Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 14, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Vestin Realty Mortgage I, Inc. | ' |
Entity Central Index Key | '0001328300 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 5,781,935 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Balance_Sheets_Unaudited
Balance Sheets (Unaudited) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Assets | ' | ' |
Cash and cash equivalents | $2,482,000 | $3,962,000 |
Investment in marketable securities - related party | 784,000 | 929,000 |
Investment in marketable securities | ' | 1,239,000 |
Investment in MVP REIT | ' | 470,000 |
Investment in equity method investee | ' | 3,082,000 |
Investment in equity method investee held for sale | ' | 1,367,000 |
Interest and other receivables, net of allowance of $0 at September 30, 2013 and December 31, 2012 | 16,000 | 7,000 |
Notes receivable, net of allowance of $1,355,000 at September 30, 2013 and $1,894,000 at December 31, 2012 | ' | ' |
Real estate held for sale | 580,000 | 568,000 |
Investment in real estate loans, net of allowance for loan losses of $750,000 at September 30, 2013 and $183,000 at December 31, 2012 | 13,858,000 | 5,463,000 |
Asset held for sale | 4,398,000 | 4,042,000 |
Other assets | 76,000 | 138,000 |
Total assets | 22,194,000 | 21,267,000 |
Liabilities | ' | ' |
Accounts payable and accrued liabilities | 97,000 | 14,000 |
Due to related parties | 216,000 | 5,000 |
Notes payable | 19,000 | 71,000 |
Liabilities related to asset held for sale | 43,000 | 39,000 |
Deferred gain on sale of HFS | 10,000 | ' |
Total liabilities | 385,000 | 129,000 |
Stockholders' equity | ' | ' |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued | ' | ' |
Treasury stock, at cost, no shares at September 30, 2013 and December 31, 2012 | ' | ' |
Common stock, $0.0001 par value; 25,000,000 shares authorized; 5,781,935 issued and outstanding at September 30, 2013 and 6,340,859 shares issued and outstanding at December 31, 2012 | 1,000 | 1,000 |
Additional paid-in capital | 61,217,000 | 60,296,000 |
Accumulated deficit | -40,702,000 | -40,551,000 |
Accumulated other comprehensive income | 156,000 | 347,000 |
Total stockholders equity before non-controlling interest - related party | 20,672,000 | 20,093,000 |
Noncontrolling interest - related party | 1,137,000 | 1,045,000 |
Total equity | 21,809,000 | 21,138,000 |
Total liabilities and stockholders' equity | $22,194,000 | $21,267,000 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Interest and other receivables, allowance | $0 | $0 |
Notes receivable, allowance | 1,894,000 | 1,355,000 |
Investment in real estate loans, allowance for loan losses | $183,000 | $750,000 |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Treasury stock, shares | 0 | 558,924 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 6,340,859 | 5,781,935 |
Common stock, shares outstanding | 6,340,859 | 5,781,935 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Revenues | ' | ' | ' | ' |
Interest income from investment in real estate loans | $173,000 | $291,000 | $732,000 | $643,000 |
Gain related to pay off of notes receivable, including recovery of allowance for notes receivable | 491,000 | 30,000 | 539,000 | 89,000 |
Gain related to pay off of real estate loan, including recovery of allowance for loan loss | ' | 22,000 | 21,000 | 210,000 |
Total revenues | 664,000 | 343,000 | 1,292,000 | 942,000 |
Operating expenses | ' | ' | ' | ' |
Management fees - related party | 69,000 | 61,000 | 207,000 | 199,000 |
Provision for loan loss | 588,000 | 21,000 | 588,000 | 40,000 |
Acquisition expense | 7,000 | ' | 7,000 | ' |
Interest expense | 2,000 | 2,000 | 3,000 | 3,000 |
Professional fees | 94,000 | 135,000 | 299,000 | 523,000 |
Insurance | 53,000 | 55,000 | 162,000 | 166,000 |
Consulting | 19,000 | 20,000 | 69,000 | 58,000 |
Other | 15,000 | 41,000 | 63,000 | 121,000 |
Total operating expenses | 847,000 | 335,000 | 1,398,000 | 1,110,000 |
Income (loss) from operations | -183,000 | 8,000 | -106,000 | -168,000 |
Non-operating income (loss) | ' | ' | ' | ' |
Gain on sale of marketable securities | 79,000 | 3,000 | 79,000 | ' |
Dividend income | 3,000 | ' | 3,000 | ' |
Reversal of settlement reserve | ' | ' | 16,000 | ' |
Recovery from settlement with loan guarantor | ' | 267,000 | ' | 978,000 |
Loss from investment in equity method investee | -25,000 | ' | 25,000 | ' |
Settlement income | ' | 55,000 | ' | 55,000 |
Settlement expense | ' | ' | ' | -23,000 |
Total non-operating income | 57,000 | 325,000 | 73,000 | 1,013,000 |
Provision for income taxes | ' | ' | ' | ' |
Income from continuing operations | -126,000 | 333,000 | -33,000 | 845,000 |
Discontinued operations, net of income taxes | ' | ' | ' | ' |
Net gain (loss) on sale of real estate held for sale | -1,000 | ' | 25,000 | 4,000 |
Recovery from 1701 Commerce | 19,000 | ' | 19,000 | ' |
Loss from investment in equity method investee | -9,000 | ' | -9,000 | ' |
Expenses related to real estate held for sale | -4,000 | -29,000 | -33,000 | -116,000 |
Income from asset held for sale, net of income taxes | 79,000 | 79,000 | 248,000 | 118,000 |
Write-downs on real estate held for sale | ' | ' | ' | 316,000 |
Total income (loss) from discontinued operations | 84,000 | 50,000 | 250,000 | -310,000 |
Income (loss) before provision for income taxes | -42,000 | 383,000 | 217,000 | 535,000 |
Net income | -42,000 | 383,000 | 217,000 | 535,000 |
Net income attributable to non-controlling interest - related parties | 21,000 | 21,000 | 65,000 | 31,000 |
Net income (loss) attributable to common stockholders | ($63,000) | $362,000 | $152,000 | $504,000 |
Basic and diluted income (loss) per weighted average common share | ' | ' | ' | ' |
Continuing operations | ($0.02) | $0.05 | ($0.01) | $0.14 |
Discontinued operations | $0.01 | $0.01 | $0.03 | ($0.05) |
Total basic and diluted income (loss) per weighted average common share | ($0.01) | $0.06 | $0.02 | $0.09 |
Dividends declared per common share | ' | ' | ' | ' |
Weighted average common shares outstanding | 5,874,818 | 6,340,859 | 6,121,921 | 6,340,859 |
Consolidated_Statement_Of_Othe
Consolidated Statement Of Other Comprehensive Income (loss) (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Consolidated Statement Of Other Comprehensive Income Loss | ' | ' | ' | ' |
Net income (loss) | ($42,000) | $383,000 | $217,000 | $535,000 |
Unrealized holding gain on available-for-sale securities | 46,000 | ' | 46,000 | ' |
Unrealized holding gain (loss) on available-for-sale securities - related party | 43,000 | 219,000 | 145,000 | 199,000 |
Comprehensive income (loss) | 47,000 | 602,000 | 408,000 | 734,000 |
Net income attributable to noncontrolling interest | 21,000 | 21,000 | 65,000 | 31,000 |
Comprehensive income (loss) attributable to Vestin Realty Mortgage I, Inc. | $26,000 | $581,000 | $343,000 | $703,000 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Cash flows from operating activities: | ' | ' |
Net income | $217,000 | $535,000 |
Adjustments to reconcile net income to net cash used in operating activities: | ' | ' |
Write-downs on real estate held for sale | ' | -316,000 |
Recovery of allowance for doubtful notes receivable | -539,000 | -89,000 |
Provision for loan loss | 588,000 | 40,000 |
Gain related to recovery of allowance for loan loss | -21,000 | -210,000 |
Gain on sale of real estate held for sale | -25,000 | -4,000 |
Gain on sale of marketable securities | -79,000 | ' |
Gain on sale of marketable securities - related party | ' | -3,000 |
Loss from equity method investee | -25,000 | ' |
Loss from equity method investee held for sale | 9,000 | ' |
Recovery from 1701 Commerce | -19,000 | ' |
Settlement Income | ' | -55,000 |
Gain related to recovery from settlement with loan guarantor | ' | -978,000 |
Change in operating assets and liabilities: | ' | ' |
Interest and other receivables | 9,000 | -5,000 |
Due to/from related parties | -211,000 | ' |
Deferred gain on sale of HFS | -10,000 | 21,000 |
Other assets | 96,000 | 103,000 |
Asset held for sale, net of liabilities | -248,000 | -118,000 |
Recovery of settlement reserve | -16,000 | ' |
Accounts payable and accrued liabilities | -43,000 | -44,000 |
Net cash used in operating activities | -267,000 | -533,000 |
Cash flows from investing activities: | ' | ' |
Investments in real estate loans | -2,317,000 | -14,169,000 |
Proceeds from loan payoffs | 8,235,000 | 6,689,000 |
VRM II | 1,200,000 | -1,000,000 |
MVP REIT | 500,000 | ' |
Other related parties | 210,000 | -300,000 |
Proceeds from settlement with loan guarantor | ' | 978,000 |
Proceeds from sale of real estate held for sale | ' | 133,000 |
Proceeds related to nonrefundable earnest money deposit on real estate held for sale | 12,000 | 5,000 |
Proceeds from recovery from 1701 Commerce | 19,000 | ' |
Purchase of marketable securities | -1,829,000 | ' |
Proceeds from sale of marketable security | 715,000 | ' |
Proceeds from sale of marketable security- related party | ' | 26,000 |
Proceeds from settlement income | ' | 55,000 |
Investment in equity method investee | -3,107,000 | ' |
Investment in equity method investee held for sale | -1,376,000 | ' |
Investment in asset held for sale | ' | -80,000 |
Proceeds from notes receivable | 70,000 | 89,000 |
Sale of investments in real estate loans from third parties | ' | 2,012,000 |
Net cash provided by (used in) investing activities | 2,332,000 | -5,562,000 |
Cash flows from financing activities: | ' | ' |
Principal payments on notes payable | -106,000 | -129,000 |
Purchase of treasury stock, at cost | -922,000 | ' |
Proceeds from distribution from assets held for sale | 443,000 | ' |
Net cash used in financing activities | -585,000 | -129,000 |
NET CHANGE IN CASH | 1,480,000 | -6,224,000 |
Cash and cash equivalents, beginning of period | 2,482,000 | 6,758,000 |
Cash and cash equivalents, end of period | 3,962,000 | 534,000 |
Interest expense | 3,000 | 3,000 |
Write-off of interest receivable and related allowance | ' | 228,000 |
Other real estate owned through deed in lieu, net of prior allowance | ' | $787,000 |
NOTE_A_ORGANIZATION
NOTE A - ORGANIZATION | 9 Months Ended |
Sep. 30, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
NOTE A - ORGANIZATION | ' |
NOTE A — ORGANIZATION | |
Vestin Realty Mortgage I, Inc. (“VRM I”) formerly Vestin Fund I, LLC (“Fund I”) invests in loans secured by real estate through deeds of trust or mortgages (hereafter referred to collectively as “deeds of trust” and as defined in our management agreement (“Management Agreement”) as (“Mortgage Assets”). In addition we may invest in, acquire, manage or sell real property or acquire entities involved in the ownership or management of real property. We commenced operations in December 1999. References in this report to the “Company,” “we,” “us,” or “our” refer to Fund I with respect to the period prior to April 1, 2006 and to VRM I with respect to the period commencing on May 1, 2006. | |
We operated as a real estate investment trust (“REIT”) through December 31, 2011. We are not a mutual fund or an investment company within the meaning of the Investment Company Act of 1940, nor are we subject to any regulation thereunder. As a REIT, we were required to have a December 31 fiscal year end. We announced on March 28, 2012 that we have terminated our election to be treated as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), effective for the tax year ending December 31, 2012. Under the Code, we will not be able to make a new election to be taxed as a REIT during the four years following December 31, 2012. Pursuant to our charter, upon the determination by the Board of Directors that we should no longer qualify as a REIT, the restrictions on transfer and ownership of shares set forth in Article VII of our charter ceased to be in effect and, accordingly, shares of the Company’s stock will no longer be subject to such restrictions. | |
Michael Shustek owns a significant majority of Vestin Mortgage, LLC, a Nevada limited liability company, which is our manager (the “manager” or “Vestin Mortgage”). On January 7, 2011, Vestin Mortgage converted from a corporation to a limited liability company. The business of brokerage and placement of real estate loans have been performed by affiliated or non-affiliated mortgage brokers, including Advant Mortgage, LLC (“MVP Mortgage”), a licensed Nevada mortgage broker, which is indirectly wholly owned by Mr. Shustek. | |
Pursuant to a management agreement, our manager is responsible for managing our operations and implementing our business strategies on a day-to-day basis. Consequently, our operating results are dependent to a significant extent upon our manager’s ability and performance in managing our operations and servicing our assets. | |
Vestin Mortgage is also the manager of Vestin Realty Mortgage II, Inc. (“VRM II”), as the successor by merger to Vestin Fund II, LLC (“Fund II”) and Vestin Fund III, LLC (“Fund III”). VRM II has investment objectives similar to ours, and Fund III is in the process of an orderly liquidation of its assets. | |
During April 2009, we entered into an accounting services agreement with Strategix Solutions, LLC (“Strategix Solutions”), a Nevada limited liability company, for the provision of accounting and financial reporting services. Strategix Solutions also provides accounting and financial reporting services to VRM II and Fund III. Our CFO and other members of our accounting staff are employees of Strategix Solutions. Strategix Solutions is managed by LL Bradford and Company, LLC ("LL Bradford"), a certified public accounting firm that has provided non-audit accounting services to us. The principal manager of LL Bradford was a former officer of our manager from April 1999 through January 1, 2005. Strategix Solutions is owned by certain partners of LL Bradford, none of whom are currently or were previously officers of our manager. On January 14, 2013, Eric Bullinger resigned from his position as Chief Financial Officer of VRM I and VRM II and the equivalent of Chief Financial Officer of Fund III (hereafter referred to collectively as the “Vestin Entities”). On January 14, 2013, the Board of Directors appointed Tracee Gress as the Chief Financial Officer of the Vestin Entities (or the equivalent thereof in the case of Fund III). As used herein, “management” means our manager, its executive officers and the individuals at Strategix Solutions who perform accounting and financial reporting services on our behalf. |
NOTE_B_SUMMARY_OF_SIGNIFICANT_
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | ||
Sep. 30, 2013 | |||
Accounting Policies [Abstract] | ' | ||
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Basis of Presentation | |||
The consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the 2012 annual report filed on Form 10-K. | |||
Management Estimates | |||
The preparation of consolidated financial statements in conformity with GAAP requires 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 expenses during the reporting period. Actual results could differ from those estimates. | |||
