The accompanying notes are an integral part
of these consolidated financial statements.
NOTES TO FINANCIAL STATEMENTS
The accompanying Consolidated Financial
Statements of American Realty Investors, Inc. “ARL” and consolidated entities have been prepared in conformity with
accounting principles generally accepted in the United States of America, the most significant of which are described in Note 1.
“Organization and Summary of Significant Accounting Policies.” The Notes to Consolidated Financial Statements are an
integral part of the Consolidated Financial Statements. The data presented in the Notes to Consolidated Financial Statements are
as of December 31 of each year and for the year then ended, unless otherwise indicated. Dollar amounts in tables are in thousands,
except per share amounts.
Certain prior year amounts have been reclassified to conform
to the current year presentation on the consolidated statements of operations, consolidated balance sheets and the consolidated
statements of cash flows.
NOTE 1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Organization and business.
The Company, a Nevada corporation that
was formed in 1999, is headquartered in Dallas, Texas and its common stock trades on the New York Stock Exchange (“NYSE American”)
under the symbol “ARL”. Over 80% of ARL’s stock is owned by related party entities. ARL and a subsidiary own
approximately 77.68% of the outstanding shares of common stock of Transcontinental Realty Investors, Inc. “TCI”, a
Nevada corporation, whose common stock is traded on the NYSE American under the symbol “TCI”.
TCI, a subsidiary of ARL, owns approximately
81.25% of the common stock of Income Opportunity Realty Investors, Inc. “IOR”. Effective July 17, 2009, IOR’s
financial results were consolidated with those of ARL and TCI and their subsidiaries. IOR’s common stock is traded on the
New York Stock Exchange (“NYSE American”) under the symbol “IOR”.
ARL’s Board of Directors are responsible
for directing the overall affairs of ARL 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 a written Advisory Agreement that is reviewed annually by ARL’s Board of Directors. The directors
of ARL are also directors of TCI and IOR. The Chairman of the Board of Directors of ARL also serves as the Chairman of the Board
of Directors of TCI and IOR. The officers of ARL also serve as officers of TCI, IOR and Pillar.
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 May Realty Holdings, Inc. (“MRHI”, formerly
known as Realty Advisors Management, Inc. “RAMI”, effective August 7, 2014), 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 the Company’s benefit, debt and equity financing with third party lenders and investors. Pillar
also serves as an Advisor and Cash Manager to TCI and IOR. As the contractual advisor, Pillar is compensated by ARL under
an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate
Governance – The Advisor”. ARL has no employees. Employees of Pillar render services to ARL in accordance with
the terms of the Advisory Agreement.
Regis Realty Prime, LLC, dba Regis Property
Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial 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 and Real Estate Brokerage”. ARL engages third-party companies to lease and manage its apartment properties.
On January 1, 2012, the Company’s
subsidiary, TCI, entered into a development agreement with Unified Housing Foundation, Inc. “UHF” a non-profit corporation
that provides management services for the development of residential apartment projects in the future. This development agreement
was terminated December 31, 2013. The Company has also invested in surplus cash notes receivables from UHF and has sold several
residential apartment properties to UHF in prior years. Due to this ongoing relationship and the significant investment in the
performance of the collateral secured under the notes receivable, UHF has been determined to be a related party.
Southern Properties Capital Ltd. a
British Virgin Island corporation (“Southern” or “SPC”), is a wholly owned subsidiary of TCI that was incorporated on
August 16, 2016 for the purpose of raising funds by issuing debentures that cannot be converted into shares on the Tel-Aviv
Stock Exchange (“TASE”) . Southern operates in the United States and is primarily involved in investing in,
developing, constructing and operating income-producing properties of multi-family residential real estate assets. Southern
is included in the consolidated financial statements of TCI.
On November 19, 2018, we executed
an agreement between the Macquarie Group (“Macquarie”) and Southern and TCI to create a joint venture, Victory
Abode Apartments, LLC (“VAA”) to address existing and future demand for quality multifamily residential housing
through acquisition and development of sustainable Class A multifamily housing in focused secondary and tertiary markets.
In connection with the formation of the joint venture, Southern and TCI contributed a portfolio of 49 income producing
apartment complexes, and 3 development projects in various stages of construction and received cash consideration of $236.8
million. At the time of the transfer of the properties, the joint venture assumed all liabilities of those properties,
including mortgage debt to the Department of Housing and Urban Development (“HUD”).
VAA is equally owned and controlled by
Abode JVP, LLC, a wholly-owned subsidiary of SPC and Summerset Intermediate Holdings 2 LLC (“Summerset”), a wholly-owned
indirect subsidiary of Macquarie. Pursuant to the Agreement, Abode JVP, LLC and Summerset each own voting and profit participation
rights of 50% and 49%, respectively (“Class A Members”). The remaining 2% of the profits interest is held by
Daniel J. Moos, who serves as the President and Chief Executive officer of the Company (“Class B Member”) and Manager
of the joint venture.
Our primary business is the
acquisition, development and ownership of income-producing residential and commercial real estate properties. In addition, we
opportunistically acquire land for future development in in-fill or high-growth suburban markets. From time to time and when
we believe it appropriate to do so, we will also sell land and income-producing properties. We generate revenues by leasing
apartment units to residents, and leasing office and retail space to various for-profit businesses as well as certain local,
state and federal agencies. We also generate revenues from gains on sales of income-producing properties and land. At
December 31, 2018, we owned through our wholly owned subsidiaries nine residential apartment communities comprising of 1,489
units, seven commercial properties comprising an aggregate of approximately 1.7 million rentable square feet, and an
investment in 2,346 acres of undeveloped and partially developed land. In addition, our joint venture VAA owns forty-nine
residential apartment communities comprised of 9,192 units.
Basis of presentation.
The
Company presents its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”).
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.
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. Our investment in Gruppa Florentina, LLC is accounted for under the equity method.
The Company in accordance with the VIE
guidance in ASC 810 “Consolidations” consolidates nine and fifty-one multifamily residential properties located throughout
the United States at December 31, 2018 and 2017, respectively, with total units of 1,489 and 8,427, respectively. Assets
totaling approximately
$459
million and approximately $1.2 billion
at December 31, 2018 and 2017, respectively, were consolidated and included in “Real estate, at cost” on the balance
sheet and are all collateral for their respective mortgage notes payable, none of which are recourse to the partnership in which
they are in or to the Company.
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”.
Real estate held for sale
.
We
classify properties as held for sale when certain criteria are met in accordance with GAAP. At that time, we present the assets
and obligations of the property held for sale separately in our consolidated balance sheet and we cease recording depreciation
and amortization expense related to that property. Properties held for sale are reported at the lower of their carrying amount
or their estimated fair value, less estimated costs to sell. We did not have any real estate assets classified as held for sale
at December 31, 2018 or 2017.
Effective as of January 1, 2015, we adopted
the revised guidance in Accounting Standards Update No. 2014-08 regarding discontinued operations. For sales of real estate
or assets classified as held for sale after January 1, 2015, we will evaluate whether a disposal transaction meets the criteria
of a strategic shift and will have a major effect on our operations and financial results to determine if the results of operations
and gains on sale of real estate will be presented as part of our continuing operations or as discontinued operations in our consolidated
statements of operations. If the disposal represents a strategic shift, it will be classified as discontinued operations for all
periods presented; if not, it will be presented in continuing operations.
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 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, if appropriate,
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.”
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.
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, which are composed largely of rental income, include rents reported on a straight-line basis over the lease term. 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.
Reimbursements of operating costs, as allowed
under most of our commercial tenant leases, consist of amounts due from tenants for common area maintenance, real estate taxes
and other recoverable costs, and are recognized as revenue in the period in which the recoverable expenses are incurred. We record
these reimbursements on a “gross” basis, since we generally are the primary obligor with respect to purchasing goods
and services from third-party suppliers, have discretion in selecting the supplier and have the credit risk with respect to paying
the supplier.
Rental income for residential property
leases is recorded when due from residents and is recognized monthly as earned, which is not materially different than on a straight-line
basis as lease terms are generally for periods of one year or less. For hotel properties, revenues for room sales and guest services
are recognized as rooms occupied and services rendered. An allowance for doubtful accounts is recorded for all past due rents and
operating expense reimbursements considered to be uncollectible.
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.
Foreign currency translation.
Foreign currency denominated assets and liabilities of subsidiaries with local functional currencies are translated
to United States dollars at year-end exchange rates. The effects of translation are recorded in the cumulative translation component
of shareholders’ equity. Subsidiaries with a United States dollar functional currency re-measure monetary assets and liabilities
at year-end exchange rates and non-monetary assets and liabilities at historical exchange rates. The effects of re-measurement
are included in income. Exchange gains and losses arising from transactions denominated in foreign currencies are translated at
average exchange rates.
Non-performing notes receivable.
ARL
considers 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 5 “Notes and Interest Receivable” 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.
Restricted cash.
Restricted
cash is comprised primarily of cash balances held in escrow by financial institutions under the terms of certain secured notes
payable and certain unsecured bonds payable.
Concentration of credit risk.
The
Company maintains its cash balances at commercial banks and through investment companies, the deposits of which are insured by
the Federal Deposit Insurance Corporation (FDIC). At December 31, 2018 and 2017, the Company maintained balances in excess of
the insured amount.
Earnings per share.
Income
(loss) per share is presented in accordance with ASC 620 “Earnings per Share”. Income (loss) per share is computed
based upon the weighted average number of shares of common stock outstanding during each year.
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 TCI and IOR 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 (benefit) for the 2012 tax period in the accompanying financial statement was calculated under a tax sharing
and compensating agreement between ARL, TCI and IOR. That agreement continued until August 31, 2012, at which time a new tax sharing
and compensating agreement was entered into by ARL, TCI, IOR 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
.
In May 2014, Accounting Standards Update
(“ASU”) No. 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers,” was issued. This
new guidance established a new single comprehensive revenue recognition model and provides for enhanced disclosures. Under the
new policy, the nature, timing and amount of revenue recognized for certain transactions could differ from those recognized under
existing accounting guidance. This new standard does not affect revenue recognized under lease contracts. ASU 2014-09 is effective
for reporting periods beginning after December 15, 2017. The Company does not believe the adoption of this guidance had a material
impact on its financial statements.
In February 2016, FASB issued ASU 2016-02
(“ASU 2016-02”), Leases. This guidance establishes a new model for accounting for leases and provides for enhanced
disclosures. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018. The Company is currently evaluating
the impact of the adoption of ASU 2016-02 on its financial position and results of operations, if any.
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses how certain cash
receipts and cash payments are presented and classified in the statement of cash flows. The ASU is effective for fiscal years beginning
after December 15, 2017, including interim periods within those years; however, early adoption is permitted. Entities must apply
the guidance retrospectively to all periods presented but may apply it prospectively if retrospective application would be impracticable.
The Company adopted this standard effective on January 1, 2018. ASU 2016-15 will impact our presentation of operating, investing
and financing activities related to certain cash receipts and payments on our consolidated statements of cash flows.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies guidance on the classification and presentation of changes
in restricted cash. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted,
and will be applied retrospectively to all periods presented. Upon adoption, restricted cash balances will be included along with
cash and cash equivalents as of the end of the period and beginning period, respectively, in the Company’s consolidated statement
of cash flows for all periods presented. Upon adoption, separate line items showing changes in restricted cash balances will be
eliminated from the Company’s consolidated statement of cash flows. The Company adopted this guidance effective on January
1, 2018. ASU 2016-18 will impact our presentation of operating, investing and financing activities related to restricted cash on
our consolidated statements of cash flows.
In January 2017, the FASB issued ASU 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business when evaluating
whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for reporting
periods beginning after December 15, 2017, with early adoption permitted. The Company expects that acquisitions of real estate
or in-substance real estate will not meet the revised definition of a business and thus will be treated as asset acquisitions.
Acquisition costs for those acquisitions that are not businesses will be capitalized rather than expensed. The Company adopted
this guidance effective January 1, 2018. The Company does not believe the adoption of this guidance will have a material impact
on its consolidated financial statements.
In February 2017, the FASB issued ASU
2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20), which requires that
all entities account for the derecognition of a business in accordance with ASC 810, including instances in which the business
is considered in-substance real estate. The ASU requires the Company to measure at fair value any retained interest in a partial
sale of real estate. The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2017.
The Company adopted ASU 2017-05 effective January 1, 2018. The Company does not believe the adoption of this guidance will have
a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13,
Fair
Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement
that
eliminates, adds and modifies certain disclosure requirements for fair value measurements. The effective date of the standard
is for fiscal periods, and interim periods within those years, beginning after December 15, 2019. The amendments on changes in
unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value
measurements, and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should
be applied retrospectively. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU
2018-13 may have on its consolidated financial statements.
