVITY
REAL ESTATE ACTIVITY | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
REAL ESTATE ACTIVITY | ' | ||||||||
REAL ESTATE ACTIVITY | ' | ||||||||
NOTE 2. REAL ESTATE | |||||||||
A summary of our real estate owned as of the end of the year is listed below (dollars in thousands): | |||||||||
2013 | 2012 | ||||||||
Apartments | $ | 436,109 | $ | 611,404 | |||||
Commercial properties | 214,486 | 225,958 | |||||||
Land held for development | 149,103 | 194,270 | |||||||
Real estate held for sale | 18,817 | 21,433 | |||||||
Real estate subject to sales contract | 29,547 | 58,234 | |||||||
Total real estate, at cost, less impairment | 848,062 | 1,111,299 | |||||||
Less accumulated deprecation | (147,768 | ) | (180,866 | ) | |||||
Total real estate, net of depreciation | $ | 700,294 | $ | 930,433 | |||||
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: | |||||||||
Land improvements | 25 to 40 years | ||||||||
Buildings and improvements | 10 to 40 years | ||||||||
Tenant improvements | Shorter of useful life or terms of related lease | ||||||||
Furniture, fixtures and equipment | 3 to 7 years | ||||||||
Provision for Impairment Losses | |||||||||
The provision on impairment of notes receivable, investment in real estate partnerships, and real estate assets was $19.0 million for the period ended December 31, 2013. This was an increase of $16.7 million as compared to the prior year expense of $2.3 million. In the current year, impairment was recorded as an additional loss in the commercial portfolio of $9.6 million, the land portfolio of $7.5 million and the remaining $1.9 million was related to provisions 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 book basis as well as disposal of another property due to bankruptcy. | |||||||||
In the prior period, the $2.3 million in impairment reserves was related to our land holdings. A prior year sale of adjacent land determined the fair value on a Waco, Texas land holding that resulted in an impairment reserve of $1.2 million, a comparable sale determined the fair value of a Florida land holding that resulted in an impairment reserve of $0.5 million and an appraisal determined the fair value of an Arkansas land holding that resulted in an impairment reserve of $0.6 million. | |||||||||
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. | |||||||||
Fair Value Measurements Using (dollars in thousands): | |||||||||
31-Dec-13 | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Land | $ | 4,899 | $ | --- | $ | 4,899 | $ | --- | |
Commercial | $ | 26,194 | $ | --- | $ | 26,194 | $ | --- | |
Land with a carrying amount of $6,529,768 was written down to its fair value of $4,899,468 resulting in an impairment charge of $1,630,300 in 2013. Level 2 inputs used to determine the fair values above included third party appraisals and the method taking the debt balance on the collateralized acres plus the book value of the uncollateralized acres. | |||||||||
A commercial building with a carrying amount of $35,794,331 was written down to its fair value of $26,194,331 resulting in an impairment charge of $9,600,000 in 2013. The Level 2 input used to determine the fair value above was a third party appraisal. | |||||||||
Fair Value Measurements Using (dollars in thousands): | |||||||||
31-Dec-12 | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Land | $ | 2,699 | $ | --- | $ | 1,800 | $ | 899 | |
Commercial | $ | 9,660 | $ | --- | $ | 9,660 | $ | --- | |
Land with a carrying amount of $5,029,254 was written down to its fair value of $2,699,175 resulting in an impairment charge of $2,330,079 in 2012. Level 2 inputs used to determine the fair values above include bona fide purchase offers and third party appraisals. The Level 3 inputs used to determine the fair values above include comparable sales prices of similar assets. | |||||||||
A commercial building with a carrying amount of $12,060,247 was written down to its fair value of $9,660,247 resulting in an impairment charge of $2,400,000 in 2012. The method used to determine the fair value was agreement with lender as to value based on their evaluation of the property. | |||||||||
Fair Value Measurements Using (dollars in thousands): | |||||||||
31-Dec-11 | Fair Value | Level 1 | Level 2 | Level 3 | |||||
Land | $ | 55,806 | $ | --- | $ | 55,806 | $ | --- | |
Residential | $ | 30,539 | $ | --- | $ | --- | $ | 30,539 | |
Commercial | $ | 11,934 | $ | --- | $ | 11,934 | $ | --- | |
Land with a carrying amount of $86,696,927 was written down to its fair value of $55,806,297 resulting in an impairment charge of $30,890,630 in 2011. Level 2 observable inputs used to determine the fair value includes bona fide purchase offers and third party appraisals. | |||||||||
Residential properties with a carrying amount of $35,717,146 were written down to their fair value of $30,539,462 resulting in an impairment charge of $5,177,684 in 2011. Level 3 unobservable inputs were used to determine the fair value includes a valuation technique, the income capitalization approach, which considers prevailing market capitalization rates. | |||||||||
Commercial properties with a carrying amount of $20,427,936 were written down to their fair value of $11,933,620 resulting in an impairment charge of $8,494,316 in 2011. Level 2 observable inputs used to determine the fair value includes bona fide purchase offers. | |||||||||
The following is a brief description of the more significant property sales in 2013: | |||||||||
On January 8, 2013, TCI sold 14.52 acres of land known as Southwood located in Tallahassee, Florida, at a foreclosure auction to an independent third party for $0.5 million. This land parcel was previously sold on December 31, 2012, to One Realco Corporation, a related party, for a sales price of $0.6 million. TCI did not recognize or record the sale in accordance with ASC 360-20 due to TCI’s continuing involvement, which included the potential payment of cash shortfalls, future obligations under the existing mortgage and guaranty, the buyer’s inadequate initial investment and TCI’s questionable recovery of investment cost. TCI determined that no sale had occurred for financial reporting purposes and therefore the asset remained on the books and continued to record operating expenses and depreciation as a period cost until a sale occurred that met the requirements of ASC 360-20. A sale to an independent third party, that met the requirements of ASC 360-20, took place on January 8, 2013, when the property was sold to a third party and sales proceeds were credited against the outstanding debt. There was no gain or loss on the land parcel sale. | |||||||||
On January 28, 2013, TCI sold a 314–unit apartment complex known as Verandas at City View located in Fort Worth, Texas, for a sales price of $25.3 million to an independent third party. The buyer assumed the existing debt of $18.2 million secured by the property. A gain of $6.2 million was recorded on the sale. | |||||||||
On March 14, 2013, TCI sold 13.90 acres of land known as Sheffield located in Grand Prairie, Texas, to an independent third party for a sales price of $2.3 million. The proceeds from the sale were used to pay off the multi-tract collateral debt, secured by the property. A nominal loss was recorded on the sale of the property. | |||||||||
On April 8, 2013, TCI recorded the transfer of ownership of Eton Square, a 225,566 square foot commercial building, located in Tulsa, Oklahoma, to the existing lender for satisfaction of the current mortgage note. There was a negotiated deficiency between the value of the property and the outstanding mortgage, resulting in a promissory note for $2.0 million provided by the seller. The promissory note is reduced by $1.0 million if timely payments are made in accordance with the note. The investment in the entity that owns this commercial building was previously sold on May 18, 2010, to TX Highland RS Corp, a related party, for a sales price of $13.7 million. TCI did not recognize or record the sale in accordance with ASC 360-20 due to TCI’s continuing involvement, which included the potential payment of cash shortfalls, future obligations under the existing mortgage and guaranty, the buyer’s inadequate initial investment and TCI’s questionable recovery of investment cost. TCI determined that no sale had occurred for financial reporting purposes and therefore the asset remained on the books and continued to record operating expenses and depreciation as a period cost until a sale occurred that met the requirements of ASC 360-20. A sale to an independent third party, that met the requirements of ASC 360-20, took place on April 8, 2013, when the property was transferred to the existing lender and sales proceeds were credited against the outstanding debt. A nominal gain was recorded on the sale. | |||||||||
On April 12, 2013, TCI was granted full title to 0.2341 acres of land known as Minivest, located in Dallas, Texas, by an order of judgment. TCI paid real estate taxes and has been maintaining the property for the years 1993-2007. | |||||||||
On February 2, 2012, TCI and its subsidiary, 1340 Poydras, LLC, executed a Guarantor Settlement and Consent Agreement with the lender for the Amoco building, Petra CRE CDO 2007-1, Ltd (“Petra”) to transfer ownership of the Amoco building to a new entity, 1340 Owner, LLC, which is affiliated with the existing lender, Petra. Petra and its affiliate are independent third parties. TCI deferred the recognition of the sale in accordance with ASC 360-20 due to TCI’s continuing involvement related to the obligations under the note and guaranty agreements and the re-acquisition option. As of May 7, 2013, TCI and Petra settled the obligations set forth under the note and guaranty and terminated the re-acquisition option. TCI recorded the sale to the independent third party and recognized a gain of $11.9 million. In connection with the settlement of certain litigation which had been pending in the U. S. District Court, Eastern District of Louisiana, among Petra, TCI, and a subsidiary, on May 7, 2013, TCI issued a $5.0 million promissory note payable to the lender which is secured by an unrecorded confession of judgment and a collateral pledge to such lender of 135,000 shares of Series K convertible preferred stock of ARL issued on the same date to TCI. Such promissory note requires regular monthly payments, is pre-payable, and matures on March 5, 2015. The issuance of the $5.0 million promissory note and collateral to the lender resolved all claims of the lender against TCI including deficiency claims under a mortgage covering certain real property located in New Orleans, Louisiana. The note has prepayment provisions whereby if it is paid off by March 1, 2014, the balance of $3.5 million is forgiven and if paid off after March 1, 2014, but before March 1, 2015, $2.5 million will be forgiven and collateral returned to the Company and the judgment released. On February 12, 2014, TCI exercised the first prepayment option date on the settlement with Petra CRE CDO relating to the Amoco Building. Per the agreement, TCI paid $1.2 million to settle all obligations and the remaining balance of the note and accrued interest of $3.5 million was forgiven. | |||||||||
On May 9, 2013, TCI sold 225 Baronne, a 422,037 square foot building, located in New Orleans, Louisiana, for a sales price of $1.5 million to an independent third party. Proceeds of sale were used to pay down a related party payable. A nominal gain was recorded on the sale. | |||||||||
On June 7, 2013, TCI sold a 206-unit apartment complex known as Laguna Vista, located in Farmers Branch, Texas, for a sale price of $24.8 million to an independent third party. A gain was recorded on the sale of $6.1 million. | |||||||||
On September 6, 2013, the Company sold 8.83 acres of land known as Elm Fork Ranch located in Carrollton, Texas for a sales price of $850,000 to an independent third party. The proceeds from the sale were used to pay off the remaining mortgage that was secured by the property. We recorded a gain of $0.2 million on the land sale. | |||||||||
On October 15, 2013, TCI recorded the transfer of ownership of a 26,000 square foot commercial building known as the Ergon building and 7.95 acres of land known as Jackson Capital City land, located in Jackson, Mississippi, to the existing lender for a settlement price of $10.4 million. The buyer assumed a $6.6 million note and the remaining sales proceeds were used to pay down a stock secured loan with Armed Forces Bank. | |||||||||
On October 30, 2013, ART Hawthorne, Inc and EQK Holdings Inc. transferred their Class B Limited Partner interest in Hawthorn Lakes Associates, Ltd, a partnership that owns the 344,975 square foot Expo Building called the Denver Merchandise Mart, back to the general partner, Woodhaven-Hawthorn, Inc., in exchange for a $1,070,000 promissory note. Additionally, EQK will transfer its rights to certain indebtedness owed to the partnership. The note will mature on October 1, 2019, and will accrue interest at 5.5% after year two. | |||||||||
On December 20, 2013, TCI sold nine residential apartment complexes to an independent third party for the sales price of $189.6 million. The properties included in the sale were Dorado Ranch, a 224 unit apartment complex located in Odessa, Texas, Huntington Ridge, a 198 unit apartment complex located in Desoto, Texas, Legends of El Paso, a 240 unit apartment complex located in El Paso, Texas, Mariposa Villas, a 216 unit apartment complex located in Dallas, Texas, Paramount Terrace, a 181 unit apartment complex located in Amarillo, Texas, River Oaks, a 180 unit apartment complex located in Wylie, Texas, Savoy of Garland, a 144 unit apartment complex located in Garland, Texas, Stonebridge at City Park, a 240 unit apartment complex located in Houston, Texas and Vistas of Pinnacle Park, a 332 unit apartment complex located in Dallas, Texas. The buyer assumed the combined debt of $115.1 million secured by the properties. A combined gain of $73.5 million was recorded on the sale. | |||||||||
In December 2010, various commercial and land holdings were sold to FRE Real Estate, Inc., a related party. During the first three months of 2011, many of these transactions were rescinded as of the original transaction date and were subsequently sold to related parties under the same ownership as FRE Real Estate, Inc. As of December 31, 2013, one commercial building, Thermalloy, remains in FRE Real Estate, Inc. TCI did not recognize or record the sale in accordance with ASC 360-20 due to TCI’s continuing involvement, which included the potential payment of cash shortfalls, future obligations under the existing mortgage and guaranty, the buyer’s inadequate initial investment and TCI’s questionable recovery of investment cost. TCI determined that no sale had occurred for financial reporting purposes and therefore the asset remained on the books and continued to record operating expenses and depreciation as a period cost until a sale occurred that met the requirements of ASC 360-20. | |||||||||
As of December 31, 2013, there remains one apartment complex, one commercial building and 212 acres of land that TCI has sold to a related party and have deferred the recognition of the sale. These are treated as “subject to sales contract” on the Consolidated Balance Sheets. These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and may or may not be transferred back to the seller upon resolution. These properties have mortgages that are secured by the property and many have corporate guarantees. According to the loan documents, the maker is currently in default on these mortgages primarily due to lack of payment and is actively involved in discussions with every lender in order to settle or cure the default situation. TCI has reviewed each asset and taken impairment to the extent TCI feels the value of the property was less than its current basis. TCI did not recognize or record the sale in accordance with ASC 360-20 due to its continuing involvement, which included the potential payment of cash shortfalls, future obligations under the existing mortgage and guaranty, the buyer’s inadequate initial investment and TCI’s questionable recovery of investment cost. TCI determined that no sale had occurred for financial reporting purposes and therefore the asset remained on the books and continued to record operating expenses and depreciation as a period cost until a sale occurred that met the requirements of ASC 360-20. The buyers received no compensation for the facilitation of the bankruptcy or debt restructuring process. | |||||||||
