Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 14, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'MVP REIT, Inc. | ' |
Entity Central Index Key | '0001546609 | ' |
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 | 'Non-accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 2,502,181 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Balance_Sheets_Unaudited
Balance Sheets (Unaudited) (USD $) | Jan. 30, 2013 | Dec. 31, 2012 |
Cash | $846,000 | $531,000 |
Accounts receivable | 1,000 | 3,000 |
Prepaid expenses | 105,000 | 216,000 |
Deferred rental assets | 93,000 | ' |
Investment in equity method investee | 1,088,000 | ' |
Investment in cost method investee | 509,000 | ' |
Investments in real estate and fixed assets | ' | ' |
Land and improvements | 12,844,000 | 819,000 |
Building and improvements | 38,541,000 | 2,460,000 |
Fixed assets | 88,000 | 84,000 |
[us-gaap:PropertyPlantAndEquipmentOther] | 51,473,000 | 3,363,000 |
Accumulated depreciation | -145,000 | -10,000 |
Total investments in real estate and fixed assets, net | 51,328,000 | 3,353,000 |
Capitalized loan fees | 67,000 | ' |
Other assets | 1,000 | ' |
Deferred offering costs | 517,000 | 2,068,000 |
Total assets | 54,555,000 | 6,171,000 |
Accrued liabilities | 438,000 | 81,000 |
Due to related parties | 3,275,000 | 3,008,000 |
Notes payable - related party | 900,000 | ' |
Notes payable | 33,307,000 | 154,000 |
Total liabilities | 37,920,000 | 3,243,000 |
Common stock, $0.001 par value, 98,999,000 shares authorized, 2,154,351 issued and outstanding as of September 30, 2013 and 98,999,000 shares authorized, 468,370 issued and outstanding as of December 31, 2012 | 2,000 | ' |
Additional paid-in capital | 23,370,000 | 4,069,000 |
Accumulated deficit | -7,919,000 | -1,141,000 |
Total stockholders' equity before non-controlling interest - related party | 15,453,000 | ' |
Non-controlling interest - related party | 1,182,000 | ' |
Total stockholders' equity | 16,635,000 | 2,928,000 |
Total liabilities and stockholders' equity | 54,555,000 | 6,171,000 |
Preferred Stock Value | ' | ' |
Investments in real estate and fixed assets | ' | ' |
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none outstanding | 0 | 0 |
Non Voting Non Participating Convertible Stock Value | ' | ' |
Investments in real estate and fixed assets | ' | ' |
Non-voting, non-participating convertible stock, $0.001 par value, 1,000 shares authorized and outstanding as of September 30, 2013 and December 31, 2012 | $0 | $0 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Jan. 30, 2013 | Dec. 31, 2012 |
Common stock par value | $0.00 | $0.00 |
Common stock, shares authorized | 98,999,000 | 98,999,000 |
Common stock, shares issued | 2,154,351 | 468,370 |
Common stock, shares outstanding | 2,154,351 | 468,370 |
Preferred Stock Value | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Non Voting Non Participating Convertible Stock Value | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 1,000 | 1,000 |
Preferred stock, shares outstanding | 1,000 | 1,000 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | |
Revenues | ' | ' | ' | ' |
Interest income from investment in real estate loans | $11,000 | ' | ' | $39,000 |
Rental revenue | 763,000 | ' | ' | 1,026,000 |
Total revenues | 774,000 | ' | ' | 1,065,000 |
Operating expenses | ' | ' | ' | ' |
General and administrative | 1,270,000 | 175,000 | 328,000 | 2,318,000 |
Acquisition expenses | 244,000 | 2,000 | 2,000 | 372,000 |
Acquisition expenses - related party | 1,122,000 | ' | ' | 1,336,000 |
Operation and maintenance | 175,000 | 24,000 | 24,000 | 275,000 |
Seminar | 32,000 | ' | ' | 936,000 |
Offering costs | 741,000 | ' | 4,000 | 1,915,000 |
Depreciation | 89,000 | 3,000 | 3,000 | 135,000 |
Total operating expenses | 3,673,000 | 204,000 | 361,000 | 7,287,000 |
Loss from operations | -2,899,000 | -204,000 | -361,000 | -6,222,000 |
Other expense | ' | ' | ' | ' |
Interest expense | 297,000 | ' | ' | 320,000 |
Loss from investment in equity method investee | 2,000 | ' | ' | 2,000 |
Loan fees | 2,000 | ' | ' | 4,000 |
Total other expense | 301,000 | ' | ' | 326,000 |
Provision for income taxes | ' | ' | ' | ' |
Net loss | -3,200,000 | -204,000 | -361,000 | -6,548,000 |
Net loss attributable to non-controlling interest - related party | -58,000 | ' | ' | -58,000 |
Net loss attributable to common stockholders | ($3,142,000) | ($204,000) | ($361,000) | ($6,490,000) |
Basic loss per weighted average common share | ($2.25) | ($9.18) | ($16.25) | ($7.92) |
Weighted average common shares outstanding, basic | 1,393,810 | 22,222 | 22,222 | 819,385 |
Stockholders_Equity_Unaudited
Stockholders Equity (Unaudited) (USD $) | Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Non-controlling Interest Related Party | Total |
Beginning Balance at Dec. 31, 2012 | ' | ' | $4,069,000 | ($1,141,000) | ' | $2,928,000 |
Balance (in Shares) at Dec. 31, 2012 | 1,000 | 468,370 | ' | ' | ' | 468,370 |
Issuance of Common Stock (Purchase) | ' | 2,000 | 844,000 | ' | ' | 846,000 |
Issuance of Common Stock (Purchase) (in Shares) | ' | 94,367 | ' | ' | ' | ' |
Distributions - DRIP | ' | ' | 40,000 | -40,000 | ' | ' |
Distributions - DRIP (in Shares) | ' | 4,603 | ' | ' | ' | ' |
Distributions - cash | ' | ' | ' | -248,000 | ' | -248,000 |
Contribution from Advisor related to reduction of due to related parties | ' | ' | 4,465,000 | ' | ' | 4,465,000 |
Non-controlling interest - related party | ' | ' | ' | ' | 1,240,000 | 1,240,000 |
Net Loss | ' | ' | ' | -6,490,000 | -58,000 | 6,490,000 |
Ending Balance at Sep. 30, 2013 | ' | $2,000 | $23,370,000 | ($7,919,000) | $1,182,000 | $16,635,000 |
Balance (in Shares) at Sep. 30, 2013 | 1,000 | 2,154,351 | ' | ' | ' | ' |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 6 Months Ended | 9 Months Ended |
Sep. 30, 2012 | Sep. 30, 2013 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($361,000) | ($6,490,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation | 3,000 | 135,000 |
Amortization of offering costs | ' | 1,551,000 |
Loss from investment in equity method investee | ' | -2,000 |
Change in operating assets and liabilities: | ' | ' |
Interest and other receivables | ' | ' |
Accounts receivable | ' | 2,000 |
Prepaid expenses | -55,000 | 126,000 |
Deferred rental assets | ' | -93,000 |
Other assets | ' | -1,000 |
Capitalized loan fees | ' | -67,000 |
Loss attributable to noncontrolling interests | ' | -58,000 |
Due to related parties | 413,000 | 4,732,000 |
Accounts payable and accrued liabilities | ' | 357,000 |
Net cash used in operating activities | ' | 192,000 |
Cash flows from investing activities: | ' | ' |
Investment in equity method investee | ' | -1,086,000 |
Investment in cost method investee | ' | -509,000 |
Investment in real estate | ' | -3,975,000 |
Fixed assets | ' | -4,000 |
Building improvements | ' | -6,000 |
Net cash used in investing activities | ' | -5,580,000 |
Cash flows from financing activities: | ' | ' |
Proceeds from issuance of common stock | 200,000 | 846,000 |
Proceeds from issuance of convertible stock | 1,000 | ' |
Reimbursement of deferred offering costs - related party | -100,000 | ' |
Proceeds from promissory note | ' | 5,350,000 |
Payments on notes payable | ' | -245,000 |
Stockholders' distributions | ' | -248,000 |
Net cash provided by financing activities | 101,000 | 5,703,000 |
NET CHANGE IN CASH | 101,000 | 315,000 |
Cash and cash equivalents, beginning of period | ' | 531,000 |
Cash and cash equivalents, end of period | 101,000 | 846,000 |
Supplemental disclosures of cash flows information: | ' | ' |
Interest expense | ' | 320,000 |
Non-cash investing and financing activities: | ' | ' |
Offering costs paid by related party | 1,358,000 | 364,000 |
Offering costs recognized in accrued liabilities | ' | 40,000 |
Note payable relating to prepaid D&O Insurance | 218,000 | ' |
Fixed assets acquired included in amount due to related party | 75,000 | ' |
Capitalized loan fees related to promissory note | ' | 71,000 |
Reduction of debt by Advisor and related party recognized as a contribution | ' | 4,465,000 |
Principal payments on note payable paid by related party | ' | 245,000 |
Land and improvements acquired with common stock and assumed debt | ' | 10,725,000 |
Building and improvements acquired with common stock and assumed debt | ' | 32,181,000 |
Debt assumed in acquisitions | ' | ($28,948,000) |
Note_A_Organization_Proposed_B
Note A - Organization, Proposed Business Operations and Capitalization | 9 Months Ended |
Sep. 30, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Note A - Organization, Proposed Business Operations and Capitalization | ' |
Note A — Organization, Proposed Business Operations and Capitalization | |
Organization and Business | |
MVP REIT, Inc. (the “Company”) was incorporated on April 3, 2012 as a Maryland corporation, and intends to qualify and elect to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2013. On September 25, 2012, the Company commenced its initial public offering of up to $500 million in common stock, $0.001 par value per share, on a “reasonable best efforts” basis, pursuant to a registration statement on Form S-11 (the “Offering”) filed with the U.S. Securities and Exchange Commission (the “SEC”). The Registration Statement also covers up to $50 million for the issuance of common stock pursuant to a distribution reinvestment plan (the “DRIP”) under which common stockholders may elect to have their distributions reinvested in additional shares of common stock. Pursuant to the terms of the Offering, the Company was required to raise at least $3.0 million in connection with the sale of common stock in order to break escrow and commence operations. On December 11, 2012, the Company reached its minimum offering of $3 million. As of September 30, 2013 the Company had raised approximately $18.8 million through the sale of shares of its common stock, net of commissions. Approximately $13.9 million was a non-cash transaction recorded as part of our acquisitions of Wolfpack Properties, LLC (“Wolfpack”), Building C, LLC (“Building C”), Building A, LLC (“Building A”) and Devonshire, LLC (“Devonshire”). | |
The Company has executed a new strategy to sell shares of its common stock. Previously, through MVP American Securities, the Company was selling shares to investors. The Company has entered into selling agreements with third party broker dealers to sell shares of the Company's common stock to their clients. In addition, the Company anticipates entering into additional selling agreements with other broker dealers for the sale of Company common stock. | |
The Company’s investment strategy is to invest substantially all of the net proceeds from the Offering in a diverse portfolio of real estate secured loans (including first and second mortgage loans, mezzanine loans, bridge loans, convertible mortgages, variable interest rate real estate secured loans where a portion of the return is dependent upon performance-based metrics and other loans related to real estate), and direct investments in real property that meet the Company’s investment objectives. The current focus for our investments and acquisitions will be on self-storage facilities and parking facilities and a decision to consider investment and acquisition opportunities throughout the United States. In addition, through one or more taxable REIT subsidiaries, the Company may invest in companies that manage real estate or mortgage investment programs. The Company intends to operate in a manner that will allow the Company to qualify as a REIT for U.S. federal income tax purposes. Among other requirements, REITs are required to satisfy certain gross income and asset tests, which may affect the composition of assets the Company acquire with the proceeds of the Offering. In addition, REITs are required to distribute to stockholders at least 90% of their annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). | |