NOTE 2.
|
INVESTMENT IN VAA
|
On November 19, 2018, TCI executed an
agreement with Macquarie Group (“Macquarie”) to create a joint venture, Victory Abode Apartments, LLC
(“VAA”) to address existing and future demand for quality multifamily residential housing through acquisition and
development of sustainable Class A multifamily housing in focused secondary and tertiary markets. In connection with the
formation of the joint venture, TCI contributed a portfolio of 49 income producing apartment complexes, and 3 development
projects in various stages of construction. TCI received cash consideration of $236.8 million and recognized a gain of
approximately $154.1 million. At the time of the transfer of the properties, the joint venture assumed all liabilities of
those properties, including mortgage debt to the Department of Housing and Urban Development (“HUD”).
VAA is equally owned and controlled by
Abode JVP, LLC, a wholly-owned subsidiary of Southern and Summerset Intermediate Holdings 2 LLC (“Summerset”), a
wholly-owned indirect subsidiary of Macquarie. Pursuant to the Agreement, Abode JVP, LLC and Summerset each own voting
and profit participation rights of 50% and 49%, respectively (“Class A Members”). The remaining 2% of the
profit participation interest is held by Daniel J. Moos ARL’s President and Chief Executive Officer (“Class B
Member”) who serves also as the Manager of the joint venture. In addition, upon the closing of the agreement the
Class B Member received a one-time consideration payment of $1.9 million.
The Company accounts for its investment in
VAA under the equity method of accounting. Under the equity method of accounting, our net equity in the investment is reflected
within the Consolidated Balance Sheets in the caption ‘Investment in VAA’, and our share of the net income or loss
from the joint venture is included within the Consolidated Statements of Operations in the caption ‘Earnings from VAA’.
The joint venture agreements may designate different percentage allocations among investors for profits and losses; however, our
recognition of joint venture income or loss generally follows the joint venture’s distribution priorities, which may change
upon the achievement of certain investment return thresholds and other agreed upon adjustments.
The following is a summary of the
financial position and results of operations of VAA (dollars in thousands):
VAA
|
|
December 31, 2018
|
Balance Sheet
|
|
|
Net real estate assets
|
|
$
|
1,257,557
|
|
Other assets
|
|
|
67,020
|
|
Debt, net
|
|
|
(791,225
|
)
|
Other liabilities
|
|
|
(280,288
|
)
|
Total equity
|
|
|
(253,064
|
)
|
|
|
For the period
November 19 to
December 31, 2018
|
Results of Operations
|
|
|
Total revenue
|
|
$
|
12,887
|
|
Total property, operating, and maintenance expenses
|
|
|
(4,507
|
)
|
Total other expense
|
|
|
(18,102
|
)
|
Net loss
|
|
$
|
(9,722
|
)
|
Below is a reconciliation of our allocation of income or loss
from VAA (dollars in thousands):
|
|
For the period
November 19 to
December 31, 2018
|
VAA net loss
|
|
$
|
(9,722
|
)
|
Adjustments to reconcile to income (loss) from VAA
|
|
|
|
|
Interest expense on mezzanine loan
|
|
|
2,815
|
|
In-place lease intangible amortization expense
|
|
|
3,983
|
|
Depreciation basis differences
|
|
|
3,012
|
|
Adjusted net income
|
|
$
|
88
|
|
Percentage ownership in VAA
|
|
|
50
|
%
|
Earnings from VAA
|
|
$
|
44
|
|
The following table shows the location
of the income-producing properties held for investment by VAA as of December 31, 2018:
|
|
Apartments
|
Location
|
|
No.
|
|
Units
|
Alabama
|
|
|
1
|
|
|
|
168
|
|
Arkansas
|
|
|
6
|
|
|
|
1,320
|
|
Colorado
|
|
|
2
|
|
|
|
260
|
|
Florida
|
|
|
2
|
|
|
|
388
|
|
Georgia
|
|
|
1
|
|
|
|
222
|
|
Louisiana
|
|
|
3
|
|
|
|
464
|
|
Mississippi
|
|
|
1
|
|
|
|
196
|
|
Nevada
|
|
|
1
|
|
|
|
308
|
|
North Carolina
|
|
|
1
|
|
|
|
201
|
|
Tennessee
|
|
|
4
|
|
|
|
708
|
|
Texas-Greater Dallas-Ft Worth
|
|
|
13
|
|
|
|
2,323
|
|
Texas-Greater Houston
|
|
|
1
|
|
|
|
176
|
|
Texas-Other
|
|
|
13
|
|
|
|
2,458
|
|
Total
|
|
|
49
|
|
|
|
9,192
|
|
At
December 31, 2018, VAA apartment projects in development included (dollars in thousands):
Property
|
|
Location
|
|
No. of
Units
|
|
Costs to
Date
(1)
|
|
Total Projected Costs
(1)
|
Terra Lago apartments
|
|
Rowlett, TX
|
|
|
451
|
|
|
$
|
66,395
|
|
|
$
|
—
|
|
Lakeside lofts apartments
|
|
Farmers Branch, TX
|
|
|
494
|
|
|
|
50,357
|
|
|
|
80,622
|
|
Sawgrass Creek apartments Phase II
|
|
Tampa, FL
|
|
|
143
|
|
|
|
25,113
|
|
|
|
26,799
|
|
Total
|
|
|
|
|
1,088
|
|
|
$
|
141,865
|
|
|
$
|
107,421
|
|
(1)
|
Costs include construction hard costs, construction soft costs and loan borrowing costs.
|
A summary of our real estate owned as of
the end of the year is listed below (dollars in thousands):
|
|
2018
|
|
|
2017
|
|
Apartments
|
|
$
|
126,274
|
|
|
$
|
733,620
|
|
Apartments under construction
|
|
|
21,916
|
|
|
|
105,452
|
|
Commercial properties
|
|
|
224,162
|
|
|
|
200,797
|
|
Land held for development
|
|
|
83,641
|
|
|
|
77,560
|
|
Real estate subject to sales contract
|
|
|
3,149
|
|
|
|
48,234
|
|
Total real estate, at cost, less impairment
|
|
|
459,142
|
|
|
|
1,165,663
|
|
Less accumulated deprecation
|
|
|
(78,099
|
)
|
|
|
(177,546
|
)
|
Total real estate, net of depreciation
|
|
$
|
381,043
|
|
|
$
|
988,117
|
|
Expenditures for repairs and maintenance
are charged to operations as incurred. Significant betterments are capitalized. When assets are sold or retired, their costs and
related accumulated depreciation are removed from the accounts with the resulting gains or losses reflected in net income or loss
for the period.
Depreciation is computed on a straight
line basis over the estimated useful lives of the assets as follows:
Land improvements
|
25 to 40 years
|
|
|
Buildings and improvements
|
10 to 40 years
|
|
|
Tenant improvements
|
Shorter of useful life or terms of related lease
|
|
|
Furniture, fixtures and equipment
|
3 to 7 years
|
Fair Value Measurement
The
Company applies the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures,” to the valuation of real
estate assets.
The Company is required to assess the fair value of its consolidated real estate assets
with indicators of impairment. The value of impaired real estate assets is determined using widely accepted valuation techniques,
including discounted cash flow analyses on the expected cash flow of each asset, as well as the income capitalization approach,
which considers prevailing market capitalization rates, analyses of recent comparable sales transactions, information from actual
sales negotiations and bona fide purchase offers received from third parties. The methods used to measure fair value may produce
an amount that may not be indicative of net realizable value or reflective of future values. Furthermore, although the Company
believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies
or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement
at the reporting date.
The fair
value measurements used in these evaluations are considered to be Level 2 and 3 valuations within the fair value hierarchy in the
accounting rules, as there are significant observable (Level 2) and unobservable inputs (Level 3). Examples of Level 2 inputs the
Company utilizes in its fair value calculations are appraisals and bona fide purchase offers from third parties. Examples of Level
3 inputs the Company utilizes in its fair value calculations are discount rates, market capitalization rates, expected lease rental
rates, timing of new leases, an estimate of future sales prices and comparable sales prices of similar assets, if available.
There
was no provision for impairment during the years ended December 31, 2018, 2017 and 2016.
The
highlights of our significant real estate transactions for the year ended December 31, 2018, are discussed below.
Purchases
During the year ended December 31, 2018,
the Company purchased through one of its subsidiaries, eight residential apartment communities. A multi-family 80 unit community
located in Baton Rouge, LA for a total purchase price of $12 million, paid through a seller’s financing note of $1.9 million,
issuance of note payable of $8.6 million, and exercising an option to purchase of $1.5 million paid in the previous year. A multi-family
99 unit residential apartment community located in Mansfield, TX for a total purchase price of $14.8 million, paid through a seller’s
financing note of $2.3 million, and an issuance of a note payable of $11.0 million. A multi-family 200 unit residential apartment
community located in Gulf Shores, AL for a total purchase price of $18.1 million, paid through an issuance of a note payable of
$11.5 million. A multi-family 144 unit residential apartment community located in Beaumont, TX for a total purchase price of $12.3
million. A multi-family 240 unit residential apartment community located in Houma, LA for a total purchase price of $20.1 million.
A multi-family 208 unit residential apartment community located in Texarkana, TX for a total purchase price of $14.7 million. A
multi-family 160 unit residential apartment community located in Tupelo, MS for a total purchase price of $11.1 million.
Sales
For the year ended December 31, 2018, TCI
sold 62 acres of land to an independent third party for a total sales price of $3.0 million and recorded a gain of $1.3 million
from the land sale. In the second quarter, a golf course comprising approximately 96.09 acres sold for an aggregate sales price
of $2.3 million, out of which, $0.6 million was received in cash and $1.7 million in note receivables. During the first quarter,
the Company sold six income-producing properties to a related party for an aggregate purchase price of $8.5 million, out of which,
$2.1 million was received in cash and $6.4 million in note receivables. During the fourth quarter, the Company sold one income-producing
properties to a related party for a purchase price of $2.2 million No gain or loss was recorded from the sale of income-producing
properties.
In addition, on November 19, 2018 TCI
through one of its subsidiaries formed VAA a joint venture with Macquarie. In connection with the formation of the joint
venture, TCI contributed fifty-two properties and received a cash consideration of $236.8 million from Macquarie for a voting
and profit participation right of 50% and 49%, respectively (“Class A Members”). The remaining 2% of the profit
participation interest is held by Daniel J. Moos ARL’s President and Chief Executive Officer (“Class B
Member”) who also serves as the Manager of the joint venture. The Company recognized a gain of approximately
$154.1 million from the sale of the contributed properties to the joint venture.
Mercer Crossing
In addition to the real estate sales noted
above the Company recorded sales from a development project known as Mercer Crossing.
At November 2015, our real estate land
holdings at Mercer Crossing consisted of land developable into residential homes and commercial projects, located in Farmers Branch,
Texas. In November 2015, the Company entered into a sales contract with an unrelated party. The contract was for all of the
developable land owned by the Company. In addition, TCI and ARL also sold land in this transaction. Total consideration for the
sale was $75 million. The agreement among the parties to this transaction provides for TCI to hold the subordinated note from the
buyer in the amount of $50 million. At the closing, due to the inadequate down payment from the buyer and the level of seller financing
involved, the transaction was accounted for under the deposit method. Under the deposit method, no revenue is recognized and the
asset sold remains on the books until the criteria for full revenue recognition are met.
During the third quarter of 2018, due to
significant cumulative sales of real estate to unrelated third parties and cash received by TCI, the criteria for recording full
accrual accounting had been met. Through the period ended August 21, 2018 approximately $28.1 million of the assets previously
held by the Company were sold, resulting in a gain of $7.5 million.
On August 22, 2018 the Company reacquired
all the unsold portions of the real estate from the November 2015 transaction for the amount that remained from the original sales
price.
During the period August 23, 2018
through December 31, 2018 additional Mercer Crossing real estate was sold for $11.7 million resulting in a net gain on sale of
real estate of $5.6 million.
As of December 31, 2018, the Company has
approximately 86 acres of land, at various locations that were sold to related parties in multiple transactions. These transactions
are treated as “subject to sales contract” on the Consolidated Balance Sheets. Due to the related party nature
of the transactions, TCI has deferred the recording of the sales in accordance with ASC 360-20.
|
NOTE 4.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
For the years ended December 31, 2018 and
2017, the Company paid interest expense of approximately $57.9 million and $39.7 million, respectively.
