Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 22, 2015 | Jun. 30, 2014 | |
Document and Entity Information | |||
Entity Registrant Name | INCOME OPPORTUNITY REALTY INVESTORS INC /TX/ | ||
Entity Trading Symbol | IORI | ||
Document Type | 10-K | ||
Document Period End Date | 31-Dec-14 | ||
Amendment Flag | FALSE | ||
Entity Central Index Key | 949961 | ||
Current Fiscal Year End Date | -19 | ||
Entity Common Stock, Shares Outstanding | 4,168,214 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Document Fiscal Year Focus | 2014 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $4,965,617 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets {1} | ||
Real estate land holdings, at cost | $25,717 | $24,511 |
Total real estate | 25,717 | 24,511 |
Notes and interest receivable from related parties | 27,461 | 30,693 |
Less allowance for doubtful accounts | -1,826 | -1,826 |
Total notes and interest receivable | 25,635 | 28,867 |
Cash and cash equivalents | 7 | 3 |
Receivable and accrued interest from related parties | 40,460 | 39,207 |
Other assets | 1,257 | 1,225 |
Total assets | 93,076 | 93,813 |
Liabilities: | ||
Notes and interest payable | 10,240 | 12,357 |
Accounts payable and other liabilities | 37 | 216 |
Total liabilities | 10,277 | 12,573 |
Shareholders' equity: | ||
Common stock, $0.01 par value, authorized 10,000,000 shares; issued 4,173,675 and outstanding 4,168,214 shares in 2014 and 2013 | 42 | 42 |
Treasury stock at cost, 5,461 shares in 2014 and 2013 | -39 | -39 |
Paid-in capital | 61,955 | 61,955 |
Retained earnings | 20,841 | 19,282 |
Total shareholders' equity | 82,799 | 81,240 |
Total liabilities and shareholders' equity | $93,076 | $93,813 |
CONSOLIDATED_BALANCE_SHEETS_PA
CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
PARENTHETICALS | ||
Common stock, par or stated value | $0.01 | $0.01 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 4,173,675 | 4,173,675 |
Common stock, shares outstanding | 4,168,214 | 4,168,214 |
Treasury stock, shares | 5,461 | 5,461 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Revenues: | |||
Rental and other property revenues | $0 | $0 | $0 |
Property operating expenses (including $46, $51 and $61 for the year ended 2014, 2013 and 2012, respectively, from related parties) | 50 | 87 | 67 |
General and administrative (including $237, $234 and $155 for the year ended 2014, 2013 and 2012, respectively, from related parties) | 573 | 734 | 334 |
Net income fee to related party | 203 | 695 | 180 |
Advisory fee to related party | 692 | 830 | 815 |
Total operating expenses | 1,518 | 2,346 | 1,396 |
Net operating loss | -1,518 | -2,346 | -1,396 |
Interest income from related parties | 4,729 | 7,129 | 5,183 |
Other income | 0 | 5,804 | 0 |
Mortgage and loan interest | -674 | -1,160 | -1,284 |
Loan charges | -32 | -830 | 0 |
Earnings from unconsolidated subsidiaries and investees.. | 0 | 0 | -37 |
Total other income | 4,023 | 10,943 | 3,862 |
Income before gain on land sales, non-controlling interest, and taxes | 2,505 | 8,597 | 2,466 |
Income from continuing operations before tax | 2,505 | 8,597 | 2,466 |
Income tax expense | -946 | -3,063 | -876 |
Net income from continuing operations | 1,559 | 5,534 | 1,590 |
Net loss from discontinued operations. | 0 | -24 | -106 |
Income tax benefit from discontinued operations | 0 | 8 | 37 |
Net loss from discontinued operations | 0 | -16 | -69 |
Net income. | $1,559 | $5,518 | $1,521 |
Income from continuing operations basic | $0.37 | $1.33 | $0.38 |
Loss from discontinued operations basic | $0 | $0 | ($0.02) |
Net income applicable to common shares basic | $0.37 | $1.33 | $0.36 |
Income from continuing operations diluted | $0.37 | $1.33 | $0.38 |
Loss from discontinued operations diluted | $0 | $0 | ($0.02) |
Net income applicable to common shares diluted (sum) | $0.37 | $1.33 | $0.36 |
Weighted average common shares used in computing earnings per share | 4,168,214 | 4,168,214 | 4,168,214 |
Weighted average common shares used in computing diluted earnings per share | 4,168,214 | 4,168,214 | 4,168,214 |
CONSOLIDATED_STATEMENTS_OF_OPE1
CONSOLIDATED STATEMENTS OF OPERATIONS PARENTHETICALS (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Statements Of Operations Parentheticals | |||
Property operating expenses from related parties | $46 | $51 | $61 |
General and administrative from related parties | $237 | $234 | $155 |
CONSOLIDATED_STATEMENT_OF_SHAR
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (dollars in thousands) (USD $) | Total | Common Stock shares | Common Stock amount | Treasury Stock | Paid-in Capital | Retained Earnings |
In Thousands, except Share data | ||||||
Balance at Dec. 31, 2011 | 74,201 | 4,173,675 | 42 | -39 | 61,955 | 12,243 |
Net income:, | $1,521 | $0 | $0 | $0 | $0 | $1,521 |
Balance at Dec. 31, 2012 | 75,722 | 4,173,675 | 42 | -39 | 61,955 | 13,764 |
Net income:, | 5,518 | 0 | 0 | 0 | 0 | 5,518 |
Balance at Dec. 31, 2013 | 81,240 | 4,173,675 | 42 | -39 | 61,955 | 19,282 |
Net income:, | $1,559 | $0 | $0 | $0 | $0 | $1,559 |
Balance at Dec. 31, 2014 | 82,799 | 4,173,675 | 42 | -39 | 61,955 | 20,841 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Cash Flow From Operating Activities: | |||
Net income (1) | $1,559 | $5,518 | $1,521 |
Adjustments to reconcile net income applicable to common shares to net cash used in operating activities: | |||
Earnings from unconsolidated subsidiaries and investees | 0 | 0 | 37 |
Decrease (increase) in assets: | |||
Accrued interest receivable from related parties | 3,232 | -3,691 | 1,620 |
Other assets | -32 | 58 | 263 |
Increase (decrease) in liabilities: | |||
Accrued interest payable to related parties | 0 | -793 | -80 |
Other liabilities | -179 | 67 | 24 |
Net cash provided by operating activities | 4,580 | 1,159 | 3,385 |
Cash Flow From Investing Activities: | |||
Proceeds from notes receivable | 0 | 0 | 2,990 |
Acquisition of land held for development | -1,202 | 0 | 0 |
Real estate improvements | -4 | 0 | 0 |
Related party receivables | -1,253 | 14,200 | -6,374 |
Net cash provided by (used in) investing activities | -2,459 | 14,200 | -3,384 |
Cash Flow From Financing Activities: | |||
Proceeds from notes payable | 0 | 12,343 | 0 |
Payments on notes payable to related parties | -2,117 | 0 | 0 |
Payments on maturing notes payable | 0 | -27,701 | 0 |
Net cash used in financing activities | -2,117 | -15,358 | 0 |
Net increase in cash and cash equivalents | 4 | 1 | 1 |
Cash and cash equivalents, beginning of period | 3 | 2 | 1 |
Cash and cash equivalents, end of period | 7 | 3 | 2 |
Supplemental disclosures of cash flow information: | |||
Cash paid for interest | $674 | $1,162 | $1,385 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2014 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
FASB Accounting Standards Codification. The Company presents its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). In June 2009, the Financial Accounting Standards Board (“FASB”) completed its accounting guidance codification project. The FASB Accounting Standards Codification (“ASC”) became effective for the Company’s financial statements issued subsequent to June 30, 2009 and is the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. As of the effective date, the company will no longer refer to the authoritative guidance dictating its accounting methodologies under the previous accounting standards hierarchy. Instead, the Company will refer to the ASC Codification as the sole source of authoritative literature. | |
Organization and business. Income Opportunity Realty Investors, Inc. is the successor to a California business trust organized on December 14, 1984, which commenced operations on April 10, 1985. Due to the completion of a tender offer by American Realty Investors, Inc. (“ARL”), a related party, on March 19, 2003, and the resulting concentration of ownership, IOT no longer met the requirement as of January 1, 2003 for tax treatment as a REIT. IOT cannot re-qualify for REIT tax status for at least five years after January 1, 2003. As of December 31, 2014, Transcontinental Realty Investors, Inc. (“TCI”), a related party, owns approximately 81.12% of IOT’s outstanding shares of Common Stock. The Company is headquartered in Dallas, Texas, and its common stock trades on the New York Stock Exchange Euronext (“NYSE MKT”) under the symbol (“IOT”). | |
IOT is a “C” corporation for U.S. federal income tax purposes. For tax periods ending before August 31, 2012, IOT filed an annual consolidated income tax return with ARL and TCI and their subsidiaries. ARL was the common parent for the consolidated group. After that date, IOT and the rest of the ARL group joined the May Realty Holdings, Inc. (“MRHI”, formerly known as Realty Advisors Management, Inc. “RAMI”, effective August 7, 2014), consolidated group for tax purposes. | |
IOT’s Board of Directors represents the Company’s shareholders and is responsible for directing the overall affairs of IOT and for setting the strategic policies that guide the Company. As of April 30, 2011, the Board of Directors delegated the day-to-day management of the Company to Pillar Income Asset Management, Inc. (“Pillar”), a Nevada corporation, under an Advisory Agreement that is reviewed annually by IOT’s Board of Directors. The directors of IOT are also directors of ARL and TCI. The Chairman of the Board of Directors of IOT also serves as the Chairman of the Board of Directors of ARL and TCI. The officers of IOT also serve as officers of ARL, TCI and Pillar. | |
Effective since April 30, 2011, Pillar, the sole shareholder of which is Realty Advisors, LLC, a Nevada limited liability company, the sole member of which is Realty Advisors, Inc. (“RAI”), a Nevada corporation, the sole shareholder of which is MRHI, a Nevada corporation, the sole shareholder of which is a trust known as the May Trust, became the Company’s external Advisor and Cash Manager. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges, for IOT’s benefit, debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to ARL and TCI. As the contractual advisor, Pillar is compensated by IOT under an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. IOT has no employees. Employees of Pillar render services to IOT in accordance with the terms of the Advisory Agreement. | |
Effective since January 1, 2011, Regis Realty Prime, LLC, dba Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial properties and provides brokerage services. Regis receives property management fees and leasing commissions in accordance with the terms of its property-level management agreement. Regis is also entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement. See Part III, Item 10. “Directors, Executive Officers and Corporate Governance – Property Management”. | |
Our primary business is investing in real estate and mortgage receivables. Land held for development or sale is our sole operating segment. At December 31, 2014, our land consisted of 184.7 acres of land held for future development or sale. All of our land holdings are located in Texas. The principal source of revenue for the Company is interest income on over $25.4 million of note receivables due from related parties. | |
Basis of presentation. The accompanying Consolidated Financial Statements include our accounts, our subsidiaries, generally all of which are wholly-owned, and all entities in which we have a controlling interest. Arrangements that are not controlled through voting or similar rights are accounted for as a Variable Interest Entity (VIE), in accordance with the provisions and guidance of ASC Topic 810 “Consolidation”, whereby we have determined that we are a primary beneficiary of the VIE and meet certain criteria of a sole general partner or managing member as identified in accordance with Emerging Issues Task Force (“EITF”) Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights (“EITF 04-5”). VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders as a group lack adequate decision making ability, the obligation to absorb expected losses or residual returns of the entity, or have voting rights that are not proportional to their economic interests. The primary beneficiary generally is the entity that provides financial support and bears a majority of the financial risks, authorizes certain capital transactions, or makes operating decisions that materially affect the entity’s financial results. All significant intercompany balances and transactions have been eliminated in consolidation. | |
In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investors’ ability to control or significantly influence key decisions for the VIE; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current future fair values and performance of real estate held by these VIEs and general market conditions. As of December 31, 2014, IOT was not the primary beneficiary of a VIE. | |
For entities in which we have less than a controlling financial interest or entities where it is not deemed to be the primary beneficiary, the entities are accounted for using the equity method of accounting. Accordingly, our share of the net earnings or losses of these entities is included in consolidated net income. IOT’s investment in Eton Square was 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). We continually evaluate the recoverability of the carrying value of its real estate assets using the methodology prescribed in ASC Topic 360, “Property, Plant and Equipment”. Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under ASC Topic 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value. | |
