Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 06, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | TRANSCONTINENTAL REALTY INVESTORS INC | |
Entity Central Index Key | 733,590 | |
Document Type | 10-Q | |
Trading Symbol | TCI | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 8,717,767 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS (un
CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Assets | ||
Real estate, at cost | $ 939,024 | $ 781,794 |
Real estate subject to sales contracts at cost, net of depreciation ($194 for 2015 and $4,278 for 2014) | 10,583 | 20,395 |
Less accumulated depreciation | (133,888) | (113,068) |
Total real estate | 815,719 | 689,121 |
Notes and interest receivable: | ||
Performing (including $60,443 in 2015 and $77,853 in 2014 from related parties) | 67,626 | 84,863 |
Non-performing | 584 | |
Less allowance for doubtful accounts (including $1,825 in 2015 and 2014 from related parties) | (1,825) | (1,990) |
Total notes and interest receivable | 65,801 | 83,457 |
Cash and cash equivalents | 11,958 | 12,201 |
Restricted cash | 42,163 | 48,238 |
Investments in unconsolidated joint ventures and investees | 2,178 | 1,543 |
Receivable from related party | 101,031 | 58,404 |
Other assets | 37,727 | 37,441 |
Total assets | 1,076,577 | 930,405 |
Liabilities: | ||
Notes and interest payable | 754,604 | 588,749 |
Notes related to real estate held for sale | 585 | 1,552 |
Notes related to real estate subject to sales contracts | 7,765 | 18,616 |
Deferred gain (from sales to related parties) | 51,356 | 51,356 |
Accounts payable and other liabilities (including $2,872 in 2015 and $4,909 in 2014 to related parties) | 35,756 | 36,684 |
Total liabilities | 850,066 | 696,957 |
Shareholders' equity: | ||
Preferred stock, Series C: $0.01 par value, authorized 10,000,000 shares; issued and outstanding zero shares in 2015 and 2014 (liquidation preference $100 per share). Series D: $0.01 par value, authorized, issued and outstanding 100,000 shares in 2015 and 2014 (liquidation preference $100 per share) | 1 | 1 |
Common stock, $0.01 par value, authorized 10,000,000 shares; issued 8,717,967 shares in 2015 and 2014; outstanding 8,717,767 shares in 2015 and 2014 | 87 | 87 |
Treasury stock at cost, 200 shares in 2015 and 2014 | (2) | (2) |
Paid-in capital | 270,976 | 271,649 |
Retained earnings | (62,808) | (56,451) |
Total Transcontinental Realty Investors, Inc. shareholders' equity | 208,254 | 215,284 |
Non-controlling interest | 18,257 | 18,164 |
Total shareholders' equity | 226,511 | 233,448 |
Total liabilities and shareholders' equity | $ 1,076,577 | $ 930,405 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Depreciation of Real Estate subject to sales contracts at cost (in dollars) | $ 194 | $ 4,278 |
Performing (in dollars) | 67,626 | 84,863 |
Allowance for doubtful accounts (in dollars) | 1,825 | 1,990 |
Accounts payable and other liabilities to related parties (in dollars) | $ 2,872 | $ 4,909 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 8,717,967 | 8,717,967 |
Common stock, shares outstanding | 8,717,767 | 8,717,767 |
Treasury stock, shares | 200 | 200 |
Related Party [Member] | ||
Performing (in dollars) | $ 60,443 | $ 77,853 |
Allowance for doubtful accounts (in dollars) | $ 1,825 | $ 1,825 |
Series C Preferred Stock [Member] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, liquidation preference per share (in dollars per share) | $ 100 | $ 100 |
Series D Preferred Stock [Member] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares issued | 100,000 | 100,000 |
Preferred stock, shares outstanding | 100,000 | 100,000 |
Preferred stock, liquidation preference per share (in dollars per share) | $ 100 | $ 100 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues: | ||||
Rental and other property revenues (including $211 and $175 for the three months and $591 and $526 for the nine months ended 2015 and 2014, respectively, from related parties) | $ 27,539 | $ 18,466 | $ 73,599 | $ 55,281 |
Expenses: | ||||
Property operating expenses (including $192 and $162 for the three months and $522 and $481 for the nine months ended 2015 and 2014, respectively, from related parties) | 14,195 | 10,077 | 35,987 | 28,640 |
Depreciation and amortization | 6,555 | 4,415 | 16,305 | 12,967 |
General and administrative (including $489 and $714 for the three months and $2,036 and $2,114 for the nine months ended 2015 and 2014, respectively, from related parties) | 1,146 | 1,131 | 4,191 | 5,417 |
Net income fee to related party | 51 | (186) | 142 | 514 |
Advisory fee to related party | 2,666 | 1,826 | 6,561 | 5,490 |
Total operating expenses | 24,613 | 17,263 | 63,186 | 53,028 |
Net operating income | 2,926 | 1,203 | 10,413 | 2,253 |
Interest incomeĀ (including $2,503 and $2,718 for the three months and $8,861 and $8,835 for the nine months ended 2015 and 2014, respectively, from related parties) | 2,505 | 3,064 | 9,260 | 9,181 |
Other income (expense) | (77) | 344 | 4 | 741 |
Mortgage and loan interest (including $0 and $0 for the three months and $31 and $31 for the six months ended 2015 and 2014, respectively, from related parties) | (12,006) | (8,043) | (29,703) | (23,329) |
Loan charges and prepayment penalties | (1,544) | (1,044) | (2,250) | (2,626) |
Earnings (losses) from unconsolidated joint ventures and investees | (4) | 10 | 39 | (5) |
Litigation settlement (expense) | (85) | (86) | (203) | 3,666 |
Total other expenses | (11,211) | (5,755) | (22,853) | (12,372) |
Loss before gain on land sales, non-controlling interest, and taxes | (8,285) | (4,552) | (12,440) | (10,119) |
Gain on sale of income producing properties | 735 | 735 | ||
Gain on land sales | 997 | 40 | 5,124 | 634 |
Net income (loss) from continuing operations before taxes | (6,553) | (4,512) | (6,581) | (9,485) |
Income tax benefit (expense) | 16 | 786 | 107 | 5,030 |
Net income (loss) from continuing operations | (6,537) | (3,726) | (6,474) | (4,455) |
Discontinued operations: | ||||
Net income (loss) from discontinued operations | $ 47 | 477 | 306 | (454) |
Gain on sale of real estate from discontinued operations | 1,770 | 14,826 | ||
Income tax benefit (expense) from discontinued operations | $ (16) | (786) | (107) | (5,030) |
Net income (loss) from discontinued operations | 31 | 1,461 | 199 | 9,342 |
Net income (loss) | (6,506) | (2,265) | (6,275) | 4,887 |
Net income (loss) attributable to non-controlling interest | (95) | (81) | (82) | (292) |
Net income attributable to Transcontinental Realty Investors, Inc. | (6,601) | (2,346) | (6,357) | 4,595 |
Preferred dividend requirement | (227) | (227) | (673) | (778) |
Net income (loss) applicable to common shares | $ (6,828) | $ (2,573) | $ (7,030) | $ 3,817 |
Earnings per share - basic | ||||
Net income (loss) from continuing operations (in dollars per share) | $ (0.79) | $ (0.46) | $ (0.83) | $ (0.65) |
Net income from discontinued operations (in dollars per share) | 0.17 | 0.02 | 1.10 | |
Net income (loss) applicable to common shares (in dollars per share) | (0.79) | (0.29) | (0.81) | 0.45 |
Earnings per share - diluted | ||||
Net income (loss) from continuing operations (in dollars per share) | (0.79) | (0.46) | (0.83) | (0.65) |
Net income from discontinued operations (in dollars per share) | 0.17 | 0.02 | 1.10 | |
Net income (loss) applicable to common shares (in dollars per share) | $ (0.79) | $ (0.29) | $ (0.81) | $ 0.45 |
Weighted average common shares used in computing earnings per share (in shares) | 8,717,767 | 8,688,018 | 8,717,767 | 8,505,991 |
Weighted average common shares used in computing diluted earnings per share (in shares) | 8,717,767 | 8,688,018 | 8,717,767 | 8,505,991 |
Amounts attributable to Transcontinental Realty Investors, Inc. | ||||
Net income (loss) from continuing operations | $ (6,632) | $ (3,807) | $ (6,556) | $ (4,747) |
Net income from discontinued operations | 31 | 1,461 | 199 | 9,342 |
Net income attributable to Transcontinental Realty Investors, Inc. | $ (6,601) | $ (2,346) | $ (6,357) | $ 4,595 |
CONSOLIDATED STATEMENTS OF OPE5
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Rental and other property revenues (including $211 and $175 for the three months and $591 and $526 for the nine months ended 2015 and 2014, respectively, from related parties) | $ 27,539 | $ 18,466 | $ 73,599 | $ 55,281 |
Property operating expenses (including $192 and $162 for the three months and $522 and $481 for the nine months ended 2015 and 2014, respectively, from related parties) | 14,195 | 10,077 | 35,987 | 28,640 |
General and administrative (including $489 and $714 for the three months and $2,036 and $2,114 for the nine months ended 2015 and 2014, respectively, from related parties) | 1,146 | 1,131 | 4,191 | 5,417 |
Interest income (including $2,503 and $2,718 for the three months and $8,861 and $8,835 for the nine months ended 2015 and 2014, respectively, from related parties) | 2,505 | 3,064 | 9,260 | 9,181 |
Mortgage and loan interest (including $0 and $0 for the three months and $31 and $31 for the six months ended 2015 and 2014, respectively, from related parties) | (12,006) | (8,043) | (29,703) | (23,329) |
Related Party [Member] | ||||
Rental and other property revenues (including $211 and $175 for the three months and $591 and $526 for the nine months ended 2015 and 2014, respectively, from related parties) | 211 | 175 | 591 | 526 |
Property operating expenses (including $192 and $162 for the three months and $522 and $481 for the nine months ended 2015 and 2014, respectively, from related parties) | 192 | 162 | 522 | 481 |
General and administrative (including $489 and $714 for the three months and $2,036 and $2,114 for the nine months ended 2015 and 2014, respectively, from related parties) | 489 | 714 | 2,036 | 2,114 |
Interest income (including $2,503 and $2,718 for the three months and $8,861 and $8,835 for the nine months ended 2015 and 2014, respectively, from related parties) | 2,503 | 2,718 | 8,861 | 8,835 |
Mortgage and loan interest (including $0 and $0 for the three months and $31 and $31 for the six months ended 2015 and 2014, respectively, from related parties) | $ 0 | $ 0 | $ 31 | $ 31 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) - 9 months ended Sep. 30, 2015 - USD ($) $ in Thousands | Comprehensive Loss [Member] | Preferred Stock [Member] | Common Stock [Member] | Treasury Stock [Member] | Paid-In Capital [Member] | Retained Earnings [Member] | Non-controlling Interest [Member] | Total |
Balance, at beginning at Dec. 31, 2014 | $ (57,670) | $ 1 | $ 87 | $ (2) | $ 271,649 | $ (56,451) | $ 18,164 | $ 233,448 |
Balance, at beginning (in shares) at Dec. 31, 2014 | 8,717,967 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Series D preferred stock dividends (9.0% per year) | (673) | (673) | ||||||
Net income (loss) | (6,275) | (6,357) | 82 | (6,275) | ||||
Contributions from non-controlling interests | 11 | 11 | ||||||
Balance, at the end at Sep. 30, 2015 | $ (63,945) | $ 1 | $ 87 | $ (2) | $ 270,976 | $ (62,808) | $ 18,257 | $ 226,511 |
Balance, at the end (in shares) at Sep. 30, 2015 | 8,717,967 |
CONSOLIDATED STATEMENTS OF SHA7
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) (Parenthetical) | 9 Months Ended |
Sep. 30, 2015 | |
Statement of Stockholders' Equity [Abstract] | |
Series D preferred stock dividend percentage | 9.00% |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Consolidated Statements Of Comprehensive Income | ||
Net income | $ (6,275) | $ 4,887 |
Other comprehensive income | ||
Total comprehensive income | $ (6,275) | $ 4,887 |
Comprehensive (income) loss attributable to non-controlling interest | (82) | (292) |
Comprehensive income attributable to Transcontinental Realty Investors, Inc. | $ (6,357) | $ 4,595 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flow From Operating Activities: | ||
Net income (loss) | $ (6,275) | $ 4,887 |
Adjustments to reconcile net income applicable to common shares to net cash flows from operating activities: | ||
Gain on sale of land | (5,124) | (634) |
Gain on sale of income-producing properties | (735) | (14,826) |
Depreciation and amortization | 16,305 | 13,631 |
Amortization of deferred borrowing costs | 1,720 | 2,379 |
Losses (earnings) from unconsolidated joint ventures and investees | (39) | 276 |
Decrease (increase) in assets: | ||
Accrued interest receivable | 2,125 | 9,527 |
Other assets | 2,469 | 2,752 |
Prepaid expense | (12,977) | (2,232) |
Escrow | 4,841 | 4,029 |
Earnest money | (1,193) | (605) |
Rent receivables | (1,405) | (83) |
Related party receivables | (42,626) | |
Increase (decrease) in liabilities: | ||
Accrued interest payable | (637) | 51 |
Related party payables | (18,686) | |
Other liabilities | (868) | (10,781) |
Net cash used in operating activities | (44,419) | (10,315) |
Cash Flow From Investing Activities: | ||
Proceeds from notes receivable | 23,350 | |
Originations or advances on notes receivable | (7,655) | (22,136) |
Acquisition of land held for development | (93) | |
Acquisition of income-producing properties | (131,220) | (19,534) |
Proceeds from sale of income-producing properties | 43,823 | |
Proceeds from sale of land | 11,307 | 6,638 |
Investment in unconsolidated real estate entities | (596) | (82) |
