UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-Q
(Mark One)
|
x
|
QUARTERLY
REPORT
PURSUANT
TO
SECTION
13
OR
15
(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
|
|
|
For
the Quarterly
period ended
June 30,
2013
|
OR
|
o
|
TRANSITION
REPORT PURSUANT
TO SECTION
13 OR 15 (d)
OF THE SECURITIES
EXCHANGE ACT
OF 1934
|
|
|
For the transition period from ____________________ to __________________
|
Commission file
number
1-7865
HMG/COURTLAND
PROPERTIES, INC.
|
(Exact name of small
business issuer as specified in its charter)
|
Delaware
|
|
59-1914299
|
(State or other jurisdiction
of
|
|
(I.R.S. Employer
|
incorporation or organization)
|
|
Identification No.)
|
1870
S. Bayshore Drive, Coconut Grove, Florida
|
|
33133
|
(Address of principal
executive offices)
|
|
(Zip Code)
|
305-854-6803
|
(Registrant’s
telephone number, including area code)
|
|
Not
Applicable
|
(Former name, former
address and former fiscal year, if changed since last report)
|
Indicate by check mark whether the
issuer (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes
x
No
o
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes
x
No
o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
x
|
(Do not
check if a smaller reporting company)
|
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the exchange Act). Yes
o
No
x
APPLICABLE ONLY
TO CORPORATE ISSUERS:
State the number of shares outstanding
of each of the issuer’s classes of common equity, as of the latest practicable date. 1,033,926 Common shares were outstanding
as of August 6, 2013.
HMG/COURTLAND
PROPERTIES, INC.
Index
Cautionary Statement
. This
Form 10-Q contains certain statements relating to future results of the Company that are considered “forward-looking statements”
within the meaning of the Private Litigation Reform Act of 1995. Actual results may differ materially from those expressed or
implied as a result of certain risks and uncertainties, including, but not limited to, changes in political and economic conditions;
interest rate fluctuation; competitive pricing pressures within the Company’s market; equity and fixed income market fluctuation;
technological change; changes in law; changes in fiscal, monetary, regulatory and tax policies; monetary fluctuations as well
as other risks and uncertainties detailed elsewhere in this Form 10-Q or from time-to-time in the filings of the Company with
the Securities and Exchange Commission. Such forward-looking statements speak only as of the date on which such statements are
made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of unanticipated events.
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(UNAUDITED)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Investment properties, net of accumulated depreciation:
|
|
|
|
|
|
|
|
|
Office building and other commercial property
|
|
$
|
817,982
|
|
|
$
|
826,061
|
|
Total investment properties, net
|
|
|
817,982
|
|
|
|
826,061
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
23,218,704
|
|
|
|
1,510,773
|
|
Assets associated with real estate interests held for sale
|
|
|
—
|
|
|
|
18,098,789
|
|
Investments in marketable securities
|
|
|
2,998,652
|
|
|
|
2,158,330
|
|
Other investments
|
|
|
3,408,651
|
|
|
|
3,603,655
|
|
Investment in affiliate
|
|
|
2,609,978
|
|
|
|
2,547,572
|
|
Loans, notes and other receivables
|
|
|
1,311,518
|
|
|
|
295,562
|
|
Notes and advances due from related parties
|
|
|
701,744
|
|
|
|
696,909
|
|
Deferred taxes
|
|
|
—
|
|
|
|
698,000
|
|
Other assets
|
|
|
32,304
|
|
|
|
36,731
|
|
TOTAL ASSETS
|
|
$
|
35,099,533
|
|
|
$
|
30,472,382
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Note payable to affiliate
|
|
$
|
2,795,632
|
|
|
$
|
2,814,379
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
37,846
|
|
|
|
46,550
|
|
Due to Adviser
|
|
|
2,063,133
|
|
|
|
—
|
|
Current and deferred income tax payable
|
|
|
370,000
|
|
|
|
—
|
|
Obligations associated with real estate interests held for sale
|
|
|
—
|
|
|
|
13,383,821
|
|
TOTAL LIABILITIES
|
|
|
5,266,611
|
|
|
|
16,244,750
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Excess common stock, $1 par value; 100,000 shares authorized: no shares issued
|
|
|
—
|
|
|
|
—
|
|
Common stock, $1 par value; 1,200,000 shares authorized and 974,526
and 969,526 issued and outstanding as of June 30, 2013 and December 31, 2012, respectively.
