Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 15, 2015 | Jun. 30, 2014 | |
Document and Entity Information | |||
Entity Registrant Name | AMERICAN REALTY INVESTORS INC | ||
Entity Trading Symbol | AREI | ||
Document Type | 10-K | ||
Document Period End Date | 31-Dec-14 | ||
Amendment Flag | FALSE | ||
Entity Central Index Key | 1102238 | ||
Current Fiscal Year End Date | -19 | ||
Entity Common Stock, Shares Outstanding | 14,027,619 | ||
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 | 2014 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $13,650,042 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
ASSET | ||
Real estate, at cost | $810,214 | $799,698 |
Real estate held for sale at cost, net of depreciation ($0 in 2014 and $2,390 in 2013 ) | 0 | 16,427 |
Real estate subject to sales contracts at cost, net of depreciation ($2,300 in 2014 and $1,949 in 2013) | 19,026 | 27,598 |
Less accumulated depreciation | -129,477 | -143,429 |
Total real estate | 699,763 | 700,294 |
Notes and interest receivable | ||
Performing (including $139,466 in 2014 and $145,754 in 2013 from related parties) | 149,484 | 153,275 |
Non-performing | 3,161 | 3,140 |
Less allowance for estimated losses (including $15,537 in 2014 and $15,809 in 2013 from related parties) | -18,279 | -19,600 |
Total notes and interest receivable | 134,366 | 136,815 |
Cash and cash equivalents | 12,299 | 16,437 |
Restricted cash | 49,266 | 32,929 |
Investments in unconsolidated subsidiaries and investees | 4,279 | 3,789 |
Receivable from related party | 21,414 | 14,086 |
Other assets | 44,111 | 38,972 |
Total assets | 965,498 | 943,322 |
Liabilities: | ||
Notes and interest payable | 638,891 | 618,930 |
Notes related to assets held for sale | 1,552 | 17,100 |
Notes related to assets subject to sales contracts | 18,616 | 23,012 |
Deferred revenue (including $72,564 in 2014 and $74,303 in 2013 from sales to related parties) | 74,409 | 76,148 |
Accounts payable and other liabilities (including $11,024 in 2014 and $15,394 in 2013 to related parties) | 52,442 | 73,271 |
Total liabilities | 785,910 | 808,461 |
Shareholders' equity: | ||
Preferred stock, Series A: $2.00 par value, authorized 15,000,000 shares, issued and outstanding 2,461,252 and 3,353,954 shares in 2014 and 2013, respectively (liquidation preference $10 per share), including 900,000 shares in 2014 and 2013 held by ARL. Series K: $2.00 par value, authorized, issued and outstanding zero and 135,000 shares in 2014 and 2013, respectively (liquidation preference $22 per share) | 3,126 | 4,908 |
Common stock, $0.01 par value, authorized 100,000,000 shares; issued 14,443,404 and 11,941,174 shares and outstanding 14,027,619 and 11,525,389 shares in 2014 and 2013, respectively; including 140,000 shares held by TCI (consolidated) in 2014 and 229,214 shares held by TCI (consolidated) in 2013. | 141 | 115 |
Treasury stock at cost; 415,785 shares in 2014 and 2013 and 140,000 shares held by TCI (consolidated) as of 2014 and 229,214 shares held by TCI (consolidated) as of 2013 | -6,395 | -6,395 |
Paid-in capital | 108,378 | 102,974 |
Retained earnings | 19,090 | -11,795 |
Total American Realty Investors, Inc. shareholders' equity | 124,340 | 89,807 |
Non-controlling interest | 55,248 | 45,054 |
Total equity | 179,588 | 134,861 |
Total liabilities and equity | $965,498 | $943,322 |
CONSOLIDATED_BALANCE_SHEETS_PA
CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Per Share data, unless otherwise specified | ||
PARENTHETICALS | ||
Depreciation of Real Estate held for sale at cost | $0 | $2,390 |
Depreciation of Real Estate subject to sales contracts at cost | 2,300 | 1,949 |
Performing from related parties | 139,466 | 145,754 |
Non-performing allowance for doubtful accounts | 15,537 | 15,809 |
Deferred revenue from sales to related parties | 72,564 | 74,303 |
Accounts payable and other liabilities to related parties | $11,024 | $15,394 |
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 | 2,461,252 | 3,353,954 |
Preferred stock Series A, shares outstanding | 2,461,252 | 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 | 0 | 135,000 |
Preferred stock Series K, shares outstanding | 0 | 135,000 |
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 | 14,443,404 | 11,941,174 |
Common stock, shares outstanding | 14,027,619 | 11,525,389 |
Shares held by TCI | 140,000 | 229,214 |
Treasury stock, shares | 415,785 | 415,785 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Revenues: | |||
Rental and other property revenues (including $701, $670 and $587 for the year ended 2014, 2013 and 2012, respectively, from related parties) | $79,412 | $80,750 | $81,849 |
Expenses: | |||
Property operating expenses (including $645, $699 and $879 for the year ended 2014, 2013 and 2012, respectively, from related parties) | 42,124 | 39,318 | 40,000 |
Depreciation | 17,593 | 15,954 | 14,873 |
General and administrative (including $3,628, $3,646 and $3,539 for the year ended 2014, 2013 and 2012, respectively, from related parties) | 10,282 | 7,919 | 6,037 |
Provision on impairment of notes receivable and real estate assets | 0 | 18,980 | 2,330 |
Net income fee to related party | 3,669 | 4,089 | 180 |
Advisory fee to related party | 8,943 | 10,166 | 10,182 |
Total operating expenses | 82,611 | 96,426 | 73,602 |
Operating income (loss) | -3,199 | -15,676 | 8,247 |
Other income (expense): | |||
Interest income (including $19,029, $19,110 and $14,182 for the year ended 2014, 2013 and 2012, respectively, from related parties) | 20,054 | 19,445 | 14,612 |
Other income (including $0, $0 and $6,000 for the year ended 2014, 2013 and 2012, respectively, from related parties) | 1,415 | 10,163 | 7,770 |
Mortgage and loan interest (including $3,660, $3,927 and $3,692 for the year ended 2014, 2013 and 2012, respectively, from related parties) | -35,416 | -36,158 | -38,224 |
Deferred borrowing costs amortization | -2,556 | -2,952 | -684 |
Loan charges and prepayment penalties | -2,854 | -5,557 | -3,574 |
Loss on the sale of investments | -92 | -283 | -118 |
Earnings from unconsolidated subsidiaries and investees | 347 | 391 | 372 |
Litigation settlement | 3,591 | -20,313 | -175 |
Total other expenses | -15,511 | -35,264 | -20,021 |
Loss before gain (loss) on land sales, non-controlling interest, and taxes | -18,710 | -50,940 | -11,774 |
Gain (loss) on land sales | 561 | -455 | 5,475 |
Loss from continuing operations before tax | -18,149 | -51,395 | -6,299 |
Income tax benefit (expense) | 20,413 | 40,513 | -144 |
Net income (loss) from continuing operations | 2,264 | -10,882 | -6,443 |
Discontinued operations: | |||
Loss from discontinued operations | -3,557 | -2,634 | -9,297 |
Gain on sale of real estate from discontinued operations | 61,879 | 98,951 | 8,885 |
Income tax benefit (expense) from discontinued operations | -20,413 | -33,711 | 144 |
Net income (loss) from discontinued operations | 37,909 | 62,606 | -268 |
Net income (loss) | 40,173 | 51,724 | -6,711 |
Net (income) loss attributable to non-controlling interests | -9,288 | -10,448 | 1,126 |
Net income (loss) attributable to American Realty Investors, Inc. | 30,885 | 41,276 | -5,585 |
Preferred dividend requirement | -2,043 | -2,452 | -2,452 |
Net income (loss) applicable to common shares | 28,842 | 38,824 | -8,037 |
Earnings per share - basic | |||
Loss from continuing operations | ($0.71) | ($2.07) | ($0.67) |
Income (loss) from discontinued operations | $2.99 | $5.43 | ($0.02) |
Net income (loss) applicable to common shares | $2.28 | $3.36 | ($0.69) |
Earnings per share - diluted | |||
Loss from continuing operations | ($0.71) | ($2.07) | ($0.67) |
Income (loss) from discontinued operations | $2.99 | $5.43 | ($0.02) |
Net income (loss) applicable to common shares | $2.28 | $3.36 | ($0.69) |
Weighted average common shares used in computing earnings per share | 12,683,956 | 11,525,389 | 11,525,389 |
Weighted average common shares used in computing diluted earnings per share | 12,683,956 | 11,525,389 | 11,525,389 |
Amounts attributable to American Realty Investors, Inc. | |||
Loss from continuing operations | -7,024 | -21,330 | -5,317 |
Income (loss) from discontinued operations | 37,909 | 62,606 | -268 |
Net income (loss) | $30,885 | $41,276 | ($5,585) |
CONSOLIDATED_STATEMENTS_OF_OPE1
CONSOLIDATED STATEMENTS OF OPERATIONS PARENTHETICALS (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
OPERATIONS PARENTHETICALS | |||
Rental and other property revenues from related parties | $701 | $670 | $587 |
Property operating expenses from related parties | 645 | 699 | 879 |
General and administrative expenses from related parties | 3,628 | 3,646 | 3,539 |
Interest income from related parties | 19,029 | 19,110 | 14,182 |
Other income related parties | 0 | 0 | 6,000 |
Mortgage and loan interests from related parties | $3,660 | $3,927 | $3,692 |
CONSOLIDATED_STATEMENTS_OF_SHA
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) | Total Equity | Comprehensive (Loss) | Preferred Stock | Common Stock Shares | Common Stock Amount | Treasury Stock | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non - controlling Interest |
In Thousands | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | |
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 |
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 |
Distribution to non-controlling interests | -333 | 0 | 0 | 0 | 0 | -302 | 0 | 0 | -31 | |
Sale of non-controlling interests | -289 | 0 | 0 | 0 | 0 | -289 | 0 | 0 | 0 | |
Series A preferred stock cash dividend ($1.00 per share) | -2,043 | 0 | 0 | 0 | 0 | -2,043 | 0 | 0 | 0 | |
Net income | $40,173 | $40,173 | $0 | $0 | $0 | $0 | $30,885 | $0 | $9,288 | |
Conversion of preferred stock into common stock | 7,219 | 0 | -1,782 | 2,502,230 | 26 | 0 | 8,038 | 0 | 0 | 937 |
Balance at Dec. 31, 2014 | 179,588 | -53,040 | 3,126 | 14,443,404 | 141 | -6,395 | 108,378 | 19,090 | 0 | 55,248 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Cash Flow From Operating Activities: | |||
Net income (loss) | $40,173 | $51,724 | ($6,711) |
Adjustments to reconcile net income (loss) applicable to common shares to net cash used in operating activities | |||
(Gain) loss on sale of land | -561 | 455 | -5,475 |
Gain on sale of income producing properties | -61,879 | -98,951 | -8,885 |
Depreciation and amortization | 18,345 | 21,518 | 22,563 |
Provision on impairment of notes receivable and real estate assets | 0 | 18,980 | 4,730 |
Amortization of deferred borrowing costs | 4,017 | 1,442 | 2,478 |
(Earnings) losses from unconsolidated subsidiaries and investees | 54 | -391 | -372 |
(Increase) decrease in assets: | |||
Accrued interest receivable | 10,095 | -12,895 | -6,117 |
Other assets | 2,034 | -2,242 | -5,854 |
Prepaid expense | -2,071 | -1,722 | -351 |
Escrow | -17,232 | 3,532 | 2,216 |
Earnest money | 180 | -535 | 235 |
Rent receivables | -1,384 | 3,807 | -286 |
Increase (decrease) in liabilities: | |||
Accrued interest payable | 157 | -5,116 | -8,467 |
Related party payables | -7,329 | -25,008 | 623 |
Other liabilities | -22,567 | 3,240 | -17,180 |
Net cash used in operating activities | -37,968 | -42,162 | -26,853 |
Cash Flow From Investing Activities: | |||
Proceeds from notes receivable | 27,767 | 2,855 | 16,055 |
Origination of notes receivables | -34,092 | -21,202 | -10,189 |
Acquisition of land held for development | -5,936 | -83 | -8,503 |
Acquisition of income producing properties | -78,557 | 0 | 0 |
Proceeds from sale of income producing properties | 132,917 | 259,115 | 42,874 |
Proceeds from sale of land | 8,391 | 14,806 | 39,766 |
Proceeds from sale of investments | 0 | 0 | 132 |
Investment in unconsolidated real estate entities | -544 | 4,770 | 2,654 |
Improvement of land held for development | -3,137 | -399 | -184 |
Improvement of income producing properties | -5,019 | -7,681 | -2,507 |
Acquisition of non-controlling interest | 0 | -75 | -355 |
Sale of non-controlling interest | -289 | 774 | -1,468 |
Sale of controlling interest | 0 | 50 | 1,339 |
Construction and development of new properties | -3,016 | -1,153 | -5,790 |
Net cash provided by investing activities | 38,485 | 251,777 | 73,824 |
Cash Flow From Financing Activities: | |||
Proceeds from notes payable | 183,766 | 203,885 | 143,449 |
Recurring amortization of principal on notes payable | -22,243 | -18,232 | -23,022 |
Payments on maturing notes payable | -163,494 | -390,941 | -167,771 |
Deferred financing costs | -6,959 | 1,837 | -3,750 |
Stock-secured borrowings | -568 | -411 | 0 |
Distributions to non-controlling interests | -333 | -263 | -338 |
Preferred stock dividends - Series A | -2,043 | -2,452 | -2,452 |
Conversion of preferred stock into common stock | 7,219 | 0 | 0 |
Net cash used in financing activities | -4,655 | -206,577 | -53,884 |
Net increase (decrease) in cash and cash equivalents | -4,138 | 3,038 | -6,913 |
Cash and cash equivalents, beginning of period | 16,437 | 13,399 | 20,312 |
Cash and cash equivalents, end of period | 12,299 | 16,437 | 13,399 |
Supplemental disclosures of cash flow information: | |||
Cash paid for interest | 37,158 | 44,240 | 48,606 |
Schedule of noncash investing and financing activities: | |||
Note receivable received from affiliate | $0 | $0 | $9,279 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
COMPREHENSIVE INCOME (LOSS) DURING | |||
Net income (loss) | $40,173 | $51,724 | ($6,711) |
Other comprehensive loss | 0 | 0 | 0 |
Unrealized income (loss) on foreign currency translation | 0 | 786 | 0 |
Unrealized loss on investment securities | 0 | 0 | 0 |
Total other comprehensive loss | 0 | 786 | 0 |
Comprehensive income (loss) | 40,173 | 52,510 | -6,711 |
Comprehensive income (loss) attributable to non-controlling interest | -9,288 | -10,448 | 1,126 |
Comprehensive income (loss) attributable to American Realty Investors, Inc. | $30,885 | $42,062 | ($5,585) |
ORGANIZATION_AND_SUMMARY_OF_SI
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||
Dec. 31, 2014 | |||
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., (“ART”), a Georgia corporation, and National Realty L.P. (“NRLP”), a Delaware limited partnership. 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 86.7% of ARL’s stock is owned by related party entities. ARL subsidiaries own approximately 80.9% of the outstanding shares of common stock of Transcontinental Realty Investors, Inc. (“TCI”), a Nevada corporation, whose common stock is traded on the NYSE under the symbol (“TCI”). 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 May Realty Holdings, Inc. (“MRHI”, formerly known as Realty Advisors Management, Inc. “RAMI”, effective August 7, 2014), a Nevada corporation, the sole shareholder of which is a trust known as the May Trust, became the Company’s external Advisor and Cash Manager. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges, for the Company’s benefit, debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to TCI and IOT. As the contractual advisor, Pillar is compensated by ARL under an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. ARL has no employees. Employees of Pillar render services to ARL in accordance with the terms of the Advisory Agreement. | |||
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, 2014, we owned 38 residential apartment communities comprising of 6,344 units, nine commercial properties comprising an aggregate of approximately 2.1 million square feet, and an investment in 4,234 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 LK-Four Hickory, LLC was accounted for under the equity method until January 17, 2012, when the investment was sold. | |||
The Company in accordance with the VIE guidance in ASC 810 “Consolidations” consolidates 36 and 34 multifamily residential properties located throughout the United States at December 31, 2014 and 2013, respectively, ranging from 32 units to 332 units. Assets totaling $363.5 million and $345.0 million at December 31, 2014 and 2013, 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 $0.0 and $16.4 million at December 31, 2014 and 2013, 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. | |||