Cash and cash equivalents, and restricted
cash for fiscal year ended 2018 and 2017 was $106.6 million and $88.5 million, respectively. The following is a reconciliation
of the Company’s cash and cash equivalents, and restricted cash to the total presented in the consolidated statement of cash
flows:
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Cash and cash equivalents
|
|
$
|
36,428
|
|
|
$
|
33,778
|
|
Restricted cash (cash held in escrow)
|
|
|
37,928
|
|
|
|
44,687
|
|
Restricted cash (certificate of deposits)
|
|
|
9,687
|
|
|
|
5,651
|
|
Restricted cash (held with Trustee)
|
|
|
22,572
|
|
|
|
4,422
|
|
|
|
$
|
106,615
|
|
|
$
|
88,538
|
|
Amounts included in restricted cash represent
funds required to meet contractual obligations with certain financial institutions for the payment of reserve replacement deposits
and tax and insurance escrow. In addition, restricted cash includes funds to the Bond’s Trustee for payment of principal
and interests.
|
NOTE 5.
|
NOTES AND INTEREST RECEIVABLE
|
A portion of our assets are invested in
mortgage notes receivable, principally secured by real estate. We may originate mortgage loans in conjunction with providing purchase
money financing of property sales. Notes receivable are generally collateralized by real estate or interests in real estate and
personal guarantees of the borrower and, unless noted otherwise, are so secured. Management intends to service and hold for investment
the mortgage notes in our portfolio. A majority of the notes receivable provide for principal to be paid at maturity (dollars in
thousands).
|
|
Maturity
|
|
Interest
|
|
|
|
|
|
|
Borrower
|
|
Date
|
|
Rate
|
|
Amount
|
|
|
Security
|
|
Performing loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H198, LLC (Las Vegas Land)
|
|
|
01/20
|
|
|
12.00
|
%
|
|
|
5,907
|
|
|
|
Secured
|
|
H198, LLC (Legacy at Pleasant Grove Land)
|
|
|
10/19
|
|
|
12.00
|
%
|
|
|
496
|
|
|
|
Secured
|
|
Oulan-Chikh Family Trust
|
|
|
03/21
|
|
|
8.00
|
%
|
|
|
174
|
|
|
|
Secured
|
|
H198, LLC (McKinney Ranch Land)
|
|
|
09/20
|
|
|
6.00
|
%
|
|
|
4,554
|
|
|
|
Secured
|
|
Forest Pines
|
|
|
09/19
|
|
|
5.00
|
%
|
|
|
2,223
|
|
|
|
Secured
|
|
Spyglass Apartments of Ennis, LP
|
|
|
11/19
|
|
|
5.00
|
%
|
|
|
5,083
|
|
|
|
Secured
|
|
Bellwether Ridge
|
|
|
05/20
|
|
|
5.00
|
%
|
|
|
3,429
|
|
|
|
Secured
|
|
Parc at Windmill Farms
|
|
|
05/20
|
|
|
5.00
|
%
|
|
|
6,066
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Echo Station)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
1,481
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Inwood on the Park)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
3,639
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Kensington Park)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
3,933
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Lakeshore Villas)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
2,000
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Lakeshore Villas)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
6,369
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Lakeshore Villas)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
2,732
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Limestone Ranch)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
1,953
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Limestone Ranch)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
2,000
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Limestone Ranch)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
4,000
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Reserve at White Rock Phase I)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
2,485
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Reserve at White Rock Phase II)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
2,555
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Timbers of Terrell)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
1,323
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Tivoli)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
6,140
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc. (Trails at White Rock)
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
3,815
|
|
|
|
Secured
|
|
Unified Housing Foundation, Inc.
(1)
|
|
|
12/19
|
|
|
12.00
|
%
|
|
|
10,401
|
|
|
|
Unsecured
|
|
Unified Housing Foundation, Inc.
(1)
|
|
|
06/20
|
|
|
12.00
|
%
|
|
|
11,074
|
|
|
|
Unsecured
|
|
Unified Housing Foundation, Inc.
(1)
|
|
|
12/32
|
|
|
12.00
|
%
|
|
|
1,349
|
|
|
|
Unsecured
|
|
Realty Advisors Management, Inc.
(1)
|
|
|
12/24
|
|
|
2.28
|
%
|
|
|
20,390
|
|
|
|
Unsecured
|
|
One Realco Corporation (1,2)
|
|
|
01/20
|
|
|
3.00
|
%
|
|
|
7,000
|
|
|
|
Unsecured
|
|
Other related party notes
|
|
|
Various
|
|
|
Various
|
|
|
|
2,890
|
|
|
|
Various secured interests
|
|
Other non-related party notes
|
|
|
Various
|
|
|
Various
|
|
|
|
1,031
|
|
|
|
Various secured interests
|
|
Other non-related party notes
|
|
|
Various
|
|
|
Various
|
|
|
|
2,670
|
|
|
|
Various unsecured interests
|
|
Accrued interest
|
|
|
|
|
|
|
|
|
|
11,165
|
|
|
|
|
|
Total Performing
|
|
|
|
|
|
|
|
|
$
|
140,327
|
|
|
|
|
|
Allowance for estimated losses
|
|
|
|
|
|
|
|
|
|
(14,269
|
)
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
$
|
126,058
|
|
|
|
|
|
|
(2)
|
An
allowance was taken for estimated losses at full value of note.
|
As of December 31, 2018,
the obligors on approximately $97.5 million or 75.5% of the mortgage notes receivable portfolio were due from related parties.
The Company recognized $10.3 million of interest income from these related party notes receivables.
As of December 31, 2018 none of the mortgage
notes receivable portfolio were non-performing.
The Company has various notes receivable
from Unified Housing Foundation, Inc. “UHF”. UHF is determined to be a related party due to our significant investment
in the performance of the collateral secured under the notes receivable. 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.
|
NOTE 6.
|
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.
The summary data presented below includes
our investments accounted for under the equity method, except for our investment in VAA which is discussed in detail in Note 2
‘Investment in VAA’.
|
|
Percentage ownership as of December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Gruppa Florentina, LLC
(1)
|
|
|
20.00%
|
|
|
|
20.00%
|
|
|
|
20.00%
|
|
The market values, other than unconsolidated
subsidiaries, as of the years ended December 31, 2018, 2017 and 2016 were not determinable as there were no readily traded markets
for these entities. The following is a summary of the financial position and results of operations from our investees (dollars
in thousands):
|
|
For the Twelve Months Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Other Investees
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net of accumulated depreciation
|
|
$
|
13,810
|
|
|
$
|
12,587
|
|
|
$
|
13,641
|
|
Notes receivable
|
|
|
11,238
|
|
|
|
2,724
|
|
|
|
9,561
|
|
Other assets
|
|
|
32,566
|
|
|
|
32,176
|
|
|
|
31,135
|
|
Notes payable
|
|
|
(11,287
|
)
|
|
|
(17,845
|
)
|
|
|
(9,834
|
)
|
Other liabilities
|
|
|
(7,320
|
)
|
|
|
(5,991
|
)
|
|
|
(8,284
|
)
|
Shareholders’ equity/partners capital
|
|
|
(39,007
|
)
|
|
|
(23,651
|
)
|
|
|
(36,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
53,834
|
|
|
$
|
38,747
|
|
|
$
|
54,264
|
|
Depreciation
|
|
|
(1,456
|
)
|
|
|
(1,279
|
)
|
|
|
(1,150
|
)
|
Operating expenses
|
|
|
(49,647
|
)
|
|
|
(35,410
|
)
|
|
|
(49,856
|
)
|
Interest expense
|
|
|
(673
|
)
|
|
|
(1,065
|
)
|
|
|
(793
|
)
|
Income (loss) from continuing operations
|
|
$
|
2,058
|
|
|
$
|
993
|
|
|
$
|
2,465
|
|
Income (loss) from discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net income (loss)
|
|
$
|
2,058
|
|
|
$
|
993
|
|
|
$
|
2,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company’s proportionate share of earnings
(1)
|
|
$
|
412
|
|
|
$
|
199
|
|
|
$
|
493
|
|
|
(1)
|
Earnings represent continued and discontinued operations
|
|
NOTE 7.
|
NOTES AND INTEREST PAYABLE
|
Below is a summary of our notes and interest
payable as of December 31, 2018 (dollars in thousands):
|
|
Notes Payable
|
|
|
Accrued Interest
|
|
|
Total Debt
|
|
Apartments
|
|
$
|
94,759
|
|
|
$
|
270
|
|
|
$
|
95,029
|
|
Apartments under Construction
|
|
|
14,402
|
|
|
|
—
|
|
|
|
14,402
|
|
Commercial
|
|
|
136,327
|
|
|
|
450
|
|
|
|
136,777
|
|
Land
|
|
|
27,520
|
|
|
|
124
|
|
|
|
27,644
|
|
Other
|
|
|
22,527
|
|
|
|
17
|
|
|
|
22,544
|
|
Total
|
|
$
|
295,535
|
|
|
$
|
861
|
|
|
$
|
296,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized deferred borrowing costs
|
|
|
(9,428
|
)
|
|
|
—
|
|
|
|
(9,428
|
)
|
|
|
$
|
286,107
|
|
|
$
|
861
|
|
|
$
|
286,968
|
|
The following table summarizes our contractual
obligations for principal payments as of December 31, 2018 (dollars in thousands):
Year
|
|
|
Amount
|
|
2019
|
|
|
$
|
47,427
|
|
2020
|
|
|
|
8,822
|
|
2021
|
|
|
|
43,202
|
|
2022
|
|
|
|
43,304
|
|
2023
|
|
|
|
37,259
|
|
Thereafter
|
|
|
|
115,521
|
|
Total
|
|
|
$
|
295,535
|
|
Interest payable at December 31, 2018,
was approximately $0.9 million. Interest accrues at rates ranging from 2.5% to 9.75% per annum, and mature between 2019 and
2055. The mortgages were collateralized by deeds of trust on real estate having a net carrying value of approximately $459 million.
During the year ended, the Company
refinanced or modified one loan with a total principal balance of $40 million. The refinancing resulted in lower interest
rates and the extension of the term of the loan. The modifications resulted in lower interest rates. The
transactions provide for lower monthly payments over the term of the loans.
There are various land mortgages, secured
by the property, that are in the process of a modification or extension to the original note due to expiration of the loan. We
are in constant contact with these lenders, working together in order to modify the terms of these loans and we anticipate a timely
resolution that is similar to the existing agreement or subsequent modification.
In conjunction with the development of
various apartment projects and other developments, we drew down $81.4 million in construction loans during the year ended December
31, 2018.
|
NOTE 8.
|
BONDS AND BONDS
INTEREST PAYABLE
|
In August 2016 Southern Properties Capital LTD (“Southern”),
a British Virgin Islands corporation was incorporated for the purpose of raising funds by issuing Bonds to be traded on the Tel
Aviv Stock Exchange (“TASE”). TCI transferred certain residential and commercial properties located in the United
States to Southern, its wholly owned subsidiary.
On February 13, 2017, Southern filed a final prospectus with
the TASE for an offering and sale of nonconvertible Series A Bonds to be issued by Southern. The bonds are obligations of Southern.
During the year ended December 31, 2017 on three separate occasions Southern issued nonconvertible Series A Bonds with a total
value of approximately NIS400 million New Israeli Shekels (“NIS”) or approximately $115 million dollars. The
Series A Bonds have a stated interest rate of 7.3%. At March 31, 2018 the effective interest rate is 9.17%. The bonds require
semi-annual equal installments on January 31 and July 31 of each year from 2019 to 2023 (inclusive). The interest will be repaid
on January 31 and July 31 of each of the years 2018 to 2023 (inclusive), with the first payment commencing on July 31, 2017.
On January 25, 2018, interest payment of approximately NIS 14.6
million (or approximately $4.3 million) was paid to the Series A bond holders.
On February 15, 2018, Southern issued Series B bonds in
the amount of NIS 137.7 million par value (approximately $39.2 million as of February 15, 2018). The Series B bonds are
registered on the TASE. The bonds are reported in NIS and bear annual interest rate of 6.8%. Interest shall be repaid January 31
and July 31 of each of the years 2019 to 2025 (inclusive), first payment commencing on July 31, 2018. The principal shall be repaid
in ten equal installments on January 31 and July 31 of each of the years from 2021 to 2025 (inclusive). With this issuance
the Company incurred approximately $1.4 million of bond issuance cost. The effective interest rate is 7.99%.
On July 19, 2018, Southern closed a private placement of its
Series B bonds in the amount of NIS 72.3 million (or approximately $19.8 million). The bonds are reported in NIS, are registered
on the TASE, bear an annual interest rate of 6.8% and have an effective interest rate of 9.60%. Interest will be paid on January
31 and July 31 of each of the years 2019 and 2025 (inclusive). The principal will be repaid in ten equal installment on January
31 and July 31 of each of the years from 2021 to 2025 (inclusive). The Company incurred bonds issuance costs of approximately $1.9
million.