Sales to our subsidiary, TCI, have been reflected, in prior years, at the fair value sale price. Upon discussion with the SEC and in review of the guidance pursuant to ASC 250-10-45-22 to 24, we have adjusted those assets, in the prior year, to reflect a basis equal to ARL’s cost basis in the asset at the time of the sale. The related party payables from TCI were reduced for the lower asset price. The Company reflected the original cost basis in consolidation, therefore no change in the financial statements was necessary to reflect this change. |
NOTES_AND_INTEREST_RECEIVABLE
NOTES AND INTEREST RECEIVABLE | 12 Months Ended | ||||||||||||||
Dec. 31, 2013 | |||||||||||||||
NOTES AND INTEREST RECEIVABLE | ' | ||||||||||||||
NOTES AND INTEREST RECEIVABLE | ' | ||||||||||||||
NOTE 3. NOTES AND INTEREST RECEIVABLE | |||||||||||||||
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. Our mortgage notes receivable consist of first, wraparound and junior mortgage loans (dollars in thousands). | |||||||||||||||
Maturity | Interest | ||||||||||||||
Borrower | Date | Rate | Amount | Security | |||||||||||
Performing loans: | |||||||||||||||
Miscellaneous non-related party notes | Various | Various | $ 3,297 | Various security interests | |||||||||||
Miscellaneous related party notes (1) | Various | Various | 2,014 | Various security interests | |||||||||||
One Realco Corporation (2) | 17-Jan | 3.00% | 7,000 | Unsecured | |||||||||||
Realty Advisors Management, Inc. (1) | 16-Dec | 2.20% | 20,387 | Unsecured | |||||||||||
S Breeze I-V, LLC | 14-Jun | 5.00% | 3,180 | 6% Class A and 25% Class B Limited Partner Interests | |||||||||||
Woodhaven-Hawthorn, Inc. (1) | 14-Oct | 5.50% | 1,049 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (Cliffs of El Dorado) (1) | Dec-32 | 12.00% | 2,097 | 100% Interest in Unified Housing of McKinney, LLC | |||||||||||
Unified Housing Foundation, Inc. (Echo Station) (1) | Dec-32 | 12.00% | 1,481 | 100% Interest in Unified Housing of Temple, LLC | |||||||||||
Unified Housing Foundation, Inc. (Inwood on the Park) (1) | Dec-32 | 12.00% | 5,059 | 100% Interest in Unified Housing Inwood, LLC | |||||||||||
Unified Housing Foundation, Inc. (Kensington Park) (1) | Dec-32 | 12.00% | 3,936 | 100% Interest in Unified Housing Kensington, LLC | |||||||||||
Unified Housing Foundation, Inc. (Lakeshore Villas) (1) | Dec-32 | 12.00% | 2,000 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (Lakeshore Villas) (1) | Dec-32 | 12.00% | 9,096 | Membership interest in Housing for Seniors of Humble, LLC | |||||||||||
Unified Housing Foundation, Inc. (Limestone Canyon) (1) | Dec-32 | 12.00% | 3,057 | 100% Interest in Unified Housing of Austin, LLC | |||||||||||
Unified Housing Foundation, Inc. (Limestone Canyon) (1) | Dec-32 | 12.00% | 4,663 | 100% Interest in Unified Housing of Austin, LLC | |||||||||||
Unified Housing Foundation, Inc. (Limestone Ranch) (1) | Dec-32 | 12.00% | 2,250 | 100% Interest in Unified Housing of Vista Ridge, LLC | |||||||||||
Unified Housing Foundation, Inc. (Limestone Ranch) (1) | Dec-32 | 12.00% | 6,000 | 100% Interest in Unified Housing of Vista Ridge, LLC | |||||||||||
Unified Housing Foundation, Inc. (Parkside Crossing) (1) | Dec-32 | 12.00% | 2,272 | 100% Interest in Unified Housing of Parkside Crossing, LLC | |||||||||||
Unified Housing Foundation, Inc. (Sendero Ridge) (1) | Dec-32 | 12.00% | 5,174 | 100% Interest in Unified Housing of Sendero Ridge, LLC | |||||||||||
Unified Housing Foundation, Inc. (Sendero Ridge) (1) | Dec-32 | 12.00% | 4,812 | 100% Interest in Unified Housing of Sendero Ridge, LLC | |||||||||||
Unified Housing Foundation, Inc. (Timbers of Terrell) (1) | Dec-32 | 12.00% | 1,323 | 100% Interest in Unified Housing of Terrell, LLC | |||||||||||
Unified Housing Foundation, Inc. (Tivoli) (1) | Dec-32 | 12.00% | 7,966 | 100% Interest in Unified Housing of Tivoli, LLC | |||||||||||
Unified Housing Foundation, Inc. (Reserve at White Rock Phase I) (1) | Dec-32 | 12.00% | 2,485 | 100% Interest in Unified Housing of Harvest Hill I, LLC | |||||||||||
Unified Housing Foundation, Inc. (Reserve at White Rock Phase II) (1) | Dec-32 | 12.00% | 2,555 | 100% Interest in Unified Housing of Harvest Hill, LLC | |||||||||||
Unified Housing Foundation, Inc. (Trails at White Rock) (1) | Dec-32 | 12.00% | 3,815 | 100% Interest in Unified Housing of Harvest Hill III, LLC | |||||||||||
Unified Housing Foundation, Inc. (1) | 13-Dec | 5.00% | 6,000 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (1) | 15-Dec | 12.00% | 17,928 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (1) | 16-Dec | 12.00% | 3,657 | Unsecured | |||||||||||
Accrued interest | 18,722 | ||||||||||||||
Total Performing | $ 153,275 | ||||||||||||||
Non-Performing loans: | |||||||||||||||
Leman Development, Ltd (2) | 11-Jul | 7.00% | 1,500 | Unsecured | |||||||||||
Tracy Suttles (2) | 11-Dec | 0.00% | 1,077 | Unsecured | |||||||||||
Miscellaneous non-related party notes | Various | Various | 507 | Various secured interest | |||||||||||
Accrued interest | 56 | ||||||||||||||
Total Non-Performing | $ 3,140 | ||||||||||||||
Allowance for estimated losses | (19,600) | ||||||||||||||
Total | $ 136,815 | ||||||||||||||
(1) Related party notes | |||||||||||||||
(2) An allowance was taken for estimated losses at full value of note | |||||||||||||||
Junior Mortgage Loans. We may invest in junior mortgage loans, secured by mortgages that are subordinate to one or more prior liens either on the fee or a leasehold interest in real estate. Recourse on such loans ordinarily includes the real estate on which the loan is made, other collateral and personal guarantees by the borrower. At December 31, 2013, 14.6% of our assets were invested in junior and wraparound mortgage loans. | |||||||||||||||
As of December 31, 2013, the obligors on $127.0 million or 92.3% of the mortgage notes receivable portfolio were due from related parties. The Company recognized $15.6 million of interest income from these related party notes receivables. Also at that date, $3.1 million or 2.2% of the mortgage notes receivable portfolio was 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 of operations. Sales or refinance of any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes. These notes are cross-collateralized, but to the extent cash is received from a specific UHF property, it is applied against any outstanding interest for the related-property note. The allowance on the UHF notes was a purchase allowance that was netted against the notes when acquired. | |||||||||||||||
We record interest income as earned in accordance with the terms of the related loan agreements. Prior to January 1, 2012, on cash flow notes where payments are based upon surplus cash from operations, accrued but unpaid interest income was only recognized to the extent cash was received. As of January 1, 2012, due to the consistency of cash received on the surplus cash notes, we are recording interest as earned. | |||||||||||||||
As of January 1, 2013, the Company agreed to extend the maturity on the surplus cash flow notes receivable from UHF for an additional term of five years in exchange for the early termination of the preferred interest related. The original notes gave a five-year period of preferred interest rate at 5.25%, before returning to the original note rate of 12%. | |||||||||||||||
On March 4, 2013, the Company received $3.0 million from One Realco Corporation as a partial pay off for their $10.0 million note receivable. | |||||||||||||||
On September 3, 2013, the Company received proceeds to fully payoff the UHF note for North Ridge. The total payoff of principal and interest was $0.3 million. | |||||||||||||||
On December 31, 2013, the Company received $23.7 million of notes and accrued interest receivable from RAI. These are related party unsecured notes due from UHF. The notes accrue interest at 12.0%. Of these receivables, $3.7 million will mature in December 2016 and the remainder will mature in December 2015.. The notes were paid for by a reduction of the intercompany receivable from Pillar. |
ALLOWANCE_FOR_ESTIMATED_LOSSES
ALLOWANCE FOR ESTIMATED LOSSES | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
ALLOWANCE FOR ESTIMATED LOSSES | ' | ||||||||||||
ALLOWANCE FOR ESTIMATED LOSSES | ' | ||||||||||||
NOTE 4. ALLOWANCE FOR ESTIMATED LOSSES | |||||||||||||
The allowance account for receivables was reviewed and decreased in 2013. The decrease 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 increase in 2012 was related to a reserve taken on a related party note receivable due to questionable recovery, reduced by the amounts of two notes that were written off in the current year, both of which were fully reserved. The decrease in 2011 was due to loan payments that had allowances. The table below shows our allowance for estimated losses (dollars in thousands): | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Balance January 1, | $ | 21,704 | $ | 13,383 | $ | 14,348 | |||||||
Increase (decrease) in provision | (2,104 | ) | 8,321 | (965 | ) | ||||||||
Balance December 31, | $ | 19,600 | $ | 21,704 | $ | 13,383 |
INVESTMENT_IN_UNCONSOLIDATED_I
INVESTMENT IN UNCONSOLIDATED INVESTEES | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
INVESTMENT IN UNCONSOLIDATED INVESTEES | ' | ||||||||||||
INVESTMENT IN UNCONSOLIDATED INVESTEES | ' | ||||||||||||
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, | |||||||||||||
2013 | 2012 | 2011(1) | |||||||||||
Gruppa Florentina, LLC(2) | 20 | % | 20 | % | 20 | % | |||||||
LK-Four Hickory, LLC(3) | 0 | % | 0 | % | 28.57 | % | |||||||
________________________________ | |||||||||||||
(1) Other investees. TCI's 5% investment in Garden Centura, L.P. was sold on December 28, 2011. | |||||||||||||
(2) Other investees | |||||||||||||
(3) Other investees. ARL's 28.57% investment in LK-Four Hickory, LLC was sold on January 17, 2012. | |||||||||||||
TCI’s 5% investment in Garden Centura, L.P. and ARL’s 28.57% investment in LK-Four Hickory, LLC were accounted for under the equity method until December 28, 2011, and January 17, 2012, respectively, when the investments were sold. | |||||||||||||
The market values, other than unconsolidated subsidiaries, as of the year ended December 31, 2013, 2012 and 2011 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 unconsolidated subsidiaries and investees (dollars in thousands): | |||||||||||||
For the Twelve Months Ended December 31, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Other Investees | |||||||||||||
Real estate, net of accumulated depreciation | $ | 10,823 | $ | 12,343 | $ | 115,641 | |||||||
Notes receivable | 6,526 | 6,192 | 5,665 | ||||||||||
Other assets | 32,131 | 32,145 | 41,305 | ||||||||||
Notes payable | (11,022 | ) | (13,824 | ) | (86,144 | ) | |||||||
Other liabilities | (8,134 | ) | (7,443 | ) | (17,885 | ) | |||||||
Shareholders' equity/partners capital | (30,324 | ) | (29,413 | ) | (58,582 | ) | |||||||
Revenue | $ | 46,276 | $ | 45,505 | $ | 54,579 | |||||||
Depreciation | (1,166 | ) | (1,277 | ) | (6,474 | ) | |||||||
Operating expenses | (42,330 | ) | (41,188 | ) | (47,510 | ) | |||||||
Interest expense | (1,022 | ) | (1,181 | ) | (5,047 | ) | |||||||
Income (loss) from continuing operations | $ | 1,758 | $ | 1,859 | $ | (4,452 | ) | ||||||
Income from discontinued operations | - | - | - | ||||||||||
Net income (loss) | $ | 1,758 | $ | 1,859 | $ | (4,452 | ) | ||||||
Company's proportionate share of earnings (losses)(1) | $ | 352 | $ | 372 | $ | (806 | ) | ||||||
(1) Earnings (loss) represent continued and discontinued operations |
NOTES_AND_INTEREST_PAYABLE
NOTES AND INTEREST PAYABLE | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
NOTES AND INTEREST PAYABLE | ' | ||||||||||||||||
NOTES AND INTEREST PAYABLE | ' | ||||||||||||||||
NOTE 6. NOTES AND INTEREST PAYABLE | |||||||||||||||||
Below is a summary of our notes and interest payable as of December 31, 2013 (dollars in thousands): | |||||||||||||||||
Notes | Stock | Accrued | Total | ||||||||||||||
Payable | Secured | Interest | Debt | ||||||||||||||
Loans | |||||||||||||||||
Apartments | $ | 368,620 | $ | - | $ | 1,241 | $ | 369,861 | |||||||||
Commercial | 116,616 | - | 285 | 116,901 | |||||||||||||
Land held for development | 95,964 | - | 300 | 96,264 | |||||||||||||
Real estate held for sale | 17,058 | - | 42 | 17,100 | |||||||||||||
Real estate subject to sales contract | 21,494 | - | 1,518 | 23,012 | |||||||||||||
Other | 14,565 | 21,307 | 32 | 35,904 | |||||||||||||
Total | $ | 634,317 | $ | 21,307 | $ | 3,418 | $ | 659,042 | |||||||||
The following table schedules the principal payments on the notes payable for the following five years and thereafter (dollars in thousands): | |||||||||||||||||
Year | Amount | ||||||||||||||||
2014 | $ 151,404 | ||||||||||||||||
2015 | 40,178 | ||||||||||||||||
2016 | 73,261 | ||||||||||||||||
2017 | 6,257 | ||||||||||||||||
2018 | 6,073 | ||||||||||||||||
Thereafter | 378,451 | ||||||||||||||||
Total | $ 655,624 | ||||||||||||||||
Interest payable at December 31, 2013, was $3.4 million. Interest accrues at rates ranging from 1.0% to 12.5% per annum, and mature between 2014 and 2053. The mortgages were collateralized by deeds of trust on real estate having a net carrying value of $685.9 million. Of the total notes payable, the senior debt is $611.1 million, junior debt is $32.0 million, and other debt is $12.5 million. Included in other debt are property tax loans of $0.8 million. | |||||||||||||||||
With respect to the additional notes payable due to the acquisition of properties or refinancing of existing mortgages, a summary of some of the more significant transactions is discussed below: | |||||||||||||||||
On January 24, 2013, TCI refinanced the existing mortgage on Breakwater Bay apartments, a 176-unit complex located in Beaumont, Texas, for a new mortgage of $9.8 million. TCI paid off the existing mortgage of $9.1 million and $0.7 million in closing costs and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on February 1, 2053. | |||||||||||||||||
On January 25, 2013, TCI refinanced the existing mortgage on Northside on Travis apartments, a 200-unit complex located in Sherman, Texas, for a new mortgage of $13.9 million. TCI paid off the existing mortgage of $13.5 million and $1.3 million in closing costs and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on February 1, 2053. | |||||||||||||||||
On January 28, 2013, TCI refinanced the existing mortgage on Capitol Hill apartments, a 156-unit complex located in Little Rock, Arkansas, for a new mortgage of $9.4 million. TCI paid off the existing mortgage of $8.8 million and $0.6 million in closing costs and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on February 1, 2053. | |||||||||||||||||
On February 12, 2013, the construction loan in the amount of $17.0 million that was taken out on May 13, 2010, to fund the development of Toulon apartments, a 240-unit complex located in Gautier, Mississippi, closed into permanent financing. The note accrues interest at 5.37% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on December 1, 2051. | |||||||||||||||||
On February 25, 2013, TCI refinanced the existing mortgage on Mansions of Mansfield apartments, a 208-unit complex located in Mansfield, Texas, for a new mortgage of $16.3 million. TCI paid off the existing mortgage of $15.8 million and $1.4 million in closing costs and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on March 1, 2053. | |||||||||||||||||
On February 25, 2013, TCI refinanced the existing mortgage on Preserve at Pecan Creek apartments, a 192-unit complex located in Denton, Texas, for a new mortgage of $15.1 million. TCI paid off the existing mortgage of $14.6 million and $1.2 million in closing costs and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on March 1, 2053. | |||||||||||||||||