Allowance for estimated losses. We assess the collectability of notes receivable on a periodic basis, of which the assessment consists primarily of an evaluation of cash flow projections of the borrower to determine whether estimated cash flows are sufficient to repay principal and interest in accordance with the contractual terms of the note. We recognize impairments on notes receivable when it is probable that principal and interest will not be received in accordance with the contractual terms of the loan. The amount of the impairment to be recognized generally is based on the fair value of the partnership’s real estate that represents the primary source of loan repayment. See Note 3 “Notes and Interest Receivable” for details on our notes receivable. | |||
Cash equivalents. For purposes of the Consolidated Statements of Cash Flows, all highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. Restricted cash consists of cash reserved primarily for specific uses such as insurance, property taxes and replacement reserves. | |||
Concentration of credit risk. The Company maintains its cash balances at commercial banks and through investment companies, the deposits of which are insured by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2014 and 2013, the Company maintained balances in excess of the insured amount. | |||
Earnings per share. Income (loss) per share is presented in accordance with ASC 620 “Earnings per Share”. Income (loss) per share is computed based upon the weighted average number of shares of common stock outstanding during each year. | |||
Use of estimates. In the preparation of Consolidated Financial Statements in conformity with GAAP, it is necessary for management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expense for the year ended. Actual results could differ from those estimates. | |||
Income taxes. The Company is a “C” corporation for U.S. federal income tax purposes. For tax periods ending before August 31, 2012, the Company filed an annual consolidated income tax return with TCI and IOT and their subsidiaries. ARL was the common parent for the consolidated group. After that date, the Company and the rest of the ARL group joined the MRHI consolidated group for tax purposes. The income tax expense (benefit) for the 2012 tax period in the accompanying financial statement was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT. That agreement continued until August 31, 2012, at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and MRHI for the remainder of 2012 and subsequent years. The agreement specifies the manner in which the group will share the consolidated tax liability and also how certain tax attributes are to be treated among members of the group. | |||
Recent accounting pronouncements. There were no recent accounting pronouncements that our company has not implemented that materially affect our financial statements |
REAL_ESTATE
REAL ESTATE | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
REAL ESTATE | |||||||||||||||||
REAL ESTATE | NOTE 2. REAL ESTATE | ||||||||||||||||
A summary of our real estate owned as of the end of the year is listed below (dollars in thousands): | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Apartments | $ | 455,602 | $ | 436,109 | |||||||||||||
Apartments under construction | 1,512 | - | |||||||||||||||
Commercial properties | 193,197 | 214,486 | |||||||||||||||
Land held for development | 159,903 | 149,103 | |||||||||||||||
Real estate held for sale | - | 18,817 | |||||||||||||||
Real estate subject to sales contract | 21,326 | 29,547 | |||||||||||||||
Total real estate, at cost, less impairment | 831,540 | 848,062 | |||||||||||||||
Less accumulated deprecation | (131,777 | ) | (147,768 | ) | |||||||||||||
Total real estate, net of depreciation | $ | 699,763 | $ | 700,294 | |||||||||||||
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 | |||||||||||||||||
There was no provision for impairment of notes receivable, investment in real estate partnerships, and real estate assets for the year ended December 31, 2014. | |||||||||||||||||
In the prior year impairment was recorded as an additional loss in the commercial portfolio of $9.6 million, the land portfolio of $1.6 million and the remaining $7.8 million was related to 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. | |||||||||||||||||
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. There was no provision for impairment for the year ended December 31, 2014. | |||||||||||||||||
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. | |||||||||||||||||
The following is a brief description of the more significant property acquisitions and sales in 2014: | |||||||||||||||||
On February 6, 2014, TCI sold a 232-unit apartment complex known as Pecan Pointe, located in Temple, Texas, to an independent third party, for a sales price of $23.1 million. The buyer assumed the existing debt of $16.5 million secured by the property. A gain of $6.1 million was recorded on the sale. | |||||||||||||||||
On March 13, 2014, 6.6 acres of land known as Three Hickory located in Farmers Branch, Texas was transferred back to TCI as a result of the settlement agreement with the lender. On the same day TCI sold the land to IOT for $1.2 million which resulted in a gain of $1.2 million. | |||||||||||||||||
On March 26, 2014, TCI sold 6.314 acres of land known as McKinney Ranch land, located in McKinney, Texas, to an independent third party, for a sales price of $1.7 million. TCI paid $1.5 million on the existing mortgage to satisfy a portion of the multi-tract collateral debt of $6.6 million, secured by various land parcels located in McKinney, Texas. A gain of $0.8 million was recorded on the sale. | |||||||||||||||||
On March 31, 2014, the Company purchased 16.87 acres of land known as Valwood Acres, located in Farmers Branch, Texas, from an independent third party, for a purchase price of $3.2 million. | |||||||||||||||||
On April 3, 2014, TCI sold a 512,593 square foot commercial building known as 1010 Common, located in New Orleans, Louisiana, to an independent third party, for a sales price of $16.6 million. A gain of $7.0 million was recorded on the sale. | |||||||||||||||||
On July 25, 2014, TCI sold 24.498 acres of land known as Stanley Tools and Kelly Lots, located in Farmers Branch, Texas, to an independent third party, for a sales price of $4.3 million. TCI paid off the existing mortgage of $1.7 million in addition to making a $0.2 million payment on an existing mortgage related to another parcel of land located in Gulfport, Mississippi. A nominal gain was recorded on the sale. | |||||||||||||||||
On August 12, 2014, TCI sold a 20,715 square foot commercial building known as Sesame Square, located in Anchorage, Alaska, to an independent party, for a sales price of $2.6 million. TCI paid off the existing mortgage of $0.8 million. A gain of $1.8 million was recorded on the sale. | |||||||||||||||||
On September 19, 2014, TCI acquired 100% ownership of Summer Breeze I-V, LLC, from an independent third party, which resulted in the acquisition of Sunset Lodge, a 216-unit complex located in Odessa, Texas. We exchanged the existing note receivable and all accrued interest in the amount of $3.5 million for the ownership interest. | |||||||||||||||||
On September 23, 2014, TCI sold a 106-unit complex known as Bridgewood Ranch, located in Kaufman, Texas, to an independent third party, for a sales price of $8.0 million. TCI paid off the existing mortgage of $4.5 million and the buyer obtained a new mortgage of $6.6 million. TCI did not recognize or record the sale in accordance with ASC 360-20 due to our continuing involvement as a result of having the option to repurchase the sold property at a later date. The exercise of the option is subject to the approval of the U.S. Department of Housing and Urban Development. TCI determined a sale had not occurred for financial reporting purposes and therefore the asset remains on their books. | |||||||||||||||||
On November 3, 2014, TCI sold a 290-unit apartment complex known as Blue Ridge, located in Midland, Texas, to an independent third party, for a sales price of $52.8 million. We paid off the existing mortgage of $23.7 million. A gain of $26.7 million was recorded on the sale. | |||||||||||||||||
On November 6, 2014, TCI acquired 100% ownership of Dun-Run Golf, Dun-Run Development, and Dun-Run Restaurants, all limited liability companies, which resulted in the acquisition of Mahogany Run Golf Course for a purchase price of $13.3 million. TCI took out a note as seller financing to aid in the purchase in the amount of $6.6 million. The note accrues at 8% with interest only payments due through the maturity date of November 6, 2015. An option to renew for one more year can be exercised if a $1.0 million principal payment is made before maturity. | |||||||||||||||||
On November 13, 2014, TCI sold a 216-unit complex known as Sunset Lodge, as well as 5.98 acres of land, both located in Odessa, Texas, to an independent third party, for a combined sales price of $40.6 million. The buyer assumed the existing debt of $19.0 million secured by the property. A gain of $20.7 million was recorded on the sale. | |||||||||||||||||
On December 1, 2014, TCI acquired a 208-unit complex known as Legacy at Pleasant Grove, located in Texarkana, Texas, from a third party. We exchanged the existing receivable and all accrued interest in the amount of $5.0 million for the complex. | |||||||||||||||||
On December 1, 2014, TCI acquired a 148-unit complex known as Villas at Park West I, located in Pueblo, Colorado, from a third party. We exchanged the existing receivable and all accrued interest in the amount of $1.3 million for the complex. | |||||||||||||||||
On December 1, 2014, TCI acquired a 112-unit complex known as Villas at Park West II, located in Pueblo, Colorado, from a third party. We exchanged the existing receivable and all accrued interest in the amount of $5.1 million for the complex. | |||||||||||||||||
On December 30, 2014, TCI acquired 8.387 acres of land known as Bonneau Land, located in Farmers Branch, Texas, from a third party, for a purchase price of $1.2 million. | |||||||||||||||||
On December 30, 2014, TCI sold 2.606 acres of land known as Carr (Luna) Land, located in Farmers Branch, Texas, to a third party, for a sales price of $0.3 million. A loss of $0.4 million was recorded on the sale. | |||||||||||||||||
On 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, 2014, 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, 2014, there remain one apartment complex, one commercial building and 110 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, 2014 | ||||||||||||||
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: | ||||||||||||||
Foundation for Better Housing, Inc. (Holland Lake) (1) | 19-Dec | 12.00% | $ 4,698 | Secured | ||||||||||
Foundation for Better Housing, Inc. (Holland Lake) (1) | 17-Dec | 12.00% | 1,674 | Secured | ||||||||||
Foundation for Better Housing, Inc. (Overlook at Allensville) (1) | 19-Nov | 12.00% | 2,472 | Secured | ||||||||||
Foundation for Better Housing, Inc. (Overlook at Allensville) (1) | 17-Dec | 12.00% | 1,408 | Secured | ||||||||||
Foundation for Better Housing, Inc. (Preserve @ Prairie Pointe) (1) | 19-Mar | 12.00% | 1,810 | Secured | ||||||||||
Foundation for Better Housing, Inc. (Preserve @ Prairie Pointe) (1) | 17-Mar | 12.00% | 1,156 | Secured | ||||||||||
Foundation for Better Housing, Inc. (Vista Ridge) (1) | 19-Apr | 12.00% | 3,923 | Secured | ||||||||||
Foundation for Better Housing, Inc. (Vista Ridge) (1) | 17-Jun | 12.00% | 1,492 | Secured | ||||||||||
HGH Residential, LLC (Tradewinds Development) | 19-Jul | 12.00% | 6,131 | Secured | ||||||||||
One Realco Corporation (1,2) | 17-Jan | 3.00% | 7,000 | Unsecured | ||||||||||
Realty Advisors Management, Inc. (1) | 16-Dec | 2.20% | 20,387 | 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. (Reserve at White Rock Phase I) (1) 12/32 | 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) 12/32 | 12.00% | 2,555 | 100% Interest in Unified Housing of Harvest Hill, 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. (Trails at White Rock) (1) | 12.00% | 3,815 | 100% Interest in Unified Housing of Harvest Hill III, LLC | |||||||||||
Unified Housing Foundation, Inc. (1) | 17-Jun | 12.00% | 1,261 | Unsecured | ||||||||||
Unified Housing Foundation, Inc. (1) | 17-Dec | 12.00% | 1,207 | Unsecured | ||||||||||
Unified Housing Foundation, Inc. (1) | 15-Dec | 12.00% | 2,665 | Unsecured | ||||||||||
Unified Housing Foundation, Inc. (1) | 16-Dec | 12.00% | 3,657 | Unsecured | ||||||||||
Various non-related party notes | Various | Various | 3,503 | Various secured interests | ||||||||||
Various related party notes (1) | Various | Various | 6,393 | Various secured interests | ||||||||||
Accrued interest | 8,606 | |||||||||||||
Total Performing | $ 149,484 | |||||||||||||
Non-Performing loans: | ||||||||||||||
Leman Development, Ltd (2) | 11-Jul | 7.00% | 1,500 | Unsecured | ||||||||||
Tracy Suttles (2) | 11-Dec | 0.00% | 1,077 | Unsecured | ||||||||||
Various non-related party notes | Various | Various | 507 | Various secured interests | ||||||||||
Accrued interest | 77 | |||||||||||||
Total Non-Performing | $ 3,161 | |||||||||||||
Allowance for estimated losses | (18,279) | |||||||||||||
Total | $ 134,366 | |||||||||||||
(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, 2014, 14.9% of our assets were invested in junior and wraparound mortgage loans. | ||||||||||||||
As of December 31, 2014, the obligors on $131.2 million or 91.2% of the mortgage notes receivable portfolio were due from related parties. The Company recognized $14.3 million of interest income from these related party notes receivables. | ||||||||||||||
As of December 31, 2014, $3.1 million or 2.1% of the mortgage notes receivable portfolio were non-performing. | ||||||||||||||
The Company has various notes receivable from Unified Housing foundation, Inc. (“UHF”). UHF is determined to be a related party due to our significant investment in the performance of the collateral secured under the notes receivable. Payments are due from surplus cash flow from operations, sale or refinancing of the underlying properties. These notes are cross collateralized to the extent that any surplus cash available from any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes. Furthermore, any surplus cash available from any of the properties UHF owns, besides the properties underlying these notes, can be used to repay outstanding interest and principal for these notes. The allowance on the notes was a purchase allowance that was netted against the notes when acquired. | ||||||||||||||
In 2010, the Company agreed to reduce the interest rate from 12% to 5.25% for a five year period on the surplus cash flow notes receivable from UHF. As of January 1, 2013, the Company agreed to extend the maturity on these surplus cash flow notes receivable for an additional term of five years in exchange for the early termination of the reduced interest rate. |
ALLOWANCE_FOR_ESTIMATED_LOSSES
ALLOWANCE FOR ESTIMATED LOSSES | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
ALLOWANCE FOR ESTIMATED LOSSES | |||||||||||||
ALLOWANCE FOR ESTIMATED LOSSES | NOTE 4. ALLOWANCE FOR ESTIMATED LOSSES | ||||||||||||
The allowance account for receivables was reviewed and decreased in 2014. The decrease was due to a note that was paid off, and a note that was written off, both of which were fully reserved. The decrease in 2013 was due to an allowance amount on a fully reserved note that was adjusted by the amount of a payment received. This decrease was offset by a reserve amount taken on a related party note receivable due to questionable recovery. The 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 table below shows our allowance for estimated losses (dollars in thousands): | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Balance January 1, | $ | 19,600 | $ | 21,704 | $ | 13,383 | |||||||