On October 3, 2012, the Company confirmed that its board of directors had approved a plan for payment of initial monthly cash distributions of $0.045 per share. On January 25, 2013, the Company issued a press release announcing that its board of directors had approved an increase in its monthly distribution rate on its common shares to an annualized distribution rate of 6.2 percent, or $0.558 per share annually or $0.0465 monthly, assuming a purchase price of $9.00 per share. The distribution, previously 6 percent, increased beginning with the January 2013 distribution, paid to stockholders of record as of January 24, 2013 on February 10, 2013. The Company anticipates paying future distributions monthly in arrears, with a record date on the 24th of each month and distributions paid on the 10th day of the following month (or the next business day if the 10th is not a business day). On June 4, 2013, the Company issued a press release announcing that its board of directors has approved an increase in its monthly distribution rate on its common shares to an annualized distribution rate of 6.7%, assuming a purchase price of $9.00 per share or $0.05025 monthly. | |
As of September 30, 2013, the Company has paid approximately $288,000 in distributions to the Company’s stockholders, all of which have constituted a return of capital. | |
The Company’s sponsor is MVP Capital Partners, LLC (“MVPCP” or the “Sponsor”), an entity owned and managed by Michael V. Shustek, the Company’s Chairman and Chief Executive Officer. The Company’s advisor is MVP Realty Advisors, LLC (the “Advisor”). MVPCP owns sixty percent (60%) of the Advisor, and the remaining forty percent (40%) is owned by Vestin Realty Mortgage II, Inc., a Maryland corporation and Nasdaq-listed Company (“VRM II”), which is managed by Vestin Mortgage, LLC. Michael Shustek, owns a significant majority of Vestin Mortgage, LLC, a Nevada limited liability company, which is the manager of Vestin Realty Mortgage II (“VRM II”), Vestin Realty Mortgage I (“VRM I”) and Vestin Fund III (“VF III”). The Advisor is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making investments on the Company’s behalf pursuant to an advisory agreement between the Company and the Advisor (the “Advisory Agreement”). | |
The Company is the sole member of its operating limited liability company, MVP Real Estate Holdings, LLC, a Nevada limited liability company (“REH”). Substantially all of the Company’s business will be conducted through a wholly owned subsidiary REH. The operating agreement provides that REH will be operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability, and (3) ensure that REH will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in REH being taxed as a corporation, rather than as a partnership. | |
Capitalization | |
As of September 30, 2013 the Company had 2,154,351 shares of common stock outstanding and 1,000 shares of non-voting, non-participating convertible stock, $0.001 par value, outstanding (the “Convertible Stock”). | |
Upon formation, the Company sold 22,222 shares of common stock to the Sponsor for $200,000. In addition, the Company issued 1,000 shares of Convertible Stock to the Advisor, for which the Advisor contributed $1,000. In the event of a termination or non-renewal of the Advisory Agreement for cause, the Convertible Stock will be redeemed by the Company for $1.00 per share. In general, upon the occurrence of any of the conditions set forth below, the Convertible Stock will convert into a number of shares of the Company’s common stock representing three and one-half percent (3.50%) of the outstanding shares of common stock immediately preceding the conversion: (A) the Company has made total distributions on the then outstanding shares of the Company’s common stock equal to the invested capital attributable to those shares plus a 6.00% cumulative, non-compounded, annual pre-tax return on such invested capital, (B) the Company lists its common stock for trading on a national securities exchange or (C) the Advisory Agreement is terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). | |
As of September 30, 2013 the Company had raised approximately $18.8 million through the sale of approximately 2,154,351 shares of its common stock, net of commissions. Approximately $13.9 million was a non-cash transaction recorded as part of our acquisition of Wolfpack. | |
Pursuant to the DRIP, stockholders may elect to reinvest distributions by purchasing shares of common stock in lieu of receiving distributions. No dealer manager fees or selling commissions are paid with respect to shares purchased pursuant to the DRIP. Participants purchasing shares pursuant to the DRIP have the same rights and are treated in the same manner as if such shares were issued pursuant to the Offering. The board of directors may designate that certain cash or other distributions be excluded from the DRIP. The Company has the right to amend any aspect of the DRIP or terminate the DRIP with ten days’ notice to participants. Shares issued under the DRIP are recorded to equity in the accompanying balance sheets in the period distributions are declared. 4,603 common shares have been issued under the DRIP during the nine months ended September 30, 2013. | |
In addition, the Company has a Share Repurchase Program (“SRP”) that may provide stockholders who generally have held their shares for at least one year an opportunity to sell their shares to the Company, subject to certain restrictions and limitations. Prior to the date that the Company establishes an estimated value per share of common stock, the purchase price will be 97.5% of the purchase price paid for the shares, if redeemed at any time between the first and third anniversaries of the purchase date, and 100% of the purchase price paid if redeemed after the third anniversary. After the Company establishes an estimated value per share of common stock, the Company will repurchase shares at 100% of the estimated value per share, as determined by its board of directors and disclosed in the annual report publicly filed with the SEC. The number of shares to be repurchased during a calendar quarter is limited to the lesser of: (i) 2.0% of the number of shares of common stock outstanding on December 31 of the prior calendar year, and (ii) those repurchases that can be funded from the net proceeds of the sale of shares under the DRP in the prior calendar year. The board of directors may also limit the amounts available for repurchase at any time at its sole discretion. The SRP will terminate if the shares of common stock are listed on a national securities exchange. At September 30, 2013, no shares had been redeemed. |
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 | |||
Consolidation | |||
The Company’s consolidated financial statements include its accounts and the accounts of its subsidiaries, REH and all of the subsidiaries of REH: MVP MS Cedar Park 2012, LLC; Wolfpack Properties, LLC; Building C, LLC; Building A, LLC; Devonshire, LLC; and MVP MS Red Mountain 2013, LLC. All intercompany profits, balances and transactions are eliminated in consolidation. | |||
Under accounting principles generally accepted in the United States of America (“GAAP”), the Company’s consolidated financial statements will also include the accounts of its consolidated subsidiaries and joint ventures in which the Company is the primary beneficiary, or in which the Company has a controlling interest. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, the Company’s management considers factors such as an entity’s purpose and design and the Company’s ability to direct the activities of the entity that most significantly impacts the entity’s economic performance, ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which it will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both. | |||
Basis of Accounting | |||
The consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with 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. | |||
Use of Estimates | |||
The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, and derivative financial instruments and hedging activities, as applicable. | |||
Acquisitions | |||
The Company records the acquired tangible and intangible assets and assumed liabilities of acquisitions of all operating properties and those development and redevelopment opportunities that meet the accounting criteria to be accounted for as business combinations at fair value at the acquisition date. The Company assesses and considers fair value based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates that the Company deems appropriate. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The acquired assets and assumed liabilities for an operating property acquisition generally include but are not limited to: land, buildings and improvements, construction in progress and identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market operating leases and ground leases, acquired in-place lease values and tenant relationships, if any. | |||
The fair value of land is derived from comparable sales of land within the same submarket and/or region. The fair value of buildings and improvements, tenant improvements, and leasing costs are based upon current market replacement costs and other relevant market rate information. | |||
The fair value of the above-market or below-market component of an acquired in-place operating lease is based upon the present value (calculated using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining non-cancellable lease term and (ii) management's estimate of the rents that would be paid using fair market rental rates and rent escalations at the date of acquisition measured over the remaining non-cancellable term of the lease for above-market operating leases and the initial non-cancellable term plus the term of any below-market fixed rate renewal options, if applicable, for below-market operating leases. The amounts recorded for above-market operating leases are included in deferred leasing costs and acquisition-related intangibles, net on the balance sheet and are amortized on a straight-line basis as a reduction of rental income over the remaining term of the applicable leases. The amounts recorded for below-market operating leases are included in deferred revenue and acquisition-related liabilities, net on the balance sheet and are amortized on a straight-line basis as an increase to rental income over the remaining term of the applicable leases plus the term of any below-market fixed rate renewal options, if applicable. Our below-market operating leases generally do not include fixed rate or below-market renewal options. | |||