Any properties that are treated as “subject to sales contract” on the Consolidated Balance Sheets and are listed in detail in Schedule III, “Real Estate and Accumulated Depreciation” are those in which we have not recognized the legal sale according to the guidance in ASC 360-20 due to various factors, disclosed in each sale transaction under Item 1 Significant Real Estate Acquisitions/Dispositions and Financing. Any sale transaction where the guidance reflects that a sale had not occurred, the asset involved in the transaction, including the debt and property operations, remained on the books of the Company. We continue to charge depreciation to expense as a period costs for the property until such time as the property has been classified as held for sale in accordance with guidance reflected in ASC 360-10-45 “Impairment or Disposal of Long-Lived Assets”. | |
Sales to our parent, TCI, have previously been reflected at the fair value sales price. Upon discussion with the SEC and in review of the guidance pursuant to ASC 250-10-45-22 to 24, we have adjusted those asset sales, in the prior year, to reflect a sales price equal to the cost basis in the asset at the time of the sale. The related party payables from TCI were reduced for the lower asset price. | |
Real estate held for sale. We periodically classify real estate assets as held for sale. An asset is classified as held for sale after the approval of our board of directors and after an active program to sell the asset has commenced. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying Consolidated Balance Sheets. Upon a decision to no longer market as an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated. The operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying statements of operations. Income from discontinued operations includes the revenues and expenses, including depreciation and interest expense, associated with the assets. This classification of operating results as discontinued operations applies retroactively for all periods presented. Additionally, gains and losses on assets designated as held for sale are classified as part of discontinued operations. | |
Cost Capitalization. The cost of buildings and improvements includes the purchase price of property, legal fees and other acquisition costs. Costs directly related to planning, developing, initial leasing and constructing a property are capitalized and classified as Real Estate in the Consolidated Balance Sheets. Capitalized development costs include interest, property taxes, insurance, and other direct project costs incurred during the period of development. | |
A variety of costs are incurred in the acquisition, development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. Our capitalization policy on development properties is guided by ASC Topic 835-20 “Interest – Capitalization of Interest” and ASC Topic 970 “Real Estate - General”. The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed and held available for occupancy upon the receipt of certificates of occupancy, but no later than one year from cessation of major construction activity. We cease capitalization on the portion (1) substantially completed and (2) occupied or held available for occupancy, and we capitalize only those costs associated with the portion under construction. | |
We capitalize leasing costs which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable. We allocate these costs to individual tenant leases and amortize them over the related lease term. | |
Fair value measurement. We apply the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures,” to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entity’s own data. | |
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows: | |
Level 1—Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets. | |
Level 2—Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
Level 3—Unobservable inputs that are significant to the fair value measurement. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. | |
Management reviews the carrying values of our properties and mortgage notes receivable at least annually and whenever events or a change in circumstances indicates that impairment may exist. Impairment is considered to exist if the future cash flow from a property (undiscounted and without interest) is less than the carrying amount of the property. For notes receivable, impairment is considered to exist if it is probable that all amounts due under the terms of the note will not be collected. The note receivable review includes an evaluation of the collateral property securing such note. If impairment is found to exist, a provision for loss is recorded by a charge against earnings. The property review generally includes: (1) selective property inspections; (2) a review of the property’s current rents compared to market rents; (3) a review of the property’s expenses; (4) a review of maintenance requirements; (5) a review of the property’s cash flow; (6) discussions with the manager of the property; and (7) a review of properties in the surrounding area. | |
Related parties. We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests, or affiliates of the entity. | |
Recognition of revenue. Our revenues are composed largely of interest income on notes receivable. Included in discontinued operations, in accordance with ASC 805 “Business Combinations”, we recognize rental revenue of acquired in-place “above-” and “below-market” leases at their fair values over the terms of the respective leases, as applicable. | |
Sales and the associated gains or losses of real estate assets are recognized in accordance with the provisions of ASC Topic 360-20, “Property, Plant and Equipment—Real Estate Sale”. The specific timing of a sale is measured against various criteria in ASC 360-20 related to the terms of the transaction and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain recognition and accounts for the continued operations of the property by applying the finance, leasing, deposit, installment or cost recovery methods, as appropriate, until the sales criteria are met. | |
Non-performing notes receivable. We consider a note receivable to be non-performing when the maturity date has passed without principal repayment and the borrower is not making interest payments in accordance with the terms of the agreement. | |
Interest recognition on notes receivable. We record interest income as earned in accordance with the terms of the related loan agreements. | |
Allowance for estimated losses. We assess the collectability of notes receivable on a periodic basis, of which the assessment consists primarily of an evaluation of cash flow projections of the borrower to determine whether estimated cash flows are sufficient to repay principal and interest in accordance with the contractual terms of the note. We recognize impairments on notes receivable when it is probable that principal and interest will not be received in accordance with the contractual terms of the loan. The amount of the impairment to be recognized generally is based on the fair value of the partnership’s real estate that represents the primary source of loan repayment. See Note 3 “Notes and Interest Receivable from Related Parties” for details on our notes receivable. | |
Cash equivalents. For purposes of the Consolidated Statements of Cash Flows, all highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. | |
Earnings per share. Earnings per share ("EPS") have been computed pursuant to the provisions of ASC 620 “Earnings Per Share”. The computation of basic EPS is calculated by dividing income available to common shareholders 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. | |
Use of estimates. In the preparation of Consolidated Financial Statements in conformity with GAAP, it is necessary for management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expense for the year ended. Actual results could differ from those estimates. | |
Income Taxes. The Company is a “C” corporation for U.S. federal income tax purposes. For tax periods ending before August 31, 2012, the Company filed an annual consolidated income tax return with ARL and TCI and their subsidiaries. ARL was the common parent for the consolidated group. After that date, the Company and the rest of the ARL group joined the MRHI consolidated group for tax purposes. The income tax expense for the first part of the 2012 tax period was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT. That agreement continued until August 31, 2012 at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and MRHI for the remainder of 2012 and subsequent years. The agreement specifies the manner in which the group will share the consolidated tax liability and also how certain tax attributes are to be treated among members of the group. | |
Recent Accounting Pronouncements. There were no recent accounting pronouncements that our company has not implemented that materially affect our financial statements. |
REAL_ESTATE_ACTIVITY
REAL ESTATE ACTIVITY | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
REAL ESTATE ACTIVITY | |||||||||
REAL ESTATE ACTIVITY | NOTE 2. REAL ESTATE | ||||||||
Real estate consisted of the following at December 31, (dollars in thousands): | |||||||||
2014 | 2013 | ||||||||
Mercer Crossing/Travelers Land | $ | 24,515 | $ | 24,511 | |||||
Three Hickory | 1,202 | - | |||||||
$ | 25,717 | $ | 24,511 | ||||||
The Travelers land owned by the Company is a contiguous land parcel in Farmers Branch, TX and is part of a larger development project referred to as “Mercer Crossing”. It is expected that this land will be developed or sold for development in the future. | |||||||||
Sales to our parent, TCI, have previously been reflected at the fair value sales price. Upon discussion with the SEC and in review of the guidance pursuant to ASC 250-10-45-22 to 24, we have adjusted those asset sales, in the prior year, to reflect a sales price equal to the cost basis in the asset at the time of the sale. The related party payables from TCI were reduced for the lower asset price. | |||||||||
On March 13, 2014, 6.6 acres of land known as Three Hickory located in Farmers Branch, Texas was transferred back to TCI as a result of the settlement agreement with the lender. On the same day TCI sold the land to the Company for the cost basis of $1.2 million. | |||||||||
Concentration of investment risk. IOT has a high concentration of investment risk on properties in the southwest region of the United States, specifically Texas. This risk includes, but is not limited to, changes in local economic conditions, changes in real estate and zoning laws, increases in real estate taxes, floods, tornados and other acts of God and other factors beyond the control of management. In the opinion of management, this investment risk is partially mitigated by the diversification of property types in other geographical regions of the United States, management’s review of additional investments, acquisitions in other areas and by insurance. |
NOTES_AND_INTEREST_RECEIVABLE_
NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES | |||||||||
NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES | NOTE 3. NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES | ||||||||
Notes and interest receivable from related parties is comprised of junior mortgage loans, which are loans secured by mortgages that are subordinate to one or more prior liens on the underlying real estate. Recourse on the loans ordinarily includes the real estate which secures the loan, other collateral and personal guarantees of the borrower. | |||||||||
All of the Company’s notes receivable are with Unified Housing Foundation, Inc. (“UHF”). UHF is determined to be a related party to the Company due to our significant investment in the performance of the collateral secured under the notes receivable. As of January 1, 2013, the Company agreed to extend the maturity on the notes receivable from UHF for an additional term of five years for the early termination of the preferred interest rate period. The original notes gave a five-year period of preferred interest rate at 5.25%, before returning to the original note rate of 12.0%. The notes mature in December 2032 and have interest rates of 12.0%. | |||||||||
Payments are due from surplus cash flow from operations, sale or refinancing of the underlying properties. These notes are cross collateralized to the extent that any surplus cash available from any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes. Furthermore, any surplus cash available from any of the properties UHF owns, besides the properties underlying these notes, can be used to repay outstanding interest and principal for these notes. The allowance on the notes was a purchase allowance that was netted against the notes when acquired. | |||||||||
At December 2014 and 2013, notes and interest receivable from related parties, net of allowances, totaled $25.6 million and $28.9 million, respectively. As of December 31, 2014 and 2013, we recognized interest income of $3.0 million and $4.8 million, respectively, related to these notes. Below is a summary of notes and interest receivable from related parties (dollars in thousands): | |||||||||