|
|
|
974,526
|
|
|
|
969,526
|
|
Additional paid-in capital
|
|
|
24,148,404
|
|
|
|
24,129,031
|
|
Undistributed gains from sales of properties, net of losses
|
|
|
59,428,071
|
|
|
|
41,572,120
|
|
Undistributed losses from operations
|
|
|
(54,989,565
|
)
|
|
|
(54,377,617
|
)
|
Accumulated other comprehensive loss
|
|
|
—
|
|
|
|
(982,500
|
)
|
Total stockholders’ equity
|
|
|
29,561,436
|
|
|
|
11,310,560
|
|
Non controlling interest
|
|
|
271,486
|
|
|
|
2,917,072
|
|
TOTAL EQUITY
|
|
|
29,832,922
|
|
|
|
14,227,632
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
35,099,533
|
|
|
$
|
30,472,382
|
|
See notes to the condensed consolidated
financial statements
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate rentals and related revenue
|
|
$
|
15,600
|
|
|
$
|
16,074
|
|
|
$
|
31,800
|
|
|
$
|
32,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other properties
|
|
|
19,266
|
|
|
|
10,851
|
|
|
|
35,671
|
|
|
|
46,950
|
|
Adviser’s base fee
|
|
|
255,000
|
|
|
|
255,000
|
|
|
|
510,000
|
|
|
|
510,000
|
|
General and administrative
|
|
|
59,445
|
|
|
|
99,524
|
|
|
|
156,128
|
|
|
|
187,930
|
|
Professional fees and expenses
|
|
|
17,968
|
|
|
|
52,530
|
|
|
|
86,775
|
|
|
|
64,872
|
|
Directors’ fees and expenses
|
|
|
24,028
|
|
|
|
18,750
|
|
|
|
46,528
|
|
|
|
43,500
|
|
Depreciation and amortization
|
|
|
4,039
|
|
|
|
4,040
|
|
|
|
8,078
|
|
|
|
8,079
|
|
Interest expense
|
|
|
22,660
|
|
|
|
25,770
|
|
|
|
45,232
|
|
|
|
51,540
|
|
Total expenses
|
|
|
402,406
|
|
|
|
466,465
|
|
|
|
888,412
|
|
|
|
912,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before other income and income taxes
|
|
|
(386,806
|
)
|
|
|
(450,391
|
)
|
|
|
(856,612
|
)
|
|
|
(880,722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains from investments in marketable securities
|
|
|
(69,840
|
)
|
|
|
4,954
|
|
|
|
32,803
|
|
|
|
97,096
|
|
Net income from other investments
|
|
|
53,530
|
|
|
|
268,898
|
|
|
|
143,148
|
|
|
|
316,446
|
|
Other than temporary impairment losses from other investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(27,666
|
)
|
Interest, dividend and other income
|
|
|
54,894
|
|
|
|
34,644
|
|
|
|
96,720
|
|
|
|
68,871
|
|
Total other income
|
|
|
38,584
|
|
|
|
308,496
|
|
|
|
272,671
|
|
|
|
454,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(348,222
|
)
|
|
|
(141,895
|
)
|
|
|
(583,941
|
)
|
|
|
(425,975
|
)
|
Benefit from income taxes
|
|
|
—
|
|
|
|
(13,000
|
)
|
|
|
—
|
|
|
|
(17,000
|
)
|
Loss from continuing operations
|
|
|
(348,222
|
)
|
|
|
(128,895
|
)
|
|
|
(583,941
|
)
|
|
|
(408,975
|
)
|
Income from discontinued operations
|
|
|
608,796
|
|
|
|
312,331
|
|
|
|
17,914,545
|
|
|
|
777,320
|
|
Net income
|
|
|
260,574
|
|
|
|
183,436
|
|
|
|
17,330,604
|
|
|
|
368,345
|
|
Noncontrolling interests in continuing operations
|
|
|
(15,668
|
)
|
|
|
642
|
|
|
|
(28,007
|
)
|
|
|
(2,619
|
)
|
Noncontrolling interests in discontinued operations
|
|
|
1,685
|
|
|
|
(19,008
|
)
|
|
|
(58,594
|
)
|
|
|
(132,035
|
)
|
Net income attributable to noncontrolling interest
|
|
|
(13,983
|
)
|
|
|
(18,366
|
)
|
|
|
(86,601
|
)
|
|
|
(134,654
|
)
|
Net income attributable to the Company
|
|
$
|
246,591
|
|
|
$
|
165,070
|
|
|
$
|
17,244,003
|
|
|
$
|
233,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(363,890
|
)
|
|
|
(128,253
|
)
|
|
|
(611,948
|
)
|
|
|
(411,594
|
)
|
Discontinued operations
|
|
|
610,481
|
|
|
|
293,323
|
|
|
|
17,855,951
|
|
|
|
645,285
|
|
Net income attributable to the Company
|
|
$
|
246,591
|
|
|
$
|
165,070
|
|
|
$
|
17,244,003
|
|
|
$
|
233,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding-basic
|
|
|
974,526
|
|
|
|
1,010,426
|
|
|
|
972,537
|
|
|
|
1,010,426
|
|
Weighted average common shares outstanding-diluted
|
|
|
1,045,011
|
|
|
|
1,010,426
|
|
|
|
1,036,556
|
|
|
|
1,010,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations basic and diluted
|
|
$
|
(0.37
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.61
|
)
|
|
$
|
(0.41
|
)
|
Discontinued operations-basic
|
|
$
|
0.63
|
|
|
$
|
0.29
|
|
|
$
|
18.36
|
|
|
$
|
0.64
|
|
Discontinued operations-diluted
|
|
$
|
0.58
|
|
|
$
|
0.29
|
|
|
$
|
17.23
|
|
|
$
|
0.64
|
|
Basic net (loss) income per share
|
|
$
|
0.25
|
|
|
$
|
0.16
|
|
|
$
|
17.73
|
|
|
$
|
0.23
|
|
Diluted net (loss) income per share
|
|
$
|
0.21
|
|
|
$
|
0.16
|
|
|
$
|
16.60
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss) gain on interest rate swap agreement
|
|
$
|
—
|
|
|
$
|
(111,000
|
)
|
|
$
|
982,500
|
|
|
$
|
(42,000
|
)
|
Total other comprehensive income
|
|
|
0
|
|
|
|
(111,000
|
)
|
|
|
982,500
|
|
|
|
(42,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
246,591
|
|
|
$
|
54,070
|
|
|
$
|
18,226,503
|
|
|
$
|
191,691
|
|
See notes to the condensed consolidated
financial statements
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30,
|
|
|
|
2013
|
|
|
2012
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income attributable to the Company
|
|
$
|
17,244,003
|
|
|
$
|
233,691
|
|
Adjustments to reconcile net income attributable to the Company to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,078
|
|
|
|
445,768
|
|
Non-employee stock compensation expense
|
|
|
372
|
|
|
|
8,970
|
|
Net income from other investments, excluding impairment losses
|
|
|
(143,148
|
)
|
|
|
(316,446
|
)
|
Other than temporary impairment losses from other investments
|
|
|
—
|
|
|
|
27,666
|
|
Gain from the sale of discontinued operations
|
|
|
(17,855,951
|
)
|
|
|
—
|
|
Net gain from investments in marketable securities
|
|
|
(32,803
|
)
|
|
|
(97,096
|
)
|
Net income attributable to non controlling interest
|
|
|
28,007
|
|
|
|
134,654
|
|
Deferred income tax benefit
|
|
|
—
|
|
|
|
(17,000
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Other assets and other receivables
|
|
|
(38,626
|
)
|
|
|
137,364
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
(8,702
|
)
|
|
|
(163,271
|
)
|
Total adjustments
|
|
|
(18,042,773
|
)
|
|
|
160,609
|
|
Net cash (used in) provided by operating activities
|
|
|
(798,770
|
)
|
|
|
394,300
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from sales of discontinued operations
|
|
|
23,033,221
|
|
|
|
—
|
|
Distributions from other investments
|
|
|
325,246
|
|
|
|
494,931
|
|