The fair value of acquired in-place leases is derived based on management's assessment of lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. This fair value is based on a variety of considerations including, but not necessarily limited to: (1) the value associated with avoiding the cost of originating the acquired in-place leases; (2) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed lease-up period; and (3) the value associated with lost rental revenue from existing leases during the assumed lease-up period. Factors considered by us in performing these analyses include an estimate of the carrying costs during the expected lease-up periods, current market conditions, and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on current market demand at market rates. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related expenses. The amount recorded for acquired in-place leases is included in deferred leasing costs and acquisition-related intangibles, net on the balance sheet and amortized as an increase to depreciation and amortization expense over the remaining term of the applicable leases. If a lease were to be terminated or if termination were determined to be likely prior to its contractual expiration (for example resulting from bankruptcy), amortization of the related unamortized in-place lease intangible would be accelerated. | |||
The determination of the fair value of any debt assumed in connection with a property acquisition is estimated by discounting the future cash flows using interest rates available for the issuance of debt with similar terms and remaining maturities. | |||
The determination of the fair value of the acquired tangible and intangible assets and assumed liabilities of operating property acquisitions requires us to make significant judgments and assumptions about the numerous inputs discussed above. The use of different assumptions in these fair value calculations could significantly affect the reported amounts of the allocation of our acquisition related assets and liabilities and the related amortization and depreciation expense recorded for such assets and liabilities. In addition, because the value of above and below market leases are amortized as either a reduction or increase to rental income, respectively, our judgments for these intangibles could have a significant impact on our reported rental revenues and results of operations. | |||
Costs directly associated with all operating property acquisitions and those development and redevelopment acquisitions that meet the accounting criteria to be accounted for as business combinations are expensed as incurred. During the nine months ended September 30, 2013, the Company expensed approximately $1.7 million of acquisition costs based on the level of our acquisition activity. Our acquisition expenses are directly related to our acquisition activity and if our acquisition activity was to increase or decrease, so would our acquisition costs. Costs directly associated with development acquisitions accounted for as asset acquisitions are capitalized as part of the cost of the acquisition. During the nine months ended September 30, 2013, the Company did not capitalize any such acquisition costs. | |||
Impairment of Long Lived Assets | |||
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. | |||
Derivative Instruments | |||
The Company may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with its borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. | |||
The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. | |||
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If the Company elects not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statement of operations. If the derivative is designated and qualifies for hedge accounting treatment, the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings. | |||
Cash | |||
The Company maintains the majority of its cash balances in one financial institution located in Las Vegas, Nevada. The balances are insured by the Federal Deposit Insurance Corporation under the same ownership category up to at least $250,000. As of September 30, 2013 and December 31, 2012 the Company had approximately $0.4 million and approximately $0.2 million in excess of the federally-insured limits, respectively. | |||
Revenue Recognition | |||
The Company will recognize interest income from loans on an accrual basis over the expected terms of the loans using the effective interest method. The Company may recognize fees, discounts, premiums, anticipated exit fees and direct cost over the terms of the loans as an adjustment to the yield. The Company may recognize fees on commitments that expire unused at expiration. The Company may recognize interest income from available-for-sale securities on an accrual basis over the life of the investment on a yield-to-maturity basis. | |||
The Company’s revenues, which will be derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since some of the Company’s leases will provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. | |||
The Company will continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Company will record an increase in the Company’s allowance for uncollectible accounts or record a direct write-off of the receivable in the Company’s consolidated statements of operations. | |||
Advertising Costs | |||
Advertising costs incurred in the normal course of operations are expensed as incurred. Advertising expense for the three and nine months ended September 30, 2013 amounted to approximately $43,000 and $64,000, respectively. | |||
Investments in Real Estate and Fixed Assets | |||
Investments in real estate and fixed assets are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are primarily 3 to 40 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense). | |||
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. | |||
Investments in Real Estate Loans | |||
Subject to the restrictions on related-party transactions set forth in the Company’s charter, the Company may, from time to time, acquire or sell investments in real estate loans from or to the advisor or other related parties 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 the Company makes and the similarity of interest rates in loans the Company 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. The Company has 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. Such 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 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 | |||
The Company maintains an allowance for loan losses on our investments in real estate loans for estimated credit impairment. The Company’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 first as a reduction to the allowance for loan losses. Generally, subsequent recoveries of amounts previously charged off are recognized 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. The Company and the Advisor 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 performed will not reveal all material facts pertaining to a borrower and the security. | |||
Additional facts and circumstances may be discovered as the Company continues efforts in the collection and foreclosure processes. This additional information often causes management to reassess its estimates. Circumstances that may 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 the Company advances funds. The Company customarily utilizes 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. | ||
Organization, Offering and Related Costs | |||
Certain organization, offering and related costs, including legal, accounting, printing, marketing expenses and the salaries and direct expenses of the employees of the Advisor and its affiliates, will be incurred by the Advisor on behalf of the Company. After the Company has reimbursed $100,000 of such costs, which has been paid to the Advisor, no additional reimbursements will be made unless the aggregate amount of such reimbursements does not exceed 0.75% of the gross offering proceeds as of the date of reimbursement. Prior to the commencement of our operations, such offering costs had been deferred and such deferred offering costs are being amortized to expense as offering costs over the 12 month period commencing January 1, 2013 on a straight-line basis. | |||
Share-Based Compensation | |||
The Company has a stock-based incentive award plan, which is accounted for under the guidance for share based payments. The expense for such awards will be included in general and administrative expenses and is recognized over the vesting period or when the requirements for exercise of the award have been met (See Note G — Share-Based Compensation). | |||
Per Share Data | |||
The Company calculates basic earnings per share by dividing net income for the period by weighted-average shares of its common stock outstanding for a respective period. Diluted earnings per share takes into account the effect of dilutive instruments, such as stock options and convertible stock, but uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding. The Company had no outstanding common share equivalents during the nine months ended September 30, 2013. | |||
Our convertible stock will convert to shares of common stock if and when: (A) the Company has made total distributions on the then outstanding shares of our common stock equal to the invested capital attributable to those shares plus a 6.00% cumulative, non-compounded, annual pre-tax return on such invested capital, (B) the Company lists our common stock for trading on a national securities exchange or (C) our advisory agreement is terminated or not renewed (other than for “cause” as defined in our advisory agreement). As of September 30, 2013, none of these conditions were met and therefore, the convertible stock was not considered in our calculation of earnings per share. | |||
Reportable Segments | |||
The Company is currently authorized to operate two reportable segments, investments in real estate loans and investments in real property. As of September 30, 2013, the Company only operates in the investment in real property segment. | |||
Accounting and Auditing Standards Applicable to “Emerging Growth Companies” | |||
The Company is an “emerging growth company” under the recently enacted JOBS Act. For as long as the Company remains an “emerging growth company,” which may be up to five fiscal years, the Company is not required to (1) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (2) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (3) comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (4) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. The Company intends to take advantage of such extended transition period. Since the Company will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, the Company’s financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If the Company were to subsequently elect to instead comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act. | |||
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. |
Note_C_Commitments_and_Conting
Note C - Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Note C - Commitments and Contingencies | ' |
Note C — Commitments and Contingencies | |
Litigation | |
In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company. | |