Cash and Cash Equivalents | |||
Cash and cash equivalents include interest-bearing and non-interest-bearing bank deposits, money market accounts, short-term certificates of deposit with original maturities of three months or less, and short-term instruments with a liquidation provision of one month or less. | |||
Revenue Recognition | |||
Interest is recognized as revenue on performing loans when earned according to the terms of the loans, using the effective interest method. We do not accrue interest income on loans once they are determined to be non-performing. A loan is non-performing when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement or when the payment of interest is 90 days past due. Cash receipts will be allocated to interest income, except when such payments are specifically designated by the terms of the loan as principal reduction. Interest is fully allowed for on impaired loans and is recognized on a cash basis method. | |||
All leases are accounted for as non-cancelable operating leases. We recognize rental revenue on a straight-line basis over the term of the lease. Rental income related to the leases is recognized on an accrual basis in accordance with the terms of the leases. Advanced receipts of rental income are deferred and classified as liabilities until earned. | |||
Investments in Real Estate Loans | |||
We may, from time to time, acquire or sell investments in real estate loans from or to our manager or other related parties pursuant to the terms of our Management Agreement without a premium. The primary purpose is to either free up capital to provide liquidity for various reasons, such as loan diversification, or place excess capital in investments to maximize the use of our capital. Selling or buying loans allows us to diversify our loan portfolio within these parameters. Due to the short-term nature of the loans we make and the similarity of interest rates in loans we normally would invest in, the fair value of a loan typically approximates its carrying value. Accordingly, discounts or premiums typically do not apply upon sales of loans and therefore, generally no gain or loss is recorded on these transactions, regardless of whether to a related or unrelated party. | |||
Investments in real estate loans are secured by deeds of trust or mortgages. Generally, our real estate loans require interest only payments with a balloon payment of the principal at maturity. We have both the intent and ability to hold real estate loans until maturity and therefore, real estate loans are classified and accounted for as held for investment and are carried at amortized cost. Loans sold to or purchased from affiliates are accounted for at the principal balance and no gain or loss is recognized by us or any affiliate. Loan-to-value ratios are initially based on appraisals obtained at the time of loan origination and are updated when new appraisals are received or when management’s assessment of the value has changed, to reflect subsequent changes in value estimates. Original appraisals are generally dated within 12 months of the date of loan origination and may be commissioned by the borrower. | |||
The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include troubled debt restructuring, and performing and non-performing loans in which full payment of principal or interest is not expected. The Company calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of its collateral. | |||
Loans that have been modified from their original terms are evaluated to determine if the loan meets the definition of a Troubled Debt Restructuring (“TDR”) as defined by Accounting Standards Codification (“ASC”) 310-40. When the Company modifies the terms of an existing loan that is considered a TDR, it is considered performing as long as it is in compliance with the modified terms of the loan agreement. If the modification calls for deferred interest, it is recorded as interest income as cash is collected. | |||
Allowance for Loan Losses | |||
We maintain an allowance for loan losses on our investments in real estate loans for estimated credit impairment. Our manager’s estimate of losses is based on a number of factors including the types and dollar amounts of loans in the portfolio, adverse situations that may affect the borrower’s ability to repay, prevailing economic conditions and the underlying collateral securing the loan. Additions to the allowance are provided through a charge to earnings and are based on an assessment of certain factors, which may indicate estimated losses on the loans. Actual losses on loans are recorded as a charge-off or a reduction to the allowance for loan losses. Generally, subsequent recoveries of amounts previously charged off are added back to the allowance and included as income. | |||
Estimating allowances for loan losses requires significant judgment about the underlying collateral, including liquidation value, condition of the collateral, competency and cooperation of the related borrower and specific legal issues that affect loan collections or taking possession of the property. As a commercial real estate lender willing to invest in loans to borrowers who may not meet the credit standards of other financial institutional lenders, the default rate on our loans could be higher than those generally experienced in the real estate lending industry. We and our manager generally approve loans more quickly than other real estate lenders and, due to our expedited underwriting process; there is a risk that the credit inquiry we perform will not reveal all material facts pertaining to a borrower and the security. | |||
Additional facts and circumstances may be discovered as we continue our efforts in the collection and foreclosure processes. This additional information often causes management to reassess its estimates. In recent years, we have revised estimates of our allowance for loan losses. Circumstances that have and may continue to cause significant changes in our estimated allowance include, but are not limited to: | |||
· | Declines in real estate market conditions, which can cause a decrease in expected market value; | ||
· | Discovery of undisclosed liens for community improvement bonds, easements and delinquent property taxes; | ||
· | Lack of progress on real estate developments after we advance funds. We customarily utilize disbursement agents to monitor the progress of real estate developments and approve loan advances. After further inspection of the related property, progress on construction occasionally does not substantiate an increase in value to support the related loan advances; | ||
· | Unanticipated legal or business issues that may arise subsequent to loan origination or upon the sale of foreclosed property; and | ||
· | Appraisals, which are only opinions of value at the time of the appraisal, may not accurately reflect the value of the property. | ||
Discontinued Operations | |||
We have reclassified for all periods presented in the accompanying consolidated statements of operations, the amounts related to discontinued operations and real estate held for sale, in accordance with the applicable accounting criteria. In addition, the assets and liabilities related to the discontinued operations are reported separately in the accompanying consolidated balance sheets as real estate held for sale, assets held for sale, and liabilities related to assets held for sale. | |||
Real Estate Held for Sale | |||
Real estate held for sale (“REO”) includes real estate acquired through foreclosure and will be carried at the lower of the recorded amount, inclusive of any senior indebtedness, or the property's estimated fair value, less estimated costs to sell, with fair value based on appraisals and knowledge of local market conditions. While pursuing foreclosure actions, we seek to identify potential purchasers of such property. We seek to sell properties acquired through foreclosure as quickly as circumstances permit, taking into account current economic conditions. The carrying values of REO are assessed on a regular basis from updated appraisals, comparable sales values or purchase offers. | |||
Management classifies REO when the following criteria are met: | |||
· | Management commits to a plan to sell the properties; | ||
· | The property is available for immediate sale in its present condition subject only to terms that are usual and customary; | ||
· | An active program to locate a buyer and other actions required to complete a sale have been initiated; | ||
· | The sale of the property is probable; | ||
· | The property is being actively marketed for sale at a reasonable price; and | ||
· | Withdrawal or significant modification of the sale is not likely. | ||
Classification of Operating Results from Real Estate Held for Sale | |||
Generally, operating results and cash flows from long-lived assets held for sale are to be classified as discontinued operations as a separately stated component of net income. Our operations related to REO are separately identified in the accompanying consolidated statements of operations. | |||
Secured Borrowings | |||
Secured borrowings provide an additional source of capital for our lending activity. Secured borrowings allow us to increase the diversification of our loan portfolio and to invest in loans that we might not otherwise invest in. We do not receive any fees for entering into secured borrowing arrangements; however, we may receive revenue for any differential of the interest spread, if applicable. Loans in which unaffiliated investors have participated through inter-creditor agreements (“Inter-creditor Agreements”) are accounted for as secured borrowings. | |||
The Inter-creditor Agreements provide us additional funding sources for real estate loans whereby an unaffiliated investor (the “Investor”) may participate on a non-pari-passu basis in certain real estate loans with us and/or VRM II (collectively, the “Lead Lenders”). In the event of borrower non-performance, the Inter-creditor Agreements generally provide that the Lead Lenders must repay the Investor’s loan amount either by (i) continuing to remit to the Investor the interest due on the participated loan amount; (ii) substituting an alternative loan acceptable to the Investor; or (iii) repurchasing the participation from the Investor for the outstanding balance plus accrued interest. | |||
Additionally, an Investor may participate in certain loans with the Lead Lenders through Participation Agreements. In the event of borrower non-performance, the Participation Agreement may allow the Investor to be repaid up to the amount of the Investor’s investment prior to the Lead Lender being repaid. Real estate loan financing under the Participation Agreements are also accounted for as a secured borrowing. We do not receive any revenues for entering into secured borrowing arrangements. | |||
Investment in Marketable Securities – Related Party | |||
Investment in marketable securities – related party consists of stock in VRM II. The securities are stated at fair value as determined by the closing market price as of September 30, 2013 and December 31, 2012. All securities are classified as available-for-sale. | |||
We are required to evaluate our available-for-sale investment for other-than-temporary impairment charges. We will determine when an investment is considered impaired (i.e., decline in fair value below its amortized cost), and evaluate whether the impairment is other-than-temporary (i.e., investment value will not be recovered over its remaining life). If the impairment is considered other-than-temporary, we will recognize an impairment loss equal to the difference between the investment’s basis and its fair value. | |||
According to the SEC Staff Accounting Bulletin, Topic 5: Miscellaneous Accounting, M - Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities, there are numerous factors to be considered in such an evaluation and their relative significance will vary from case to case. The following are a few examples of the factors that, individually or in combination, indicate that a decline is other than temporary and that a write-down of the carrying value is required: | |||
· | The length of the time and the extent to which the market value has been less than cost; | ||
· | The financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; or | ||
· | The intent and ability of the holder to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. | ||
Basic and Diluted Earnings Per Common Share | |||
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted EPS is similar to basic EPS except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been exercised. We had no outstanding common share equivalents during the nine months ended September 30, 2013 and 2012. | |||
Common Stock Dividends | |||
During June 2008, our Board of Directors decided to suspend the payment of dividends. Our Board of Directors will closely monitor our operating results in order to determine when dividends should be reinstated; however, we do not expect them to be reinstating dividends in the foreseeable future. | |||
Treasury Stock | |||
On February 21, 2008, our Board of Directors authorized the repurchase of up to $5 million worth of our common stock. Depending upon market conditions, shares may be repurchased from time to time at prevailing market prices through open market or privately negotiated transactions. We are not obligated to purchase any shares. Subject to applicable securities laws, including SEC Rule 10b-18, repurchases may be made at such times and in such amounts, as our management deems appropriate. The repurchases will be funded from our available cash. During the nine months ended September 2013 we purchased 558,924 shares of treasury stock for approximately $0.9 million. | |||
Under the Maryland General Corporation Law, shares of its own stock acquired by a corporation constitute authorized but unissued shares. | |||
Segments | |||
We are currently authorized to operate two reportable segments, investments in real estate loans and investments in real property. As of September 30, 2013, we had not commenced investing in real property. | |||
Our objective is to invest approximately 97% of our assets in real estate loans and real estate investments, while maintaining approximately 3% as a working capital cash reserve. Current market conditions have impaired our ability to be fully invested in real estate loans and real estate investments. As of September 30, 2013, approximately 26% of our assets, net of allowance for loan losses, are classified as investments in real estate loans. | |||
Principles of Consolidation | |||
Our consolidated financial statements include the accounts of VRM I, TRS I, our wholly owned subsidiary, and VREO XXV, LLC, in which we have a controlling interest. All significant intercompany balances and transactions have been eliminated in consolidation. | |||