Increase (decrease) in provision | (1,321 | ) | (2,104 | ) | 8,321 | ||||||||
Balance December 31, | $ | 18,279 | $ | 19,600 | $ | 21,704 |
INVESTMENTS_IN_UNCONSOLIDATED_
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES | |||||||||||||
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND 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, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Gruppa Florentina, LLC(1) | 20 | % | 20 | % | 20 | % | |||||||
LK-Four Hickory, LLC(2) | 0 | % | 0 | % | 0 | % | |||||||
______________________ | |||||||||||||
(1) Other investees. | |||||||||||||
(2) Other investees. ARL's 28.57% investment in LK-Four Hickory, LLC was sold on January 17, 2012. | |||||||||||||
The market values, other than unconsolidated subsidiaries, as of the year ended December 31, 2014, 2013 and 2012 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, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Other Investees | |||||||||||||
Real estate, net of accumulated depreciation | $ | 11,647 | $ | 10,823 | $ | 12,343 | |||||||
Notes receivable | 7,326 | 6,526 | 6,192 | ||||||||||
Other assets | 30,291 | 32,131 | 32,145 | ||||||||||
Notes payable | (10,429 | ) | (11,022 | ) | (13,824 | ) | |||||||
Other liabilities | (7,192 | ) | (8,134 | ) | (7,443 | ) | |||||||
Shareholders' equity/partners capital | (31,643 | ) | (30,324 | ) | (29,413 | ) | |||||||
Revenue | $ | 48,893 | $ | 46,276 | $ | 45,505 | |||||||
Depreciation | (1,151 | ) | (1,166 | ) | (1,277 | ) | |||||||
Operating expenses | (45,590 | ) | (42,330 | ) | (41,188 | ) | |||||||
Interest expense | (901 | ) | (1,022 | ) | (1,181 | ) | |||||||
Income from continuing operations | $ | 1,251 | $ | 1,758 | $ | 1,859 | |||||||
Income from discontinued operations | - | - | - | ||||||||||
Net income | $ | 1,251 | $ | 1,758 | $ | 1,859 | |||||||
Company's proportionate share of earnings (1) | $ | 250 | $ | 352 | $ | 372 | |||||||
(1) Earnings represent continued and discontinued operations |
NOTES_AND_INTEREST_PAYABLE
NOTES AND INTEREST PAYABLE | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
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, 2014 (dollars in thousands): | |||||||||||||
Notes | Accrued | Total | |||||||||||
Payable | Interest | Debt | |||||||||||
Apartments | $ | 420,083 | $ | 1,157 | $ | 421,240 | |||||||
Commercial | 114,085 | 433 | 114,518 | ||||||||||
Land held for development | 83,439 | 117 | 83,556 | ||||||||||
Real estate held for sale | 452 | - | 452 | ||||||||||
Real estate subject to sales contract | 16,961 | 1,655 | 18,616 | ||||||||||
Other | 20,464 | 213 | 20,677 | ||||||||||
Total | $ | 655,484 | $ | 3,575 | $ | 659,059 | |||||||
The following table schedules the principal payments on the notes payable for the next five years and thereafter (dollars in thousands): | |||||||||||||
Year | Amount | ||||||||||||
2015 | $ 109,841 | ||||||||||||
2016 | 79,994 | ||||||||||||
2017 | 43,602 | ||||||||||||
2018 | 8,661 | ||||||||||||
2019 | 43,583 | ||||||||||||
Thereafter | 369,803 | ||||||||||||
Total | $ 655,484 | ||||||||||||
Interest payable at December 31, 2014, was $3.6 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 $684.8 million. Of the total notes payable, the senior debt is $586.9 million, junior debt is $60.2 million, and other debt is $8.4 million. Included in other debt are property tax loans of $0.3 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 February 10, 2014, a subsidiary of the Company paid off an existing margin loan and entered into a $4 million promissory note with a third party, secured by TCI stock. The note matures on February 10, 2016 and has an interest rate of 6%. | |||||||||||||
On February 12, 2014, TCI exercised the first prepayment option on the settlement relating to the Amoco Building and paid $1.2 million to settle all obligations. The remaining balance of the note in the amount of $3.5 million, along with accrued interest, was forgiven. The 135,000 shares of Series K Convertible Preferred Stock of ARL that was pledged to the lender has been released to TCI. The Series K preferred stock was cancelled May 7, 2014. | |||||||||||||
On February 14, 2014, the Company entered into a settlement and loan modification agreement with the lender regarding EQK Portage land. The new loan is for $1.6 million, matures on February 6, 2017, and has an interest rate of one-month LIBOR plus 5%. 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. | |||||||||||||
On February 28, 2014, TCI refinanced the existing mortgage on Parc at Denham Springs apartments, a 224-unit complex located in Denham Springs, Louisiana, 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, maturing April 1, 2051. | |||||||||||||
On March 25, 2014, TCI exercised its lender granted option under the settlement agreement relating to the Galleria East Center Retail / Showcase Chevrolet land which was transferred to the existing lender on February 4, 2011. TCI paid the balance of the notes along with all accrued and unpaid interest and received a reduction in price of $0.4 million. | |||||||||||||
On March 28, 2014, TCI secured financing of $40.0 million from an independent third party. The note has a term of five years at an interest rate of 12.0%. The note is interest only for the first year with quarterly principal payments due of $500,000 starting April 1, 2015. The loan is secured by various equity interests in residential apartments and can be prepaid at a penalty rate of 4% for year 1 with the penalty declining by 1% each year thereafter. | |||||||||||||
On March 31, 2014, TCI entered into a settlement agreement relating to the Fenton Centre building which was transferred to the existing lender on June 7, 2011. The total amount of the settlement was $7.0 million, $5.0 million was paid at the time of the settlement and the remaining $2.0 million will be paid out in equal monthly installments through November 5, 2015. | |||||||||||||
On May 28, 2014, a $1.5 million principal payment was made to the existing Realty Advisors, Inc. mortgage and two additional land parcels, including 8.0 acres of Ladue land owned by TCI and 16.87 acres of Valwood land owned by ARL, were substituted as collateral under the note in exchange for a release of a $4 million deposit account. The principal balance is allocated based on the land valuation. | |||||||||||||
On July 31, 2014, TCI refinanced the existing mortgage on Desoto Ranch apartments, a 248-unit complex located in Desoto, Texas, for a new mortgage of $15.7 million. TCI paid off the existing mortgage of $15.7 million and $0.5 million in closing costs. The note accrues interest at 3.50% and payments of interest and principal are due monthly, maturing June 1, 2050. | |||||||||||||
On August 28, 2014, TCI refinanced the existing mortgage on Treehouse apartments, a 160-unit complex located in Irving, Texas, for a new mortgage of $5.8 million. TCI paid off the existing mortgage of $4.7 million and $1.1 million in closing costs and escrows. The note accrues interest at 3.55% and payments of interest and principal are due monthly, maturing September 1, 2044. | |||||||||||||
On September 23, 2014, TCI sold a 106-unit complex known as Bridgewood Ranch, located in Kaufman, Texas, to an independent third party, for a sales price of $8.0 million. TCI paid off the existing mortgage of $4.5 million and the buyer obtained a new mortgage of $6.6 million. TCI did not recognize or record the sale in accordance with ASC 360-20 due to our continuing involvement as a result of having the option to repurchase the sold property at a later date. The exercise of the option is subject to the approval of the U.S. Department of Housing and Urban Development. TCI determined a sale had not occurred for financial reporting purposes and therefore the asset remains on their books. | |||||||||||||
On October 17, 2014, the construction loan in the amount of $19.7 million that was taken out on July 1, 2012, to fund the development of Sunset Lodge apartments, a 216-unit complex located in Odessa, Texas, closed into permanent financing. The note accrues interest at 3.00% and payments of interest only are payable commencing August 1, 2012, through February 1, 2014, at which time principal and interest payments are due through the maturity date of February 1, 2054. | |||||||||||||
On December 12, 2014, TCI refinanced the existing mortgage on Stanford Center, a 333,381 square foot commercial building located in Dallas, Texas, for a new mortgage of $28.0 million. We paid off the existing mortgage of $21.3 million and $7.8 million in closing costs and escrows. The note accrues interest at a floating rate of 5.50% above the 30-day LIBOR index, with a floor of 5.75% and payments of interest only, maturing on January 5, 2017. | |||||||||||||
In conjunction with the development of various apartment projects and other developments, we drew down $3.0 million in construction loans during the twelve months ended December 31, 2014. |
RELATED_PARTY_TRANSACTIONS_AND
RELATED PARTY TRANSACTIONS AND FEES | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
RELATED PARTY TRANSACTIONS AND FEES | ||||||||||||||
RELATED PARTY TRANSACTIONS AND FEES | 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 MRHI, a Nevada corporation, the sole shareholder of which is a trust known as the May Trust, became the Company’s external Advisor and Cash Manager. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges, for the Company’s benefit, debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to TCI and IOT. As the contractual advisor, Pillar is compensated by ARL under an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. ARL has no employees. Employees of Pillar render services to ARL in accordance with the terms of the Advisory Agreement. | ||||||||||||||
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 and Regis: | ||||||||||||||
Fees, expenses, and revenue paid to and/or received from our advisor: | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
(dollars in thousands) | ||||||||||||||
Fees: | ||||||||||||||
Advisory | $ | 8,943 | $ | 10,166 | $ | 10,182 | ||||||||
Construction advisory | - | - | 181 | |||||||||||
Mortgage brokerage and equity refinancing | 1,152 | 1,878 | 1,881 | |||||||||||
Net income | 3,669 | 4,089 | 180 | |||||||||||
Property acquisition and sales | 177 | - | 20 | |||||||||||
$ | 13,941 | $ | 16,133 | $ | 12,444 | |||||||||
Other Expense: | ||||||||||||||
Cost reimbursements | $ | 3,449 | $ | 3,466 | $ | 3,359 | ||||||||
Interest paid (received) | (1,043 | ) | 431 | 495 | ||||||||||
$ | 2,406 | $ | 3,897 | $ | 3,854 | |||||||||
Revenue: | ||||||||||||||
Rental | $ | 701 | $ | 670 | $ | 587 | ||||||||
Fees paid to Regis and related parties: | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
(dollars in thousands) | ||||||||||||||
Fees: | ||||||||||||||
Property acquisition | $ | 348 | $ | - | $ | 71 | ||||||||
Property management, construction manaement and leasing commissions | 583 | 474 | 2,189 | |||||||||||
Real estate brokerage | 2,848 | 4,081 | 2,321 | |||||||||||
$ | 3,779 | $ | 4,555 | $ | 4,581 | |||||||||
The Company received rental revenue of $0.7 million in 2013, $0.6 million in 2012, and $0.4 million in 2011 from Pillar and its related parties for properties owned by the Company. | ||||||||||||||
As of December 31, 2014, the Company had notes and interest receivables, net of allowances, of $73.9 million and $5.8 million, respectively, due from UHF, a related party. See Part 2, Item 8. Note 3. “Notes and Interest Receivable”. During the current period, the Company recognized interest income of $13.0 million, originated $5.4 million, received principal payments of $21.9 million and received interest payments of $24.8 million from these related party notes receivables. | ||||||||||||||
As of December 31, 2014, the Company had notes and interest receivables of $21.0 million and $1.0 million, respectively, due from FBH, a related party. See Part 2, Item 8. Note 3. “Notes and Interest Receivable”. During the current period, the Company recognized interest income of $1.0 million and originated $21.0 million from these related party notes receivables. | ||||||||||||||
On January 1, 2012, the Company’s subsidiary, TCI, entered into a development agreement with UHF, a non-profit corporation that provides management services for the development of residential apartment projects in the future. This development agreement was terminated December 31, 2013. The Company has also invested in surplus cash notes receivables from UHF and has sold several residential apartment properties to UHF in prior years. Due to this ongoing relationship and the significant investment in the performance of the collateral secured under the notes receivable, UHF has been determined to be a related party. | ||||||||||||||
The Company is 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 MRHI for the remainder of 2012 and subsequent years. 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, 2014 (dollars in thousands): | ||||||||||||||
Pillar | ||||||||||||||
Related party receivable, December 31, 2013 | $ | 14,086 | ||||||||||||
Cash transfers | 59,372 | |||||||||||||
Advisory fees | (8,943 | ) | ||||||||||||
Net income fee | (3,669 | ) | ||||||||||||
Cost reimbursements | (3,449 | ) | ||||||||||||
Interest income | 1,043 | |||||||||||||
Notes receivable purchased | (26,290 | ) | ||||||||||||
Fees and commissions | (4,526 | ) | ||||||||||||
Expenses paid by Advisor | (6,957 | ) | ||||||||||||
Financing (mortgage payments) | (3 | ) | ||||||||||||
Sales/purchases transactions | 750 | |||||||||||||
Tax sharing | - | |||||||||||||
Related party receivable, December 31, 2014 | $ | 21,414 | ||||||||||||
Below are transactions that involve a related party: | ||||||||||||||
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, 2014, 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. | ||||||||||||||
As of December 31, 2014, there remain one apartment complex, one commercial building and 110 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. 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, 2014 | |
DIVIDENDS Text Block: | |
DIVIDENDS Text Block | 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 2014, 2013, or 2012. 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, 2014 | |
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, 2014, 2,461,252 shares of Series A Preferred Stock were outstanding. Of the outstanding shares, there were 300,000 shares owned by ART Edina, Inc., and 600,000 shares owned by ART Hotel Equities, Inc., a wholly owned subsidiary of ARL. As of May 30, 2014, these 900,000 shares were transferred to ARL. Dividends are not paid on the shares owned by ARL. | |
Prior to July 17, 2014, RAI owned 2,451,435 shares of the outstanding Series A convertible preferred stock. On July 17, 2014, RAI converted 890,797 shares, including $6.3 million in accumulated dividends unpaid for these shares, into the requisite number of shares of common stock. As of December 31, 2014, RAI owns 1,560,638 shares of the outstanding Series A convertible preferred stock and has accrued dividends of $9.6 million. | |
There are 91,000 shares of Series D 9.50% Cumulative Preferred Stock authorized, with a par value of $2.00 per share, and a liquidation preference of $20.00 per share. Dividends are payable at the annual rate of $1.90 per year or $.475 per quarter to stockholders of record on the last day of each March, June, September and December when and as declared by the Board of Directors. The Series D Preferred Stock is reserved for the conversion of the Class A limited partner units of Ocean Beach Partners, L.P. The Class A units may be exchanged for Series D Preferred Stock at the rate of 20 Class A units for each share of Series D Preferred Stock. Between June 1, 2001 and May 31, 2006, all unexchanged Class A units are exchangeable. At December 31, 2014, 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, 2014, 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, 2014. | |