Environmental Matters | |
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations. |
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, the Company had no investments in real estate loans. During July 2013, VRM II repurchased $1.0 million of the Company’s only investment in real estate loans, and a third-party investor purchased the remaining $1.0 million of the loan. The loan, which was due in February 2014 and secured by real estate located in Nevada, provided for interest only payments at a rate of 7.5% with a “balloon” payment of principal payable at maturity. In the future, the Company may invest in additional real estate loans, which may require borrowers to maintain interest reserves funded from the principal amount of the loan for a period of time. |
Note_E_Related_Party_Transacti
Note E - Related Party Transactions and Arrangements | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
Note E - Related Party Transactions and Arrangements | ' |
Note E — Related Party Transactions and Arrangements | |
Accounting services | |
During the three and nine months ended September 30, 2013, L.L. Bradford & Company, an entity partially owned by Mr. Lewis, the Company’s Chief Financial Officer, received fees of approximately $11,000 and $53,000, repectively, for accounting services. | |
During the three and nine months ended September 30, 2013, Accounting Solutions, an entity partially owned by Mr. Lewis, the Company’s Chief Financial Officer, received fee of approximately $6,600 and $10,000, respectively, for accounting services. | |
During May 2013, the Company entered into an agreement with Strategix Solutions, LLC, an entity partially owned by Mr. Lewis, the Company’s Chief Financial Officer, to provide certain accounting services. During the three and nine months ended September 30, 2013, Strategix Solutions, LLC received fees of approximately $21,000. | |
All transactions described above were approved by a majority of the Company’s board of directors (including a majority of the independent directors) not otherwise interested in such transaction as fair and reasonable to the Company and on terms and conditions no less favorable to the Company than those available from unaffiliated third parties. | |
Investments in Loans | |
During April 2013 the Company purchased $0.5 million in investments in real estate loans from VRM I. | |
During April 2013 the Company purchased $1.5 million in investments in real estate loans from VRM II. | |
After June 30, 2013, VRM II repurchased $1.0 million of our investment in real estate loan and a third party investor purchased the remaining $1.0 million. | |
Loan from Affiliate | |
During September 2013, the Company issued a promissory note with Now Fund II, LP, a limited partnership wholly owned by Michael Shustek, for $0.9 million. This note bears an annual interest rate of 7.5%, and is payable in monthly interest payments of approximately $5,600, with the unpaid principal balance due at maturity in March 2014. | |
Stock Ownership | |
As of September 30, 2013, the Sponsor owned 22,222 shares of the Company’s outstanding common stock and the Advisor owned 1,000 shares of the Convertible Stock. See “Capitalization” under Note A for further information, including a description of the terms of the Convertible Stock. | |
Fees and Expenses Paid to the Advisor | |
The Advisor, an entity majority owned by the Sponsor, and its affiliates may incur and pay costs and fees on behalf of the Company. As of June 30, 2013, the Company had payables to the Advisor related to management fees, funding offering costs and operating expenses paid by the Advisor of approximately $0.5 million. During June 2013, the Advisor reduced this balance by approximately $4.5 million which was recognized as a contribution of equity. This contribution fully reduced all of the amounts payable related to the offering costs and reduced the amount payable for reimbursable operating expenses. This reduction was not made in exchange for the issuance of common stock. As of September 30, 2013, the Company had a balance of approximately $3.3 million payable to the Advisor. | |
The terms under which the fees are earned and payable to related parties for specific transactions are as follows: | |
Fees and Expenses Paid in Connection with the Offering | |
On July 16, 2012 the Company signed a selling agreement which appoints MVP American Securities (“Selling Agent”), an entity owned by our CEO, to act as one of the selling agents for the Offering. The Selling Agent will receive 3.00% of the gross offering proceeds in the offering, subject to reductions based on volume and for certain categories of purchasers. No selling commissions are payable on shares sold under the distribution reinvestment plan. For the nine months ended September 30, 2013, the Company had paid selling commissions to the Selling Agent of $120,000. Additionally, the Advisor pays up to an additional 5.25% of offering proceeds for broker dealer commissions and due diligence expenses. | |
Certain organization, offering and related costs will be incurred by the Advisor on behalf of the Company. After the Company has reimbursed $100,000 of such costs, which amount has been paid to the Advisor, no additional reimbursements will be made unless the aggregate amount of such reimbursements does not exceed 0.75% of the gross offering proceeds as of the date of reimbursement. Such reimbursable costs may include legal, accounting, printing and other offering expenses, including marketing, salaries and direct expenses of the Advisor’s employees and employees of the Advisor’s affiliates and others. Any such reimbursement will not exceed actual expenses incurred by the Advisor. On November 1, 2013, the advisor has forgiven the reimbursement of the full amount of offering costs incurred. | |
Fees and Expenses Paid in Connection With the Operations of the Company | |
The Company has no paid employees. The Company has retained the Advisor to manage its affairs on a day-to-day basis and will reimburse, no less than monthly, the Advisor for 100% of actual, documented expenses paid or incurred in connection with services provided to the Company, including wages and benefits. The Company will not reimburse the Advisor for the salaries and benefits paid to any of the Company’s named executive officers. For the period from April 3, 2012 (inception) through September 30, 2013, the Company has not reimbursed the Advisor for these expenses. As of September 30, 2013, the Company has recognized a contingent liability due to the Advisor of approximately $3.3 million for the unreimbursed expenses. On November 1, 2013, the Advisor has forgiven all reimbursable expenses. | |
The Advisor must reimburse the Company at least quarterly for reimbursements paid to the Advisor in any four consecutive fiscal quarters to the extent that such reimbursements to the Advisor cause the Company’s total operating expenses to exceed the greater of (1) 2% of our average invested assets, which generally consists of the average book value of the Company’s real properties before deducting depreciation, bad debts or other non-cash reserves and the average book value of securities, or (2) 25% of the Company’s net income, which is defined as the Company’s total revenues less total expenses for any given period excluding reserves for depreciation, bad debts or other similar non-cash reserves, unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. As of September 30, 2013, the Company has a balance owed to the Advisor for these expenses; however they have not been paid to the Advisor. Accordingly the Advisor has no reimbursement amount owed to the Company. As the Company commences the reimbursement of the expenses to the Advisor, the Company will verify the reimbursements do not exceed the amounts discussed above or will receive reimbursements from the Advisor. | |
The Advisor or its affiliates will receive an acquisition fee of 3.0% of the purchase price of any real estate or loan acquired at a discount, provided, however, the Company will not pay any fees when acquiring loans from its affiliates. During the three and nine months ended September 30, 2013 approximately $ 1.1and $1.3 million, respectively, in acquisition fees were earned, all of which were recognized as a due to related party as of September 30, 2013. | |
The Advisor or its affiliates will be reimbursed for actual expenses paid or incurred in connection with the selection or acquisition of an investment, whether or not the Company ultimately acquires the investment. The Company may recoup all or a portion of these expenses from the borrower in connection with each investment. | |
The Advisor or its affiliates will receive a monthly asset management fee at an annual rate equal to 0.85% of the fair market value of (i) all assets then held by the Company or (ii) the Company’s proportionate share thereof in the case of an investment made through a joint venture or other co-ownership arrangement, excluding (only for clause (ii) debt financing obtained by the Company or made available to the Company. The fair market value of real property shall be based on annual “AS-IS”, “WHERE-IS” appraisals, and the fair market value of real estate-related secured loans shall be equal to the face value of the such loan, unless it is non-performing, in which case the fair market value shall be equal to the book value of such loan. The asset management fee will be reduced to 0.75% if the Company is listed on a national securities exchange. Asset management fees for the three and nine months ended September 30, 2013 were approximately $70,000 and $87,000, respectively, and were recognized as a due to related party as of September 30, 2013. | |
The Advisor or its affiliates receive a monthly debt financing fee at an annual rate equal to 0.25% of the aggregate debt financing obtained by the Company or made available to the Company, such as mortgage debt, lines of credit, and other term indebtedness, including refinancings. In the case of a joint venture, the Company pays this fee only on the Company’s pro rata share. Debt financing fee for three and nine months ended September 30, 2013 were approximately $1,000 and $2,000, respectively, and were recognized as a due to related party as of September 30, 2013. | |
The Advisor or its affiliates will receive a monthly market-based fee for property management services of up to 6.0% of the gross revenues generated by the Company’s properties. The Company’s property manager may subcontract with third party property managers and will be responsible for supervising and compensating those property managers. The aggregate property management fees charged by the Company’s property manager and any subcontractor shall not exceed 6.0% of the gross revenues generated by the Company’s properties. There were no property management fees paid to the Advisor for the nine months ended September 30, 2013. | |
Disposition Fee | |