Improvement of land held for development | (2,930) | (1,654) |
Improvement of income-producing properties | (7,942) | (3,621) |
Construction and development of new properties | (5,110) | (1,026) |
Net cash provided by (used in) investing activities | (120,796) | 2,315 |
Cash Flow From Financing Activities: | ||
Proceeds from notes payable | 221,450 | 105,056 |
Recurring amortization of principal on notes payable | (11,630) | (13,942) |
Payments on maturing notes payable | (35,344) | (89,420) |
Deferred financing costs | (8,842) | (5,623) |
Distributions to non-controlling interests | 11 | (31) |
Common stock issuance | 937 | |
Preferred stock dividends - Series C | (106) | |
Preferred stock dividends - Series D | (673) | (672) |
Net cash provided by (used in) financing activities | 164,972 | (3,801) |
Net increase (decrease) in cash and cash equivalents | (243) | (11,801) |
Cash and cash equivalents, beginning of period | 12,201 | 16,086 |
Cash and cash equivalents, end of period | 11,958 | 4,285 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | $ 16,748 | $ 22,717 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION Organization As used herein, the terms ĀTCIĀ, Āthe CompanyĀ, ĀweĀ, ĀourĀ or ĀusĀ refer to Transcontinental Realty Investors, Inc., a Nevada corporation, which was formed in 1984 The Company is headquartered in Dallas, Texas and its common stock trades on the New York Stock Exchange (ĀNYSEĀ) under the symbol (ĀTCIĀ). Subsidiaries of American Realty Investors, Inc (ĀARLĀ) own approximately 80.9% of the CompanyĀs common stock. Accordingly, TCIĀs financial results are consolidated with those of ARLĀs on Form 10-K and related Consolidated Financial Statements. ARLĀs common stock trades on the New York Stock Exchange under the symbol (ĀARLĀ). We have no employees. TCI is a ĀCĀ corporation for U.S. federal income tax purposes and files an annual consolidated tax return with ARL and its ultimate parent, May Realty Holdings, Inc. (ĀMRHIĀ). TCI owns approximately 81.1% of the common stock of Income Opportunity Realty Investors, Inc. (ĀIOTĀ). Accordingly IOTĀs financial results are consolidated with those of TCI and its subsidiaries. Shares of IOT are traded on the New York Stock Exchange Euronext (ĀNYSE MKTĀ) under the symbol (ĀIOTĀ). TCI invests in real estate through direct ownership, leases and partnerships and also invests in mortgage loans on real estate. Pillar Income Asset Management, Inc. (ĀPillarĀ) is the CompanyĀs external Advisor and Cash Manager. Although the Board of Directors is directly responsible for managing the affairs of TCI, and for setting the policies which guide it, the day-to-day operations of TCI are performed by Pillar, as the contractual Advisor, under the supervision of the Board. PillarĀs duties include, but are not limited to: locating, evaluating and recommending real estate and real estate-related investment opportunities, and arranging debt and equity financing for the Company with third party lenders and investors. Additionally, Pillar serves as a consultant to the Board with regard to their decisions in connection with TCIĀs business plan and investment policy. Pillar also serves as an Advisor and Cash Manager to ARL and IOT. Regis Realty Prime, LLC (ĀRegisĀ) manages our commercial properties and provides brokerage services for our real estate portfolio. TCI engages third-party companies to lease and manage its apartment properties. Properties We own or had interests in a total property portfolio of 54 income-producing properties as of September 30, 2015. The properties consisted of: Ā Nine commercial properties consisting of five office buildings, two retail centers, one industrial warehouse and a golf course, comprising in aggregate approximately 1.9 million rentable square feet; Ā 45 apartment communities totaling 7,511 units; excluding apartments being developed; and Ā 3,885 acres of developed and undeveloped land. We join with various third-party development companies to construct residential apartment communities. We are in the predevelopment process on several residential apartment communities that have not yet begun construction. At September 30, 2015, we had two apartment projects in development. The third-party developer typically holds a general partner, as well as a majority limited partner interest in a limited partnership formed for the purpose of building a single property, while we generally take a minority limited partner interest in the limited partnership. We may contribute land to the partnership as part of our equity contribution or we may contribute the necessary funds to the partnership to acquire the land. We are required to fund all necessary equity contributions while the third-party developer is responsible for obtaining construction financing, hiring a general contractor and for the overall management, successful completion and delivery of the project. We generally bear all the economic risks and rewards of ownership in these partnerships and therefore include these partnerships in our Consolidated Financial Statements. The third-party developer is paid a developer fee typically equal to a percentage of the construction costs. When the project reaches stabilized occupancy, we acquire the third-party developerĀs partnership interests in exchange for any remaining unpaid developer fees. Basis of Presentation The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (ĀU.S. GAAPĀ) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included. The results of operations for the nine months ended September 30, 2015, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year. The year-end Consolidated Balance Sheet at December 31, 2014, was derived from the audited Consolidated Financial Statements at that date, but does not include all of the information and disclosures required by U.S. GAAP for complete financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the CompanyĀs Annual Report on Form 10-K for the year ended December 31, 2014. Certain 2014 Consolidated Financial Statement amounts have been reclassified to conform to the 2015 presentation. Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of the Company, its subsidiaries, generally all of which are wholly-owned, and all entities in which we have a controlling interest. Arrangements that are not controlled through voting or similar rights are accounted for as a Variable Interest Entity (ĀVIEĀ), in accordance with the provisions and guidance of ASC Topic 810 ĀConsolidationĀ, whereby we have determined that we are a primary beneficiary of the VIE and meet certain criteria of a sole general partner or managing member as identified in accordance with Emerging Issues Task Force (ĀEITFĀ) Issue 04-5, InvestorĀs Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights (ĀEITF 04-5Ā). VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders as a group lack adequate decision making ability, the obligation to absorb expected losses or residual returns of the entity, or have voting rights that are not proportional to their economic interests. The primary beneficiary is generally the entity that provides financial support and bears a majority of the financial risks, authorizes certain capital transactions, or makes operating decisions that materially affect the entityĀs financial results. All significant intercompany balances and transactions have been eliminated in consolidation. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investorsĀ ability to control or significantly influence key decisions for the VIE; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current future fair values and performance of real estate held by these VIEs and general market conditions. For entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary, the entities are accounted for using the equity method of accounting. Accordingly, our share of the net earnings or losses of these entities is included in consolidated net income. Our investment in ARL is accounted for under the equity method. Real Estate, Depreciation and Impairment Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and improvements: 10-40 years; furniture, fixtures and equipment: 5-10 years). The Company continually evaluates the recoverability of the carrying value of its real estate assets using the methodology prescribed in ASC Topic 360 (ĀASC 360Ā), ĀProperty, Plant and EquipmentĀ. Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under ASC 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the assetĀs net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value. Real Estate Held for Sale We periodically classify real estate assets as Āheld for saleĀ. An asset is classified as held for sale after the approval of our Board of Directors, after an active program to sell the asset has commenced and if the sale is probable. One of the deciding factors in determining whether a sale is probable is whether the firm purchase commitment is obtained and whether the sale is probable within the year. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying Consolidated Balance Sheets. Upon a decision that the sale is no longer probable, the asset is classified as an operating asset and depreciation expense is reinstated. Prior to January 1, 2015, the operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying Consolidated Statements of Operations. Income from discontinued operations includes the revenues and expenses, including depreciation and interest expense, associated with the assets. Subsequent to January 1, 2015, Accounting Standards Update 2014-08, ĀReporting Discontinued Operations and Disclosures of Disposals of Components of an EntityĀ (ĀASU 2014-08Ā) substantially changed the criteria for determining whether a disposition qualifies for discontinued operations presentation. Adoption of this standard will result in substantially fewer of the Company's dispositions meeting the discontinued operations criteria. Cost Capitalization Costs related to planning, developing, leasing and constructing a property are capitalized and classified as Real Estate in the Consolidated Balance Sheets. We capitalize interest to qualifying assets under development based on average accumulated expenditures outstanding during the period. In capitalizing interest to qualifying assets, we first use the interest incurred on specific project debt, if any, and next use the weighted average interest rate of non-project specific debt. We capitalize interest, real estate taxes and certain operating expenses until building construction is substantially complete and the building is ready for its intended use, but no later than one year from the cessation of major construction activity. We capitalize leasing costs, which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable. We allocate these costs to individual tenant leases and amortize them over the related lease term. Fair Value Measurement We apply the guidance in ASC Topic 820, ĀFair Value Measurements and DisclosuresĀ, to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entityĀs own data. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows: Level 1 Ā Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets. Level 2 Ā Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 Ā Unobservable inputs that are significant to the fair value measurement. A financial instrumentĀs categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Deferred Costs Costs relating to the financing of properties are deferred and amortized over the life of the related financing agreement. Amortization is reflected as interest expense in the Consolidated Statements of Operations, with remaining terms ranging from 6 months to 40 years. Unamortized financing costs are written off when the financing agreement is extinguished before the maturity date. Related Parties We apply ASC Topic 805, ĀBusiness CombinationsĀ, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests, or affiliates of the entity. Newly Issued Accounting Pronouncements In April 2014, the Financial Accounting Standards Board (ĀFASBĀ) issued ASU 2014-08, ĀReporting Discontinued Operations and Disclosures of Disposals of Components of an EntityĀ, which changes the criteria for determining which disposals qualify to be accounted for as discontinued operations and modifies related reporting and disclosure requirements. Disposals representing a strategic shift in operations, such as a change in a major line of business, a major geographical area or major equity investment, that have a major effect on a companyĀs operations and financial results will be presented as discontinued operations. If the disposal does qualify as a discontinued operation under ASU 2014-08, the Company will be required to expand their disclosures about discontinued operations to provide more information on the assets, liabilities, income and expenses of the disposed component. The classification of operating results as discontinued operations are applied retroactively for all periods presented. The new standard was effective January 1, 2015. We adopted ASU 2014-08 as of January 1, 2015 and believe future sales of our individual operating properties will no longer qualify as discontinued operations. Adoption of this standard has resulted in substantially fewer of the Company's dispositions meeting the discontinued operations criteria. See Note 8 below. In May 2014, Accounting Standards Update (ĀASUĀ) No. 2014-09 (ĀASU 2014-09Ā), ĀRevenue from Contracts with Customers,Ā was issued. This new guidance established a new single comprehensive revenue recognition model and provides for enhanced disclosures. Under the new policy, the nature, timing and amount of revenue recognized for certain transactions could differ from those recognized under existing accounting guidance. This new standard does not affect revenue recognized under lease contracts. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this guidance has on its financial position and results of operations, if any. In April 2015, the FASB issued ASU 2015-03, ĀSimplifying the Presentation of Debt Issuance CostsĀ (ĀASU 2015-03Ā). ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Prior to the issuance of the standard, debt issuance costs were required to be presented in the balance sheet as an asset. The Company has adopted this standard effective June 30, 2015. The accompanying financials have been reclassified to reflect the adoption. |