Maturity | Interest | ||||||||
Borrower | Date | Rate | Amount | Security | |||||
Performing loans: | |||||||||
Unified Housing Foundation, Inc. (Echo Station) | Dec-32 | 12.00% | $ 1,481 | 100% Interest in Unified Housing of Temple, LLC | |||||
Unified Housing Foundation, Inc. (Lakeshore Villas) | Dec-32 | 12.00% | 2,000 | Unsecured | |||||
Unified Housing Foundation, Inc. (Lakeshore Villas) | Dec-32 | 12.00% | 6,363 | Membership interest in Housing for Seniors of Humble, LLC | |||||
Unified Housing Foundation, Inc. (Limestone Canyon) | Dec-32 | 12.00% | 3,057 | 100% Interest in Unified Housing of Austin, LLC | |||||
Unified Housing Foundation, Inc. (Limestone Ranch) | Dec-32 | 12.00% | 2,250 | 100% Interest in Unified Housing of Vista Ridge, LLC | |||||
Unified Housing Foundation, Inc. (Parkside Crossing) | Dec-32 | 12.00% | 1,936 | 100% Interest in Unified Housing of Parkside Crossing, LLC | |||||
Unified Housing Foundation, Inc. (Sendero Ridge) | Dec-32 | 12.00% | 5,174 | 100% Interest in Unified Housing of Sendero Ridge, LLC | |||||
Unified Housing Foundation, Inc. (Timbers of Terrell) | Dec-32 | 12.00% | 1,323 | 100% Interest in Unified Housing of Terrell, LLC | |||||
Unified Housing Foundation, Inc. (Tivoli) | Dec-32 | 12.00% | 1,826 | 100% Interest in Unified Housing of Tivoli, LLC | |||||
Accrued interest | 2,051 | ||||||||
Total Performing | $ 27,461 | ||||||||
Allowance for estimated losses | (1,826) | ||||||||
Total | $ 25,635 | ||||||||
All are related party notes. | |||||||||
INVESTMENTS_IN_UNCONSOLIDATED_
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEESPolicies | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES | |||||||||||||
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES | NOTE 4. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES | ||||||||||||
Investments in unconsolidated subsidiaries, jointly owned companies and other investees in which we have a 20% to 50% interest or otherwise exercise significant influence are carried at cost, adjusted for the Company’s proportionate share of their undistributed earnings or losses, via the equity method of accounting. | |||||||||||||
Percent ownership | |||||||||||||
Investee | 2014 | 2013 | 2012 | ||||||||||
TCI Eton Square, L.P. ("Eton Square") | 0 | % | 0 | % | 10 | % | |||||||
Our interest in Eton Square, LP was 0% as of December 31, 2014 and December 31, 2013, respectively, and 10% as of December 31, 2012. We accounted for this interest under the equity method because the general partner was a related party and exercised significant influence over the operations and financial activities. Accordingly, the investment was carried at cost, and adjusted for the Companies’ proportionate share of earnings or losses. Due to the losses accounted for under the equity method, our investment is now at zero. | |||||||||||||
As of April 8, 2013, the underlying asset owned by this entity was transferred to the existing lender in a settlement agreement and IOT no longer recorded this entity as an investment on its books. IOT recorded no gain or loss on the transfer. | |||||||||||||
The market values as of the years ended December 31, 2014 and December 31, 2013 were zero, due to the transfer. The market value as of December 31, 2012 was not determinable as there were no traded markets, either active or inactive, for this investment. | |||||||||||||
The following is a summary of the financial position and results of operations from our investees (dollars in thousands): | |||||||||||||
2014 | 2013(1) | 2012 | |||||||||||
Real Estate, net of accumulated depreciation | $ | - | $ | - | $ | 9,660 | |||||||
Other assets | - | - | 641 | ||||||||||
Notes payable | - | - | (9,647 | ) | |||||||||
Other liabilities | (7,470 | ) | (7,470 | ) | (3,972 | ) | |||||||
Shareholders' equity/partners' capital | $ | 7,470 | $ | 7,470 | $ | 3,318 | |||||||
Rents | $ | - | $ | 224 | $ | 1,117 | |||||||
Depreciation and amortization | - | (140 | ) | (877 | ) | ||||||||
Property operating expenses | - | (224 | ) | (819 | ) | ||||||||
General and administrative | - | (5 | ) | (24 | ) | ||||||||
Mortgage and loan interest | - | (155 | ) | (682 | ) | ||||||||
Provision for losses | - | - | (2,400 | ) | |||||||||
Loss from continuing operations | - | (300 | ) | (3,685 | ) | ||||||||
Income from discontinued operations | - | - | - | ||||||||||
Net loss | $ | - | $ | (300 | ) | $ | (3,685 | ) | |||||
Company's proportionate share of losses (2) | $ | - | $ | - | $ | (37 | ) | ||||||
(1) Financial results are represented through April 2013, the date of the asset transfer to the existing lender. | |||||||||||||
(2) Losses are recorded to the extent of the carrying value of the partner's capital contribution. | |||||||||||||
NOTES_AND_INTEREST_PAYABLE
NOTES AND INTEREST PAYABLE | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
NOTES AND INTEREST PAYABLE | |||||||
NOTES AND INTEREST PAYABLE | NOTE 5. NOTES AND INTEREST PAYABLE | ||||||
The following table lists the mortgage notes payable as of December 31, 2014 (dollars in thousands): | |||||||
Lender | Maturity | Principal | |||||
Balance | |||||||
Realty Advisors, Inc.* | 12/30/16 | $ | 10,236 | ||||
Propel Financial Services | 6/1/20 | $ | 4 | ||||
Accrued interest | - | ||||||
$ | 10,240 | ||||||
The following table shows the principal payments due on our notes payable through the next five years and thereafter (dollars in thousands): | |||||||
Year | Amount | ||||||
2015 | $ 1,054 | ||||||
2016 | 9,184 | ||||||
2017 | 1 | ||||||
2018 | 1 | ||||||
2019 | - | ||||||
Thereafter | - | ||||||
Total | $ 10,240 | ||||||
*On December 30, 2013, Realty Advisors, Inc. (“RAI”), a related party, obtained a $20 million mortgage to a lender on the Company’s behalf, secured by Mercer/Travelers land owned by the Company and 100.05 acres of land owned by its parent TCI. The Company and TCI have executed a promissory note to RAI for the same terms as the lender’s loan with a maturity of December 30, 2016, and a variable interest rate of prime plus 1.5% with an interest rate floor of 6%. On May 28, 2014, a $1.5 million principal payment was made and two additional land parcels, including 8.0 acres of Ladue land owned by TCI and 16.75 acres of Valwood land owned by ARL, were substituted as collateral under the note in exchange for a release of a $4 million deposit account. The principal balance is allocated based on the land valuation. | |||||||
There is a property tax loan in the amount of $3,712 that accrues interest at 12.50% and matures on June 1, 2020. | |||||||
RECEIVABLE_FROM_AND_PAYABLE_TO
RECEIVABLE FROM AND PAYABLE TO RELATED PARTIES | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
RECEIVABLE FROM AND PAYABLE TO RELATED PARTIES | ||||||||||||||
RECEIVABLE FROM AND PAYABLE TO RELATED PARTIES | NOTE 6. RELATED PARTY TRANSACTIONS AND FEES | |||||||||||||
The Advisory agreement provides for Pillar or a related party of Pillar to receive fees and cost reimbursements as defined in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. Cost reimbursements are allocated based on the relative market values of the Company’s assets. The Company and Pillar entered into an Advisory Agreement and Cash Management Agreement to further define the administration of the Company’s day-to-day investment operations, relationship contacts, flow of funds and deposit and borrowing of funds. The fees and cost reimbursements paid to Pillar, TCI and related parties are detailed below (dollars in thousands): | ||||||||||||||
Fees: | 2014 | 2013 | 2012 | |||||||||||
Advisory | 692 | 830 | 815 | |||||||||||
Net income | 203 | 695 | 180 | |||||||||||
Construction managmeent | - | - | - | |||||||||||
Tax sharing agreement | 946 | 3,055 | 839 | |||||||||||
$ | 1,841 | $ | 4,580 | $ | 1,834 | |||||||||
Other Expense: | ||||||||||||||
Cost reimbursements | 237 | 234 | 155 | |||||||||||
Revenue: | ||||||||||||||
Rental revenue | - | - | - | |||||||||||
Interest received | $ | 1,692 | $ | 2,364 | $ | 2,695 | ||||||||
1,692 | 2,364 | 2,695 | ||||||||||||
As of December 31, 2014, IOT has notes and interest receivable of $27.5 million due from Unified Housing Foundation, Inc. and recognized interest income of $3.0 million related to these notes receivable. See details in Part 2, Item 8. “Note 3. Notes and Interest Receivable From Related Parties.” | ||||||||||||||
The following table reconciles the beginning and ending balances of amounts receivable from related parties as of December 31, 2014 (dollars in thousands): | ||||||||||||||
TCI | Pillar | Total | ||||||||||||
Balance, December 31, 2013 | $ | 39,207 | $ | - | $ | 39,207 | ||||||||
Cash transfers | - | 5,836 | 5,836 | |||||||||||
Advisory fees | - | (692 | ) | (692 | ) | |||||||||
Net income fee | - | (203 | ) | (203 | ) | |||||||||
Cost reimbursements | - | (237 | ) | (237 | ) | |||||||||
Expenses paid by advisor | - | (68 | ) | (68 | ) | |||||||||
Financing (mortgage payments) | - | (2,927 | ) | (2,927 | ) | |||||||||
Significant transaction | - | (1,202 | ) | (1,202 | ) | |||||||||
Interest income | 1,692 | - | 1,692 | |||||||||||
Tax Sharing Expense | (946 | ) | - | (946 | ) | |||||||||
Purchase of obligation | 507 | (507 | ) | - | ||||||||||
Balance, December 31, 2014 | $ | 40,460 | $ | - | $ | 40,460 | ||||||||
Sales to our parent, TCI, have previously been reflected at the fair value sales price. Upon discussion with the SEC and in review of the guidance pursuant to ASC 250-10-45-22 to 24, we have adjusted those asset sales, in the prior year, to reflect a sales price equal to the cost basis in the asset at the time of the sale. The related party payables from TCI were reduced for the lower asset price. | ||||||||||||||
On March 13, 2014, 6.6 acres of land known as Three Hickory located in Farmers Branch, Texas was transferred back to TCI as a result of the settlement agreement with the lender. On the same day TCI sold the land to the Company for $1.2 million. | ||||||||||||||
IOT is part of a tax sharing and compensating agreement with respect to federal income taxes between ARL, TCI and IOT and their subsidiaries that was entered into in July of 2009. That agreement continued until August 31, 2012 at which time a new tax sharing and compensating agreement was entered into by TCI, ARL, IOT and MRHI, for the remainder of 2012 and subsequent years. The expense (benefit) in each year was calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory tax rate of 35%. IOT paid TCI $0.9 million in 2014 for the tax sharing agreement. |
DIVIDENDS
DIVIDENDS | 12 Months Ended |
Dec. 31, 2014 | |
DIVIDENDS: | |
DIVIDENDS | NOTE 7. DIVIDENDS |
IOT’s Board of Directors established a policy that dividend declarations on common stock would be determined on an annual basis following the end of each year. In accordance with that policy, no dividends on IOT’s common stock were declared for 2014, 2013, or 2012. Future distributions to common stockholders will be determined by the Board of Directors in light of conditions then existing, including the Company’s financial condition and requirements, future prospects, restrictions in financing agreements, business conditions and other factors deemed relevant by the Board. | |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INCOME TAXES | |||||||||||||
INCOME TAXES | NOTE 8. INCOME TAXES | ||||||||||||
For tax periods ending before August 31, 2012, IOT was part of the ARL consolidated federal return. After that date, IOT and the rest of the ARL group joined the MRHI consolidated group for tax purposes. The income tax expense for the first part of the 2012 tax period was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT. That agreement continued until August 31, 2012 at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and MRHI for the remainder of 2012 and subsequent years. For 2014, MRHI, ARL, TCI and IOT had a combined net taxable loss and IOT recorded a current tax expense of $0.9 million. The benefit or expense is calculated based on the amount of losses absorbed by taxable income multiplied by the statutory rate of 35% per the tax sharing and compensating agreements. | |||||||||||||
Current income tax expense is attributable to (dollars in thousands): | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Income from continuing operations | $ | 2,705 | $ | 8,729 | $ | 2,360 | |||||||
Income from discontinued operations | - | - | 37 | ||||||||||
$ | 2,705 | $ | 8,729 | $ | 2,397 | ||||||||
The following table presents the principal reasons for the differences between the Company’s effective tax rate and the United States statutory income tax rate of 35% (dollars in thousands): | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Federal income tax at statutory rate | $ | 946 | $ | 3,055 | $ | 839 | |||||||
State tax expense | - | - | 8 | ||||||||||
Gain on sale differences | - | - | - | ||||||||||
Other | - | - | (8 | ) | |||||||||
Utilization of net operating loss and minimum tax credit carry forwards | - | - | - | ||||||||||
Effective income tax rate | 35 | % | 35 | % | 35 | % | |||||||