For substantial assistance in connection with the sale of real property, as determined by the independent directors, the Company will pay the Advisor or its affiliate the lesser of (i) 3.00% of the contract sale price of the real property sold or (ii) 50% of the customary commission which would be paid to a third-party broker for the sale of a comparable property. The amount paid, when added to the sums paid to unaffiliated parties, may not exceed either the customary commission or an amount equal to 6.00% of the contract sales price. The disposition fee will be paid concurrently with the closing of any such disposition of all or any portion of any real property. The Company will not pay a disposition fee upon the maturity, prepayment, workout, modification or extension of a loan or other debt-related investment; provided, however, that the Advisor or its affiliates may receive an exit fee or a prepayment penalty paid by the borrower. If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such real property equal to 3.00% of the sales price. With respect to real property held in a joint venture, the foregoing commission will be reduced to a percentage reflecting the Company’s economic interest in the joint venture. There were no disposition fees paid to the Advisor for the nine months ended September 30, 2013. |
Note_F_Economic_Dependency
Note F - Economic Dependency | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
Note F - Economic Dependency | ' |
Note F — Economic Dependency | |
The Company is dependent on the Advisor and the Selling Agents for certain services that are essential to the Company, including the sale of the Company’s shares of common stock in the Offering, asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and investor relations. | |
In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services. |
Note_G_ShareBased_Compensation
Note G - Share-Based Compensation | 9 Months Ended |
Sep. 30, 2013 | |
Equity [Abstract] | ' |
Note G - Share-Based Compensation | ' |
Note G — Share-Based Compensation | |
Equity Incentive Plan | |
The Company has adopted an equity incentive plan. The equity incentive plan offers certain individuals an opportunity to participate in the Company’s growth through awards in the form of, or based on, the Company’s common stock. The Company has no current intention to issue any awards under the equity incentive plan but may do so in the future in order to attract and retain qualified directors, officers, employees, and consultants. | |
The equity incentive plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, performance awards, dividend equivalents, other stock-based awards and cash-based awards to directors, employees and consultants of the Company selected by the board of directors for participation in the equity incentive plan. Stock options granted under the equity incentive plan will not exceed an amount equal to 10% of the outstanding shares of the Company’s common stock on the date of grant of any such stock options. Any stock options and stock appreciation rights granted under the equity incentive plan will have an exercise price or base price that is not less than the fair market value of the Company’s common stock on the date of grant. | |
The board of directors, or the compensation committee of the board of directors, will administer the equity incentive plan, with sole authority to determine all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted if the grant or vesting of the awards would jeopardize the Company’s status as a REIT under the Code or otherwise violate the ownership and transfer restrictions imposed under the Company’s charter. Unless otherwise determined by the board of directors, no award granted under the equity incentive plan will be transferable except through the laws of descent and distribution. | |
The Company has authorized and reserved an aggregate maximum of 300,000 shares for issuance under the equity incentive plan. In the event of a transaction between the Company and its stockholders that causes the per-share value of common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits under the equity incentive plan will be adjusted proportionately, and the board of directors must make such adjustments to the equity incentive plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend or a combination or consolidation of the outstanding shares of common stock into a lesser number of shares, the authorization limits under the equity incentive plan will automatically be adjusted proportionately and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price. | |
Unless otherwise provided in an award certificate or any special plan document governing an award, in the event of a corporate transaction (as defined in the Company’s equity incentive plan), if any award issued under the Company’s equity incentive plan is not assumed or replaced as part of the corporate transaction, then such portion of the award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at fair market value) immediately prior to the effective date of such corporation transaction, so long as the grantee’s continuous service has not terminated prior to such date. Unless otherwise provided in an award certificate or any special plan document governing an award, in the event of a change in control, each outstanding award issued automatically shall become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at fair market value), immediately prior to the effective date of such change in control, provided that the grantee’s continuous service has not terminated prior to such date. Under the equity incentive plan, a “corporate transaction” is defined to include (i) a merger or consolidation in which the Company is not the surviving entity; (ii) the sale of all or substantially all of the Company’s assets; (iii) the Company’s complete liquidation or dissolution; and (iv) acquisitions by any person of beneficial ownership of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities (but excluding any transactions determined by our administrator not to constitute a “corporate transaction”). Under the equity incentive plan, a “change in control” is defined generally as a change in ownership or control of the Company effected either through (i) acquisitions of securities by any person (or related group of persons) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities pursuant to a tender offer or exchange offer that the Company’s directors do not recommend the Company’s stockholders accept; or (ii) a change in the composition of the board over a period of 12 months or less such that a majority of the Company’s board members will no longer serve as directors, by reason of one or more contested elections for board membership. | |
The equity incentive plan will automatically expire on the tenth anniversary of the date on which it is approved by the board of directors and stockholders, unless extended or earlier terminated by the board of directors. The board of directors may terminate the equity incentive plan at any time. The expiration or other termination of the equity incentive plan will have no adverse impact on any award previously granted under the equity incentive plan. The board of directors may amend the equity incentive plan at any time, but no amendment will adversely affect any award previously granted, and no amendment to the equity incentive plan will be effective without the approval of the Company’s stockholders if such approval is required by any law, regulation or rule applicable to the equity incentive plan. |
Note_H_Recent_Accounting_Prono
Note H - Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2013 | |
Accounting Changes and Error Corrections [Abstract] | ' |
Note H - Recent Accounting Pronouncements | ' |
Note H – Recent Accounting Pronouncements | |
On June 7, 2013, the FASB issued Accounting Standards Update No. 2013-08, Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements. The new standard clarifies the characteristics of an investment company, and provides comprehensive guidance for assessing whether an entity is an investment company. The amendments apply to an entity's interim and annual reporting periods in fiscal years that begin after December 15, 2013. Early application is prohibited. The adoption of ASU 2013-08 is not expected to materially impact our consolidated financial statements. |
Note_I_Investment_in_Equity_Me
Note I - Investment in Equity Method Investee and Investment in Cost Method Investee | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Notes to Financial Statements | ' | |||||
Note I - Investment in Equity Method Investee and Investment in Cost Method Investee | ' | |||||
Note I – Investment in Equity Method Investee and Investment in Cost Method Investee | ||||||
On July 26, 2013 the Company, VRM I and VRM II entered into an agreement to acquire six parking facilities from the same seller. The Company has formed limited liability companies with VRM I and VRM II to acquire 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. The Company has the right, at any time, with 10 days written notice, to purchase VRM I or VRM II’s interest in the limited liability company (the “Purchase Right”). The price for the Purchase Right shall be equal to VRM I or VRM II’s and our capital contribution plus a 7.5% annual cumulative return less any distributions received by VRM I or VRM II. | ||||||
The following is a 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 | ||||||
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 | MVP REIT’s Accounting Method | ||||
Ft Lauderdale | $3,400,000 | Equity Method | ||||
Memphis Court | 190,000 | Cost Method | ||||
Memphis Poplar | 2,685,000 | Cost Method | ||||
Kansas City | 1,550,000 | Cost Method | ||||
Baltimore | 1,550,000 | Cost Method | ||||
St. Louis | 4,125,000 | Cost 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. |
Note_J_Acquisitions
Note J - Acquisitions | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
Business Combinations [Abstract] | ' | ||||||||||
Note J - Acquisitions | ' | ||||||||||
Note J — Acquisitions | |||||||||||
On June 14, 2013, the Company acquired a 22,000-square-foot office building in Las Vegas, Nevada (“Wolfpack”) for $6.5 million. Located at 8860 W. Sunset Road, the two-story, single-tenant building was built in 2008 and is fully occupied by a national short-term lender, which uses the property as its national headquarters. The property has approximately 10 years remaining on its triple net lease, under which the tenant is responsible for the majority of the costs associated with maintaining the building. The Company financed the acquisition through the assumption of approximately $3,967,000 in existing debt and the transfer of 285,744 shares of the Company’s common stock to the seller totaling approximately $2,533,000. | |||||||||||
On July 31, 2013, the Company acquired a 47,500-square-foot office building in Las Vegas, Nevada (“Building C”) for $15.0 million. Located at 8930 W. Sunset Road, the three-story, multi-tenant building was built in 2008 and is 90% occupied by a mix of medical and professional tenants. The property has 5 to 10 years remaining on triple net leases, under which the tenants are responsible for the majority of the costs associated with maintaining the building. The Company financed the acquisition through the assumption of approximately $10,842,000 in existing debt and the transfer of 473,805 shares of the Company’s common stock to the seller totaling approximately $4,158,000. | |||||||||||