Business Combinations | |||
In December 2007, the Financial Accounting Standards Board (FASB) revised the authoritative guidance for business combinations, establishing principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired (including goodwill), the liabilities assumed, and any noncontrolling interest in the acquiree. Subsequently, on April 1, 2009, the FASB amended and clarified certain aspects of its authoritative guidance on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. We apply the FASB authoritative guidance to all business combinations for which the acquisition date is on or after January 1, 2009, and to certain future income tax effects related to our prior business combinations, should they arise. | |||
Non-controlling Interests | |||
The FASB issued authoritative guidance for non-controlling interests in December 2007, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as an unconsolidated investment, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, the guidance requires consolidated net income to be reported at amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. | |||
Income Taxes | |||
The Company accounts for its income taxes under the assets and liabilities method, which requires recognition of deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. | |||
The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, they would make an adjustment to the valuation allowance which would reduce the provision for income taxes. | |||
The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. |
NOTE_C_FINANCIAL_INSTRUMENTS_A
NOTE C - FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
NOTE C - FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK | ' |
NOTE C — FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK | |
Financial instruments consist of cash, interest and other receivables, notes receivable, accounts payable and accrued liabilities, due to/from related parties and notes payable. The carrying values of these instruments approximate their fair values due to their short-term nature. Marketable securities – related party and investment in real estate loans are further described in Note K – Fair Value. | |
Financial instruments with concentration of credit and market risk include cash, interest and other receivables, marketable securities - related party, notes receivable, accounts payable and accrued liabilities, due to/from related parties, notes payable, and loans secured by deeds of trust. | |
We maintain cash deposit accounts and certificates of deposit which, at times, may exceed federally-insured limits. To date, we have not experienced any losses. As of September 30, 2013 we had approximately $2.9 million in funds in excess, and as of December 31, 2012, we had approximately $1.9 million in funds in excess of the federally-insured limits. | |
As of September 30, 2013, 50% and 28% of our loans were in Nevada and Michigan, respectively, compared to 79%, and 12% at December 31, 2012, respectively. As a result of this geographical concentration of our real estate loans, the downturn in the local real estate markets in these states has had a material adverse effect on us. | |
As of September 30, 2013, the aggregate amount of loans to our three largest borrowers represented approximately 63% of our total investment in real estate loans. These real estate loans consisted of commercial loans, secured by property located in Nevada, Michigan, Texas and Arizona. All are first lien positions with interest rates between 7.75% and 9.00%, and an aggregate outstanding balance of approximately $3.9 million. As of September 30, 2013, all three of our largest loans were considered performing. | |
The success of a borrower’s ability to repay its real estate loan obligation in a large lump-sum payment may be dependent upon the borrower’s ability to refinance the obligation or otherwise raise a substantial amount of cash. With the weakened economy, credit continues to be difficult to obtain and as such, many of our borrowers who develop and sell commercial real estate projects have been unable to complete their projects, obtain takeout financing or have been otherwise adversely impacted. In addition, an increase in interest rates over the loan rate applicable at origination of the loan may have an adverse effect on our borrower’s ability to refinance. | |
Common Guarantors | |
As of September 30, 2013 and December 31, 2012, there were four loans totaling approximately $2.9 million and $5.0 million, respectively, representing approximately 46.3% and 35.5%, respectively, of our portfolio’s total value, which had a common guarantor. As of September 30, 2013, all of these loans are considered performing. | |
For additional information regarding the above loans, see Note D – Investments In Real Estate Loans. |
NOTE_D_INVESTMENTS_IN_REAL_EST
NOTE D - INVESTMENTS IN REAL ESTATE LOANS | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
NOTE D - INVESTMENTS IN REAL ESTATE LOANS | ' | ||||||||||||
NOTE D — INVESTMENTS IN REAL ESTATE LOANS | |||||||||||||
As of September 30, 2013 and December 31, 2012, most of our loans provided for interest only payments with a “balloon” payment of principal payable and any accrued interest payable in full at the end of the term. | |||||||||||||
In addition, we may invest in real estate loans that require borrowers to maintain interest reserves funded from the principal amount of the loan for a period of time. At September 30, 2013 and December 31, 2012, we had no investments in real estate loans that had interest reserves. | |||||||||||||
Loan Portfolio | |||||||||||||
As of September 30, 2013, we had five available real estate loan products consisting of commercial, construction, acquisition and development, land and residential. The effective interest rates on all product categories range from 6.0% to 10% which includes performing loans that are being fully or partially accrued and will be payable at maturity. Revenue by product will fluctuate based upon relative balances during the period. | |||||||||||||
Investments in real estate loans as of September 30, 2013, were as follows: | |||||||||||||
Loan Type | Number of Loans | Balance * | Weighted Average Interest Rate | Portfolio Percentage | Current Weighted Average Loan-To-Value, Net of Allowance for Loan Losses | ||||||||
Commercial | 8 | $ | 6,119,000 | 8.52% | 98.49% | 65.19% | |||||||
Land | 1 | 94,000 | 6.00% | 1.51% | 49.67% | ||||||||
Total | 9 | $ | 6,213,000 | 8.49% | 100.00% | 64.92% | |||||||
Investments in real estate loans as of December 31, 2012, were as follows: | |||||||||||||
Loan Type | Number of Loans | Balance * | Weighted Average Interest Rate | Portfolio Percentage | Current Weighted Average Loan-To-Value, Net of Allowance for Loan Losses | ||||||||
Commercial | 13 | $ | 13,947,000 | 8.23% | 99.33% | 64.21% | |||||||
Land | 1 | 94,000 | 6.00% | 0.67% | 53.81% | ||||||||
Total | 14 | $ | 14,041,000 | 8.21% | 100.00% | 66.79% | |||||||
* | Please see Balance Sheet Reconciliation below. | ||||||||||||
The “Weighted Average Interest Rate” as shown above is based on the contractual terms of the loans for the entire portfolio including non-performing loans. The weighted average interest rate on performing loans only, as of September 30, 2013 and December 31, 2012, was 8.49% and 8.21%, respectively. Please see “Asset Quality and Loan Reserves” below for further information regarding performing and non-performing loans. | |||||||||||||
Loan-to-value ratios are generally based on the most recent appraisals and may not reflect subsequent changes in value and include allowances for loan losses. Recognition of allowance for loan losses will result in a maximum loan-to-value ratio of 100% per loan. | |||||||||||||
The following is a schedule of priority of real estate loans as of September 30, 2013 and December 31, 2012: | |||||||||||||
Number of Loans | 30-Sep-13 | Portfolio | Number of Loans | December 31, 2012 Balance * | Portfolio | ||||||||
Loan Type | Balance * | Percentage | Percentage | ||||||||||
First deeds of trust | 8 | $ | 5,463,000 | 87.93% | 12 | $ | 13,058,000 | 93.00% | |||||
Second deeds of trust | 1 | 750,000 | 12.07% | 2 | 983,000 | 7.00% | |||||||
Total | 9 | $ | 6,213,000 | 100.00% | 14 | $ | 14,041,000 | 100.00% | |||||
* | Please see Balance Sheet Reconciliation below. | ||||||||||||
The following is a schedule of contractual maturities of investments in real estate loans as of September 30, 2013: | |||||||||||||
October 2013 – December 2013 | $ | 2,318,000 | |||||||||||
January 2014 – March 2014 | 1,627,000 | ||||||||||||
April 2014 – June 2014 | 193,000 | ||||||||||||
July 2014 – September 2014 | 875,000 | ||||||||||||
October 2014 – December 2014 | 450,000 | ||||||||||||
Thereafter | 750,000 | ||||||||||||
Total | $ | 6,213,000 | |||||||||||
The following is a schedule by geographic location of investments in real estate loans as of September 30, 2013 and December 31, 2012: | |||||||||||||
September 30, 2013 Balance * | Portfolio Percentage | December 31, 2012 Balance * | Portfolio Percentage | ||||||||||
Arizona | $ | 875,000 | 14.08% | $ | -- | -- | |||||||
Michigan | 1,741,000 | 28.02% | 1,741,000 | 12.40% | |||||||||
Nevada | 3,113,000 | 50.10% | 11,157,000 | 79.46% | |||||||||
Texas | 484,000 | 7.80% | 484,000 | 3.45% | |||||||||
Utah | -- | -- | 659,000 | 4.69% | |||||||||
Total | $ | 6,213,000 | 100.00% | $ | 14,041,000 | 100.00% | |||||||
* | Please see Balance Sheet Reconciliation below. | ||||||||||||
Balance Sheet Reconciliation | |||||||||||||
The following table reconciles the balance of the loan portfolio to the amount shown on the accompanying Consolidated Balance Sheets. | |||||||||||||
30-Sep-13 | 31-Dec-12 | ||||||||||||
Balance per loan portfolio | $ | 6,213,000 | $ | 14,041,000 | |||||||||
Less: | |||||||||||||
Allowance for loan losses (a) | -750,000 | -183,000 | |||||||||||
Balance per consolidated balance sheets | $ | 5,463,000 | $ | 13,858,000 | |||||||||
(a) | Please refer to Specific Reserve Allowance below. | ||||||||||||
Non-Performing Loans | |||||||||||||
As of September 30, 2013, we had no loans considered non-performing (i.e., based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement or when the payment of interest is 90 days past due). | |||||||||||||
Asset Quality and Loan Reserves | |||||||||||||
Losses may occur from investing in real estate loans. The amount of losses will vary as the loan portfolio is affected by changing economic conditions and the financial condition of borrowers. | |||||||||||||
The conclusion that a real estate loan is uncollectible or that collectability is doubtful is a matter of judgment. On a quarterly basis, our manager evaluates our real estate loan portfolio for impairment. The fact that a loan is temporarily past due does not necessarily mean that the loan is non-performing. Rather, all relevant circumstances are considered by our manager to determine impairment and the need for specific reserves. Such evaluation, which includes a review of all loans on which full collectability may not be reasonably assured, considers among other matters: | |||||||||||||
· | Prevailing economic conditions; | ||||||||||||
· | Historical experience; | ||||||||||||
· | The nature and volume of the loan portfolio; | ||||||||||||
· | The borrowers’ financial condition and adverse situations that may affect the borrowers’ ability to pay; | ||||||||||||
· | Evaluation of industry trends; and | ||||||||||||
· | Estimated net realizable value of any underlying collateral in relation to the loan amount. | ||||||||||||
Based upon this evaluation, a determination is made as to whether the allowance for loan losses is adequate to cover any potential losses on an individual loan basis; we do not have a general allowance for loan losses. Additions to the allowance for loan losses are made by charges to the provision for loan loss. | |||||||||||||
As of September 30, 2013, our ratio of total allowance for loan losses to total loans with an allowance for loan loss is 100%. The following is a breakdown of allowance for loan losses related to performing and non-performing loans as of September 30, 2013 and December 31, 2012. | |||||||||||||
As of September 30, 2013 | |||||||||||||
Balance | Allowance for loan losses * | Balance, net of allowance | |||||||||||
Non-performing loans – no related allowance | $ | -- | $ | -- | $ | -- | |||||||
Non-performing loans – related allowance | -- | -- | -- | ||||||||||
Subtotal non-performing loans | -- | -- | -- | ||||||||||
Performing loans – no related allowance | 5,463,000 | -- | 5,463,000 | ||||||||||
Performing loans – related allowance | 750,000 | -750,000 | -- | ||||||||||
Subtotal performing loans | 6,213,000 | -750,000 | 5,463,000 | ||||||||||
Total | $ | 6,213,000 | $ | -750,000 | $ | 5,463,000 | |||||||
As of December 31, 2012 | |||||||||||||
Balance | Allowance for loan losses* | Balance, net of allowance | |||||||||||
Non-performing loans – no related allowance | $ | -- | $ | -- | $ | -- | |||||||
Non-performing loans – related allowance | -- | -- | -- | ||||||||||
Subtotal non-performing loans | -- | -- | -- | ||||||||||
Performing loans – no related allowance | 12,941,000 | -- | 12,941,000 | ||||||||||
Performing loans – related allowance | 1,100,000 | -183,000 | 917,000 | ||||||||||
Subtotal performing loans | 14,041,000 | -183,000 | |||||||||||
13,858,000 | |||||||||||||
Total | $ | 14,041,000 | $ | -183,000 | $ | 13,858,000 | |||||||
* | Please refer to Specific Reserve Allowances below. | ||||||||||||
Our manager evaluated our loans and, based on current estimates with respect to the value of the underlying collateral, believes that such collateral is sufficient to protect us against further losses of principal. However, such estimates could change or the value of the underlying real estate could decline. Our manager will continue to evaluate our loans in order to determine if any other allowance for loan losses should be recorded. | |||||||||||||
Specific Reserve Allowances | |||||||||||||
As of September 30, 2013, we have provided a specific reserve allowance for one performing loan based on updated appraisals of the underlying collateral and/or our evaluation of the borrower. The following table is a roll-forward of the allowance for loan losses for the nine months ended September 30, 2013 and 2012 by loan type. | |||||||||||||
Loan Type | Balance at | Specific Reserve Allocation | Loan Pay Downs and Settlements | Transfers to REO and Notes Receivable | Balance at | ||||||||
12/31/12 | 9/30/13 | ||||||||||||
Write Off | |||||||||||||
Commercial | $ | 183,000 | $ | -- | $ | 567,000 | $ | -- | -- | $ | 750,000 | ||
Total | $ | 183,000 | $ | -- | $ | 567,000 | $ | -- | -- | $ | 750,000 | ||
Loan Type | Balance at | Specific Reserve Allocation | Write Off | Loan Pay Downs and Settlements | Transfers to REO and Notes Receivable | Balance at | |||||||
12/31/11 | 9/30/12 | ||||||||||||
Commercial | $ | 5,412,000 | $ | 40,000 | $ | -1,000,000 | $ | -1,312,000 | $ | -2,512,000 | $ | 628,000 | |