Deferred income taxes reflect the tax effects of temporary timing differences between carrying amounts of assets and liabilities reflected on the financial statements and the amounts used for income tax purposes. IOT’s tax basis in its net assets differs from the amount at which its net assets are reported for financial statement purposes, principally due to the accounting for gains and losses on property sales, and depreciation on owned properties. The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (dollars in thousands): | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Accumulated depreciation and amortization | $ | (516 | ) | $ | (514 | ) | $ | (514 | ) | ||||
Allowance for loss | 694 | 694 | 694 | ||||||||||
Other | - | - | 38 | ||||||||||
Federal benefit of NOL carryforward | 1,078 | 1,078 | 1,078 | ||||||||||
Federal benefit of AMT caryforward | 164 | 164 | 164 | ||||||||||
Deferred tax asset | $ | 1,420 | $ | 1,422 | $ | 1,460 | |||||||
Less valuation allowance | (1,420 | ) | (1,422 | ) | (1,460 | ) | |||||||
Total deferred tax asset | $ | - | $ | - | $ | - | |||||||
Recognition of the benefits of deferred tax assets will require IOT to generate future taxable income. There is no assurance that IOT will generate earnings in future years. Therefore, IOT has established a valuation allowance for deferred tax assets of approximately $1.4 million, $1.4 million and $1.5 million as of December 31, 2014, 2013 and 2012, respectively. | |||||||||||||
In 2014, IOT used approximately $2.7 million of current losses from the consolidated group. In 2013, the company used approximately $8.7 million of losses from the ARL consolidated group. In 2012, IOT used approximately $2.4 million of losses from the consolidated group. The most recent loss year is 2010, which, if not used, will expire in 2030. The alternative minimum tax credit balance did not change in 2014 and remains at approximately $0.2 million. The credit has no expiration date. | |||||||||||||
IOT is subject to routine audits by taxing jurisdictions; however, there are currently no audits in progress for any tax periods. Management believes IOT is no longer subject to income tax examinations for years prior to 2011. |
OPERATING_SEGMENTS
OPERATING SEGMENTS | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
OPERATING SEGMENTS | |||||||||||||||||
OPERATING SEGMENTS | NOTE 9. OPERATING SEGMENTS | ||||||||||||||||
Our segments are based on management’s method of internal reporting which classifies its operations by property type. The segments are commercial, land and other. Significant differences among the accounting policies of the operating segments as compared to the Consolidated Financial Statements principally involve the calculation and allocation of administrative and other expenses. Management evaluates the performance of each of the operating segments and allocates resources to them based on their net operating income and cash flow. | |||||||||||||||||
Items of income that are not reflected in the segments are interest, other income, gain on debt extinguishment, gain on condemnation award, equity in partnerships, and gains on sale of real estate. Expenses that are not reflected in the segments are provision for losses, advisory, net income and incentive fees, general and administrative, non-controlling interests, foreign currency transaction loss and net loss from discontinued operations before gains on sale of real estate. | |||||||||||||||||
The segment labeled as “Other” consists of revenue and operating expenses related to the notes receivable and corporate debt. | |||||||||||||||||
The Company’s segments are based on our method of internal reporting which classifies operations by the type of property in the portfolio. The Company’s segments by use of property are land and other (dollars in thousands): | |||||||||||||||||
Commercial | |||||||||||||||||
For the Twelve Months Ended December 31, 2014 | Properties | Land | Other | Total | |||||||||||||
Operating revenue | $ | - | $ | - | $ | - | $ | - | |||||||||
Operating expenses | - | 50 | - | 50 | |||||||||||||
Mortgage and loan interest | - | 674 | - | 674 | |||||||||||||
Loan charges | - | 32 | - | 32 | |||||||||||||
Interest income | - | - | 4,729 | 4,729 | |||||||||||||
Segment operating income (loss) | $ | - | $ | (756 | ) | $ | 4,729 | $ | 3,973 | ||||||||
Capital expenditures | - | - | - | - | |||||||||||||
Assets | - | 25,717 | - | 25,717 | |||||||||||||
Property Sales | |||||||||||||||||
Sales price | $ | - | $ | - | $ | - | $ | - | |||||||||
Cost of sale | - | - | - | - | |||||||||||||
Deferred current gain | - | - | - | - | |||||||||||||
Recognized prior deferred gain | - | - | - | - | |||||||||||||
Gain on sale | $ | - | $ | - | $ | - | $ | - | |||||||||
Commercial | |||||||||||||||||
Properties | Land | Other | Total | ||||||||||||||
For the Twelve Months Ended December 31, 2013 | |||||||||||||||||
Operating revenue | $ | - | - | - | $ | - | |||||||||||
Operating expenses | - | 87 | - | 87 | |||||||||||||
Mortgage and loan interest | - | 1,160 | - | 1,160 | |||||||||||||
Loan charges | - | 830 | - | 830 | |||||||||||||
Interest income | - | - | 7,129 | 7,129 | |||||||||||||
Segment operating income (loss) | $ | - | $ | (2,077 | ) | $ | 7,129 | $ | 5,052 | ||||||||
Capital expenditures | - | - | - | - | |||||||||||||
Assets | - | 24,511 | - | 24,511 | |||||||||||||
Property Sales | |||||||||||||||||
Sales price | $ | - | $ | - | $ | - | $ | - | |||||||||
Cost of sale | - | - | - | - | |||||||||||||
Deferred current gain | - | - | - | - | |||||||||||||
Recognized prior deferred gain | - | - | - | - | |||||||||||||
Gain on sale | $ | - | $ | - | $ | - | $ | - | |||||||||
Commercial | |||||||||||||||||
Properties | Land | Other | Total | ||||||||||||||
For the Twelve Months Ended December 31, 2012 | |||||||||||||||||
Operating revenue | $ | - | $ | - | $ | - | $ | - | |||||||||
Operating expenses | - | 67 | - | 67 | |||||||||||||
Mortgage and loan interest | - | 1,284 | - | 1,284 | |||||||||||||
Interest income | - | - | 5,183 | 5,183 | |||||||||||||
Segment operating income (loss) | $ | - | $ | (1,351 | ) | $ | 5,183 | 3,832 | |||||||||
Capital expenditures | - | - | - | - | |||||||||||||
Assets | - | 24,511 | - | 24,511 | |||||||||||||
Property Sales | |||||||||||||||||
Sales price | $ | - | $ | - | $ | - | $ | - | |||||||||
Cost of sale | - | - | - | - | |||||||||||||
Deferred current gain | - | - | - | - | |||||||||||||
Recognized prior deferred gain | - | - | - | - | |||||||||||||
Gain (loss) on sale | $ | - | $ | - | $ | - | $ | - | |||||||||
The tables below reconcile the segment information to the corresponding amounts in the Consolidated Statements of Operations (dollars in thousands): | |||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||
Segment operating income | $ | 3,973 | $ | 5,052 | $ | 3,832 | |||||||||||
Other non-segment items of income (expense) | |||||||||||||||||
General and administrative | (573 | ) | (734 | ) | (334 | ) | |||||||||||
Net income fee | (203 | ) | (695 | ) | (180 | ) | |||||||||||
Advisory fee to related party | (692 | ) | (830 | ) | (815 | ) | |||||||||||
Other income | - | 5,804 | - | ||||||||||||||
Equity from unconsolidated subsidiaries and investees | - | - | (37 | ) | |||||||||||||
Income tax expense | (946 | ) | (3,063 | ) | (876 | ) | |||||||||||
Income from continuing operations | $ | 1,559 | $ | 5,534 | $ | 1,590 | |||||||||||
The table below reconciles the segment information to the corresponding amounts in the Consolidated Balance Sheets (dollars in thousands): | |||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||
Segment assets | $ | 25,717 | $ | 24,511 | $ | 24,511 | |||||||||||
Notes and interest receivable | 25,635 | 28,867 | 25,176 | ||||||||||||||
Other assets and receivables | 41,724 | 40,435 | 59,819 | ||||||||||||||
Total assets | $ | 93,076 | $ | 93,813 | $ | 109,506 | |||||||||||
DISCONTINUED_OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
DISCONTINUED OPERATIONS | |||||||||||||
Discontinued Operations | NOTE 10. DISCONTINUED OPERATIONS | ||||||||||||
The Company applies the provisions of ASC Topic 360, “Property, Plant and Equipment.” ASC Topic 360 requires that long-lived assets that are to be disposed of by sale be measured at the lesser of (1) book value or (2) fair value less cost to sell. In addition, it requires that one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. | |||||||||||||
Discontinued operations relates to properties that were either sold or repositioned as held-for-sale as of the year ended 2014, 2013 and 2012. There were no properties sold in 2014 or 2013. The statements of operations for all prior periods presented have been restated to reflect the reclassification to discontinued operations. The results of operations from these properties are shown below (dollars in thousands): | |||||||||||||
For Years Ended December 31, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Revenue | |||||||||||||
Rental and other property revenues | $ | - | $ | - | $ | - | |||||||
- | - | - | |||||||||||
Expenses | |||||||||||||
General and administrative | - | 24 | 106 | ||||||||||
- | 24 | 106 | |||||||||||
Net loss from discontinued operations before gains on sale of real estate, taxes, and fees | - | (24 | ) | (106 | ) | ||||||||
Income tax benefit | - | 8 | 37 | ||||||||||
Net loss from discontinued operations | $ | - | $ | (16 | ) | $ | (69 | ) | |||||
The Company’s application of ASC Topic 360 results in the presentation of the net operating results of these qualifying properties sold or held for sale during 2014, 2013 and 2012 as income from discontinued operations. The application of ASC Topic 360 does not have an impact on net income available to common shareholders. ASC Topic 360 only impacts the presentation of these properties within the Consolidated Statements of Operations. | |||||||||||||
QUARTERLY_DATA
QUARTERLY DATA | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
QUARTERLY DATA | |||||||||||||||||
QUARTERLY DATA | NOTE 11. QUARTERLY DATA | ||||||||||||||||
The following is a table of quarterly results of operations for the years 2014, 2013 and 2012: | |||||||||||||||||
Three Months Ended 2014 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except per share amounts) | |||||||||||||||||
2014 | |||||||||||||||||
Rental and other property revenues | $ | - | $ | - | $ | - | $ | - | |||||||||
Total operating expenses | 390 | 363 | 380 | 385 | |||||||||||||
Operating loss | (390 | ) | (363 | ) | (380 | ) | (385 | ) | |||||||||
Other income, net of other expenses | 949 | 1,058 | 1,003 | 1,013 | |||||||||||||
Income before gain on land sales, non-contolling interest, and taxes | 559 | 695 | 623 | 628 | |||||||||||||
Gain on land sales | - | - | - | - | |||||||||||||
Income tax expense | - | - | - | (946 | ) | ||||||||||||
Net income (loss) from continuing operations | 559 | 695 | 623 | (318 | ) | ||||||||||||
Net income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income (loss) | $ | 559 | $ | 695 | $ | 623 | $ | (318 | ) | ||||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income (loss) from continuing operations | $ | 0.13 | $ | 0.17 | $ | 0.15 | $ | (0.08 | ) | ||||||||
Income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income (loss) applicable to common shares | $ | 0.13 | $ | 0.17 | $ | 0.15 | $ | (0.08 | ) | ||||||||
Weighted average common shares used in computing earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Earnings per share - diluted | |||||||||||||||||
Income (loss) from continuing operations | $ | 0.13 | $ | 0.17 | $ | 0.15 | $ | (0.08 | ) | ||||||||
Income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income (loss) applicable to common shares | $ | 0.13 | $ | 0.17 | $ | 0.15 | $ | (0.08 | ) | ||||||||
Weighted average common shares used in computing diluted earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Three Months Ended 2013 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except per share amounts) | |||||||||||||||||
2013 | |||||||||||||||||
Rental and other property revenues | $ | - | $ | - | $ | - | $ | - | |||||||||
Total operating expenses | 406 | 477 | 505 | 958 | |||||||||||||
Operating loss | (406 | ) | (477 | ) | (505 | ) | (958 | ) | |||||||||
Other income, net of other expenses | 1,119 | 1,123 | 1,130 | 7,571 | |||||||||||||
Income before gain on land sales, non-controlling interest, and taxes | 713 | 646 | 625 | 6,613 | |||||||||||||
Gain on land sales | - | - | - | - | |||||||||||||
Income tax expense | (6 | ) | - | - | (3,057 | ) | |||||||||||
Net income from continuing operations | 707 | 646 | 625 | 3,556 | |||||||||||||
Net loss from discontinued operations | (12 | ) | - | - | (4 | ) | |||||||||||
Net income | $ | 695 | $ | 646 | $ | 625 | $ | 3,552 | |||||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income from continuing operations | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.86 | |||||||||
Income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income applicable to common shares | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.86 | |||||||||
Weighted average common shares used in computing earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Earnings per share - diluted | |||||||||||||||||
Income from continuing operations | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.86 | |||||||||
Income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income applicable to common shares | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.86 | |||||||||