On August 30, 2013, the Company acquired a 47,500-square-foot office building in Las Vegas, Nevada (“Building A”) for $15.0 million. Located at 8880 W. Sunset Road, the three-story, multi-tenant building was built in 2008 and is 100% occupied by a mix of medical and professional tenants, including the corporate headquarters for MVP REIT which occupies 4,190 square feet. . The property has 5 to 10 years remaining on triple net leases, under which the tenants are responsible for the majority of the costs associated with maintaining the building. The Company financed the acquisition through the assumption of approximately $10,197,000 in existing debt and the transfer of 547,368 shares of the Company’s common stock to the seller totaling approximately $4,803,000. | |||||||||||
During September 2013, the Company formed a limited liability company, MVP MS Red Mountain 2013, LLC (“Red Mountain”), with VRM II to acquire a 299-unit self-storage facility located adjacent to Nevada Highway in Boulder City, NV for $5.2 million. The Company and VRM II hold a 51% and 49% interest, respectively in the limited liability company. The limited liability company will be jointly managed by MVP Realty Advisors, LLC and Vestin Mortgage, LLC. The Company has the right, at any time, with ten days written notice, to purchase VRM II’s interest in the limited liability company (the “Purchase Right”). The price for the Purchase Right shall be equal to VRM II’s capital contribution plus a 7.5% annual cumulative return less any distributions received by VRM II. | |||||||||||
This acquisition closed on September 12, 2013. The self-storage facility was originally constructed in 1996 and expanded in both 2000 and 2006. The property consists of 23 buildings located on five acres. As of the closing date, the property is approximately 97% occupied. Red Mountain obtained financing of $2.7 million through a 7-year term loan amortized over 25 years at 4.35% annual percentage rate. | |||||||||||
On September 16, 2013, the Company acquired a 22,000-square-foot office building in Las Vegas, Nevada (“Devonshire”) for $6.4 million. Located at 8925 W. Post Road, the two-story, multi-tenant building was built in 2008 and is 100% occupied by professional tenants. The property has 4 to 9 years remaining on triple net leases, under which the tenants are responsible for the majority of the costs associated with maintaining the building. The Company financed the acquisition through the assumption of approximately $3,942,000 in existing debt and the transfer of 280,095 shares of the Company’s common stock to the seller totaling approximately $2,458,000. | |||||||||||
The related assets, liabilities, and results of operations of the acquired properties are included in the consolidated financial statements as of the date of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date for our 2013 acquisition: | |||||||||||
Assets | Wolfpack | Building C | Building A | Red Mountain | Devonshire | ||||||
Land and improvements | $ | 1,625,000 | $ | 3,750,000 | $ | 3,750,000 | $ | 1,300,000 | $ | 1,600,000 | |
Building and improvements | 4,875,000 | 11,250,000 | 11,250,000 | 3,900,000 | 4,800,000 | ||||||
Total assets acquired | 6,500,000 | 15,000,000 | 15,000,000 | 5,200,000 | 6,400,000 | ||||||
Liabilities | |||||||||||
Notes payable | 3,967,000 | 10,842,000 | 10,197,000 | 2,700,000 | 3,942,000 | ||||||
Total liabilities assumed | 3,967,000 | 10,842,000 | 10,197,000 | 2,700,000 | 3,942,000 | ||||||
Net assets and liabilities acquired | $ | 2,533,000 | $ | 4,158,000 | $ | 4,803,000 | $ | 2,500,000 | $ | 2,458,000 | |
Pro forma results of the Company | |||||||||||
The following table of pro forma consolidated results of operations of the Company for the three and nine months ended September 30, 2013, the three months ended September 30, 2012 and for the period from April 3, 2012 (inception) through December 31, 2012 and assumes that the acquisition of Wolfpack, Building C, Building A, Red Mountain and Devonshire were completed as of April 3, 2012 (inception of the Company). | |||||||||||
For the three months ended September 30, 2013 | For the three months ended September 30, 2012 | For the nine months ended September 30, 2013 | The period from April 3, 2012 (inception) through September 30, 2012 | ||||||||
Revenues from continuing operations | $ | 1,318,000 | $ | 1,096,000 | $ | 3,914,000 | $ | 1,594,000 | |||
Net loss available to common stockholders(1) | $ | -1,660,000 | $ | -139,000 | $ | -4,464,000 | -259,000 | ||||
Net loss available to common stockholders per share – basic(1) | $ | -1.99 | $ | -0.17 | $ | -5.36 | $ | -0.31 | |||
Net loss available to common stockholders per share – diluted(1)(2) | $ | -1.99 | $ | -0.17 | $ | -5.36 | $ | -0.31 | |||
(1)The pro forma results for the nine months ended September 30, 2013 were adjusted to exclude acquisition expenses of approximately $1,708,000 incurred in 2013 for the acquisitions. | |||||||||||
(2) The pro forma results include assumptions the acquisition was funded by a pro forma issuance of our common stock. The pro forma results assume issuances of the common stock were issued during April 2012. |
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. The Company 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. The Company uses 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 table presents the valuation of our financial assets and liabilities as of September 30, 2013 measured at fair value on a recurring basis by input levels: | |||||||||||
Quoted Prices in Active Markets For Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at 9/30/13 | Carrying Value on Balance Sheet at 9/30/13 | |||||||
Assets | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | |
Investment in real estate loans | |||||||||||
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: | |||||||||||
Investment in | |||||||||||
real estate loans | |||||||||||
Balance on January 1, 2013 | $ | -- | |||||||||
Purchase and additions of assets | |||||||||||
New mortgage loans and mortgage loans acquired | 2,000,000 | ||||||||||
Sales, pay downs and reduction of assets | |||||||||||
Collections of principal | -2,000,000 | ||||||||||
Balance on September 30, 2013, net of temporary valuation adjustment | $ | -- | |||||||||
Note_L_Notes_Payable
Note L - Notes Payable | 9 Months Ended |
Sep. 30, 2013 | |
Debt Disclosure [Abstract] | ' |
Note L - Notes Payable | ' |
Note L — Notes Payable | |
During March 2013, Cedar Park issued a promissory note for approximately $1.8 million. The note is collateralized by real property located in Cedar Park, Texas, bears an annual interest rate of 4.66%, and is payable in monthly installment payments of principal and interest totaling approximately $10,000, with a lump sum payment of approximately $1.3 million due at maturity in April 2023. | |
Cedar Park incurred approximately $71,000 in fees associated with the new promissory note. Total unamortized loan fees as of September 30, 2013 totaled approximately $47,000. The Company is amortizing capitalized loan fees over the life of the debt agreement which commenced on April 1, 2013. | |
During June 2013, through the acquisition of Wolfpack, LLC the Company assumed the liability on a loan with a balance of approximately $4.0 million, collateralized by real property located in Las Vegas, Nevada, bears an annual interest rate of 7.0%, and is payable in monthly installment payments of principal and interest totaling approximately $30,000, with a lump sum payment of approximately $3.7 million due at maturity in July 2016. | |
During July 2013, through the acquisition of Building C the Company assumed the liability on a loan with a balance of approximately $10.8 million, collateralized by real property located in Las Vegas, Nevada, bears an annual interest rate of 6.5%, and is payable in monthly installment payments of principal and interest totaling approximately $77,000, with a lump sum payment of approximately $10.3 million due at maturity in December 2015. | |
During August 2013, through the acquisition of Building A, the Company assumed the liability on a loan with a balance of approximately $10.2 million, collateralized by real property located in Las Vegas, Nevada, bears an annual interest rate of 6.41%, and is payable in monthly installment payments of principal and interest totaling approximately $73,000, with a lump sum payment of approximately $10.1 million due at maturity in May 2014. | |
During September 2013, through the acquisition of Red Mountain the Company financed a 7-year term loan amortized over 25 years with a balance of approximately $2.7 million, collateralized by real property located in Las Vegas, Nevada, bears an annual interest rate of 4.35%, and is payable in monthly installment payments of principal and interest totaling approximately $15,000. | |
During September 2013, through the acquisition of Devonshire, the Company assumed the liability on a loan with a balance of approximately $3.9 million, collateralized by real property located in Las Vegas, Nevada, bears an annual interest rate of 7.0%, and is payable in monthly installment payments of principal and interest totaling approximately $30,000, with a lump sum payment of approximately $3.7 million due at maturity in July 2016. | |
During September 2013, the Company issued a promissory note with Now Fund II, LP, a company wholly owned by Michael Shustek, for $0.9 million. This note bears an annual interest rate of 7.5%, and is payable in monthly interest payments of approximately $5,600, with the unpaid principal balance due at maturity in March 2014. |
Note_M_Subsequent_Events
Note M - Subsequent Events | 9 Months Ended |
Sep. 30, 2013 | |
Subsequent Events [Abstract] | ' |
Note M - Subsequent Events | ' |
Note M — Subsequent Events | |
The following subsequent events have been evaluated through the date of this filing with the SEC. | |
In October 2013, the Company financed a 12-month insurance policy for Directors and Officers liability, with an annual interest rate of 3.85%. The agreement required a down payment of approximately $68,000 and nine monthly payments of approximately $23,000 beginning in October 2013. | |
On October 31, 2013, MVP PF Baltimore 2013, LLC entered into an agreement to sell its sole asset for $1,550,000. The agreement allows for 30 days of due diligence prior to the closing of the transaction. The sale of this asset is not expected to result in a significant gain or loss. | |
The Advisor, an entity majority owned by the Sponsor, and its affiliates may incur and pay costs and fees on behalf of the Company. As of September 30, 2013, the Company had payables to the Advisor related to management fees, organization and offering costs and operating expenses paid by the Advisor of approximately $3.3 million. On November 1, 2013, the Advisor reduced the balance as of September 30, 2013 by approximately $2.0 million which will be recognized during the fourth quarter of 2013 as a contribution of equity. This contribution fully reduced all of the amounts payable related to the offering costs and reduced the amount payable for reimbursable operating expenses. This reduction was not made in exchange for the issuance of common stock. | |