The Company had 135,000 shares of Series K convertible preferred stock, which were held by TCI and used as collateral on a note. The note has been paid in full and the Series K preferred stock was cancelled May 7, 2014. |
STOCK_OPTIONS
STOCK OPTIONS | 12 Months Ended |
Dec. 31, 2014 | |
STOCK OPTIONS | |
STOCK OPTIONS | NOTE 10. STOCK OPTIONS |
In January 1999, stockholders approved the Director’s Stock Option Plan (the “Director’s Plan”) which provided for options to purchase up to 40,000 shares of common stock. In December 2005, the Director’s Plan was terminated. Options granted pursuant to the Director’s Plan were immediately exercisable and expire on the earlier of the first anniversary of the date on which a Director ceases to be a Director or ten years from the date of grant. Each Independent Director was granted an option to purchase 1,000 common shares. As of December 31, 2014, there were 1,000 shares of stock options outstanding which were exercisable at $9.70 per share. These options expired unexercised January 1, 2015. | |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INCOME TAXES | |||||||||||||
INCOME TAXES | NOTE 11. INCOME TAXES | ||||||||||||
For tax periods ending before August 31, 2012, ARL was part of the ARL consolidated federal return. After that date, ARL and the rest of the ARL group joined the MRHI consolidated group for tax purposes. The income tax expense (benefit) for the first part of the 2012 tax period was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT. That agreement continued until August 31, 2012 at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and MRHI for the remainder of 2012 and subsequent periods. For 2012 and 2014, MRHI, ARL, TCI and IOT had a combined net taxable loss and ARL recorded no current tax (benefit) or expense. For 2013, MRHI 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): | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Loss from continuing operations | $ | (1,169 | ) | $ | (24,217 | ) | $ | (5,387 | ) | ||||
Income from discontinued operations | 1,169 | 17,415 | 5,387 | ||||||||||
The full 2013 tax (benefit) to ARL comes from MRHI | $ | - | $ | (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): | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Computed "expected" income tax (benefit) expense | $ | 14,061 | $ | 15,684 | $ | (1,955 | ) | ||||||
Book to tax differences in gains on sale of property | (2,350 | ) | (20,373 | ) | (8,503 | ) | |||||||
Book to tax differences from entities not consolidated for tax purposes | (23,900 | ) | (33,565 | ) | (3,831 | ) | |||||||
Book to tax differences of depreciation and amortization | 1,415 | 1,250 | 1,460 | ||||||||||
Valuation allowance against current net operating loss benefit | 20,125 | 17,415 | 5,387 | ||||||||||
Other book to tax differences | (9,351 | ) | 17,208 | 7,442 | |||||||||
Total | $ | - | $ | (2,381 | ) | $ | - | ||||||
Alternative minimum tax | $ | - | $ | - | $ | - | |||||||
Deferred income taxes reflect the tax effects of temporary timing differences between carrying amounts of assets and liabilities reflected on the financial statements and the amounts used for income tax purposes. ARL’s tax basis in its net assets differs from the amount at which its net assets are reported for financial statement purposes, principally due to the accounting for gains and losses on property sales, and depreciation on owned properties. The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (amounts in thousands): | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Net operating losses | $ | 74,357 | $ | 88,486 | $ | 68,034 | |||||||
AMT credits | 2,201 | 2,201 | 2,201 | ||||||||||
Basis difference of: | |||||||||||||
Real estate holdings and equipment | 10,337 | 11,959 | 1,159 | ||||||||||
Notes receivable | 6,946 | 7,448 | 8,248 | ||||||||||
Investments | (14,950 | ) | (14,960 | ) | (13,824 | ) | |||||||
Notes payable | 8,189 | 13,360 | 17,691 | ||||||||||
Deferred gains | 18,086 | 18,746 | 18,170 | ||||||||||
Total | $ | 105,166 | $ | 127,240 | $ | 101,679 | |||||||
Deferred tax valuation allowance | (105,166 | ) | (127,240 | ) | (101,679 | ) | |||||||
Net deferred tax asset | $ | - | $ | - | $ | - | |||||||
At December 31, 2014, 2013 and 2012 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 $53.0 million expiring through the year 2033. The alternative minimum tax credit balance did not change in 2014 and remains at approximately $2.2 million. The credit has no expiration. | |||||||||||||
ARL is subject to routine audits by taxing jurisdictions; however, there are currently no audits in progress for any tax periods. Management believes ARL is no longer subject to income tax examinations for years prior to 2011. |
FUTURE_MINIMUM_RENTAL_INCOME_U
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES | 12 Months Ended | ||
Dec. 31, 2014 | |||
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, 2014 (dollars in thousands): | |||
Year | Amount | ||
2015 | $ 17,627 | ||
2016 | 16,063 | ||
2017 | 13,665 | ||
2018 | 12,470 | ||
2019 | 8,136 | ||
Thereafter | 20,000 | ||
Total | $ 87,961 |
OPERATING_SEGMENTS
OPERATING SEGMENTS | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
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 2014, 2013 and 2012 (dollars in thousands): | |||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2014 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 20,476 | $ | 58,882 | $ | - | $ | 1 | $ | 53 | $ | 79,412 | |||||||||||||
Operating expenses | 13,127 | 27,588 | - | 1,397 | 12 | 42,124 | |||||||||||||||||||
Depreciation and amortization | 7,413 | 10,270 | - | - | (90 | ) | 17,593 | ||||||||||||||||||
Mortgage and loan interest | 5,934 | 15,240 | - | 4,375 | 9,867 | 35,416 | |||||||||||||||||||
Deferred borrowing costs | 92 | 1,538 | - | 243 | 683 | 2,556 | |||||||||||||||||||
Loan charges and prepayment penalties | 113 | 2,625 | - | 66 | 50 | 2,854 | |||||||||||||||||||
Interest income | - | - | - | - | 20,054 | 20,054 | |||||||||||||||||||
Gain on land sales | - | - | - | 561 | - | 561 | |||||||||||||||||||
Segment operating income (loss) | $ | (6,203 | ) | $ | 1,621 | $ | - | $ | (5,519 | ) | $ | 9,585 | $ | (516 | ) | ||||||||||
Capital expenditures | 4,874 | 320 | - | 2,436 | - | 7,630 | |||||||||||||||||||
Assets | 142,118 | 390,366 | - | 167,279 | - | 699,763 | |||||||||||||||||||
Property Sales | |||||||||||||||||||||||||
Sales price | $ | 19,182 | $ | 115,273 | $ | - | $ | 8,091 | $ | - | $ | 142,546 | |||||||||||||
Cost of sale | 9,168 | 63,408 | - | 7,530 | - | 80,106 | |||||||||||||||||||
Deferred current gain | - | - | - | - | - | - | |||||||||||||||||||
Recognized prior deferred gain | - | - | - | - | - | - | |||||||||||||||||||
Gain on sale | $ | 10,014 | $ | 51,865 | $ | - | $ | 561 | $ | - | $ | 62,440 | |||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2013 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 24,215 | $ | 56,369 | $ | - | $ | 39 | $ | 127 | $ | 80,750 | |||||||||||||
Operating expenses | 11,623 | 26,223 | - | 1,431 | 41 | 39,318 | |||||||||||||||||||
Depreciation and amortization | 5,938 | 10,188 | - | - | (172 | ) | 15,954 | ||||||||||||||||||
Mortgage and loan interest | 5,798 | 16,206 | - | 6,200 | 7,954 | 36,158 | |||||||||||||||||||
Deferred borrowing costs | 67 | 2,268 | - | 212 | 405 | 2,952 | |||||||||||||||||||
Loan charges and prepayment penalties | 150 | 3,937 | - | 1,080 | 390 | 5,557 | |||||||||||||||||||
Interest income | - | - | - | - | 19,445 | 19,445 | |||||||||||||||||||
Loss on land sales | - | - | - | (455 | ) | - | (455 | ) | |||||||||||||||||
Segment operating income (loss) | $ | 639 | $ | (2,453 | ) | $ | - | $ | (9,339 | ) | $ | 10,954 | $ | (199 | ) | ||||||||||
Capital expenditures | 6,964 | 315 | - | 387 | - | 7,666 | |||||||||||||||||||
Assets | 141,200 | 394,397 | - | 164,697 | - | 700,294 | |||||||||||||||||||
Property Sales | |||||||||||||||||||||||||
Sales price | $ | 26,974 | $ | 239,676 | $ | - | $ | 7,186 | $ | - | $ | 273,836 | |||||||||||||
Cost of sale | 14,914 | 152,785 | - | 7,641 | - | 175,340 | |||||||||||||||||||
Deferred current gain | - | - | - | - | - | - | |||||||||||||||||||
Recognized prior deferred gain | - | - | - | - | - | - | |||||||||||||||||||
Gain (loss) on sale | $ | 12,060 | $ | 86,891 | $ | - | $ | (455 | ) | $ | - | $ | 98,496 | ||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2012 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 28,151 | $ | 53,534 | $ | - | $ | 78 | $ | 86 | 81,849 | ||||||||||||||
Operating expenses | 14,227 | 24,654 | - | 689 | 430 | 40,000 | |||||||||||||||||||
Depreciation and amortization | 5,046 | 10,096 | - | - | (269 | ) | 14,873 | ||||||||||||||||||
Mortgage and loan interest | 5,181 | 18,942 | - | 6,684 | 7,417 | 38,224 | |||||||||||||||||||
Deferred borrowing costs | 92 | 405 | - | 159 | 28 | 684 | |||||||||||||||||||
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) | $ | 3,605 | $ | (4,058 | ) | $ | - | $ | (2,058 | ) | $ | 7,092 | $ | 4,581 | |||||||||||
Capital expenditures | 2,114 | 547 | (920 | ) | 1,741 | ||||||||||||||||||||
Assets | 162,756 | 555,392 | - | 212,285 | - | 930,433 | |||||||||||||||||||
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 | - | - | - | - | - | - | |||||||||||||||||||
Recognized prior deferred gain | - | - | - | 615 | - | 615 | |||||||||||||||||||
Gain on sale | $ | 225 | $ | 5,543 | $ | 3,117 | $ | 5,475 | $ | - | $ | 14,360 | |||||||||||||
The table below reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations (dollars in in thousands): | |||||||||||||||||||||||||
For Twelve Months Ended December 31, | |||||||||||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||||||||||
Segment operating income (loss) | $ | (516 | ) | $ | (199 | ) | $ | 4,581 | |||||||||||||||||
Other non-segment items of income (expense) | |||||||||||||||||||||||||
General and administrative | (10,282 | ) | (7,919 | ) | (6,037 | ) | |||||||||||||||||||
Provision on impairment of notes receivable and real estate assets | - | (18,980 | ) | (2,330 | ) | ||||||||||||||||||||
Net income fee to related party | (3,669 | ) | (4,089 | ) | (180 | ) | |||||||||||||||||||
Advisory fee to related party | (8,943 | ) | (10,166 | ) | (10,182 | ) | |||||||||||||||||||
Other income | 1,415 | 10,163 | 7,770 | ||||||||||||||||||||||
Loss on sale of investments | (92 | ) | (283 | ) | (118 | ) | |||||||||||||||||||
Earnings from unconsolidated joint ventures and investees | 347 | 391 | 372 | ||||||||||||||||||||||
Litigation settlement | 3,591 | (20,313 | ) | (175 | ) | ||||||||||||||||||||
Income tax benefit (expense) | 20,413 | 40,513 | (144 | ) | |||||||||||||||||||||
Gain (loss) from continuing operations | $ | 2,264 | $ | (10,882 | ) | $ | (6,443 | ) | |||||||||||||||||
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, | |||||||||||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||||||||||
Segment assets | $ | 699,763 | $ | 700,294 | $ | 930,433 | |||||||||||||||||||
Investments in unconsolidated subsidiaries and investees | 4,279 | 3,789 | 8,168 | ||||||||||||||||||||||
Notes and interest receivable | 134,366 | 136,815 | 103,469 | ||||||||||||||||||||||
Other assets and receivables | 127,090 | 102,424 | 93,275 | ||||||||||||||||||||||
Assets held for sale | - | - | - | ||||||||||||||||||||||
Total assets | $ | 965,498 | $ | 943,322 | $ | 1,135,345 |
DISCONTINUED_OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
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 2014, 2013 and 2012. Income from discontinued operations relates to 5, 19, and 25 properties that were sold or repositioned in 2014, 2013 and 2012, 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, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Revenues: | |||||||||||||
Rental and other property revenues | $ | 5,612 | $ | 34,922 | $ | 43,589 | |||||||
5,612 | 34,922 | 43,589 | |||||||||||
Expenses: | |||||||||||||
Property operating expenses | 2,350 | 16,479 | 23,326 | ||||||||||
Depreciation | 751 | 5,563 | 7,691 | ||||||||||
General and administrative | 451 | 966 | 1,224 | ||||||||||
Provision on impairment of notes receivable and real estate assets | - | - | 2,400 | ||||||||||
Total operating expenses | $ | 3,552 | $ | 23,008 | $ | 34,641 | |||||||
Other income (expense): | |||||||||||||
Other income (expense) | (507 | ) | 45 | 7 | |||||||||
Mortgage and loan interest | (1,743 | ) | (8,082 | ) | (12,737 | ) | |||||||
Deferred borrowing costs amortization | (1,461 | ) | (3,015 | ) | (1,793 | ) | |||||||
Loan charges and prepayment penalties | (1,656 | ) | (3,246 | ) | (3,472 | ) | |||||||
Litigation settlement | (250 | ) | (250 | ) | (250 | ) | |||||||
Total other expenses | $ | (5,617 | ) | $ | (14,548 | ) | $ | (18,245 | ) | ||||
Loss from discontinued operations before gain on sale of real estate and taxes | (3,557 | ) | (2,634 | ) | (9,297 | ) | |||||||
Gain on sale of real estate from discontinued operations | 61,879 | 98,951 | 8,885 | ||||||||||
Income tax benefit (expense) | (20,413 | ) | (33,711 | ) | 144 | ||||||||
Income (loss) from discontinued operations | $ | 37,909 | $ | 62,606 | $ | (268 | ) | ||||||
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 2014, 2013 and 2012 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, 2014 | ||||||||||||||||||||||||||||||||
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 2014, 2013, and 2012. 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 2014 | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||||||
(dollars in thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||
Total operating revenues | $ | 19,159 | $ | 19,500 | $ | 19,326 | $ | 21,427 | ||||||||||||||||||||||||
Total operating expenses | 18,957 | 19,914 | 18,858 | 24,882 | ||||||||||||||||||||||||||||
Operating income (loss) | 202 | (414 | ) | 468 | (3,455 | ) | ||||||||||||||||||||||||||
Other expense | (2,440 | ) | (3,630 | ) | (4,274 | ) | (5,167 | ) | ||||||||||||||||||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (2,238 | ) | (4,044 | ) | (3,806 | ) | (8,622 | ) | ||||||||||||||||||||||||
Gain (loss) on land sales | 753 | (159 | ) | 40 | (73 | ) | ||||||||||||||||||||||||||
Income tax benefit | 2,049 | 2,195 | 786 | 15,383 | ||||||||||||||||||||||||||||
Net income (loss) from continued operations | 564 | (2,008 | ) | (2,980 | ) | 6,688 | ||||||||||||||||||||||||||
Net income from discontinued operations | 3,805 | 4,077 | 1,461 | 28,566 | ||||||||||||||||||||||||||||
Net income (loss) | 4,369 | 2,069 | (1,519 | ) | 35,254 | |||||||||||||||||||||||||||
Less: net income (loss) attributable to non-controlling interest | (819 | ) | (551 | ) | 200 | (8,118 | ) | |||||||||||||||||||||||||
Preferred dividend requirement | (613 | ) | (613 | ) | (427 | ) | (390 | ) | ||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | 2,937 | $ | 905 | $ | (1,746 | ) | $ | 26,746 | |||||||||||||||||||||||
PER SHARE DATA | ||||||||||||||||||||||||||||||||
Earnings per share - basic | ||||||||||||||||||||||||||||||||
Loss from continued operations | $ | (0.08 | ) | $ | (0.28 | ) | $ | (0.24 | ) | $ | (0.13 | ) | ||||||||||||||||||||
Income from discontinued operations | 0.33 | 0.35 | 0.11 | 2.04 | ||||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | 0.25 | $ | 0.07 | $ | (0.13 | ) | $ | 1.91 | |||||||||||||||||||||||
Weighted average common shares used in computing earnings per share | 11,525,389 | 11,525,389 | 13,619,647 | 14,027,618 | ||||||||||||||||||||||||||||
Earnings per share - diluted | ||||||||||||||||||||||||||||||||
Loss from continued operations | $ | (0.08 | ) | $ | (0.28 | ) | $ | (0.24 | ) | $ | (0.13 | ) | ||||||||||||||||||||
Income from discontinued operations | 0.33 | 0.35 | 0.11 | 2.04 | ||||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | 0.25 | $ | 0.07 | $ | (0.13 | ) | $ | 1.91 | |||||||||||||||||||||||