Contributions to other investments
|
|
|
(49,500
|
)
|
|
|
(168,548
|
)
|
Net proceeds from sales and redemptions of securities
|
|
|
397,930
|
|
|
|
700,216
|
|
Purchase of marketable securities
|
|
|
(1,205,449
|
)
|
|
|
(512,661
|
)
|
Purchases and improvements of properties
|
|
|
—
|
|
|
|
(126,796
|
)
|
Net cash provided by investing activities
|
|
|
22,501,448
|
|
|
|
387,142
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Stock options exercised
|
|
|
24,000
|
|
|
|
|
|
Repayment of mortgages and notes payables
|
|
|
(18,747
|
)
|
|
|
(227,725
|
)
|
Net cash provided by (used in) financing activities
|
|
|
5,253
|
|
|
|
(227,725
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
21,707,931
|
|
|
|
553,717
|
|
Cash and cash equivalents at beginning of the period
|
|
|
1,510,773
|
|
|
|
2,366,363
|
|
Cash and cash equivalents at end of the period
|
|
$
|
23,218,704
|
|
|
$
|
2,920,080
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
45,000
|
|
|
$
|
441,000
|
|
Cash paid during the period for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Non-cash Investing Activities:
|
|
|
|
|
|
|
|
|
Note receivable received for sales of discontinued operations
|
|
$
|
1,000,000
|
|
|
$
|
—
|
|
See notes to the condensed
consolidated financial statements
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
|
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only
of normal recurring accruals) which are necessary for a fair presentation of the results for the periods presented. Certain information
and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the Company’s Annual Report for the year ended December 31, 2012. The balance
sheet as of December 31, 2012 was derived from audited consolidated financial statements as of that date. The results of operations
for the three and six months ended June 30, 2013 are not necessarily indicative of the results to be expected for the full year.
The condensed consolidated financial statements include the accounts
of HMG/Courtland Properties, Inc. (the “Company”) and entities in which the Company owns a majority voting interest
or controlling financial interest. All material transactions and balances with consolidated and unconsolidated entities have been
eliminated in consolidation or as required under the equity method. Amounts in footnotes are rounded to the nearest thousands.
2.
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
Refer to the consolidated financial statements and footnotes thereto
included in the HMG/Courtland Properties, Inc. Annual Report on Form 10-K for the year ended December 31, 2012 for recent accounting
pronouncements. The Company does not believe that any recently issued, but not yet effective accounting standards, if currently
adopted, will have a material effect on the Company’s consolidated financial position, results of operations and cash flows.
3.
|
SALE OF REAL ESTATE INTERESTS
|
As previously reported, on February 25, 2013 the Company completed
the sale of its interests in Grove Isle Associates LLLP, Grove Isle Yacht Club Associates, Grove Isle Investments Inc. and CII
Yacht Club, Inc., which represent interests in the Grove Isle hotel, club, tennis courts and marina (collectively, the “Grove
Isle Property”) to Grove Isle Yacht & Tennis, LLC, a Florida limited liability company and an unrelated entity (“the
Purchaser”), pursuant to a purchase agreement entered into on the same day (the “Agreement”). The purchase price
was $24.4 million, consisting of $23.4 million in cash and a $1 million promissory note due from the Purchaser. Approximately $2.7
million of the proceeds were used to pay off the existing mortgage on the Grove Isle Property. The Company realized gain on the
sale of these interests (including transactions in June 2013 described below) of approximately $19 million (or $19 per share) net
of incentive fee due to the Adviser of approximately $2.1 million.
In June 2013 the Company received an additional $327,000 in proceeds
for unpaid rent due by the Grove Isle tenant prior to the sale. Also in June 2013 the Purchaser exercised its option to purchase
our 50% interest in the spa for $100,000.
As previously reported, on March 29, 2013, pursuant to a Membership
Interests Purchase Agreement (the “Agreement”) entered into in December 2012, HMG/Courtland Properties, Inc. and its
95% owned subsidiary, Courtland Investments, Inc. (the “Company”), completed the sale of the Company’s 50% membership
interests in Bayshore Landing LLC, Bayshore Rawbar LLC and Bayshore Restaurant LLC, (collectively the “Monty’s property)
to the other 50% owner, The Christoph Family Trusts, which are unrelated entities. The purchase price for the membership interests
of $3 million was paid in cash. The Company realized a loss on the sale of these interests of approximately $184,000 (or $.19 per
share).
4.
|
INVESTMENTS IN MARKETABLE SECURITIES
|
Investments in marketable securities consist primarily of large
capital corporate equity and debt securities in varying industries or issued by government agencies with readily determinable fair
values. These securities are stated at market value, as determined by the most recent traded price of each security at the balance
sheet date. Consistent with the Company’s overall current investment objectives and activities its entire marketable securities
portfolio is classified as trading.
Net realized and unrealized gain (loss) from investments in marketable
securities for the three and six months ended June 30, 2013 and 2012 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
Description
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Net realized gain from sales of securities
|
|
$
|
11,000
|
|
|
$
|
18,000
|
|
|
$
|
8,000
|
|
|
$
|
68,000
|
|
Unrealized net (loss) gain in trading securities
|
|
|
(81,000
|
)
|
|
|
(13,000
|
)
|
|
|
25,000
|
|
|
|
29,000
|
|
Total net (loss) gain from investments in marketable securities
|
|
$
|
(70,000
|
)
|
|
$
|
5,000
|
|
|
$
|
33,000
|
|
|
$
|
97,000
|
|
For the three and six months ended June 30, 2013, net unrealized
(losses) gains from trading securities were ($81,000) and $25,000, respectively. This is compared to net unrealized (losses) gains
of ($13,000) and $29,000 for the three and six months ended June 30, 2012, respectively.