On October 24, 2013, the Company acquired a 22,000-square-foot office building in Las Vegas, Nevada for $6.1 million. Located at 8905 W. Post Road, the two-story, multi-tenant building was built in 2008 and is 91.08% occupied by professional tenants. The property has 5 to 10 years remaining on triple net leases, under which the tenants are responsible for the majority of the costs associated with maintaining the building. The Company financed the acquisition through the assumption of approximately $3.5 million in existing debt and the transfer of 296,106 shares of the Company’s common stock to the seller totaling approximately $2,598,000. |
Note_B_Summary_of_Significant_1
Note B - Summary of Significant Accounting Policies (Policies) | 9 Months Ended | ||
Sep. 30, 2013 | |||
Accounting Policies [Abstract] | ' | ||
Consolidation | ' | ||
Consolidation | |||
The Company’s consolidated financial statements include its accounts and the accounts of its subsidiaries, REH and all of the subsidiaries of REH: MVP MS Cedar Park 2012, LLC; Wolfpack Properties, LLC; Building C, LLC; Building A, LLC; Devonshire, LLC; and MVP MS Red Mountain 2013, LLC. All intercompany profits, balances and transactions are eliminated in consolidation. | |||
Under accounting principles generally accepted in the United States of America (“GAAP”), the Company’s consolidated financial statements will also include the accounts of its consolidated subsidiaries and joint ventures in which the Company is the primary beneficiary, or in which the Company has a controlling interest. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, the Company’s management considers factors such as an entity’s purpose and design and the Company’s ability to direct the activities of the entity that most significantly impacts the entity’s economic performance, ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which it will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both. | |||
Basis of Accounting | ' | ||
Basis of Accounting | |||
The consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with 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. | |||
Use of Estimates | ' | ||
Use of Estimates | |||
The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, and derivative financial instruments and hedging activities, as applicable. | |||
Acquisitions | ' | ||
Acquisitions | |||
The Company records the acquired tangible and intangible assets and assumed liabilities of acquisitions of all operating properties and those development and redevelopment opportunities that meet the accounting criteria to be accounted for as business combinations at fair value at the acquisition date. The Company assesses and considers fair value based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates that the Company deems appropriate. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The acquired assets and assumed liabilities for an operating property acquisition generally include but are not limited to: land, buildings and improvements, construction in progress and identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market operating leases and ground leases, acquired in-place lease values and tenant relationships, if any. | |||
The fair value of land is derived from comparable sales of land within the same submarket and/or region. The fair value of buildings and improvements, tenant improvements, and leasing costs are based upon current market replacement costs and other relevant market rate information. | |||
The fair value of the above-market or below-market component of an acquired in-place operating lease is based upon the present value (calculated using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining non-cancellable lease term and (ii) management's estimate of the rents that would be paid using fair market rental rates and rent escalations at the date of acquisition measured over the remaining non-cancellable term of the lease for above-market operating leases and the initial non-cancellable term plus the term of any below-market fixed rate renewal options, if applicable, for below-market operating leases. The amounts recorded for above-market operating leases are included in deferred leasing costs and acquisition-related intangibles, net on the balance sheet and are amortized on a straight-line basis as a reduction of rental income over the remaining term of the applicable leases. The amounts recorded for below-market operating leases are included in deferred revenue and acquisition-related liabilities, net on the balance sheet and are amortized on a straight-line basis as an increase to rental income over the remaining term of the applicable leases plus the term of any below-market fixed rate renewal options, if applicable. Our below-market operating leases generally do not include fixed rate or below-market renewal options. | |||
The fair value of acquired in-place leases is derived based on management's assessment of lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. This fair value is based on a variety of considerations including, but not necessarily limited to: (1) the value associated with avoiding the cost of originating the acquired in-place leases; (2) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed lease-up period; and (3) the value associated with lost rental revenue from existing leases during the assumed lease-up period. Factors considered by us in performing these analyses include an estimate of the carrying costs during the expected lease-up periods, current market conditions, and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on current market demand at market rates. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related expenses. The amount recorded for acquired in-place leases is included in deferred leasing costs and acquisition-related intangibles, net on the balance sheet and amortized as an increase to depreciation and amortization expense over the remaining term of the applicable leases. If a lease were to be terminated or if termination were determined to be likely prior to its contractual expiration (for example resulting from bankruptcy), amortization of the related unamortized in-place lease intangible would be accelerated. | |||
The determination of the fair value of any debt assumed in connection with a property acquisition is estimated by discounting the future cash flows using interest rates available for the issuance of debt with similar terms and remaining maturities. | |||
The determination of the fair value of the acquired tangible and intangible assets and assumed liabilities of operating property acquisitions requires us to make significant judgments and assumptions about the numerous inputs discussed above. The use of different assumptions in these fair value calculations could significantly affect the reported amounts of the allocation of our acquisition related assets and liabilities and the related amortization and depreciation expense recorded for such assets and liabilities. In addition, because the value of above and below market leases are amortized as either a reduction or increase to rental income, respectively, our judgments for these intangibles could have a significant impact on our reported rental revenues and results of operations. | |||
Costs directly associated with all operating property acquisitions and those development and redevelopment acquisitions that meet the accounting criteria to be accounted for as business combinations are expensed as incurred. During the nine months ended September 30, 2013, the Company expensed approximately $1.7 million of acquisition costs based on the level of our acquisition activity. Our acquisition expenses are directly related to our acquisition activity and if our acquisition activity was to increase or decrease, so would our acquisition costs. Costs directly associated with development acquisitions accounted for as asset acquisitions are capitalized as part of the cost of the acquisition. During the nine months ended September 30, 2013, the Company did not capitalize any such acquisition costs. | |||
Impairment of Long Lived Assets | ' | ||
Impairment of Long Lived Assets | |||
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. | |||
Derivative Instruments | ' | ||
Derivative Instruments | |||
The Company may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with its borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. | |||
The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. | |||
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If the Company elects not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statement of operations. If the derivative is designated and qualifies for hedge accounting treatment, the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings. | |||
Cash | ' | ||
Cash | |||
The Company maintains the majority of its cash balances in one financial institution located in Las Vegas, Nevada. The balances are insured by the Federal Deposit Insurance Corporation under the same ownership category up to at least $250,000. As of September 30, 2013 and December 31, 2012 the Company had approximately $0.4 million and approximately $0.2 million in excess of the federally-insured limits, respectively. | |||
Revenue Recognition | ' | ||
Revenue Recognition | |||
The Company will recognize interest income from loans on an accrual basis over the expected terms of the loans using the effective interest method. The Company may recognize fees, discounts, premiums, anticipated exit fees and direct cost over the terms of the loans as an adjustment to the yield. The Company may recognize fees on commitments that expire unused at expiration. The Company may recognize interest income from available-for-sale securities on an accrual basis over the life of the investment on a yield-to-maturity basis. | |||
The Company’s revenues, which will be derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since some of the Company’s leases will provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. | |||
The Company will continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Company will record an increase in the Company’s allowance for uncollectible accounts or record a direct write-off of the receivable in the Company’s consolidated statements of operations. | |||
Advertising Costs | ' | ||
Advertising Costs | |||
Advertising costs incurred in the normal course of operations are expensed as incurred. Advertising expense for the three and nine months ended September 30, 2013 amounted to approximately $43,000 and $64,000, respectively. | |||
Investments in Real Estate and Fixed Assets | ' | ||
Investments in Real Estate and Fixed Assets | |||
Investments in real estate and fixed assets are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are primarily 3 to 40 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense). | |||
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. | |||
Investments in Real Estate Loans | ' | ||
Investments in Real Estate Loans | |||
The Company may, from time to time, acquire or sell investments in real estate loans from or to our manager or other related parties 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 the Company makes and the similarity of interest rates in loans the Company 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. The Company has 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. Such 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 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 | |||