On July 26, 2018, interest payment of approximately NIS 18.9
million (or approximately $5.2 million) was paid to Series A and B bond holders.
In December 2018, the Company deposited $16.2 million with
the bond Trustee for the upcoming January 2019 Series A and B bonds principal and interest payment.
The outstanding balance of these Bonds at December 31, 2018
and 2017 were as follows:
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
Bonds (Series A)
|
|
$
|
106,686
|
|
|
$
|
115,336
|
|
Bonds (Series B)
|
|
|
36,740
|
|
|
|
—
|
|
Bonds (Series B expansion)
|
|
|
19,290
|
|
|
|
—
|
|
Less: deferred issuance expense, net
|
|
|
(8,179
|
)
|
|
|
(5,914
|
)
|
Accrued Interest
|
|
|
4,037
|
|
|
|
3,627
|
|
|
|
$
|
158,574
|
|
|
$
|
113,049
|
|
The aggregate maturity of the bonds are
as follows:
Year
|
|
|
December
31,
2018
|
|
|
December
31,
2017
|
|
2019
|
|
|
$
|
22,049
|
|
|
$
|
—
|
|
2020
|
|
|
|
22,049
|
|
|
|
23,067
|
|
2021
|
|
|
|
33,629
|
|
|
|
23,067
|
|
2022
|
|
|
|
33,629
|
|
|
|
23,067
|
|
2023
|
|
|
|
30,070
|
|
|
|
23,067
|
|
Thereafter
|
|
|
|
21,290
|
|
|
|
20,781
|
|
|
|
|
$
|
162,716
|
|
|
$
|
113,049
|
|
The funds were used primarily for the acquisition
and development of additional real estate operations in the United States. The funds were raised and will be repaid in NIS, however
the funds raised have been converted to US dollars. The Company records unrealized gains or losses each quarter based upon the
relative exchange values of the US dollar and the NIS; however, no gain or loss will be realized until a conversion from US dollars
to NIS actually occurs in the future. The recorded unrealized gain or loss is reflected as a separate line item to highlight the
fact that it is a non-cash transaction until such time as actual payment of principal and interest on the bonds is made. For the
years ended December 31, 2018, and 2017, the Company recorded a gain on foreign currency transaction of approximately $12.4 million,
and a loss of $4.5 million, respectively.
|
NOTE 9.
|
RELATED PARTY TRANSACTIONS AND FEES
|
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.
The Company has historically engaged in
and may continue to engage in certain business transactions with related parties, including but not limited to asset acquisition
and dispositions. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due
to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related
party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily
beneficial to or in our best interest.
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 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 the Company’s benefit,
debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to TCI and
IOR. As the contractual advisor, Pillar is compensated by ARL under an Advisory Agreement that is more fully described in
Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor.” ARL has
no employees. Employees of Pillar render services to ARL in accordance with the terms of the Advisory Agreement.
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 and Real Estate Brokerage.” ARL engages third-party companies to lease and manage its apartment
properties.
Below is a description of the related party
transactions and fees between Pillar and Regis for each of the three years ended December 31, 2018:
Fees, expenses, and revenue paid to and/or
received from our advisor:
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
(dollars in thousands)
|
|
Fees:
|
|
|
|
|
|
|
|
|
|
Advisory
|
|
$
|
11,475
|
|
|
$
|
11,082
|
|
|
$
|
10,918
|
|
Mortgage brokerage and equity refinancing
|
|
|
852
|
|
|
|
1,712
|
|
|
|
775
|
|
Net income
|
|
|
631
|
|
|
|
250
|
|
|
|
257
|
|
|
|
$
|
12,958
|
|
|
$
|
13,044
|
|
|
$
|
11,950
|
|
Other Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost reimbursements
|
|
$
|
4,720
|
|
|
$
|
3,240
|
|
|
$
|
3,826
|
|
Interest paid (received)
|
|
|
(3,370
|
)
|
|
|
(1,195
|
)
|
|
|
(1,444
|
)
|
|
|
$
|
1,350
|
|
|
$
|
2,045
|
|
|
$
|
2,382
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
1,178
|
|
|
$
|
783
|
|
|
$
|
708
|
|
Fees paid to Regis and related parties:
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
(dollars in thousands)
|
|
Fees:
|
|
|
|
|
|
|
|
|
|
Property acquisition
|
|
$
|
32,008
|
|
|
$
|
9,128
|
|
|
$
|
10,775
|
|
Property management, construction management and leasing commissions
|
|
|
540
|
|
|
|
963
|
|
|
|
888
|
|
Real estate brokerage
|
|
|
2,068
|
|
|
|
1,369
|
|
|
|
787
|
|
|
|
$
|
34,616
|
|
|
$
|
11,460
|
|
|
$
|
12,450
|
|
The Company received rental revenue of
$1.2 million, $0.8 million, and $0.7 million in the years ended December 31, 2018, 2017, and 2016, respectively, from Pillar and
its related parties for properties owned by the Company.
As of December 31, 2018, the Company had
notes and interest receivables, net of allowances, of $67.2 million and $4.1 million, respectively, due from UHF, a related party.
See Part 2, Item 8. Note 5. “Notes and Interest Receivable.” During 2018, the Company recognized interest income of
$8.4 million, originated $5.3 million, received no principal payments, and received interest payments of $8.6 million from these
related party notes receivables.
On January 1, 2012, the Company’s
subsidiary, TCI, entered into a development agreement with UHF, a non-profit corporation that provides management services for
the development of residential apartment projects in the future. This development agreement was terminated December 31, 2013. The
Company has also invested in surplus cash notes receivables from UHF and has sold several residential apartment properties to UHF
in prior years. Due to this ongoing relationship and the significant investment in the performance of the collateral secured under
the notes receivable, UHF has been determined to be a related party.
The Company is the primary guarantor, on
a $39.1 million mezzanine loan between UHF and a lender. In addition, ARL, and an officer of the Company are limited recourse guarantors
of the loan. As of December 31, 2018, UHF was in compliance with the covenants to the loan agreement.
The Company is part of a tax sharing and compensating agreement
with respect to federal income taxes between ARL, TCI and IOR and their subsidiaries that was entered into in July of 2009. 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 21%.
The
following table reconciles the beginning and ending balances of accounts receivable from and (accounts payable) to related parties
(Pillar) as of December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
|
|
(dollars
in thousands)
|
|
Related
party receivable, beginning balance
|
$
|
38,311
|
|
$
|
24,672
|
|
Cash
transfers
|
|
75,892
|
|
|
56,635
|
|
Advisory
fees
|
|
(11,475
|
)
|
|
(11,082
|
)
|
Net
income fee
|
|
(631
|
)
|
|
(250
|
)
|
Cost
reimbursements
|
|
(4,720
|
)
|
|
(3,240
|
)
|
Interest
income
|
|
3,370
|
|
|
1,196
|
|
Notes
receivable purchased
|
|
(5,314
|
)
|
|
(447
|
)
|
Fees
and commissions
|
|
(2,919
|
)
|
|
(3,082
|
)
|
Expenses
received (paid) by Advisor
|
|
(62
|
)
|
|
(579
|
)
|
Financing
(mortgage payments)
|
|
9,933
|
|
|
(17,313
|
)
|
Sales/purchases
transactions
|
|
(32,008
|
)
|
|
(9,818
|
)
|
Tax
sharing
|
|
—
|
|
|
1,619
|
|
Related
party receivable, ending balance
|
$
|
70,377
|
|
$
|
38,311
|
|
As
of December 31, 2018, subsidiaries hold approximately 86 acres of land, at various locations that were sold to related parties
in multiple transactions. These transactions are treated as “subject to sales contract” on the Consolidated Balance
Sheets.
ARL’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 ARL’s common stock were declared for fiscal years
ended 2018, 2017, or 2016. 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. On January 12, 2018 Realty Advisors
converted 200,000 preferred Series A shares plus accrued dividends into 482,716 shares of common stock.
Under
ARL’s Amended Articles of Incorporation, 15,000,000 shares of Series A 10.0% Cumulative Convertible Preferred Stock are
authorized to be issued with a par value of $2.00 per share with a liquidation preference of $10.00 per share plus accrued and
unpaid dividends. Dividends are payable at the annual rate of $1.00 per share, or $.25 per share quarterly, to stockholders of
record on the last day of each March, June, September, and December, when and as declared by the Board of Directors. The Series
A Preferred Stock may be converted into common stock at 90.0% of the average daily closing price of ARL’s common stock for
the prior 20 trading days.
On
December 31, 2018, a stock transfer agreement was entered into between Realty Advisors, Inc. (“RAI”) and
TCI whereby TCI purchased from RAI 900,000 shares of Series A Preferred Stock for a total purchase price of approximately
$9 million. Also, as part of the agreement, TCI acquired accrued unpaid dividends on the 900,000 shares of Series A
Preferred Stock of approximately $9.9 million. At December 31, 2018, 1.8 million shares of Series A Convertible
Preferred Stock have been eliminated in consolidation. Unpaid accrued dividends in the amount of $9.9 million have also
been eliminated in consolidation. After these eliminations, there are 614 shares outstanding of Series A Preferred
Stock at December 31, 2018.
We account for income taxes under the asset and liability method, which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to
reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that
includes the enactment date. We recognize deferred tax assets to the extent that we believe these assets are more likely than not
to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals
of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.
If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount,
we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We
record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it
is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for
those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that
is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
For financial reporting purposes, income before income taxes were:
|
|
Years
Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
(In
thousands)
|
|
Income
(loss) from continuing operations before income taxes
|
|
$
|
183,902
|
|
|
$
|
(8,696
|
)
|
|
$
|
(2,363
|
)
|
The
expense (benefit) for income taxes consists of:
|
|
Years
Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
42
,231
|
|
|
$
|
(3,044
|
)
|
|
$
|
—
|
|
State
|
|
|
1,210
|
|
|
|
10
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred and Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(42,231
|
)
|
|
|
3,044
|
|
|
|
46
|
|
State
|
|
|
—
|
|
|
|
170
|
|
|
|
—
|
|
Total Tax Expense
|
|
$
|
1,210
|
|
|
$
|
180
|
|
|
$
|
46
|
|
The reconciliation between the Company’s effective tax rate on income from continuing operations and
the statutory rate is as follows:
|
|
Years Ended December 31,
|
|
|
2018
|
|
2016
|
|
2015
|
|
|
(In thousands)
|
Income Tax Expense (Benefit) at Federal Statutory Rate
|
|
$
|
38,619
|
|
|
$
|
(3,044
|
)
|
|
$
|
(827
|
)
|
State and Local Income Taxes Net of Federal Tax Benefit
|
|
|
1,210
|
|
|
|
180
|
|
|
|
—
|
|
Permanent tax differences
|
|
|
(224
|
)
|
|
|
—
|
|
|
|
—
|
|
Temporary tax differences
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment note on land sale
|
|
|
(2,875
|
)
|
|
|
(1,918
|
)
|
|
|
|
|
Allowance for losses on note receivables
|
|
|
(712
|
)
|
|
|
(2,372
|
)
|
|
|
|
|
Deferred gains
|
|
|
(7,041
|
)
|
|
|
(10,758
|
)
|
|
|
|
|
Basis differences on fixed assets
|
|
|
22,110
|
|
|
|
9,284
|
|
|
|
|
|
Other basis/timing differences
|
|
|
(7,646
|
)
|
|
|
5,764
|
|
|
|
|
|
Use/generation on net operating loss carryforwards
|
|
|
(42,231
|
)
|
|
|
3,044
|
|
|
|
873
|
|
Reported Income Tax Expense
|
|
$
|
1,210
|
|
|
$
|
180
|
|
|
$
|
46
|
|
Effective Tax Rate
|
|
|
0.7
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The company is subject to taxation in the United States and various states and foreign jurisdictions. As of
December 31, 2018, the Company’s tax years for 2017, 2016, and 2015 are subject to examination by the tax authorities. With
few exceptions, as of December 31, 2018, the Company is no longer subject to U.S federal, state, local, or foreign examinations
by tax authorities for the years before 2014.
The 2017 effective tax rate is driven primarily by the passing of the Tax Cuts and Jobs Act by congress. This
act has reduced the statutory tax rate for corporations from 35% to 21% starting in 2018. As a result, the tax assets of ARI had
to be re-priced to reflect the new rate for future years with the impact on the 2017 provision for income taxes.