Weighted average common shares used in computing diluted earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Three Months Ended 2012 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||
2012 | |||||||||||||||||
Rental and other property revenues | $ | - | $ | - | $ | - | $ | - | |||||||||
Total operating expenses | 383 | 426 | 285 | 302 | |||||||||||||
Operating loss | (383 | ) | (426 | ) | (285 | ) | (302 | ) | |||||||||
Other income, net of other expenses | 897 | 1,424 | 682 | 859 | |||||||||||||
Income before gain on land sales, non-controlling interest, and taxes | 514 | 998 | 397 | 557 | |||||||||||||
Gain on land sales | - | - | - | - | |||||||||||||
Income tax expense | (2 | ) | - | (14 | ) | (860 | ) | ||||||||||
Net income (loss) from continuing operations | 512 | 998 | 383 | (303 | ) | ||||||||||||
Net loss from discontinued operations | (5 | ) | - | (27 | ) | (37 | ) | ||||||||||
Net income (loss) | $ | 507 | $ | 998 | $ | 356 | $ | (340 | ) | ||||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income (loss) from continuing operations | $ | 0.12 | $ | 0.24 | $ | 0.09 | $ | (0.07 | ) | ||||||||
Loss from discontinued operations | - | - | (0.01 | ) | (0.01 | ) | |||||||||||
Net income (loss) applicable to common shares | $ | 0.12 | $ | 0.24 | $ | 0.08 | $ | (0.08 | ) | ||||||||
Weighted average common shares used in computing earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Earnings per share - diluted | |||||||||||||||||
Income (loss) from continuing operations | $ | 0.12 | $ | 0.24 | $ | 0.09 | $ | (0.07 | ) | ||||||||
Loss from discontinued operations | - | - | (0.01 | ) | (0.01 | ) | |||||||||||
Net income (loss) applicable to common shares | $ | 0.12 | $ | 0.24 | $ | 0.08 | $ | (0.08 | ) | ||||||||
Weighted average common shares used in computing diluted earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and contingenciestextblock | |
Commitments Contingencies | NOTE 12. COMMITMENTS, CONTINGENCIES AND LIQUIDITY |
Litigation | |
The Company and its subsidiaries, from time to time, have been involved in various items of litigation incidental to and in the ordinary course of its business and, in the opinion of management; the outcome of such litigation will not have a material adverse impact upon the Company’s financial condition, results of operations or liquidity. | |
In 2005, IOT purchased 10.08 acres of land, located in Dallas County, Texas, from TCI, a related party, and obtained 3rd party financing. On August 2, 2011, the property was sold to ABCLD Real Estate, LLC ("ABCLD"), a related party. Ownership of this property was subsequently transferred from ABCLD to the lender through foreclosure procedures. | |
On April 27, 2012, ABCLD filed a lawsuit for wrongful foreclosure against the lender. On September 9, 2014, the court entered a final judgement declaring that the foreclosure was void as a matter of law. ABCLD subsequently paid $7 million to get the property back. | |
The plaintiffs appealed the final judgement and also allege that ABCLD and other various entities are still responsible for deficiencies, unpaid interest and related attorney fees. With the $7 million that was applied to the outstanding loan balance, the potential loss is significantly reduced, and the amount of final damages is contingent upon the outcome of the appeal. In the event of an unfavorable outcome, we believe the potential loss should be no more than $2 million. At this time, it is unknown as to the amount of damages and deficiency balances that the plaintiff will be entitled to recover, if any. Further, if there is any future obligations, it is unknown what the Company’s portion would be. | |
ART and ART Midwest, Inc. | |
In August 2014, David M. Clapper and two entities related to Mr. Clapper (all, collectively, the “Clapper Parties”) filed a complaint in the U. S. District Court against the Company, its directors and certain of its officers alleging purported transactions to the detriment of the Clapper Parties and others by transferring assets, cash and diverting property. Management of the Company believes that there is no basis for this action against the Company and its officers and directors and intends to vigorously defend itself. The August 2014 complaint does not allege any facts relating to the Company, except that the named directors and officers are directors and officers of the Company and that the Company is a Nevada corporation, with its headquarters/principal place of business in Dallas, Texas. | |
The case arises over other litigation, commenced in 1999, among the Clapper Parties and American Realty Trust, Inc. (“ART”) 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. | |
Liquidity | |
Management anticipates that IOT will generate excess cash from operations in 2015 due to the interest collected from notes receivable; however, such excess may not be sufficient to discharge all of IOT’s debt obligations as they mature. Management intends to reduce its cash invested with its Advisor to meet its cash requirements not funded through operations. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2014 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 13. SUBSEQUENT EVENTS |
The Company has evaluated subsequent events through March 30, 2015, the date the financial statements were available to be issued, and has determined that there are none to be reported. |
Organization_And_Basis_Of_Pres
Organization And Basis Of Presentation (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Organization And Basis Of Presentation (Policies) | |
FASB Accounting Standards Codification | FASB Accounting Standards Codification. The Company presents its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). In June 2009, the Financial Accounting Standards Board (“FASB”) completed its accounting guidance codification project. The FASB Accounting Standards Codification (“ASC”) became effective for the Company’s financial statements issued subsequent to June 30, 2009 and is the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. As of the effective date, the company will no longer refer to the authoritative guidance dictating its accounting methodologies under the previous accounting standards hierarchy. Instead, the Company will refer to the ASC Codification as the sole source of authoritative literature. |
Organization | Organization and business. Income Opportunity Realty Investors, Inc. is the successor to a California business trust organized on December 14, 1984, which commenced operations on April 10, 1985. Due to the completion of a tender offer by American Realty Investors, Inc. (“ARL”), a related party, on March 19, 2003, and the resulting concentration of ownership, IOT no longer met the requirement as of January 1, 2003 for tax treatment as a REIT. IOT cannot re-qualify for REIT tax status for at least five years after January 1, 2003. As of December 31, 2014, Transcontinental Realty Investors, Inc. (“TCI”), a related party, owns approximately 81.12% of IOT’s outstanding shares of Common Stock. The Company is headquartered in Dallas, Texas, and its common stock trades on the New York Stock Exchange Euronext (“NYSE MKT”) under the symbol (“IOT”). |
IOT is a “C” corporation for U.S. federal income tax purposes. For tax periods ending before August 31, 2012, IOT filed an annual consolidated income tax return with ARL and TCI and their subsidiaries. ARL was the common parent for the consolidated group. After that date, IOT and the rest of the ARL group joined the May Realty Holdings, Inc. (“MRHI”, formerly known as Realty Advisors Management, Inc. “RAMI”, effective August 7, 2014), consolidated group for tax purposes. | |
IOT’s Board of Directors represents the Company’s shareholders and is responsible for directing the overall affairs of IOT and for setting the strategic policies that guide the Company. As of April 30, 2011, the Board of Directors delegated the day-to-day management of the Company to Pillar Income Asset Management, Inc. (“Pillar”), a Nevada corporation, under an Advisory Agreement that is reviewed annually by IOT’s Board of Directors. The directors of IOT are also directors of ARL and TCI. The Chairman of the Board of Directors of IOT also serves as the Chairman of the Board of Directors of ARL and TCI. The officers of IOT also serve as officers of ARL, TCI and Pillar. | |
Effective since April 30, 2011, Pillar, the sole shareholder of which is Realty Advisors, LLC, a Nevada limited liability company, the sole member of which is Realty Advisors, Inc. (“RAI”), a Nevada corporation, the sole shareholder of which is MRHI, a Nevada corporation, the sole shareholder of which is a trust known as the May Trust, became the Company’s external Advisor and Cash Manager. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges, for IOT’s benefit, debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to ARL and TCI. As the contractual advisor, Pillar is compensated by IOT under an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. IOT has no employees. Employees of Pillar render services to IOT in accordance with the terms of the Advisory Agreement. | |
Effective since January 1, 2011, Regis Realty Prime, LLC, dba Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial properties and provides brokerage services. Regis receives property management fees and leasing commissions in accordance with the terms of its property-level management agreement. Regis is also entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement. See Part III, Item 10. “Directors, Executive Officers and Corporate Governance – Property Management”. | |
Our primary business is investing in real estate and mortgage receivables. Land held for development or sale is our sole operating segment. At December 31, 2014, our land consisted of 184.7 acres of land held for future development or sale. All of our land holdings are located in Texas. The principal source of revenue for the Company is interest income on over $25.4 million of note receivables due from related parties. | |
Basis of Presentation | Basis of presentation. The accompanying Consolidated Financial Statements include our accounts, our subsidiaries, generally all of which are wholly-owned, and all entities in which we have a controlling interest. Arrangements that are not controlled through voting or similar rights are accounted for as a Variable Interest Entity (VIE), in accordance with the provisions and guidance of ASC Topic 810 “Consolidation”, whereby we have determined that we are a primary beneficiary of the VIE and meet certain criteria of a sole general partner or managing member as identified in accordance with Emerging Issues Task Force (“EITF”) Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights (“EITF 04-5”). VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders as a group lack adequate decision making ability, the obligation to absorb expected losses or residual returns of the entity, or have voting rights that are not proportional to their economic interests. The primary beneficiary generally is the entity that provides financial support and bears a majority of the financial risks, authorizes certain capital transactions, or makes operating decisions that materially affect the entity’s financial results. All significant intercompany balances and transactions have been eliminated in consolidation. |
In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investors’ ability to control or significantly influence key decisions for the VIE; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current future fair values and performance of real estate held by these VIEs and general market conditions. As of December 31, 2014, IOT was not the primary beneficiary of a VIE. | |
For entities in which we have less than a controlling financial interest or entities where it is not deemed to be the primary beneficiary, the entities are accounted for using the equity method of accounting. Accordingly, our share of the net earnings or losses of these entities is included in consolidated net income. IOT’s investment in Eton Square was 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). We continually evaluate the recoverability of the carrying value of its real estate assets using the methodology prescribed in ASC Topic 360, “Property, Plant and Equipment”. Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under ASC Topic 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value. |
Any properties that are treated as “subject to sales contract” on the Consolidated Balance Sheets and are listed in detail in Schedule III, “Real Estate and Accumulated Depreciation” are those in which we have not recognized the legal sale according to the guidance in ASC 360-20 due to various factors, disclosed in each sale transaction under Item 1 Significant Real Estate Acquisitions/Dispositions and Financing. Any sale transaction where the guidance reflects that a sale had not occurred, the asset involved in the transaction, including the debt and property operations, remained on the books of the Company. We continue to charge depreciation to expense as a period costs for the property until such time as the property has been classified as held for sale in accordance with guidance reflected in ASC 360-10-45 “Impairment or Disposal of Long-Lived Assets”. | |