On March 25, 2013, TCI refinanced the existing mortgage on Parc at Clarksville apartments, a 168-unit complex, located in Clarksville, Tennessee, for a new mortgage of $13.4 million. TCI paid off the existing mortgage of $13.0 million and $0.7 million in closing costs and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on April 1, 2053. | |||||||||||||||||
On May 7, 2013, TCI signed a $5.0 million promissory note to Petra CRE CDO relating to the Amoco building settlement agreement. The promissory note is collateralized with ARL Series K Preferred Stock acquired by TCI. | |||||||||||||||||
On June 26, 2013, TCI refinanced the existing mortgage on Dorado Ranch apartments, a 224-unit complex located in Dallas, Texas, for a new mortgage of $16.6 million. TCI paid off the existing mortgage of $16.2 million and $1.4 million in closing cost and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based on a 40-year amortization schedule, maturing on July 1, 2053. | |||||||||||||||||
On June 26, 2013, TCI refinanced the existing mortgage on Legends of El Paso apartments, a 240-unit complex located in El Paso, Texas, for a new mortgage of $16.0 million. TCI paid off the existing mortgage of $15.2 million and $1.2 million in closing cost and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based on a 40-year amortization schedule, maturing on July 1, 2053. | |||||||||||||||||
On June 26, 2013, TCI refinanced the existing mortgage on Vistas of Pinnacle Park apartments, a 332-unit complex located in Dallas, Texas, for a new mortgage of $19.0 million. TCI paid off the existing mortgage of $18.6 million and $2 million in closing cost and escrows. The note accrues interest at 2.50% and payments of interest and principal are due monthly based on a 40-year amortization schedule, maturing on June 26, 2053. | |||||||||||||||||
On July 26, 2013, the Company and various parties entered into a settlement agreement with Far East National Bank (“FENB”) related to a deficiency claim on three hotels in Fresno, California that were foreclosed upon by FENB in July 2011. In the settlement agreement, the Company is required to pay FENB $3.7 million to resolve and settle in full and without exception the dispute filed against them. The settlement agreement calls for thirty-seven equal monthly payments of $100,000. The settlement amount is secured by an accommodation pledge of shares of Series A cumulative convertible preferred stock in the Company with a liquidation value of $10.0 million, owned by RAI, the owner of more than a majority of the common stock of the Company. We have also agreed to indemnify RAI for any loss it may incur as a result of the accommodation pledge of the preferred stock. | |||||||||||||||||
On August 30, 2013, TCI obtained a loan of $1.9 million, secured by 4.02 acres of land known as Denham Springs, located in Denham Springs, Louisiana, 2.90 acres of land known as Sugar Mill, located in Baton Rouge, Louisiana, and 23.24 acres of land known as Cooks Lane, located in Fort Worth, Texas. The existing loan on Denham Springs land for $0.1 million was paid with the proceeds from the loan. | |||||||||||||||||
On October 11, 2013, TCI refinanced the existing mortgage on 600 Las Colinas, a 510,841 square foot commercial building located in Irving, TX, for a new mortgage of $41 million. TCI paid off the existing mortgage of $31.0 million and $5.3 million in closing costs and escrows. The note accrues interest at 5.31% and payments of principal and interest are due monthly based upon a 30-year amortization schedule, maturing on November 1, 2023. | |||||||||||||||||
On December 30, 2013, TCI and IOT paid off the Mercer/Travelers land and the Lamar land loans according to the Settlement and Release Agreement and a Loan Purchase Agreement executed on June 7, 2013. According to the terms of the agreement, TCI and IOT purchased, at a discount, the Mercer/Travelers land mortgage note due to BDF TCI Mercer III, LLC (“BDF”), the existing lender, for $29,635,211. The agreement also included the purchase of an obligation, known as the Lamar land loan, by a subsidiary of TCI, from BDF for $1,864,789, which was not discounted. The total settlement price of the agreement for the two loans was $31,500,000. The result of this agreement was a jointly recognized gain of $7.5 million for the discount received. Prior to the loan payoffs, TCI and IOT incurred extension fees of $1.08 million. | |||||||||||||||||
On December 30, 2013, RAI, a related party, obtained a $20.0 million mortgage to First NBC Bank on the behalf of IOT and TCI, secured by 178.1 acres of land owned by IOT and by 100.05 acres of land owned by TCI. IOT and TCI have executed a promissory note to RAI for the same terms as the First NBC loan with a maturity of December 30, 2016, and a variable interest rate of prime plus 1.5% with an interest rate floor of 6%. Based off the land valuation, $12.4 million is allocated to IOT and $7.6 million of the loan is allocated to TCI. | |||||||||||||||||
In conjunction with the development of various apartment projects and other developments, we drew down $0.3 million in construction loans during the twelve months ended December 31, 2013. This was related to the permanent closing of the construction loan for Toulon apartments. |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
RELATED PARTY TRANSACTIONS | ' | |||||||||||||
RELATED PARTY TRANSACTIONS | ' | |||||||||||||
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. | ||||||||||||||
Effective 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 RAMI, 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. Prime Income Asset Management, LLC (“Prime”) served as the Company’s contractual Advisor prior to April 30, 2011. | ||||||||||||||
Effective since January 1, 2011, Regis Realty Prime, LLC, dba Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial and hotel properties, 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, Prime and Regis: | ||||||||||||||
2013 | 2012 | 2011 | ||||||||||||
(dollars in thousands) | ||||||||||||||
Fees: | ||||||||||||||
Advisory | $ | 10,166 | $ | 10,182 | $ | 13,225 | ||||||||
Construction advisory | - | 181 | 2,429 | |||||||||||
Mortgage brokerage and equity refinancing | 1,878 | 1,881 | 812 | |||||||||||
Net income | 4,089 | 180 | 54 | |||||||||||
Property acquisition and sales | - | 20 | - | |||||||||||
$ | 16,133 | $ | 12,444 | $ | 16,520 | |||||||||
Other Expense: | ||||||||||||||
Cost reimbursements | $ | 3,466 | $ | 3,359 | $ | 4,246 | ||||||||
Interest paid | 431 | 495 | 272 | |||||||||||
$ | 3,897 | $ | 3,854 | $ | 4,518 | |||||||||
Revenue: | ||||||||||||||
Rental | $ | 670 | $ | 587 | $ | 434 | ||||||||
Fees paid to Triad, an affiliate, Regis I, Regis and related parties: | ||||||||||||||
2013 | 2012 | 2011 | ||||||||||||
(dollars in thousands) | ||||||||||||||
Fees: | ||||||||||||||
Property acquisition | $ | - | $ | 71 | $ | - | ||||||||
Property management, construction manaement and leasing commissions | 474 | 2,189 | 1,791 | |||||||||||
Real estate brokerage | 4,081 | 2,321 | - | |||||||||||
$ | 4,555 | $ | 4,581 | $ | 1,791 | |||||||||
The Company received rental revenue of $0.7 million in 2013, $0.6 million in 2012, and $0.4 million in 2011 from Pillar, Prime and its related parties for properties owned by the Company, including Addison Hanger, Browning Place and Eagle Crest. | ||||||||||||||
As of December 31, 2013, the Company had notes and interest receivables of $145.7 million due from related parties. See Part 2, Item 8. Note 3. “Notes and Interest Receivable”. During the current period, ARL recognized $15.6 million of interest income from these related party notes receivables. | ||||||||||||||
On March 4, 2013, the Company received $3.0 million from One Realco Corporation as a partial pay off for their $10.0 million note receivable. | ||||||||||||||
On September 3, 2013, the Company received $0.3 million from UHF to pay off their note receivable related to North Ridge. | ||||||||||||||
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. | ||||||||||||||
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. 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 RAMI for the remainder of 2012. 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 the related party payable due to Pillar as of December 31, 2013 (dollars in thousands): | ||||||||||||||
Pillar | ||||||||||||||
Related party payable, December 31, 2012 | $ | (10,922 | ) | |||||||||||
Cash transfers | (681 | ) | ||||||||||||
Advisory fees | (10,166 | ) | ||||||||||||
Net income fee | (4,089 | ) | ||||||||||||
Cost reimbursements | (3,466 | ) | ||||||||||||
Interest income | (431 | ) | ||||||||||||
Fees and commissions | (2,977 | ) | ||||||||||||
Expenses paid by Advisor | (915 | ) | ||||||||||||
Financing (mortgage payments) | (1,853 | ) | ||||||||||||
Sales/purchases transactions | 42,784 | |||||||||||||
Tax sharing | 6,802 | |||||||||||||
Related party receivable, December 31, 2013 | $ | 14,086 | ||||||||||||
Below are transactions that involve a related party: | ||||||||||||||
On December 30, 2013, RAI, a related party, obtained a $20.0 million mortgage to First NBC Bank on the behalf of IOT and TCI, secured by 178.1 acres of land owned by IOT and by 100.05 acres of land owned by TCI. IOT and TCI have executed a promissory note to RAI for the same terms as the First NBC loan with a maturity of December 30, 2016, and a variable interest rate of prime plus 1.5% with an interest rate floor of 6%. Based on the land valuation, $12.4 million is allocated to IOT and $7.6 million of the loan is allocated to TCI. | ||||||||||||||
On December 31, 2013, the Company received $23.7 million of notes and accrued interest receivable from RAI. These are related party unsecured notes due from UHF. The notes accrue interest at 12.0%. Of these receivables, $3.7 million will mature in December 2016 and the remainder will mature in December 2015.. The notes were paid for by a reduction of the intercompany receivable from Pillar. | ||||||||||||||
In December 2010, various commercial and land holdings were sold to FRE Real Estate, Inc., a related party. During the first three months of 2011, many of these transactions were rescinded as of the original transaction date and were subsequently sold to related parties under the same ownership as FRE Real Estate, Inc. As of September 30, 2013, one commercial building, Thermalloy, remains in FRE Real Estate, Inc. The Company did not recognize or record the sale in accordance with ASC 360-20 due to TCI’s continuing involvement, which included the potential payment of cash shortfalls, future obligations under the existing mortgage and guaranty, the buyer’s inadequate initial investment and the Company’s questionable recovery of investment cost. The Company determined that no sale had occurred for financial reporting purposes and therefore the asset remained on the books and continued to record operating expenses and depreciation as a period cost until a sale occurred that met the requirements of ASC 360-20. | ||||||||||||||
The properties that we have sold to a related party and have deferred the recognition of the sale are treated as “subject to sales contract” on the Consolidated Balance Sheets. These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and may or may not be transferred back to the seller upon resolution. These properties have mortgages that are secured by the property and many have corporate guarantees. According to the loan documents, the maker is currently in default on these mortgages primarily due to lack of payment and is actively involved in discussions with every lender in order to settle or cure the default situation. We have reviewed each asset and taken impairment to the extent we feel the value of the property was less than our current basis. | ||||||||||||||
As of December 31, 2013, there remains one apartment complex, one commercial building and 212 acres of land that we have sold to a related party and have deferred the recognition of the sale. These are treated as “subject to sales contract” on the Consolidated Balance Sheets. These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and may or may not be transferred back to the seller upon resolution. These properties have mortgages that are secured by the property and many have corporate guarantees. According to the loan documents, the maker is currently in default on these mortgages primarily due to lack of payment and is actively involved in discussions with every lender in order to settle or cure the default situation. We have reviewed each asset and taken impairment to the extent we feel the value of the property was less than our current basis. The Company did not recognize or record the sale in accordance with ASC 360-20 due to our continuing involvement, which included the potential payment of cash shortfalls, future obligations under the existing mortgage and guaranty, the buyer’s inadequate initial investment and the Company’s questionable recovery of investment cost. The Company determined that no sale had occurred for financial reporting purposes and therefore the asset remained on the books and continued to record operating expenses and depreciation as a period cost until a sale occurred that met the requirements of ASC 360-20. The buyers received no compensation for the facilitation of the bankruptcy or debt restructuring. | ||||||||||||||
Sales to our subsidiary, TCI, have been reflected, in prior years, at the fair value sale price. Upon discussion with the SEC and in review of the guidance pursuant to ASC 250-10-45-22 to 24, we have adjusted those assets, in the prior year, to reflect a basis equal to ARL’s cost basis in the asset at the time of the sale. The related party payables from TCI were reduced for the lower asset price. The Company reflected the original cost basis in consolidation, therefore no change in the financial statements were necessary to reflect this change. |
DIVIDENDS
DIVIDENDS | 12 Months Ended |
Dec. 31, 2013 | |
DIVIDENDS | ' |
DIVIDENDS | ' |
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 2013, 2012, or 2011. 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. |
PREFERRED_STOCK
PREFERRED STOCK | 12 Months Ended |
Dec. 31, 2013 | |
PREFERRED STOCK | ' |
PREFERRED STOCK | ' |
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, 2013, 3,353,954 shares of Series A Preferred Stock were outstanding. Of the outstanding shares, 300,000 shares are owned by ART Edina, Inc., and 600,000 shares are owned by ART Hotel Equities, Inc., a wholly owned subsidiary of ARL. Dividends are not paid on the shares owned by ARL subsidiaries. Realty Advisor, Inc., a related party, owns 2,451,435 shares of the outstanding shares and has accrued dividends unpaid of $13.9 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, 2013, 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 $.60 per share or $.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, 2013, 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, 2013. | |
There are 135,000 shares of Series K Convertible Preferred Stock authorized, with a par value of $2.00 per share and liquidation preference of $22.00 per share. The Series K Preferred Stock may be converted at the rate of five shares of ARL common stock for every one share of preferred stock based on the daily closing price of the common stock. At December 31, 2013, 135,000 shares of Series K Preferred Stock were outstanding, all held by Petra CRE CDO. Dividends are not paid on the shares owned by Petra CRE CDO. |
STOCK_OPTIONS
STOCK OPTIONS | 12 Months Ended |
Dec. 31, 2013 | |
STOCK OPTIONS | ' |
STOCK OPTIONS | ' |
NOTE 10. STOCK OPTIONS | |
In January 1998, stockholders approved the 1997 Stock Option Plan (the “Option Plan”). The plan was terminated effective December 31, 2005. As of July 1, 2008, all options still outstanding under the plan expired. There are no remaining options outstanding under this plan as of December 31, 2013. | |