Components of the Net Deferred Tax Asset or Liability
|
|
Years Ended December 31,
|
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Deferred Tax Assets:
|
|
|
Allowance for losses on notes
|
|
$
|
2,879
|
|
|
$
|
3,591
|
|
Installment note on land sale
|
|
|
—
|
|
|
|
2,875
|
|
Deferred Gain
|
|
|
3,999
|
|
|
|
11,040
|
|
Net Operating Loss Carryforward
|
|
|
8,700
|
|
|
|
50,931
|
|
Total Deferred Tax Assets
|
|
|
15,578
|
|
|
|
68,437
|
|
Less: Valuation Allowance
|
|
|
(12,246
|
)
|
|
|
(42,995
|
)
|
Total Net Deferred Tax Assets
|
|
|
3,332
|
|
|
|
25,442
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities:
|
|
|
|
|
|
|
|
|
Deferred gain
|
|
|
—
|
|
|
|
—
|
|
Basis Differences for Fixed Assets
|
|
|
(3,332
|
)
|
|
|
(25,442
|
)
|
Total Deferred Tax Liability
|
|
|
(3,332
|
)
|
|
|
(25,442
|
)
|
|
|
|
|
|
|
|
|
|
Current Net Deferred Tax Asset
|
|
|
3,332
|
|
|
|
25,442
|
|
Long-Term Net Deferred Tax Liability
|
|
|
(3,332
|
)
|
|
|
(25,442
|
)
|
Net deferred tax asset (liability)
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating Loss and Tax Credit Carryforwards
We have federal income tax net operating losses (NOLs) carryforwards related to our domestic operations of
approximately $26 million on a standalone basis, which have an indefinite life. We also have state NOLs in many of the various
states in which we operate.
Valuation Allowance Reversal
Management assesses the available positive and negative evidence to estimate if sufficient future taxable
income will be generated to use the existing deferred tax assets. At December 31, 2018, 2017 and 2016 ARL had a net deferred tax
asset due to tax deductions available to it in future years. However, as management could not determine that it was more likely
than not that ARL would realize the benefit of the deferred tax asset, a valuation allowance was established.
|
NOTE
13.
|
FUTURE MINIMUM RENTAL INCOME UNDER OPERATING
LEASES
|
ARL’s
operations include the leasing of commercial properties (office buildings, industrial warehouses and retail centers). The leases,
thereon, expire at various dates through 2029. The following is a schedule of minimum future rents due to ARL under non-cancelable
operating leases as of December 31, 2018 (dollars in thousands):
Year
|
|
|
Amount
|
|
2019
|
|
|
$
|
27,346
|
|
2020
|
|
|
|
23,805
|
|
2021
|
|
|
|
21,249
|
|
2022
|
|
|
|
18,033
|
|
2023
|
|
|
|
12,825
|
|
Thereafter
|
|
|
|
13,983
|
|
Total
|
|
|
$
|
117,241
|
|
|
NOTE
14.
|
OPERATING
SEGMENTS
|
Our
segments are based on management’s method of internal reporting which classifies its operations by property type. The segments
are commercial, apartments, 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
operating income and cash flow.
Items
of income that are not reflected in the segments are interest, other income, 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 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.
Presented below is the Company’s reportable segments’ operating income including segment assets
and expenditures for the years 2018, 2017 and 2016 (dollars in thousands):
For the Twelve Months Ended December 31, 2018
|
|
Commercial
Properties
|
|
|
Apartments
|
|
|
Land
|
|
|
Other
|
|
|
Total
|
|
Operating revenue
|
|
$
|
33,113
|
|
|
$
|
87,832
|
|
|
$
|
1
|
|
|
$
|
10
|
|
|
$
|
120,956
|
|
Operating expenses
|
|
|
(16,252
|
)
|
|
|
(42,134
|
)
|
|
|
(645
|
)
|
|
|
(556
|
)
|
|
|
(59,587
|
)
|
Depreciation and amortization
|
|
|
(9,530
|
)
|
|
|
(13,140
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(22,670
|
)
|
Mortgage and loan interest
|
|
|
(7,663
|
)
|
|
|
(20,671
|
)
|
|
|
(636
|
)
|
|
|
(37,093
|
)
|
|
|
(66,063
|
)
|
Interest income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,645
|
|
|
|
21,645
|
|
Gain on land sales
|
|
|
—
|
|
|
|
—
|
|
|
|
17,404
|
|
|
|
—
|
|
|
|
17,404
|
|
Segment operating income (loss)
|
|
$
|
(332
|
)
|
|
$
|
11,887
|
|
|
$
|
16,124
|
|
|
$
|
(15,994
|
)
|
|
$
|
11,685
|
|
Capital expenditures
|
|
$
|
8,246
|
|
|
$
|
16,953
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,199
|
|
Assets
|
|
$
|
153,014
|
|
|
$
|
143,500
|
|
|
$
|
84,529
|
|
|
$
|
—
|
|
|
$
|
381,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,311
|
|
|
$
|
—
|
|
|
$
|
43,311
|
|
Cost of sale
|
|
|
—
|
|
|
|
—
|
|
|
|
(25,907
|
)
|
|
|
—
|
|
|
|
(25,907
|
)
|
Gain on land sales
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,404
|
|
|
$
|
—
|
|
|
$
|
17,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended December 31, 2017
|
|
Commercial
Properties
|
|
|
Apartments
|
|
|
Land
|
|
|
Other
|
|
|
Total
|
|
Operating revenue
|
|
$
|
33,286
|
|
|
$
|
92,807
|
|
|
$
|
111
|
|
|
$
|
17
|
|
|
$
|
126,221
|
|
Operating expenses
|
|
|
(18,549
|
)
|
|
|
(43,677
|
)
|
|
|
(878
|
)
|
|
|
(987
|
)
|
|
|
(64,091
|
)
|
Depreciation and amortization
|
|
|
(9,358
|
)
|
|
|
(16,354
|
)
|
|
|
—
|
|
|
|
33
|
|
|
|
(25,679
|
)
|
Mortgage and loan interest
|
|
|
(7,527
|
)
|
|
|
(22,347
|
)
|
|
|
(1,945
|
)
|
|
|
(34,352
|
)
|
|
|
(66,171
|
)
|
Interest income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,941
|
|
|
|
18,941
|
|
Gain on sale of income producing properties
|
|
|
2,391
|
|
|
|
12,760
|
|
|
|
1,547
|
|
|
|
—
|
|
|
|
16,698
|
|
Gain on land sales
|
|
|
—
|
|
|
|
—
|
|
|
|
4,884
|
|
|
|
—
|
|
|
|
4,884
|
|
Segment operating income (loss)
|
|
$
|
243
|
|
|
$
|
23,189
|
|
|
$
|
3,719
|
|
|
$
|
(16,348
|
)
|
|
$
|
10,803
|
|
Capital expenditures
|
|
$
|
(5,817
|
)
|
|
$
|
1,402
|
|
|
$
|
609
|
|
|
$
|
—
|
|
|
$
|
(3,806
|
)
|
Assets
|
|
$
|
137,157
|
|
|
$
|
727,508
|
|
|
$
|
123,452
|
|
|
$
|
—
|
|
|
$
|
988,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
$
|
5,050
|
|
|
$
|
—
|
|
|
$
|
29,969
|
|
|
$
|
—
|
|
|
$
|
35,019
|
|
Cost of sale
|
|
|
(2,659
|
)
|
|
|
—
|
|
|
|
(23,538
|
)
|
|
|
—
|
|
|
|
(26,197
|
)
|
Recognized prior deferred gain
|
|
|
—
|
|
|
|
12,760
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,760
|
|
Gain on sale
|
|
$
|
2,391
|
|
|
$
|
12,760
|
|
|
$
|
6,431
|
|
|
$
|
—
|
|
|
$
|
21,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Twelve Months Ended December 31, 2016
|
|
Commercial
Properties
|
|
|
Apartments
|
|
|
Land
|
|
|
Other
|
|
|
Total
|
|
Operating revenue
|
|
$
|
33,026
|
|
|
$
|
86,603
|
|
|
$
|
30
|
|
|
$
|
4
|
|
|
$
|
119,663
|
|
Operating expenses
|
|
|
(20,398
|
)
|
|
|
(40,786
|
)
|
|
|
(1,745
|
)
|
|
|
(21
|
)
|
|
|
(62,950
|
)
|
Depreciation and amortization
|
|
|
(9,099
|
)
|
|
|
(14,759
|
)
|
|
|
—
|
|
|
|
73
|
|
|
|
(23,785
|
)
|
Mortgage and loan interest
|
|
|
(7,191
|
)
|
|
|
(25,381
|
)
|
|
|
(2,232
|
)
|
|
|
(24,558
|
)
|
|
|
(59,362
|
)
|
Interest income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,453
|
|
|
|
20,453
|
|
Gain on sale of income producing properties
|
|
|
(238
|
)
|
|
|
16,445
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,207
|
|
Gain on land sales
|
|
|
—
|
|
|
|
—
|
|
|
|
3,121
|
|
|
|
—
|
|
|
|
3,121
|
|
Segment operating income (loss)
|
|
$
|
(3,900
|
)
|
|
$
|
22,122
|
|
|
$
|
(826
|
)
|
|
$
|
(4,049
|
)
|
|
$
|
13,347
|
|
Capital expenditures
|
|
$
|
5,008
|
|
|
$
|
864
|
|
|
$
|
268
|
|
|
$
|
—
|
|
|
$
|
6,140
|
|
Assets
|
|
$
|
150,838
|
|
|
$
|
622,061
|
|
|
$
|
128,107
|
|
|
$
|
—
|
|
|
$
|
901,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
$
|
1,500
|
|
|
$
|
20,350
|
|
|
$
|
29,128
|
|
|
$
|
—
|
|
|
$
|
50,978
|
|
Cost of sale
|
|
|
(1,738
|
)
|
|
|
(3,905
|
)
|
|
|
(26,007
|
)
|
|
|
—
|
|
|
|
(31,650
|
)
|
Gain on sale
|
|
$
|
(238
|
)
|
|
$
|
16,445
|
|
|
$
|
3,121
|
|
|
$
|
—
|
|
|
$
|
19,328
|
|
The table below reflects the reconciliation of segment information
to the corresponding amounts in the Consolidated Statements of Operations (dollars in thousands):
|
|
For the Years Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Segment operating income (loss)
|
|
$
|
11,685
|
|
|
$
|
10,803
|
|
|
$
|
13,347
|
|
Other non-segment items of income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
(12,708
|
)
|
|
|
(7,691
|
)
|
|
|
(7,119
|
)
|
Net income fee to related party
|
|
|
(631
|
)
|
|
|
(250
|
)
|
|
|
(257
|
)
|
Advisory fee to related party
|
|
|
(11,475
|
)
|
|
|
(11,082
|
)
|
|
|
(10,918
|
)
|
Other income
|
|
|
28,993
|
|
|
|
4,082
|
|
|
|
2,091
|
|
Gain on disposition of 50% interest in VAA
|
|
|
154,126
|
|
|
|
—
|
|
|
|
—
|
|
Loss on sale of investments
|
|
|
—
|
|
|
|
(331
|
)
|
|
|
—
|
|
Earnings from unconsolidated joint ventures and investees
|
|
|
1,513
|
|
|
|
309
|
|
|
|
493
|
|
Foreign currency transaction gain (loss)
|
|
|
12,399
|
|
|
|
(4,536
|
)
|
|
|
—
|
|
Income tax expense
|
|
|
(1,210
|
)
|
|
|
(180
|
)
|
|
|
(46
|
)
|
Net income (loss) from continuing operations
|
|
$
|
182,692
|
|
|
$
|
(8,876
|
)
|
|
$
|
(2,409
|
)
|
The table below reflects the reconciliation of
segment information to the corresponding amounts in the Consolidated Balance Sheets (dollars in thousands):
|
|
For the Years Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Segment assets
|
|
$
|
381,043
|
|
|
$
|
988,117
|
|
|
$
|
901,006
|
|
Investments in unconsolidated subsidiaries and investees
|
|
|
76,001
|
|
|
|
6,396
|
|
|
|
6,087
|
|
Notes and interest receivable
|
|
|
126,058
|
|
|
|
112,095
|
|
|
|
126,564
|
|
Other assets and receivables
|
|
|
243,047
|
|
|
|
190,112
|
|
|
|
141,252
|
|
Total assets
|
|
$
|
826,149
|
|
|
$
|
1,296,720
|
|
|
$
|
1,174,909
|
|
|
NOTE 15.