Sales to our parent, TCI, have previously been reflected at the fair value sales price. Upon discussion with the SEC and in review of the guidance pursuant to ASC 250-10-45-22 to 24, we have adjusted those asset sales, in the prior year, to reflect a sales price equal to the cost basis in the asset at the time of the sale. The related party payables from TCI were reduced for the lower asset price. | |
Real Estate Held for Sale | Real estate held for sale. We periodically classify real estate assets as held for sale. An asset is classified as held for sale after the approval of our board of directors and after an active program to sell the asset has commenced. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying Consolidated Balance Sheets. Upon a decision to no longer market as an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated. The operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying statements of operations. Income from discontinued operations includes the revenues and expenses, including depreciation and interest expense, associated with the assets. This classification of operating results as discontinued operations applies retroactively for all periods presented. Additionally, gains and losses on assets designated as held for sale are classified as part of discontinued operations. |
Cost Capitalization | Cost Capitalization. The cost of buildings and improvements includes the purchase price of property, legal fees and other acquisition costs. Costs directly related to planning, developing, initial leasing and constructing a property are capitalized and classified as Real Estate in the Consolidated Balance Sheets. Capitalized development costs include interest, property taxes, insurance, and other direct project costs incurred during the period of development. |
A variety of costs are incurred in the acquisition, development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. Our capitalization policy on development properties is guided by ASC Topic 835-20 “Interest – Capitalization of Interest” and ASC Topic 970 “Real Estate - General”. The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed and held available for occupancy upon the receipt of certificates of occupancy, but no later than one year from cessation of major construction activity. We cease capitalization on the portion (1) substantially completed and (2) occupied or held available for occupancy, and we capitalize only those costs associated with the portion under construction. | |
We capitalize leasing costs which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable. We allocate these costs to individual tenant leases and amortize them over the related lease term. | |
Fair Value Measurements | Fair value measurement. We apply the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures,” to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entity’s own data. |
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows: | |
Level 1—Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets. | |
Level 2—Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
Level 3—Unobservable inputs that are significant to the fair value measurement. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. | |
Management reviews the carrying values of our properties and mortgage notes receivable at least annually and whenever events or a change in circumstances indicates that impairment may exist. Impairment is considered to exist if the future cash flow from a property (undiscounted and without interest) is less than the carrying amount of the property. For notes receivable, impairment is considered to exist if it is probable that all amounts due under the terms of the note will not be collected. The note receivable review includes an evaluation of the collateral property securing such note. If impairment is found to exist, a provision for loss is recorded by a charge against earnings. The property review generally includes: (1) selective property inspections; (2) a review of the property’s current rents compared to market rents; (3) a review of the property’s expenses; (4) a review of maintenance requirements; (5) a review of the property’s cash flow; (6) discussions with the manager of the property; and (7) a review of properties in the surrounding area. | |
Related Parties | Related parties. We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests, or affiliates of the entity. |
Recognition of revenue | Recognition of revenue. Our revenues are composed largely of interest income on notes receivable. Included in discontinued operations, in accordance with ASC 805 “Business Combinations”, we recognize rental revenue of acquired in-place “above-” and “below-market” leases at their fair values over the terms of the respective leases, as applicable. |
Sales and the associated gains or losses of real estate assets are recognized in accordance with the provisions of ASC Topic 360-20, “Property, Plant and Equipment—Real Estate Sale”. The specific timing of a sale is measured against various criteria in ASC 360-20 related to the terms of the transaction and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain recognition and accounts for the continued operations of the property by applying the finance, leasing, deposit, installment or cost recovery methods, as appropriate, until the sales criteria are met. | |
Non-performing notes receivable | Non-performing notes receivable. We consider a note receivable to be non-performing when the maturity date has passed without principal repayment and the borrower is not making interest payments in accordance with the terms of the agreement. |
Interest recognition on notes receivable | Interest recognition on notes receivable. We record interest income as earned in accordance with the terms of the related loan agreements. |
Allowance for estimated losses | Allowance for estimated losses. We assess the collectability of notes receivable on a periodic basis, of which the assessment consists primarily of an evaluation of cash flow projections of the borrower to determine whether estimated cash flows are sufficient to repay principal and interest in accordance with the contractual terms of the note. We recognize impairments on notes receivable when it is probable that principal and interest will not be received in accordance with the contractual terms of the loan. The amount of the impairment to be recognized generally is based on the fair value of the partnership’s real estate that represents the primary source of loan repayment. See Note 3 “Notes and Interest Receivable from Related Parties” for details on our notes receivable. |
Cash Equivalents | Cash equivalents. For purposes of the Consolidated Statements of Cash Flows, all highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. |
Earnings Per Share | Earnings per share. Earnings per share ("EPS") have been computed pursuant to the provisions of ASC 620 “Earnings Per Share”. The computation of basic EPS is calculated by dividing income available to common shareholders 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. |
Use of Estimates | Use of estimates. In the preparation of Consolidated Financial Statements in conformity with GAAP, it is necessary for management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expense for the year ended. Actual results could differ from those estimates. |
Income Tax | Income Taxes. The Company is a “C” corporation for U.S. federal income tax purposes. For tax periods ending before August 31, 2012, the Company filed an annual consolidated income tax return with ARL and TCI and their subsidiaries. ARL was the common parent for the consolidated group. After that date, the Company and the rest of the ARL group joined the MRHI consolidated group for tax purposes. The income tax expense for the first part of the 2012 tax period was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT. That agreement continued until August 31, 2012 at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and MRHI for the remainder of 2012 and subsequent years. The agreement specifies the manner in which the group will share the consolidated tax liability and also how certain tax attributes are to be treated among members of the group. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements. There were no recent accounting pronouncements that our company has not implemented that materially affect our financial statements. |
REAL_ESTATE_TABLE
REAL ESTATE (TABLE) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
REAL ESTATE (TABLE) | |||||||||
REAL ESTATE (TABLE) | Real estate consisted of the following at December 31, (dollars in thousands): | ||||||||
2014 | 2013 | ||||||||
Mercer Crossing/Travelers Land | $ | 24,515 | $ | 24,511 | |||||
Three Hickory | 1,202 | - | |||||||
$ | 25,717 | $ | 24,511 | ||||||
NOTES_AND_INTEREST_RECEIVABLE_1
NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes and Interest Receivable From Related Parties (Tables) | |||||||||
Schedule of Receivables with Imputed Interest | . Below is a summary of notes and interest receivable from related parties (dollars in thousands): | ||||||||
Maturity | Interest | ||||||||
Borrower | Date | Rate | Amount | Security | |||||
Performing loans: | |||||||||
Unified Housing Foundation, Inc. (Echo Station) | Dec-32 | 12.00% | $ 1,481 | 100% Interest in Unified Housing of Temple, LLC | |||||
Unified Housing Foundation, Inc. (Lakeshore Villas) | Dec-32 | 12.00% | 2,000 | Unsecured | |||||
Unified Housing Foundation, Inc. (Lakeshore Villas) | Dec-32 | 12.00% | 6,363 | Membership interest in Housing for Seniors of Humble, LLC | |||||
Unified Housing Foundation, Inc. (Limestone Canyon) | Dec-32 | 12.00% | 3,057 | 100% Interest in Unified Housing of Austin, LLC | |||||
Unified Housing Foundation, Inc. (Limestone Ranch) | Dec-32 | 12.00% | 2,250 | 100% Interest in Unified Housing of Vista Ridge, LLC | |||||
Unified Housing Foundation, Inc. (Parkside Crossing) | Dec-32 | 12.00% | 1,936 | 100% Interest in Unified Housing of Parkside Crossing, LLC | |||||
Unified Housing Foundation, Inc. (Sendero Ridge) | Dec-32 | 12.00% | 5,174 | 100% Interest in Unified Housing of Sendero Ridge, LLC | |||||
Unified Housing Foundation, Inc. (Timbers of Terrell) | Dec-32 | 12.00% | 1,323 | 100% Interest in Unified Housing of Terrell, LLC | |||||
Unified Housing Foundation, Inc. (Tivoli) | Dec-32 | 12.00% | 1,826 | 100% Interest in Unified Housing of Tivoli, LLC | |||||
Accrued interest | 2,051 | ||||||||
Total Performing | $ 27,461 | ||||||||
Allowance for estimated losses | (1,826) | ||||||||
Total | $ 25,635 | ||||||||
INVESTMENT_IN_UNCONSOLIDATED_S
INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES (Tables): | |||||||||||||
INVESTMENTS ACCOUNTED | Undistributed earnings or losses, via the equity method of accounting. | ||||||||||||
Percent ownership | |||||||||||||
Investee | 2014 | 2013 | 2012 | ||||||||||
TCI Eton Square, L.P. ("Eton Square") | 0 | % | 0 | % | 10 | % | |||||||
RESULTS OF OPERATIONS FROM OUR INVESTEES | The following is a summary of the financial position and results of operations from our investees (dollars in thousands): | ||||||||||||
2014 | 2013(1) | 2012 | |||||||||||
Real Estate, net of accumulated depreciation | $ | - | $ | - | $ | 9,660 | |||||||
Other assets | - | - | 641 | ||||||||||
Notes payable | - | - | (9,647 | ) | |||||||||
Other liabilities | (7,470 | ) | (7,470 | ) | (3,972 | ) | |||||||
Shareholders' equity/partners' capital | $ | 7,470 | $ | 7,470 | $ | 3,318 | |||||||
Rents | $ | - | $ | 224 | $ | 1,117 | |||||||
Depreciation and amortization | - | (140 | ) | (877 | ) | ||||||||
Property operating expenses | - | (224 | ) | (819 | ) | ||||||||
General and administrative | - | (5 | ) | (24 | ) | ||||||||
Mortgage and loan interest | - | (155 | ) | (682 | ) | ||||||||
Provision for losses | - | - | (2,400 | ) | |||||||||
Loss from continuing operations | - | (300 | ) | (3,685 | ) | ||||||||
Income from discontinued operations | - | - | - | ||||||||||
Net loss | $ | - | $ | (300 | ) | $ | (3,685 | ) | |||||
Company's proportionate share of losses (2) | $ | - | $ | - | $ | (37 | ) | ||||||
NOTES_AND_INTEREST_PAYABLE_Tab
NOTES AND INTEREST PAYABLE (Tables) | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
NOTES AND INTEREST PAYABLE (Tables) | |||||||
NOTES AND INTEREST PAYABLE | The following table lists the mortgage notes payable as of December 31, 2014 (dollars in thousands): | ||||||
Lender | Maturity | Principal | |||||
Balance | |||||||
Realty Advisors, Inc.* | 12/30/16 | $ | 10,236 | ||||
Propel Financial Services | 6/1/20 | $ | 4 | ||||
Accrued interest | - | ||||||
$ | 10,240 | ||||||
The following table shows the principal payments due on our notes payable through the next five years and thereafter (dollars in thousands): | |||||||
Year | Amount | ||||||
2015 | $ 1,054 | ||||||
2016 | 9,184 | ||||||
2017 | 1 | ||||||
2018 | 1 | ||||||
2019 | - | ||||||
Thereafter | - | ||||||
Total | $ 10,240 |
RECEIVABLE_FROM_AND_PAYABLE_TO1
RECEIVABLE FROM AND PAYABLE TO RELATED PARTIES (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Receivable From And Payable To Affiliates | ||||||||||||||
RECEIVABLE FROM AND PAYABLE TO RELATED PARTIES | The fees and cost reimbursements paid to Pillar, TCI and related parties are detailed below (dollars in thousands): | |||||||||||||