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, 2013, there were 1,000 shares of stock options outstanding which were exercisable at $9.70 per share. These options will expire January 1, 2015, if not exercised. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
INCOME TAXES | ' | ||||||||||||
INCOME TAXES | ' | ||||||||||||
NOTE 11. INCOME TAXES | |||||||||||||
For tax periods ending before August 31, 2012, the Company was part of the ARL consolidated federal return. After that date, the Company and the rest of the ARL group joined the RAMI consolidated group for tax purposes. The income tax expense (benefit) for the 2011 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 RAMI for the remainder of 2012. For 2012, RAMI, ARL, TCI and IOT had a combined net taxable loss and ARL recorded no current tax (benefit) or expense. For 2013, RAMI had net taxable income and 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): | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Income from continuing operations | $ | (24,217 | ) | $ | (5,387 | ) | $ | (9,283 | ) | ||||
Income from discontinued operations | 17,415 | 5,387 | 9,283 | ||||||||||
The full 2013 tax (benefit) to ARL comes from RAMI | $ | (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): | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Computed "expected" income tax (benefit) expense | $ | 15,684 | $ | (1,955 | ) | $ | (2,556 | ) | |||||
Book to tax differences in gains on sale of property | (20,373 | ) | (8,503 | ) | 2,184 | ||||||||
Book to tax differences from entities not consolidated for tax purposes | (33,565 | ) | (3,831 | ) | (3,228 | ) | |||||||
Book to tax differences of depreciation and amortization | 1,250 | 1,460 | 1,556 | ||||||||||
Valuation allowance against current net operating loss benefit | 17,415 | 5,387 | 9,283 | ||||||||||
Other book to tax differences | 19,589 | 7,442 | (7,239 | ) | |||||||||
Total | $ | - | $ | - | $ | - | |||||||
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 (dollars in thousands): | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Net operating losses | $ | 88,486 | $ | 68,034 | $ | 66,767 | |||||||
AMT credits | 2,201 | 2,201 | 2,201 | ||||||||||
Basis difference of: | |||||||||||||
Real estate holdings and equipment | 11,959 | 1,159 | (2,500 | ) | |||||||||
Notes receivable | 7,448 | 8,248 | 5,314 | ||||||||||
Investments | (14,960 | ) | (13,824 | ) | (14,660 | ) | |||||||
Notes payable | 13,360 | 17,691 | 25,299 | ||||||||||
Deferred gains | 18,746 | 18,170 | 28,181 | ||||||||||
Total | $ | 127,240 | $ | 101,679 | $ | 110,602 | |||||||
Deferred tax valuation allowance | (127,240 | ) | (101,679 | ) | (110,602 | ) | |||||||
Net deferred tax asset | $ | - | $ | - | $ | - | |||||||
At December 31, 2013, 2012 and 2011, 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 $45.8 million expiring through the year 2032. The alternative minimum tax credit balance did not change in 2013 and remains at approximately $2.2 million. The credit has no expiration date. |
FUTURE_MINIMUM_RENTAL_INCOME_U
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES | 12 Months Ended | ||
Dec. 31, 2013 | |||
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES | ' | ||
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES | ' | ||
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, 2013 (dollars in thousands): | |||
Year | Amount | ||
2014 | $ 15,158 | ||
2015 | 14,678 | ||
2016 | 12,264 | ||
2017 | 9,790 | ||
2018 | 8,652 | ||
Thereafter | 16,647 | ||
Total | $ 77,189 |
OPERATING_SEGMENTS
OPERATING SEGMENTS | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
OPERATING SEGMENTS | ' | ||||||||||||||||||||||||
OPERATING SEGMENTS | ' | ||||||||||||||||||||||||
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, hotels, 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 2013, 2012 and 2011 (dollars in thousands): | |||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2013 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 28,217 | $ | 61,253 | $ | - | $ | 39 | $ | 127 | $ | 89,636 | |||||||||||||
Operating expenses | 14,682 | 27,443 | - | 1,431 | 41 | 43,597 | |||||||||||||||||||
Depreciation and amortization | 6,642 | 10,816 | - | - | (172 | ) | 17,286 | ||||||||||||||||||
Mortgage and loan interest | 6,349 | 17,598 | - | 6,200 | 7,954 | 38,101 | |||||||||||||||||||
Deferred borrowing costs | 67 | 2,275 | - | 212 | 405 | 2,959 | |||||||||||||||||||
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) | $ | 327 | $ | (816 | ) | $ | - | $ | (9,339 | ) | $ | 10,954 | $ | 1,126 | |||||||||||
Capital expenditures | 7,188 | 315 | - | 387 | - | 7,890 | |||||||||||||||||||
Assets | 141,200 | 377,970 | - | 164,697 | - | 683,867 | |||||||||||||||||||
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 | ||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2012 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 32,110 | $ | 57,811 | $ | - | $ | 78 | $ | 87 | $ | 90,086 | |||||||||||||
Operating expenses | 17,448 | 25,917 | - | 689 | 430 | 44,484 | |||||||||||||||||||
Depreciation and amortization | 5,770 | 10,701 | - | - | (270 | ) | 16,201 | ||||||||||||||||||
Mortgage and loan interest | 5,707 | 20,287 | - | 6,684 | 7,417 | 40,095 | |||||||||||||||||||
Deferred borrowing costs | 92 | 408 | - | 160 | 28 | 688 | |||||||||||||||||||
Loan charges and prepayment penalties | - | 3,495 | - | 79 | - | 3,574 | |||||||||||||||||||
Interest income | - | - | - | - | 14,612 | 14,612 | |||||||||||||||||||
Gain on land sales | - | - | - | 5,475 | - | 5,475 | |||||||||||||||||||
Segment operating income (loss) | $ | 3,093 | $ | (2,997 | ) | $ | - | $ | (2,059 | ) | $ | 7,094 | $ | 5,131 | |||||||||||
Capital expenditures | 2,737 | 978 | - | - | - | 3,715 | |||||||||||||||||||
Assets | 162,756 | 538,352 | - | 212,285 | - | 913,393 | |||||||||||||||||||
Property Sales | |||||||||||||||||||||||||
Sales price | $ | 9,825 | $ | 45,610 | $ | 3,369 | $ | 39,733 | $ | - | $ | 98,537 | |||||||||||||
Cost of sale | (9,600 | ) | (40,067 | ) | (252 | ) | (34,873 | ) | - | (84,792 | ) | ||||||||||||||
Deferred current gain | - | - | - | 615 | - | 615 | |||||||||||||||||||
Recognized prior deferred gain | - | - | - | - | - | ||||||||||||||||||||
Gain on sale | $ | 225 | $ | 5,543 | $ | 3,117 | $ | 5,475 | $ | - | $ | 14,360 | |||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2011 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 29,453 | $ | 50,037 | $ | - | $ | 467 | $ | 118 | 80,075 | ||||||||||||||
Operating expenses | 17,545 | 23,949 | - | 2,097 | 368 | 43,959 | |||||||||||||||||||
Depreciation and amortization | 4,479 | 9,367 | - | - | (178 | ) | 13,668 | ||||||||||||||||||
Mortgage and loan interest | 6,983 | 19,422 | - | 9,880 | 6,962 | 43,247 | |||||||||||||||||||
Deferred borrowing costs | 174 | 238 | - | 1,330 | 154 | 1,896 | |||||||||||||||||||
Loan charges and prepayment penalties | - | 292 | - | 147 | - | 439 | |||||||||||||||||||
Interest income | - | - | - | - | 10,948 | 10,948 | |||||||||||||||||||
Gain on land sales | - | - | - | 34,247 | - | 34,247 | |||||||||||||||||||
Segment operating income (loss) | $ | 272 | $ | (3,231 | ) | $ | - | $ | 21,260 | $ | 3,760 | $ | 22,061 | ||||||||||||
Capital expenditures | 3,073 | 652 | 137 | 3,862 | |||||||||||||||||||||
Assets | 169,187 | 547,667 | - | 243,488 | - | 960,342 | |||||||||||||||||||
Property Sales | |||||||||||||||||||||||||
Sales price | $ | 106,653 | $ | 28,690 | $ | 29,844 | $ | 249,495 | $ | - | $ | 414,682 | |||||||||||||
Cost of sale | (96,837 | ) | (14,466 | ) | (26,245 | ) | (223,331 | ) | - | (360,879 | ) | ||||||||||||||
Deferred current gain | 1,652 | - | - | - | - | 1,652 | |||||||||||||||||||
Recognized prior deferred gain | 17,448 | 10,168 | - | 8,083 | - | 35,699 | |||||||||||||||||||
Gain on sale | $ | 28,916 | $ | 24,392 | $ | 3,599 | $ | 34,247 | $ | - | $ | 91,154 | |||||||||||||
The table below reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations (dollars in thousands): | |||||||||||||||||||||||||
For Twelve Months Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||
Segment operating income | $ | 1,126 | $ | 5,131 | $ | 22,061 | |||||||||||||||||||
Other non-segment items of income (expense) | |||||||||||||||||||||||||
General and administrative | (7,934 | ) | (6,051 | ) | (13,157 | ) | |||||||||||||||||||
Provision on impairment of notes receivable and real estate assets | (18,980 | ) | (2,330 | ) | (42,409 | ) | |||||||||||||||||||
Net income fee to related party | (4,089 | ) | (180 | ) | (54 | ) | |||||||||||||||||||
Advisory fee to related party | (10,166 | ) | (10,182 | ) | (13,225 | ) | |||||||||||||||||||
Other income | 10,179 | 7,763 | 2,684 | ||||||||||||||||||||||
Gain (loss) on sale of investments | (283 | ) | (118 | ) | 91 | ||||||||||||||||||||
Earnings from unconsolidated joint ventures and investees | 391 | 372 | 79 | ||||||||||||||||||||||
Litigation settlement | (20,313 | ) | (175 | ) | (225 | ) | |||||||||||||||||||
Income tax benefit (expense) | 40,049 | (329 | ) | 13,100 | |||||||||||||||||||||
Loss from continuing operations | $ | (10,020 | ) | $ | (6,099 | ) | $ | (31,055 | ) | ||||||||||||||||
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, | |||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||
Segment assets | $ | 683,867 | $ | 913,393 | $ | 960,342 | |||||||||||||||||||
Investments in unconsolidated subsidiaries and investees | 3,789 | 8,168 | 10,746 | ||||||||||||||||||||||
Notes and interest receivable | 136,815 | 103,469 | 101,540 | ||||||||||||||||||||||
Other assets and receivables | 102,424 | 93,275 | 95,492 | ||||||||||||||||||||||
Assets held for sale | 16,427 | 17,040 | 67,351 | ||||||||||||||||||||||
Total assets | $ | 943,322 | $ | 1,135,345 | $ | 1,235,471 |
DISCONTINUED_OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
DISCONTINUED OPERATIONS | ' | ||||||||||||
DISCONTINUED OPERATIONS | ' | ||||||||||||
NOTE 14. DISCONTINUED OPERATIONS | |||||||||||||
The Company applies the provisions of ASC Topic 360 “Property, Plant and Equipment.” ASC Topic 360 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. | |||||||||||||
Discontinued operations relates to properties that were either sold or repositioned as held for sale as of the year ended 2013, 2012 and 2011. Income from discontinued operations relates to 16, 22, and 42 properties that were sold or repositioned in 2013, 2012 and 2011, 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, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Revenues: | |||||||||||||
Rental and other property revenues | $ | 26,036 | $ | 35,352 | $ | 63,273 | |||||||
26,036 | 35,352 | 63,273 | |||||||||||
Expenses: | |||||||||||||
Property operating expenses | 12,200 | 18,842 | 38,025 | ||||||||||
Depreciation | 4,231 | 6,363 | 10,589 | ||||||||||
General and administrative | 951 | 1,210 | 2,203 | ||||||||||
Provision on impairment of notes receivable and real estate assets | - | 2,400 | 7,618 | ||||||||||
Total operating expenses | $ | 17,382 | $ | 28,815 | $ | 58,435 | |||||||
Other income (expense): | |||||||||||||
Other income (expense) | 29 | 14 | (24 | ) | |||||||||
Mortgage and loan interest | (6,139 | ) | (10,866 | ) | (22,103 | ) | |||||||
Deferred borrowing costs amortization | (3,009 | ) | (1,790 | ) | (921 | ) | |||||||
Loan charges and prepayment penalties | (3,245 | ) | (3,471 | ) | (1,269 | ) | |||||||
Litigation settlement | (250 | ) | (250 | ) | - | ||||||||
Total other expenses | $ | (12,614 | ) | $ | (16,363 | ) | $ | (24,317 | ) | ||||
Loss from discontinued operations before gain on sale of real estate and taxes | (3,960 | ) | (9,826 | ) | (19,479 | ) | |||||||
Gain on sale of real estate from discontinued operations | 98,951 | 8,885 | 56,907 | ||||||||||
Income tax benefit (expense) | (33,247 | ) | 329 | (13,100 | ) | ||||||||
Income (loss) from discontinued operations | $ | 61,744 | $ | (612 | ) | $ | 24,328 | ||||||
The Company’s application of ASC Topic 360 results in the presentation of the net operating results of these qualifying properties sold or held for sale during 2013, 2012 and 2011 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. |
QUARTERLY_RESULTS_OF_OPERATION
QUARTERLY RESULTS OF OPERATIONS | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
QUARTERLY RESULTS OF OPERATIONS | ' | ||||||||||||||||
QUARTERLY RESULTS OF OPERATIONS | ' | ||||||||||||||||
NOTE 15. QUARTERLY RESULTS OF OPERATIONS | |||||||||||||||||
The following is a tabulation of quarterly results of operations for the years 2013, 2012, and 2011. 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 2013 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||
2013 | |||||||||||||||||
Total operating revenues | $ | 21,229 | $ | 21,478 | $ | 21,697 | $ | 25,232 | |||||||||
Total operating expenses | 19,245 | 20,034 | 21,519 | 41,254 | |||||||||||||
Operating income | 1,984 | 1,444 | 178 | (16,022 | ) | ||||||||||||
Other expenses | (9,742 | ) | (5,879 | ) | (9,015 | ) | (12,562 | ) | |||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (7,758 | ) | (4,435 | ) | (8,837 | ) | (28,584 | ) | |||||||||
Gain(loss) on land sales | (35 | ) | - | 598 | (1,018 | ) | |||||||||||
Income tax benefit | 2,724 | 5,208 | 319 | 31,798 | |||||||||||||
Net income (loss) from continuing operations | (5,069 | ) | 773 | (7,920 | ) | 2,196 | |||||||||||
Net income from discontinuing operations | 5,058 | 9,671 | 591 | 46,424 | |||||||||||||
Net income (loss) | (11 | ) | 10,444 | (7,329 | ) | 48,620 | |||||||||||
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 continuing operations | $ | (0.46 | ) | $ | (0.17 | ) | $ | (0.66 | ) | $ | (0.70 | ) | |||||
Income from discontinued operations | 0.44 | 0.84 | 0.05 | 4.03 | |||||||||||||
Net income (loss) applicable to common shares | $ | (0.02 | ) | $ | 0.67 | $ | (0.61 | ) | $ | 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 continuing operations | $ | (0.46 | ) | $ | (0.17 | ) | $ | (0.66 | ) | $ | (0.70 | ) | |||||
Income from discontinued operations | 0.44 | 0.84 | 0.05 | 4.03 | |||||||||||||
Net income (loss) applicable to common shares | $ | (0.02 | ) | $ | 0.67 | $ | (0.61 | ) | $ | 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 | |||||||||||||
Three Months Ended 2012 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||
2012 | |||||||||||||||||
Total operating revenues | $ | 21,274 | $ | 21,819 | $ | 22,278 | $ | 24,715 | |||||||||
Total operating expenses | 20,010 | 18,510 | 18,972 | 21,936 | |||||||||||||
Operating income | 1,264 | 3,309 | 3,306 | 2,779 | |||||||||||||
Other expenses | (6,727 | ) | (7,071 | ) | (5,322 | ) | (2,783 | ) | |||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (5,463 | ) | (3,762 | ) | (2,016 | ) | (4 | ) | |||||||||
Gain(loss) on land sales | (1,021 | ) | 4,738 | 2,898 | (1,140 | ) | |||||||||||
Income tax benefit (expense) | (348 | ) | 1,664 | (85 | ) | (1,560 | ) | ||||||||||
Net income (loss) from continuing operations | (6,832 | ) | 2,640 | 797 | (2,704 | ) | |||||||||||
Net income (loss) from discontinuing operations | (645 | ) | 3,089 | (159 | ) | (2,897 | ) | ||||||||||
Net income (loss) | (7,477 | ) | 5,729 | 638 | (5,601 | ) | |||||||||||
Net income (loss) attributable to non-controlling interest | 1,177 | (1,064 | ) | (74 | ) | 1,087 | |||||||||||
Preferred dividend requirement | (613 | ) | (613 | ) | (613 | ) | (613 | ) | |||||||||
Net income (loss) applicable to common shares | $ | (6,913 | ) | $ | 4,052 | $ | (49 | ) | $ | (5,127 | ) | ||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income (loss) from continuing operations | $ | (0.54 | ) | $ | 0.08 | $ | 0.01 | $ | (0.19 | ) | |||||||
Income (loss) from discontinued operations | (0.06 | ) | 0.27 | (0.01 | ) | (0.25 | ) | ||||||||||
Net income (loss) applicable to common shares | $ | (0.60 | ) | $ | 0.35 | $ | - | $ | (0.44 | ) | |||||||
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 | |||||||||||||||||
Income (loss) from continuing operations | $ | (0.54 | ) | $ | 0.04 | $ | 0.01 | $ | (0.19 | ) | |||||||
Income (loss) from discontinued operations | (0.06 | ) | 0.12 | (0.01 | ) | (0.25 | ) | ||||||||||
Net income (loss) applicable to common shares | $ | (0.60 | ) | $ | 0.16 | $ | - | $ | (0.44 | ) | |||||||
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 25,679,951 | 21,027,447 | 11,525,389 | |||||||||||||