|
QUARTERLY RESULTS
OF OPERATIONS
|
The following is a tabulation of quarterly results
of operations for the years 2018, 2017 and 2016. Quarterly results presented differ from those previously reported in ARL’s
Form 10-Q due to the reclassification of the operations of properties sold or held for sale to discontinued operations in accordance
with ASC topic 360:
|
|
Three Months Ended 2018
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
(dollars in thousands, except share and per share amounts)
|
|
Total operating revenues
|
|
$
|
31,083
|
|
|
$
|
31,607
|
|
|
$
|
33,409
|
|
|
$
|
24,857
|
|
Total operating expenses
|
|
|
26,165
|
|
|
|
27,990
|
|
|
|
28,199
|
|
|
|
24,717
|
|
Operating income
|
|
|
4,918
|
|
|
|
3,617
|
|
|
|
5,210
|
|
|
|
140
|
|
Other (expense) income
|
|
|
(6,638
|
)
|
|
|
2,678
|
|
|
|
5,955
|
|
|
|
(3,508
|
)
|
(Loss) income before gain on sales, non-contolling interest, and taxes
|
|
|
(1,720
|
)
|
|
|
6,295
|
|
|
|
11,165
|
|
|
|
(3,368
|
)
|
Gain on disposition of 50% interest in VAA
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
154,126
|
|
Gain on land sales
|
|
|
1,335
|
|
|
|
—
|
|
|
|
12,243
|
|
|
|
3,826
|
|
Income tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
(792
|
)
|
|
|
(418
|
)
|
Net income (loss) from continued operations
|
|
|
(385
|
)
|
|
|
6,295
|
|
|
|
22,616
|
|
|
|
154,166
|
|
Net income (loss)
|
|
|
(385
|
)
|
|
|
6,295
|
|
|
|
22,616
|
|
|
|
154,166
|
|
Less: net (income) attributable to non-controlling interest
|
|
|
(275
|
)
|
|
|
(441
|
)
|
|
|
(2,265
|
)
|
|
|
(6,012
|
)
|
Preferred dividend requirement
|
|
|
(225
|
)
|
|
|
(225
|
)
|
|
|
(225
|
)
|
|
|
(226
|
)
|
Net (loss) income applicable to common shares
|
|
$
|
(885
|
)
|
|
$
|
5,629
|
|
|
$
|
20,126
|
|
|
$
|
147,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continued operations
|
|
$
|
(0.06
|
)
|
|
$
|
0.35
|
|
|
$
|
1.26
|
|
|
$
|
9.26
|
|
Net income (loss) applicable to common shares
|
|
$
|
(0.06
|
)
|
|
$
|
0.35
|
|
|
$
|
1.26
|
|
|
$
|
9.26
|
|
Weighted average common shares used in computing earnings per share
|
|
|
15,938,077
|
|
|
|
15,997,076
|
|
|
|
15,997,076
|
|
|
|
15,997,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continued operations
|
|
$
|
(0.06
|
)
|
|
$
|
0.35
|
|
|
$
|
1.26
|
|
|
$
|
9.26
|
|
Net income (loss) applicable to common shares
|
|
$
|
(0.06
|
)
|
|
$
|
0.35
|
|
|
$
|
1.26
|
|
|
$
|
9.26
|
|
Weighted average common shares used in computing diluted earnings per share
|
|
|
15,938,077
|
|
|
|
15,997,076
|
|
|
|
15,997,076
|
|
|
|
15,997,076
|
|
|
|
Three Months Ended 2017
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
(dollars in thousands, except share and per share amounts)
|
|
Total operating revenues
|
|
$
|
31,822
|
|
|
$
|
31,587
|
|
|
$
|
31,807
|
|
|
$
|
31,005
|
|
Total operating expenses
|
|
|
27,345
|
|
|
|
26,759
|
|
|
|
26,397
|
|
|
|
28,292
|
|
Operating income (loss)
|
|
|
4,477
|
|
|
|
4,828
|
|
|
|
5,410
|
|
|
|
2,713
|
|
Other expense
|
|
|
(10,829
|
)
|
|
|
(15,676
|
)
|
|
|
(9,348
|
)
|
|
|
(11,853
|
)
|
Loss before gain on sales, non-contolling interest, and taxes
|
|
|
(6,352
|
)
|
|
|
(10,848
|
)
|
|
|
(3,938
|
)
|
|
|
(9,140
|
)
|
Gain (loss) on sale of income producing properties
|
|
|
—
|
|
|
|
—
|
|
|
|
12,760
|
|
|
|
3,938
|
|
Gain (loss) on land sales
|
|
|
445
|
|
|
|
(476
|
)
|
|
|
1,062
|
|
|
|
3,853
|
|
Income tax benefit (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(180
|
)
|
Net income (loss) from continued operations
|
|
|
(5,907
|
)
|
|
|
(11,324
|
)
|
|
|
9,884
|
|
|
|
(1,529
|
)
|
Net income (loss)
|
|
|
(5,907
|
)
|
|
|
(11,324
|
)
|
|
|
9,884
|
|
|
|
(1,529
|
)
|
Less: net (income) loss attributable to non-controlling interest
|
|
|
193
|
|
|
|
435
|
|
|
|
(522
|
)
|
|
|
339
|
|
Preferred dividend requirement
|
|
|
(275
|
)
|
|
|
(275
|
)
|
|
|
(275
|
)
|
|
|
(280
|
)
|
Net (loss) income applicable to common shares
|
|
$
|
(5,989
|
)
|
|
$
|
(11,164
|
)
|
|
$
|
9,087
|
|
|
$
|
(1,470
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
(0.39
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
0.59
|
|
|
$
|
(0.09
|
)
|
Net income (loss) applicable to common shares
|
|
$
|
(0.39
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
0.59
|
|
|
$
|
(0.09
|
)
|
Weighted average common shares used in computing earnings per share
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
(0.39
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
0.59
|
|
|
$
|
(0.09
|
)
|
Net income (loss) applicable to common shares
|
|
$
|
(0.39
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
0.59
|
|
|
$
|
(0.09
|
)
|
Weighted average common shares used in computing diluted earnings per share
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
Three Months Ended 2016
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
(dollars in thousands, except share and per share amounts)
|
|
Total operating revenues
|
|
$
|
29,205
|
|
|
$
|
30,834
|
|
|
$
|
30,067
|
|
|
$
|
29,557
|
|
Total operating expenses
|
|
|
25,881
|
|
|
|
26,212
|
|
|
|
26,272
|
|
|
|
26,664
|
|
Operating income (loss)
|
|
|
3,324
|
|
|
|
4,622
|
|
|
|
3,795
|
|
|
|
2,893
|
|
Other expense
|
|
|
(8,470
|
)
|
|
|
(8,156
|
)
|
|
|
(9,252
|
)
|
|
|
(10,447
|
)
|
Loss before gain on sales, non-contolling interest, and taxes
|
|
|
(5,146
|
)
|
|
|
(3,534
|
)
|
|
|
(5,457
|
)
|
|
|
(7,554
|
)
|
Gain (loss) on sale of income producing properties
|
|
|
(244
|
)
|
|
|
5,168
|
|
|
|
—
|
|
|
|
11,283
|
|
Gain (loss) on land sales
|
|
|
1,652
|
|
|
|
1,719
|
|
|
|
555
|
|
|
|
(805
|
)
|
Income tax benefit (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
(46
|
)
|
|
|
—
|
|
Net income (loss) from continued operations
|
|
|
(3,738
|
)
|
|
|
3,353
|
|
|
|
(4,948
|
)
|
|
|
2,924
|
|
Net loss from discontinued operations
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
Net income (loss)
|
|
|
(3,736
|
)
|
|
|
3,353
|
|
|
|
(4,948
|
)
|
|
|
2,921
|
|
Less: net (income) loss attributable to non-controlling interest
|
|
|
530
|
|
|
|
(864
|
)
|
|
|
1,194
|
|
|
|
(1,182
|
)
|
Preferred dividend requirement
|
|
|
(497
|
)
|
|
|
(53
|
)
|
|
|
(275
|
)
|
|
|
(276
|
)
|
Net (loss) income applicable to common shares
|
|
$
|
(3,703
|
)
|
|
$
|
2,436
|
|
|
$
|
(4,029
|
)
|
|
$
|
1,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
(0.24
|
)
|
|
$
|
0.16
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.09
|
|
Income from discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net income (loss) applicable to common shares
|
|
$
|
(0.24
|
)
|
|
$
|
0.16
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.09
|
|
Weighted average common shares used in computing earnings per share
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continued operations
|
|
$
|
(0.24
|
)
|
|
$
|
0.16
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.09
|
|
Income from discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net income (loss) applicable to common shares
|
|
$
|
(0.24
|
)
|
|
$
|
0.16
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.09
|
|
Weighted average common shares used in computing diluted earnings per share
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
|
15,514,360
|
|
|
NOTE 16.
|
COMMITMENTS,
CONTINGENCIES, AND LIQUIDITY
|
Liquidity.
Management believes that ARL
will generate excess cash flow from property operations in 2019. Such excess however, will not be sufficient to discharge all of
ARL’s obligations as they become due. Management intends to sell land and income-producing real estate, refinance real estate
and obtain additional borrowings primarily secured by real estate to meet its liquidity requirements.
Guarantees.
TCI is a primary guarantor,
on a $39.1 million mezzanine loan between UHF and a lender. In addition, ARL, and an officer of the Company are limited recourse
guarantors of the loan. As of December 31, 2018 UHF was in compliance with the covenants to the loan agreement.
Partnership Buyouts
. ARL is the limited
partner in various partnerships related to the construction of residential properties. As permitted in the respective partnership
agreements, ARL intends to purchase the interests of the general and any other limited partners in these partnerships subsequent
to the completion of these projects. The amounts paid to buyout the nonaffiliated partners are limited to development fees earned
by the nonaffiliated partners, and are set forth in the respective partnership agreements.
ART and ART Midwest, Inc
.
While the Company and all entities in which the
Company has a direct or indirect equity interest are not parties to or obligated in any way for the outcome, a formerly owned entity
(American Realty Trust, Inc.) and its former subsidiary (ART Midwest, Inc.) have been engaged since 1999 in litigation with Mr.
David Clapper and entities related to Mr. Clapper (collectively, the “Clapper Parties”). The matter originally involved
a transaction in 1998 in which ART Midwest, Inc. was to acquire eight residential apartment complexes from the Clapper Parties.
Through the years, a number of rulings, both for and against American Realty Trust, Inc. “ART” and ART Midwest, Inc.,
were issued. In October 2011, a ruling was issued under which the Clapper Parties received a judgment for approximately $74 million,
including $26 million in actual damages and $48 million interest. The ruling was 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. Subsequently, the trial court recalculated
the damage award, reducing it to approximately $59 million, inclusive of actual damages and then current interest. ART was also
a significant owner of a partnership interest in the partnership that was awarded the initial damages in this matter.
The Clapper Parties subsequently filed a new lawsuit
against ARI, its subsidiary EQK Holdings, Inc. “EQK”, and ART. The Clapper Parties seek damages from ARL for payment
by ART to ARL of ART’s stock in EQK in exchange for a release of the Antecedent Debt owed by ART to ARI. In February 2018
the court determined that this legal matter should not have been filed in federal court and therefore granted motions to dismiss
on jurisdictional grounds. In June 2018, the court overruled its own grant of motions to dismiss and reinstated the case. We continue
to vigorously defend the case and management believes it has defenses to the claims.
In 2005, ART filed suit against a major national
law firm over the initial transaction. That action was initially abated while the principal case with the Clapper Parties was pending,
but the abatement was recently lifted. The trial court subsequently dismissed the case on procedural grounds, but ART has filed
a notice of appeal. The appeal was heard in February 2018 and we are awaiting a ruling by the appeals court. In January 2012, the
Company sold all of the issued and outstanding stock of ART to an unrelated party for a promissory note in the amount of $10 million.
At December 31, 2012, the Company fully reserved and valued such note at zero.
Dynex Capital, Inc.
On July 20, 2015, the 68
th
Judicial
District Court in Dallas County, Texas issued its Final Judgment in Cause No. DC-03-00675, styled Basic Capital Management, Inc.,
American Realty Trust, Inc., Transcontinental Realty Investors, Inc., Continental Poydras Corp., Continental Common, Inc. and Continental
Baronne, Inc. v. Dynex Commercial, Inc. The case, which was litigated for more than a decade, had its origin with Dynex Commercial
making loans to Continental Poydras Corp., Continental Common, Inc. and Continental Baronne, Inc. (subsidiaries of Continental
Mortgage & Equity Trust (“CMET”), an entity which merged into TCI in 1999 after the original suit was filed). Under
the original loan commitment, $160 million in loans were to be made to the entities. The loans were conditioned on the execution
of a commitment between Dynex Commercial and Basic Capital Management, Inc. (“Basic”).