REAL ESTATE ACTIVITY
REAL ESTATE ACTIVITY | 9 Months Ended |
Sep. 30, 2015 | |
Real Estate [Abstract] | |
REAL ESTATE ACTIVITY | NOTE 2. REAL ESTATE ACTIVITY Below is a summary of the real estate owned as of September 30, 2015 (dollars in thousands): Apartments $ 582,219 Apartments under construction 7,503 Commercial properties 204,417 Land held for development 144,885 Real estate subject to sales contract 10,777 Total real estate $ 949,801 Less accumulated depreciation (134,082 ) Total real estate, net of depreciation $ 815,719 The highlights of our significant real estate transactions for the nine months ended September 30, 2015, are listed below: Purchases For the nine months ended September 30, 2015, the Company acquired five income-producing apartment complexes from third parties in the states of Texas (2), Tennessee (1) and Florida (2), increasing the total number of units by 761, for a combined purchase price of $67.5 million. In addition, the Company acquired three income-producing apartment complexes from related parties in the states of Texas (2) and Kansas (1), increasing the total number of units by 698, for a combined purchase price of $11.6 million. The Company also purchased a commercial office building in Texas, comprised of 92,723 square feet, for $16.8 million. Sales For the nine months ended September 30, 2015, the Company sold approximately 198 acres of land located in Texas to independent third parties for a total sales price of $12 million. We recorded a total gain of $5.1 million from the sales. In addition, one income-producing apartment complex consisting of 200 units located in Ohio was foreclosed upon. The Company recorded a gain of $0.7 million related to the extinguishment of debt. As of September 30, 2015, the Company has 110 acres of land, at various locations, that were sold to related parties in multiple transactions. These transactions are treated as Āsubject to sales contractĀ on the Consolidated Balance Sheets. Due to the related party nature of the transactions TCI has deferred the recording of the sales in accordance with ASC 360-20. We continue to invest in the development of apartment projects. During the nine months ended September 30, 2015, we have expended $5.1 million related to the construction or predevelopment of various apartment complexes and capitalized $0.4 million of interest costs. |
NOTES AND INTEREST RECEIVABLE
NOTES AND INTEREST RECEIVABLE | 9 Months Ended |
Sep. 30, 2015 | |
Receivables [Abstract] | |
NOTES AND INTEREST RECEIVABLE | NOTE 3. NOTES AND INTEREST RECEIVABLE A portion of our assets are invested in mortgage notes receivable, principally secured by real estate. We may originate mortgage loans in conjunction with providing purchase money financing of property sales. Notes receivable are generally collateralized by real estate or interests in real estate and guarantees, unless noted otherwise, are so secured. Management intends to service and hold for investment the mortgage notes in our portfolio. A majority of the notes receivable provide for principal to be paid at maturity. Below is a summary of our notes receivable (dollars in thousands): Maturity Interest Borrower Date Rate Amount Collateral Performing loans: Foundation for Better Housing, Inc. (Overlook at Allensville) (1) 11/19 12.00% 2,472 Secured Foundation for Better Housing, Inc. (Vista Ridge) (1) 04/19 12.00% 3,923 Secured H198, LLC (Las Vegas Land) 01/20 12.00% 5,907 Secured Unified Housing Foundation, Inc. (Echo Station) (1) 09/17 12.00% 1,481 Secured Unified Housing Foundation, Inc. (Lakeshore Villas) (1) 12/32 12.00% 2,000 Secured Unified Housing Foundation, Inc. (Lakeshore Villas) (1) 12/32 12.00% 6,363 Secured Unified Housing Foundation, Inc. (Limestone Canyon) (1) 12/32 12.00% 4,663 Secured Unified Housing Foundation, Inc. (Limestone Canyon) (1) 12/32 12.00% 3,057 Secured Unified Housing Foundation, Inc. (Limestone Ranch) (1) 12/32 12.00% 6,000 Secured Unified Housing Foundation, Inc. (Limestone Ranch) (1) 12/32 12.00% 2,250 Secured Unified Housing Foundation, Inc. (Parkside Crossing) (1) 12/32 12.00% 1,936 Secured Unified Housing Foundation, Inc. (Sendero Ridge) (1) 12/32 12.00% 4,812 Secured Unified Housing Foundation, Inc. (Sendero Ridge) (1) 12/32 12.00% 5,174 Secured Unified Housing Foundation, Inc. (Timbers of Terrell) (1) 12/32 12.00% 1,323 Secured Unified Housing Foundation, Inc. (Tivoli) (1) 12/32 12.00% 7,966 Secured Unified Housing Foundation, Inc. (1) 06/17 12.00% 1,261 Unsecured Unified Housing Foundation, Inc. (1) 12/17 12.00% 1,207 Unsecured Other related party notes (1) Various Various 395 Various secured interests Other related party notes (1) Various Various 1,420 Various unsecured interests Other non-related party notes Various Various 496 Various secured interests Other non-related party notes Various Various 503 Various unsecured interests Accrued interest 3,017 Total Performing $ 67,626 Allowance for doubtful accounts (1,825 ) Total $ 65,801 (1) Junior Mortgage Loans At September 30, 2015, we had junior mortgage loans and accrued interest receivable from related parties, net of allowances, totaling $58.6 million. We recognized interest income of $6.4 million related to these notes receivables. The Company has various notes receivable from Unified Housing Foundation, Inc. (ĀUHFĀ) and Foundation for Better Housing, Inc. (ĀFBHĀ). UHF and FBH are determined to be related parties due to our reliance upon the performance of the collateral secured under the notes receivable. Payments are due from surplus cash flow of operations of the properties. A sale or refinance of any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes for the specific borrower. These notes are cross-collateralized for the specific borrower, but to the extent cash is received from a specific UHF or FBH property, it is applied first against any outstanding interest for the related-property note. The allowance on the UHF notes was a purchase allowance that was netted against the notes when acquired. |
INVESTMENT IN UNCONSOLIDATED JO
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND INVESTEES | 9 Months Ended |
Sep. 30, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND INVESTEES | NOTE 4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND INVESTEES Investments in unconsolidated joint ventures and other investees in which we have a 20% to 50% interest or otherwise exercise significant influence, are carried at cost and adjusted for the CompanyĀs proportionate share of their undistributed earnings or losses under the equity method of accounting. ARL is our parent company and is considered as an unconsolidated joint venture. Investments in unconsolidated joint ventures and investees consist of the following: Percentage ownership as of September 30, 2015 September 30, 2014 American Realty Investors, Inc. (1) 0.90% 1.00% _____________________ (1) Unconsolidated investment in parent company owning 140,000 shares of ARL Common Stock Our interest in the common stock of ARL in the amount of 1.00% is accounted for under the equity method because we exercise significant influence over the operations and financial activities. Accordingly, the investments are carried at cost, adjusted for the CompanyĀs proportionate share of earnings or losses. The following is a summary of the financial position and results of operations from our unconsolidated parent (dollars in thousands): As of September 30, 2015 2014 Real estate, net of accumulated depreciation $ 14,255 $ 15,087 Notes receivable 49,614 67,419 Other assets 127,300 128,211 Notes payable (27,315 ) (51,661 ) Other liabilities (94,479 ) (92,664 ) Shareholders' equity (69,375 ) (66,393 ) For the Nine Months Ended September 30, 2015 2014 Rents and interest and other income $ 10,121 $ 9,785 Depreciation (159 ) (204 ) Operating expenses (3,727 ) (4,304 ) Gain on land sales 2,737 Ā Interest expense (4,502 ) (5,323 ) Income (loss) from continuing operations 4,470 (46 ) Income (loss) from discontinued operations 1 Ā Net income (loss) $ 4,471 $ (46 ) Company's proportionate share of income (loss) $ 40 $ (0.46 ) |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTE 5. NOTES PAYABLE Below is a summary of our notes and interest payable as of September 30, 2015 (dollars in thousands): Notes Payable Accrued Interest Total Debt Apartments $ 473,647 $ 1,466 $ 475,113 Commercial 115,965 492 116,457 Land 54,934 117 55,051 Real estate subject to sales contract 5,757 594 6,351 Mezzanine financing 123,400 Ā 123,400 Other 6,417 Ā 6,417 Total $ 780,120 $ 2,669 $ 782,789 Unamortized deferred borrowing costs (19,835 ) Ā (19,835 ) Total $ 760,285 $ 2,669 $ 762,954 The segment labeled as ĀOtherĀ consists of unsecured or stock-secured notes payable. With respect to the additional notes payable due to the acquisition of properties or refinancing of existing mortgages, a summary of some of the more significant transactions is discussed below: On January 28, 2015, the Company modified the existing mortgage on a 200-unit complex located in Texas, to reduce the interest rate. The modified note accrues interest at 3.24% and payments of interest and principal are due monthly, maturing August 1, 2050. On January 28, 2015, the Company modified the existing mortgage on a 240-unit complex located in Mississippi, to reduce the interest rate. The modified note accrues interest at 3.24% and payments of interest and principal are due monthly, maturing December 1, 2051 . On April 23, 2015, the Company refinanced the existing mortgage on a 250-unit complex located in Arkansas, for a new mortgage of $21.0 million. We paid off the existing mortgage of $15.7 million and $0.6 million in closing costs. The note accrues interest at 2.74% and payments of interest and principal are due monthly, maturing May 1, 2050. On April 29, 2015, the Company refinanced the existing mortgage on a 240-unit complex located in Texas, for a new mortgage of $15.4 million. We paid $0.7 million in closing costs. The note accrues interest at 3.28% and payments of interest and principal are due monthly, maturing March 31, 2051. On May 28, 2015, the Company secured additional financing of $120.0 million from an independent third party. At closing $84.4 million was advanced to the Company. The financing can be used for general corporate purposes, acquisition of multi-family apartment complexes and to reduce debt. The note has a term of five years at an interest rate of 30 day Libor plus 10.75%. The note is interest only, payable monthly, with the principal due at the end of the five years. The loan is secured by various equity interests in certain residential apartments. The note contains customary restrictions, representations, covenants, corporate and officer guarantees, events of default and require the Company to meet certain financial covenants. The Company believes it is in compliance with these financial covenants at September 30, 2015. Simultaneous with the closing of the above financing, the Company amended its existing financing of $40.0 million from an independent third party. The note has a term of five years at an interest rate of 12.0%. The note is interest only for the first year with quarterly principal payments due of $0.5 million starting April 1, 2015. As of September 30, 2015, the outstanding balance on the loan was $39.0 million. The loan is secured by various equity interests in residential apartments and can be prepaid at a penalty rate of 4% for year 1 with the penalty declining by 1% each year thereafter. The note contains customary restrictions, representations, covenants, corporate and officer guarantees, events of default and require the Company to meet certain financial covenants. The Company believes it is in compliance with these financial covenants at September 30, 2015. There are various land mortgages, secured by the property, that are in the process of a modification or extension to the original note due to expiration of the loan. We are in constant contact with these lenders, working together in order to modify the terms of these loans and we anticipate a timely resolution that is similar to the existing agreement or subsequent modification. In conjunction with the development of various apartment projects and other developments, we drew down $1.7 million in construction loans during the nine months ended September 30, 2015. The properties that we have sold to a related party and have deferred the recognition of the sale are treated as Āsubject to sales contractĀ on the Consolidated Balance Sheets. These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and may or may not be transferred back to the seller upon resolution. These properties have mortgages that are secured by the property and many have corporate guarantees. According to the loan documents, the maker is currently in default on these mortgages primarily due to lack of payment and is actively involved in discussions with every lender in order to settle or cure the default situation. We have reviewed each asset and taken impairment to the extent we feel the value of the property was less than our current basis. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS AND FEES | NOTE 6. RELATED PARTY TRANSACTIONS The following table reconciles the beginning and ending balances of accounts receivable from and (accounts payable) to related parties as of September 30, 2015 (dollars in thousands): Pillar ARL Total Related party receivable, December 31, 2014 $ Ā $ 58,404 $ 58,404 Cash transfers 52,225 Ā 52,225 Advisory fees (6,558 ) Ā (6,558 ) Net income fee (142 ) Ā (142 ) Fees and commissions (3,654 ) Ā (3,654 ) Cost reimbursements (2,076 ) Ā (2,076 ) Interest income Ā 2,300 2,300 Expenses paid by advisor (7,867 ) Ā (7,867 ) Financing (mortgage payments) 2,968 Ā 2,968 Sales/purchases transactions 5,431 Ā 5,431 Purchase of obligations (40,327 ) 40,327 Ā Related party receivable, September 30, 2015 $ Ā $ 101,031 $ 101,031 During the ordinary course of business, we have related party transactions that include, but are not limited to, rental income, interest income, interest expense, general and administrative costs, commissions, management fees, and property expenses. In addition, we have assets and liabilities that include related party amounts. The related party amounts included in assets and liabilities, and the related party revenues and expenses received/paid are shown on the face of the Consolidated Financial Statements. |
OPERATING SEGMENTS
OPERATING SEGMENTS | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
OPERATING SEGMENTS | NOTE 7. OPERATING SEGMENTS Our segments are based on our method of internal reporting, which classifies our operations by property type. Our property types are grouped into commercial properties, apartments, land and other operating segments. Significant differences between and among the accounting policies of the operating segments as compared to the Consolidated Financial Statements principally involve the calculation and allocation of administrative and other expenses. Management evaluates the performance of each of the operating segments and allocates resources to them based on their net operating income and cash flow. Items of income that are not reflected in the segments are interest, other income, gain on debt extinguishment, gain on condemnation award, equity in partnerships, and gains on sale of real estate. Expenses that are not reflected in the segments are provision for losses, advisory fees, net income and incentive fees, general and administrative, non-controlling interests and net loss from discontinued operations before gains on sale of real estate. The segment labeled as āOtherā consists of revenue and operating expenses related to the notes receivable and corporate debt. Presented below is our reportable segmentsā operating income for the three and nine months ended September 30, 2015 and 2014, including segment assets and expenditures (dollars in thousands): For the Three Months Ended September 30, 2015 Commercial Apartments Land Other Total Rental and other property revenues $ 7,820 $ 19,672 $ ā $ 47 $ 27,539 Property operating expenses (4,202 ) (9,374 ) (349 ) (270 ) (14,195 ) Depreciation (2,326 ) (4,229 ) ā ā (6,555 ) Mortgage and loan interest (1,865 ) (6,299 ) (1,242 ) (4,144 ) (13,550 ) Interest income ā ā ā 2,505 2,505 Gain on sale of income producing properties ā 735 ā ā 735 Gain on land sales ā ā 997 ā 997 Segment operating income (loss) $ (573 ) $ 505 $ (594 ) $ (1,862 ) $ (2,524 ) Capital expenditures 1,404 (43 ) 1,461 ā 2,822 Real estate assets 159,976 501,932 153,811 ā 815,719 Property Sales Sales price $ ā $ 11,129 $ 2,851 $ ā $ 13,980 Cost of sale ā (10,394 ) (1,854 ) ā (12,248 ) Gain on sale $ ā $ 735 $ 997 $ ā $ 1,732 For the Three Months Ended September 30, 2014 Commercial Apartments Land Other Total Rental and other property revenues $ 4,268 $ 14,187 $ ā $ 11 $ 18,466 Property operating expenses (2,680 ) (6,856 ) (534 ) (7 ) (10,077 ) Depreciation (1,924 ) (2,491 ) ā ā (4,415 ) Mortgage and loan interest (1,245 ) (5,221 ) (1,057 ) (1,564 ) (9,087 ) Interest income ā ā ā 3,064 3,064 Gain on land sales ā ā 40 ā 40 Segment operating income (loss) $ (1,581 ) $ (381 ) $ (1,551 ) $ 1,504 $ (2,009 ) Capital expenditures 485 38 1,435 ā 1,958 Real estate assets 127,791 346,656 155,088 ā 629,535 Property Sales Sales price $ 2,582 $ ā $ 4,269 $ ā $ 6,851 Cost of sale (812 ) ā (4,229 ) ā (5,041 ) Gain on sale $ 1,770 $ ā $ 40 $ ā $ 1,810 The table below reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations For the Three Months Ended September 30, 2015 2014 Segment operating income (loss) $ (2,524 ) $ (2,009 ) Other non-segment items of income (expense) General and administrative (1,146 ) (1,131 ) Net income fee to related party (51 ) 186 Advisory fee to related party (2,666 ) (1,826 ) Other income (77 ) 344 Earnings (loss) from unconsolidated joint ventures and investees (4 ) 10 Litigation settlement (85 ) (86 ) Income tax benefit 16 786 Net income (loss) from continuing operations $ (6,537 ) $ (3,726 ) The table below reconciles the segment information to the corresponding amounts in the Consolidated Balance Sheets (dollars in thousands): As of September 30, 2015 2014 Segment assets $ 815,719 $ 629,535 Investments in real estate partnerships 2,178 1,503 Notes and interest receivable 65,801 80,788 Other assets 192,879 170,853 Total assets $ 1,076,577 $ 882,679 For the Nine Months Ended September 30, 2015 Commercial Apartments Land Other Total Rental and other property revenues $ 21,284 $ 52,215 $ ā $ 100 $ 73,599 Property operating expenses (11,350 ) (23,725 ) (659 ) (253 ) (35,987 ) Depreciation (6,417 ) (9,888 ) ā ā (16,305 ) Mortgage and loan interest (5,110 ) (15,664 ) (3,439 ) (7,740 ) (31,953 ) Interest income ā ā ā 9,260 9,260 Gain on sale of income producing properties ā 735 ā ā 735 Gain on land sales ā ā 5,124 ā 5,124 Segment operating income (loss) $ (1,593 ) $ 3,673 $ 1,026 $ 1,367 $ 4,473 Capital expenditures 7,536 1,712 2,772 ā 12,020 Real estate assets 159,976 501,932 153,811 ā 815,719 Property Sales Sales price $ ā $ 11,129 $ 11,987 $ ā $ 23,116 Cost of sale ā (10,394 ) (6,863 ) ā (17,257 ) Gain on sale $ ā $ 735 $ 5,124 $ ā $ 5,859 For the Nine Months Ended September 30, 2014 Commercial Apartments Land Other Total Rental and other property revenues $ 13,143 $ 42,105 $ ā $ 33 $ 55,281 Property operating expenses (8,526 ) (19,175 ) (927 ) (12 ) (28,640 ) Depreciation (5,448 ) (7,519 ) ā ā (12,967 ) Mortgage and loan interest (4,219 ) (15,171 ) (3,545 ) (3,020 ) (25,955 ) Interest income ā ā ā 9,181 9,181 Gain on land sales ā ā 634 ā 634 Segment operating income (loss) $ (5,050 ) $ 240 $ (3,838 ) $ 6,182 $ (2,466 ) Capital expenditures 3,474 137 1,586 ā 5,197 Real estate assets 127,791 346,656 155,088 ā 629,535 Property Sales Sales price $ 19,182 $ 23,131 $ 4,986 $ ā $ 47,299 Cost of sale (10,409 ) (17,078 ) (4,352 ) ā (31,839 ) Gain on sale $ 8,773 $ 6,053 $ 634 $ ā $ 15,460 The tables below reconcile the segment information to the corresponding amounts in the Consolidated Statements of Operations: For the Nine Months Ended September 30, 2015 2014 Segment operating income (loss) $ 4,473 $ (2,466 ) Other non-segment items of income (expense) General and administrative (4,191 ) (5,417 ) Net income fee to related party (142 ) (514 ) Advisory fee to related party (6,561 ) (5,490 ) Other income 4 741 Earnings (loss) from unconsolidated joint ventures and investees 39 (5 ) Litigation settlement (203 ) 3,666 Income tax benefit 107 5,030 Net income (loss) from continuing operations $ (6,474 ) $ (4,455 ) The tables below reconcile the segment information to the corresponding amounts in the Consolidated Balance Sheets: As of September 30, 2015 2014 Segment assets $ 815,719 $ 629,535 Investments in real estate partnerships 2,178 1,503 Notes and interest receivable 65,801 80,788 Other assets 192,879 170,853 Total assets $ 1,076,577 $ 882,679 |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Sep. 30, 2015 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | NOTE 8. DISCONTINUED OPERATIONS Prior to January 1, 2015, we applied the provisions of ASC 360, āProperty, Plant and Equipmentā, which required that long-lived assets that are to be disposed of by sale be measured at the lesser of (1) book value or (2) fair value less cost to sell. In addition, it requires that one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. Effective January 1, 2015, the Company adopted the provisions of ASU 2014-08, āReporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ā Disposals representing a strategic shift in operations that have a major effect on a companyās operations and financial results will be presented as discontinued operations. Companies will be required to expand their disclosures about discontinued operations to provide more information on the assets, liabilities, income and expenses of the discontinued operations. The new standard was effective January 1, 2015. Adoption of this standard will result in substantially fewer of the Company's dispositions meeting the discontinued operations criteria. There were no sales of income-producing properties in the first nine months of 2015. In 2014, we sold two apartment complexes (both in Texas), and two commercial properties (one in Louisiana and one in Alaska). The gain on sale of the properties is also included in discontinued operations for those years. The following table summarizes revenue and expense information for the properties sold and held for sale (dollars in thousands): For the Three Months Ended For the Nine Months Ended 2015 2014 2015 2014 Revenues: Rental and other property revenues $ ā $ 1,416 $ 15 $ 5,328 ā 1,416 15 5,328 Expenses: Property operating expenses 2 326 (346 ) 2,201 Depreciation ā 155 ā 664 General and administrative (4 ) 65 99 378 Total operating expenses (2 ) 546 (247 ) 3,243 Other income (expense): Other income 45 (36 ) 45 (522 ) Mortgage and loan interest ā (357 ) (1 ) (1,767 ) Litigation settlement ā ā ā (250 ) Total other income (expenses) 45 (393 ) 44 (2,539 ) Gain (loss) from discontinued operations before gain on sale of real estate and tax 47 477 306 (454 ) Gain on sale of real estate from discontinued operations ā 1,770 ā 14,826 Income tax benefit (expense) (16 ) (786 ) (107 ) (5,030 ) Income from discontinued operations $ 31 $ 1,461 $ 199 $ 9,342 |
COMMITMENTS AND CONTINGENCIES A