Three Months Ended 2011 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||
2011 | |||||||||||||||||
Total operating revenues | $ | 19,387 | $ | 21,721 | $ | 20,830 | $ | 18,137 | |||||||||
Total operating expenses | 26,300 | 16,165 | 21,736 | 62,271 | |||||||||||||
Operating income (loss) | (6,913 | ) | 5,556 | (906 | ) | (44,134 | ) | ||||||||||
Other expenses | (10,091 | ) | (9,505 | ) | (9,613 | ) | (2,796 | ) | |||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (17,004 | ) | (3,949 | ) | (10,519 | ) | (46,930 | ) | |||||||||
Gain (loss) on land sales | 5,344 | (3,594 | ) | (982 | ) | 33,479 | |||||||||||
Income tax benefit | 100 | 9,338 | 2,458 | 1,204 | |||||||||||||
Net income (loss) from continuing operations | (11,560 | ) | 1,795 | (9,043 | ) | (12,247 | ) | ||||||||||
Net income from discontinued operations | 187 | 5,463 | 4,566 | 14,112 | |||||||||||||
Net income (loss) | (11,373 | ) | 7,258 | (4,477 | ) | 1,865 | |||||||||||
Net income (loss) attributable to non-controlling interest | 2,170 | 7,175 | 4,830 | (7,158 | ) | ||||||||||||
Preferred dividend requirement | (617 | ) | (613 | ) | (613 | ) | (613 | ) | |||||||||
Net income (loss) applicable to common shares | $ | (9,820 | ) | $ | 13,820 | $ | (260 | ) | $ | (5,906 | ) | ||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income (loss) from continuing operations | $ | (0.87 | ) | $ | 0.73 | $ | (0.42 | ) | $ | (1.74 | ) | ||||||
Income from discontinued operations | 0.02 | 0.47 | 0.4 | 1.23 | |||||||||||||
Net income (loss) applicable to common shares | $ | (0.85 | ) | $ | 1.2 | $ | (0.02 | ) | $ | (0.51 | ) | ||||||
Weighted average common shares used in computing earnings per share | 11,493,115 | 11,525,389 | 11,525,389 | 11,517,431 | |||||||||||||
Earnings per share - diluted | |||||||||||||||||
Income (loss) from continuing operations | $ | (0.87 | ) | $ | 0.48 | $ | (0.42 | ) | $ | (1.74 | ) | ||||||
Income from discontinued operations | 0.02 | 0.31 | 0.4 | 1.23 | |||||||||||||
Net income (loss) applicable to common shares | $ | (0.85 | ) | $ | 0.79 | $ | (0.02 | ) | $ | (0.51 | ) | ||||||
Weighted average common shares used in computing diluted earnings per share | 11,493,115 | 17,394,553 | 11,525,389 | 11,517,431 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY | 12 Months Ended |
Dec. 31, 2013 | |
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY | ' |
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY | ' |
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 $23.1 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 2014, 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. | |
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. | |
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. | |
Litigation. The Company is involved in and vigorously defending against, a number of deficiency claims with respect to assets that have been foreclosed by various lenders. Such claims are generally against a consolidated subsidiary as the borrower or the Company as a guarantor of indebtedness or performance. Some of these proceedings may ultimately result in an unfavorable determination for the Company and/or one of its consolidated subsidiaries. While we cannot predict the final result of such proceedings, Management believes that the maximum exposure to the Company and its consolidated subsidiaries, if any, will not exceed approximately $20 million in the aggregate and will occur, if at all, in future years. | |
DISPOSED OF ENTITIES: | |
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. | |
Subsequent to the sale of the ART stock in January 2012, ART instituted a Chapter 11 bankruptcy proceeding in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. In March 2014, the bankruptcy court dismissed the proceeding. | |
Management of the Company 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, continues to maintain a full reservation of the value of such note at zero. | |
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. | |
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. |
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2013 | |
EARNINGS PER SHARE | ' |
EARNINGS PER SHARE | ' |
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. | |
We have 3,353,954 shares of Series A 10.0% Cumulative Convertible Preferred Stock, which are outstanding. These shares may be converted into common stock at 90.0% 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. | |
We have 135,000 shares of Series K Convertible Preferred Stock, which are outstanding. These shares may be converted into common stock at a rate of five common shares to one based on daily closing price of the common stock. These are considered in the computation of diluted earnings per share if the effect of applying the “if-converted” method is dilutive. | |
As of December 31, 2013, we have 1,000 shares of stock options outstanding. These options will expire January 1, 2015, if not exercised. The outstanding options are considered in the computation of diluted earnings per share if the effect of applying the “treasury stock” method is dilutive. | |
As of December 31, 2013, the preferred stock and the stock options were anti-dilutive and therefore not included in the EPS calculation. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2013 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
NOTE 18. SUBSEQUENT EVENTS | |
On January 29, 2014, TCI entered into a sales contract to sell 1010 Common, a 512,593 square foot commercial building, located in New Orleans, LA, for a sales price of $16.6 million. Due to the small amount of firm money, TCI has determined that the contract has not met the requirements to be considered held for sale. Upon a larger firm deposit, TCI will reclassify the asset as held for sale. | |
On February 6, 2014, TCI sold a 232-unit apartment complex known as Pecan Pointe located in Temple, TX, for a sales price of $23.1 million to an independent third party. The buyer assumed the existing debt of $16.5 million secured by the property. We recorded a gain of $5.8 million. | |
On February 12, 2014, TCI exercised the first prepayment option date on the settlement with Petra CRE CDO relating to the Amoco Building. Per the agreement, TCI paid $1.2 million to settle all obligations and the remaining balance of the note and accrued interest of $3.5 million was forgiven. | |
On February 13, 2014, TCI acquired 0.75 acres of land adjacent to the Mandahl Bay Land located in St. Thomas, VI, for a sales price of $89,454. | |
On February 14, 2014, the Company entered into a settlement and loan modification agreement with U.S. Bank National Association regarding EQK Portage land. The new loan is for $1.6 million. The Company paid $200,000 at close which was used to adjust the current outstanding loan balance to the newly stated loan balance and the remainder was used to pay down interest that had been accruing under the prior agreement. The rest of the unpaid interest that accrued under the prior agreement was waived. Per the agreement, the Company was also required to pay off the property tax note of $257,000 due to Propel Financial Services, LLC. | |
On February 20, 2014, a subsidiary of the Company refinanced an existing margin loan with a third party loan for $4 million, secured by TCI stock. The note matures on February 10, 2016, and has an interest rate of 6%. | |
On February 28, 2014, TCI refinanced the existing mortgage on Parc at Denham Springs apartments, a 224-unit complex located in Denham Springs, LA, for a new mortgage of $19.2 million. TCI paid off the existing mortgage of $19.2 million and $1.6 million in closing costs. The note accrues interest at 3.75% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing April 1, 2051. | |
On March 31, 2014, the Company is scheduled to acquire 19.43 acres of land known as Valwood Acres from Armed Forces Bank for a purchase price of $3.2 million. The Company entered into a Purchase and Sale Agreement to acquire the property on November 1, 2013 and has been extending the close of the agreement. To date, the Company has paid $1.6 million in extension deposits that will be applied against the purchase price and an additional $40,000 in extension fees that will not be applicable to the purchase price. |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||
Dec. 31, 2013 | |||
SIGNIFICANT ACCOUNTING POLICIES | ' | ||
Organization and business. | ' | ||
Organization and business. ARL was organized in 1999. In August 2000, the Company acquired American Realty Trust, Inc., a Georgia corporation (“ART”) and National Realty L.P.; a Delaware limited partnership (“NRLP”). ART was the successor to a District of Columbia business trust organized in 1961. The business trust was merged into ART in 1988. NRLP was organized in 1987 and subsequently acquired all of the assets and assumed all of the liabilities of several public and private limited partnerships. NRLP also owned a portfolio of real estate and mortgage loan investments. ARL is a “C” corporation for U.S. federal income tax purposes. | |||
The Company is headquartered in Dallas, Texas and its common stock trades on the New York Stock Exchange (“NYSE”) under the symbol (“ARL”). Approximately 87.4% of ARL’s stock is owned by related party entities. ARL subsidiaries own approximately 83.8% of the outstanding shares of common stock of Transcontinental Realty Investors, Inc., a Nevada corporation (“TCI”) whose common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol (“TCI”). ARL has consolidated TCI’s accounts and operations since March 2003. | |||
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. | |||
Effective 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 Realty Advisors Management, Inc. (“RAMI”), 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. Prime Income Asset Management, LLC (“Prime”) served as the Company’s contractual Advisor prior to April 30, 2011. | |||
Effective since January 1, 2011, Regis Realty Prime, LLC, dba Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial and hotel properties, 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, and renting hotel rooms to guests. We also generate revenues from gains on sales of income-producing properties and land. At December 31, 2013, we owned 47 residential apartment communities comprising of 6,398 units, ten commercial properties comprising an aggregate of approximately 2.6 million square feet, and an investment in 4,198 acres of undeveloped and partially developed land. | |||
Basis of Presentation | ' | ||
Basis of presentation. 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 Garden Centura, L.P. and LK-Four Hickory, LLC were accounted for under the equity method until December 28, 2011and January 17, 2012, respectively, when the investments were sold. | |||
Real estate, depreciation, and impairment. | ' | ||
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 Policy | ' | ||
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 | ' | ||
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 | ' | ||
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: | |||
Level 1 | — | Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets. | |
Level 2 | — | Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
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 Policy | ' | ||
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 | ' | ||
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 Policy | ' | ||
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 Policy | ' | ||
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 Policy | ' | ||
Interest recognition on notes receivable. We record interest income as earned in accordance with the terms of the related loan agreements. Prior to January 1, 2012, on cash flow notes where payments are based upon surplus cash from operations, accrued but unpaid interest income was only recognized to the extent that cash was received. As of January 1, 2012, due to the consistency of cash received on the surplus cash notes, we are recording interest as earned. | |||
Allowance for estimated losses Policy | ' | ||
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 Policy | ' | ||
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. | |||
Earnings Per Share, Policy | ' | ||
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 | ' | ||
Use of estimates. In the preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America, 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 Tax, Policy | ' | ||
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 RAMI consolidated group for tax purposes. The income tax expense (benefit) for the 2011 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 RAMI for the remainder of 2012. 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 | ' | ||
Recent accounting pronouncements. There were no recent accounting pronouncements that our company has not implemented that materially affect our financial statements. |
Summary_of_the_real_estate_own
Summary of the real estate owned as of (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Summary of the real estate owned as of | ' | ||||||||
Summary of the real estate owned as of | ' | ||||||||
A summary of our real estate owned as of the end of the year is listed below (dollars in thousands): | |||||||||
2013 | 2012 | ||||||||
Apartments | $ | 436,109 | $ | 611,404 | |||||
Commercial properties | 214,486 | 225,958 | |||||||
Land held for development | 149,103 | 194,270 | |||||||
Real estate held for sale | 18,817 | 21,433 | |||||||
Real estate subject to sales contract | 29,547 | 58,234 | |||||||
Total real estate, at cost, less impairment | 848,062 | 1,111,299 | |||||||
Less accumulated deprecation | (147,768 | ) | (180,866 | ) | |||||
Total real estate, net of depreciation | $ | 700,294 | $ | 930,433 |
Depreciation_is_computed_on_a_
Depreciation is computed on a straight line basis over the estimated useful lives of the assets as follows (Tables) | 12 Months Ended | |
Dec. 31, 2013 | ||
Depreciation is computed on a straight line basis over the estimated useful lives of the assets as follows | ' | |
Depreciation is computed on a straight line basis over the estimated useful lives of the assets as follows | ' | |
Depreciation is computed on a straight line basis over the estimated useful lives of the assets as follows: | ||
Land improvements | 25 to 40 years | |
Buildings and improvements | 10 to 40 years | |
Tenant improvements | Shorter of useful life or terms of related lease | |
Furniture, fixtures and equipment | 3 to 7 years |
NOTES_AND_INTEREST_RECEIVABLE_
NOTES AND INTEREST RECEIVABLE (Tables) | 12 Months Ended | ||||||||||||||
Dec. 31, 2013 | |||||||||||||||
NOTES AND INTEREST RECEIVABLE {2} | ' | ||||||||||||||
NOTES AND INTEREST RECEIVABLES | ' | ||||||||||||||
Maturity | Interest | ||||||||||||||
Borrower | Date | Rate | Amount | Security | |||||||||||
Performing loans: | |||||||||||||||
Miscellaneous non-related party notes | Various | Various | $ 3,297 | Various security interests | |||||||||||
Miscellaneous related party notes (1) | Various | Various | 2,014 | Various security interests | |||||||||||
One Realco Corporation (2) | 17-Jan | 3.00% | 7,000 | Unsecured | |||||||||||
Realty Advisors Management, Inc. (1) | 16-Dec | 2.20% | 20,387 | Unsecured | |||||||||||
S Breeze I-V, LLC | 14-Jun | 5.00% | 3,180 | 6% Class A and 25% Class B Limited Partner Interests | |||||||||||
Woodhaven-Hawthorn, Inc. (1) | 14-Oct | 5.50% | 1,049 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (Cliffs of El Dorado) (1) | Dec-32 | 12.00% | 2,097 | 100% Interest in Unified Housing of McKinney, LLC | |||||||||||
Unified Housing Foundation, Inc. (Echo Station) (1) | Dec-32 | 12.00% | 1,481 | 100% Interest in Unified Housing of Temple, LLC | |||||||||||
Unified Housing Foundation, Inc. (Inwood on the Park) (1) | Dec-32 | 12.00% | 5,059 | 100% Interest in Unified Housing Inwood, LLC | |||||||||||
Unified Housing Foundation, Inc. (Kensington Park) (1) | Dec-32 | 12.00% | 3,936 | 100% Interest in Unified Housing Kensington, LLC | |||||||||||