An original trial in 2004, which also included
Dynex Capital, Inc. as a defendant, resulted in a jury awarding damages in favor of Basic for “lost opportunity,” as
well as damages in favor of ART and in favor of TCI and its subsidiaries for “increased costs” and “lost opportunity.”
The original Trial Court judge ignored the jury’s findings, however, and entered a “Judgment Notwithstanding the Verdict”
(“JNOV”) in favor of the Dynex entities (the judge held the Plaintiffs were not entitled to any damages from the Dynex
entities). After numerous appeals by all parties, Dynex Capital, Inc. was ultimately dismissed from the case and the remaining
claims against Dynex Commercial were remanded to the Trial Court for a new judgment consistent with the jury’s findings.
The Court entered the new Final Judgment against Dynex Commercial, Inc. on July 20, 2015.
The Final Judgment entered against Dynex Commercial,
Inc. on July 20, 2015 awarded Basic was $0.256 million in damages, plus pre-judgment interest of $0.192 million for a total amount
of $0.448 million. The Judgment awarded ART was $14.2 million in damages, plus pre-judgment interest of $10.6 million for a total
amount of $24.8 million. The Judgment awarded TCI was $11.1 million, plus pre-judgment interest of $8.4 million for a total amount
of $19.5 million. The Judgment also awarded Basic, ART, and TCI post-judgment interest at the rate of 5% per annum from April 25,
2014 until the date their respective damages were paid. Lastly, the Judgement awarded Basic, ART, and TCI was $1.6 million collectively
in attorneys’ fees from Dynex Commercial, Inc.
TCI is working with counsel to identify assets
and collect on the Final Judgment against Dynex Commercial, Inc., as well as explore possible additional claims, if any, against
Dynex Capital, Inc.
Berger Litigation
On February 4, 2019, an individual claiming to
be a stockholder holding 7,900 shares of Common Stock of Income Opportunity Realty Investors, Inc. (“
IOR
”)
filed a Complaint in the United States District Court for the Northern District of Texas, Dallas Division, individually and allegedly
derivatively on behalf of IOR, against Transcontinental Realty Investors, Inc. (“
TCI
”), American Realty Investors,
Inc. (“
ARL
”), (TCI is a shareholder of IOR, ARL is a shareholder of TCI) Pillar Income Asset Management, Inc.
(“
Pillar
”), ( collectively the “Companies”), certain officers and directors of the Companies (“Additional
Parties”) and two other individuals. The Complaint filed alleges that the sale and/or exchange of certain tangible and intangible
property between the Companies and IOR during the last ten years of business operations constitutes a breach of fiduciary duty
by the one or more of Companies, the Additional Defendants and/or the directors of IOR. The case alleges other related claims.
The Plaintiff seeks certification as a representative of IOR and all of its shareholders, unspecified damages, a return to IOR
of various funds and an award of costs, expenses, disbursements (including Plaintiff’s attorneys’ fees) and prejudgment
and post-judgment interest. The named Defendants intend to vigorously defend the action, deny all of the allegations of the Complaint,
and believe the allegations to be wholly without any merit. While only in the early stages of defending the case, it is not clear
that Plaintiff owns any shares of Common Stock of IOR or would be a proper representative of IOR or a class of minority stockholders.
|
NOTE 17.
|
EARNINGS PER SHARE
|
Earnings per share (“EPS”) has been
computed pursuant to the provisions of ASC Topic 260 “
Earnings Per Share.”
The computation of basic EPS is calculated
by dividing net income available to common shareholders from continuing operations, adjusted for preferred dividends, by the weighted-average
number of common shares outstanding during the period. Shares issued during the period shall be weighted for the portion of the
period that they were outstanding.
For the years ended December 31, 2018 and 2017,
we had 2,000,614 and 1,800,614 of outstanding shares of Series A 10.0% cumulative convertible preferred stock, respectively. These
shares may be converted into common stock at 90% of the average daily closing price of the common stock for the prior 20 trading
days. These are considered in the computation of diluted earnings per share if the effect of applying the if-converted method is
dilutive. On January 12, 2018 Realty Advisors (“RAI”) converted 200,000 preferred shares, plus accrued dividends into
482,716 shares of common stock. Of the outstanding 1,800,614 shares, 900,000 are held by ARL. Dividends are not paid on the shares
owned by ARL.
Prior to July 17, 2014, RAI owned 2,451,435 shares
of the outstanding Series A 10.0.0% convertible preferred stock and had accrued dividends unpaid of $15.1 million. On July 17,
2014, RAI converted 890,797 shares, including $6.3 million in accumulated dividends unpaid for these shares, into the requisite
number of shares of common stock. This conversion resulted in the issuance of 2,502,230 new shares of ARL common stock. On April
9, 2015, RAI converted 460,638 shares including $2.3 million in accumulated dividends unpaid for these shares, into the requisite
number of shares of common stock. This conversion resulted in the issuance of 1,486,741 new shares of ARL common stock. As of December
31, 2018, RAI owns 900,000 shares of the outstanding Series A convertible preferred stock and has accrued unpaid dividends of approximately
$9.9 million.
The Company had 135,000 shares of Series K convertible
preferred stock, which were held by TCI and used as collateral on a note. The note has been paid in full and the Series K preferred
stock was cancelled May 7, 2014.
Prior to January 1, 2015, the Company had 1,000
shares of stock options outstanding. These options expired unexercised January 1, 2015. The options are no longer included in the
dilutive earnings per share calculation for the current period, but are considered in the computation for the prior periods if
applying the “treasury stock” method is dilutive.
As of December 31, 2018 and 2017, the Series A
convertible preferred stock and the stock options were anti-dilutive and therefore not included in the EPS calculation.
|
NOTE 18.
|
SUBSEQUENT EVENTS
|
The date to which events occurring
after December 31, 2018, the date of the most recent balance sheet, have been evaluated for possible adjustments to the
financial statements or disclosure is March 31, 2019, which is the date of which the financial statements were available
to be issued. There are no subsequent events that would require an adjustment to the financial statements.
Schedule III
AMERICAN REALTY INVESTORS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2018
(dollars in thousands)
|
|
|
|
|
|
Initial
Cost
|
|
|
Cost
Capitalized Subsequent to Acquisition
|
|
|
Asset
Impairment
|
|
|
Gross
Amount of Which Carried at End of
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property/Location
|
|
Encumbrances
|
|
|
Land
|
|
|
Buildings
|
|
|
Improvements
|
|
|
Asset
Impairment
|
|
|
Land
|
|
|
Building
& Improvements
|
|
|
Total
|
|
|
Accumulated
Depreciation
|
|
|
Date
of Construction
|
|
|
Date
Acquired
|
|
Life on Which Depreciation In Latest Statement of Operation is Computed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties Held for Investment Apartments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chelsea, Beaumont, TX
|
|
$
|
8,953
|
|
|
$
|
1,225
|
|
|
$
|
11,025
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,225
|
|
|
$
|
11,025
|
|
|
$
|
12,250
|
|
|
$
|
23
|
|
|
|
1999
|
|
|
|
11
|
/18
|
|
40 years
|
Farnham Park, Port Aurther, TX
|
|
|
9,348
|
|
|
|
1,010
|
|
|
|
9,086
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,010
|
|
|
|
9,086
|
|
|
|
10,096
|
|
|
|
—
|
|
|
|
|
|
|
|
11
|
/18
|
|
40 years
|
Landing, Houma, LA
|
|
|
15,720
|
|
|
|
2,012
|
|
|
|
18,115
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,012
|
|
|
|
18,115
|
|
|
|
20,127
|
|
|
|
38
|
|
|
|
|
|
|
|
12
|
/18
|
|
40 years
|
Legacy at Pleasant Grove, Texarkana, TX
|
|
|
14,224
|
|
|
|
2,005
|
|
|
|
17,892
|
|
|
|
217
|
|
|
|
—
|
|
|
|
2,005
|
|
|
|
18,109
|
|
|
|
20,114
|
|
|
|
1,817
|
|
|
|
2006
|
|
|
|
12
|
/14
|
|
40 years
|
Toulon, Gautier, MS
|
|
|
19,844
|
|
|
|
1,173
|
|
|
|
17,181
|
|
|
|
372
|
|
|
|
—
|
|
|
|
1,173
|
|
|
|
17,553
|
|
|
|
18,726
|
|
|
|
2,640
|
|
|
|
2011
|
|
|
|
9
|
/09
|
|
40 years
|
Villager, Ft. Walton, FL
|
|
|
693
|
|
|
|
141
|
|
|
|
1,267
|
|
|
|
—
|
|
|
|
—
|
|
|
|
141
|
|
|
|
1,267
|
|
|
|
1,408
|
|
|
|
116
|
|
|
|
1972
|
|
|
|
6
|
/15
|
|
40 years
|
Villas at Bon Secour, Gulf Shores, AL
|
|
|
11,730
|
|
|
|
2,715
|
|
|
|
15,385
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,715
|
|
|
|
15,385
|
|
|
|
18,100
|
|
|
|
160
|
|
|
|
2007
|
|
|
|
7
|
/18
|
|
40 years
|
Vista Ridge, Tupelo, MS
|
|
|
10,394
|
|
|
|
1,339
|
|
|
|
13,398
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,339
|
|
|
|
13,398
|
|
|
|
14,737
|
|
|
|
1,544
|
|
|
|
2009
|
|
|
|
10
|
/15
|
|
40 years
|
Westwood, Mary Ester, FL
|
|
|
3,854
|
|
|
|
692
|
|
|
|
6,650
|
|
|
|
—
|
|
|
|
—
|
|
|
|
692
|
|
|
|
6,650
|
|
|
|
7,342
|
|
|
|
596
|
|
|
|
1972
|
|
|
|
6
|
/15
|
|
40 years
|
Total Apartments Held for Investment
|
|
$
|
94,760
|
|
|
$
|
12,312
|
|
|
$
|
109,999
|
|
|
$
|
589
|
|
|
$
|
—
|
|
|
$
|
12,312
|
|
|
$
|
110,588
|
|
|
$
|
122,900
|
|
|
$
|
6,934
|
|
|
|
|
|
|
|
|
|
|
|
Apartments Under Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apalache Point
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21
|
|
|
|
21
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
—
|
Forest Pines
|
|
|
—
|
|
|
|
5,040
|
|
|
|
—
|
|
|
|
300
|
|
|
|
—
|
|
|
|
5,040
|
|
|
|
300
|
|
|
|
5,340
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
/17
|
|
—
|
Parc at Denham
|
|
|
3,325
|
|
|
|
714
|
|
|
|
—
|
|
|
|
4,138
|
|
|
|
—
|
|
|
|
714
|
|
|
|
4,138
|
|
|
|
4,852
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Overlook at Allensville Square II, Sevierville, TN
|
|
|
10,529
|
|
|
|
1,933
|
|
|
|
—
|
|
|
|
12,567
|
|
|
|
—
|
|
|
|
1,933
|
|
|
|
12,567
|
|
|
|
14,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11
|
/15
|
|
—
|
Sugar Mill II
|
|
|
547
|
|
|
|
576
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
576
|
|
|
|
—
|
|
|
|
576
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
—
|
Total Apartments Under Construction
|
|
$
|
14,401
|
|
|
$
|
8,263
|
|
|
$
|
—
|
|
|
$
|
17,026
|
|
|
$
|
—
|
|
|
$
|
8,263
|
|
|
$
|
17,026
|
|
|
$
|
25,289
|
|
|
$
|
—
|
|
|
$
|
|
|
|
|
|
|
|
|
Property/Location
|
|
Encumbrances
|
|
|
Land
|
|
|
Buildings
|
|
|
Improvements
|
|
|
Asset
Impairment
|
|
|
Land
|
|
|
Building
& Improvements
|
|
|
Total
|
|
|
Accumulated
Depreciation
|
|
|
Date
of Construction
|
|
|
Date
Acquired
|
|
Life
on Which Depreciation In Latest Statement of Operation is Computed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600 Las Colinas, Las Colinas, TX
|
|
$
|
37,926
|
|
|
$
|
5,751
|
|
|
$
|
51,759
|
|
|
$
|
19,317
|
|
|
$
|
—
|
|
|
$
|
5,751
|
|
|
$
|
71,076
|
|
|
$
|
76,827
|
|
|
$
|
29,896
|
|
|
|
1984
|
|
|
|
8
|
/05
|
|
40 years
|
770 South Post Oak, Houston, TX
|
|
|
12,394
|
|
|
|
1,763
|
|
|
|
15,834
|
|
|
|
412
|
|
|
|
—
|
|
|
|
1,763
|
|
|
|
16,246
|
|
|
|
18,009
|
|
|
|
1,619
|
|
|
|
1970
|
|
|
|