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 11,525,389 | 13,619,647 | 14,027,618 | ||||||||||||||||||||||||||||
Three Months Ended 2013 | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||||||
(dollars in thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||||
2013 | ||||||||||||||||||||||||||||||||
Total operating revenues | $ | 19,088 | $ | 19,193 | $ | 19,530 | $ | 22,939 | ||||||||||||||||||||||||
Total operating expenses | 17,838 | 18,640 | 20,071 | 39,877 | ||||||||||||||||||||||||||||
Operating income (loss) | 1,250 | 553 | (541 | ) | (16,938 | ) | ||||||||||||||||||||||||||
Other expense | (9,245 | ) | (5,401 | ) | (8,533 | ) | (12,085 | ) | ||||||||||||||||||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (7,995 | ) | (4,848 | ) | (9,074 | ) | (29,023 | ) | ||||||||||||||||||||||||
Gain (loss) on land sales | (35 | ) | - | 598 | (1,018 | ) | ||||||||||||||||||||||||||
Income tax benefit | 2,807 | 5,352 | 402 | 31,952 | ||||||||||||||||||||||||||||
Net income (loss) from continued operations | (5,223 | ) | 504 | (8,074 | ) | 1,911 | ||||||||||||||||||||||||||
Net income from discontinued operations | 5,212 | 9,940 | 745 | 46,709 | ||||||||||||||||||||||||||||
Net income (loss) | (11 | ) | 10,444 | (7,329 | ) | 48,620 | ||||||||||||||||||||||||||
Less: net income (loss) attributable to non-controlling interest | 385 | (2,090 | ) | 903 | (9,646 | ) | ||||||||||||||||||||||||||
Preferred dividend requirement | (613 | ) | (613 | ) | (613 | ) | (613 | ) | ||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (239 | ) | $ | 7,741 | $ | (7,039 | ) | $ | 38,361 | ||||||||||||||||||||||
PER SHARE DATA | ||||||||||||||||||||||||||||||||
Earnings per share - basic | ||||||||||||||||||||||||||||||||
Loss from continued operations | $ | (0.47 | ) | $ | (0.19 | ) | $ | (0.68 | ) | $ | (0.72 | ) | ||||||||||||||||||||
Income from discontinued operations | 0.45 | 0.86 | 0.06 | 4.05 | ||||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (0.02 | ) | $ | 0.67 | $ | (0.62 | ) | $ | 3.33 | ||||||||||||||||||||||
Weighted average common shares used in computing earnings per share | 11,525,389 | 11,525,389 | 11,525,389 | 11,525,389 | ||||||||||||||||||||||||||||
Earnings per share - diluted | ||||||||||||||||||||||||||||||||
Loss from continued operations | $ | (0.47 | ) | $ | (0.19 | ) | $ | (0.68 | ) | $ | (0.72 | ) | ||||||||||||||||||||
Income from discontinued operations | 0.45 | 0.86 | 0.06 | 4.05 | ||||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (0.02 | ) | $ | 0.67 | $ | (0.62 | ) | $ | 3.33 | ||||||||||||||||||||||
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 11,525,389 | 11,525,389 | 11,525,389 | ||||||||||||||||||||||||||||
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 | $ | 19,240 | $ | 19,744 | $ | 20,189 | $ | 22,676 | ||||||||||||||||||||||||
Total operating expenses | 18,626 | 17,146 | 17,518 | 20,312 | ||||||||||||||||||||||||||||
Operating income | 614 | 2,598 | 2,671 | 2,364 | ||||||||||||||||||||||||||||
Other expense | (6,310 | ) | (6,645 | ) | (4,778 | ) | (2,288 | ) | ||||||||||||||||||||||||
Income (loss) before gain on land sales, non-contolling interest, and taxes | (5,696 | ) | (4,047 | ) | (2,107 | ) | 76 | |||||||||||||||||||||||||
Gain(loss) on land sales | (1,021 | ) | 4,738 | 2,898 | (1,140 | ) | ||||||||||||||||||||||||||
Income tax benefit (expense) | (266 | ) | 1,763 | (54 | ) | (1,587 | ) | |||||||||||||||||||||||||
Net income (loss) from continued operations | (6,983 | ) | 2,454 | 737 | (2,651 | ) | ||||||||||||||||||||||||||
Net income (loss) from discontinued operations | (494 | ) | 3,275 | (99 | ) | (2,950 | ) | |||||||||||||||||||||||||
Net income (loss) | (7,477 | ) | 5,729 | 638 | (5,601 | ) | ||||||||||||||||||||||||||
Less: 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 continued operations | $ | (0.56 | ) | $ | 0.07 | $ | - | $ | (0.19 | ) | ||||||||||||||||||||||
Income (loss) from discontinued operations | (0.04 | ) | 0.28 | (0.01 | ) | (0.26 | ) | |||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (0.60 | ) | $ | 0.35 | $ | (0.01 | ) | $ | (0.45 | ) | |||||||||||||||||||||
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 continued operations | $ | (0.56 | ) | $ | 0.03 | $ | - | $ | (0.19 | ) | ||||||||||||||||||||||
Income (loss) from discontinued operations | (0.04 | ) | 0.13 | - | (0.26 | ) | ||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (0.60 | ) | $ | 0.16 | $ | - | $ | (0.45 | ) | ||||||||||||||||||||||
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 25,679,951 | 21,027,447 | 11,525,389 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY | 12 Months Ended |
Dec. 31, 2014 | |
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 $22.3 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 2015, 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. | |
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. | |
In August 2014, David M. Clapper and two entities related to Mr. Clapper (all, collectively, the “Clapper Parties”) filed a complaint in the U. S. District Court against the Company, its directors and certain of its officers alleging purported transactions to the detriment of the Clapper Parties and others by transferring assets, cash and diverting property. Management of the Company believes that there is no basis for this action against the Company and its officers and directors and intends to vigorously defend itself. The August 2014 complaint does not allege any facts relating to the Company, except that the named directors and officers are directors and officers of the Company and that the Company is a Nevada corporation, with its headquarters/principal place of business in Dallas, Texas. | |
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. | |
Dynex Capital, Inc. | |
On February 13, 2013, the Court of Appeals, Fifth District of Texas at Dallas (the “Fifth Court of Appeals”) rendered an opinion involving TCI in Case No. 05-04-01358-CV styled Basic Capital Management, Inc., American Realty Trust, Inc., Transcontinental Realty Investors, Inc., Continental Poydras Corp., Continental Common, Inc. and Continental Baronne, Inc. v. Dynex Commercial, Inc. and Dynex Capital, Inc. The case was on appeal from the 68th Judicial District Court of Dallas County, Texas, had previously been appealed to the Fifth Court of Appeals and further appealed to the Supreme Court of the State of Texas which had remanded the instant case back to the Fifth Court of Appeals to address certain issues. The case had its origin with Dynex Commercial making loans to Continental Poydras Corp., Continental Common, Inc. and Continental Baronne, Inc. (subsidiaries of Continental Mortgage & Equity Trust (“CMET”), an entity which merged into TCI in 1999 after the original suit was filed). Under the original loan commitment, $160,000,000 in loans were to be made to the entities. The loans were conditioned on the execution of a commitment between Dynex Commercial and Basic Capital Management, Inc. (“Basic”). | |
An original trial to a jury resulted in the jury awarding significant damages to Basic for “lost opportunity,” awarding damages in “increased costs” and “lost opportunity” damages to ART and damages of $960,646 in “increased costs” and $11,161,520 for “lost opportunity’ damages in favor of TCI and its subsidiaries (a total of $12,122,166). The original Trial Court ignored the jury’s findings and entered a “Judgment Notwithstanding the Verdict” (“JNOV”) in Dynex’s favor; the Fifth Court of Appeals has now ruled that the JNOV was improper because there was sufficient evidence to support the jury’s findings. As a result, the Fifth Court of Appeals ordered the Trial Court to enter a new judgment consistent with the jury’s original findings. | |
The Fifth Court of Appeals also determined that TCI was entitled to damages for “lost opportunities” relating to tenant improvements and awarded TCI an additional $252,577. Issues relating to attorneys fees were also addressed with the Fifth Court of Appeals ordering the Trial Court to “re-try” the issue of attorney’s fees to determine the amount of fees to which TCI would be entitled on a “breach of commitment” claim. In addition, as a result of the changes in amounts awarded and passage of time, the Fifth Court of Appeals also ordered the Trial Court to recalculate the correct amounts of pre and post-judgment interest owed to Appellants. | |
While the fifteen year old controversy is not yet fully resolved, the Fifth Court of Appeals opinion is favorable to TCI, but TCI expects continued challenges by Dynex to the Fifth Court of Appeals opinion and any ultimate award of damages by the Trial Court. | |
ARL is also involved in various other lawsuits arising in the ordinary course of business. Management is of the opinion that the outcome of these lawsuits will have no material impact on ARL’s financial condition, results of operations or liquidity. | |
Other Litigation. The ownership of property and provision of services to the public as tenants entails an inherent risk of liability. Although the Company and its subsidiaries are involved in various items of litigation incidental to and in the ordinary course of its business, in the opinion of Management, the outcome of such litigation will not have a material adverse impact upon the Company’s financial condition, results of operation or liquidity, unless notes otherwise above. | |
The Company is involved in and vigorously defending against other 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. |
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2014 | |
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. | |
As of December 31, 2014, we have 2,461,252 shares of Series A 10.0% cumulative convertible preferred stock, which are outstanding. These shares may be converted into common stock at 90% of the average daily closing price of the common stock for the prior 20 trading days. These are considered in the computation of diluted earnings per share if the effect of applying the if-converted method is dilutive. Of the outstanding 2,461,252 shares of Series A 10.0% cumulative convertible preferred stock, there were 300,000 shares owned by ART Edina, Inc. and 600,000 shares owned by ART Hotel Equities, Inc., a wholly owned subsidiary of ARL. As of May 30, 2014, these 900,000 shares were transferred to ARL. Dividends are not paid on the shares owned by ARL. | |
Prior to July 17, 2014, RAI owned 2,451,435 shares of the outstanding Series A 10.0.0% convertible preferred stock and had accrued dividends unpaid of $15.1 million. On July 17, 2014, RAI converted 890,797 shares, including $6.3 million in accumulated dividends unpaid for these shares, into the requisite number of shares of common stock. This conversion resulted in the issuance of 2,502,230 new shares of ARL common stock. As of December 31, 2014, RAI owns 1,560,638 shares of the outstanding Series A convertible preferred stock and has accrued dividends unpaid of $9.6 million. | |
The Company had 135,000 shares of Series K convertible preferred stock, which were held by TCI and used as collateral on a note. The note has been paid in full and the Series K preferred stock was cancelled May 7, 2014. | |
As of December 31, 2014, we have 1,000 shares of stock options outstanding. The outstanding options are considered in the computation of diluted earnings per share if the effect of applying the “treasury stock” method is dilutive. These options expired unexercised January 1, 2015. | |
As of December 31, 2014, 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, 2014 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 18. SUBSEQUENT EVENTS |
The date to which events occurring after December 31, 2014, the date of the most recent balance sheet, have been evaluated for possible adjustment to the financial statements or disclosure is March 30, 2015, which is the date on which the financial statements were available to be issued. | |
On January 30, 2015, TCI refinanced the existing mortgage on Heather Creek apartments, a 200-unit complex located in Mesquite, Texas, for a new mortgage of $11.5 million. TCI paid off the existing mortgage of $11.5 million and $0.3 million in closing costs. The note accrues interest at 3.24% and payments of interest and principal are due monthly, maturing August 1, 2050. | |
On February 9, 2015, TCI purchased 100% of the membership interest in Holland Lake Partners, Ltd, which owns Residences at Holland Lake apartments, a 208-unit complex located in Weatherford, Texas, from FBH, a related party under common control, for $4.7 millions. TCI assumed the current mortgage of $12.0 million. | |
On February 9, 2015, TCI purchased 100% of the membership interest in Mount Drive, LLC, which owns Overlook at Allensville apartments, a 144-unit complex located in Seiverville, Tennessee, from FBH, a related party under common control, for $2.5 million. TCI assumed the current mortgage of $11.6 million. |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||
Dec. 31, 2014 | |||
SIGNIFICANT ACCOUNTING POLICIES | |||
FASB Accounting Standards Codification | 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 | Organization and business. ARL was organized in 1999. In August 2000, the Company acquired American Realty Trust, Inc., (“ART”), a Georgia corporation, and National Realty L.P. (“NRLP”), a Delaware limited partnership. 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 86.7% of ARL’s stock is owned by related party entities. ARL subsidiaries own approximately 80.9% of the outstanding shares of common stock of Transcontinental Realty Investors, Inc. (“TCI”), a Nevada corporation, whose common stock is traded on the NYSE under the symbol (“TCI”). 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 May Realty Holdings, Inc. (“MRHI”, formerly known as Realty Advisors Management, Inc. “RAMI”, effective August 7, 2014), a Nevada corporation, the sole shareholder of which is a trust known as the May Trust, became the Company’s external Advisor and Cash Manager. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges, for the Company’s benefit, debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to TCI and IOT. As the contractual advisor, Pillar is compensated by ARL under an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. ARL has no employees. Employees of Pillar render services to ARL in accordance with the terms of the Advisory Agreement. | |||
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, 2014, we owned 38 residential apartment communities comprising of 6,344 units, nine commercial properties comprising an aggregate of approximately 2.1 million square feet, and an investment in 4,234 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 LK-Four Hickory, LLC was accounted for under the equity method until January 17, 2012, when the investment was sold. | |||
The Company in accordance with the VIE guidance in ASC 810 “Consolidations” consolidates 36 and 34 multifamily residential properties located throughout the United States at December 31, 2014 and 2013, respectively, ranging from 32 units to 332 units. Assets totaling $363.5 million and $345.0 million at December 31, 2014 and 2013, 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 $0.0 and $16.4 million at December 31, 2014 and 2013, 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, 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 | 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 | 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 | 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 | 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 | Interest recognition on notes receivable. We record interest income as earned in accordance with the terms of the related loan agreements. | ||