Unified Housing Foundation, Inc. (Lakeshore Villas) (1) | Dec-32 | 12.00% | 2,000 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (Lakeshore Villas) (1) | Dec-32 | 12.00% | 9,096 | Membership interest in Housing for Seniors of Humble, LLC | |||||||||||
Unified Housing Foundation, Inc. (Limestone Canyon) (1) | Dec-32 | 12.00% | 3,057 | 100% Interest in Unified Housing of Austin, LLC | |||||||||||
Unified Housing Foundation, Inc. (Limestone Canyon) (1) | Dec-32 | 12.00% | 4,663 | 100% Interest in Unified Housing of Austin, LLC | |||||||||||
Unified Housing Foundation, Inc. (Limestone Ranch) (1) | Dec-32 | 12.00% | 2,250 | 100% Interest in Unified Housing of Vista Ridge, LLC | |||||||||||
Unified Housing Foundation, Inc. (Limestone Ranch) (1) | Dec-32 | 12.00% | 6,000 | 100% Interest in Unified Housing of Vista Ridge, LLC | |||||||||||
Unified Housing Foundation, Inc. (Parkside Crossing) (1) | Dec-32 | 12.00% | 2,272 | 100% Interest in Unified Housing of Parkside Crossing, LLC | |||||||||||
Unified Housing Foundation, Inc. (Sendero Ridge) (1) | Dec-32 | 12.00% | 5,174 | 100% Interest in Unified Housing of Sendero Ridge, LLC | |||||||||||
Unified Housing Foundation, Inc. (Sendero Ridge) (1) | Dec-32 | 12.00% | 4,812 | 100% Interest in Unified Housing of Sendero Ridge, LLC | |||||||||||
Unified Housing Foundation, Inc. (Timbers of Terrell) (1) | Dec-32 | 12.00% | 1,323 | 100% Interest in Unified Housing of Terrell, LLC | |||||||||||
Unified Housing Foundation, Inc. (Tivoli) (1) | Dec-32 | 12.00% | 7,966 | 100% Interest in Unified Housing of Tivoli, LLC | |||||||||||
Unified Housing Foundation, Inc. (Reserve at White Rock Phase I) (1) | Dec-32 | 12.00% | 2,485 | 100% Interest in Unified Housing of Harvest Hill I, LLC | |||||||||||
Unified Housing Foundation, Inc. (Reserve at White Rock Phase II) (1) | Dec-32 | 12.00% | 2,555 | 100% Interest in Unified Housing of Harvest Hill, LLC | |||||||||||
Unified Housing Foundation, Inc. (Trails at White Rock) (1) | Dec-32 | 12.00% | 3,815 | 100% Interest in Unified Housing of Harvest Hill III, LLC | |||||||||||
Unified Housing Foundation, Inc. (1) | 13-Dec | 5.00% | 6,000 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (1) | 15-Dec | 12.00% | 17,928 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (1) | 16-Dec | 12.00% | 3,657 | Unsecured | |||||||||||
Accrued interest | 18,722 | ||||||||||||||
Total Performing | $ 153,275 | ||||||||||||||
Non-Performing loans: | |||||||||||||||
Leman Development, Ltd (2) | 11-Jul | 7.00% | 1,500 | Unsecured | |||||||||||
Tracy Suttles (2) | 11-Dec | 0.00% | 1,077 | Unsecured | |||||||||||
Miscellaneous non-related party notes | Various | Various | 507 | Various secured interest | |||||||||||
Accrued interest | 56 | ||||||||||||||
Total Non-Performing | $ 3,140 | ||||||||||||||
Allowance for estimated losses | (19,600) | ||||||||||||||
Total | $ 136,815 | ||||||||||||||
(1) Related party notes | |||||||||||||||
(2) An allowance was taken for estimated losses at full value of note |
Recovered_Sheet1
Allowance For Estimated Losses Consists Of The Following (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Allowance For Estimated Losses Consists Of The Following | ' | ||||||||||||
Allowance For Estimated Losses Consists Of The Following | ' | ||||||||||||
The table below shows our allowance for estimated losses (dollars in thousands): | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Balance January 1, | $ | 21,704 | $ | 13,383 | $ | 14,348 | |||||||
Increase (decrease) in provision | (2,104 | ) | 8,321 | (965 | ) | ||||||||
Balance December 31, | $ | 19,600 | $ | 21,704 | $ | 13,383 |
Investments_accounted_for_via_
Investments accounted for via the equity method consists of the following (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Investments accounted for via the equity method consists of the following | ' | ||||||||||||
Investments accounted for via the equity method consists of the following | ' | ||||||||||||
Investments accounted for via the equity method consists of the following: | |||||||||||||
Percentage ownership as of December 31, | |||||||||||||
2013 | 2012 | 2011(1) | |||||||||||
Gruppa Florentina, LLC(2) | 20 | % | 20 | % | 20 | % | |||||||
LK-Four Hickory, LLC(3) | 0 | % | 0 | % | 28.57 | % | |||||||
________________________________ | |||||||||||||
(1) Other investees. TCI's 5% investment in Garden Centura, L.P. was sold on December 28, 2011. | |||||||||||||
(2) Other investees | |||||||||||||
(3) Other investees. ARL's 28.57% investment in LK-Four Hickory, LLC was sold on January 17, 2012. |
The_Following_Is_a_Summary_Of_
The Following Is a Summary Of The Financial Position And Results Of Operations (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
The Following Is a Summary Of The Financial Position And Results Of Operations | ' | ||||||||||||
The Following Is a Summary Of The Financial Position And Results Of Operations | ' | ||||||||||||
The following is a summary of the financial position and results of operations from our unconsolidated subsidiaries and investees (dollars in thousands): | |||||||||||||
For the Twelve Months Ended December 31, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Other Investees | |||||||||||||
Real estate, net of accumulated depreciation | $ | 10,823 | $ | 12,343 | $ | 115,641 | |||||||
Notes receivable | 6,526 | 6,192 | 5,665 | ||||||||||
Other assets | 32,131 | 32,145 | 41,305 | ||||||||||
Notes payable | (11,022 | ) | (13,824 | ) | (86,144 | ) | |||||||
Other liabilities | (8,134 | ) | (7,443 | ) | (17,885 | ) | |||||||
Shareholders' equity/partners capital | (30,324 | ) | (29,413 | ) | (58,582 | ) | |||||||
Revenue | $ | 46,276 | $ | 45,505 | $ | 54,579 | |||||||
Depreciation | (1,166 | ) | (1,277 | ) | (6,474 | ) | |||||||
Operating expenses | (42,330 | ) | (41,188 | ) | (47,510 | ) | |||||||
Interest expense | (1,022 | ) | (1,181 | ) | (5,047 | ) | |||||||
Income (loss) from continuing operations | $ | 1,758 | $ | 1,859 | $ | (4,452 | ) | ||||||
Income from discontinued operations | - | - | - | ||||||||||
Net income (loss) | $ | 1,758 | $ | 1,859 | $ | (4,452 | ) | ||||||
Company's proportionate share of earnings (losses)(1) | $ | 352 | $ | 372 | $ | (806 | ) | ||||||
(1) Earnings (loss) represent continued and discontinued operations |
Summary_Of_Notes_And_Interest_
Summary Of Notes And Interest Payable (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Summary Of Notes And Interest Payable | ' | ||||||||||||||||
Summary Of Notes And Interest Payable Text Block | ' | ||||||||||||||||
Below is a summary of our notes and interest payable as of December 31, 2013 (dollars in thousands): | |||||||||||||||||
Notes | Stock | Accrued | Total | ||||||||||||||
Payable | Secured | Interest | Debt | ||||||||||||||
Loans | |||||||||||||||||
Apartments | $ | 368,620 | $ | - | $ | 1,241 | $ | 369,861 | |||||||||
Commercial | 116,616 | - | 285 | 116,901 | |||||||||||||
Land held for development | 95,964 | - | 300 | 96,264 | |||||||||||||
Real estate held for sale | 17,058 | - | 42 | 17,100 | |||||||||||||
Real estate subject to sales contract | 21,494 | - | 1,518 | 23,012 | |||||||||||||
Other | 14,565 | 21,307 | 32 | 35,904 | |||||||||||||
Total | $ | 634,317 | $ | 21,307 | $ | 3,418 | $ | 659,042 |
The_following_table_schedules_
The following table schedules the principal payments on the notes payable for the following (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
The following table schedules the principal payments on the notes payable for the following | ' | ||
The following table schedules the principal payments on the notes payable for the following | ' | ||
The following table schedules the principal payments on the notes payable for the following five years and thereafter (dollars in thousands): | |||
Year | Amount | ||
2014 | $ 151,404 | ||
2015 | 40,178 | ||
2016 | 73,261 | ||
2017 | 6,257 | ||
2018 | 6,073 | ||
Thereafter | 378,451 | ||
Total | $ 655,624 |
Below_is_a_description_of_the_
Below is a description of the related party transactions and fees between Pillar, Prime and Regis (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Related Party Transactions Table Text Block: | ' | |||||||||||||
Below is a description of the related party transactions and fees between Pillar, Prime and Regis | ' | |||||||||||||
Below is a description of the related party transactions and fees between Pillar, Prime and Regis: | ||||||||||||||
2013 | 2012 | 2011 | ||||||||||||
(dollars in thousands) | ||||||||||||||
Fees: | ||||||||||||||
Advisory | $ | 10,166 | $ | 10,182 | $ | 13,225 | ||||||||
Construction advisory | - | 181 | 2,429 | |||||||||||
Mortgage brokerage and equity refinancing | 1,878 | 1,881 | 812 | |||||||||||
Net income | 4,089 | 180 | 54 | |||||||||||
Property acquisition and sales | - | 20 | - | |||||||||||
$ | 16,133 | $ | 12,444 | $ | 16,520 | |||||||||
Other Expense: | ||||||||||||||
Cost reimbursements | $ | 3,466 | $ | 3,359 | $ | 4,246 | ||||||||
Interest paid | 431 | 495 | 272 | |||||||||||
$ | 3,897 | $ | 3,854 | $ | 4,518 | |||||||||
Revenue: | ||||||||||||||
Rental | $ | 670 | $ | 587 | $ | 434 | ||||||||
Fees paid to Triad, an affiliate, Regis I, Regis and related parties: | ||||||||||||||
2013 | 2012 | 2011 | ||||||||||||
(dollars in thousands) | ||||||||||||||
Fees: | ||||||||||||||
Property acquisition | $ | - | $ | 71 | $ | - | ||||||||
Property management, construction manaement and leasing commissions | 474 | 2,189 | 1,791 | |||||||||||
Real estate brokerage | 4,081 | 2,321 | - | |||||||||||
$ | 4,555 | $ | 4,581 | $ | 1,791 |
Reconciles_of_the_related_part
Reconciles of the related party payable due to Pillar (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Reconciles of the related party payable | ' | ||||
Reconciles of the related party payable due to Pillar | ' | ||||
The following table reconciles the beginning and ending balances of the related party payable due to Pillar as of December 31, 2013 (dollars in thousands): | |||||
Pillar | |||||
Related party payable, December 31, 2012 | $ | (10,922 | ) | ||
Cash transfers | (681 | ) | |||
Advisory fees | (10,166 | ) | |||
Net income fee | (4,089 | ) | |||
Cost reimbursements | (3,466 | ) | |||
Interest income | (431 | ) | |||
Fees and commissions | (2,977 | ) | |||
Expenses paid by Advisor | (915 | ) | |||
Financing (mortgage payments) | (1,853 | ) | |||
Sales/purchases transactions | 42,784 | ||||
Tax sharing | 6,802 | ||||
Related party receivable, December 31, 2013 | $ | 14,086 |
Components_Of_Income_Tax_Expen
Components Of Income Tax Expense Benefit (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Components Of Income Tax Expense Benefit | ' | ||||||||||||
Current expense (benefit) is attributable | ' | ||||||||||||
Current expense (benefit) is attributable to (dollars in thousands): | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Income from continuing operations | $ | (24,217 | ) | $ | (5,387 | ) | $ | (9,283 | ) | ||||
Income from discontinued operations | 17,415 | 5,387 | 9,283 | ||||||||||
The full 2013 tax (benefit) to ARL comes from RAMI | $ | (6,802 | ) | $ | - | $ | - | ||||||
The Federal income tax expense differs from the amount computed as follows | ' | ||||||||||||
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): | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Computed "expected" income tax (benefit) expense | $ | 15,684 | $ | (1,955 | ) | $ | (2,556 | ) | |||||
Book to tax differences in gains on sale of property | (20,373 | ) | (8,503 | ) | 2,184 | ||||||||
Book to tax differences from entities not consolidated for tax purposes | (33,565 | ) | (3,831 | ) | (3,228 | ) | |||||||
Book to tax differences of depreciation and amortization | 1,250 | 1,460 | 1,556 | ||||||||||
Valuation allowance against current net operating loss benefit | 17,415 | 5,387 | 9,283 | ||||||||||
Other book to tax differences | 19,589 | 7,442 | (7,239 | ) | |||||||||
Total | $ | - | $ | - | $ | - | |||||||
Alternative minimum tax | $ | - | $ | - | $ | - | |||||||
Deferred Tax Assets and Liabilities Temperory Differences | ' | ||||||||||||
The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (dollars in thousands): | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Net operating losses | $ | 88,486 | $ | 68,034 | $ | 66,767 | |||||||
AMT credits | 2,201 | 2,201 | 2,201 | ||||||||||
Basis difference of: | |||||||||||||
Real estate holdings and equipment | 11,959 | 1,159 | (2,500 | ) | |||||||||
Notes receivable | 7,448 | 8,248 | 5,314 | ||||||||||
Investments | (14,960 | ) | (13,824 | ) | (14,660 | ) | |||||||
Notes payable | 13,360 | 17,691 | 25,299 | ||||||||||
Deferred gains | 18,746 | 18,170 | 28,181 | ||||||||||
Total | $ | 127,240 | $ | 101,679 | $ | 110,602 | |||||||
Deferred tax valuation allowance | (127,240 | ) | (101,679 | ) | (110,602 | ) | |||||||
Net deferred tax asset | $ | - | $ | - | $ | - |
The_following_is_a_schedule_of
The following is a schedule of minimum future rents due to ARL under non-cancelable operating leases (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
The following is a schedule of minimum future rents due to ARL under non-cancelable operating leases | ' | ||
The following is a schedule of minimum future rents due to ARL under non-cancelable operating leases | ' | ||
The following is a schedule of minimum future rents due to ARL under non-cancelable operating leases as of December 31, 2013 (dollars in thousands): | |||
Year | Amount | ||
2014 | $ 15,158 | ||
2015 | 14,678 | ||
2016 | 12,264 | ||
2017 | 9,790 | ||
2018 | 8,652 | ||
Thereafter | 16,647 | ||
Total | $ 77,189 |
Operating_Segments_As_Follows_
Operating Segments As Follows (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Operating Segments As Follows | ' | ||||||||||||||||||||||||
Operating Segments As Follows | ' | ||||||||||||||||||||||||
Presented below is the operating income of each operating segment and each segment’s assets for 2013, 2012 and 2011 (dollars in thousands): | |||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2013 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 28,217 | $ | 61,253 | $ | - | $ | 39 | $ | 127 | $ | 89,636 | |||||||||||||
Operating expenses | 14,682 | 27,443 | - | 1,431 | 41 | 43,597 | |||||||||||||||||||
Depreciation and amortization | 6,642 | 10,816 | - | - | (172 | ) | 17,286 | ||||||||||||||||||
Mortgage and loan interest | 6,349 | 17,598 | - | 6,200 | 7,954 | 38,101 | |||||||||||||||||||
Deferred borrowing costs | 67 | 2,275 | - | 212 | 405 | 2,959 | |||||||||||||||||||
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) | $ | 327 | $ | (816 | ) | $ | - | $ | (9,339 | ) | $ | 10,954 | $ | 1,126 | |||||||||||
Capital expenditures | 7,188 | 315 | - | 387 | - | 7,890 | |||||||||||||||||||
Assets | 141,200 | 377,970 | - | 164,697 | - | 683,867 | |||||||||||||||||||
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 | ||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2012 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 32,110 | $ | 57,811 | $ | - | $ | 78 | $ | 87 | $ | 90,086 | |||||||||||||
Operating expenses | 17,448 | 25,917 | - | 689 | 430 | 44,484 | |||||||||||||||||||
Depreciation and amortization | 5,770 | 10,701 | - | - | (270 | ) | 16,201 | ||||||||||||||||||
Mortgage and loan interest | 5,707 | 20,287 | - | 6,684 | 7,417 | 40,095 | |||||||||||||||||||
Deferred borrowing costs | 92 | 408 | - | 160 | 28 | 688 | |||||||||||||||||||
Loan charges and prepayment penalties | - | 3,495 | - | 79 | - | 3,574 | |||||||||||||||||||
Interest income | - | - | - | - | 14,612 | 14,612 | |||||||||||||||||||
Gain on land sales | - | - | - | 5,475 | - | 5,475 | |||||||||||||||||||
Segment operating income (loss) | $ | 3,093 | $ | (2,997 | ) | $ | - | $ | (2,059 | ) | $ | 7,094 | $ | 5,131 | |||||||||||
Capital expenditures | 2,737 | 978 | - | - | - | 3,715 | |||||||||||||||||||
Assets | 162,756 | 538,352 | - | 212,285 | - | 913,393 | |||||||||||||||||||
Property Sales | |||||||||||||||||||||||||
Sales price | $ | 9,825 | $ | 45,610 | $ | 3,369 | $ | 39,733 | $ | - | $ | 98,537 | |||||||||||||
Cost of sale | (9,600 | ) | (40,067 | ) | (252 | ) | (34,873 | ) | - | (84,792 | ) | ||||||||||||||
Deferred current gain | - | - | - | 615 | - | 615 | |||||||||||||||||||
Recognized prior deferred gain | - | - | - | - | - | ||||||||||||||||||||