Construction | 73,000 | -- | -- | -73,000 | -- | -- | |||||||
Total | $ | 5,485,000 | $ | 40,000 | $ | -1,000,000 | $ | -1,385,000 | $ | -2,512,000 | $ | 628,000 | |
Troubled Debt Restructuring | |||||||||||||
As of September 30, 2013 and December 31, 2012 we had one loan totaling approximately $0.8 million that met the definition of a Troubled Debt Restructuring or TDR. When the Company modifies the terms of an existing loan that is considered TDR, it is considered performing as long as it is in compliance with the modified terms of the loan agreement. If the modification calls for deferred interest, it is recorded as interest income as cash is collected. Impairment on these loans is generally determined by the lesser of the value of the underlying collateral or the present value of expected future cash flows. During the previous 12 months there have been no loans that became TDR loans. | |||||||||||||
The following is a breakdown of our TDR loans that were considered performing and non-performing as of September 30, 2013 and December 31, 2012: | |||||||||||||
Total | Performing | Non-Performing | |||||||||||
Loan Type | Number of Loans | Fund Balance | Number of Loans | Fund Balance | Number of Loans | Fund Balance | |||||||
Commercial | 1 | $ | 750,000 | 1 | $ | 750,000 | -- | $ | -- | ||||
Construction | -- | -- | -- | -- | -- | -- | |||||||
Total | 1 | $ | 750,000 | 1 | $ | 750,000 | -- | $ | -- | ||||
Extensions | |||||||||||||
As of September 30, 2013, our manager had granted extensions on five outstanding loans, totaling approximately $12.4 million, of which our portion was approximately $4.4 million, pursuant to the terms of the original loan agreements, which permit extensions by mutual consent, or as part of a TDR. Such extensions are generally provided on loans where the original term was 12 months or less and where a borrower requires additional time to complete a construction project or negotiate take-out financing. Our manager generally grants extensions when a borrower is in compliance with the material terms of the loan, including, but not limited to the borrower’s obligation to make interest payments on the loan. In addition, if circumstances warrant, our manager may extend a loan that is in default as part of a work out plan to collect interest and/or principal. |
NOTE_E_INVESTMENT_IN_MARKETABL
NOTE E - INVESTMENT IN MARKETABLE SECURITIES - RELATED PARTY | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
NOTE E - INVESTMENT IN MARKETABLE SECURITIES - RELATED PARTY | ' |
NOTE E — INVESTMENT IN MARKETABLE SECURITIES – RELATED PARTY | |
As of September 30, 2013 and December 31, 2012, we owned 537,078 shares of VRM II’s common stock, representing approximately 4.7% of the total outstanding shares. The closing price of VRM II’s common stock on September 30, 2013, was $1.73 per share, resulting in an unrealized gain for the nine months ended September 30, 2013. | |
During the three months ended September 30, 2013, the trading price for VRM II’s common stock ranged from $1.47 to $2.04 per share. We will continue to evaluate our investment in marketable securities on a quarterly basis. |
NOTE_F_INVESTMENT_IN_MARKETABL
NOTE F - INVESTMENT IN MARKETABLE SECURITIES | 9 Months Ended |
Sep. 30, 2013 | |
Investments, Debt and Equity Securities [Abstract] | ' |
NOTE F - INVESTMENT IN MARKETABLE SECURITIES | ' |
NOTE F — INVESTMENT IN MARKETABLE SECURITIES | |
As of September 30, 2013, we owned 99,919 shares of a publicly traded company that invests in loans collateralized by real estate. The closing price of the common stock on September 30, 2013 resulted in an unrealized gain of approximately $46,000. Additionally, for the nine months ended September 30, 2013, we sold 51,066 shares for a realized gain of approximately $79,000. |
NOTE_G_REAL_ESTATE_HELD_FOR_SA
NOTE G - REAL ESTATE HELD FOR SALE | 9 Months Ended | ||
Sep. 30, 2013 | |||
Real Estate [Abstract] | ' | ||
NOTE G - REAL ESTATE HELD FOR SALE | ' | ||
NOTE G — REAL ESTATE HELD FOR SALE | |||
At September 30, 2013 we held five properties with a total carrying value of approximately $0.6 million, which were acquired through foreclosure and recorded as investments in REO. Our REO are accounted for at the lower of cost or fair value less costs to sell with fair value based on appraisals and knowledge of local market conditions. We seek to sell properties acquired through foreclosure as quickly as circumstances permit taking into account current economic conditions. | |||
Beginning balance, January 1, 2013 | $ | 580,000 | |
Real estate held for sale acquired through foreclosure | -- | ||
Additional investment in REO | -- | ||
Proceeds on nonrefundable earnest money deposit | -12,000 | ||
Write down | -- | ||
Sale | -- | ||
Ending balance, September 30, 2013 | $ | 568,000 |
NOTE_H_ASSETS_HELD_FOR_SALE_AN
NOTE H - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Notes to Financial Statements | ' | |||||
NOTE H - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | ' | |||||
NOTE H — ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | ||||||
During May 2012, we, VRM II and Fund III foreclosed on a loan with a balance of approximately $6.0 million, of which our portion was approximately $4.4 million. The property includes 23 cottage units in a retirement community located in Eugene, Oregon. The property includes operations, which will be reported as an asset held for sale from the date of this foreclosure. During May 2013 we, VRM II and VF III received a distribution in the amount of $600,000 of which our portion was $443,000. | ||||||
Effective January 1, 2009, we adopted FASB's accounting standard related to business combination which required the acquisition method of accounting to be used for all business combinations and for an acquirer to be identified for each business combination. This accounting standard requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. It also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with the standard). | ||||||
Our acquisition of VREO XXV was accounted for in accordance with this standard and the Company has allocated the purchase price of VREO XXV based upon the estimated fair value of the net assets acquired and liabilities assumed and the fair value of the non-controlling interest measured at the acquisition date. The estimated fair value of VREO XXV at the time of the acquisition totaled $4.1 million. | ||||||
We performed an allocation as of the foreclosure date as follows: | ||||||
Cash | $ | 308,000 | ||||
Property and equipment | 3,841,000 | |||||
Current assets | 14,000 | |||||
Accounts payable and accrued liabilities | -23,000 | |||||
Net assets | $ | 4,140,000 | ||||
In addition, we estimated the fair value of the non-controlling interest at $1.1 million, which is 25% owned by Fund III and 1% by VRM II. | ||||||
Immediately upon foreclosure, we committed to a plan to sell all interests in VREO XXV, at which point we began classifying the related assets of VREO XXV as assets held for sale, and the related liabilities as liabilities related to assets held for sale. Additionally, we have classified VREO XXV’s results as discontinued operations. | ||||||
Assets and groups of assets and liabilities which comprise disposal groups are classified as “held for sale” when all of the following criteria are met: a decision has been made to sell, the assets are available for sale immediately, the assets are being actively marketed at a reasonable price in relation to the current fair value, a sale has been or is expected to be concluded within twelve months of the balance sheet date, and significant changes to the plan to sell are not expected. Assets held for sale are not depreciated. | ||||||
Additionally, the operating results and cash flows related to these assets and liabilities are included in discontinued operations in the consolidated statements of operations and consolidated statements of cash flows for the nine months ended September 30, 2013. | ||||||
The following is summary of net assets held for sale through September 30, 2013: | ||||||
30-Sep-13 | ||||||
Assets: | ||||||
Cash | $ | 183,000 | ||||
Current assets | 4,000 | |||||
Property and equipment | 3,855,000 | |||||
Total assets | $ | 4,042,000 | ||||
Liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 39,000 | ||||
Total liabilities | 39,000 | |||||
Net assets held for sale | $ | 4,003,000 | ||||
The following is a summary of the results of operations related to the assets held for sale for the three and nine months ended September 30, 2013: | ||||||
For The Three Months Ended | For The Nine | |||||
30-Sep-13 | Months Ended | |||||
30-Sep-13 | ||||||
Revenue | $ | 172,000 | $ | 512,000 | ||
Expenses | (93,000 | ) | (264,000 | ) | ||
Net Income | $ | 79,000 | $ | 248,000 |
NOTE_I_RELATED_PARTY_TRANSACTI
NOTE I - RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
NOTE I - RELATED PARTY TRANSACTIONS | ' |
NOTE I — RELATED PARTY TRANSACTIONS | |
From time to time, we may acquire or sell investments in real estate loans from/to our manager or other related parties. Pursuant to the terms of our Management Agreement, such acquisitions and sales are made without any mark up or mark down. No gain or loss is recorded on these transactions, as it is not our intent to make a profit on the purchase or sale of such investments. The purpose is generally to diversify our portfolio by syndicating loans, thereby providing us with additional capital to make additional loans. | |
Transactions with the Manager | |
Our manager is entitled to receive from us an annual management fee of up to 0.25% of our aggregate capital contributions received by us and Fund I from the sale of shares or membership units, paid monthly. The amount of management fees paid to our manager for the three months and nine months ended September 30, 2013 was $69,000 and $207,000, respectively, for each period. Management fees paid to our manager for the three and nine months ended September 30, 2012 was $61,000 and $199,000, respectively, for each period. | |
As of September 30, 2013 and December 31, 2012, our manager owned 100,000 of our common shares, representing approximately 1.7% and 1.6%, respectively, of our total outstanding common stock. For the three and nine months ended September 30, 2013 and 2012, we declared $0 in dividends payable to our manager. | |
As of September 30, 2013 and December 31, 2012 we did not owe or have any receivables from our manager. | |
Transactions with Other Related Parties | |
As of September 30, 2013 and December 31, 2012, we owned 537,078 common shares of VRM II, representing approximately 4.7% and 4.4%, respectively, of their total outstanding common stock. For the three and nine months ended September 30, 2013 and 2012 we recognized $0 in dividend income from VRM II. | |
As of September 30, 2013 and December 31, 2012, VRM II owned 538,178 of our common shares, approximately 9.3% and 8.5%, respectively, of our total outstanding common stock. For the three and nine months ended September 30, 2013 and 2012 we declared $0 in dividends payable to VRM II. | |
As of September 30, 2013 we owned 53,365 of our common shares of MVP REIT common stock. For the three and nine months ended September 30, 2013 we declared $1,300 in dividends income from MVP REIT. | |
As of September 30, 2013 and December 31, 2012 we owed VRM II approximately $5,000 and $0.2 million, respectively, primarily related to legal fees. | |
As of September 30, 2013 we had no receivable from Fund III. As of December 31, 2012 we had a receivable with Fund III of approximately $8,000. | |
During April 2013 we sold $0.5 million in investments in real estate loans to MVP REIT, Inc., an entity managed by a company majority owned by Mr. Shustek. | |
See also Notes J and M below. |
NOTE_J_NOTES_RECEIVABLE
NOTE J - NOTES RECEIVABLE | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Receivables [Abstract] | ' | ||||
NOTE J - NOTES RECEIVABLE | ' | ||||
NOTE J — NOTES RECEIVABLE | |||||
As of November 30, 2010, we had five loans totaling approximately $19.0 million, of which our portion is approximately $0.5 million, before allowances totaling approximately $7.3 million, of which our portion was approximately $0.2 million, and were guaranteed by common guarantors. Pursuant to agreements entered into on March 16, 2009 and July 2, 2009, which modified these loans, three of these loans continued to be secured by real property and two became unsecured due to the permanent financing being obtained for less than the outstanding balance on the loans. On November 30, 2010, we entered into additional agreements to modify the terms related to these five loans in order to further enhance our investment. Pursuant to these additional agreements, we obtained an additional guarantor, interest in operating profits and any aggregate sales proceeds of approximately $534,000 less operating profits previously received related to these properties. The new guarantor is the managing member of the borrowing entities who is also the principal manager of L.L. Bradford and was a former officer of our manager from April 1999 through January 2005. As a result of releasing our deeds of trust we classified these loans as unsecured notes receivable for the same amount and recognized a full allowance on this balance. | |||||
During 2013, SERE, LLC (“SERE”), the loan guarantor whose managing member is also the principal manager of L.L. Bradford and was a former officer of our manager from April 1999 through January 2005, entered into a purchase agreement with MVP REIT, Inc. (“MVP REIT”) to sell six office buildings associated with the unsecured notes receivables mentioned above. Upon the closing of the sale of each office building, we will terminate the unsecured note receivable and receive from SERE MVP REIT shares of common stock which equate to the amount of our notes receivables pursuant to MVP REIT’s current offering. We have recorded these shares as Investment in MVP REIT on our balance sheet and recognized their receipt as a gain related to recovery of notes receivable previously written off on the consolidated statements of operations for the quarter ending September 30, 2013. | |||||
The following is a summary of the MVP REIT shares we have or will receive in consideration of cancelling the unsecured notes receivable: | |||||
Property Name | Date shares received | Approximate Receivable Balance | Price Per Share | Number of shares received | |
Wolfpack, LLC | Aug-13 | $43,000 | 8.865 | 4,800 | |
Building C, LLC | Aug-13 | $196,000 | 8.775 | 22,328 | |
Building A, LLC | Sep-13 | $196,000 | 8.775 | 22,328 | |
Devonshire, LLC | Sep-13 | $34,000 | 8.775 | 3,909 | |
SE Property, LLC | Oct-13 | $35,000 | 8.775 | 4,041 | |
ExecuSuites, LLC | Estimated November 2013 | $30,000 | 8.775 | 3,404 | |
NOTE_K_FAIR_VALUE
NOTE K - FAIR VALUE | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||
NOTE K - FAIR VALUE | ' | ||||||||||
NOTE K — FAIR VALUE | |||||||||||