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY | NOTE 9. COMMITMENTS AND CONTINGENCIES AND LIQUIDITY Dynex Capital, Inc. On July 20, 2015, the 68 th An original trial in 2004, which also included Dynex Capital, Inc. as a defendant, resulted in a jury awarding damages in favor of Basic for Ālost opportunity,Ā as well as damages in favor of ART and in favor of TCI and its subsidiaries for Āincreased costsĀ and Ālost opportunity.Ā The original Trial Court judge ignored the juryĀs findings, however, and entered a ĀJudgment Notwithstanding the VerdictĀ (ĀJNOVĀ) in favor of the Dynex entities (the judge held the Plaintiffs were not entitled to any damages from the Dynex entities). After numerous appeals by all parties, Dynex Capital, Inc. was ultimately dismissed from the case and the remaining claims against Dynex Commercial were remanded to the Trial Court for a new judgment consistent with the juryĀs findings. The Court entered the new Final Judgment against Dynex Commercial, Inc. on July 20, 2015. The Final Judgment entered against Dynex Commercial, Inc. on July 20, 2015 awarded Basic $.256 million in damages, plus pre-judgment interest of $.192 million for a total amount of $.448 million. The Judgment awarded ART $14.2 million in damages, plus pre-judgment interest of $10.6 million for a total amount of $24.8 million. The Judgment awarded TCI $11.1 million, plus pre-judgment interest of $8.4 million for a total amount of $19.5 million. The Judgment also awarded Basic, ART, and TCI post-judgment interest at the rate of 5% per annum from April 25, 2014 until the date their respective damages are paid. Lastly, the Judgement awarded Basic, ART, and TCI $1.6 million collectively in attorneysĀ fees from Dynex Commercial, Inc. The Company is reviewing the Final Judgment with counsel to determine the appropriate steps moving forward now that they have obtained this Final Judgment against Dynex Commercial, Inc. ART and ART Midwest, Inc. In August 2014, David M. Clapper and two entities related to Mr. Clapper (all, collectively, the ĀClapper PartiesĀ) filed a complaint in the U. S. District Court against the Company, its directors and certain of its officers alleging purported transactions to the detriment of the Clapper Parties and others by transferring assets, cash and diverting property. Management of the Company believes that there is no basis for this action against the Company and its officers and directors and intends to vigorously defend itself. The August 2014 complaint does not allege any facts relating to the Company, except that the named directors and officers are directors and officers of the Company and that the Company is a Nevada corporation, with its headquarters/principal place of business in Dallas, Texas. The case arises over other litigation, commenced in 1999, among the Clapper Parties and American Realty Trust, Inc. (ĀARTĀ) and its former subsidiary, ART Midwest, Inc., originally arising out of a transaction in 1998, in which ART and the Clapper Parties were to form a partnership to own eight residential apartment complexes. Over the ensuing years, a number of rulings, both for and against ART and ART Midwest, Inc., were issued, resulting in a ruling in October 2011, under which the Clapper Parties were awarded an initial judgment for approximately $74 million, including $26 million in actual damages and $48 million in interest. The 2011 ruling was only against ART and ART Midwest, Inc., but no other entity. During February 2014, the Court of Appeals affirmed a portion of the judgment in favor of the Clapper Parties but also ruled that a double counting of a significant portion of the damages had occurred and remanded the case back to the trial court to recalculate the damage award, as well as pre- and post-judgment interest thereon. ART was also a significant owner of a partnership interest in the partnership that was awarded the initial damages in the matter. ART and ART Midwest, Inc. are not and have never been subsidiaries of the Company. Management believes that the Company has no liability for any ultimate judgment in the proceeding involving the Clapper Parties. TCI is also involved in various other lawsuits arising in the ordinary course of business. Management is of the opinion that the outcome of these lawsuits will have no material impact on TCIĀs financial condition, results of operations or liquidity. Liquidity. Partnership Buyouts Litigation. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | NOTE 10. EARNINGS PER SHARE Earnings Per Share (ĀEPSĀ) have been computed pursuant to the provisions of ASC Topic 260 ĀEarnings Per ShareĀ. The computation of basic EPS is calculated by dividing income available to common shareholders from continuing operations, adjusted for preferred dividends, by the weighted-average number of common shares outstanding during the period. Shares issued during the period shall be weighted for the portion of the period that they were outstanding. Prior to July 9, 2014, we had 30,000 shares of Series C cumulative convertible preferred stock issued and outstanding. These 30,000 shares were owned by Realty Advisors, Inc. (ĀRAIĀ), a related party, and had accrued dividends unpaid of $0.9 million. The stock had a liquidation preference of $100 per share and could be converted into common stock at 90% of the daily average closing price of the common stock for the prior five trading days. On July 9, 2014, RAI converted all 30,000 shares into the requisite number of shares of common stock. The conversion resulted in the issuance of 304,298 new shares of common stock. The effects of the Series C Cumulative Convertible Preferred Stock are no longer included in the dilutive earnings per share calculation for the current period, but are considered in the calculation for the prior period if applying the if-converted method is dilutive. Prior to January 1, 2015, the Company had 5,000 shares of stock options outstanding. These options expired unexercised January 1, 2015. The options are no longer included in the dilutive earnings per share calculation for the current period, but are considered in the computation for the prior periods if applying the Ātreasury stockĀ method is dilutive. In the prior period, the preferred stock and stock options were anti-dilutive and thus included in the EPS calculation. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 11. SUBSEQUENT EVENTS The date to which events occurring after September 30, 2015, the date of the most recent balance sheet, have been evaluated for possible adjustment to the Consolidated Financial Statements or disclosure is November 13, 2015, which is the date on which the Consolidated Financial Statements were available to be issued. The Company has determined that there are no subsequent events to be reported. |
ORGANIZATION AND BASIS OF PRE21
ORGANIZATION AND BASIS OF PRESENTATION ( Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization As used herein, the terms ĀTCIĀ, Āthe CompanyĀ, ĀweĀ, ĀourĀ or ĀusĀ refer to Transcontinental Realty Investors, Inc., a Nevada corporation, which was formed in 1984 The Company is headquartered in Dallas, Texas and its common stock trades on the New York Stock Exchange (ĀNYSEĀ) under the symbol (ĀTCIĀ). Subsidiaries of American Realty Investors, Inc (ĀARLĀ) own approximately 80.9% of the CompanyĀs common stock. Accordingly, TCIĀs financial results are consolidated with those of ARLĀs on Form 10-K and related Consolidated Financial Statements. ARLĀs common stock trades on the New York Stock Exchange under the symbol (ĀARLĀ). We have no employees. TCI is a ĀCĀ corporation for U.S. federal income tax purposes and files an annual consolidated tax return with ARL and its ultimate parent, May Realty Holdings, Inc. (ĀMRHIĀ). TCI owns approximately 81.1% of the common stock of Income Opportunity Realty Investors, Inc. (ĀIOTĀ). Accordingly IOTĀs financial results are consolidated with those of TCI and its subsidiaries. Shares of IOT are traded on the New York Stock Exchange Euronext (ĀNYSE MKTĀ) under the symbol (ĀIOTĀ). TCI invests in real estate through direct ownership, leases and partnerships and also invests in mortgage loans on real estate. Pillar Income Asset Management, Inc. (ĀPillarĀ) is the CompanyĀs external Advisor and Cash Manager. Although the Board of Directors is directly responsible for managing the affairs of TCI, and for setting the policies which guide it, the day-to-day operations of TCI are performed by Pillar, as the contractual Advisor, under the supervision of the Board. PillarĀs duties include, but are not limited to: locating, evaluating and recommending real estate and real estate-related investment opportunities, and arranging debt and equity financing for the Company with third party lenders and investors. Additionally, Pillar serves as a consultant to the Board with regard to their decisions in connection with TCIĀs business plan and investment policy. Pillar also serves as an Advisor and Cash Manager to ARL and IOT. Regis Realty Prime, LLC (ĀRegisĀ) manages our commercial properties and provides brokerage services for our real estate portfolio. TCI engages third-party companies to lease and manage its apartment properties. |
Properties | Properties We own or had interests in a total property portfolio of 54 income-producing properties as of September 30, 2015. The properties consisted of: Ā Nine commercial properties consisting of five office buildings, two retail centers, one industrial warehouse and a golf course, comprising in aggregate approximately 1.9 million rentable square feet; Ā 45 apartment communities totaling 7,511 units; excluding apartments being developed; and Ā 3,885 acres of developed and undeveloped land. We join with various third-party development companies to construct residential apartment communities. We are in the predevelopment process on several residential apartment communities that have not yet begun construction. At September 30, 2015, we had two apartment projects in development. The third-party developer typically holds a general partner, as well as a majority limited partner interest in a limited partnership formed for the purpose of building a single property, while we generally take a minority limited partner interest in the limited partnership. We may contribute land to the partnership as part of our equity contribution or we may contribute the necessary funds to the partnership to acquire the land. We are required to fund all necessary equity contributions while the third-party developer is responsible for obtaining construction financing, hiring a general contractor and for the overall management, successful completion and delivery of the project. We generally bear all the economic risks and rewards of ownership in these partnerships and therefore include these partnerships in our Consolidated Financial Statements. The third-party developer is paid a developer fee typically equal to a percentage of the construction costs. When the project reaches stabilized occupancy, we acquire the third-party developerĀs partnership interests in exchange for any remaining unpaid developer fees. |
Basis of Presentation | Basis of Presentation The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (ĀU.S. GAAPĀ) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included. The results of operations for the nine months ended September 30, 2015, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year. The year-end Consolidated Balance Sheet at December 31, 2014, was derived from the audited Consolidated Financial Statements at that date, but does not include all of the information and disclosures required by U.S. GAAP for complete financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the CompanyĀs Annual Report on Form 10-K for the year ended December 31, 2014. Certain 2014 Consolidated Financial Statement amounts have been reclassified to conform to the 2015 presentation. |
Principles of Consolidation | Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of the Company, its subsidiaries, generally all of which are wholly-owned, and all entities in which we have a controlling interest. Arrangements that are not controlled through voting or similar rights are accounted for as a Variable Interest Entity (ĀVIEĀ), in accordance with the provisions and guidance of ASC Topic 810 ĀConsolidationĀ, whereby we have determined that we are a primary beneficiary of the VIE and meet certain criteria of a sole general partner or managing member as identified in accordance with Emerging Issues Task Force (ĀEITFĀ) Issue 04-5, InvestorĀs Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights (ĀEITF 04-5Ā). VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders as a group lack adequate decision making ability, the obligation to absorb expected losses or residual returns of the entity, or have voting rights that are not proportional to their economic interests. The primary beneficiary is generally the entity that provides financial support and bears a majority of the financial risks, authorizes certain capital transactions, or makes operating decisions that materially affect the entityĀs financial results. All significant intercompany balances and transactions have been eliminated in consolidation. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investorsĀ ability to control or significantly influence key decisions for the VIE; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current future fair values and performance of real estate held by these VIEs and general market conditions. For entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary, the entities are accounted for using the equity method of accounting. Accordingly, our share of the net earnings or losses of these entities is included in consolidated net income. Our investment in ARL is accounted for under the equity method. |
Real Estate, Depreciation and Impairment | Real Estate, Depreciation and Impairment Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and improvements: 10-40 years; furniture, fixtures and equipment: 5-10 years). The Company continually evaluates the recoverability of the carrying value of its real estate assets using the methodology prescribed in ASC Topic 360 (ĀASC 360Ā), ĀProperty, Plant and EquipmentĀ. Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under ASC 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the assetĀs net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value. |