Gain on sale | $ | 225 | $ | 5,543 | $ | 3,117 | $ | 5,475 | $ | - | $ | 14,360 | |||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2011 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 29,453 | $ | 50,037 | $ | - | $ | 467 | $ | 118 | 80,075 | ||||||||||||||
Operating expenses | 17,545 | 23,949 | - | 2,097 | 368 | 43,959 | |||||||||||||||||||
Depreciation and amortization | 4,479 | 9,367 | - | - | (178 | ) | 13,668 | ||||||||||||||||||
Mortgage and loan interest | 6,983 | 19,422 | - | 9,880 | 6,962 | 43,247 | |||||||||||||||||||
Deferred borrowing costs | 174 | 238 | - | 1,330 | 154 | 1,896 | |||||||||||||||||||
Loan charges and prepayment penalties | - | 292 | - | 147 | - | 439 | |||||||||||||||||||
Interest income | - | - | - | - | 10,948 | 10,948 | |||||||||||||||||||
Gain on land sales | - | - | - | 34,247 | - | 34,247 | |||||||||||||||||||
Segment operating income (loss) | $ | 272 | $ | (3,231 | ) | $ | - | $ | 21,260 | $ | 3,760 | $ | 22,061 | ||||||||||||
Capital expenditures | 3,073 | 652 | 137 | 3,862 | |||||||||||||||||||||
Assets | 169,187 | 547,667 | - | 243,488 | - | 960,342 | |||||||||||||||||||
Property Sales | |||||||||||||||||||||||||
Sales price | $ | 106,653 | $ | 28,690 | $ | 29,844 | $ | 249,495 | $ | - | $ | 414,682 | |||||||||||||
Cost of sale | (96,837 | ) | (14,466 | ) | (26,245 | ) | (223,331 | ) | - | (360,879 | ) | ||||||||||||||
Deferred current gain | 1,652 | - | - | - | - | 1,652 | |||||||||||||||||||
Recognized prior deferred gain | 17,448 | 10,168 | - | 8,083 | - | 35,699 | |||||||||||||||||||
Gain on sale | $ | 28,916 | $ | 24,392 | $ | 3,599 | $ | 34,247 | $ | - | $ | 91,154 |
The_Table_Below_Reconciles_Seg
The Table Below Reconciles Segment Information To Consolidated Statements Of Operations (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
The Table Below Reconciles Segment Information To Consolidated Statements Of Operations | ' | ||||||||||||
The Table Below Reconciles Segment Information To Consolidated Statements Of Operations | ' | ||||||||||||
The table below reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations (dollars in thousands): | |||||||||||||
For Twelve Months Ended December 31, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Segment operating income | $ | 1,126 | $ | 5,131 | $ | 22,061 | |||||||
Other non-segment items of income (expense) | |||||||||||||
General and administrative | (7,934 | ) | (6,051 | ) | (13,157 | ) | |||||||
Provision on impairment of notes receivable and real estate assets | (18,980 | ) | (2,330 | ) | (42,409 | ) | |||||||
Net income fee to related party | (4,089 | ) | (180 | ) | (54 | ) | |||||||
Advisory fee to related party | (10,166 | ) | (10,182 | ) | (13,225 | ) | |||||||
Other income | 10,179 | 7,763 | 2,684 | ||||||||||
Gain (loss) on sale of investments | (283 | ) | (118 | ) | 91 | ||||||||
Earnings from unconsolidated joint ventures and investees | 391 | 372 | 79 | ||||||||||
Litigation settlement | (20,313 | ) | (175 | ) | (225 | ) | |||||||
Income tax benefit (expense) | 40,049 | (329 | ) | 13,100 | |||||||||
Loss from continuing operations | $ | (10,020 | ) | $ | (6,099 | ) | $ | (31,055 | ) |
Reconciles_the_segment_informa
Reconciles the segment information to corresponding amounts in the Consolidated Balance Sheets (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Reconciles the segment information to corresponding amounts in the Consolidated Balance Sheets: | ' | ||||||||||||
Reconciles the segment information to corresponding amounts in the Consolidated Balance Sheets | ' | ||||||||||||
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, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Segment assets | $ | 683,867 | $ | 913,393 | $ | 960,342 | |||||||
Investments in unconsolidated subsidiaries and investees | 3,789 | 8,168 | 10,746 | ||||||||||
Notes and interest receivable | 136,815 | 103,469 | 101,540 | ||||||||||
Other assets and receivables | 102,424 | 93,275 | 95,492 | ||||||||||
Assets held for sale | 16,427 | 17,040 | 67,351 | ||||||||||
Total assets | $ | 943,322 | $ | 1,135,345 | $ | 1,235,471 |
The_following_table_summarizes
The following table summarizes revenue and expense information for these properties sold and held for sale (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
The following table summarizes revenue and expense information for these properties sold and held for sale | ' | ||||||||||||
The following table summarizes revenue and expense information for these properties sold and held for sale | ' | ||||||||||||
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, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Revenues: | |||||||||||||
Rental and other property revenues | $ | 26,036 | $ | 35,352 | $ | 63,273 | |||||||
26,036 | 35,352 | 63,273 | |||||||||||
Expenses: | |||||||||||||
Property operating expenses | 12,200 | 18,842 | 38,025 | ||||||||||
Depreciation | 4,231 | 6,363 | 10,589 | ||||||||||
General and administrative | 951 | 1,210 | 2,203 | ||||||||||
Provision on impairment of notes receivable and real estate assets | - | 2,400 | 7,618 | ||||||||||
Total operating expenses | $ | 17,382 | $ | 28,815 | $ | 58,435 | |||||||
Other income (expense): | |||||||||||||
Other income (expense) | 29 | 14 | (24 | ) | |||||||||
Mortgage and loan interest | (6,139 | ) | (10,866 | ) | (22,103 | ) | |||||||
Deferred borrowing costs amortization | (3,009 | ) | (1,790 | ) | (921 | ) | |||||||
Loan charges and prepayment penalties | (3,245 | ) | (3,471 | ) | (1,269 | ) | |||||||
Litigation settlement | (250 | ) | (250 | ) | - | ||||||||
Total other expenses | $ | (12,614 | ) | $ | (16,363 | ) | $ | (24,317 | ) | ||||
Loss from discontinued operations before gain on sale of real estate and taxes | (3,960 | ) | (9,826 | ) | (19,479 | ) | |||||||
Gain on sale of real estate from discontinued operations | 98,951 | 8,885 | 56,907 | ||||||||||
Income tax benefit (expense) | (33,247 | ) | 329 | (13,100 | ) | ||||||||
Income (loss) from discontinued operations | $ | 61,744 | $ | (612 | ) | $ | 24,328 |
QUARTERLY_RESULTS_OF_OPERATION1
QUARTERLY RESULTS OF OPERATIONS (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
QUARTERLY RESULTS OF OPERATIONS FOR THE PERIODS | ' | ||||||||||||||||
QUARTERLY RESULTS OF OPERATIONS FOR THE PERIODS | ' | ||||||||||||||||
The following is a tabulation of quarterly results of operations for the years 2013, 2012, and 2011. 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 2013 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||
2013 | |||||||||||||||||
Total operating revenues | $ | 21,229 | $ | 21,478 | $ | 21,697 | $ | 25,232 | |||||||||
Total operating expenses | 19,245 | 20,034 | 21,519 | 41,254 | |||||||||||||
Operating income | 1,984 | 1,444 | 178 | (16,022 | ) | ||||||||||||
Other expenses | (9,742 | ) | (5,879 | ) | (9,015 | ) | (12,562 | ) | |||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (7,758 | ) | (4,435 | ) | (8,837 | ) | (28,584 | ) | |||||||||
Gain(loss) on land sales | (35 | ) | - | 598 | (1,018 | ) | |||||||||||
Income tax benefit | 2,724 | 5,208 | 319 | 31,798 | |||||||||||||
Net income (loss) from continuing operations | (5,069 | ) | 773 | (7,920 | ) | 2,196 | |||||||||||
Net income from discontinuing operations | 5,058 | 9,671 | 591 | 46,424 | |||||||||||||
Net income (loss) | (11 | ) | 10,444 | (7,329 | ) | 48,620 | |||||||||||
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 continuing operations | $ | (0.46 | ) | $ | (0.17 | ) | $ | (0.66 | ) | $ | (0.70 | ) | |||||
Income from discontinued operations | 0.44 | 0.84 | 0.05 | 4.03 | |||||||||||||
Net income (loss) applicable to common shares | $ | (0.02 | ) | $ | 0.67 | $ | (0.61 | ) | $ | 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 continuing operations | $ | (0.46 | ) | $ | (0.17 | ) | $ | (0.66 | ) | $ | (0.70 | ) | |||||
Income from discontinued operations | 0.44 | 0.84 | 0.05 | 4.03 | |||||||||||||
Net income (loss) applicable to common shares | $ | (0.02 | ) | $ | 0.67 | $ | (0.61 | ) | $ | 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 | |||||||||||||
Three Months Ended 2012 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||
2012 | |||||||||||||||||
Total operating revenues | $ | 21,274 | $ | 21,819 | $ | 22,278 | $ | 24,715 | |||||||||
Total operating expenses | 20,010 | 18,510 | 18,972 | 21,936 | |||||||||||||
Operating income | 1,264 | 3,309 | 3,306 | 2,779 | |||||||||||||
Other expenses | (6,727 | ) | (7,071 | ) | (5,322 | ) | (2,783 | ) | |||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (5,463 | ) | (3,762 | ) | (2,016 | ) | (4 | ) | |||||||||
Gain(loss) on land sales | (1,021 | ) | 4,738 | 2,898 | (1,140 | ) | |||||||||||
Income tax benefit (expense) | (348 | ) | 1,664 | (85 | ) | (1,560 | ) | ||||||||||
Net income (loss) from continuing operations | (6,832 | ) | 2,640 | 797 | (2,704 | ) | |||||||||||
Net income (loss) from discontinuing operations | (645 | ) | 3,089 | (159 | ) | (2,897 | ) | ||||||||||
Net income (loss) | (7,477 | ) | 5,729 | 638 | (5,601 | ) | |||||||||||
Net income (loss) attributable to non-controlling interest | 1,177 | (1,064 | ) | (74 | ) | 1,087 | |||||||||||
Preferred dividend requirement | (613 | ) | (613 | ) | (613 | ) | (613 | ) | |||||||||
Net income (loss) applicable to common shares | $ | (6,913 | ) | $ | 4,052 | $ | (49 | ) | $ | (5,127 | ) | ||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income (loss) from continuing operations | $ | (0.54 | ) | $ | 0.08 | $ | 0.01 | $ | (0.19 | ) | |||||||
Income (loss) from discontinued operations | (0.06 | ) | 0.27 | (0.01 | ) | (0.25 | ) | ||||||||||
Net income (loss) applicable to common shares | $ | (0.60 | ) | $ | 0.35 | $ | - | $ | (0.44 | ) | |||||||
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 | |||||||||||||||||
Income (loss) from continuing operations | $ | (0.54 | ) | $ | 0.04 | $ | 0.01 | $ | (0.19 | ) | |||||||
Income (loss) from discontinued operations | (0.06 | ) | 0.12 | (0.01 | ) | (0.25 | ) | ||||||||||
Net income (loss) applicable to common shares | $ | (0.60 | ) | $ | 0.16 | $ | - | $ | (0.44 | ) | |||||||
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 25,679,951 | 21,027,447 | 11,525,389 | |||||||||||||
Three Months Ended 2011 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||
2011 | |||||||||||||||||
Total operating revenues | $ | 19,387 | $ | 21,721 | $ | 20,830 | $ | 18,137 | |||||||||
Total operating expenses | 26,300 | 16,165 | 21,736 | 62,271 | |||||||||||||
Operating income (loss) | (6,913 | ) | 5,556 | (906 | ) | (44,134 | ) | ||||||||||
Other expenses | (10,091 | ) | (9,505 | ) | (9,613 | ) | (2,796 | ) | |||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (17,004 | ) | (3,949 | ) | (10,519 | ) | (46,930 | ) | |||||||||
Gain (loss) on land sales | 5,344 | (3,594 | ) | (982 | ) | 33,479 | |||||||||||
Income tax benefit | 100 | 9,338 | 2,458 | 1,204 | |||||||||||||
Net income (loss) from continuing operations | (11,560 | ) | 1,795 | (9,043 | ) | (12,247 | ) | ||||||||||
Net income from discontinued operations | 187 | 5,463 | 4,566 | 14,112 | |||||||||||||
Net income (loss) | (11,373 | ) | 7,258 | (4,477 | ) | 1,865 | |||||||||||
Net income (loss) attributable to non-controlling interest | 2,170 | 7,175 | 4,830 | (7,158 | ) | ||||||||||||
Preferred dividend requirement | (617 | ) | (613 | ) | (613 | ) | (613 | ) | |||||||||
Net income (loss) applicable to common shares | $ | (9,820 | ) | $ | 13,820 | $ | (260 | ) | $ | (5,906 | ) | ||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income (loss) from continuing operations | $ | (0.87 | ) | $ | 0.73 | $ | (0.42 | ) | $ | (1.74 | ) | ||||||
Income from discontinued operations | 0.02 | 0.47 | 0.4 | 1.23 | |||||||||||||
Net income (loss) applicable to common shares | $ | (0.85 | ) | $ | 1.2 | $ | (0.02 | ) | $ | (0.51 | ) | ||||||
Weighted average common shares used in computing earnings per share | 11,493,115 | 11,525,389 | 11,525,389 | 11,517,431 | |||||||||||||
Earnings per share - diluted | |||||||||||||||||
Income (loss) from continuing operations | $ | (0.87 | ) | $ | 0.48 | $ | (0.42 | ) | $ | (1.74 | ) | ||||||
Income from discontinued operations | 0.02 | 0.31 | 0.4 | 1.23 | |||||||||||||
Net income (loss) applicable to common shares | $ | (0.85 | ) | $ | 0.79 | $ | (0.02 | ) | $ | (0.51 | ) | ||||||
Weighted average common shares used in computing diluted earnings per share | 11,493,115 | 17,394,553 | 11,525,389 | 11,517,431 |
ORGANIZATION_AND_SUMMARY_OF_SI1
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSISTS OF THE FOLLOWING (Details) | Dec. 31, 2013 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSISTS OF THE FOLLOWING: | ' |
Percentage of common stock owned by related parties | 87.40% |
Percentage of common stock owned by ARL of Transcontinental Realty Investors Inc. | 83.80% |
Owned percentage of subsidiary TCI in Income Opportunity Realty Investors | 81.10% |
Number of interests in a total property portfolio of income producing properties | 47 |
Number of commercial properties | 10 |
Number of office buildings | 7 |
Number of industrial warehouses | 1 |
Number of retailcenters | 3 |
Area of rental square feet (In Millions) | 2.6 |
Number of apartment communities | 37 |
Apartment communities units total | 6,398 |
Area of acres of developed and undeveloped land | 4,198 |
Summary_of_real_estate_owned_a
Summary of real estate owned as of (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Summary of real estate owned as of: | ' | ' |
Apartments | $436,109 | $611,404 |
Commercial properties | 214,486 | 225,958 |
Land held for development | 149,103 | 194,270 |
Real estate held for sale | 18,817 | 21,433 |
Real estate subject to sales contract | 29,547 | 58,234 |
Total real estate | 848,062 | 1,111,299 |
Less accumulated deprecation | -147,768 | -180,866 |
Total real estate, net of depreciation | $700,294 | $930,433 |
Depreciation_computed_on_a_str
Depreciation computed on a straight line basis (Details) | Dec. 31, 2013 |
Depreciation computed on a straight line basis : | ' |
Land improvements | '25 to 40 years |
Buildings and improvements | '10 to 40 years |
Tenant improvements | 'Shorter of useful life or terms of related lease |
Furniture, fixtures and equipment | '3 to 7 years |
Fair_value_measurements_using_
Fair value measurements using significant inputs (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Fair Value Measurements Using Fair Value | ' | ' | ' |
Land | $4,899 | ' | ' |
Commercial | 26,194 | 9,660 | 11,934 |
Land | ' | 2,699 | 55,806 |
Residential | ' | ' | 30,539 |
Fair Value Measurements Using Level 1 | ' | ' | ' |
Residential | ' | ' | 0 |
Fair Value Measurements Using Level 2 | ' | ' | ' |
Land | 4,899 | ' | ' |
Commercial | 26,194 | 9,660 | 11,934 |
Land | ' | 1,800 | 55,806 |
Residential | ' | ' | 0 |
Fair Value Measurements Using Level 3 | ' | ' | ' |
Land | 0 | ' | ' |
Land | ' | 899 | 0 |
Residential | ' | ' | $30,539 |
NOTES_AND_INTEREST_RECEIVABLE_1
NOTES AND INTEREST RECEIVABLE CONSISTS OF THE FOLLOWING (Details) (USD $) | Dec. 31, 2013 |
Performing loans As Of: | ' |
Miscellaneous non-related party notes | $3,297 |
Miscellaneous related party notes (1) | 2,014 |
One Realco Corporation (1)(2) | 7,000 |
Realty Advisors Management, Inc. (1) | 20,387 |
S Breeze I-V, LLC | 3,180 |
Woodhaven-Hawthorn, Inc. (1) | 1,049 |
Unified Housing Foundation, Inc. (Cliffs of El Dorado) (1) | 2,097 |
Unified Housing Foundation, Inc. (Echo Station) (1) | 1,481 |
Unified Housing Foundation, Inc. (Inwood on the Park) (1) | 5,059 |
Unified Housing Foundation, Inc. (Kensington Park) (1) | 3,936 |
Unified Housing Foundation, Inc. (Lakeshore Villas) (1) | 2,000 |
Unified Housing Foundation, Inc. (Lakeshore Villas) (2) | 9,096 |
Unified Housing Foundation, Inc. (Limestone Canyon) (1) | 3,057 |
Unified Housing Foundation, Inc. (Limestone Canyon) | 4,663 |
Unified Housing Foundation, Inc. (Limestone Ranch) (1) | 2,250 |
Unified Housing Foundation, Inc. (Limestone Ranch) | 6,000 |
Unified Housing Foundation, Inc. (Parkside Crossing) (1) | 2,272 |
Unified Housing Foundation, Inc. (Sendero Ridge) (1) | 5,174 |
Unified Housing Foundation, Inc. (Sendero Ridge) | 4,812 |
Unified Housing Foundation, Inc. (Timbers at the Park) (1) | 1,323 |