Fees: | 2014 | 2013 | 2012 | |||||||||||
Advisory | 692 | 830 | 815 | |||||||||||
Net income | 203 | 695 | 180 | |||||||||||
Construction managmeent | - | - | - | |||||||||||
Tax sharing agreement | 946 | 3,055 | 839 | |||||||||||
$ | 1,841 | $ | 4,580 | $ | 1,834 | |||||||||
Other Expense: | ||||||||||||||
Cost reimbursements | 237 | 234 | 155 | |||||||||||
Revenue: | ||||||||||||||
Rental revenue | - | - | - | |||||||||||
Interest received | $ | 1,692 | $ | 2,364 | $ | 2,695 | ||||||||
1,692 | 2,364 | 2,695 | ||||||||||||
As of December 31, 2014, IOT has notes and interest receivable of $27.5 million due from Unified Housing Foundation, Inc. and recognized interest income of $3.0 million related to these notes receivable. See details in Part 2, Item 8. “Note 3. Notes and Interest Receivable From Related Parties.” | ||||||||||||||
The following table reconciles the beginning and ending balances of amounts receivable from related parties as of December 31, 2014 (dollars in thousands): | ||||||||||||||
TCI | Pillar | Total | ||||||||||||
Balance, December 31, 2013 | $ | 39,207 | $ | - | $ | 39,207 | ||||||||
Cash transfers | - | 5,836 | 5,836 | |||||||||||
Advisory fees | - | (692 | ) | (692 | ) | |||||||||
Net income fee | - | (203 | ) | (203 | ) | |||||||||
Cost reimbursements | - | (237 | ) | (237 | ) | |||||||||
Expenses paid by advisor | - | (68 | ) | (68 | ) | |||||||||
Financing (mortgage payments) | - | (2,927 | ) | (2,927 | ) | |||||||||
Significant transaction | - | (1,202 | ) | (1,202 | ) | |||||||||
Interest income | 1,692 | - | 1,692 | |||||||||||
Tax Sharing Expense | (946 | ) | - | (946 | ) | |||||||||
Purchase of obligation | 507 | (507 | ) | - | ||||||||||
Balance, December 31, 2014 | $ | 40,460 | $ | - | $ | 40,460 | ||||||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
INCOME TAXES (Tables): | |||||||||||||
INCOME TAXES - OTHER DETAILS (TABLE) | Current income tax expense is attributable to (dollars in thousands): | ||||||||||||
2014 | 2013 | 2012 | |||||||||||
Income from continuing operations | $ | 2,705 | $ | 8,729 | $ | 2,360 | |||||||
Income from discontinued operations | - | - | 37 | ||||||||||
$ | 2,705 | $ | 8,729 | $ | 2,397 | ||||||||
INCOME TAXES - US STATUTORY INCOME TAX RATES (TABLE) | The following table presents the principal reasons for the differences between the Company’s effective tax rate and the United States statutory income tax rate of 35% (dollars in thousands): | ||||||||||||
2014 | 2013 | 2012 | |||||||||||
Federal income tax at statutory rate | $ | 946 | $ | 3,055 | $ | 839 | |||||||
State tax expense | - | - | 8 | ||||||||||
Gain on sale differences | - | - | - | ||||||||||
Other | - | - | (8 | ) | |||||||||
Utilization of net operating loss and minimum tax credit carry forwards | - | - | - | ||||||||||
Effective income tax rate | 35 | % | 35 | % | 35 | % | |||||||
INCOME TAXES - DEFERRED TAX ASSET (TABLE) | The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (dollars in thousands): | ||||||||||||
2014 | 2013 | 2012 | |||||||||||
Accumulated depreciation and amortization | $ | (516 | ) | $ | (514 | ) | $ | (514 | ) | ||||
Allowance for loss | 694 | 694 | 694 | ||||||||||
Other | - | - | 38 | ||||||||||
Federal benefit of NOL carryforward | 1,078 | 1,078 | 1,078 | ||||||||||
Federal benefit of AMT caryforward | 164 | 164 | 164 | ||||||||||
Deferred tax asset | $ | 1,420 | $ | 1,422 | $ | 1,460 | |||||||
Less valuation allowance | (1,420 | ) | (1,422 | ) | (1,460 | ) | |||||||
Total deferred tax asset | $ | - | $ | - | $ | - | |||||||
OPERATING_SEGMENTS_Tables
OPERATING SEGMENTS (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
OPERATING SEGMENTS (Tables) | |||||||||||||||||
OPERATING SEGMENTS - Operating segment information for the three & nine months ended September 30, 2014 and 2013 | The Company’s segments are based on our method of internal reporting which classifies operations by the type of property in the portfolio. The Company’s segments by use of property are land and other (dollars in thousands): | ||||||||||||||||
Commercial | |||||||||||||||||
For the Twelve Months Ended December 31, 2014 | Properties | Land | Other | Total | |||||||||||||
Operating revenue | $ | - | $ | - | $ | - | $ | - | |||||||||
Operating expenses | - | 50 | - | 50 | |||||||||||||
Mortgage and loan interest | - | 674 | - | 674 | |||||||||||||
Loan charges | - | 32 | - | 32 | |||||||||||||
Interest income | - | - | 4,729 | 4,729 | |||||||||||||
Segment operating income (loss) | $ | - | $ | (756 | ) | $ | 4,729 | $ | 3,973 | ||||||||
Capital expenditures | - | - | - | - | |||||||||||||
Assets | - | 25,717 | - | 25,717 | |||||||||||||
Property Sales | |||||||||||||||||
Sales price | $ | - | $ | - | $ | - | $ | - | |||||||||
Cost of sale | - | - | - | - | |||||||||||||
Deferred current gain | - | - | - | - | |||||||||||||
Recognized prior deferred gain | - | - | - | - | |||||||||||||
Gain on sale | $ | - | $ | - | $ | - | $ | - | |||||||||
Commercial | |||||||||||||||||
Properties | Land | Other | Total | ||||||||||||||
For the Twelve Months Ended December 31, 2013 | |||||||||||||||||
Operating revenue | $ | - | - | - | $ | - | |||||||||||
Operating expenses | - | 87 | - | 87 | |||||||||||||
Mortgage and loan interest | - | 1,160 | - | 1,160 | |||||||||||||
Loan charges | - | 830 | - | 830 | |||||||||||||
Interest income | - | - | 7,129 | 7,129 | |||||||||||||
Segment operating income (loss) | $ | - | $ | (2,077 | ) | $ | 7,129 | $ | 5,052 | ||||||||
Capital expenditures | - | - | - | - | |||||||||||||
Assets | - | 24,511 | - | 24,511 | |||||||||||||
Property Sales | |||||||||||||||||
Sales price | $ | - | $ | - | $ | - | $ | - | |||||||||
Cost of sale | - | - | - | - | |||||||||||||
Deferred current gain | - | - | - | - | |||||||||||||
Recognized prior deferred gain | - | - | - | - | |||||||||||||
Gain on sale | $ | - | $ | - | $ | - | $ | - | |||||||||
Commercial | |||||||||||||||||
Properties | Land | Other | Total | ||||||||||||||
For the Twelve Months Ended December 31, 2012 | |||||||||||||||||
Operating revenue | $ | - | $ | - | $ | - | $ | - | |||||||||
Operating expenses | - | 67 | - | 67 | |||||||||||||
Mortgage and loan interest | - | 1,284 | - | 1,284 | |||||||||||||
Interest income | - | - | 5,183 | 5,183 | |||||||||||||
Segment operating income (loss) | $ | - | $ | (1,351 | ) | $ | 5,183 | 3,832 | |||||||||
Capital expenditures | - | - | - | - | |||||||||||||
Assets | - | 24,511 | - | 24,511 | |||||||||||||
Property Sales | |||||||||||||||||
Sales price | $ | - | $ | - | $ | - | $ | - | |||||||||
Cost of sale | - | - | - | - | |||||||||||||
Deferred current gain | - | - | - | - | |||||||||||||
Recognized prior deferred gain | - | - | - | - | |||||||||||||
Gain (loss) on sale | $ | - | $ | - | $ | - | $ | - | |||||||||
OPERATING SEGMENTS - Reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations and Balance Sheets: | The tables below reconcile the segment information to the corresponding amounts in the Consolidated Statements of Operations (dollars in thousands): | ||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||
Segment operating income | $ | 3,973 | $ | 5,052 | $ | 3,832 | |||||||||||
Other non-segment items of income (expense) | |||||||||||||||||
General and administrative | (573 | ) | (734 | ) | (334 | ) | |||||||||||
Net income fee | (203 | ) | (695 | ) | (180 | ) | |||||||||||
Advisory fee to related party | (692 | ) | (830 | ) | (815 | ) | |||||||||||
Other income | - | 5,804 | - | ||||||||||||||
Equity from unconsolidated subsidiaries and investees | - | - | (37 | ) | |||||||||||||
Income tax expense | (946 | ) | (3,063 | ) | (876 | ) | |||||||||||
Income from continuing operations | $ | 1,559 | $ | 5,534 | $ | 1,590 | |||||||||||
OPERATING SEGMENTS - Operating segment information to the corresponding amounts in the Consolidated Balance Sheets | The table below reconciles the segment information to the corresponding amounts in the Consolidated Balance Sheets (dollars in thousands): | ||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||
Segment assets | $ | 25,717 | $ | 24,511 | $ | 24,511 | |||||||||||
Notes and interest receivable | 25,635 | 28,867 | 25,176 | ||||||||||||||
Other assets and receivables | 41,724 | 40,435 | 59,819 | ||||||||||||||
Total assets | $ | 93,076 | $ | 93,813 | $ | 109,506 | |||||||||||
DISCONTINUED_OPERATIONS_Tables
DISCONTINUED OPERATIONS (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
DISCONTINUED OPERATIONS (Tables) | |||||||||||||
REVENUE AND EXPENSES PROPERTIES SOLD | The results of operations from these properties are shown below (dollars in thousands): | ||||||||||||
For Years Ended December 31, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
Revenue | |||||||||||||
Rental and other property revenues | $ | - | $ | - | $ | - | |||||||
- | - | - | |||||||||||
Expenses | |||||||||||||
General and administrative | - | 24 | 106 | ||||||||||
- | 24 | 106 | |||||||||||
Net loss from discontinued operations before gains on sale of real estate, taxes, and fees | - | (24 | ) | (106 | ) | ||||||||
Income tax benefit | - | 8 | 37 | ||||||||||
Net loss from discontinued operations | $ | - | $ | (16 | ) | $ | (69 | ) | |||||
QUARTERLY_DATA_Tables
QUARTERLY DATA (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
QUARTERLY DATA (Tables): | |||||||||||||||||
Schedule of Quarterly Financial Information | NOTE 11. QUARTERLY DATA | ||||||||||||||||
The following is a table of quarterly results of operations for the years 2014, 2013 and 2012: | |||||||||||||||||
Three Months Ended 2014 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except per share amounts) | |||||||||||||||||
2014 | |||||||||||||||||
Rental and other property revenues | $ | - | $ | - | $ | - | $ | - | |||||||||
Total operating expenses | 390 | 363 | 380 | 385 | |||||||||||||
Operating loss | (390 | ) | (363 | ) | (380 | ) | (385 | ) | |||||||||
Other income, net of other expenses | 949 | 1,058 | 1,003 | 1,013 | |||||||||||||
Income before gain on land sales, non-contolling interest, and taxes | 559 | 695 | 623 | 628 | |||||||||||||
Gain on land sales | - | - | - | - | |||||||||||||
Income tax expense | - | - | - | (946 | ) | ||||||||||||
Net income (loss) from continuing operations | 559 | 695 | 623 | (318 | ) | ||||||||||||
Net income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income (loss) | $ | 559 | $ | 695 | $ | 623 | $ | (318 | ) | ||||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income (loss) from continuing operations | $ | 0.13 | $ | 0.17 | $ | 0.15 | $ | (0.08 | ) | ||||||||
Income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income (loss) applicable to common shares | $ | 0.13 | $ | 0.17 | $ | 0.15 | $ | (0.08 | ) | ||||||||
Weighted average common shares used in computing earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Earnings per share - diluted | |||||||||||||||||
Income (loss) from continuing operations | $ | 0.13 | $ | 0.17 | $ | 0.15 | $ | (0.08 | ) | ||||||||
Income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income (loss) applicable to common shares | $ | 0.13 | $ | 0.17 | $ | 0.15 | $ | (0.08 | ) | ||||||||
Weighted average common shares used in computing diluted earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Three Months Ended 2013 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except per share amounts) | |||||||||||||||||
2013 | |||||||||||||||||
Rental and other property revenues | $ | - | $ | - | $ | - | $ | - | |||||||||
Total operating expenses | 406 | 477 | 505 | 958 | |||||||||||||
Operating loss | (406 | ) | (477 | ) | (505 | ) | (958 | ) | |||||||||
Other income, net of other expenses | 1,119 | 1,123 | 1,130 | 7,571 | |||||||||||||
Income before gain on land sales, non-controlling interest, and taxes | 713 | 646 | 625 | 6,613 | |||||||||||||
Gain on land sales | - | - | - | - | |||||||||||||
Income tax expense | (6 | ) | - | - | (3,057 | ) | |||||||||||
Net income from continuing operations | 707 | 646 | 625 | 3,556 | |||||||||||||
Net loss from discontinued operations | (12 | ) | - | - | (4 | ) | |||||||||||
Net income | $ | 695 | $ | 646 | $ | 625 | $ | 3,552 | |||||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income from continuing operations | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.86 | |||||||||
Income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income applicable to common shares | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.86 | |||||||||
Weighted average common shares used in computing earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Earnings per share - diluted | |||||||||||||||||
Income from continuing operations | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.86 | |||||||||
Income (loss) from discontinued operations | - | - | - | - | |||||||||||||
Net income applicable to common shares | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.86 | |||||||||
Weighted average common shares used in computing diluted earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Three Months Ended 2012 | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||
2012 | |||||||||||||||||
Rental and other property revenues | $ | - | $ | - | $ | - | $ | - | |||||||||
Total operating expenses | 383 | 426 | 285 | 302 | |||||||||||||