Allowance for estimated losses | 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 | Cash equivalents. For purposes of the Consolidated Statements of Cash Flows, all highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. Restricted cash consists of cash reserved primarily for specific uses such as insurance, property taxes and replacement reserves. | ||
Concentration of credit risk | Concentration of credit risk. The Company maintains its cash balances at commercial banks and through investment companies, the deposits of which are insured by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2014 and 2013, the Company maintained balances in excess of the insured amount. | ||
Earnings per share | 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 GAAP, it is necessary for management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expense for the year ended. Actual results could differ from those estimates. | ||
Income taxes | Income taxes. The Company is a “C” corporation for U.S. federal income tax purposes. For tax periods ending before August 31, 2012, the Company filed an annual consolidated income tax return with TCI and IOT and their subsidiaries. ARL was the common parent for the consolidated group. After that date, the Company and the rest of the ARL group joined the MRHI consolidated group for tax purposes. The income tax expense (benefit) for the 2012 tax period in the accompanying financial statement was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT. That agreement continued until August 31, 2012, at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and MRHI for the remainder of 2012 and subsequent years. The agreement specifies the manner in which the group will share the consolidated tax liability and also how certain tax attributes are to be treated among members of the group. | ||
Recent accounting pronouncements | Recent accounting pronouncements. There were no recent accounting pronouncements that our company has not implemented that materially affect our financial statements. |
REAL_ESTATE_ACTIVITY_Tables
REAL ESTATE ACTIVITY (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Schedule of summary of the real estate owned | |||||||||
Schedule of summary of the real estate owned | A summary of our real estate owned as of the end of the year is listed below (dollars in thousands): | ||||||||
2014 | 2013 | ||||||||
Apartments | $ | 455,602 | $ | 436,109 | |||||
Apartments under construction | 1,512 | - | |||||||
Commercial properties | 193,197 | 214,486 | |||||||
Land held for development | 159,903 | 149,103 | |||||||
Real estate held for sale | - | 18,817 | |||||||
Real estate subject to sales contract | 21,326 | 29,547 | |||||||
Total real estate, at cost, less impairment | 831,540 | 848,062 | |||||||
Less accumulated deprecation | (131,777 | ) | (147,768 | ) | |||||
Total real estate, net of depreciation | $ | 699,763 | $ | 700,294 | |||||
Schedule of Depreciation is computed on a straight line basis over the estimated useful lives of the assets Table Text Block | 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, 2014 | |||||||||||||||
SCHEDULE OF NOTES AND INTEREST RECEIVABLE | |||||||||||||||
SCHEDULE OF NOTES AND INTEREST RECEIVABLE | . 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: | |||||||||||||||
Foundation for Better Housing, Inc. (Holland Lake) (1) | 19-Dec | 12.00% | $ 4,698 | Secured | |||||||||||
Foundation for Better Housing, Inc. (Holland Lake) (1) | 17-Dec | 12.00% | 1,674 | Secured | |||||||||||
Foundation for Better Housing, Inc. (Overlook at Allensville) (1) | 19-Nov | 12.00% | 2,472 | Secured | |||||||||||
Foundation for Better Housing, Inc. (Overlook at Allensville) (1) | 17-Dec | 12.00% | 1,408 | Secured | |||||||||||
Foundation for Better Housing, Inc. (Preserve @ Prairie Pointe) (1) | 19-Mar | 12.00% | 1,810 | Secured | |||||||||||
Foundation for Better Housing, Inc. (Preserve @ Prairie Pointe) (1) | 17-Mar | 12.00% | 1,156 | Secured | |||||||||||
Foundation for Better Housing, Inc. (Vista Ridge) (1) | 19-Apr | 12.00% | 3,923 | Secured | |||||||||||
Foundation for Better Housing, Inc. (Vista Ridge) (1) | 17-Jun | 12.00% | 1,492 | Secured | |||||||||||
HGH Residential, LLC (Tradewinds Development) | 19-Jul | 12.00% | 6,131 | Secured | |||||||||||
One Realco Corporation (1,2) | 17-Jan | 3.00% | 7,000 | Unsecured | |||||||||||
Realty Advisors Management, Inc. (1) | 16-Dec | 2.20% | 20,387 | 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. (Reserve at White Rock Phase I) (1) 12/32 | 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) 12/32 | 12.00% | 2,555 | 100% Interest in Unified Housing of Harvest Hill, 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. (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) | 17-Jun | 12.00% | 1,261 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (1) | 17-Dec | 12.00% | 1,207 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (1) | 15-Dec | 12.00% | 2,665 | Unsecured | |||||||||||
Unified Housing Foundation, Inc. (1) | 16-Dec | 12.00% | 3,657 | Unsecured | |||||||||||
Various non-related party notes | Various | Various | 3,503 | Various secured interests | |||||||||||
Various related party notes (1) | Various | Various | 6,393 | Various secured interests | |||||||||||
Accrued interest | 8,606 | ||||||||||||||
Total Performing | $ 149,484 | ||||||||||||||
Non-Performing loans: | |||||||||||||||
Leman Development, Ltd (2) | 11-Jul | 7.00% | 1,500 | Unsecured | |||||||||||
Tracy Suttles (2) | 11-Dec | 0.00% | 1,077 | Unsecured | |||||||||||
Various non-related party notes | Various | Various | 507 | Various secured interests | |||||||||||
Accrued interest | 77 | ||||||||||||||
Total Non-Performing | $ 3,161 | ||||||||||||||
Allowance for estimated losses | (18,279) | ||||||||||||||
Total | $ 134,366 | ||||||||||||||
(1) Related party notes | |||||||||||||||
(2) An allowance was taken for estimated losses at full value of note. |
SCHEDULE_OF_ALLOWANCE_FOR_ESTI
SCHEDULE OF ALLOWANCE FOR ESTIMATED LOSSES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
SCHEDULE OF ALLOWANCE FOR ESTIMATED LOSSES | |||||||||||||
SCHEDULE OF ALLOWANCE FOR ESTIMATED LOSSES | The table below shows our allowance for estimated losses (dollars in thousands): | ||||||||||||
2014 | 2013 | 2012 | |||||||||||
Balance January 1, | $ | 19,600 | $ | 21,704 | $ | 13,383 | |||||||
Increase (decrease) in provision | (1,321 | ) | (2,104 | ) | 8,321 | ||||||||
Balance December 31, | $ | 18,279 | $ | 19,600 | $ | 21,704 |
INVESTMENT_IN_UNCONSOLIDATED_I
INVESTMENT IN UNCONSOLIDATED INVESTEES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
SCHEDULE OF INVESTMENT IN UNCONSOLIDATED INVESTEES | |||||||||||||
Investments accounted for via the equity method Table Text Block | Investments accounted for via the equity method consists of the following: | ||||||||||||
Percentage ownership as of December 31, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Gruppa Florentina, LLC(1) | 20 | % | 20 | % | 20 | % | |||||||
LK-Four Hickory, LLC(2) | 0 | % | 0 | % | 0 | % | |||||||
Schedule 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, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Other Investees | |||||||||||||
Real estate, net of accumulated depreciation | $ | 11,647 | $ | 10,823 | $ | 12,343 | |||||||
Notes receivable | 7,326 | 6,526 | 6,192 | ||||||||||
Other assets | 30,291 | 32,131 | 32,145 | ||||||||||
Notes payable | (10,429 | ) | (11,022 | ) | (13,824 | ) | |||||||
Other liabilities | (7,192 | ) | (8,134 | ) | (7,443 | ) | |||||||
Shareholders' equity/partners capital | (31,643 | ) | (30,324 | ) | (29,413 | ) | |||||||
Revenue | $ | 48,893 | $ | 46,276 | $ | 45,505 | |||||||
Depreciation | (1,151 | ) | (1,166 | ) | (1,277 | ) | |||||||
Operating expenses | (45,590 | ) | (42,330 | ) | (41,188 | ) | |||||||
Interest expense | (901 | ) | (1,022 | ) | (1,181 | ) | |||||||
Income from continuing operations | $ | 1,251 | $ | 1,758 | $ | 1,859 | |||||||
Income from discontinued operations | - | - | - | ||||||||||
Net income | $ | 1,251 | $ | 1,758 | $ | 1,859 | |||||||
Company's proportionate share of earnings (1) | $ | 250 | $ | 352 | $ | 372 |
NOTES_AND_INTEREST_PAYABLE_Tab
NOTES AND INTEREST PAYABLE (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
NOTES AND INTEREST PAYABLE {2} | |||||||||||||
Schedule Of Notes And Interest Payable | Below is a summary of our notes and interest payable as of December 31, 2014 (dollars in thousands): | ||||||||||||
Notes | Accrued | Total | |||||||||||
Payable | Interest | Debt | |||||||||||
Apartments | $ | 420,083 | $ | 1,157 | $ | 421,240 | |||||||
Commercial | 114,085 | 433 | 114,518 | ||||||||||
Land held for development | 83,439 | 117 | 83,556 | ||||||||||
Real estate held for sale | 452 | - | 452 | ||||||||||
Real estate subject to sales contract | 16,961 | 1,655 | 18,616 | ||||||||||
Other | 20,464 | 213 | 20,677 | ||||||||||
Total | $ | 655,484 | $ | 3,575 | $ | 659,059 | |||||||
Schedule of the principal payments on the notes payable for the future dates Table Text Block | The following table schedules the principal payments on the notes payable for the next five years and thereafter (dollars in thousands): | ||||||||||||
Year | Amount | ||||||||||||
2015 | $ 108,341 | ||||||||||||
2016 | 77,994 | ||||||||||||
2017 | 41,602 | ||||||||||||
2018 | 6,661 | ||||||||||||
2019 | 51,083 | ||||||||||||
Thereafter | 369,803 | ||||||||||||
Total | $ 655,484 |
Schedules_of_principal_payment
Schedules of principal payments on the notes payable (Tables) | 12 Months Ended | ||
Dec. 31, 2014 | |||
Schedules of principal payments on the notes payable | |||
Schedules of principal payments on the notes payable | The following table schedules the principal payments on the notes payable for the next five years and thereafter (dollars in thousands): | ||
Year | Amount | ||
2015 | $ 109,841 | ||
2016 | 79,994 | ||
2017 | 43,602 | ||
2018 | 8,661 | ||
2019 | 43,583 | ||
Thereafter | 369,803 | ||
Total | $ 655,484 |
RELATED_PARTY_TRANSACTIONS_AND1
RELATED PARTY TRANSACTIONS AND FEES (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
SCHEDULE OF RELATED PARTY TRANSACTIONS AND FEES | ||||||||||||||
Schedule of Related Party Transactions | Below is a description of the related party transactions and fees between Pillar and Regis: | |||||||||||||
Fees, expenses, and revenue paid to and/or received from our advisor: | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
(dollars in thousands) | ||||||||||||||
Fees: | ||||||||||||||
Advisory | $ | 8,943 | $ | 10,166 | $ | 10,182 | ||||||||
Construction advisory | - | - | 181 | |||||||||||
Mortgage brokerage and equity refinancing | 1,152 | 1,878 | 1,881 | |||||||||||
Net income | 3,669 | 4,089 | 180 | |||||||||||
Property acquisition and sales | 177 | - | 20 | |||||||||||
$ | 13,941 | $ | 16,133 | $ | 12,444 | |||||||||
Other Expense: | ||||||||||||||
Cost reimbursements | $ | 3,449 | $ | 3,466 | $ | 3,359 | ||||||||
Interest paid (received) | (1,043 | ) | 431 | 495 | ||||||||||
$ | 2,406 | $ | 3,897 | $ | 3,854 | |||||||||
Revenue: | ||||||||||||||
Rental | $ | 701 | $ | 670 | $ | 587 | ||||||||
Fees paid to Regis and related parties: | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
(dollars in thousands) | ||||||||||||||
Fees: | ||||||||||||||
Property acquisition | $ | 348 | $ | - | $ | 71 | ||||||||
Property management, construction manaement and leasing commissions | 583 | 474 | 2,189 | |||||||||||
Real estate brokerage | 2,848 | 4,081 | 2,321 | |||||||||||
$ | 3,779 | $ | 4,555 | $ | 4,581 | |||||||||
Schedule of Reconciles Of The Related Party Payable Due To Pillar Text Block | The following table reconciles the beginning and ending balances of the related party payable due to Pillar as of December 31, 2014 (dollars in thousands): | |||||||||||||
Pillar | ||||||||||||||
Related party receivable, December 31, 2013 | $ | 14,086 | ||||||||||||
Cash transfers | 59,372 | |||||||||||||
Advisory fees | (8,943 | ) | ||||||||||||
Net income fee | (3,669 | ) | ||||||||||||
Cost reimbursements | (3,449 | ) | ||||||||||||
Interest income | 1,043 | |||||||||||||
Notes receivable purchased | (26,290 | ) | ||||||||||||
Fees and commissions | (4,526 | ) | ||||||||||||
Expenses paid by Advisor | (6,957 | ) | ||||||||||||
Financing (mortgage payments) | (3 | ) | ||||||||||||
Sales/purchases transactions | 750 | |||||||||||||
Tax sharing | - | |||||||||||||
Related party receivable, December 31, 2014 | $ | 21,414 |
SCHEDULE_OF_INCOME_TAXES_Table
SCHEDULE OF INCOME TAXES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
SCHEDULE OF INCOME TAXES | |||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | Current expense (benefit) is attributable to (dollars in thousands): | ||||||||||||
2014 | 2013 | 2012 | |||||||||||
Loss from continuing operations | $ | (1,169 | ) | $ | (24,217 | ) | $ | (5,387 | ) | ||||
Income from discontinued operations | 1,169 | 17,415 | 5,387 | ||||||||||
The full 2013 tax (benefit) to ARL comes from MRHI | $ | - | $ | (6,802 | ) | $ | - | ||||||
Schedule of Effective Income Tax Rate Reconciliation | 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): | ||||||||||||
2014 | 2013 | 2012 | |||||||||||
Computed "expected" income tax (benefit) expense | $ | 14,061 | $ | 15,684 | $ | (1,955 | ) | ||||||
Book to tax differences in gains on sale of property | (2,350 | ) | (20,373 | ) | (8,503 | ) | |||||||
Book to tax differences from entities not consolidated for tax purposes | (23,900 | ) | (33,565 | ) | (3,831 | ) | |||||||
Book to tax differences of depreciation and amortization | 1,415 | 1,250 | 1,460 | ||||||||||
Valuation allowance against current net operating loss benefit | 20,125 | 17,415 | 5,387 | ||||||||||
Other book to tax differences | (9,351 | ) | 17,208 | 7,442 | |||||||||
Total | $ | - | $ | (2,381 | ) | $ | - | ||||||
Alternative minimum tax | $ | - | $ | - | $ | - | |||||||
Schedule of Deferred Tax Assets and Liabilities | The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (amounts in thousands): | ||||||||||||
2014 | 2013 | 2012 | |||||||||||
Net operating losses | $ | 74,357 | $ | 88,486 | $ | 68,034 | |||||||
AMT credits | 2,201 | 2,201 | 2,201 | ||||||||||
Basis difference of: | |||||||||||||
Real estate holdings and equipment | 10,337 | 11,959 | 1,159 | ||||||||||
Notes receivable | 6,946 | 7,448 | 8,248 | ||||||||||
Investments | (14,950 | ) | (14,960 | ) | (13,824 | ) | |||||||
Notes payable | 8,189 | 13,360 | 17,691 | ||||||||||
Deferred gains | 18,086 | 18,746 | 18,170 | ||||||||||
Total | $ | 105,166 | $ | 127,240 | $ | 101,679 | |||||||
Deferred tax valuation allowance | (105,166 | ) | (127,240 | ) | (101,679 | ) | |||||||
Net deferred tax asset | $ | - | $ | - | $ | - |
FUTURE_MINIMUM_RENTAL_INCOME_U1
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES (Tables) | 12 Months Ended | ||
Dec. 31, 2014 | |||
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES {2} | |||
Schedule of Future Minimum Rental Payments for Operating Leases | The following is a schedule of minimum future rents due to ARL under non-cancelable operating leases as of December 31, 2014 (dollars in thousands): | ||
Year | Amount | ||
2015 | $ 17,627 | ||
2016 | 16,063 | ||
2017 | 13,665 | ||
2018 | 12,470 | ||
2019 | 8,136 | ||
Thereafter | 20,000 | ||
Total | $ 87,961 |
OPERATING_SEGMENTS_Tables
OPERATING SEGMENTS (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
SCHEDULE OF OPERATING SEGMENTS | |||||||||||||||||||||||||
SCHEDULE OF OPERATING SEGMENTS | Presented below is the operating income of each operating segment and each segment’s assets for 2014, 2013 and 2012 (dollars in thousands): | ||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2014 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 20,476 | $ | 58,882 | $ | - | $ | 1 | $ | 53 | $ | 79,412 | |||||||||||||
Operating expenses | 13,127 | 27,588 | - | 1,397 | 12 | 42,124 | |||||||||||||||||||
Depreciation and amortization | 7,413 | 10,270 | - | - | (90 | ) | 17,593 | ||||||||||||||||||
Mortgage and loan interest | 5,934 | 15,240 | - | 4,375 | 9,867 | 35,416 | |||||||||||||||||||