For the three months ended June 30, 2013, net realized gain from
sales of marketable securities of approximately $11,000, consisted of all gains, no losses. For the six months ended June 30, 2013,
net realized gain from sales of marketable securities of was approximately $8,000, and consisted of approximately $31,000 of gross
gains net of $23,000 of gross losses.
For the three months ended June 30, 2012, net realized gain from
sales of marketable securities of approximately $18,000, and consisted of approximately $39,000 of gross gains net of $21,000 of
gross losses. For the six months ended June 30, 2012 net realized gain from sales of marketable securities of approximately $68,000,
and consisted of approximately $104,000 of gross gains net of $36,000 of gross losses.
Investment gains and losses on marketable securities may fluctuate
significantly from period to period in the future and could have a significant impact on the Company’s net earnings. However,
the amount of investment gains or losses on marketable securities for any given period has no predictive value and variations in
amount from period to period have no practical analytical value.
As of June 30, 2013, the Company’s portfolio of other investments
had an aggregate carrying value of approximately $3.4 million and we have committed to fund approximately $ 973,000 as required
by agreements with the investees. The carrying value of these investments is equal to contributions less distributions and loss
valuation adjustments. During the six months ended June 30, 2013, cash distributions received from other investments totaled approximately
$325,000 from several investments in privately owned partnerships owning diversified operating companies. During the same six
months ended June 30, 2013, the Company contributed an additional $50,000 toward fulfilling capital commitments on existing investments.
Net income from other investments for the three and six months ended
June 30, 2013 and 2012, is summarized below:
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
Description
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Partnerships owning real estate and related
|
|
$
|
8,000
|
|
|
$
|
255,000
|
|
|
$
|
41,000
|
|
|
$
|
255,000
|
|
Partnerships owning diversified businesses
|
|
|
14,000
|
|
|
|
—
|
|
|
|
40,000
|
|
|
|
30,000
|
|
Income from investment in 49% owned affiliate
(T.G.I.F. Texas, Inc.)
|
|
|
32,000
|
|
|
|
14,000
|
|
|
|
62,000
|
|
|
|
31,000
|
|
Total net income from other investments (excluding other than temporary impairment losses)
|
|
$
|
54,000
|
|
|
$
|
269,000
|
|
|
$
|
143,000
|
|
|
$
|
316,000
|
|
The following tables present gross unrealized losses and fair values
for those investments that were in an unrealized loss position as of June 30, 2013 and December 31, 2012, aggregated by investment
category and the length of time that investments have been in a continuous loss position:
|
|
As of June 30, 2013
|
|
|
|
12 Months or less
|
|
|
Greater than 12 Months
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
Investment Description
|
|
Value
|
|
|
Loss
|
|
|
Fair Value
|
|
|
Loss
|
|
|
Fair Value
|
|
|
Loss
|
|
Partnerships owning investments in
technology related industries
|
|
$
|
8,000
|
|
|
$
|
(10,000
|
)
|
|
$
|
370,000
|
|
|
$
|
(78,000
|
)
|
|
$
|
378,000
|
|
|
$
|
(88,000
|
)
|
Partnerships owning real estate and related investments
|
|
|
—
|
|
|
|
—
|
|
|
|
232,000
|
|
|
|
(48,000
|
)
|
|
|
232,000
|
|
|
|
(48,000
|
)
|
Total
|
|
$
|
8,000
|
|
|
$
|
(10,000
|
)
|
|
$
|
602,000
|
|
|
$
|
(126,000
|
)
|
|
$
|
610,000
|
|
|
$
|
(136,000
|
)
|
|
|
As of December 31, 2012
|
|
|
|
12 Months or less
|
|
|
Greater than 12 Months
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
Investment Description
|
|
Value
|
|
|
Loss
|
|
|
Fair Value
|
|
|
Loss
|
|
|
Fair Value
|
|
|
Loss
|
|
Partnerships owning investments in
technology related industries
|
|
$
|
11,000
|
|
|
$
|
(10,000
|
)
|
|
$
|
374,000
|
|
|
$
|
(69,000
|
)
|
|
$
|
384,000
|
|
|
$
|
(79,000
|
)
|
Partnerships owning diversified businesses
|
|
|
—
|
|
|
|
—
|
|
|
|
241,000
|
|
|
|
(5,000
|
)
|
|
|
241,000
|
|
|
|
(5,000
|
)
|
Partnerships owning real estate and related
investments
|
|
|
—
|
|
|
|
—
|
|
|
|
231,000
|
|
|
|
(49,000
|
)
|
|
|
231,000
|
|
|
|
(49,000
|
)
|
Total
|
|
$
|
11,000
|
|
|
$
|
(10,000
|
)
|
|
$
|
846,000
|
|
|
$
|
(123,000
|
)
|
|
$
|
856,000
|
|
|
$
|
(133,000
|
)
|
When evaluating the investments for other-than-temporary impairment,
the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial
condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not
it will be required to sell, the investment before recovery of the investment’s amortized cost basis.
In accordance with
ASC Topic 320-10-65, Recognition and Presentation of Other-Than-Temporary Impairments there were no OTTI impairment valuation adjustments
for the three and six months ended June 30, 2013.
In June, 2012 the Company recorded a loss of approximately $28,000 from an investment
in a partnership which operates and leases executive suites in Miami, Florida. The Company has funded $120,000 to date in this
investment and the losses incurred were associated with the initial start up of the venture in 2010.
6.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
In accordance with ASC Topic 820, the Company measures cash and
equivalents, marketable debt and equity securities at fair value on a recurring basis. Other investments are measured at fair value
on a nonrecurring basis.