As of September 30, 2013, financial assets and liabilities utilizing Level 1 inputs included investment in marketable securities - related party. We had no assets or liabilities utilizing Level 2 inputs, and assets and liabilities utilizing Level 3 inputs included investments in real estate loans. | |||||||||||
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, our degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset or liability will be classified in its entirety based on the lowest level of input that is significant to the measurement of fair value. | |||||||||||
Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that are current as of the measurement date, including during periods of market dislocation, such as the recent illiquidity in the auction rate securities market. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition may cause our financial instruments to be reclassified from Level 1 to Level 2 or Level 3 and/or vice versa. | |||||||||||
Our valuation techniques will be consistent with at least one of the three possible approaches: the market approach, income approach and/or cost approach. Our Level 1 inputs are based on the market approach and consist primarily of quoted prices for identical items on active securities exchanges. Our Level 2 inputs are primarily based on the market approach of quoted prices in active markets or current transactions in inactive markets for the same or similar collateral that do not require significant adjustment based on unobservable inputs. Our Level 3 inputs are primarily based on the income and cost approaches, specifically, discounted cash flow analyses, which utilize significant inputs based on our estimates and assumptions. | |||||||||||
The following tables present the valuation of our financial assets as of September 30, 2013 and December 31, 2012, measured at fair value on a recurring basis by input levels: | |||||||||||
Fair Value Measurements at Reporting Date Using | |||||||||||
Quoted Prices in Active Markets For Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance | Carrying Value on Balance Sheet at 9/30/13 | |||||||
at 9/30/13 | |||||||||||
Assets | |||||||||||
Investment in marketable securities - related party | $ | 929,000 | $ | -- | $ | -- | $ | 929,000 | $ | 929,000 | |
Investment in marketable securities | $ | 1,239,000 | $ | -- | $ | -- | $ | 1,239,000 | $ | 1,239,000 | |
Investment in real estate loans | $ | -- | $ | -- | $ | 5,440,000 | $ | 5,440,000 | $ | 5,463,000 | |
Fair Value Measurements at Reporting Date Using | |||||||||||
Quoted Prices in Active Markets For Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at 12/31/2012 | Carrying Value on Balance Sheet at 12/31/2012 | |||||||
Assets | |||||||||||
Investment in marketable securities - related party | $ | 784,000 | $ | -- | $ | -- | $ | 784,000 | $ | 784,000 | |
Investment in real estate loans | $ | -- | $ | -- | $ | 13,870,000 | $ | 13,870,000 | $ | 13,858,000 | |
The following table presents the changes in our financial assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from January 1, 2013 to September 30, 2013. There were no liabilities measured at fair value on a recurring basis using significant unobservable inputs as of January 1, 2013 to September 30, 2013. | |||||||||||
Investment in real estate loans | |||||||||||
Balance on January 1, 2013 | $ | 13,870,000 | |||||||||
Change in temporary valuation adjustment included in net income | |||||||||||
Net increase in allowance for loan losses | -567,000 | ||||||||||
Purchase and additions of assets | |||||||||||
New mortgage loans and mortgage loans bought | 2,317,000 | ||||||||||
Sales, pay downs and reduction of assets | |||||||||||
Collections of principal and sales of investment in real estate loans | -8,235,000 | ||||||||||
Sale of assets to related parties | -1,700,000 | ||||||||||
Sale of assets to third parties | -210,000 | ||||||||||
Temporary change in estimated fair value based on future cash flows | -35,000 | ||||||||||
Balance on September 30, 2013, net of temporary valuation adjustment | $ | 5,440,000 | |||||||||
The following table presents the changes in our financial assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from January 1, 2012 to September 30, 2012: | |||||||||||
Investment in real estate loans | |||||||||||
Balance on January 1, 2012 | $ | 10,827,000 | |||||||||
Change in temporary valuation adjustment included in net income (loss) | |||||||||||
Net increase in allowance for loan losses | -40,000 | ||||||||||
Write-off of allowance for uncollectable loan | 1,000,000 | ||||||||||
Transfer of allowance on real estate loans converted to unsecured notes receivable | 989,000 | ||||||||||
Transfer of allowance on real estate loan to real estate held for sale | 150,000 | ||||||||||
Transfer of allowance on real estate loan to asset held for sale | 1,375,000 | ||||||||||
Reduction of allowance on real estate loan following payment of loan | 284,000 | ||||||||||
Reduction of allowance on real estate loan following settlement of loan | 1,101,000 | ||||||||||
Purchase and additions of assets | |||||||||||
New mortgage loans and mortgage loans bought | 15,395,000 | ||||||||||
Transfer of real estate loans to real estate held for sale | -936,000 | ||||||||||
Transfer of real estate loan to asset held for sale | -4,434,000 | ||||||||||
Transfer of real estate loans converted to unsecured notes receivable | -989,000 | ||||||||||
Sales, pay downs and reduction of assets | |||||||||||
Collections of principal and sales of investment in real estate loans | -8,703,000 | ||||||||||
Reduction of balance of real estate loan following settlement | -1,101,000 | ||||||||||
Write-off for uncollectable loan | -1,000,000 | ||||||||||
Temporary change in estimated fair value based on future cash flows | -708,000 | ||||||||||
Balance on September 30, 2012, net of temporary valuation adjustment | $ | 13,210,000 |
NOTE_L_INVESTMENT_IN_EQUTIY_ME
NOTE L - INVESTMENT IN EQUTIY METHOD INVESTEE | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Notes to Financial Statements | ' | |||||
NOTE L - INVESTMENT IN EQUTIY METHOD INVESTEE | ' | |||||
Note L — INVESTMENT IN EQUTIY METHOD INVESTEE | ||||||
On July 26, 2013 we, MVP REIT and VRM II entered into an agreement to acquire six parking facilities from the same seller. We have formed limited liability companies with MVP REIT and VRM II to acquire five of the properties based on ownership noted in the table below. The limited liability companies will be jointly managed by MVP Realty Advisors, LLC and Vestin Mortgage, LLC. MVP REIT has the right, at any time, with 10 days written notice, to purchase VRM II’s and our interest in the limited liability company (the “Purchase Right”). The price for the Purchase Right shall be equal to VRM II’s and our capital contribution plus a 7.5% annual cumulative return less any Distributions received by VRM II or us. | ||||||
The following is a summary of the purchase per the agreement: | ||||||
Ownership | ||||||
Property Name | Purchase Date | Purchase Price | VRMII | VRM I | MVP | |
MVP PF Ft Lauderdale 2013, LLC | 31-Jul-13 | $3,400,000 | 68% | -- | 32% | |
MVP PF Memphis Court 2013, LLC | 28-Aug-13 | $1,000,000 | 51% | 44% | 5% | |
MVP PF Memphis Poplar 2013, LLC | 28-Aug-13 | $2,000,000 | 51% | 44% | 5% | |
MVP PF Kansas City 2013, LLC | 28-Aug-13 | $2,800,000 | 51% | 44% | 5% | |
MVP PF Baltimore 2013, LLC | 4-Sep-13 | $2,300,000 | 51% | 44% | 5% | |
MVP PF St. Louis 2013, LLC | 4-Sep-13 | $2,000,000 | 51% | 44% | 5% | |
$13,500,000 | ||||||
All of the parking facilities are currently leased to tenants under triple net leases, therefore no specific party has additional management responsibility or decision making authority beyond their ownership interest. | ||||||
In accordance with ASC 805-10-25-13, the following is the preliminary purchase price allocation: | ||||||
Property Name | Amount | VRM I’s Accounting Method | ||||
Ft Lauderdale | $3,400,000 | Not applicable | ||||
Memphis Court | $190,000 | Equity Method | ||||
Memphis Poplar | $2,685,000 | Equity Method | ||||
Kansas City | $1,550,000 | Equity Method | ||||
Baltimore | $1,550,000 | Equity Method | ||||
St. Louis | $4,125,000 | Equity Method | ||||
$13,500,000 | ||||||
Upon the closing of the purchases described above, three of the six triple net leases were terminated which included a 180 day termination period. Management is in current negotiations to enter into new triple net leases. Upon completion of the new lease agreements, we will obtain updated appraisals to determine final purchase price allocation. | ||||||
Management has commenced a plan to sell MVP PF Baltimore 2013, LLC and MVP PF Kansas City 2013, LLC. These properties have been reported as Discontinued Operations in the accompanying statement of operations. | ||||||
The following table summarizes the estimated fair values of the assets acquired at the acquisition date for our 2013 acquisition: | ||||||
Assets | ||||||
Land and improvements – continued operations | $ | 770,000 | ||||
Building and improvements – continued operations | 2,310,000 | |||||
Land and improvements – discontinued operations | 341,000 | |||||
Building and improvements – discontinued operations | 1,023,000 | |||||
Total assets acquired | 4,444,000 | |||||
Liabilities | ||||||
Liabilities | -- | |||||
Total liabilities | -- | |||||
Net assets and liabilities acquired | $ | 4,444,000 | ||||
The following is a summary of the results of operations related to the acquisitions for the three and nine months ended September 30, 2013: | ||||||
For The Three and Nine Months Ended | ||||||
30-Sep-13 | ||||||
Triple-net lease revenue – continued operations | $ | 35,000 | ||||
Triple-net lease revenue – discontinued operations | 16,000 | |||||
Expenses – continued operations | -92,000 | |||||
Expenses – discontinued operations | (36,000 | ) | ||||
Net loss | -77,000 | |||||
% of ownership | 44% | |||||
$ | -34,000 |
NOTE_M_INVESTMENT_IN_MVP_REIT_
NOTE M - INVESTMENT IN MVP REIT, INC. | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
NOTE M - INVESTMENT IN MVP REIT, INC. | ' |
NOTE M — INVESTMENT IN MVP REIT, INC. | |
As of September 30, 2013, we owned 53,365 shares of common stock of MVP REIT, Inc. (“MVP REIT”), a non-traded REIT. The shares were assigned to us by SERE, LLC in consideration of the cancellation of certain unsecured notes, as described in Note H above. . We recorded a gain of approximately $469,000 upon receipt of such shares and the shares are recorded on our balance sheet as Investment in MVP REIT valued at $469,000. Such amount was determined based upon the offer price for such shares in MVP REIT’s pending public offering. |
NOTE_N_RECENT_ACCOUNTING_PRONO
NOTE N - RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2013 | |
Accounting Changes and Error Corrections [Abstract] | ' |
NOTE N - RECENT ACCOUNTING PRONOUNCEMENTS | ' |
NOTE N — RECENT ACCOUNTING PRONOUNCEMENTS | |
No new accounting pronouncements have been defined that would materially impact our financial statements. |
NOTE_O_LEGAL_MATTERS_INVOLVING
NOTE O - LEGAL MATTERS INVOLVING THE MANAGER | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
NOTE O - LEGAL MATTERS INVOLVING THE MANAGER | ' |
NOTE O — LEGAL MATTERS INVOLVING THE MANAGER | |
The United States Securities and Exchange Commission (the “Commission”), conducted an investigation of certain matters related to us, our manager, Vestin Capital, VRM I, and Fund III. We fully cooperated during the course of the investigation. On September 27, 2006, the investigation was resolved through the entry of an Administrative Order by the Commission (the “Order”). Our manager, Vestin Mortgage and its Chief Executive Officer, Michael Shustek, as well as Vestin Capital (collectively, the “Respondents”), consented to the entry of the Order without admitting or denying the findings therein. | |
In the Order, the Commission found that the Respondents violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 through the use of certain slide presentations in connection with the sale of units in Fund III and in our predecessor, Vestin Fund II, LLC. The Respondents consented to the entry of a cease and desist order, the payment by Mr. Shustek of a fine of $100,000 and Mr. Shustek’s suspension from association with any broker or dealer for a period of six months, which expired in March 2007. In addition, the Respondents agreed to implement certain undertakings with respect to future sales of securities. We are not a party to the Order. | |
In addition to the matters described above, our manager is involved in a number of other legal proceedings concerning matters arising in connection with the conduct of its business activities. Our manager believes it has meritorious defenses to each of these actions and intends to defend them vigorously. Other than the matters described in Note P – Legal Matters Involving The Company below, our manager believes that it is not a party to any pending legal or arbitration proceedings that would have a material adverse effect on our manager’s financial condition or results of operations or cash flows, although it is possible that the outcome of any such proceedings could have a material impact on the manager’s net income in any particular period. |
NOTE_P_LEGAL_MATTERS_INVOLVING
NOTE P - LEGAL MATTERS INVOLVING THE COMPANY | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
NOTE P - LEGAL MATTERS INVOLVING THE COMPANY | ' |
NOTE P — LEGAL MATTERS INVOLVING THE COMPANY | |
On February 7, 2012, we, VRM II and Fund III entered into a Deed in Lieu Agreement with a borrower in lieu of the foreclosure of our subordinated secured loan which had matured on December 31, 2011, with a principal balance, net of allowance for loan loss, of approximately $9.9 million, of which our portion was approximately $0.8 million. Pursuant to the Deed in Lieu Agreement, our subsidiary 1701 Commerce, LLC (“1701 Commerce”) received a deed to the property. The property is operated as the Sheraton Hotel and Spa– Fort Worth, Texas. On March 26, 2012, 1701 Commerce filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of Texas, Ft. Worth Division, to reorganize its financial affairs and to avoid a pending foreclosure of the property that had been scheduled by the senior mortgage lien holder and to preserve and protect 1701 Commerce’s equity and the interests of the other creditors of the Hotel. Due to the uncertainty and disputes involving this property, we recorded this investment as Other Real Estate Owned on our balance sheet until August 23, 2012 when the Bankruptcy Court issued an order allowing the bankruptcy to proceed despite a motion to dismiss it and required 1701 Commerce to deposit $1 million as additional collateral with the court to be funded by us, VRM II and VF III. The sum of $0.2 million was expended from this account leaving the sum of $0.8 million, which sum was returned to the Company in October 2013. | |