Unified Housing Foundation, Inc. (Tivoli) (1) | 7,966 |
Unified Housing Foundation, Inc. (Reserve at White Rock Phase I) (1) | 2,485 |
Unified Housing Foundation, Inc. (Reserve at White Rock Phase II) (1) | 2,555 |
Unified Housing Foundation, Inc. (Trails at White Rock) (1) | 3,815 |
Unified Housing Foundation, Inc. (1) | 6,000 |
Unified Housing Foundation, Inc | 17,928 |
Unified Housing Foundation, Inc | 3,657 |
Accrued interest: | 18,722 |
Total Performing | 153,275 |
Leman Development, Ltd (2) | 1,500 |
Tracy Suttles (2) | 1,077 |
Miscellaneous non-related party notes: | 507 |
Accrued interest | 56 |
Total Non-Performing | 3,140 |
Allowance for estimated losses | -19,600 |
Total Non-Performing loans: | $136,815 |
(1) Related Party Notes | ' |
(2) An allowance was taken for estimated losses at full value of note | ' |
ALLOWANCE_FOR_ESTIMATED_LOSSES1
ALLOWANCE FOR ESTIMATED LOSSES As Follows (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
ALLOWANCE FOR ESTIMATED LOSSES As Follows: | ' | ' | ' |
Allowance for estimated losses opening balance | $21,704 | $13,383 | $14,348 |
Increase (decrease) in provision | -2,104 | 8,321 | -965 |
Allowance for estimated losses closing balance | $19,600 | $21,704 | $13,383 |
Investment_In_UnConsolidated_J
Investment In UnConsolidated Joint Ventures And Investees consists of the following (Details) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Investment In UnConsolidated Joint Ventures And Investees consists of the following: | ' | ' | ' |
Gruppa Florentina, LLC | 20.00% | 20.00% | 20.00% |
LK-Four Hickory, LLC | 0.00% | 0.00% | 0.00% |
Summary_of_the_unconsolidated_
Summary of the unconsolidated subsidiaries and investees as follows (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Summary of the unconsolidated subsidiaries and investees as follows: | ' | ' | ' |
Real estate, net of accumulated depreciation | $10,823 | $12,343 | $115,641 |
Notes receivable | 6,526 | 6,192 | 5,665 |
Other assets | 32,131 | 32,145 | 41,305 |
Notes payable | -11,022 | -13,824 | -86,144 |
Other liabilities | -8,134 | -7,443 | -17,885 |
Shareholders' equity/partners capital | ($30,324) | ($29,413) | ($58,582) |
Summary_of_the_results_of_oper
Summary of the results of operations from unconsolidated subsidiaries and investees as follows (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Summary of the results of operations from unconsolidated subsidiaries and investees as follows: | ' | ' | ' |
Revenue | $46,276 | $45,505 | $54,579 |
Depreciation | -1,166 | -1,277 | -6,474 |
Operating expenses | -42,330 | -41,188 | -47,510 |
Interest expense | -1,022 | -1,181 | -5,047 |
Income from continuing operations | 1,758 | 1,859 | -4,452 |
Income from discontinued operations | 0 | 0 | 0 |
Net income (loss) | 1,758 | 1,859 | -4,452 |
Company's proportionate share of earnings (losses) | $352 | $372 | ($806) |
Recovered_Sheet2
Summary of notes and interest payable as follows (Details) (USD $) | Dec. 31, 2013 |
Summary of notes and interest payable as follows: | ' |
Apartments | $368,620 |
Commercial | 116,616 |
Land held for development | 95,964 |
Real estate held for sale | 17,058 |
Real estate subject to sales contract | 21,494 |
Other | 14,565 |
Total | 634,317 |
Stock Secured Loans | ' |
Other | 21,307 |
Total | 21,307 |
Accrued Interest: | ' |
Apartments | 1,241 |
Commercial | 285 |
Land held for development | 300 |
Real estate held for sale | 42 |
Real estate subject to sales contract | 1,518 |
Other | 32 |
Total | 3,418 |
Total Debt: | ' |
Apartments | 369,861 |
Commercial | 116,901 |
Land held for development | 96,264 |
Real estate held for sale | 17,100 |
Real estate subject to sales contract | 23,012 |
Other | 35,904 |
Total | $659,042 |
Principal_payments_on_the_note
Principal payments on the notes payable for the following years (Details) (USD $) | Dec. 31, 2013 |
Principal payments on the notes payable for the following five years | ' |
Principal payments on the notes payable 2014 | $151,404 |
Principal payments on the notes payable 2015 | 40,178 |
Principal payments on the notes payable 2016 | 73,261 |
Principal payments on the notes payable 2017 | 6,257 |
Principal payments on the notes payable 2018 | 6,073 |
Thereafter | 378,451 |
Total | $655,624 |
RELATED_PARTY_TRANSACTIONS_rel
RELATED PARTY TRANSACTIONS related party payable due to Pillar (Details) (Pillar, USD $) | Pillar |
USD ($) | |
Related party payable, at Dec. 31, 2012 | ($10,922) |
Cash transfers | -681 |
Advisory fees | -10,166 |
Net income fee | -4,089 |
Cost reimbursements | -3,466 |
Interest income | -431 |
Fees and commissions | -2,977 |
Expenses paid by Advisor | -915 |
Financing (mortgage payments) | -1,853 |
Sales/purchases transactions | 42,784 |
Tax sharing | 6,802 |
Related party payable, at Dec. 31, 2013 | $14,086 |
Description_of_the_related_par
Description of the related party transactions and fees As Follows (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Fees: | ' | ' | ' |
Advisory | $10,166 | $10,182 | $13,225 |
Construction advisory | 0 | 181 | 2,429 |
Mortgage brokerage and equity refinancing | 1,878 | 1,881 | 812 |
Net income | 4,089 | 180 | 54 |
Property acquisition and sales | 0 | 20 | 0 |
Total Fees | 16,133 | 12,444 | 16,520 |
Other Expense: | ' | ' | ' |
Cost reimbursements | 3,466 | 3,359 | 4,246 |
Interest paid | 431 | 495 | 272 |
Total Other Expenses | 3,897 | 3,854 | 4,518 |
Revenue | ' | ' | ' |
Rental revenue | 670 | 587 | 434 |
Fees paid to Triad, an affiliate, Regis I, Regis and related parties: | ' | ' | ' |
Property acquisition | 0 | 71 | 0 |
Property management, construction manaement and leasing commissions | 474 | 2,189 | 1,791 |
Real estate brokerage | 4,081 | 2,321 | 0 |
Total Fees | $4,555 | $4,581 | $1,791 |
PREFERRED_STOCK_TRANSACTIONS_A
PREFERRED STOCK TRANSACTIONS AS FOLLOWS (Details) (USD $) | Dec. 31, 2013 |
PREFERRED STOCK TRANSACTIONS AS FOLLOWS: | ' |
Series A Cumulative convertible Preferred Stock were Authorized | 15,000,000 |
Series A Cumulative Convertible Preferred Stock authorized percent | 10.00% |
Series A Cumulative convertible Preferred Stock were Outstanding | 3,353,954 |
Series A Preferred stock Par value per share | $2 |
Series A Preferred Stock Liquidation preference per share | $10 |
Preferred Stock Dividends payable annual rate | $1 |
Preferred Stock Conversion rate to common stock | 90.00% |
Preferred Stock held by wholly owned subsidiaries | 600,000 |
Series D Cumulative convertible Preferred Stock were Authorized | 91,000 |
Series D Cumulative Convertible Preferred Stock authorized percent | 9.50% |
Series D Preferred stock Par value per share | $2 |
Series D Preferred Stock Liquidation preference per share | $20 |
Series D Preferred Stock Dividends payable annual rate | 1.9 |
Series E Cumulative convertible Preferred Stock were Authorized | 500,000 |
Series E Cumulative Convertible Preferred Stock authorized percent | 6.00% |
Series E Preferred stock Par value per share | $2 |
Series E Preferred Stock Liquidation preference per share | $10 |
Series E Preferred Stock Dividends payable annual rate | $0.60 |
Series J Cumulative convertible Preferred Stock were Authorized | 100,000 |
Series J Cumulative Convertible Preferred Stock authorized percent | 8.00% |
Series J Preferred Stock Liquidation preference per share | $1,000 |
Series J Preferred stock Par value per share | $2 |
Series J payable at the annual rate per share | $80 |
Series k Cumulative convertible Preferred Stock were Authorized | 135,000 |
Series k Preferred Stock Liquidation preference per share | $22 |
Series k Preferred stock Par value per share | $2 |
STOCK_OPTIONS_CONSISTS_OF_THE_
STOCK OPTIONS CONSISTS OF THE FOLLOWING (Details) (USD $) | Dec. 31, 2013 |
STOCK OPTIONS CONSISTS OF THE FOLLOWING: | ' |
Stock Option Plan purchase shares of common stock | 40,000 |
Independent Director granted an option to purchase common shares | 1,000 |
Exercise Price | $9.70 |
Shares of stock options outstanding | 1,000 |
Current_expense_benefit_is_att
Current expense (benefit) is attributable as follows (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Current expense (benefit) is attributable as follows: | ' | ' | ' |
Income from continuing operations | ($24,217) | ($5,387) | ($9,283) |
Income from discontinued operations | 17,415 | 5,387 | 9,283 |
The full 2013 tax (benefit) to ARL comes from RAMI | ($6,802) | $0 | $0 |
Federal_income_tax_expense_dif
Federal income tax expense differs from the amount computed as follows (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Federal income tax expense differs from the amount computed as follows: | ' | ' | ' |
Computed "expected" income tax (benefit) expense | $15,684 | ($1,955) | ($2,556) |
Book to tax differences in gains on sale of property | -20,373 | -8,503 | 2,184 |
Book to tax differences from entities not consolidated for tax purposes | -33,565 | -3,831 | -3,228 |
Book to tax differences of depreciation and amortization | 1,250 | 1,460 | 1,556 |
Valuation allowance against current net operating loss benefit | 17,415 | 5,387 | 9,283 |
Other book to tax differences | 19,589 | 7,442 | -7,239 |
Total | 0 | 0 | 0 |
Alternative minimum tax | $0 | $0 | $0 |
Deferred_tax_asset_are_as_foll
Deferred tax asset are as follows (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Deferred tax asset are as follows: | ' | ' | ' |
Net operating losses | $88,486 | $68,034 | $66,767 |
AMT credits | 2,201 | 2,201 | 2,201 |
Real estate holdings and equipment | 11,959 | 1,159 | -2,500 |
Notes receivable | 7,448 | 8,248 | 5,314 |
Investments | -14,960 | -13,824 | -14,660 |
Notes payable | 13,360 | 17,691 | 25,299 |
Deferred gains | 18,746 | 18,170 | 28,181 |
Total | 127,240 | 101,679 | 110,602 |
Deferred tax valuation allowance | -127,240 | -101,679 | -110,602 |
Net deferred tax asset | $0 | $0 | $0 |
FUTURE_MINIMUM_RENTAL_INCOME_U1
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES AS FOLLOWS (Details) (USD $) | Dec. 31, 2013 |
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES AS FOLLOWS: | ' |
Minimum future rents due to ARL under non-cancelable operating leases 2014 | $15,158 |
Minimum future rents due to ARL under non-cancelable operating leases 2015 | 14,678 |
Minimum future rents due to ARL under non-cancelable operating leases 2016 | 12,264 |
Minimum future rents due to ARL under non-cancelable operating leases 2017 | 9,790 |
Minimum future rents due to ARL under non-cancelable operating leases 2018 | 8,652 |
Minimum future rents due to ARL under non-cancelable operating leases Threreafter | 16,647 |
Minimum future rents total | $77,189 |
Reconciles_the_segment_informa1
Reconciles the segment information to the corresponding amounts during the period (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Reconciles the segment information to the corresponding amounts during the period: | ' | ' | ' |
Segment operating income | $1,126 | $5,131 | $22,061 |
General and administrative | -7,934 | -6,051 | -13,157 |
Provision on impairment of notes receivable and real estate assets | -18,980 | -2,330 | -42,409 |
Net income fee to related party | -4,089 | -180 | -54 |
Advisory fee to related party | -10,166 | -10,182 | -13,225 |
Other income | 10,179 | 7,763 | 2,684 |
Gain (loss) on sale of investments | -283 | -118 | 91 |
Earnings from unconsolidated joint ventures and investees | 391 | 372 | 79 |
Litigation settlement | -20,313 | -175 | -225 |
Income tax benefit (expense) | 40,049 | -329 | 13,100 |
Loss from continuing operations | ($10,020) | ($6,099) | ($31,055) |
Operating_Segments_to_the_corr
Operating Segments to the corresponding amounts Narrative (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Operating Segments to the corresponding amounts in narrative: | ' | ' | ' |
Segment assets | $683,867 | $913,393 | $960,342 |
Investments in unconsolidated subsidiaries and investees | 3,789 | 8,168 | 10,746 |
Notes and interest receivable | 136,815 | 103,469 | 101,540 |
Other assets and receivables | 102,424 | 93,275 | 95,492 |
Assets held for sale | 16,427 | 17,040 | 67,351 |
Total Assets | $943,322 | $1,135,345 | $1,235,471 |
Summarizes_revenue_and_expense
Summarizes revenue and expense information for these properties sold and held for sale (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Revenues: | ' | ' | ' |
Rental and other property revenues | $26,036 | $35,352 | $63,273 |
Total Revenues | 26,036 | 35,352 | 63,273 |
Expenses: | ' | ' | ' |
Property operating expenses | 12,200 | 18,842 | 38,025 |
Depreciation | 4,231 | 6,363 | 10,589 |
General and administrative | 951 | 1,210 | 2,203 |
Provision on impairment of notes receivable and real estate assets | 0 | 2,400 | 7,618 |
Total operating expenses | 17,382 | 28,815 | 58,435 |
Other income (expense): | ' | ' | ' |
Other income (expense) | 29 | 14 | -24 |
Mortgage and loan interest | -6,139 | -10,866 | -22,103 |
Deferred borrowing costs amortization | -3,009 | -1,790 | -921 |
Loan charges and prepayment penalties | -3,245 | -3,471 | -1,269 |
Litigation settlement | -250 | -250 | 0 |
Total other expenses | -12,614 | -16,363 | -24,317 |
Loss from discontinued operations before gain on sale of real estate and taxes | -3,960 | -9,826 | -19,479 |
Gain on sale of real estate from discontinued operations | 98,951 | 8,885 | 56,907 |
Income tax benefit (expense) | -33,247 | 329 | -13,100 |
Income (loss) from discontinued operations | $61,744 | ($612) | $24,328 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY AS FOLLOWS (Details) (USD $) | Dec. 31, 2013 | Dec. 17, 2007 |
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY AS FOLLOWS: | ' | ' |
Notes payable for LK Four Hickory, LLC | ' | $28,000,000 |
Notes payable current outstanding balance | ' | 23,100,000 |
Maximum exposure to the Company will not exceed approximately | $20,000,000 | ' |
EARNINGS_PER_SHARE_CONSISTES_O
EARNINGS PER SHARE CONSISTES OF (Details) | Dec. 31, 2013 |
EARNINGS PER SHARE CONSISTS OF: | ' |
Series A 10% Cumulative Convertible Preferred stock shares outstanding | 3,353,954 |
Shares converted to Common Stock of the average daily closing price percent | 90.00% |
Shares of Series K convertible preferred stock, which are outstanding | 135,000 |
Stock Options Outstanding | 1,000 |
SUBSEQUENT_EVENTS_TRANSACTIONS
SUBSEQUENT EVENTS TRANSACTIONS AS FOLLOWS (Details) (USD $) | Mar. 31, 2014 | Feb. 28, 2014 | Feb. 20, 2014 | Feb. 14, 2014 | Feb. 13, 2014 | Feb. 12, 2014 | Feb. 06, 2014 | Jan. 29, 2014 |
SUBSEQUENT EVENTS TRANSACTIONS AS FOLLOWS: | ' | ' | ' | ' | ' | ' | ' | ' |
TCI entered into a sales contract to sell square foot commercial building | ' | ' | ' | ' | ' | ' | ' | 512,593 |
Commercial building sales price in millions | ' | ' | ' | ' | ' | ' | ' | $16.60 |
TCI sold unit apartment complex sales | ' | ' | ' | ' | ' | ' | 232 | ' |
Apartment complex sale price in millions | ' | ' | ' | ' | ' | ' | 23.1 | ' |
Buyer assumed the existing debt in millions | ' | ' | ' | ' | ' | ' | 16.5 | ' |
Recorded a gain in millions | ' | ' | ' | ' | ' | ' | 5.8 | ' |
TCI paid to settle all obligations in millions | ' | ' | ' | ' | ' | 1.2 | ' | ' |
Remaining balance of the note and accrued interest of was forgiven in millions | ' | ' | ' | ' | ' | 3.5 | ' | ' |
TCI acquired acres of land | ' | ' | ' | ' | 0.75 | ' | ' | ' |
TCI acquired acres of land for a sales price | ' | ' | ' | ' | 89,454 | ' | ' | ' |
Pay off the property tax note due to Propel Financial | ' | ' | ' | 257,000 | ' | ' | ' | ' |
Refinanced an existing margin loan with a third party loan in millions | ' | ' | 4 | ' | ' | ' | ' | ' |
Note matures at an interest rate | ' | ' | 6.00% | ' | ' | ' | ' | ' |
TCI refinanced the existing mortgage for a new mortgage in millions | ' | 19.2 | ' | ' | ' | ' | ' | ' |
TCI paid off the existing mortgage in millions | ' | 19.2 | ' | ' | ' | ' | ' | ' |
TCI paid off in closing costs in millions | ' | 1.6 | ' | ' | ' | ' | ' | ' |
Scheduled to acquire acres of land | 19.43 | ' | ' | ' | ' | ' | ' | ' |
Scheduled to acquire acres of land for a purchase price millions | 3.2 | ' | ' | ' | ' | ' | ' | ' |
Paid in extension deposits that will be applied against the purchase price in millions | $1.60 | ' | ' | ' | ' | ' | ' | ' |