Deferred borrowing costs | 92 | 1,538 | - | 243 | 683 | 2,556 | |||||||||||||||||||
Loan charges and prepayment penalties | 113 | 2,625 | - | 66 | 50 | 2,854 | |||||||||||||||||||
Interest income | - | - | - | - | 20,054 | 20,054 | |||||||||||||||||||
Gain on land sales | - | - | - | 561 | - | 561 | |||||||||||||||||||
Segment operating income (loss) | $ | (6,203 | ) | $ | 1,621 | $ | - | $ | (5,519 | ) | $ | 9,585 | $ | (516 | ) | ||||||||||
Capital expenditures | 4,874 | 320 | - | 2,436 | - | 7,630 | |||||||||||||||||||
Assets | 142,118 | 390,366 | - | 167,279 | - | 699,763 | |||||||||||||||||||
Property Sales | |||||||||||||||||||||||||
Sales price | $ | 19,182 | $ | 115,273 | $ | - | $ | 8,091 | $ | - | $ | 142,546 | |||||||||||||
Cost of sale | 9,168 | 63,408 | - | 7,530 | - | 80,106 | |||||||||||||||||||
Deferred current gain | - | - | - | - | - | - | |||||||||||||||||||
Recognized prior deferred gain | - | - | - | - | - | - | |||||||||||||||||||
Gain on sale | $ | 10,014 | $ | 51,865 | $ | - | $ | 561 | $ | - | $ | 62,440 | |||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2013 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 24,215 | $ | 56,369 | $ | - | $ | 39 | $ | 127 | $ | 80,750 | |||||||||||||
Operating expenses | 11,623 | 26,223 | - | 1,431 | 41 | 39,318 | |||||||||||||||||||
Depreciation and amortization | 5,938 | 10,188 | - | - | (172 | ) | 15,954 | ||||||||||||||||||
Mortgage and loan interest | 5,798 | 16,206 | - | 6,200 | 7,954 | 36,158 | |||||||||||||||||||
Deferred borrowing costs | 67 | 2,268 | - | 212 | 405 | 2,952 | |||||||||||||||||||
Loan charges and prepayment penalties | 150 | 3,937 | - | 1,080 | 390 | 5,557 | |||||||||||||||||||
Interest income | - | - | - | - | 19,445 | 19,445 | |||||||||||||||||||
Loss on land sales | - | - | - | (455 | ) | - | (455 | ) | |||||||||||||||||
Segment operating income (loss) | $ | 639 | $ | (2,453 | ) | $ | - | $ | (9,339 | ) | $ | 10,954 | $ | (199 | ) | ||||||||||
Capital expenditures | 6,964 | 315 | - | 387 | - | 7,666 | |||||||||||||||||||
Assets | 141,200 | 394,397 | - | 164,697 | - | 700,294 | |||||||||||||||||||
Property Sales | |||||||||||||||||||||||||
Sales price | $ | 26,974 | $ | 239,676 | $ | - | $ | 7,186 | $ | - | $ | 273,836 | |||||||||||||
Cost of sale | 14,914 | 152,785 | - | 7,641 | - | 175,340 | |||||||||||||||||||
Deferred current gain | - | - | - | - | - | - | |||||||||||||||||||
Recognized prior deferred gain | - | - | - | - | - | - | |||||||||||||||||||
Gain (loss) on sale | $ | 12,060 | $ | 86,891 | $ | - | $ | (455 | ) | $ | - | $ | 98,496 | ||||||||||||
Commercial | |||||||||||||||||||||||||
For the Twelve Months Ended Dec 31, 2012 | Properties | Apartments | Hotels | Land | Other | Total | |||||||||||||||||||
Operating revenue | $ | 28,151 | $ | 53,534 | $ | - | $ | 78 | $ | 86 | 81,849 | ||||||||||||||
Operating expenses | 14,227 | 24,654 | - | 689 | 430 | 40,000 | |||||||||||||||||||
Depreciation and amortization | 5,046 | 10,096 | - | - | (269 | ) | 14,873 | ||||||||||||||||||
Mortgage and loan interest | 5,181 | 18,942 | - | 6,684 | 7,417 | 38,224 | |||||||||||||||||||
Deferred borrowing costs | 92 | 405 | - | 159 | 28 | 684 | |||||||||||||||||||
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) | $ | 3,605 | $ | (4,058 | ) | $ | - | $ | (2,058 | ) | $ | 7,092 | $ | 4,581 | |||||||||||
Capital expenditures | 2,114 | 547 | (920 | ) | 1,741 | ||||||||||||||||||||
Assets | 162,756 | 555,392 | - | 212,285 | - | 930,433 | |||||||||||||||||||
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 | - | - | - | - | - | - | |||||||||||||||||||
Recognized prior deferred gain | - | - | - | 615 | - | 615 | |||||||||||||||||||
Gain on sale | $ | 225 | $ | 5,543 | $ | 3,117 | $ | 5,475 | $ | - | $ | 14,360 |
The_Table_Below_Reconciles_Seg
The Table Below Reconciles Segment Information To Consolidated Statements Of Operations (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
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 in thousands): | ||||||||||||
For Twelve Months Ended December 31, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Segment operating income (loss) | $ | (516 | ) | $ | (199 | ) | $ | 4,581 | |||||
Other non-segment items of income (expense) | |||||||||||||
General and administrative | (10,282 | ) | (7,919 | ) | (6,037 | ) | |||||||
Provision on impairment of notes receivable and real estate assets | - | (18,980 | ) | (2,330 | ) | ||||||||
Net income fee to related party | (3,669 | ) | (4,089 | ) | (180 | ) | |||||||
Advisory fee to related party | (8,943 | ) | (10,166 | ) | (10,182 | ) | |||||||
Other income | 1,415 | 10,163 | 7,770 | ||||||||||
Loss on sale of investments | (92 | ) | (283 | ) | (118 | ) | |||||||
Earnings from unconsolidated joint ventures and investees | 347 | 391 | 372 | ||||||||||
Litigation settlement | 3,591 | (20,313 | ) | (175 | ) | ||||||||
Income tax benefit (expense) | 20,413 | 40,513 | (144 | ) | |||||||||
Gain (loss) from continuing operations | $ | 2,264 | $ | (10,882 | ) | $ | (6,443 | ) |
Reconciles_the_segment_informa
Reconciles the segment information to corresponding amounts in the Consolidated Balance Sheets (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
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, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Segment assets | $ | 699,763 | $ | 700,294 | $ | 930,433 | |||||||
Investments in unconsolidated subsidiaries and investees | 4,279 | 3,789 | 8,168 | ||||||||||
Notes and interest receivable | 134,366 | 136,815 | 103,469 | ||||||||||
Other assets and receivables | 127,090 | 102,424 | 93,275 | ||||||||||
Assets held for sale | - | - | - | ||||||||||
Total assets | $ | 965,498 | $ | 943,322 | $ | 1,135,345 |
DISCONTINUED_OPERATIONS_Tables
DISCONTINUED OPERATIONS (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
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, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Revenues: | |||||||||||||
Rental and other property revenues | $ | 5,612 | $ | 34,922 | $ | 43,589 | |||||||
5,612 | 34,922 | 43,589 | |||||||||||
Expenses: | |||||||||||||
Property operating expenses | 2,350 | 16,479 | 23,326 | ||||||||||
Depreciation | 751 | 5,563 | 7,691 | ||||||||||
General and administrative | 451 | 966 | 1,224 | ||||||||||
Provision on impairment of notes receivable and real estate assets | - | - | 2,400 | ||||||||||
Total operating expenses | $ | 3,552 | $ | 23,008 | $ | 34,641 | |||||||
Other income (expense): | |||||||||||||
Other income (expense) | (507 | ) | 45 | 7 | |||||||||
Mortgage and loan interest | (1,743 | ) | (8,082 | ) | (12,737 | ) | |||||||
Deferred borrowing costs amortization | (1,461 | ) | (3,015 | ) | (1,793 | ) | |||||||
Loan charges and prepayment penalties | (1,656 | ) | (3,246 | ) | (3,472 | ) | |||||||
Litigation settlement | (250 | ) | (250 | ) | (250 | ) | |||||||
Total other expenses | $ | (5,617 | ) | $ | (14,548 | ) | $ | (18,245 | ) | ||||
Loss from discontinued operations before gain on sale of real estate and taxes | (3,557 | ) | (2,634 | ) | (9,297 | ) | |||||||
Gain on sale of real estate from discontinued operations | 61,879 | 98,951 | 8,885 | ||||||||||
Income tax benefit (expense) | (20,413 | ) | (33,711 | ) | 144 | ||||||||
Income (loss) from discontinued operations | $ | 37,909 | $ | 62,606 | $ | (268 | ) |
QUARTERLY_RESULTS_OF_OPERATION1
QUARTERLY RESULTS OF OPERATIONS (Tables) | 12 Months Ended | |||||||||||||||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||||||||||||||
QUARTERLY RESULTS OF OPERATIONS {2} | ||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information | The following is a tabulation of quarterly results of operations for the years 2014, 2013, and 2012. 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 2014 | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||||||
(dollars in thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||||||
Total operating revenues | $ | 19,159 | $ | 19,500 | $ | 19,326 | $ | 21,427 | ||||||||||||||||||||||||
Total operating expenses | 18,957 | 19,914 | 18,858 | 24,882 | ||||||||||||||||||||||||||||
Operating income (loss) | 202 | (414 | ) | 468 | (3,455 | ) | ||||||||||||||||||||||||||
Other expense | (2,440 | ) | (3,630 | ) | (4,274 | ) | (5,167 | ) | ||||||||||||||||||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (2,238 | ) | (4,044 | ) | (3,806 | ) | (8,622 | ) | ||||||||||||||||||||||||
Gain (loss) on land sales | 753 | (159 | ) | 40 | (73 | ) | ||||||||||||||||||||||||||
Income tax benefit | 2,049 | 2,195 | 786 | 15,383 | ||||||||||||||||||||||||||||
Net income (loss) from continued operations | 564 | (2,008 | ) | (2,980 | ) | 6,688 | ||||||||||||||||||||||||||
Net income from discontinued operations | 3,805 | 4,077 | 1,461 | 28,566 | ||||||||||||||||||||||||||||
Net income (loss) | 4,369 | 2,069 | (1,519 | ) | 35,254 | |||||||||||||||||||||||||||
Less: net income (loss) attributable to non-controlling interest | (819 | ) | (551 | ) | 200 | (8,118 | ) | |||||||||||||||||||||||||
Preferred dividend requirement | (613 | ) | (613 | ) | (427 | ) | (390 | ) | ||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | 2,937 | $ | 905 | $ | (1,746 | ) | $ | 26,746 | |||||||||||||||||||||||
PER SHARE DATA | ||||||||||||||||||||||||||||||||
Earnings per share - basic | ||||||||||||||||||||||||||||||||
Loss from continued operations | $ | (0.08 | ) | $ | (0.28 | ) | $ | (0.24 | ) | $ | (0.13 | ) | ||||||||||||||||||||
Income from discontinued operations | 0.33 | 0.35 | 0.11 | 2.04 | ||||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | 0.25 | $ | 0.07 | $ | (0.13 | ) | $ | 1.91 | |||||||||||||||||||||||
Weighted average common shares used in computing earnings per share | 11,525,389 | 11,525,389 | 13,619,647 | 14,027,618 | ||||||||||||||||||||||||||||
Earnings per share - diluted | ||||||||||||||||||||||||||||||||
Loss from continued operations | $ | (0.08 | ) | $ | (0.28 | ) | $ | (0.24 | ) | $ | (0.13 | ) | ||||||||||||||||||||
Income from discontinued operations | 0.33 | 0.35 | 0.11 | 2.04 | ||||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | 0.25 | $ | 0.07 | $ | (0.13 | ) | $ | 1.91 | |||||||||||||||||||||||
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 11,525,389 | 13,619,647 | 14,027,618 | ||||||||||||||||||||||||||||
Three Months Ended 2013 | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||||||
(dollars in thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||||
2013 | ||||||||||||||||||||||||||||||||
Total operating revenues | $ | 19,088 | $ | 19,193 | $ | 19,530 | $ | 22,939 | ||||||||||||||||||||||||
Total operating expenses | 17,838 | 18,640 | 20,071 | 39,877 | ||||||||||||||||||||||||||||
Operating income (loss) | 1,250 | 553 | (541 | ) | (16,938 | ) | ||||||||||||||||||||||||||
Other expense | (9,245 | ) | (5,401 | ) | (8,533 | ) | (12,085 | ) | ||||||||||||||||||||||||
Loss before gain on land sales, non-contolling interest, and taxes | (7,995 | ) | (4,848 | ) | (9,074 | ) | (29,023 | ) | ||||||||||||||||||||||||
Gain (loss) on land sales | (35 | ) | - | 598 | (1,018 | ) | ||||||||||||||||||||||||||
Income tax benefit | 2,807 | 5,352 | 402 | 31,952 | ||||||||||||||||||||||||||||
Net income (loss) from continued operations | (5,223 | ) | 504 | (8,074 | ) | 1,911 | ||||||||||||||||||||||||||
Net income from discontinued operations | 5,212 | 9,940 | 745 | 46,709 | ||||||||||||||||||||||||||||
Net income (loss) | (11 | ) | 10,444 | (7,329 | ) | 48,620 | ||||||||||||||||||||||||||
Less: net income (loss) attributable to non-controlling interest | 385 | (2,090 | ) | 903 | (9,646 | ) | ||||||||||||||||||||||||||
Preferred dividend requirement | (613 | ) | (613 | ) | (613 | ) | (613 | ) | ||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (239 | ) | $ | 7,741 | $ | (7,039 | ) | $ | 38,361 | ||||||||||||||||||||||
PER SHARE DATA | ||||||||||||||||||||||||||||||||
Earnings per share - basic | ||||||||||||||||||||||||||||||||
Loss from continued operations | $ | (0.47 | ) | $ | (0.19 | ) | $ | (0.68 | ) | $ | (0.72 | ) | ||||||||||||||||||||
Income from discontinued operations | 0.45 | 0.86 | 0.06 | 4.05 | ||||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (0.02 | ) | $ | 0.67 | $ | (0.62 | ) | $ | 3.33 | ||||||||||||||||||||||
Weighted average common shares used in computing earnings per share | 11,525,389 | 11,525,389 | 11,525,389 | 11,525,389 | ||||||||||||||||||||||||||||
Earnings per share - diluted | ||||||||||||||||||||||||||||||||
Loss from continued operations | $ | (0.47 | ) | $ | (0.19 | ) | $ | (0.68 | ) | $ | (0.72 | ) | ||||||||||||||||||||
Income from discontinued operations | 0.45 | 0.86 | 0.06 | 4.05 | ||||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (0.02 | ) | $ | 0.67 | $ | (0.62 | ) | $ | 3.33 | ||||||||||||||||||||||
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 11,525,389 | 11,525,389 | 11,525,389 | ||||||||||||||||||||||||||||
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 | $ | 19,240 | $ | 19,744 | $ | 20,189 | $ | 22,676 | ||||||||||||||||||||||||
Total operating expenses | 18,626 | 17,146 | 17,518 | 20,312 | ||||||||||||||||||||||||||||
Operating income | 614 | 2,598 | 2,671 | 2,364 | ||||||||||||||||||||||||||||
Other expense | (6,310 | ) | (6,645 | ) | (4,778 | ) | (2,288 | ) | ||||||||||||||||||||||||
Income (loss) before gain on land sales, non-contolling interest, and taxes | (5,696 | ) | (4,047 | ) | (2,107 | ) | 76 | |||||||||||||||||||||||||
Gain(loss) on land sales | (1,021 | ) | 4,738 | 2,898 | (1,140 | ) | ||||||||||||||||||||||||||
Income tax benefit (expense) | (266 | ) | 1,763 | (54 | ) | (1,587 | ) | |||||||||||||||||||||||||
Net income (loss) from continued operations | (6,983 | ) | 2,454 | 737 | (2,651 | ) | ||||||||||||||||||||||||||
Net income (loss) from discontinued operations | (494 | ) | 3,275 | (99 | ) | (2,950 | ) | |||||||||||||||||||||||||
Net income (loss) | (7,477 | ) | 5,729 | 638 | (5,601 | ) | ||||||||||||||||||||||||||
Less: 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 continued operations | $ | (0.56 | ) | $ | 0.07 | $ | - | $ | (0.19 | ) | ||||||||||||||||||||||
Income (loss) from discontinued operations | (0.04 | ) | 0.28 | (0.01 | ) | (0.26 | ) | |||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (0.60 | ) | $ | 0.35 | $ | (0.01 | ) | $ | (0.45 | ) | |||||||||||||||||||||
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 continued operations | $ | (0.56 | ) | $ | 0.03 | $ | - | $ | (0.19 | ) | ||||||||||||||||||||||
Income (loss) from discontinued operations | (0.04 | ) | 0.13 | - | (0.26 | ) | ||||||||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (0.60 | ) | $ | 0.16 | $ | - | $ | (0.45 | ) | ||||||||||||||||||||||
Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 25,679,951 | 21,027,447 | 11,525,389 |
ORGANIZATION_AND_BASIS_OF_PRES
ORGANIZATION AND BASIS OF PRESENTATION (Details) | Dec. 31, 2014 |
ORGANIZATION AND BASIS OF PRESENTATION CONSISTS OF THE FOLLOWING: | |
Percentage of common stock owned by related parties | 86.70% |
Percentage of common stock owned by ARL of Transcontinental Realty Investors Inc. | 80.90% |
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 | 9 |
Number of office buildings | 4 |
Number of industrial warehouses | 1 |
Number of retailcenters and Golf Courses | 4 |
Area of rental square feet (In Millions) | 2,100,000 |
Number of apartment communities | 38 |
Apartment communities units total | 6,344 |
Area of acres of developed and undeveloped land | 4,234 |
Summary_of_real_estate_owned_D
Summary of real estate owned (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Summary of real estate owned details: | ||
Apartments | $455,602 | $436,109 |
Apartments under construction | 1,512 | 0 |
Commercial properties | 193,197 | 214,486 |
Land held for development | 159,903 | 149,103 |
Real estate held for sale | 0 | 18,817 |
Real estate subject to sales contract | 21,326 | 29,547 |
Total real estate, at cost, less impairment | 831,540 | 848,062 |
Less accumulated deprecation | -131,777 | -147,768 |