The hotel was sold on July 17, 2013 for the sum of $49,300,000. The net proceeds of the sale and the cash on hand as of the date of the sale are being held in a debtor in possession account subject to the Hotel’s operating accounts payable and claims made through the bankruptcy court. The balance, if any, will be paid over to the owners of 1701 Commerce according to their interest. | |
We hold an interest of approximately 8%, VRM II holds an interest of approximately 90% and Fund III holds an interest of approximately 2% in 1701 Commerce. | |
In addition to the matters described above, we are involved in a number of other legal proceedings concerning matters arising in the ordinary course of our business activities. We believe we have meritorious defenses to each of these actions and intend to defend them vigorously. Other than the matters described above, we believe that we are not a party to any pending legal or arbitration proceedings that would have a material adverse effect on our financial condition or results of operations or cash flows, although it is possible that the outcome of any such proceedings could have a material impact on our operations in any particular period. |
NOTE_Q_SUBSEQUENT_EVENTS
NOTE Q - SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2013 | |
Subsequent Events [Abstract] | ' |
NOTE Q - SUBSEQUENT EVENTS | ' |
NOTE Q — SUBSEQUENT EVENTS | |
The following subsequent events have been evaluated through the date of this filing with the SEC. |
NOTE_B_SUMMARY_OF_SIGNIFICANT_1
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | ||
Sep. 30, 2013 | |||
Accounting Policies [Abstract] | ' | ||
Basis of Presentation | ' | ||
Basis of Presentation | |||
The consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the 2012 annual report filed on Form 10-K. | |||
Management Estimates | ' | ||
Management Estimates | |||
The preparation of consolidated financial statements in conformity with GAAP requires 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 expenses during the reporting period. Actual results could differ from those estimates. | |||
Cash and Cash Equivalents | ' | ||
Cash and Cash Equivalents | |||
Cash and cash equivalents include interest-bearing and non-interest-bearing bank deposits, money market accounts, short-term certificates of deposit with original maturities of three months or less, and short-term instruments with a liquidation provision of one month or less. | |||
Revenue Recognition | ' | ||
Revenue Recognition | |||
Interest is recognized as revenue on performing loans when earned according to the terms of the loans, using the effective interest method. We do not accrue interest income on loans once they are determined to be non-performing. A loan is non-performing when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement or when the payment of interest is 90 days past due. Cash receipts will be allocated to interest income, except when such payments are specifically designated by the terms of the loan as principal reduction. Interest is fully allowed for on impaired loans and is recognized on a cash basis method. | |||
All leases are accounted for as non-cancelable operating leases. We recognize rental revenue on a straight-line basis over the term of the lease. Rental income related to the leases is recognized on an accrual basis in accordance with the terms of the leases. Advanced receipts of rental income are deferred and classified as liabilities until earned. | |||
Investments in Real Estate Loans | ' | ||
Investments in Real Estate Loans | |||
We may, from time to time, acquire or sell investments in real estate loans from or to our manager or other related parties pursuant to the terms of our Management Agreement without a premium. The primary purpose is to either free up capital to provide liquidity for various reasons, such as loan diversification, or place excess capital in investments to maximize the use of our capital. Selling or buying loans allows us to diversify our loan portfolio within these parameters. Due to the short-term nature of the loans we make and the similarity of interest rates in loans we normally would invest in, the fair value of a loan typically approximates its carrying value. Accordingly, discounts or premiums typically do not apply upon sales of loans and therefore, generally no gain or loss is recorded on these transactions, regardless of whether to a related or unrelated party. | |||
Investments in real estate loans are secured by deeds of trust or mortgages. Generally, our real estate loans require interest only payments with a balloon payment of the principal at maturity. We have both the intent and ability to hold real estate loans until maturity and therefore, real estate loans are classified and accounted for as held for investment and are carried at amortized cost. Loans sold to or purchased from affiliates are accounted for at the principal balance and no gain or loss is recognized by us or any affiliate. Loan-to-value ratios are initially based on appraisals obtained at the time of loan origination and are updated when new appraisals are received or when management’s assessment of the value has changed, to reflect subsequent changes in value estimates. Original appraisals are generally dated within 12 months of the date of loan origination and may be commissioned by the borrower. | |||
The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include troubled debt restructuring, and performing and non-performing loans in which full payment of principal or interest is not expected. The Company calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of its collateral. | |||
Loans that have been modified from their original terms are evaluated to determine if the loan meets the definition of a Troubled Debt Restructuring (“TDR”) as defined by Accounting Standards Codification (“ASC”) 310-40. When the Company modifies the terms of an existing loan that is considered a TDR, it is considered performing as long as it is in compliance with the modified terms of the loan agreement. If the modification calls for deferred interest, it is recorded as interest income as cash is collected. | |||
Allowance for Loan Losses | ' | ||
Allowance for Loan Losses | |||
We maintain an allowance for loan losses on our investments in real estate loans for estimated credit impairment. Our manager’s estimate of losses is based on a number of factors including the types and dollar amounts of loans in the portfolio, adverse situations that may affect the borrower’s ability to repay, prevailing economic conditions and the underlying collateral securing the loan. Additions to the allowance are provided through a charge to earnings and are based on an assessment of certain factors, which may indicate estimated losses on the loans. Actual losses on loans are recorded as a charge-off or a reduction to the allowance for loan losses. Generally, subsequent recoveries of amounts previously charged off are added back to the allowance and included as income. | |||
Estimating allowances for loan losses requires significant judgment about the underlying collateral, including liquidation value, condition of the collateral, competency and cooperation of the related borrower and specific legal issues that affect loan collections or taking possession of the property. As a commercial real estate lender willing to invest in loans to borrowers who may not meet the credit standards of other financial institutional lenders, the default rate on our loans could be higher than those generally experienced in the real estate lending industry. We and our manager generally approve loans more quickly than other real estate lenders and, due to our expedited underwriting process; there is a risk that the credit inquiry we perform will not reveal all material facts pertaining to a borrower and the security. | |||
Additional facts and circumstances may be discovered as we continue our efforts in the collection and foreclosure processes. This additional information often causes management to reassess its estimates. In recent years, we have revised estimates of our allowance for loan losses. Circumstances that have and may continue to cause significant changes in our estimated allowance include, but are not limited to: | |||
· | Declines in real estate market conditions, which can cause a decrease in expected market value; | ||
· | Discovery of undisclosed liens for community improvement bonds, easements and delinquent property taxes; | ||
· | Lack of progress on real estate developments after we advance funds. We customarily utilize disbursement agents to monitor the progress of real estate developments and approve loan advances. After further inspection of the related property, progress on construction occasionally does not substantiate an increase in value to support the related loan advances; | ||
· | Unanticipated legal or business issues that may arise subsequent to loan origination or upon the sale of foreclosed property; and | ||
· | Appraisals, which are only opinions of value at the time of the appraisal, may not accurately reflect the value of the property. | ||
Discontinued Operations | ' | ||
Discontinued Operations | |||
We have reclassified for all periods presented in the accompanying consolidated statements of operations, the amounts related to discontinued operations and real estate held for sale, in accordance with the applicable accounting criteria. In addition, the assets and liabilities related to the discontinued operations are reported separately in the accompanying consolidated balance sheets as real estate held for sale, assets held for sale, and liabilities related to assets held for sale. | |||
Real Estate Held for Sale | ' | ||
Real Estate Held for Sale | |||
Real estate held for sale (“REO”) includes real estate acquired through foreclosure and will be carried at the lower of the recorded amount, inclusive of any senior indebtedness, or the property's estimated fair value, less estimated costs to sell, with fair value based on appraisals and knowledge of local market conditions. While pursuing foreclosure actions, we seek to identify potential purchasers of such property. We seek to sell properties acquired through foreclosure as quickly as circumstances permit, taking into account current economic conditions. The carrying values of REO are assessed on a regular basis from updated appraisals, comparable sales values or purchase offers. | |||
Management classifies REO when the following criteria are met: | |||
· | Management commits to a plan to sell the properties; | ||
· | The property is available for immediate sale in its present condition subject only to terms that are usual and customary; | ||
· | An active program to locate a buyer and other actions required to complete a sale have been initiated; | ||
Classification of Operating Results from Real Estate Held for Sale | ' | ||
Classification of Operating Results from Real Estate Held for Sale | |||
Generally, operating results and cash flows from long-lived assets held for sale are to be classified as discontinued operations as a separately stated component of net income. Our operations related to REO are separately identified in the accompanying consolidated statements of operations. | |||
Secured Borrowings | ' | ||
Secured Borrowings | |||
Secured borrowings provide an additional source of capital for our lending activity. Secured borrowings allow us to increase the diversification of our loan portfolio and to invest in loans that we might not otherwise invest in. We do not receive any fees for entering into secured borrowing arrangements; however, we may receive revenue for any differential of the interest spread, if applicable. Loans in which unaffiliated investors have participated through inter-creditor agreements (“Inter-creditor Agreements”) are accounted for as secured borrowings. | |||
The Inter-creditor Agreements provide us additional funding sources for real estate loans whereby an unaffiliated investor (the “Investor”) may participate on a non-pari-passu basis in certain real estate loans with us and/or VRM II (collectively, the “Lead Lenders”). In the event of borrower non-performance, the Inter-creditor Agreements generally provide that the Lead Lenders must repay the Investor’s loan amount either by (i) continuing to remit to the Investor the interest due on the participated loan amount; (ii) substituting an alternative loan acceptable to the Investor; or (iii) repurchasing the participation from the Investor for the outstanding balance plus accrued interest. | |||
Additionally, an Investor may participate in certain loans with the Lead Lenders through Participation Agreements. In the event of borrower non-performance, the Participation Agreement may allow the Investor to be repaid up to the amount of the Investor’s investment prior to the Lead Lender being repaid. Real estate loan financing under the Participation Agreements are also accounted for as a secured borrowing. We do not receive any revenues for entering into secured borrowing arrangements. | |||
Investment in Marketable Securities - Related Party | ' | ||
Investment in Marketable Securities – Related Party | |||
Investment in marketable securities – related party consists of stock in VRM II. The securities are stated at fair value as determined by the closing market price as of September 30, 2013 and December 31, 2012. All securities are classified as available-for-sale. | |||
We are required to evaluate our available-for-sale investment for other-than-temporary impairment charges. We will determine when an investment is considered impaired (i.e., decline in fair value below its amortized cost), and evaluate whether the impairment is other-than-temporary (i.e., investment value will not be recovered over its remaining life). If the impairment is considered other-than-temporary, we will recognize an impairment loss equal to the difference between the investment’s basis and its fair value. | |||
According to the SEC Staff Accounting Bulletin, Topic 5: Miscellaneous Accounting, M - Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities, there are numerous factors to be considered in such an evaluation and their relative significance will vary from case to case. The following are a few examples of the factors that, individually or in combination, indicate that a decline is other than temporary and that a write-down of the carrying value is required: | |||
· | The length of the time and the extent to which the market value has been less than cost; | ||
· | The financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; or | ||
· | The intent and ability of the holder to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. | ||
Basic and Diluted Earnings Per Common Share | ' | ||
Basic and Diluted Earnings Per Common Share | |||
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted EPS is similar to basic EPS except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been exercised. We had no outstanding common share equivalents during the nine months ended September 30, 2013 and 2012. | |||