Real Estate Held For Sale | Real Estate Held for Sale We periodically classify real estate assets as Āheld for saleĀ. An asset is classified as held for sale after the approval of our Board of Directors, after an active program to sell the asset has commenced and if the sale is probable. One of the deciding factors in determining whether a sale is probable is whether the firm purchase commitment is obtained and whether the sale is probable within the year. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying Consolidated Balance Sheets. Upon a decision that the sale is no longer probable, the asset is classified as an operating asset and depreciation expense is reinstated. Prior to January 1, 2015, the operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying Consolidated Statements of Operations. Income from discontinued operations includes the revenues and expenses, including depreciation and interest expense, associated with the assets. Subsequent to January 1, 2015, Accounting Standards Update 2014-08, ĀReporting Discontinued Operations and Disclosures of Disposals of Components of an EntityĀ (ĀASU 2014-08Ā) substantially changed the criteria for determining whether a disposition qualifies for discontinued operations presentation. Adoption of this standard will result in substantially fewer of the Company's dispositions meeting the discontinued operations criteria. |
Cost Capitalization | Cost Capitalization Costs related to planning, developing, leasing and constructing a property are capitalized and classified as Real Estate in the Consolidated Balance Sheets. We capitalize interest to qualifying assets under development based on average accumulated expenditures outstanding during the period. In capitalizing interest to qualifying assets, we first use the interest incurred on specific project debt, if any, and next use the weighted average interest rate of non-project specific debt. We capitalize interest, real estate taxes and certain operating expenses until building construction is substantially complete and the building is ready for its intended use, but no later than one year from the cessation of major construction activity. We capitalize leasing costs, which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable. We allocate these costs to individual tenant leases and amortize them over the related lease term. |
Fair Value Measurement | Fair Value Measurement We apply the guidance in ASC Topic 820, ĀFair Value Measurements and DisclosuresĀ, to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entityĀs own data. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows: Level 1 Ā Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets. Level 2 Ā Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 Ā Unobservable inputs that are significant to the fair value measurement. A financial instrumentĀs categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. |
Deferred Costs | Deferred Costs Costs relating to the financing of properties are deferred and amortized over the life of the related financing agreement. Amortization is reflected as interest expense in the Consolidated Statements of Operations, with remaining terms ranging from 6 months to 40 years. Unamortized financing costs are written off when the financing agreement is extinguished before the maturity date. |
Related Parties | Related Parties We apply ASC Topic 805, ĀBusiness CombinationsĀ, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests, or affiliates of the entity. |
Newly Issued Accounting Standards | Newly Issued Accounting Pronouncements In April 2014, the Financial Accounting Standards Board (ĀFASBĀ) issued ASU 2014-08, ĀReporting Discontinued Operations and Disclosures of Disposals of Components of an EntityĀ, which changes the criteria for determining which disposals qualify to be accounted for as discontinued operations and modifies related reporting and disclosure requirements. Disposals representing a strategic shift in operations, such as a change in a major line of business, a major geographical area or major equity investment, that have a major effect on a companyĀs operations and financial results will be presented as discontinued operations. If the disposal does qualify as a discontinued operation under ASU 2014-08, the Company will be required to expand their disclosures about discontinued operations to provide more information on the assets, liabilities, income and expenses of the disposed component. The classification of operating results as discontinued operations are applied retroactively for all periods presented. The new standard was effective January 1, 2015. We adopted ASU 2014-08 as of January 1, 2015 and believe future sales of our individual operating properties will no longer qualify as discontinued operations. Adoption of this standard has resulted in substantially fewer of the Company's dispositions meeting the discontinued operations criteria. See Note 8 below. In May 2014, Accounting Standards Update (ĀASUĀ) No. 2014-09 (ĀASU 2014-09Ā), ĀRevenue from Contracts with Customers,Ā was issued. This new guidance established a new single comprehensive revenue recognition model and provides for enhanced disclosures. Under the new policy, the nature, timing and amount of revenue recognized for certain transactions could differ from those recognized under existing accounting guidance. This new standard does not affect revenue recognized under lease contracts. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this guidance has on its financial position and results of operations, if any. In April 2015, the FASB issued ASU 2015-03, ĀSimplifying the Presentation of Debt Issuance CostsĀ (ĀASU 2015-03Ā). ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Prior to the issuance of the standard, debt issuance costs were required to be presented in the balance sheet as an asset. The Company has adopted this standard effective June 30, 2015. The accompanying financials have been reclassified to reflect the adoption. |
REAL ESTATE ACTIVITY (Tables)
REAL ESTATE ACTIVITY (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Real Estate [Abstract] | |
Schedule of the real estate owned | Below is a summary of the real estate owned as of September 30, 2015 (dollars in thousands): Apartments $ 582,219 Apartments under construction 7,503 Commercial properties 204,417 Land held for development 144,885 Real estate subject to sales contract 10,777 Total real estate $ 949,801 Less accumulated depreciation (134,082 ) Total real estate, net of depreciation $ 815,719 |
NOTES AND INTEREST RECEIVABLE (
NOTES AND INTEREST RECEIVABLE (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Receivables [Abstract] | |
Schedule of notes and interest receivable | Below is a summary of our notes receivable (dollars in thousands): Maturity Interest Borrower Date Rate Amount Collateral Performing loans: Foundation for Better Housing, Inc. (Overlook at Allensville) (1) 11/19 12.00% 2,472 Secured Foundation for Better Housing, Inc. (Vista Ridge) (1) 04/19 12.00% 3,923 Secured H198, LLC (Las Vegas Land) 01/20 12.00% 5,907 Secured Unified Housing Foundation, Inc. (Echo Station) (1) 09/17 12.00% 1,481 Secured Unified Housing Foundation, Inc. (Lakeshore Villas) (1) 12/32 12.00% 2,000 Secured Unified Housing Foundation, Inc. (Lakeshore Villas) (1) 12/32 12.00% 6,363 Secured Unified Housing Foundation, Inc. (Limestone Canyon) (1) 12/32 12.00% 4,663 Secured Unified Housing Foundation, Inc. (Limestone Canyon) (1) 12/32 12.00% 3,057 Secured Unified Housing Foundation, Inc. (Limestone Ranch) (1) 12/32 12.00% 6,000 Secured Unified Housing Foundation, Inc. (Limestone Ranch) (1) 12/32 12.00% 2,250 Secured Unified Housing Foundation, Inc. (Parkside Crossing) (1) 12/32 12.00% 1,936 Secured Unified Housing Foundation, Inc. (Sendero Ridge) (1) 12/32 12.00% 4,812 Secured Unified Housing Foundation, Inc. (Sendero Ridge) (1) 12/32 12.00% 5,174 Secured Unified Housing Foundation, Inc. (Timbers of Terrell) (1) 12/32 12.00% 1,323 Secured Unified Housing Foundation, Inc. (Tivoli) (1) 12/32 12.00% 7,966 Secured Unified Housing Foundation, Inc. (1) 06/17 12.00% 1,261 Unsecured Unified Housing Foundation, Inc. (1) 12/17 12.00% 1,207 Unsecured Other related party notes (1) Various Various 395 Various secured interests Other related party notes (1) Various Various 1,420 Various unsecured interests Other non-related party notes Various Various 496 Various secured interests Other non-related party notes Various Various 503 Various unsecured interests Accrued interest 3,017 Total Performing $ 67,626 Allowance for doubtful accounts (1,825 ) Total $ 65,801 (1) |
INVESTMENT IN UNCONSOLIDATED 24
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND INVESTEES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Schedule of investments accounted for via the equity method | Investments in unconsolidated joint ventures and investees consist of the following: Percentage ownership as of September 30, 2015 September 30, 2014 American Realty Investors, Inc. (1) 0.90% 1.00% _____________________ (1) Unconsolidated investment in parent company owning 140,000 shares of ARL Common Stock |
Schedule of the financial position and results of operations - unconsolidated parent | The following is a summary of the financial position and results of operations from our unconsolidated parent (dollars in thousands): As of September 30, 2015 2014 Real estate, net of accumulated depreciation $ 14,255 $ 15,087 Notes receivable 49,614 67,419 Other assets 127,300 128,211 Notes payable (27,315 ) (51,661 ) Other liabilities (94,479 ) (92,664 ) Shareholders' equity (69,375 ) (66,393 ) For the Nine Months Ended September 30, 2015 2014 Rents and interest and other income $ 10,121 $ 9,785 Depreciation (159 ) (204 ) Operating expenses (3,727 ) (4,304 ) Gain on land sales 2,737 Ā Interest expense (4,502 ) (5,323 ) Income (loss) from continuing operations 4,470 (46 ) Income (loss) from discontinued operations 1 Ā Net income (loss) $ 4,471 $ (46 ) Company's proportionate share of income (loss) $ 40 $ (0.46 ) |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of notes and interest payable | Below is a summary of our notes and interest payable as of September 30, 2015 (dollars in thousands): Notes Payable Accrued Interest Total Debt Apartments $ 473,647 $ 1,466 $ 475,113 Commercial 115,965 492 116,457 Land 54,934 117 55,051 Real estate subject to sales contract 5,757 594 6,351 Mezzanine financing 123,400 Ā 123,400 Other 6,417 Ā 6,417 Total $ 780,120 $ 2,669 $ 782,789 Unamortized deferred borrowing costs (19,835 ) Ā (19,835 ) Total $ 760,285 $ 2,669 $ 762,954 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Schedule of related party transactions | The following table reconciles the beginning and ending balances of accounts receivable from and (accounts payable) to related parties as of September 30, 2015 (dollars in thousands): Pillar ARL Total Related party receivable, December 31, 2014 $ Ā $ 58,404 $ 58,404 Cash transfers 52,225 Ā 52,225 Advisory fees (6,558 ) Ā (6,558 ) Net income fee (142 ) Ā (142 ) Fees and commissions (3,654 ) Ā (3,654 ) Cost reimbursements (2,076 ) Ā (2,076 ) Interest income Ā 2,300 2,300 Expenses paid by advisor (7,867 ) Ā (7,867 ) Financing (mortgage payments) 2,968 Ā 2,968 Sales/purchases transactions 5,431 Ā 5,431 Purchase of obligations (40,327 ) 40,327 Ā Related party receivable, September 30, 2015 $ Ā $ 101,031 $ 101,031 |
OPERATING SEGMENTS (Tables)
OPERATING SEGMENTS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Schedule of operating segment, including segment assets and expenditures | Presented below is our reportable segmentsā operating income for the three and nine months ended September 30, 2015 and 2014, including segment assets and expenditures (dollars in thousands): For the Three Months Ended September 30, 2015 Commercial Apartments Land Other Total Rental and other property revenues $ 7,820 $ 19,672 $ ā $ 47 $ 27,539 Property operating expenses (4,202 ) (9,374 ) (349 ) (270 ) (14,195 ) Depreciation (2,326 ) (4,229 ) ā ā (6,555 ) Mortgage and loan interest (1,865 ) (6,299 ) (1,242 ) (4,144 ) (13,550 ) Interest income ā ā ā 2,505 2,505 Gain on sale of income producing properties ā 735 ā ā 735 Gain on land sales ā ā 997 ā 997 Segment operating income (loss) $ (573 ) $ 505 $ (594 ) $ (1,862 ) $ (2,524 ) Capital expenditures 1,404 (43 ) 1,461 ā 2,822 Real estate assets 159,976 501,932 153,811 ā 815,719 Property Sales Sales price $ ā $ 11,129 $ 2,851 $ ā $ 13,980 Cost of sale ā (10,394 ) (1,854 ) ā (12,248 ) Gain on sale $ ā $ 735 $ 997 $ ā $ 1,732 For the Three Months Ended September 30, 2014 Commercial Apartments Land Other Total Rental and other property revenues $ 4,268 $ 14,187 $ ā $ 11 $ 18,466 Property operating expenses (2,680 ) (6,856 ) (534 ) (7 ) (10,077 ) Depreciation (1,924 ) (2,491 ) ā ā (4,415 ) Mortgage and loan interest (1,245 ) (5,221 ) (1,057 ) (1,564 ) (9,087 ) Interest income ā ā ā 3,064 3,064 Gain on land sales ā ā 40 ā 40 Segment operating income (loss) $ (1,581 ) $ (381 ) $ (1,551 ) $ 1,504 $ (2,009 ) Capital expenditures 485 38 1,435 ā 1,958 Real estate assets 127,791 346,656 155,088 ā 629,535 Property Sales Sales price $ 2,582 $ ā $ 4,269 $ ā $ 6,851 Cost of sale (812 ) ā (4,229 ) ā (5,041 ) Gain on sale $ 1,770 $ ā $ 40 $ ā $ 1,810 For the Nine Months Ended September 30, 2015 Commercial Apartments Land Other Total Rental and other property revenues $ 21,284 $ 52,215 $ ā $ 100 $ 73,599 Property operating expenses (11,350 ) (23,725 ) (659 ) (253 ) (35,987 ) Depreciation (6,417 ) (9,888 ) ā ā (16,305 ) Mortgage and loan interest (5,110 ) (15,664 ) (3,439 ) (7,740 ) (31,953 ) Interest income ā ā ā 9,260 9,260 Gain on sale of income producing properties ā 735 ā ā 735 Gain on land sales ā ā 5,124 ā 5,124 Segment operating income (loss) $ (1,593 ) $ 3,673 $ 1,026 $ 1,367 $ 4,473 Capital expenditures 7,536 1,712 2,772 ā 12,020 Real estate assets 159,976 501,932 153,811 ā 815,719 Property Sales Sales price $ ā $ 11,129 $ 11,987 $ ā $ 23,116 Cost of sale ā (10,394 ) (6,863 ) ā (17,257 ) Gain on sale $ ā $ 735 $ 5,124 $ ā $ 5,859 For the Nine Months Ended September 30, 2014 Commercial Apartments Land Other Total Rental and other property revenues $ 13,143 $ 42,105 $ ā $ 33 $ 55,281 Property operating expenses (8,526 ) (19,175 ) (927 ) (12 ) (28,640 ) Depreciation (5,448 ) (7,519 ) ā ā (12,967 ) Mortgage and loan interest (4,219 ) (15,171 ) (3,545 ) (3,020 ) (25,955 ) Interest income ā ā ā 9,181 9,181 Gain on land sales ā ā 634 ā 634 Segment operating income (loss) $ (5,050 ) $ 240 $ (3,838 ) $ 6,182 $ (2,466 ) Capital expenditures 3,474 137 1,586 ā 5,197 Real estate assets 127,791 346,656 155,088 ā 629,535 Property Sales Sales price $ 19,182 $ 23,131 $ 4,986 $ ā $ 47,299 Cost of sale (10,409 ) (17,078 ) (4,352 ) ā (31,839 ) Gain on sale $ 8,773 $ 6,053 $ 634 $ ā $ 15,460 |