The following are the major categories of assets and liabilities measured at fair value on a recurring
basis during the three and six months ended June 30, 2013 and for the year ended December 31, 2012, using quoted prices in active
markets for identical assets (Level 1) and significant other observable inputs (Level 2). For the periods presented, there were
no major assets measured at fair value on a recurring basis which uses significant unobservable inputs (Level 3):
Assets and liabilities measured at fair value on a recurring
basis are summarized below:
|
|
Fair value measurement at reporting date using
|
|
|
|
Total
|
|
|
Quoted Prices in Active
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
June 30,
|
|
|
Markets for Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
Description
|
|
2013
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury bills
|
|
$
|
21,553,000
|
|
|
$
|
21,553,000
|
|
|
$
|
—
|
|
|
|
—
|
|
Money market mutual funds
|
|
|
1,144,000
|
|
|
|
1,144,000
|
|
|
|
—
|
|
|
|
—
|
|
Time deposits
|
|
|
55,000
|
|
|
|
—
|
|
|
|
55,000
|
|
|
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
|
1,932,000
|
|
|
|
1,932,000
|
|
|
|
—
|
|
|
|
—
|
|
Corporate debt securities
|
|
|
1,067,000
|
|
|
|
—
|
|
|
|
1,067,000
|
|
|
|
—
|
|
Total assets
|
|
$
|
25,751,000
|
|
|
$
|
24,629,000
|
|
|
$
|
1,122,000
|
|
|
$
|
—
|
|
|
|
Fair value measurement at reporting date using
|
|
|
|
Total
|
|
|
Quoted Prices in Active
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
December 31,
|
|
|
Markets for Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
Description
|
|
2012
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
54,000
|
|
|
|
—
|
|
|
$
|
54,000
|
|
|
|
—
|
|
Money market mutual funds
|
|
|
783,000
|
|
|
$
|
783,000
|
|
|
|
—
|
|
|
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
662,000
|
|
|
|
—
|
|
|
|
662,000
|
|
|
|
—
|
|
Marketable equity securities
|
|
|
1,496,000
|
|
|
|
1,496,000
|
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
|
$
|
2,995,000
|
|
|
$
|
2,279,000
|
|
|
$
|
716,000
|
|
|
$
|
—
|
|
Assets measured at fair value on a nonrecurring basis are summarized
below:
|
|
Fair value measurement at reporting date using
|
|
|
Total gains
|
|
|
|
Total
|
|
|
Quoted Prices in Active
|
|
|
Significant Other
|
|
|
Significant
|
|
|
(losses for)
|
|
|
|
June 30,
|
|
|
Markets for Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
three and six months ended
|
|
Description
|
|
2013
|
|
|
(Level 1)
|
|
|
(Level 2) (a)
|
|
|
(Level 3) (b)
|
|
|
6/30/2013
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments by investment focus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology & Communication
|
|
$
|
517,000
|
|
|
$
|
—
|
|
|
$
|
517,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Diversified businesses
|
|
|
1,143,000
|
|
|
|
—
|
|
|
|
1,143,000
|
|
|
|
—
|
|
|
|
—
|
|
Real estate and related
|
|
|
1,449,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
949,000
|
|
|
|
—
|
|
Other
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
$
|
3,409,000
|
|
|
$
|
—
|
|
|
$
|
2,160,000
|
|
|
$
|
1,249,000
|
|
|
$
|
—
|
|
|
|
Fair value measurement at reporting date using
|
|
|
Total
|
|
|
|
Total
|
|
|
Quoted Prices in Active
|
|
|
Significant Other
|
|
|
Significant
|
|
|
losses for
|
|
|
|
December 31,
|
|
|
Markets for Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
year ended
|
|
Description
|
|
2012
|
|
|
(Level 1)
|
|
|
(Level 2) (a)
|
|
|
(Level 3) (b)
|
|
|
12/31/2012
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments by investment focus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology & Communication
|
|
$
|
514,000
|
|
|
$
|
—
|
|
|
$
|
514,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Diversified businesses
|
|
|
1,337,000
|
|
|
|
—
|
|
|
|
1,337,000
|
|
|
|
—
|
|
|
|
—
|
|
Real estate and related
|
|
|
1,453,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
953,000
|
|
|
|
28,000
|
|
Other
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
$
|
3,604,000
|
|
|
$
|
—
|
|
|
$
|
2,351,000
|
|
|
$
|
1,253,000
|
|
|
$
|
28,000
|
|
|
(a)
|
Other investments measured at fair value on a non recurring
basis include investments in certain entities that calculate net asset value per share (or its equivalent such as member units
or an ownership interest in partners’ capital to which a proportionate share of net assets is attributed, “NAV”).
This class primarily consists of private equity funds that have varying investment focus. These investments can never be redeemed
with the funds. Instead, the nature of the investments in this class is that distributions are received through the liquidation
of the underlying assets of the fund. If these investments were held it is estimated that the underlying assets of the fund would
be liquidated over 5 to 10 years. As of June 30, 2013, it is probable that all of the investments in this class will be sold at
an amount different from the NAV of the Company’s ownership interest in partners’ capital. Therefore, the fair values
of the investments in this class have been estimated using recent observable information such as audited financial statements
and/or statements of partners’ capital obtained directly from investees on a quarterly or other regular basis. During the
six months ended June 30, 2013, the Company received distributions of approximately $321,000 from this type of investment primarily
from investments in diversified businesses and real estate. During the six months ended June 30, 2013 the Company made contributions
totaling $49,000 in this type of investment. As of June 30, 2013, the amount of the Company’s unfunded commitments related
to the aforementioned investments is approximately $723,000.
|
|
(b)
|
Other investments above which are measured on a nonrecurring
basis using Level 3 unobservable inputs consist of investments primarily in commercial real estate in Florida through private
partnerships and two investments in the stock of private banks in Florida and Texas. The Company does not know when it will have
the ability to redeem the investments and has categorized them as a Level 3 fair value measurement. The Level 3 real estate and
related investments of approximately $953,000 include one investment in a commercial building located near the Company’s
offices purchased in 2005 with a carrying value as of June 30, 2013 of $724,000. These investments are measured using primarily
inputs provided by the managing member of the partnerships with whom the Company has done similar transactions in the past and
is well known to management. The fair values of these real estate investments have been estimated using the net asset value of
the Company’s ownership interest in partners’ capital. The investments in private bank stocks include a private bank
and trust located in Coral Gables, Florida in the amount of $250,000 made in 2009, and a $50,000 investment in a bank located
in El Campo, Texas made in 2010. The fair values of these bank stock investments have been estimated using the cost method less
distributions received and other than temporary impairments. This investment is valued using inputs provided by the management
of the banks.