Common Stock Dividends | ' | ||
Common Stock Dividends | |||
During June 2008, our Board of Directors decided to suspend the payment of dividends. Our Board of Directors will closely monitor our operating results in order to determine when dividends should be reinstated; however, we do not expect them to be reinstating dividends in the foreseeable future. | |||
Treasury Stock | ' | ||
Treasury Stock | |||
On February 21, 2008, our Board of Directors authorized the repurchase of up to $5 million worth of our common stock. Depending upon market conditions, shares may be repurchased from time to time at prevailing market prices through open market or privately negotiated transactions. We are not obligated to purchase any shares. Subject to applicable securities laws, including SEC Rule 10b-18, repurchases may be made at such times and in such amounts, as our management deems appropriate. The repurchases will be funded from our available cash. During the nine months ended September 2013 we purchased 558,924 shares of treasury stock for approximately $0.9 million. | |||
Under the Maryland General Corporation Law, shares of its own stock acquired by a corporation constitute authorized but unissued shares. | |||
Segments | ' | ||
Segments | |||
We are currently authorized to operate two reportable segments, investments in real estate loans and investments in real property. As of September 30, 2013, we had not commenced investing in real property. | |||
Our objective is to invest approximately 97% of our assets in real estate loans and real estate investments, while maintaining approximately 3% as a working capital cash reserve. Current market conditions have impaired our ability to be fully invested in real estate loans and real estate investments. As of September 30, 2013, approximately 26% of our assets, net of allowance for loan losses, are classified as investments in real estate loans. | |||
Principles of Consolidation | ' | ||
Principles of Consolidation | |||
Our consolidated financial statements include the accounts of VRM I, TRS I, our wholly owned subsidiary, and VREO XXV, LLC, in which we have a controlling interest. All significant intercompany balances and transactions have been eliminated in consolidation. | |||
Business Combinations | ' | ||
Business Combinations | |||
In December 2007, the Financial Accounting Standards Board (FASB) revised the authoritative guidance for business combinations, establishing principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired (including goodwill), the liabilities assumed, and any noncontrolling interest in the acquiree. Subsequently, on April 1, 2009, the FASB amended and clarified certain aspects of its authoritative guidance on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. We apply the FASB authoritative guidance to all business combinations for which the acquisition date is on or after January 1, 2009, and to certain future income tax effects related to our prior business combinations, should they arise. | |||
Non-controlling Interests | ' | ||
Non-controlling Interests | |||
The FASB issued authoritative guidance for non-controlling interests in December 2007, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as an unconsolidated investment, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, the guidance requires consolidated net income to be reported at amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. | |||
Income Taxes | ' | ||
Income Taxes | |||
The Company accounts for its income taxes under the assets and liabilities method, which requires recognition of deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. | |||
The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, they would make an adjustment to the valuation allowance which would reduce the provision for income taxes. | |||
The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. |
NOTE_D_INVESTMENTS_IN_REAL_EST1
NOTE D - INVESTMENTS IN REAL ESTATE LOANS (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
Schedule of Accounts, Notes, Loans and Financing Receivable | ' | ||||||||||||
Loan Type | Number of Loans | Balance * | Weighted Average Interest Rate | Portfolio Percentage | Current Weighted Average Loan-To-Value, Net of Allowance for Loan Losses | ||||||||
Commercial | 8 | $ | 6,119,000 | 8.52% | 98.49% | 65.19% | |||||||
Land | 1 | 94,000 | 6.00% | 1.51% | 49.67% | ||||||||
Total | 9 | $ | 6,213,000 | 8.49% | 100.00% | 64.92% | |||||||
Investments in real estate loans as of December 31, 2012, were as follows: | |||||||||||||
Loan Type | Number of Loans | Balance * | Weighted Average Interest Rate | Portfolio Percentage | Current Weighted Average Loan-To-Value, Net of Allowance for Loan Losses | ||||||||
Commercial | 13 | $ | 13,947,000 | 8.23% | 99.33% | 64.21% | |||||||
Land | 1 | 94,000 | 6.00% | 0.67% | 53.81% | ||||||||
Total | 14 | $ | 14,041,000 | 8.21% | 100.00% | 66.79% | |||||||
Investments Classified by Contractual Maturity Date | ' | ||||||||||||
October 2013 – December 2013 | $ | 2,318,000 | |||||||||||
January 2014 – March 2014 | 1,627,000 | ||||||||||||
April 2014 – June 2014 | 193,000 | ||||||||||||
July 2014 – September 2014 | 875,000 | ||||||||||||
October 2014 – December 2014 | 450,000 | ||||||||||||
Thereafter | 750,000 | ||||||||||||
Total | $ | 6,213,000 | |||||||||||
The following is a schedule by geographic location of investments in real estate loans as of September 30, 2013 and December 31, 2012: | |||||||||||||
September 30, 2013 Balance * | Portfolio Percentage | December 31, 2012 Balance * | Portfolio Percentage | ||||||||||
Arizona | $ | 875,000 | 14.08% | $ | -- | -- | |||||||
Michigan | 1,741,000 | 28.02% | 1,741,000 | 12.40% | |||||||||
Nevada | 3,113,000 | 50.10% | 11,157,000 | 79.46% | |||||||||
Texas | 484,000 | 7.80% | 484,000 | 3.45% | |||||||||
Utah | -- | -- | 659,000 | 4.69% | |||||||||
Total | $ | 6,213,000 | 100.00% | $ | 14,041,000 | 100.00% | |||||||
Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent | ' | ||||||||||||
As of September 30, 2013 | |||||||||||||
Balance | Allowance for loan losses * | Balance, net of allowance | |||||||||||
Non-performing loans – no related allowance | $ | -- | $ | -- | $ | -- | |||||||
Non-performing loans – related allowance | -- | -- | -- | ||||||||||
Subtotal non-performing loans | -- | -- | -- | ||||||||||
Performing loans – no related allowance | 5,463,000 | -- | 5,463,000 | ||||||||||
Performing loans – related allowance | 750,000 | -750,000 | -- | ||||||||||
Subtotal performing loans | 6,213,000 | -750,000 | 5,463,000 | ||||||||||
Total | $ | 6,213,000 | $ | -750,000 | $ | 5,463,000 | |||||||
As of December 31, 2012 | |||||||||||||
Balance | Allowance for loan losses* | Balance, net of allowance | |||||||||||
Non-performing loans – no related allowance | $ | -- | $ | -- | $ | -- | |||||||
Non-performing loans – related allowance | -- | -- | -- | ||||||||||
Subtotal non-performing loans | -- | -- | -- | ||||||||||
Performing loans – no related allowance | 12,941,000 | -- | 12,941,000 | ||||||||||
Performing loans – related allowance | 1,100,000 | -183,000 | 917,000 | ||||||||||
Subtotal performing loans | 14,041,000 | -183,000 | |||||||||||
13,858,000 | |||||||||||||
Total | $ | 14,041,000 | $ | -183,000 | $ | 13,858,000 | |||||||
Allowance for Credit Losses on Financing Receivables | ' | ||||||||||||
Loan Type | Balance at | Specific Reserve Allocation | Loan Pay Downs and Settlements | Transfers to REO and Notes Receivable | Balance at | ||||||||
12/31/12 | 9/30/13 | ||||||||||||
Write Off | |||||||||||||
Commercial | $ | 183,000 | $ | -- | $ | 567,000 | $ | -- | -- | $ | 750,000 | ||
Total | $ | 183,000 | $ | -- | $ | 567,000 | $ | -- | -- | $ | 750,000 | ||
Loan Type | Balance at | Specific Reserve Allocation | Write Off | Loan Pay Downs and Settlements | Transfers to REO and Notes Receivable | Balance at | |||||||
12/31/11 | 9/30/12 | ||||||||||||
Commercial | $ | 5,412,000 | $ | 40,000 | $ | -1,000,000 | $ | -1,312,000 | $ | -2,512,000 | $ | 628,000 | |
Construction | 73,000 | -- | -- | -73,000 | -- | -- | |||||||
Total | $ | 5,485,000 | $ | 40,000 | $ | -1,000,000 | $ | -1,385,000 | $ | -2,512,000 | $ | 628,000 | |
Troubled Debt Restructuring | |||||||||||||
As of September 30, 2013 and December 31, 2012 we had one loan totaling approximately $0.8 million that met the definition of a Troubled Debt Restructuring or TDR. When the Company modifies the terms of an existing loan that is considered TDR, it is considered performing as long as it is in compliance with the modified terms of the loan agreement. If the modification calls for deferred interest, it is recorded as interest income as cash is collected. Impairment on these loans is generally determined by the lesser of the value of the underlying collateral or the present value of expected future cash flows. During the previous 12 months there have been no loans that became TDR loans. | |||||||||||||
The following is a breakdown of our TDR loans that were considered performing and non-performing as of September 30, 2013 and December 31, 2012: | |||||||||||||
Total | Performing | Non-Performing | |||||||||||
Loan Type | Number of Loans | Fund Balance | Number of Loans | Fund Balance | Number of Loans | Fund Balance | |||||||
Commercial | 1 | $ | 750,000 | 1 | $ | 750,000 | -- | $ | -- | ||||
Construction | -- | -- | -- | -- | -- | -- | |||||||
Total | 1 | $ | 750,000 | 1 | $ | 750,000 | -- | $ | -- |
NOTE_G_REAL_ESTATE_HELD_FOR_SA1
NOTE G - REAL ESTATE HELD FOR SALE (Tables) | 9 Months Ended | ||
Sep. 30, 2013 | |||
Real Estate [Abstract] | ' | ||
Schedule of Real Estate Properties | ' | ||
Beginning balance, January 1, 2013 | $ | 580,000 | |
Real estate held for sale acquired through foreclosure | -- | ||
Additional investment in REO | -- | ||
Proceeds on nonrefundable earnest money deposit | -12,000 | ||
Write down | -- | ||
Sale | -- | ||
Ending balance, September 30, 2013 | $ | 568,000 |
NOTE_H_ASSETS_HELD_FOR_SALE_AN1
NOTE H - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Tables) | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Notes to Financial Statements | ' | |||||
Schedule of Purchase Price Allocation | ' | |||||
Cash | $ | 308,000 | ||||
Property and equipment | 3,841,000 | |||||
Current assets | 14,000 | |||||
Accounts payable and accrued liabilities | -23,000 | |||||
Net assets | $ | 4,140,000 | ||||
Schedule of Condensed Balance Sheet | ' | |||||
30-Sep-13 | ||||||
Assets: | ||||||
Cash | $ | 183,000 | ||||
Current assets | 4,000 | |||||
Property and equipment | 3,855,000 | |||||
Total assets | $ | 4,042,000 | ||||
Liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 39,000 | ||||
Total liabilities | 39,000 | |||||
Net assets held for sale | $ | 4,003,000 | ||||
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures | ' | |||||
For The Three Months Ended | For The Nine | |||||
30-Sep-13 | Months Ended | |||||
30-Sep-13 | ||||||
Revenue | $ | 172,000 | $ | 512,000 | ||
Expenses | (93,000 | ) | (264,000 | ) | ||
Net Income | $ | 79,000 | $ | 248,000 |
NOTE_J_NOTES_RECEIVABLE_Tables
NOTE J - NOTES RECEIVABLE (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Receivables [Abstract] | ' | ||||
Summary Of The MVP REIT Shares Of Common Stock Received Or To Be Received From SERE | ' | ||||
Property Name | Date shares received | Approximate Receivable Balance | Price Per Share | Number of shares received | |
Wolfpack, LLC | Aug-13 | $43,000 | 8.865 | 4,800 | |
Building C, LLC | Aug-13 | $196,000 | 8.775 | 22,328 | |
Building A, LLC | Sep-13 | $196,000 | 8.775 | 22,328 | |
Devonshire, LLC | Sep-13 | $34,000 | 8.775 | 3,909 | |
SE Property, LLC | Oct-13 | $35,000 | 8.775 | 4,041 | |
ExecuSuites, LLC | Estimated November 2013 | $30,000 | 8.775 | 3,404 |
NOTE_K_FAIR_VALUE_Tables
NOTE K - FAIR VALUE (Tables) | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||
Fair Value, Assets Measured on Recurring Basis | ' | ||||||||||
Fair Value Measurements at Reporting Date Using | |||||||||||
Quoted Prices in Active Markets For Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance | Carrying Value on Balance Sheet at 9/30/13 | |||||||
at 9/30/13 | |||||||||||
Assets | |||||||||||
Investment in marketable securities - related party | $ | 929,000 | $ | -- | $ | -- | $ | 929,000 | $ | 929,000 | |
Investment in marketable securities | $ | 1,239,000 | $ | -- | $ | -- | $ | 1,239,000 | $ | 1,239,000 | |
Investment in real estate loans | $ | -- | $ | -- | $ | 5,440,000 | $ | 5,440,000 | $ | 5,463,000 | |
Fair Value Measurements at Reporting Date Using | |||||||||||
Quoted Prices in Active Markets For Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at 12/31/2012 | Carrying Value on Balance Sheet at 12/31/2012 | |||||||
Assets | |||||||||||
Investment in marketable securities - related party | $ | 784,000 | $ | -- | $ | -- | $ | 784,000 | $ | 784,000 | |
Investment in real estate loans | $ | -- | $ | -- | $ | 13,870,000 | $ | 13,870,000 | $ | 13,858,000 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | ' | ||||||||||
Investment in real estate loans | |||||||||||
Balance on January 1, 2013 | $ | 13,870,000 | |||||||||
Change in temporary valuation adjustment included in net income | |||||||||||
Net increase in allowance for loan losses | -567,000 | ||||||||||
Purchase and additions of assets | |||||||||||
New mortgage loans and mortgage loans bought | 2,317,000 | ||||||||||
Sales, pay downs and reduction of assets | |||||||||||
Collections of principal and sales of investment in real estate loans | -8,235,000 | ||||||||||
Sale of assets to related parties | -1,700,000 | ||||||||||
Sale of assets to third parties | -210,000 | ||||||||||
Temporary change in estimated fair value based on future cash flows | -35,000 | ||||||||||
Balance on September 30, 2013, net of temporary valuation adjustment | $ | 5,440,000 | |||||||||
The following table presents the changes in our financial assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from January 1, 2012 to September 30, 2012: | |||||||||||
Investment in real estate loans | |||||||||||
Balance on January 1, 2012 | $ | 10,827,000 | |||||||||
Change in temporary valuation adjustment included in net income (loss) | |||||||||||
Net increase in allowance for loan losses | -40,000 | ||||||||||
Write-off of allowance for uncollectable loan | 1,000,000 | ||||||||||
Transfer of allowance on real estate loans converted to unsecured notes receivable | 989,000 | ||||||||||
Transfer of allowance on real estate loan to real estate held for sale | 150,000 | ||||||||||
Transfer of allowance on real estate loan to asset held for sale | 1,375,000 | ||||||||||
Reduction of allowance on real estate loan following payment of loan | 284,000 | ||||||||||
Reduction of allowance on real estate loan following settlement of loan | 1,101,000 | ||||||||||
Purchase and additions of assets | |||||||||||
New mortgage loans and mortgage loans bought | 15,395,000 | ||||||||||
Transfer of real estate loans to real estate held for sale | -936,000 | ||||||||||