Schedule of reconciliaton of segment information to consolidated statements of operations | The table below reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations For the Three Months Ended September 30, 2015 2014 Segment operating income (loss) $ (2,524 ) $ (2,009 ) Other non-segment items of income (expense) General and administrative (1,146 ) (1,131 ) Net income fee to related party (51 ) 186 Advisory fee to related party (2,666 ) (1,826 ) Other income (77 ) 344 Earnings (loss) from unconsolidated joint ventures and investees (4 ) 10 Litigation settlement (85 ) (86 ) Income tax benefit 16 786 Net income (loss) from continuing operations $ (6,537 ) $ (3,726 ) For the Nine Months Ended September 30, 2015 2014 Segment operating income (loss) $ 4,473 $ (2,466 ) Other non-segment items of income (expense) General and administrative (4,191 ) (5,417 ) Net income fee to related party (142 ) (514 ) Advisory fee to related party (6,561 ) (5,490 ) Other income 4 741 Earnings (loss) from unconsolidated joint ventures and investees 39 (5 ) Litigation settlement (203 ) 3,666 Income tax benefit 107 5,030 Net income (loss) from continuing operations $ (6,474 ) $ (4,455 ) |
Schedule of reconciliaton segment information to consolidated balance sheets | The table below reconciles the segment information to the corresponding amounts in the Consolidated Balance Sheets (dollars in thousands): As of September 30, 2015 2014 Segment assets $ 815,719 $ 629,535 Investments in real estate partnerships 2,178 1,503 Notes and interest receivable 65,801 80,788 Other assets 192,879 170,853 Total assets $ 1,076,577 $ 882,679 As of September 30, 2015 2014 Segment assets $ 815,719 $ 629,535 Investments in real estate partnerships 2,178 1,503 Notes and interest receivable 65,801 80,788 Other assets 192,879 170,853 Total assets $ 1,076,577 $ 882,679 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of summarizes revenue and expense information for the properties sold and held for sale | The following table summarizes revenue and expense information for the properties sold and held for sale (dollars in thousands): For the Three Months Ended For the Nine Months Ended 2015 2014 2015 2014 Revenues: Rental and other property revenues $ ā $ 1,416 $ 15 $ 5,328 ā 1,416 15 5,328 Expenses: Property operating expenses 2 326 (346 ) 2,201 Depreciation ā 155 ā 664 General and administrative (4 ) 65 99 378 Total operating expenses (2 ) 546 (247 ) 3,243 Other income (expense): Other income 45 (36 ) 45 (522 ) Mortgage and loan interest ā (357 ) (1 ) (1,767 ) Litigation settlement ā ā ā (250 ) Total other income (expenses) 45 (393 ) 44 (2,539 ) Gain (loss) from discontinued operations before gain on sale of real estate and tax 47 477 306 (454 ) Gain on sale of real estate from discontinued operations ā 1,770 ā 14,826 Income tax benefit (expense) (16 ) (786 ) (107 ) (5,030 ) Income from discontinued operations $ 31 $ 1,461 $ 199 $ 9,342 |
ORGANIZATION AND BASIS OF PRE29
ORGANIZATION AND BASIS OF PRESENTATION (Details Narrative) | 9 Months Ended |
Sep. 30, 2015ftĀ²Number | |
Number of properties | 54 |
Area of real estate property | ftĀ² | 1,900,000 |
Acres of land | ftĀ² | 3,885 |
Buildings and Improvements [Member] | Maximum [Member] | |
Use life | 40 years |
Buildings and Improvements [Member] | Minimum [Member] | |
Use life | 10 years |
Furniture, Fixtures and Equipment [Member] | Maximum [Member] | |
Use life | 10 years |
Furniture, Fixtures and Equipment [Member] | Minimum [Member] | |
Use life | 5 years |
Transcontinential Realty Investors [Member] | |
Percentage of ownership | 80.90% |
Transcontinential Realty Investors [Member] | Income Opportunity Reality Investors [Member] | |
Percentage of ownership | 81.10% |
Apartments [Member] | |
Number of units | 7,511 |
Number of properties | 45 |
REAL ESTATE ACTIVITY (Details N
REAL ESTATE ACTIVITY (Details Narrative) $ in Thousands | 9 Months Ended |
Sep. 30, 2015USD ($)ftĀ²aNumber | |
Number of income-producing apartment purchase | 54 |
Payment for construction or predevelopment of various apartment complexes | $ | $ 5,100 |
Capitalized interest costs | $ | $ 400 |
Sale of land | a | 110 |
Gain on extinguishment of debt | $ | $ 700 |
Area of real estate property | ftĀ² | 1,900,000 |
Related Party [Member] | |
Number of income-producing apartment purchase | 5 |
Number of units | 761 |
Payment to acquire the properties | $ | $ 67,500 |
TEXAS [Member] | |
Number of income-producing apartment purchase | 2 |
Proceeds from sale of real estate | $ | $ 12,000 |
Gain on sale of real estate | $ | $ 5,100 |
Sale of land | a | 198 |
TEXAS [Member] | Related Party [Member] | |
Number of income-producing apartment purchase | 2 |
KANSAS [Member] | Related Party [Member] | |
Number of income-producing apartment purchase | 1 |
TENNESSEE [Member] | |
Number of income-producing apartment purchase | 1 |
FLORIDA [Member] | |
Number of income-producing apartment purchase | 2 |
OHIO [Member] | |
Number of units | 200 |
Apartments - New Acqusitions [Member] | |
Payment to acquire the properties | $ | $ 11,600 |
Apartments - New Acqusitions [Member] | Related Party [Member] | |
Number of income-producing apartment purchase | 3 |
Number of units | 698 |
Office Building [Member] | TEXAS [Member] | |
Payment to acquire the properties | $ | $ 16,800 |
Area of real estate property | a | 92,723 |
REAL ESTATE ACTIVITY (Details)
REAL ESTATE ACTIVITY (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Real Estate [Abstract] | ||
Apartments | $ 582,219 | |
Apartments under construction | 7,503 | |
Commercial properties | 204,417 | |
Land held for development | 144,885 | |
Real estate subject to sales contract | 10,777 | |
Total real estate | 949,801 | |
Less accumulated depreciation | (134,082) | |
Total real estate | $ 815,719 | $ 689,121 |
NOTES AND INTEREST RECEIVABLE32
NOTES AND INTEREST RECEIVABLE (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015USD ($) | ||
Allowance for doubtful accounts | $ (1,825) | |
Total | 65,801 | |
Performing Loans [Member] | ||
Accrued interest | 3,017 | |
Total | $ 67,626 | |
Performing Loans [Member] | Foundation for Better Housing, Inc. (Overlook at Allensville) [Member] | ||
Maturity Date | 2019-11 | |
Interest rate | 12.00% | |
Amount | $ 2,472 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Foundation for Better Housing, Inc. (Vista Ridge) [Member] | ||
Maturity Date | 2019-04 | |
Interest rate | 12.00% | |
Amount | $ 3,923 | [1] |
Description of security | Secured | |
Performing Loans [Member] | H198, LLC (Las Vegas Land) [Member] | ||
Maturity Date | 2020-01 | |
Interest rate | 12.00% | |
Amount | $ 5,907 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Echo Station) [Member] | ||
Maturity Date | 2017-09 | |
Interest rate | 12.00% | |
Amount | $ 1,481 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Lakeshore Villas) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 2,000 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Lakeshore Villas) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 6,363 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Limestone Canyon) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 3,057 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Limestone Canyon) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 4,663 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Limestone Ranch) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 2,250 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Limestone Ranch) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 6,000 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Parkside Crossing) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 1,936 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Sendero Ridge) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 5,174 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Sendero Ridge) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 4,812 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Timbers of Terrell) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 1,323 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. (Tivoli) [Member] | ||
Maturity Date | 2032-12 | |
Interest rate | 12.00% | |
Amount | $ 7,966 | [1] |
Description of security | Secured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. [Member] | ||
Maturity Date | 2017-06 | |
Interest rate | 12.00% | |
Amount | $ 1,261 | [1] |
Description of security | Unsecured | |
Performing Loans [Member] | Unified Housing Foundation, Inc. [Member] | ||
Maturity Date | 2017-12 | |
Interest rate | 12.00% | |
Amount | $ 1,207 | [1] |
Description of security | Unsecured | |
Performing Loans [Member] | Other related party notes [Member] | ||
Description of Maturity Date | Various | |
Description of Interest rate | Various | |
Amount | $ 395 | [1] |
Description of security | Various secured interests | |
Performing Loans [Member] | Other related party notes [Member] | ||
Description of Maturity Date | Various | |
Description of Interest rate | Various | |
Amount | $ 1,420 | [1] |
Description of security | Various unsecured interests | |
Performing Loans [Member] | Other non-related party notes [Member] | ||
Description of Maturity Date | Various | |
Description of Interest rate | Various | |
Amount | $ 496 | |
Description of security | Various secured interests | |
Performing Loans [Member] | Other non-related party notes [Member] | ||
Description of Maturity Date | Various | |
Description of Interest rate | Various | |
Amount | $ 503 | |
Description of security | Various unsecured interests | |
Non-Performing Loans [Member] | ||
Accrued interest | $ 97 | |
Total | $ 604 | |
Non-Performing Loans [Member] | Other non-related party notes [Member] | ||
Description of Maturity Date | Various | |
Description of Interest rate | Various | |
Amount | $ 507 | |
Description of security | Secured interests | |
[1] | Related party notes. |
INVESTMENT IN UNCONSOLIDATED 33
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND INVESTEES (Details) | Sep. 30, 2015 | Sep. 30, 2014 | |
American Realty Investors, Inc [Member] | |||
Percentage of ownership | [1] | 0.90% | 1.00% |
[1] | Unconsolidated investment in parent company owning 140,000 shares of ARL Common Stock |
INVESTMENT IN UNCONSOLIDATED 34
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND INVESTEES (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Real estate, net of accumulated depreciation | $ 815,719,000 | $ 815,719,000 | $ 689,121,000 | ||
Other assets | 37,727,000 | 37,727,000 | 37,441,000 | ||
Notes payable | (754,604,000) | (754,604,000) | (588,749,000) | ||
Shareholders' equity | (208,254,000) | (208,254,000) | $ (215,284,000) | ||
Rents and interest and other income | 27,539,000 | $ 18,466,000 | 73,599,000 | $ 55,281,000 | |
Depreciation | (6,555,000) | (4,415,000) | (16,305,000) | (12,967,000) | |
Operating expenses | 24,613,000 | 17,263,000 | 63,186,000 | 53,028,000 | |
Gain on land sales | 997,000 | 40,000 | 5,124,000 | 634,000 | |
Income (loss) from discontinued operations | 31,000 | 1,461,000 | 199,000 | 9,342,000 | |
Net income (loss) | (6,506,000) | (2,265,000) | (6,275,000) | 4,887,000 | |
Company's proportionate share of income (loss) | (4,000) | 10,000 | 39,000 | (5,000) | |
American Realty Investors, Inc [Member] | |||||
Real estate, net of accumulated depreciation | 14,255,000 | 15,087,000 | 14,255,000 | 15,087,000 | |
Notes receivable | 49,614,000 | 67,419,000 | 49,614,000 | 67,419,000 | |
Other assets | 127,300,000 | 128,211,000 | 127,300,000 | 128,211,000 | |
Notes payable | 27,315,000 | 51,661,000 | 27,315,000 | 51,661,000 | |
Other liabilities | 94,479,000 | 92,664,000 | 94,479,000 | 92,664,000 | |
Shareholders' equity | $ 69,375,000 | $ 66,393,000 | 69,375,000 | 66,393,000 | |
Rents and interest and other income | 10,121,000 | 9,785,000 | |||
Depreciation | 159,000 | 204,000 | |||
Operating expenses | (3,727,000) | (4,304,000) | |||
Gain on land sales | 2,737,000 | ||||
Interest expense | 4,502,000 | 5,323,000 | |||
Income (loss) from continuing operations | 4,470,000 | (46,000) | |||
Income (loss) from discontinued operations | 1,000 | ||||
Net income (loss) | 4,471,000 | (46,000) | |||