|
|
|
Level 3 Investments:
|
|
Balance at January 1, 2013
|
|
$
|
1,253,000
|
|
Additional investment in limited partnership
|
|
|
—
|
|
Distributions from Level 3 investments
|
|
|
(4,000
|
)
|
Transfers from Level 2
|
|
|
—
|
|
Balance at June 30, 2013
|
|
$
|
1,249,000
|
|
The Company (excluding CII) qualifies
as a real estate investment trust and distributes its taxable ordinary income to stockholders in conformity with requirements
of the Internal Revenue Code and is not required to report deferred items due to its ability to distribute all taxable income.
In addition, net operating losses can be carried forward to reduce future taxable income but cannot be carried back. Distributed
capital gains on sales of real estate as they relate to REIT activities are not subject to taxes; however, undistributed capital
gains may be subject to corporate tax.
As of June 30, 2013 the
Company (excluding CII) had an estimated net operating loss carryover of approximately $4.9 million which is available to partially
offset 2013 REIT taxable income generated from gains realized from discontinued operations in 2013. The estimated REIT tax capital
gain from the sale of real estate interests in 2013 is $15.1 million. The Company has not determined when and if any dividend
distribution will be made that could fully or partially offset any REIT taxable income.
The Company’s 95%-owned subsidiary,
CII, files a separate income tax return and its operations are not included in the REIT’s income tax return.
As of June 30, 2013 CII
has an estimated net operating loss carryover of approximately $1.3 million which is available to partially offset 2013 CII taxable
income generated primarily from capital gains realized from the sale of real estate interests in 2013. After utilization of net
operating loss carryover, CII has estimated a current provision for state and federal income taxes of $219,000.
The Company accounts for
income taxes in accordance with ASC Topic 740, “Accounting for Income Taxes”. ASC Topic 740 requires a Company to
use the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for
the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect
on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred
taxes only pertain to CII. As of June 30, 2013 the Company has recorded a net deferred tax liability of $151,000 as a result of
timing differences associated with the carrying value of other investments and depreciable assets and the future benefit of a
net operating loss. This increase from deferred tax asset to deferred tax liability of $849,000 is a deferred tax expense and
was primarily the result of the utilization of CII net operating loss carryover of $471,000 and a net decrease in investments
with tax basis in excess of book of $378,000 (primarily relating CII’s investment in Grove Spa which was sold in June 2013).
The provision
for (benefit from) income taxes in the consolidated statements of comprehensive income consists of the following:
For the six months ended
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
144,000
|
|
|
|
—
|
|
State
|
|
|
75,000
|
|
|
|
—
|
|
|
|
|
219,000
|
|
|
|
—
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
764,000
|
|
|
($
|
15,000
|
)
|
State
|
|
|
85,000
|
|
|
|
(2,000
|
)
|
|
|
|
849,000
|
|
|
|
(17,000
|
)
|
Total
|
|
$
|
1,068,000
|
|
|
($
|
17,000
|
)
|
We adopted the provisions of ASC
Topic 740-10, “Accounting for Uncertainty in Income Taxes” on January 1, 2007. This topic clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC Topic 740, “Accounting
for Income Taxes”, and prescribes a recognition threshold and measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. Topic 740-10 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition.
Based on our evaluation, we have
concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements.
Our evaluation was performed for the tax years ended December 31, 2009, 2010, 2011 and 2012, the tax years which remain subject
to examination by major tax jurisdictions as of June 30, 2013.
We may from time to time be assessed
interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial
to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in
the consolidated financial statements as selling, general and administrative expense.
|
8.
|
DISCONTINUED OPERATIONS
AND REAL ESTATE INTERESTS HELD FOR SALE
|
As previously reported, on February
25, 2013 the Company completed the sale of its interests in Grove Isle Associates LLLP, Grove Isle Yacht Club Associates, Grove
Isle Investments Inc. and CII Yacht Club, Inc., which represent interests in the Grove Isle hotel, club, tennis courts and marina
(collectively, the “Grove Isle Property”) to Grove Isle Yacht & Tennis, LLC, a Florida limited liability company
and an unrelated entity (“the Purchaser”), pursuant to a purchase agreement entered into on the same day (the “Agreement”).
The purchase price was $24.4 million, consisting of $23.4 million in cash and a $1 million promissory note due from the Purchaser.
Approximately $2.7 million of the proceeds were used to pay off the existing mortgage on the Grove Isle Property. The Company
realized gain on the sale of these interests (including amounts received in June 2013 described below) of approximately $19 million
(or $19 per share) net of incentive fee due to the Adviser of approximately $2.1 million.
In June 2013 the Company received
approximately $327,000 of past due rental payments from the Grove Isle tenant. This amount is included in the realized gain on
the sale of Grove Isle. Also in June 2013 the Purchaser exercised its option to purchase our 50% interest in the spa for $100,000
as provided in the Agreement. There was no gain or loss realized on this transaction.
As previously reported, on March
29, 2013, pursuant to a Membership Interests Purchase Agreement (the “Agreement”) entered into in December 2012, HMG/Courtland
Properties, Inc. and its 95% owned subsidiary, Courtland Investments, Inc. (the “Company”), completed the sale of
the Company’s 50% membership interests in Bayshore Landing LLC, Bayshore Rawbar LLC and Bayshore Restaurant LLC, (collectively
the “Monty’s property) to the other 50% owner, The Christoph Family Trusts, which are unrelated entities. The purchase
price for the membership interests of $3 million was paid in cash. The Company realized a loss on the sale of these interests
of approximately $184,000 (or $.19 per share).