Total real estate, net of depreciation | $699,763 | $700,294 |
Depreciation_is_computed_on_a_
Depreciation is computed on a straight line basis over the estimated useful lives of the assets (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Depreciation is computed on a straight line basis over the estimated useful lives of the assets: | |
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 $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Fair Value Measurements Using Fair Value | ||
Land | $4,899 | $2,699 |
Commercial | 26,194 | 9,660 |
Fair Value Measurements Using Level 2 | ||
Land | 4,899 | 1,800 |
Commercial | 26,194 | 9,660 |
Fair Value Measurements Using Level 3 | ||
Land | $0 | $899 |
Provision_for_Impairment_Losse
Provision for Impairment Losses (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Provision for Impairment Losses Details | |
Prior period impairment recorded as an additional loss in the commercial portfolio | $9,600,000 |
Prior period impairment recorded as an additional loss in the land portfolio | 7,500,000 |
Provision for impairment of notes receivables | $1,900,000 |
Significant_real_estate_transa
Significant real estate transactions (Details) (USD $) | Dec. 30, 2014 | Dec. 01, 2014 | Nov. 13, 2014 | Nov. 06, 2014 | Nov. 03, 2014 | Sep. 23, 2014 | Aug. 12, 2014 | Jul. 25, 2014 | Apr. 03, 2014 | Mar. 31, 2014 | Mar. 26, 2014 | Mar. 13, 2014 | Feb. 06, 2014 |
In Millions, unless otherwise specified | |||||||||||||
Significant real estate transactions | |||||||||||||
TCI sold apartment complex (No of units) | 216 | 290 | 106 | 232 | |||||||||
Acres of Land Hickory (Acers) | 0 | ||||||||||||
TCI sold acres of land | 2.606 | 5.98 | 24.498 | 6.314 | 6.6 | ||||||||
Sale price | $0.30 | $40.60 | $52.80 | $8 | $2.60 | $4.30 | $16.60 | $1.70 | $1.20 | $23.10 | |||
TCI sold commercial building (square foot) | 20,715 | 512,593 | |||||||||||
Existing debt secured by the property | 19 | 23.7 | 4.5 | 0.8 | 1.7 | 6.6 | 16.5 | ||||||
Recorded a gain on the sale | 20.7 | 26.7 | 1.8 | 7 | 0.8 | 1.2 | 6.1 | ||||||
Recorded a loss on the sale | 0.4 | ||||||||||||
Acres of Land Valwood (Acres) | 16.87 | ||||||||||||
Purchase price | $1.20 | $11.40 | $13.30 | $3.20 | |||||||||
TCI acquired apartment complex Legacy at Pleasant Grove (No of units) | 208 | ||||||||||||
TCI acquired apartment complex Villas at Park West I (No of units) | 148 | ||||||||||||
TCI acquired apartment complex Villas at Park West II (No of units) | 112 | ||||||||||||
TCI acquired Bonneau Land (No of units) | 8.387 |
NOTES_AND_INTEREST_RECEIVABLE_1
NOTES AND INTEREST RECEIVABLE CONSISTS OF THE FOLLOWING (Details) (USD $) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
Performing loans As Of: | |
Foundation for Better Housing, Inc. (Holland Lake) (1) | $4,698 |
Foundation for Better Housing, Inc. (Holland Lake) (1) | 1,674 |
Foundation for Better Housing, Inc. (Overlook at Allensville) (1) | 2,472 |
Foundation for Better Housing, Inc. (Overlook at Allensville) (1) | 1,408 |
Foundation for Better Housing, Inc. (Preserve at Pecan Pointe) (1) | 1,810 |
Foundation for Better Housing, Inc. (Preserve at Pecan Pointe) | 1,156 |
Foundation for Better Housing, Inc. (Vista Ridge) (1) | 3,923 |
Foundation for Better Housing, Inc. (Vista Ridge) (1) | 1,492 |
HGH Residential, Inc. (Tradewinds Dev) | 6,131 |
One Realco Corporation (1) (2) | 7,000 |
Realty Advisors Management, Inc. (1) | 20,387 |
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. (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. (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. (Trails at White Rock) (1) | 3,815 |
Unified Housing Foundation, Inc. (1) | 1,261 |
Unified Housing Foundation, Inc. (1) | 1,207 |
Unified Housing Foundation, Inc. (1) | 2,665 |
Unified Housing Foundation, Inc | 3,657 |
Various non-related party notes | 3,503 |
Various related party notes (1) | 6,393 |
Accrued interest: | 8,606 |
Total Performing | 149,484 |
Leman Development, Ltd (2) | 1,500 |
Tracy Suttles (2) | 1,077 |
Other non-related party notes | 507 |
Accrued interest | 77 |
Total Non-Performing | 3,161 |
Allowance for estimated losses | -18,279 |
Total Non-Performing loans: | $134,366 |
(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 (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
ALLOWANCE FOR ESTIMATED LOSSES {2} | |||
Allowance for estimated losses opening balance | $19,600 | $21,704 | $13,383 |
Increase (decrease) in provision | -1,321 | -2,104 | 8,321 |
Allowance for estimated losses closing balance | $18,279 | $19,600 | $21,704 |
Investments_accounted_for_via_
Investments accounted for via the equity method consists of the following (Details) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Investments accounted for via the equity method consists of the following | |||
Gruppa Florentina, LLC(1) | 20.00% | 20.00% | 20.00% |
LK-Four Hickory, LLC(2) | 0.00% | 0.00% | 0.00% |
Summary_of_the_unconsolidated_
Summary of the unconsolidated subsidiaries and investees (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Summary of the unconsolidated subsidiaries and investees as follows: | |||
Real estate, net of accumulated depreciation | $11,647 | $10,823 | $12,343 |
Notes receivable | 7,326 | 6,526 | 6,192 |
Other assets | 30,291 | 32,131 | 32,145 |
Notes payable | -10,429 | -11,022 | -13,824 |
Other liabilities | -7,192 | -8,134 | -7,443 |
Shareholders' equity | ($31,643) | ($30,324) | ($29,413) |
Summary_of_the_results_of_oper
Summary of the results of operations from unconsolidated subsidiaries and investees as follows (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Summary of the results of operations from unconsolidated subsidiaries and investees as follows: | |||
Revenue | $48,893 | $46,276 | $45,505 |
Depreciation | -1,151 | -1,166 | -1,277 |
Operating expenses | -45,590 | -42,330 | -41,188 |
Interest expense | -901 | -1,022 | -1,181 |
Income from continuing operations | 1,251 | 1,758 | 1,859 |
Income from discontinued operations | 0 | 0 | 0 |
Net income | 1,251 | 1,758 | 1,859 |
Company's proportionate share of earnings | $250 | $352 | $372 |
Summary_of_notes_and_interest_
Summary of notes and interest payable as follows (Details) (USD $) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
Notes Payable: | |
Apartments | $420,083 |
Commercial | 114,085 |
Land held for development | 83,439 |
Real estate held for sale | 452 |
Real estate subject to sales contract | 16,961 |
Other | 20,464 |
Total | 655,484 |
Accrued Interest: | |
Apartments | 1,157 |
Commercial | 433 |
Land held for development | 117 |
Real estate held for sale | 0 |
Real estate subject to sales contract | 1,655 |
Other | 213 |
Total | 3,575 |
Total Debt: | |
Apartments | 421,240 |
Commercial | 114,518 |
Land held for development | 83,556 |
Real estate held for sale | 452 |
Real estate subject to sales contract | 18,616 |
Other | 20,677 |
Total | $659,059 |
Principal_payments_on_the_note
Principal payments on the notes payable for the following years (Details) (USD $) | Dec. 31, 2014 |
Principal payments on the notes payable for the following five years | |
Principal payments on the notes payable 2014 | $109,841 |
Principal payments on the notes payable 2015 | 79,994 |
Principal payments on the notes payable 2016 | 43,602 |
Principal payments on the notes payable 2017 | 8,661 |
Principal payments on the notes payable 2018 | 43,583 |
Thereafter | 369,803 |
Total | $655,484 |
RELATED_PARTY_TRANSACTIONS_rel
RELATED PARTY TRANSACTIONS related party receivable from and payable to Pillar (Details) (Pillar, USD $) | Pillar |
In Thousands | USD ($) |
Related party receivable, at Dec. 31, 2013 | $14,086 |
Cash transfers | 59,372 |
Advisory fees | -8,943 |
Net income fees | -3,669 |
Cost reimbursements | -3,449 |
Interest income | 1,043 |
Notes receivable purchased | -26,290 |
Fees and commissions | -4,526 |
Expenses paid by Advisor | -6,957 |
Financing (mortgage payments) | -3 |
Sales/purchases transactions | 750 |
Tax sharing | 0 |
Related party receivable, at Dec. 31, 2014 | $21,414 |
PREFERRED_STOCK_TRANSACTIONS_D
PREFERRED STOCK TRANSACTIONS (Details) (USD $) | Dec. 31, 2014 |
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 | 2,461,252 |
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_Details
STOCK OPTIONS (Details) (USD $) | Dec. 31, 2014 |
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_Detail
Current expense (benefit) (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Current expense (benefit) is attributable as follows: | |||
Income from continuing operations | ($1,169) | ($24,217) | ($5,387) |
Income from discontinued operations | 1,169 | 17,415 | 5,387 |
The full 2013 tax (benefit) to ARL comes from MRHI | $0 | ($6,802) | $0 |
Federal_income_tax_expense_dif
Federal income tax expense differs from the amount computed as follows (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Federal income tax expense differs from the amount computed as follows: | |||
Computed "expected" income tax (benefit) expense | $14,061 | $15,684 | ($1,955) |
Book to tax differences in gains on sale of property | -2,350 | -20,373 | -8,503 |
Book to tax differences from entities not consolidated for tax purposes | -23,900 | -33,565 | -3,831 |
Book to tax differences of depreciation and amortization | 1,415 | 1,250 | 1,460 |
Valuation allowance against current net operating loss benefit | 20,125 | 17,415 | 5,387 |
Other book to tax differences | -9,351 | 17,208 | 7,442 |
Total | 0 | -2,381 | 0 |
Alternative minimum tax | $0 | $0 | $0 |
Deferred_tax_asset_Details
Deferred tax asset (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Deferred tax asset are as follows: | |||
Net operating losses | $74,357 | $88,486 | $68,034 |
AMT credits | 2,201 | 2,201 | 2,201 |
Real estate holdings and equipment | 10,337 | 11,959 | 1,159 |
Notes receivable | 6,946 | 7,448 | 8,248 |
Investments | -14,950 | -14,960 | -13,824 |
Notes payable | 8,189 | 13,360 | 17,691 |
Deferred gains | 18,086 | 18,746 | 18,170 |
Total | 105,166 | 127,240 | 101,679 |
Deferred tax valuation allowance | -105,166 | -127,240 | -101,679 |
Net deferred tax asset | $0 | $0 | $0 |
FUTURE_MINIMUM_RENTAL_INCOME_U2
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES (Details) (USD $) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES AS FOLLOWS: | |
Minimum future rents due to ARL under non-cancelable operating leases 2015 | $17,627 |
Minimum future rents due to ARL under non-cancelable operating leases 2016 | 16,063 |
Minimum future rents due to ARL under non-cancelable operating leases 2017 | 13,665 |
Minimum future rents due to ARL under non-cancelable operating leases 2018 | 12,470 |
Minimum future rents due to ARL under non-cancelable operating leases 2019 | 8,136 |
Minimum future rents due to ARL under non-cancelable operating leases Threreafter | 20,000 |
Minimum future rents total | $87,961 |
Reconciles_the_segment_informa1
Reconciles the segment information to the corresponding amounts during the period (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Reconciles the segment information to the corresponding amounts during the period: | |||
Segment operating Income (loss) | ($516) | ($199) | $4,581 |
General and administrative | -10,282 | -7,919 | -6,037 |
Provision on impairment of notes receivable and real estate assets | 0 | -18,980 | -2,330 |
Net income fee to related party | -3,669 | -4,089 | -180 |
Advisory fee to related party | -8,943 | -10,166 | -10,182 |
Other income | 1,415 | 10,163 | 7,770 |
Loss on sale of investments | -92 | -283 | -118 |
Earnings from unconsolidated investees | 347 | 391 | 372 |
Litigation settlement | 3,591 | -20,313 | -175 |
Income tax benefit | 20,413 | 40,513 | -144 |
Gain (loss) from continuing operations | $2,264 | ($10,882) | ($6,443) |
Operating_Segments_to_the_corr
Operating Segments to the corresponding amounts Narrative (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Operating Segments to the corresponding amounts in narrative: | |||
Segment assets | $699,763 | $700,294 | $930,433 |
Investments in unconsolidated subsidiaries and investees | 4,279 | 3,789 | 8,168 |
Notes and interest receivable | 134,366 | 136,815 | 103,469 |
Other assets and receivables | 127,090 | 102,424 | 93,275 |
Assets held for sale | 0 | 0 | 0 |
Total assets | $965,498 | $943,322 | $1,135,345 |
DISCONTINUED_OPERATIONS_Detail
DISCONTINUED OPERATIONS (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Summarizes revenue and expense information for these properties sold and held for sale: | |||
Rental and other property revenues | $5,612 | $34,922 | $43,589 |
Total Revenues | 5,612 | 34,922 | 43,589 |
Property operating expenses | 2,350 | 16,479 | 23,326 |
Depreciation | 751 | 5,563 | 7,691 |
General and administrative | 451 | 966 | 1,224 |
Provision on impairment of notes receivable and real estate assets | 0 | 0 | 2,400 |
Total operating expenses | 3,552 | 23,008 | 34,641 |
Other income (expense) | -507 | 45 | 7 |
Mortgage and loan interest | -1,743 | -8,082 | -12,737 |
Deferred borrowing costs amortization | -1,461 | -3,015 | -1,793 |
Loan charges and prepayment penalties | -1,656 | -3,246 | -3,472 |
Litigation settlement | -250 | -250 | -250 |
Total other expenses | -5,617 | -14,548 | -18,245 |
Loss from discontinued operations before gain on sale of real estate and taxes | -3,557 | -2,634 | -9,297 |
Gain on sale of real estate from discontinued operations | 61,879 | 98,951 | 8,885 |
Income tax benefit (expense) | -20,413 | -33,711 | 144 |
Income (loss) from discontinued operations | $37,909 | $62,606 | ($268) |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY AS FOLLOWS (Details) (USD $) | Dec. 31, 2013 | Feb. 13, 2013 | Dec. 31, 2012 | Jan. 31, 2012 | Oct. 31, 2011 | 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 | 22,300,000 | |||||
Total awarded including damages and interest awarded to the Clapper Entities | 74,000,000 | |||||
Damages awarded to the clapper entities | 26,000,000 | |||||
Interest awarded to the clapper entities | 48,000,000 | |||||
Total assets and net worth | 10,000,000 | |||||
Reserved value represents 100% of both assets and book value | 0 | |||||
Sold ART and subsidiaries for note | 10,000,000 | 10,000,000 | ||||
Written off the unreserved balance | 5,300,000 | |||||
Original Loan Commitment Were To Be Made To The Entities | 160,000,000 | |||||
Damages to TCI increased costs | 960,646 | |||||
Damages to TCI loss opportunity | 11,161,520 | |||||
TCI was entitled to damages for "lost opportunities" relating to tenant improvements and awarded | $252,577 |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) | Dec. 31, 2014 | Jul. 17, 2014 |
EARNINGS PER SHARE DETAILS: | ||
Series A 10% Cumulative Convertible Preferred stock shares outstanding | 2,461,252 | |
Shares converted to Common Stock of the average daily closing price percent | 90.00% | |
Preferred Stock held by ART Edina owned subsidiaries | 300,000 | |
Preferred Stock held by ART Hotel Equities owned subsidiaries | 600,000 | |
Series A Convertible Preferred stock owned by RAI | 2,451,435 | |
Seies A Shares converted to Common Stock | 890,797 | |
Issuance of new shares of common stock ARI | 2,502,230 | |
Series A Convertible Preferred stock shares outstanding | 1,560,638 | |
Shares of Series K convertible preferred stock, which are outstanding | 135,000 | |
Stock Options Outstanding | 1,000 |
SUBSEQUENT_EVENTS_TRANSACTIONS
SUBSEQUENT EVENTS TRANSACTIONS (Details) (USD $) | Feb. 09, 2015 | Jan. 30, 2015 |
SUBSEQUENT EVENTS TRANSACTIONS: | ||
Refinance by way of new mortgage | $11,500,000 | |
Repayment of existing mortgage | 11,500,000 | |
Closing cost of mortgage | 300,000 | |
Interest rate on the note | 3.24% | |
Number of years for the mortgage | 35 | |
Purchased Apartments by TCI from FBH under common control | 4,700,000 | |
TCI assumed the mortgage | 12,000,000 | |
Purchased Apartments by TCI from FBH under common contro1 | 2,500,000 | |
TCI assumed the mortgage | $11,600,000 |