Transfer of real estate loan to asset held for sale | -4,434,000 | ||||||||||
Transfer of real estate loans converted to unsecured notes receivable | -989,000 | ||||||||||
Sales, pay downs and reduction of assets | |||||||||||
Collections of principal and sales of investment in real estate loans | -8,703,000 | ||||||||||
Reduction of balance of real estate loan following settlement | -1,101,000 | ||||||||||
Write-off for uncollectable loan | -1,000,000 | ||||||||||
Temporary change in estimated fair value based on future cash flows | -708,000 | ||||||||||
Balance on September 30, 2012, net of temporary valuation adjustment | $ | 13,210,000 |
NOTE_L_INVESTMENT_IN_EQUTIY_ME1
NOTE L - INVESTMENT IN EQUTIY METHOD INVESTEE (Tables) | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Notes to Financial Statements | ' | |||||
Summary Of The Purchase Per The Agreement | ' | |||||
Ownership | ||||||
Property Name | Purchase Date | Purchase Price | VRTB | VRTA | MVP | |
MVP PF Ft Lauderdale 2013, LLC | 31-Jul-13 | $3,400,000 | 68% | -- | 32% | |
MVP PF Memphis Court 2013, LLC | 28-Aug-13 | $1,000,000 | 51% | 44% | 5% | |
MVP PF Memphis Poplar 2013, LLC | 28-Aug-13 | $2,000,000 | 51% | 44% | 5% | |
MVP PF Kansas City 2013, LLC | 28-Aug-13 | $2,800,000 | 51% | 44% | 5% | |
MVP PF Baltimore 2013, LLC | 4-Sep-13 | $2,300,000 | 51% | 44% | 5% | |
MVP PF St. Louis 2013, LLC | 4-Sep-13 | $2,000,000 | 51% | 44% | 5% | |
$13,500,000 | ||||||
Preliminary Purchase Price Allocation | ' | |||||
Property Name | Amount | VRTA’s Accounting Method | ||||
Ft Lauderdale | $3,400,000 | Not applicable | ||||
Memphis Court | $190,000 | Equity Method | ||||
Memphis Poplar | $2,685,000 | Equity Method | ||||
Kansas City | $1,550,000 | Equity Method | ||||
Baltimore | $1,550,000 | Equity Method | ||||
St. Louis | $4,125,000 | Equity Method | ||||
$13,500,000 | ||||||
Fair Values Of The Assets Acquired | ' | |||||
Assets | ||||||
Land and improvements – continued operations | $ | 770,000 | ||||
Building and improvements – continued operations | 2,310,000 | |||||
Land and improvements – discontinued operations | 341,000 | |||||
Building and improvements – discontinued operations | 1,023,000 | |||||
Total assets acquired | 4,444,000 | |||||
Liabilities | ||||||
Liabilities | -- | |||||
Total liabilities | -- | |||||
Net assets and liabilities acquired | $ | 4,444,000 | ||||
Results Of Operations Related To The Acquisitions | ' | |||||
For The Three and Nine Months Ended | ||||||
30-Sep-13 | ||||||
Triple-net lease revenue – continued operations | $ | 35,000 | ||||
Triple-net lease revenue – discontinued operations | 16,000 | |||||
Expenses – continued operations | -92,000 | |||||
Expenses – discontinued operations | (36,000 | ) | ||||
Net loss | -77,000 | |||||
% of ownership | 44% | |||||
$ | -34,000 |
NOTE_C_FINANCIAL_INSTRUMENTS_A1
NOTE C - FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Fair Value Disclosures [Abstract] | ' | ' |
Funds In Excess | $2,900,000 | $1,900,000 |
Aggregate Outstanding Balance | 3,900,000 | ' |
Four And Four Loans, Respectively, Totaling Approximately | $2,900,000 | $5,000,000 |
NOTE_D_INVESTMENTS_IN_REAL_EST2
NOTE D - INVESTMENTS IN REAL ESTATE LOANS (Detail) - Investments in Real Estate Loans (USD $) | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | |
Balance (in Dollars) | $14,182,000 | 14,041,000 | ' |
Portfolio Percentage | 10000.00% | 10000.00% | ' |
Commercial Loans [Member] | ' | ' | ' |
Number of Loans | 13 | 13 | ' |
Balance (in Dollars) | 14,088,000 | ' | 13,947,000 |
Weighted Average Interest Rate | 815.00% | ' | 823.00% |
Portfolio Percentage | 9934.00% | ' | 9933.00% |
Current Weighted Average Loan-To-Value Net of Allowance for Loan Losses | 6227.00% | ' | 6421.00% |
Land Loans [Member] | ' | ' | ' |
Number of Loans | 1 | 1 | ' |
Balance (in Dollars) | $94,000 | ' | $94,000 |
Weighted Average Interest Rate | 600.00% | ' | 600.00% |
Portfolio Percentage | 66.00% | ' | 67.00% |
Current Weighted Average Loan-To-Value Net of Allowance for Loan Losses | 5381.00% | ' | 5381.00% |
NOTE_D_INVESTMENTS_IN_REAL_EST3
NOTE D - INVESTMENTS IN REAL ESTATE LOANS (Detail) - Summary of Priority of Real Estate Loans (USD $) | 3 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Balance | $14,182,000 | $14,041,000 |
Portfolio Percentage | 10000.00% | 10000.00% |
First Deeds Of Trust [Member] | ' | ' |
Number of Loans | 12 | 12 |
Balance | 13,199,000 | 13,058,000 |
Portfolio Percentage | 9307.00% | 9300.00% |
Second Deeds Of Trust [Member] | ' | ' |
Number of Loans | 2 | 2 |
Balance | $983,000 | $983,000 |
Portfolio Percentage | 693.00% | 700.00% |
NOTE_D_INVESTMENTS_IN_REAL_EST4
NOTE D - INVESTMENTS IN REAL ESTATE LOANS (Detail) - Contractual Maturities of Investments in Real Estate Loans (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Balance | $14,182,000 | $14,041,000 |
April 2013 to June 2013 [Member] | ' | ' |
Balance | 5,809,000 | ' |
July 2013 to September 2013 [Member] | ' | ' |
Balance | 5,585,000 | ' |
October 2013 to December 2013 [Member] | ' | ' |
Balance | ' | ' |
January 2014 to March 2014 [Member] | ' | ' |
Balance | 800,000 | ' |
April 2014 to June 2014 [Member] | ' | ' |
Balance | 1,238,000 | ' |
Thereafter [Member] | ' | ' |
Balance | 750,000 | ' |
Total [Member] | ' | ' |
Balance | $14,182,000 | ' |
NOTE_D_INVESTMENTS_IN_REAL_EST5
NOTE D - INVESTMENTS IN REAL ESTATE LOANS (Detail) - Geoographic Location of Investments in Real Estate Loans (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Utah [Member] | Michigan [Member] | Michigan [Member] | Texas [Member] | Texas [Member] | Nevada [Member] | Nevada [Member] | |||
Balance | $14,182,000 | $14,041,000 | $659,000 | $1,741,000 | $1,741,000 | $484,000 | $484,000 | $11,957,000 | $11,157,000 |
Portfolio Percentage | 10000.00% | 10000.00% | 469.00% | 1228.00% | 1240.00% | 341.00% | 345.00% | 8431.00% | 7946.00% |
NOTE_D_INVESTMENTS_IN_REAL_EST6
NOTE D - INVESTMENTS IN REAL ESTATE LOANS (Detail) - Reconciliation of Balance of Portfolio to Balance Sheet Amounts (USD $) | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
Note D - Investments In Real Estate Loans Detail - Reconciliation Of Balance Of Portfolio To Balance Sheet Amounts | ' | ' | ' |
Balance per loan portfolio | ' | $14,182,000 | $14,041,000 |
Allowance for loan losses (a) | -183,000 | -750,000 | -183,000 |
Balance per consolidated balance sheets | $13,858,000 | $5,463,000 | $13,858,000 |
NOTE_D_INVESTMENTS_IN_REAL_EST7
NOTE D - INVESTMENTS IN REAL ESTATE LOANS (Detail) - Allowance for Loan Losses Determination (USD $) | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
Balance | ' | $14,182,000 | $14,041,000 |
Allowance for loan losses | ' | -750,000 | -183,000 |
Balance, net of allowance | 13,858,000 | 5,463,000 | 13,858,000 |
Performing Loans No Related Allowance [Member] | ' | ' | ' |
Balance | ' | 5,463,000 | 12,941,000 |
Allowance for loan losses | ' | ' | ' |
Balance, net of allowance | ' | 5,463,000 | 12,941,000 |
Performing Loans Related Allowance [Member] | ' | ' | ' |
Balance | ' | 750,000 | 1,100,000 |
Allowance for loan losses | ' | -750,000 | -183,000 |
Balance, net of allowance | ' | ' | 917,000 |
Performing Loans [Member] | ' | ' | ' |
Balance | ' | 6,213,000 | 14,041,000 |
Allowance for loan losses | ' | -750,000 | -183,000 |
Balance, net of allowance | ' | 6,213,000 | 13,858,000 |
Non Performing Loans Related Allowance [Member] | ' | ' | ' |
Allowance for loan losses | ' | ' | ' |
Non Performing Loans No Related Allowance [Member] | ' | ' | ' |
Allowance for loan losses | ' | ' | ' |
Non Performing Loans [Member] | ' | ' | ' |
Allowance for loan losses | ' | ' | ' |
NOTE_D_INVESTMENTS_IN_REAL_EST8
NOTE D - INVESTMENTS IN REAL ESTATE LOANS (Detail) - Roll-forward of Allowance for Loan Losses (USD $) | 9 Months Ended | 9 Months Ended | 9 Months Ended | ||||||||||||
Sep. 30, 2012 | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2012 | Dec. 31, 2011 | |
End Of Period [Member] | End Of Period [Member] | Beginning Of Period [Member] | Beginning Of Period [Member] | Commercial Loans [Member] | Commercial Loans [Member] | Commercial Loans [Member] | Commercial Loans [Member] | Commercial Loans [Member] | Construction Loans 1 [Member] | Construction Loans 1 [Member] | |||||
End Of Period [Member] | End Of Period [Member] | Beginning Of Period [Member] | Beginning Of Period [Member] | Beginning Of Period [Member] | |||||||||||
Balance at 12/31/2012 | ' | $183,000 | $750,000 | $183,000 | $750,000 | $628,000 | $183,000 | $5,485,000 | ' | $183,000 | $628,000 | $183,000 | $5,412,000 | ' | $73,000 |
Specific Reserve Allocation | 19,000 | ' | ' | ' | ' | ' | ' | ' | 40,000 | ' | ' | ' | ' | ' | ' |
Write Off | -1,385,000 | ' | ' | ' | ' | ' | ' | ' | -1,312,000 | ' | ' | ' | ' | -73,000 | ' |
Transfers to REO and Notes Receivable | -2,512,000 | ' | ' | ' | ' | ' | ' | ' | -2,512,000 | ' | ' | ' | ' | ' | ' |
Balance at 03/312013 | ' | $183,000 | $750,000 | $183,000 | $750,000 | $628,000 | $183,000 | $5,485,000 | ' | $183,000 | $628,000 | $183,000 | $5,412,000 | ' | $73,000 |
NOTE_E_INVESTMENT_IN_MARKETABL1
NOTE E - INVESTMENT IN MARKETABLE SECURITIES - RELATED PARTY (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
VRMII [Member] | ' | ' |
Investments in and Advances to Affiliates, Balance, Shares (in Shares) | 537,078 | 537,078 |
Percent of Shares Outstanding Owned | 470.00% | 470.00% |
Closing Price per Share | $1.73 | ' |
Maximum [Member] | VRMIII [Member] | ' | ' |
Share Price | $2.04 | ' |
Minimum [Member] | VRMIII [Member] | ' | ' |
Share Price | $1.47 | ' |
NOTE_F_INVESTMENT_IN_MARKETABL1
NOTE F - INVESTMENT IN MARKETABLE SECURITIES (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Note F - Investment In Marketable Securities Details Narrative | ' | ' | ' | ' |
Marketable Securities Owned, Shares | 99,919 | ' | ' | ' |
Unrealized holding gain on available-for-sale securities | $46,000 | ' | $46,000 | ' |
Marketable Securities Sold, Shares | ' | ' | ' | 51,066 |
Gain on sale of marketable securities | ' | ' | ' | $79,000 |
NOTE_G_REAL_ESTATE_HELD_FOR_SA2
NOTE G - REAL ESTATE HELD FOR SALE (Detail) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
Real Estate Held-for-sale | $580,000 | $568,000 | $580,000 |
Proceeds On Nonrefundable Earnest Money Deposit | ' | -12,000 | ' |
REO [Member] | ' | ' | ' |
Real Estate Held-for-sale | ' | $600,000 | ' |
VRMII [Member] | REO [Member] | ' | ' | ' |
Number of Real Estate Properties | ' | 5 | ' |
NOTE_H_ASSETS_HELD_FOR_SALE_AN2
NOTE H - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Detail) - Allocation As Of The Foreclosure Date (USD $) | Sep. 30, 2013 |
Cash | $308,000 |
Property and equipment | 3,841,000 |
Current assets | 14,000 |
Accounts payable and accrued liabilities | -23,000 |
Net assets | $4,140,000 |
NOTE_H_ASSETS_HELD_FOR_SALE_AN3
NOTE H - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Detail) - Net Assets Held for Sale (USD $) | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
Total assets | $4,398,000 | $4,042,000 | $4,398,000 |
Accounts payable and accrued liabilities | 43,000 | 39,000 | 39,000 |
Cash [Member] | ' | ' | ' |
Cash | ' | 183,000 | ' |
Current Assets [Member] | ' | ' | ' |
Current assets | ' | 4,000 | ' |
Property And Equipment [Member] | ' | ' | ' |
Property and equipment | ' | 3,855,000 | ' |
Total Liabilities Held For Sale [Member] | ' | ' | ' |
Accounts payable and accrued liabilities | ' | 26,000 | ' |
Net Assets Held For Sale [Member] | ' | ' | ' |
Net assets held for sale | ' | 4,003,000 | ' |
Total Assets Held For Sale [Member] | ' | ' | ' |
Total assets | ' | 4,480,000 | ' |
Accrued Liabilities [Member] | ' | ' | ' |
Accounts payable and accrued liabilities | ' | $39,000 | ' |
NOTE_H_ASSETS_HELD_FOR_SALE_AN4
NOTE H - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Detail) - Results of Operations Related to the Assets Held for Sale (USD $) | 9 Months Ended | 3 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | |
Assets Held-for-sale [Member] | ||
Revenue | $512,000 | $172,000 |
Expenses | -264,000 | -93,000 |
Net Income | $248,000 | $79,000 |
NOTE_I_RELATED_PARTY_TRANSACTI1
NOTE I - RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Note I - Related Party Transactions Details Narrative | ' | ' | ' | ' | ' |
Management Fee Percentage of Sale of Membership Units | 25.00% | ' | ' | ' | ' |
Management Fees | $69,000 | $61,000 | $207,000 | $199,000 | ' |
Common Stock Shares Owned By Manager | 100,000 | ' | 100,000 | ' | 100,000 |
Percentage of Common Stock Shares Owned By Manager | 170.00% | ' | 170.00% | ' | 160.00% |
Common Stock, Dividends, Per Share, Declared | ' | ' | ' | ' | ' |
NOTE_J_NOTES_RECEIVABLE_Detail
NOTE J - NOTES RECEIVABLE (Details Narrative) (USD $) | Nov. 30, 2010 |
Note J - Notes Receivable Details Narrative | ' |
Notes Receivable Loans Before Allowances | $500,000 |
Notes Receivable Loans | 200,000 |
Additional Guarantor, Interest In Operating Profits | $534,000 |
NOTE_K_FAIR_VALUE_Detail
NOTE K - FAIR VALUE (Detail) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
Balance, fair value | ' | $929,000 | $784,000 |
Net Balance | ' | 650,000 | 784,000 |
Net Balance | 13,858,000 | 5,463,000 | 13,858,000 |
Investment In Real Estate Loans [Member] | ' | ' | ' |
Balance, fair value | ' | 14,034,000 | 13,870,000 |
Net Balance | ' | 13,999,000 | 13,858,000 |
Fair Value, Inputs, Level 1 [Member] | ' | ' | ' |
Balance, fair value | ' | 929,000 | 784,000 |
Fair Value, Inputs, Level 3 [Member] | Investment In Real Estate Loans [Member] | ' | ' | ' |
Balance, fair value | ' | $5,440,000 | $13,870,000 |
NOTE_M_INVESTMENT_IN_MVP_REIT_1
NOTE M - INVESTMENT IN MVP REIT, INC. (Details Narrative) (USD $) | 2 Months Ended |
Sep. 30, 2013 | |
Note M - Investment In Mvp Reit Inc. Details Narrative | ' |
shares of common stock of MVP REIT, Inc. were assigned by SERE, LLC | 53,365 |
equivalent value of approximately, shares | $469,000 |
NOTE_O_LEGAL_MATTERS_INVOLVING1
NOTE O - LEGAL MATTERS INVOLVING THE MANAGER (Details Narrative) (USD $) | 3 Months Ended |
Sep. 30, 2013 | |
Note O - Legal Matters Involving Manager Details Narrative | ' |
Fines | $100,000 |
NOTE_P_LEGAL_MATTERS_INVOLVING1
NOTE P - LEGAL MATTERS INVOLVING THE COMPANY (Details Narrative) (USD $) | Jul. 17, 2013 | Dec. 31, 2011 |
Note P - Legal Matters Involving Company Details Narrative | ' | ' |
Allowance for loan loss | ' | $9,900,000 |
Our portion | ' | 800,000 |
Collateral with the court | ' | 200,000 |
Expended from this account | ' | 800,000 |
Deposited into a Texas State court account | ' | 200,000 |
Proceeds of the sale | $49,300,000 | ' |
Hold an interest of approximately | '8% | ' |
Hold an interest of approximately | '90% | ' |
Hold an interest of approximately | '2% | ' |
NOTE_Q_SUBSEQUENT_EVENTS_Detai
NOTE Q - SUBSEQUENT EVENTS (Details Narrative) (USD $) | 1 Months Ended |
Aug. 31, 2012 | |
Note Q - Subsequent Events Details Narrative | ' |
Collateral with Court | $1,000,000 |
Sum Expended from Collateral | 200,000 |
Collateral Balance with Court | $800,000 |