We have classified the results of
operations for the real estate interests discussed above into discontinued operations in the accompanying condensed consolidated
financial statements of comprehensive income.
|
|
For the three months
|
|
|
For the six months
|
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and related revenue
|
|
$
|
—
|
|
|
$
|
471,000
|
|
|
$
|
171,000
|
|
|
$
|
930,000
|
|
Food & beverage sales
|
|
|
—
|
|
|
|
1,611,000
|
|
|
|
1,950,000
|
|
|
$
|
3,357,000
|
|
Marina revenue
|
|
|
—
|
|
|
|
419,000
|
|
|
|
382,000
|
|
|
$
|
831,000
|
|
Other
|
|
|
—
|
|
|
|
119,000
|
|
|
|
—
|
|
|
$
|
240,000
|
|
Total revenue
|
|
$
|
—
|
|
|
$
|
2,620,000
|
|
|
$
|
2,503,000
|
|
|
$
|
5,358,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operating expenses
|
|
|
—
|
|
|
|
10,000
|
|
|
|
97,000
|
|
|
|
60,000
|
|
Food & beverage operation expenses
|
|
|
—
|
|
|
|
1,363,000
|
|
|
|
1,430,000
|
|
|
|
2,770,000
|
|
Marina expenses
|
|
|
—
|
|
|
|
372,000
|
|
|
|
178,000
|
|
|
|
586,000
|
|
Professional fees
|
|
|
—
|
|
|
|
81,000
|
|
|
|
53,000
|
|
|
|
117,000
|
|
Interest expense
|
|
|
—
|
|
|
|
194,000
|
|
|
|
190,000
|
|
|
|
389,000
|
|
Depreciation, amortization and other expenses
|
|
|
—
|
|
|
|
288,000
|
|
|
|
199,000
|
|
|
|
659,000
|
|
Total expenses
|
|
$
|
—
|
|
|
$
|
2,308,000
|
|
|
$
|
2,147,000
|
|
|
$
|
4,581,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: noncontrolling interest sold
|
|
|
—
|
|
|
|
—
|
|
|
|
(212,000
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of discontinued operations
|
|
|
313,000
|
|
|
|
—
|
|
|
|
18,839,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit from (provision for) income tax expense on gain on sale of discontinued ops
|
|
|
296,000
|
|
|
|
—
|
|
|
|
(1,068,000
|
)
|
|
|
—
|
|
Income from discontinued operations
|
|
$
|
609,000
|
|
|
$
|
312,000
|
|
|
$
|
17,915,000
|
|
|
$
|
777,000
|
|
The major classes of assets and liabilities
associated with the real estate interest held for sale as of June 30, 2013 and December 31, 2012 were as follows:
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
Grove Isle Spa remaining interest
|
|
$
|
—
|
|
|
$
|
1,434,000
|
|
Grove Isle land, hotel, club building and marina
|
|
|
—
|
|
|
|
1,801,000
|
|
Grove Isle other assets
|
|
|
—
|
|
|
|
222,000
|
|
Bayshore Restaurant, marina and retail offices
|
|
|
—
|
|
|
|
7,822,000
|
|
Bayshore goodwill
|
|
|
—
|
|
|
|
5,629,000
|
|
Bayshore other receivables
|
|
|
—
|
|
|
|
206,000
|
|
Bayshore other assets
|
|
|
—
|
|
|
|
985,000
|
|
Assets associated with real estate interest held for sale
|
|
$
|
—
|
|
|
$
|
18,099,000
|
|
|
|
|
|
|
|
|
|
|
Grove Isle mortgage note payable
|
|
$
|
—
|
|
|
$
|
2,696,000
|
|
Grove Isle accrued and other liabilities
|
|
|
—
|
|
|
|
23,000
|
|
Bayshore mortgage note payable
|
|
|
—
|
|
|
|
8,190,000
|
|
Bayshore interest rate swap contract payable
|
|
|
—
|
|
|
|
1,965,000
|
|
Bayshore accrued and other liabilities
|
|
|
—
|
|
|
|
510,000
|
|
Obligations associated with real estate interest held for sale
|
|
$
|
—
|
|
|
$
|
13,384,000
|
|
|
Item 2.
|
Management’s Discussion
and Analysis of Financial
Condition and Results of Operations
|
RESULTS OF OPERATIONS
The Company reported net income of
approximately $261,000 ($.25 per basic share and $.21 per diluted share) and approximately $17,244,000 ($17.73 per basic shares
and $16.60 per diluted shares) for the three and six months ended June 30, 2013, respectively. For the three and six months ended
June 30, 2012, we reported net income of $165,000 ($.16 per share) and $234,000 ($.23 per share), respectively.
As previously reported, on February
25, 2013 the Company completed the sale the Grove Isle Property to Grove Isle Yacht & Tennis, LLC, a Florida limited liability
company and an unrelated entity (“the Purchaser”), pursuant to a purchase agreement entered into on the same day (the
“Agreement”). The purchase price was $24.4 million, consisting of $23.4 million in cash and a $1 million promissory
note due from the Purchaser. Approximately $2.7 million of the proceeds were used to pay off the existing mortgage on the Grove
Isle Property. The Company realized gain on the sale of these interests (including amounts received in June 2013) of approximately
$19 million (or $19 per share) net of incentive fee due to the Adviser of approximately $2.1 million. In June 2013 the Company
received approximately $327,000 of past due rental payments from the Grove Isle tenant which is included in the realized gain
on the sale of Grove Isle.
As previously reported, on March
29, 2013, pursuant to a Membership Interests Purchase Agreement (the “Agreement”) entered into in December 2012, HMG/Courtland
Properties, Inc. and its 95% owned subsidiary, Courtland Investments, Inc. (the “Company”), completed the sale of
the Company’s 50% membership interests in Bayshore Landing LLC, Bayshore Rawbar LLC and Bayshore Restaurant LLC, (collectively
the “Monty’s property) to the other 50% owner, The Christoph Family Trusts, which are unrelated entities. The purchase
price for the membership interests of $3 million was paid in cash. The Company realized a loss on the sale of these interests
of approximately $184,000 (or $.17 per share).