Company's proportionate share of income (loss) | $ 40,000 | $ (460) |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) $ in Thousands | May. 28, 2015USD ($) | Apr. 29, 2015USD ($)Number | Apr. 23, 2015USD ($)Number | Jan. 28, 2015Number | Sep. 30, 2015USD ($) |
Notes oustanding balance | $ 762,954 | ||||
Mortgage Notes Payable [Member] | TEXAS [Member] | |||||
Number of units | Number | 200 | ||||
Interest rate | 3.24% | ||||
Description of frequency payment | Monthly | ||||
Maturity date | Aug. 1, 2050 | ||||
Mortgage Notes Payable [Member] | MISSISSIPPI [Member] | |||||
Number of units | Number | 240 | ||||
Interest rate | 3.24% | ||||
Description of frequency payment | Monthly | ||||
Maturity date | Dec. 1, 2051 | ||||
New Mortgage Notes Payable [Member] | ARKANSAS [Member] | |||||
Number of units | Number | 250 | ||||
Interest rate | 2.74% | ||||
Description of frequency payment | Monthly | ||||
Maturity date | May 1, 2050 | ||||
Notes Payable | $ 21,000 | ||||
Repayment of notes payable | 15,700 | ||||
Repayment of notes payable closing cost | $ 600 | ||||
New Mortgage Notes Payable [Member] | TEXAS [Member] | |||||
Number of units | Number | 240 | ||||
Interest rate | 3.28% | ||||
Description of frequency payment | Monthly | ||||
Maturity date | Mar. 31, 2051 | ||||
Notes Payable | $ 15,400 | ||||
Repayment of notes payable closing cost | $ 700 | ||||
Secured Notes Payable [Member] | Independent Third Party [Member] | |||||
Description of frequency payment | Monthly | ||||
Notes Payable | $ 120,000 | ||||
Notes oustanding balance | $ 84,400 | ||||
Notes payable term | 5 years | ||||
Description of interest rate | Interest rate of 30 day Libor plus 10.75% | ||||
Description of collteral | The loan is secured by various equity interests in certain residential apartments. | ||||
New Secured Notes Payable [Member] | Independent Third Party [Member] | |||||
Interest rate | 12.00% | ||||
Description of frequency payment | Quarterly | ||||
Notes oustanding balance | $ 40,000 | 39,000 | |||
Notes payable term | 5 years | ||||
Description of collteral | The loan is secured by various equity interests in residential apartments and can be prepaid at a penalty rate of 4% for year 1 with the penalty declining by 1% each year thereafter. | ||||
Notes payable principal payment | $ 500 | ||||
Construction Loans [Member] | |||||
Notes oustanding balance | $ 1,700 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) $ in Thousands | Sep. 30, 2015USD ($) |
Notes Payable | $ 760,285 |
Accrued Interest | 2,669 |
Total Debt | 762,954 |
Unamortized deferred borrowing costs | (19,835) |
Commercial [Member] | |
Notes Payable | 115,965 |
Accrued Interest | 492 |
Total Debt | 116,457 |
Land [Member] | |
Notes Payable | 54,934 |
Accrued Interest | 117 |
Total Debt | 55,051 |
Real Estate Subject to Sales Contract [Member] | |
Notes Payable | 5,757 |
Accrued Interest | 594 |
Total Debt | 6,351 |
Mezzanine Financing [Member] | |
Notes Payable | $ 123,400 |
Accrued Interest | |
Total Debt | $ 123,400 |
Other [Member] | |
Notes Payable | $ 6,417 |
Accrued Interest | |
Total Debt | $ 6,417 |
Total Notes Payable [Member] | |
Notes Payable | 780,120 |
Accrued Interest | 2,669 |
Total Debt | 782,789 |
Apartments [Member] | |
Notes Payable | 473,647 |
Accrued Interest | 1,466 |
Total Debt | $ 475,113 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Related party receivable, December 31, 2014 | $ 58,404 | |||
Advisory fee | $ (2,666) | $ (1,826) | (6,561) | $ (5,490) |
Net income fee | (51) | $ 186 | (142) | $ (514) |
Related party receivable, June 30, 2015 | 101,031 | 101,031 | ||
American Realty Investors, Inc [Member] | ||||
Related party receivable, December 31, 2014 | $ 58,404 | |||
Cash transfers | ||||
Advisory fee | ||||
Net income fee | ||||
Fees and commissions | ||||
Cost reimbursements | ||||
Interest income | $ 2,300 | |||
Expenses paid by Advisor | ||||
Financing (mortgage payments) | ||||
Sales/purchases transactions | ||||
Purchase of obligations | $ 40,327 | |||
Related party receivable, June 30, 2015 | $ 101,031 | $ 101,031 | ||
Pillar Income Asset Management, Inc [Member] | ||||
Related party receivable, December 31, 2014 | ||||
Cash transfers | $ 52,225 | |||
Advisory fee | (6,558) | |||
Net income fee | (142) | |||
Fees and commissions | (3,654) | |||
Cost reimbursements | $ (2,076) | |||
Interest income | ||||
Expenses paid by Advisor | $ (7,867) | |||
Financing (mortgage payments) | 2,968 | |||
Sales/purchases transactions | 5,431 | |||
Purchase of obligations | $ (40,327) | |||
Related party receivable, June 30, 2015 | ||||
Related Party [Member] | ||||
Related party receivable, December 31, 2014 | $ 58,404 | |||
Cash transfers | 52,225 | |||
Advisory fee | (6,558) | |||
Net income fee | (142) | |||
Fees and commissions | (3,654) | |||
Cost reimbursements | (2,076) | |||
Interest income | 2,300 | |||
Expenses paid by Advisor | (7,867) | |||
Financing (mortgage payments) | 2,968 | |||
Sales/purchases transactions | $ 5,431 | |||
Purchase of obligations | ||||
Related party receivable, June 30, 2015 | $ 101,031 | $ 101,031 |
OPERATING SEGMENTS (Details)
OPERATING SEGMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Segment Reporting Information [Line Items] | |||||
Rental and other property revenues | $ 27,539 | $ 18,466 | $ 73,599 | $ 55,281 | |
Property operating expenses | (14,195) | (10,077) | (35,987) | (28,640) | |
Depreciation | (6,555) | (4,415) | (16,305) | (12,967) | |
Mortgage and loan interest | (12,006) | (8,043) | (29,703) | (23,329) | |
Gain on land sales | 997 | 40 | 5,124 | 634 | |
Segment operating income (loss) | (2,524) | (2,009) | 4,473 | (2,466) | |
Real estate assets | 815,719 | 815,719 | $ 689,121 | ||
Property Sales | |||||
Gain on sale | 735 | 14,826 | |||
Commercial Properties [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Rental and other property revenues | 7,820 | 4,268 | 21,284 | 13,143 | |
Property operating expenses | (4,202) | (2,680) | (11,350) | (8,526) | |
Depreciation | (2,326) | (1,924) | (6,417) | (5,448) | |
Mortgage and loan interest | (1,865) | (1,245) | (5,110) | (4,219) | |
Segment operating income (loss) | (573) | (1,581) | (1,593) | (5,050) | |
Capital expenditures | 1,404 | 485 | 7,536 | 3,474 | |
Real estate assets | 159,976 | 127,791 | 159,976 | 127,791 | |
Property Sales | |||||
Sales price | 2,582 | 19,182 | |||
Cost of sale | (812) | (10,409) | |||
Gain on sale | 1,770 | 8,773 | |||
Apartments [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Rental and other property revenues | 19,672 | 14,187 | 52,215 | 42,105 | |
Property operating expenses | (9,374) | (6,856) | (23,725) | (19,175) | |
Depreciation | (4,229) | (2,491) | (9,888) | (7,519) | |
Mortgage and loan interest | (6,299) | (5,221) | (15,664) | (15,171) | |
Gain on sale of income producing properties | 735 | 735 | |||
Segment operating income (loss) | 505 | (381) | 3,673 | 240 | |
Capital expenditures | (43) | 38 | 1,712 | 137 | |
Real estate assets | 501,932 | 346,656 | 501,932 | 346,656 | |
Property Sales | |||||
Sales price | 11,129 | 11,129 | 23,131 | ||
Cost of sale | (10,394) | (10,394) | (17,078) | ||
Gain on sale | 735 | 735 | 6,053 | ||
Land [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Property operating expenses | (349) | (534) | (659) | (927) | |
Mortgage and loan interest | (1,242) | (1,057) | (3,439) | (3,545) | |
Gain on land sales | 997 | 40 | 5,124 | 634 | |
Segment operating income (loss) | (594) | (1,551) | 1,026 | (3,838) | |
Capital expenditures | 1,461 | 1,435 | 2,772 | 1,586 | |
Real estate assets | 153,811 | 155,088 | 153,811 | 155,088 | |
Property Sales | |||||
Sales price | 2,851 | 4,269 | 11,987 | 4,986 | |
Cost of sale | (1,854) | (4,229) | (6,863) | (4,352) | |
Gain on sale | 997 | 40 | 5,124 | 634 | |
Other [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Rental and other property revenues | 47 | 11 | 100 | 33 | |
Property operating expenses | (270) | (7) | (253) | (12) | |
Mortgage and loan interest | (4,144) | (1,564) | (7,740) | (3,020) | |
Interest income | 2,505 | 3,064 | 9,260 | 9,181 | |
Segment operating income (loss) | (1,862) | 1,504 | 1,367 | 6,182 | |
Total Segments [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Rental and other property revenues | 27,539 | 18,466 | 73,599 | 55,281 | |
Property operating expenses | (14,195) | (10,077) | (35,987) | (28,640) | |
Depreciation | (6,555) | (4,415) | (16,305) | (12,967) | |
Mortgage and loan interest | (13,550) | (9,087) | (31,953) | (25,955) | |
Interest income | 2,505 | 3,064 | 9,260 | 9,181 | |
Gain on sale of income producing properties | 735 | 735 | |||
Gain on land sales | 997 | 40 | 5,124 | 634 | |
Segment operating income (loss) | (2,524) | (2,009) | 4,473 | (2,466) | |
Capital expenditures | 2,822 | 1,958 | 12,020 | 5,197 | |
Real estate assets | 815,719 | 629,535 | 815,719 | 629,535 | |
Property Sales | |||||
Sales price | 13,980 | 6,851 | 23,116 | 47,299 | |
Cost of sale | (12,248) | (5,041) | (17,257) | (31,839) | |
Gain on sale | $ 1,732 | $ 1,810 | $ 5,859 | $ 15,460 |
OPERATING SEGMENTS (Details 1)
OPERATING SEGMENTS (Details 1) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Segment Reporting [Abstract] | ||||
Segment operating income (loss) | $ (2,524) | $ (2,009) | $ 4,473 | $ (2,466) |
Other non-segment items of income (expense) | ||||
General and administrative | (1,146) | (1,131) | (4,191) | (5,417) |
Net income fee to related party | 51 | (186) | 142 | 514 |
Advisory fee to related party | 2,666 | 1,826 | 6,561 | 5,490 |
Other income | (77) | 344 | 4 | 741 |
Earnings (loss) from unconsolidated joint ventures and investees | (4) | 10 | 39 | (5) |
Litigation settlement | (85) | (86) | (203) | 3,666 |
Income tax benefit | 16 | 786 | 107 | 5,030 |
Net income (loss) from continuing operations | $ (6,537) | $ (3,726) | $ (6,474) | $ (4,455) |
OPERATING SEGMENTS (Details 2)
OPERATING SEGMENTS (Details 2) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 |
Segment assets | $ 815,719 | $ 689,121 | |
Investments in real estate partnerships | 2,178 | 1,543 | |
Other assets | 37,727 | 37,441 | |
Total assets | 1,076,577 | $ 930,405 | |
Total Segments [Member] | |||
Segment assets | 815,719 | $ 629,535 | |
Investments in real estate partnerships | 2,178 | 1,503 | |
Notes and interest receivable | 65,801 | 80,788 | |
Other assets | 192,879 | 170,853 | |
Total assets | $ 1,076,577 | $ 882,679 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues: | ||||
Rental and other property revenues | $ 1,416 | $ 15 | $ 5,328 | |
Revenues | 1,416 | 15 | 5,328 | |
Expenses: | ||||
Property operating expenses | $ 2 | 326 | $ (346) | 2,201 |
Depreciation | 155 | 664 | ||
General and administrative | $ (4) | 65 | $ 99 | 378 |
Total operating expenses | (2) | 546 | (247) | 3,243 |
Other income (expense): | ||||
Other income | $ 45 | (36) | 45 | (522) |
Mortgage and loan interest | (357) | (1) | (1,767) | |
Litigation settlement | (250) | |||
Total other income (expenses) | $ 45 | (393) | 44 | (2,539) |
Gain (loss) from discontinued operations before gain on sale of real estate and tax | $ 47 | 477 | 306 | (454) |
Gain on sale of real estate from discontinued operations | 1,770 | 14,826 | ||
Income tax benefit (expense) | $ (16) | (786) | (107) | (5,030) |
Income from discontinued operations | $ 31 | $ 1,461 | $ 199 | $ 9,342 |
COMMITMENTS AND CONTINGENCIES42
COMMITMENTS AND CONTINGENCIES AND LIQUIDITY (Details Narrative) - Clapper Parties [Member] - USD ($) $ in Thousands | 1 Months Ended | |
Feb. 28, 2014 | Oct. 31, 2011 | |
Damages sought value | $ 74,000 | |
Actual damages sought value | 26,000 | |
Interest damages sought value | $ 48,000 | |
Description of plaintiff | Mr. David Clapper and entities related to Mr. Clapper | |
Description of defendant | A formerly owned entity (American Realty Trust, Inc.) and its former subsidiary (ART Midwest, Inc.) | |
Description of allegation | Originally arising out of a transaction in 1998, in which ART and the Clapper Parties were to form a partnership to own eight residential apartment complexes. | |
Description of action taken by court | The Court of Appeals affirmed a portion of the judgment in favor of the Clapper Parties, but also ruled that a double counting of a significant portion of the damages had occurred and remanded the case back to the trial court to recalculate the damage award, as well as pre and post-judgment interest thereon. |
EARNINGS PER SHARE (Details Nar
EARNINGS PER SHARE (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Jul. 09, 2014 | Sep. 30, 2015 | Dec. 31, 2014 |
Stock options outstanding | 5,000 | ||
Series C Cumulative Convertible Preferred Stock [Member] | |||
Preferred stock outstanding" | 30,000 | ||
Description of conversion basic | The stock had a liquidation preference of $100 per share and could be converted into common stock at 90% of the daily average closing price of the common stock for the prior five trading days. | ||
Preferred stock, liquidation preference per share | $ 100 | ||
Series C Cumulative Convertible Preferred Stock [Member] | RAI [Member] | |||
Preferred stock outstanding" | 30,000 | ||
Accrued dividends unpaid | $ 900 | ||
Number of preferred stock converted | 30,000 | ||
Number of common stock issued for conversion | 304,298 |