The Company maintains 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 first as a reduction to the allowance for loan losses. Generally, subsequent recoveries of amounts previously charged off are recognized 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. The Company 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 performed will not reveal all material facts pertaining to a borrower and the security. | |||
Additional facts and circumstances may be discovered as the Company continues efforts in the collection and foreclosure processes. This additional information often causes management to reassess its estimates. Circumstances that may 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 the Company advances funds. The Company customarily utilizes 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. | ||
Organization, Offering and Related Costs | ' | ||
Organization, Offering and Related Costs | |||
Certain organization, offering and related costs, including legal, accounting, printing, marketing expenses and the salaries and direct expenses of the employees of the Advisor and its affiliates, will be incurred by the Advisor on behalf of the Company. After the Company has reimbursed $100,000 of such costs, which has been paid to the Advisor, no additional reimbursements will be made unless the aggregate amount of such reimbursements does not exceed 0.75% of the gross offering proceeds as of the date of reimbursement. Prior to January 1, 2013, such offering costs had been deferred. As the Company effectively commenced operations on January 1, 2013, the offering costs previously deferred are being amortized to expense as offering costs over 12 months on a straight-line basis. | |||
Share-Based Compensation | ' | ||
Share-Based Compensation | |||
The Company has a stock-based incentive award plan, which is accounted for under the guidance for share based payments. The expense for such awards will be included in general and administrative expenses and is recognized over the vesting period or when the requirements for exercise of the award have been met (See Note G — Share-Based Compensation). | |||
Per Share Data | ' | ||
Per Share Data | |||
The Company calculates basic earnings per share by dividing net income for the period by weighted-average shares of its common stock outstanding for a respective period. Diluted earnings per share takes into account the effect of dilutive instruments, such as stock options and convertible stock, but uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding. The Company had no outstanding common share equivalents during the nine months ended September 30, 2013. | |||
Our convertible stock will convert to shares of common stock if and when: (A) the Company has made total distributions on the then outstanding shares of our common stock equal to the invested capital attributable to those shares plus a 6.00% cumulative, non-compounded, annual pre-tax return on such invested capital, (B) the Company lists our common stock for trading on a national securities exchange or (C) our advisory agreement is terminated or not renewed (other than for “cause” as defined in our advisory agreement). As of September 30, 2013, none of these conditions were met and therefore, the convertible stock was not considered in our calculation of earnings per share. | |||
Reportable Segments | ' | ||
Reportable Segments | |||
The Company is currently authorized to operate two reportable segments, investments in real estate loans and investments in real property. As of September 30, 2013, the Company only operates in the investment in real property segment. | |||
Accounting and Auditing Standards Applicable to "Emerging Growth Companies" | ' | ||
Accounting and Auditing Standards Applicable to “Emerging Growth Companies” | |||
The Company is an “emerging growth company” under the recently enacted JOBS Act. For as long as the Company remains an “emerging growth company,” which may be up to five fiscal years, the Company is not required to (1) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (2) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (3) comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (4) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. The Company intends to take advantage of such extended transition period. Since the Company will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, the Company’s financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If the Company were to subsequently elect to instead comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act. | |||
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. |
Note_I_Investment_in_Equity_Me1
Note I - Investment in Equity Method Investee and Investment in Cost Method Investee (Tables) | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Notes to Financial Statements | ' | |||||
Purchase Agreement Summary | ' | |||||
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 | MVP REIT’s Accounting Method | ||||
Ft Lauderdale | $3,400,000 | Equity Method | ||||
Memphis Court | 190,000 | Cost Method | ||||
Memphis Poplar | 2,685,000 | Cost Method | ||||
Kansas City | 1,550,000 | Cost Method | ||||
Baltimore | 1,550,000 | Cost Method | ||||
St. Louis | 4,125,000 | Cost Method | ||||
$13,500,000 |
Note_J_Acquisition_Tables
Note J - Acquisition (Tables) | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
Business Combinations [Abstract] | ' | ||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | ' | ||||||||||
Assets | Wolfpack | Building C | Building A | Red Mountain | Devonshire | ||||||
Land and improvements | $ | 1,625,000 | $ | 3,750,000 | $ | 3,750,000 | $ | 1,300,000 | $ | 1,600,000 | |
Building and improvements | 4,875,000 | 11,250,000 | 11,250,000 | 3,900,000 | 4,800,000 | ||||||
Total assets acquired | 6,500,000 | 15,000,000 | 15,000,000 | 5,200,000 | 6,400,000 | ||||||
Liabilities | |||||||||||
Notes payable | 3,967,000 | 10,842,000 | 10,197,000 | 2,700,000 | 3,942,000 | ||||||
Total liabilities assumed | 3,967,000 | 10,842,000 | 10,197,000 | 2,700,000 | 3,942,000 | ||||||
Net assets and liabilities acquired | $ | 2,533,000 | $ | 4,158,000 | $ | 4,803,000 | $ | 2,500,000 | $ | 2,458,000 | |
Business Acquisition, Pro Forma Information | ' | ||||||||||
For the three months ended September 30, 2013 | For the three months ended September 30, 2012 | For the nine months ended September 30, 2013 | The period from April 3, 2012 (inception) through September 30, 2012 | ||||||||
Revenues from continuing operations | $ | 1,318,000 | $ | 1,096,000 | $ | 3,914,000 | $ | 1,594,000 | |||
Net loss available to common stockholders(1) | $ | -1,660,000 | $ | -139,000 | $ | -4,464,000 | -259,000 | ||||
Net loss available to common stockholders per share – basic(1) | $ | -1.99 | $ | -0.17 | $ | -5.36 | $ | -0.31 | |||
Net loss available to common stockholders per share – diluted(1)(2) | $ | -1.99 | $ | -0.17 | $ | -5.36 | $ | -0.31 |
Note_K_Fair_Value_Tables
Note K - Fair Value (Tables) | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||
Fair Value Measurements, Nonrecurring | ' | ||||||||||
Quoted Prices in Active Markets For Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at 9/30/13 | Carrying Value on Balance Sheet at 9/30/13 | |||||||
Assets | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | |
Investment in real estate loans | |||||||||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | ' | ||||||||||
Investment in | |||||||||||
real estate loans | |||||||||||
Balance on January 1, 2013 | $ | -- | |||||||||
Purchase and additions of assets | |||||||||||
New mortgage loans and mortgage loans acquired | 2,000,000 | ||||||||||
Sales, pay downs and reduction of assets | |||||||||||
Collections of principal | -2,000,000 | ||||||||||
Balance on September 30, 2013, net of temporary valuation adjustment | $ | -- |
Note_A_Organization_Proposed_B1
Note A - Organization, Proposed Business Operations and Capitalization (Details Narrative) (USD $) | 1 Months Ended | ||
Sep. 25, 2012 | Jan. 30, 2013 | Dec. 31, 2012 | |
Note - Organization Proposed Business Operations And Capitalization Details Narrative | ' | ' | ' |
Initial Planned Offer For Sale Equity Value | $500 | ' | ' |
Common Stock, Par or Stated Value Per Share | $0.00 | $0.00 | $0.00 |
Note_D_Investments_in_Real_Est1
Note D - Investments in Real Estate Loans (Details Narrative) (USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Mortgage Loans on Real Estate | $100,000 |
Mortgage Loans on Real Estate, Interest Rate | 750.00% |
VRMII [Member] | ' |
Mortgage Loans on Real Estate | 1 |
Third Party Investor [Member] | ' |
Mortgage Loans on Real Estate | $1 |
Note_E_Related_Party_Transacti1
Note E - Related Party Transactions and Arrangements (Details Narrative) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
L.L. Bradford & Company [Member] | ' |
Related Party Transaction, Expenses from Transactions with Related Party | $53,000 |
Accounting Solutions [Member] | ' |
Related Party Transaction, Expenses from Transactions with Related Party | 10,000 |
Strategix Solutions, LLC [Member] | ' |
Related Party Transaction, Expenses from Transactions with Related Party | $21,000 |
Note_G_ShareBased_Compensation1
Note G - Share-Based Compensation (Details Narrative) | 3 Months Ended |
Sep. 30, 2013 | |
Note G - Share-Based Compensation Details Narrative | ' |
authorized and reserved shares for issuance under the equity incentive plan | 300,000 |
Note_I_Investment_in_Equity_Me2
Note I - Investment in Equity Method Investee and Investment in Cost Method Investee (Details Narrative) | 3 Months Ended |
Sep. 30, 2013 | |
Note I - Investment In Equity Method Investee And Investment In Cost Method Investee Details Narrative | ' |
annual cumulative return | 750.00% |
Note_J_Acquisition_Details_Nar
Note J - Acquisition (Details Narrative) (Wolfpack [Member], USD $) | Jun. 14, 2013 |
sqft | |
Wolfpack [Member] | ' |
Area of Real Estate Property (in Square Feet) | 22,000 |
Real Estate Investment Property, at Cost | $65 |
Stock Shares Transferred To Seller Of Real Estate (in Shares) | 285,744 |
Value Of Shares Transferred For Purchase Of Real Estate | $2,533,000 |
Note_L_Notes_Payable_Details_N
Note L - Notes Payable (Details Narrative) (USD $) | 1 Months Ended | 9 Months Ended | 1 Months Ended | ||
Mar. 31, 2013 | Sep. 30, 2013 | Jan. 30, 2013 | Dec. 31, 2012 | Mar. 31, 2013 | |
Ballon Payment [Member] | |||||
Debt Instrument, Interest Rate, Stated Percentage | 466.00% | ' | ' | ' | ' |
Debt Instrument, Periodic Payment | ' | ' | ' | ' | $13 |
Debt Instrument, Frequency of Periodic Payment | '10,000 | ' | ' | ' | ' |
Notes Payable | ' | ' | 33,307,000 | 154,000 | ' |
Debt Instrument, Face Amount | 18 | ' | ' | ' | ' |
Debt Issuance Cost | $71,000 | $47,000 | ' | ' | ' |
Note_M_Subsequent_Events_Detai
Note M - Subsequent Events (Details Narrative) (USD $) | 1 Months Ended |
Oct. 31, 2013 | |
Subsequent Events [Abstract] | ' |
Insurnace Policy Annual Interest Rate | 385.00% |
Insurance Policy Down Payment | $68,000 |
Insurance Policy Monthly Payments | 23,000 |
Insurance Policy Number of Payments | 9 |
Sale of Asset | 1,550,000 |
Management Fees, Organization And Offering Costs Payable | 3,300,000 |
Management Fees, Organization And Offering Costs Payable Reduced Amount | $2,000,000 |