REVENUES
Rentals and related revenues for
the three and six months ended June 30, 2013 and 2012 primarily consists of rent from the Advisor to CII for its corporate office.
Net realized and unrealized gain
from investments in marketable securities:
Net realized gain from investments
in marketable securities for the three and six months ended June 30, 2013 was approximately $11,000 and $8,000, respectively.
Net realized gain from investments in marketable securities for the three and six months ended June 30, 2012 was approximately
$18,000 and $68,000, respectively. Net unrealized (loss) gain from investments in marketable securities for the three and six
months ended June 30, 2013 was approximately ($81,000) and $25,000, respectively. Net unrealized (loss) gain from investments
in marketable securities for the three and six months ended June 30, 2012 was approximately ($13,000) and $29,000, respectively.
For further details refer to
Note 4
to Condensed Consolidated Financial Statements (unaudited).
Net income from other investments:
Net income from other investments
for the three and six months ended June 30, 2013 was approximately $53,000 and $143,000, respectively. Net income from other investments
for the three and six months ended June 30, 2012 was approximately $269,000 and $316,000, respectively. For further details refer
to
Note 5
to Condensed Consolidated Financial Statements (unaudited).
EXPENSES
Rental and other properties expenses
for the six months ended June 30, 2013 as compared with the same period in 2012 decreased by approximately $ 11,000 (24%) related
primarily due to non recurring repairs and maintenance in 2012.
Professional
fees and expenses for the three months ended June 30, 2013 as compared with the same period in 2012 decreased by approximately
$35,000 (or 66%) due to decreased legal fees. Professional fees and expenses for the six months ended June 30, 2013 as compared
with the same period in 2012 increased by approximately $22,000 (or 66%) due to increased accounting fees.
General and
administrative expenses for the three and six months ended June 30, 2013 as compared with the same period in 2012 decreased by
approximately $40,000 (or 40%) and $32,000 (or 17%), respectively. The decreases were primarily due to a $28,000 nonrecurring
loss on abandonment of vacant land by Courtland Investments in 2012.
EFFECT
OF INFLATION:
Inflation affects the costs of holding
the Company’s investments. Increased inflation would decrease the purchasing power of our mainly liquid investments.
LIQUIDITY, CAPITAL EXPENDITURE
REQUIREMENTS AND CAPITAL RESOURCES
The Company’s material commitments
primarily consist of a note payable to the Company’s 49% owned affiliate, T.G.I.F. Texas, Inc. (“TGIF”) of approximately
$2.8 million due on demand and contributions committed to other investments of approximately $973,000 due upon demand. The funds
necessary to meet these obligations are expected from the proceeds from the sales of investments, distributions from investments
and available cash.
MATERIAL COMPONENTS OF CASH
FLOWS
For the six months ended June 30,
2013, net cash used in operating activities was approximately $799,000, primarily consisting of the Advisers regular fee of $510,000
and other general and administrative expenses.
For the six months ended June 30,
2013, net cash provided by investing activities was approximately $22.5 million and consisted primarily of net cash proceeds from
the sale of real estate interests of approximately $23 million, proceeds from sales of marketable securities of $398,000 and distributions
from other investments of $325,000. These sources were partially offset by uses of funds of $1.2 million for purchase of marketable
securities and $49,000 of contributions to other investments.
For the six months ended June 30,
2013, net cash provided by financing activities was $5,000 consisting of $24,000 of proceeds from the exercise of stock options
less principal repayment of note payable to affiliate of $19,000.
|
Item 3.
|
Quantitative and Qualitative
Disclosures about Market Risk
|
Not applicable
|
Item 4.
|
Controls and Procedures
|
(a)
Evaluation of Disclosure Controls and Procedures.
Our Chief Executive Officer and Chief
Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the Securities
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q have concluded
that, based on such evaluation, our disclosure controls and procedures were effective and designed to ensure that material information
relating to us and our consolidated subsidiaries, which we are required to disclose in the reports we file or submit under the
Securities Exchange Act of 1934, was made known to them by others within those entities and reported within the time periods specified
in the SEC’s rules and forms.
(b)
Changes in Internal Control Over Financial Reporting.
There were
no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation of such
internal control over financial reporting that occurred during our last fiscal quarter which have materially affected, or reasonably
likely to materially affect, our internal control over financial reporting
.
|
Item 1.
|
Legal Proceedings
|
Grove Isle Associates, LLLP was a
co-defendant in two lawsuits in the circuit court in Miami Dade County Florida. These cases arose from claims by a condominium
association and resident seeking a declaratory judgment regarding certain provisions of the declaration of condominium relating
to the Grove Isle Club and the developer. The claim by the association has been dismissed as to all counts related to the Company;
however the association has filed an appeal. Pursuant to an agreement dated February 25, 2013, in which the company sold its interests
in Grove Isle Associates, LLLP the company will continue to defend the lawsuit in the event the appellate court reverses the dismissal
and will indemnify the purchaser for any related judgment. The ultimate outcome of this litigation cannot presently be determined.
However, in management’s opinion the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any
that might result from the resolution of this matter have not been reflected in the consolidated financial statements.
|
Item 2.
|
Unregistered Sales
of Equity Securities and Use of Proceeds:
None
|
|
Item 3.
|
Defaults Upon Senior
Securities:
None.
|
|
Item 4.
|
Mine Safety Disclosures:
None
|
|
Item 5.
|
Other Information:
None
|
(a)
Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002.
Filed
herewith.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
HMG/COURTLAND
PROPERTIES, INC.
|
|
|
Dated: August 6, 2013
|
/s/
Larry Rothstein
|
|
President, Treasurer and Secretary
|
|
Principal Financial Officer
|
|
|
Dated: August 6, 2013
|
/s/
Carlos Camarotti
|
|
Vice President- Finance and Controller
|
|
Principal Accounting Officer
|
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