Operating loss | (383 | ) | (426 | ) | (285 | ) | (302 | ) | |||||||||
Other income, net of other expenses | 897 | 1,424 | 682 | 859 | |||||||||||||
Income before gain on land sales, non-controlling interest, and taxes | 514 | 998 | 397 | 557 | |||||||||||||
Gain on land sales | - | - | - | - | |||||||||||||
Income tax expense | (2 | ) | - | (14 | ) | (860 | ) | ||||||||||
Net income (loss) from continuing operations | 512 | 998 | 383 | (303 | ) | ||||||||||||
Net loss from discontinued operations | (5 | ) | - | (27 | ) | (37 | ) | ||||||||||
Net income (loss) | $ | 507 | $ | 998 | $ | 356 | $ | (340 | ) | ||||||||
PER SHARE DATA | |||||||||||||||||
Earnings per share - basic | |||||||||||||||||
Income (loss) from continuing operations | $ | 0.12 | $ | 0.24 | $ | 0.09 | $ | (0.07 | ) | ||||||||
Loss from discontinued operations | - | - | (0.01 | ) | (0.01 | ) | |||||||||||
Net income (loss) applicable to common shares | $ | 0.12 | $ | 0.24 | $ | 0.08 | $ | (0.08 | ) | ||||||||
Weighted average common shares used in computing earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 | |||||||||||||
Earnings per share - diluted | |||||||||||||||||
Income (loss) from continuing operations | $ | 0.12 | $ | 0.24 | $ | 0.09 | $ | (0.07 | ) | ||||||||
Loss from discontinued operations | - | - | (0.01 | ) | (0.01 | ) | |||||||||||
Net income (loss) applicable to common shares | $ | 0.12 | $ | 0.24 | $ | 0.08 | $ | (0.08 | ) | ||||||||
Weighted average common shares used in computing diluted earnings per share | 4,168,214 | 4,168,214 | 4,168,214 | 4,168,214 |
Recovered_Sheet1
Organization and Basis Of Presentation (Details) (USD $) | Dec. 31, 2014 |
Organization and Basis Of Presentation | |
Percentage of Transcontinental Realty Investors, Inc on common stock | 81.12% |
Land in acres | 178.1 |
Note Receivables due from related parties | $25,400,000 |
Real_Estate_Details_Dollars_in
Real Estate (Details) (Dollars in thousands) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Real Estate Details | ||
Mercer Crossing/Travelers Land | $24,515 | $24,511 |
Three Hickory | 1,202 | 0 |
Total Real Estate amount | $25,717 | $24,511 |
Three_Hickory_Details
Three Hickory (Details) (USD $) | Mar. 31, 2014 |
Three Hickory Details | |
Land Three Hickory located in texas (No of acres) | 6.6 |
TCI sold the land to the company (million) | $1.20 |
Recovered_Sheet2
Notes And Interest Receivable From Related Parties Narrative (Details) (USD $) | Dec. 31, 2014 |
Performing loans: | |
Unified Housing Foundation, Inc. (Echo Station) at 12% | $1,481 |
Unified Housing Foundation, Inc. (Lakeshore Villas) at 12% | 2,000 |
Unified Housing Foundation, Inc. (Lakeshore Villas)-at 12%., | 6,363 |
Unified Housing Foundation, Inc. (Limestone Canyon) at 12% | 3,057 |
Unified Housing Foundation, Inc. (Limestone Ranch) at 12% | 2,250 |
Unified Housing Foundation, Inc. (Parkside Crossing) at 12% | 1,936 |
Unified Housing Foundation, Inc. (Sendero Ridge) at 12% | 5,174 |
Unified Housing Foundation, Inc. (Timbers of Terrell) at 12% | 1,323 |
Unified Housing Foundation, Inc. (Tivoli) at 12% | 1,826 |
Accrued interest | 2,051 |
Total Performing | 27,461 |
Allowance for estimated losses | -1,826 |
Total | $25,635 |
Recovered_Sheet3
Notes And Interest Receivable From Unified Housing Foundation Inc (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Notes And Interest Receivable From UHF | ||
Interest receivable from related parties, net allowances ,totaled | $25,600,000 | $28,900,000 |
Interest rate of loans | 12.00% | 12.00% |
Recognized Interest Income | $3,000,000 | $4,800,000 |
Five Year Preferred Interest Of The Original Notes | 5.25% | 5.25% |
Percentage_of_Investment_in_Un
Percentage of Investment in Unconsolidated Subsidiaries And Investees (Details) | Dec. 31, 2014 |
Percentage of Investment in Subsidiaries And Investees | |
Investments Minimum Percentage In Unconsolidated Subsidiaries, Jointly Owned Companies | 20.00% |
Investments Maximum Percentage in Unconsolidated Subsidiaries, Jointly Owned Companies | 50.00% |
Interest In Eton Square, Under Equity Method | 0.00% |
TCI_Eton_Square_Details
TCI Eton Square (Details) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Investee Percent ownership | |||
TCI Eton Square, L.P. ("Eton Square") | 0.00% | 0.00% | 10.00% |
Investments_Investees_summary_
Investments Investees summary and results of operations Parentheticals (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Financial position and results of operations from our investees Parentheticals | |||
Rents during the period | $0 | $224 | $1,117 |
Depreciation and amortization expenses during the period | 0 | -140 | -877 |
Property operating expenses during the period | 0 | -224 | -819 |
General and administrative expenses during the period | 0 | -5 | -24 |
Mortgage and loan interest during the period | 0 | -155 | -682 |
Provision for losses during the period | 0 | 0 | -2,400 |
Loss from continuing operations during the period | 0 | -300 | -3,685 |
Income from discontinued operations during the period | 0 | 0 | 0 |
Net (loss) for the period | 0 | -300 | -3,685 |
Companys proportionate share of earnings for the period | $0 | $0 | ($37) |
Investments_Investees_summary_1
Investments Investees summary and results of operations (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Financial position and results of operations from our investees | |||
Real estate, net of accumulated depreciation as at | $0 | $0 | $9,660 |
Other assets as at | 0 | 0 | 641 |
Notes payable as at | 0 | 0 | -9,647 |
Other liabilities as at | -7,470 | -7,470 | -3,972 |
Shareholders equity/partners capital as at | $7,470 | ($7,470) | $3,318 |
Notes_And_Interest_Payable_Mor
Notes And Interest Payable - Mortgage notes payable (Details) (USD $) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
Mortage notes payable at | |
Realty Advisors, Inc. principal balance | $10,236 |
Propel Financial Services principal balance | 4 |
Accrued interest of notes payable at | 0 |
Total mortgage notes | $10,240 |
Principal_payments_due_on_note
Principal payments due on notes payable for next five years (Details) (USD $) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
Principal payments due on notes payable | |
Principal payment due in 2015 | $1,054 |
Principal payment due in 2016 | 9,184 |
Principal payment due in 2017 | 1 |
Principal payment due in 2018 | 1 |
Principal payment due in 2019 | 0 |
Principal payments due there after | 0 |
Total Principal payment due | $10,240 |
Realty_Advisors_Inc_Details
Realty Advisors Inc (Details) (USD $) | 28-May-14 | Dec. 31, 2013 |
Realty Advisors Inc Details | ||
RAI ,A related party obtained mortgage to lender on the company's behalf (million) | $20 | |
Mercer/Travelers land owned by the Company ( acres) | 100.05 | |
Variable interest rate of prime plus | 1.50% | |
Interest rate floor | 6.00% | |
Principal payment was made and two additional land parcels (million) | 1.5 | 0 |
Acres of Ladue land owned by TCI | 8 | |
Acres of Valwood land owned by ARL, | 16.75 | |
Note in exchange for a release of Deposit account (million) | 4 | |
Property tax loan in the amount | $3,712 | |
Accured interest on loan | 12.50% |
The_fees_and_cost_reimbursemen
The fees and cost reimbursements paid to Pillar, Prime, TCI and related parties are detailed below (dollars in thousands): (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Total Fees and cost reimbursements paid | |||
Advisory Fees paid | $692 | $830 | $815 |
Net income for the period | 203 | 695 | 180 |
Construction managment fees paid | 0 | 0 | 0 |
Tax sharing agreement with related parties | 945 | 3,055 | 839 |
Total Fees paid | 1,841 | 4,580 | 1,834 |
Cost reimbursements paid | 237 | 234 | 155 |
Rental revenue received | 0 | 0 | 0 |
Interest amount received | 1,692 | 2,364 | 2,695 |
Total Amount of Revenues | $1,692 | $2,364 | $2,695 |
Recovered_Sheet4
Receivable From And Payable To Related Parties (Details) (USD $) | TCI | Pillar | Total |
In Thousands | |||
Balance at Dec. 31, 2013 | $39,207 | $0 | $39,207 |
Cash transfers | 0 | 5,836 | 5,836 |
Advisory fees | 0 | -692 | -692 |
Net income fee | 0 | -203 | -203 |
Cost reimbursements | 0 | -237 | -237 |
Expenses paid by advisor | 0 | -68 | -68 |
Financing (mortgage payments) | 0 | -2,927 | -2,927 |
Significant transaction | 0 | -1,202 | -1,202 |
Interest income | 1,692 | 0 | 1,692 |
Tax Sharing Expense | -946 | 0 | -946 |
Purchase of obligation | 507 | -507 | 0 |
Balance, at Dec. 31, 2014 | $40,460 | $0 | $40,460 |
IOT_Details
IOT (Details) (USD $) | Mar. 31, 2014 |
IOT Details | |
IOT Notes and interest receivables due from UHF(Million) | $27.50 |
IOT recognized interest income | 3 |
Land of Three Hickory located in farmers branch(acres) | 6.6 |
Sold the land to TCI (million) | 1.2 |
amount of losses absorbed by taxable income multiplied by the maximum statutory tax rate | 35.00% |
IOT Paid to TCI tax sharing (Million) | $0.90 |
Income_Taxes_Current_income_ta
Income Taxes - Current income tax expense (benefit) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Income Taxes - Current income tax expense (benefit) | |||
Income from continuing operations, | $2,705 | $8,729 | $2,360 |
Income from discontinued operations, | 0 | 0 | 37 |
Total Income from discontinued operations | $2,705 | $8,729 | $2,397 |
Differences_between_the_Compan
Differences between the Company's Effective tax rate and the United States Statutory Income tax rate (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Differences between Effective tax and statutory income tax rate | |||
Federal income tax at statutory rate | $946 | $3,055 | $839 |
State tax expense | 0 | 8 | |
Gain on sale differences | 0 | ||
Other | -8 | ||
Utilization of net operating loss and minimum tax credit carry forwards | $0 | ||
Effective income tax rate | 35.00% | 35.00% | 35.00% |
Income_Taxes_net_operating_los
Income Taxes - net operating loss carry forwards and deferred tax assets (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Income Taxes - net operating loss carry forwards and deferred tax assets | |||
Accumulated depreciation and amortization | ($516) | ($514) | ($514) |
Allowance for loss | 694 | 694 | 694 |
Others | 0 | 0 | 38 |
Federal benefit of NOL carryforward | 1,078 | 1,078 | 1,078 |
Federal benefit of AMT carryforward | 164 | 164 | 164 |
Deferred tax asset | 1,420 | 1,422 | 1,460 |
Less valuation allowance | -1,420 | -1,422 | -1,460 |
Total deferred tax asset | $0 | $0 | $0 |
Income_Taxes_Valuation_Allowan
Income Taxes - Valuation Allowance for deferred tax assets (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Income Taxes - Valuation Allowance for deferred tax assets | |||
Valuation Allowance for deferred tax assets | $1,400,000 | $1,400,000 | $1,500,000 |
DISCONTINUED_OPERATIONS_CONSIS
DISCONTINUED OPERATIONS CONSISTS OF THE FOLLOWING (DETAILS) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
DISCONTINUED OPERATIONS CONSISTS OF THE FOLLOWING: | |||
Rental and other property revenues | $0 | $0 | $0 |
Total rental and other property revenue | 0 | 0 | 0 |
General and administrative. | 0 | 24 | 106 |
Total General and administative | 0 | 24 | 106 |
Net Loss from discontinued operations before gains on sale of real estate, taxes, and fees | 0 | -24 | -106 |
Net loss from discontinued operations | $0 | ($16) | ($69) |
Operating_segments_information
Operating segments information to corresponding Statement of operations (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Operating segments information to corresponding Statement of operations | |||
Segment operating income | $3,973 | $5,052 | $3,832 |
segment General and administrative | -573 | -734 | -334 |
segment Net income fee | -203 | -695 | -180 |
segment Advisory fee to related party | -692 | -830 | -815 |
segment Other income | 0 | 5,804 | 0 |
Equity from unconsolidated subsidiaries and investees | 0 | 0 | -37 |
segment Income tax expense. | -946 | -3,063 | -876 |
segment Income from continuing operations | $1,559 | $5,534 | $1,590 |
Operating_segments_reconciles_
Operating segments reconciles segment assets to total assets for the year ended(Detail) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Operating segments reconciles segment assets to total assets for the year ended | |||
Segment assets. | $25,717 | $24,511 | $24,511 |
Segment notes and interest receivables | 25,635 | 28,867 | 25,176 |
Other assets and receivables segment | 41,724 | 40,435 | 59,819 |
Total assets segment. | $93,076 | $93,813 | $109,506 |
COMMITMENTS_CONTINGENCIES_AND_
COMMITMENTS, CONTINGENCIES AND LIQUIDITY (Details) (USD $) | Oct. 31, 2011 |
In Millions, unless otherwise specified | |
CoMMITMENTS, CONTINGENCIES AND LIQUIDITY | |
Clapper Parties were awarded an initial judgment for approximately | $74 |
Acutal damages | 26 |
Interest amount of CCL | $48 |
IOT_Used_current_losses_from_c
IOT Used current losses from consolidated group in 2013 to the extent of (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Income Taxes - Current Losses used from consolidated group | |
Taxable Loss carryforwards of the company IOT which will expire in 2030 | $2,700,000 |
Alternate Minimum tax credit balance which remained unchanged | 200,000 |
IOT Used current losses from consolidated group in 2013 to the extent of | 8,700,000 |
IOT Used current losses from consolidated group in 2012 to the extent of | $2,400,000 |