7
|
/15
|
|
40 years
|
Bridgeview Plaza, LaCrosse, WI
|
|
|
4,423
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,157
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,157
|
|
|
|
1,157
|
|
|
|
710
|
|
|
|
1979
|
|
|
|
3
|
/03
|
|
40 years
|
Browning Place (Park West I), Farmers Branch, TX
|
|
|
41,891
|
|
|
|
5,096
|
|
|
|
45,868
|
|
|
|
22,848
|
|
|
|
—
|
|
|
|
5,096
|
|
|
|
68,716
|
|
|
|
73,812
|
|
|
|
26,556
|
|
|
|
1984
|
|
|
|
4
|
/05
|
|
40 years
|
Mahogany Run Golf Course, US Virgin Islands
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15
|
|
|
|
1981
|
|
|
|
11
|
/14
|
|
40 years
|
Cross County Mall S/C - IL C2117
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
40 years
|
Fruitland Plaza, Fruitland Park, FL
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
|
83
|
|
|
|
—
|
|
|
|
17
|
|
|
|
83
|
|
|
|
100
|
|
|
|
62
|
|
|
|
—
|
|
|
|
05
|
/92
|
|
40 years
|
Senlac VHP, Farmers Branch, TX
|
|
|
—
|
|
|
|
622
|
|
|
|
—
|
|
|
|
142
|
|
|
|
—
|
|
|
|
622
|
|
|
|
142
|
|
|
|
764
|
|
|
|
142
|
|
|
|
—
|
|
|
|
8
|
/05
|
|
40 years
|
Stanford Center, Dallas, TX
|
|
|
40,000
|
|
|
|
20,278
|
|
|
|
34,862
|
|
|
|
7,953
|
|
|
|
-9,600
|
|
|
|
20,278
|
|
|
|
42,815
|
|
|
|
53,493
|
|
|
|
12,148
|
|
|
|
—
|
|
|
|
6
|
/08
|
|
40 years
|
Total Commercial Held for Investment
|
|
$
|
136,634
|
|
|
$
|
33,527
|
|
|
$
|
148,323
|
|
|
$
|
51,912
|
|
|
$
|
(9,600
|
)
|
|
$
|
33,527
|
|
|
$
|
200,235
|
|
|
$
|
224,162
|
|
|
$
|
71,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonneau Land, Farmers Branch, TX
|
|
$
|
—
|
|
|
$
|
1,309
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,309
|
|
|
$
|
—
|
|
|
$
|
1,309
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
12
|
/14
|
|
—
|
Cooks Lane, Fort Worth, TX
|
|
|
—
|
|
|
|
1,094
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,094
|
|
|
|
—
|
|
|
|
1,094
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
/04
|
|
—
|
Dedeaux, Gulfport, MS
|
|
|
—
|
|
|
|
1,612
|
|
|
|
—
|
|
|
|
46
|
|
|
|
(38
|
)
|
|
|
1,612
|
|
|
|
46
|
|
|
|
1,620
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
/06
|
|
—
|
Gautier Land, Gautier, MS
|
|
|
—
|
|
|
|
202
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
202
|
|
|
|
—
|
|
|
|
202
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
/98
|
|
—
|
Lake Shore Villas, Humble, TX
|
|
|
—
|
|
|
|
81
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
81
|
|
|
|
3
|
|
|
|
84
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
/02
|
|
—
|
Lubbock Land, Lubbock, TX
|
|
|
—
|
|
|
|
234
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
234
|
|
|
|
—
|
|
|
|
234
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
/04
|
|
—
|
Nakash, Malden, MO
|
|
|
—
|
|
|
|
103
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
103
|
|
|
|
—
|
|
|
|
103
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
/93
|
|
—
|
Nashville, Nashville, TN
|
|
|
—
|
|
|
|
278
|
|
|
|
—
|
|
|
|
59
|
|
|
|
—
|
|
|
|
278
|
|
|
|
59
|
|
|
|
337
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
/02
|
|
—
|
Ocean Estates, Gulfport, MS
|
|
|
—
|
|
|
|
1,418
|
|
|
|
—
|
|
|
|
390
|
|
|
|
—
|
|
|
|
1,418
|
|
|
|
390
|
|
|
|
1,808
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
/07
|
|
—
|
Texas Plaza Land, Irving, TX
|
|
|
—
|
|
|
|
1,738
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(238
|
)
|
|
|
1,738
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12
|
/06
|
|
—
|
Union Pacific Railroad Land, Dallas, TX
|
|
|
—
|
|
|
|
130
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
130
|
|
|
|
—
|
|
|
|
130
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
/04
|
|
—
|
Willowick Land, Pensacola, FL
|
|
|
—
|
|
|
|
137
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
137
|
|
|
|
—
|
|
|
|
137
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
/95
|
|
—
|
Windmill Farms Land, Kaufman County, TX
|
|
|
14,402
|
|
|
|
57,345
|
|
|
|
—
|
|
|
|
13,911
|
|
|
|
(20,343
|
)
|
|
|
57,345
|
|
|
|
13,911
|
|
|
|
50,913
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11
|
/11
|
|
—
|
2427 Valley View Ln, Farmers Branch, TX
|
|
|
—
|
|
|
|
76
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
76
|
|
|
|
—
|
|
|
|
76
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
/12
|
|
—
|
GNB Land ARI 8/06 L2870
|
|
|
2,220
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
—
|
GNB Land Edina 6/07 L2875
|
|
|
3,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
—
|
Lacy Longhorn Land, Farmers Branch, TX
|
|
|
—
|
|
|
|
1,169
|
|
|
|
—
|
|
|
|
(760
|
)
|
|
|
—
|
|
|
|
1,169
|
|
|
|
(760
|
)
|
|
|
409
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
/04
|
|
—
|
Manhattan Land
|
|
|
—
|
|
|
|
(344
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(344
|
)
|
|
|
—
|
|
|
|
(344
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
—
|
Minivest Land, Dallas, TX
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
/13
|
|
—
|
Mira Lago, Farmers Branch, TX
|
|
|
—
|
|
|
|
53
|
|
|
|
—
|
|
|
|
15
|
|
|
|
—
|
|
|
|
53
|
|
|
|
15
|
|
|
|
68
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
/01
|
|
—
|
Nicholson Croslin, Dallas, TX
|
|
|
—
|
|
|
|
184
|
|
|
|
—
|
|
|
|
(118
|
)
|
|
|
—
|
|
|
|
184
|
|
|
|
(118
|
)
|
|
|
66
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
/98
|
|
—
|
Nicholson Mendoza, Dallas, TX
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
(51
|
)
|
|
|
—
|
|
|
|
80
|
|
|
|
(51
|
)
|
|
|
29
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
/98
|
|
—
|
Valley View 34 (Mercer Crossing), Farmers Branch, TX
|
|
|
—
|
|
|
|
1,173
|
|
|
|
—
|
|
|
|
(945
|
)
|
|
|
—
|
|
|
|
1,173
|
|
|
|
(945
|
)
|
|
|
228
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
/08
|
|
—
|
Mercer Crossing Land L2876
|
|
|
—
|
|
|
|
12,029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,029
|
|
|
|
—
|
|
|
|
12,029
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Mercer Crossing Land L2877
|
|
|
—
|
|
|
|
2,834
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,834
|
|
|
|
—
|
|
|
|
2,834
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Dominion Mercer, Farmers Branch, TX
|
|
|
6,400
|
|
|
|
3,801
|
|
|
|
—
|
|
|
|
2,774
|
|
|
|
(133
|
)
|
|
|
3,801
|
|
|
|
2,774
|
|
|
|
6,442
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
/16
|
|
—
|
McKinney 36, Collin County, TX
|
|
|
1,092
|
|
|
|
456
|
|
|
|
—
|
|
|
|
161
|
|
|
|
(19
|
)
|
|
|
456
|
|
|
|
161
|
|
|
|
598
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
/98
|
|
—
|
Sugar Mill
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Travis Ranch Land, Kaufman County, TX
|
|
|
307
|
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
/08
|
|
—
|
Travis Ranch Retail, Kaufman City, TX
|
|
|
—
|
|
|
|
1,517
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,517
|
|
|
|
—
|
|
|
|
1,517
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
/08
|
|
—
|
Total Land Held for Investment
|
|
$
|
27,521
|
|
|
$
|
88,796
|
|
|
$
|
—
|
|
|
$
|
15,485
|
|
|
$
|
(20,771
|
)
|
|
$
|
88,796
|
|
|
$
|
15,485
|
|
|
$
|
83,510
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Departments/Investments/Misc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCI - Corporate
|
|
$
|
18,225
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Departments/Investments/Misc.
|
|
$
|
18,225
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
Total Properties Held for Investment
|
|
$
|
291,541
|
|
|
$
|
142,898
|
|
|
$
|
258,322
|
|
|
$
|
85,012
|
|
|
$
|
(30,371
|
)
|
|
$
|
142,898
|
|
|
$
|
343,334
|
|
|
$
|
455,861
|
|
|
$
|
78,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties Held for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial Held for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dunes Plaza C2195
|
|
$
|
376
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total Properties Held for Sale
|
|
$
|
376
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Tract, Dallas, TX
|
|
$
|
—
|
|
|
$
|
2,083
|
|
|
$
|
—
|
|
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
2,083
|
|
|
$
|
53
|
|
|
$
|
2,136
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
3
|
/99
|
|
—
|
Hollywood Casino Tract I, Farmers Branch, TX
|
|
|
—
|
|
|
|
(482
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(482
|
)
|
|
|
—
|
|
|
|
(482
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
/02
|
|
—
|
Whorton Land, Bentonville, AR
|
|
|
—
|
|
|
|
3,510
|
|
|
|
—
|
|
|
|
568
|
|
|
|
(2,451
|
)
|
|
|
3,510
|
|
|
|
568
|
|
|
|
1,627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
/05
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Properties Subject to Sales Contract
|
|
$
|
—
|
|
|
$
|
5,111
|
|
|
$
|
—
|
|
|
$
|
621
|
|
|
$
|
(2,451
|
)
|
|
$
|
5,111
|
|
|
$
|
621
|
|
|
$
|
3,281
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL: Real Estate
|
|
$
|
291,917
|
|
|
$
|
148,009
|
|
|
$
|
258,322
|
|
|
$
|
85,633
|
|
|
$
|
(32,822
|
)
|
|
$
|
148,009
|
|
|
$
|
343,955
|
|
|
$
|
459,142
|
|
|
$
|
78,099
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE III
(Continued)
AMERICAN REALTY INVESTORS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
As of December 31, 2018
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
(dollars
in thousands)
|
|
Reconciliation of Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
1,165,663
|
|
|
$
|
1,066,603
|
|
|
$
|
1,003,545
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, improvements and construction
|
|
|
576,232
|
|
|
|
129,484
|
|
|
|
112,762
|
|
Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real estate
|
|
|
(1,282,752
|
)
|
|
|
(30,424
|
)
|
|
|
(49,704
|
)
|
Asset impairments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance at December 31,
|
|
$
|
459,143
|
|
|
$
|
1,165,663
|
|
|
$
|
1,066,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
177,546
|
|
|
$
|
165,597
|
|
|
$
|
150,038
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
22,670
|
|
|
|
24,417
|
|
|
|
23,277
|
|
Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real estate
|
|
|
(122,117
|
)
|
|
|
(12,468
|
)
|
|
|
(7,718
|
)
|
Balance at December 31,
|
|
$
|
78,099
|
|
|
$
|
177,546
|
|
|
$
|
165,597
|
|
SCHEDULE IV
AMERICAN REALTY INVESTORS, INC.
MORTGAGE
LOANS RECEIVABLE ON REAL ESTATE
December 31, 2018
Description
|
|
Interest
Rate
|
|
|
Final Maturity
Date
|
|
Periodic Payment
Terms
|
|
Prior
Liens
|
|
|
Face
Amount of Mortgage
|
|
|
Carrying
Amount of Mortgage
|
|
|
Principal
or
Loans Subject to Delinquent Principal or Interest
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
Christine Tunney
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
$
|
—
|
|
|
$
|
49
|
|
|
$
|
48
|
|
|
$
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compton Partners
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
289
|
|
|
|
289
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Monier
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
97
|
|
|
|
97
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earl Samson III
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
96
|
|
|
|
96
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Samson III
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
96
|
|
|
|
96
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hammon Operating Corporation
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
193
|
|
|
|
193
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold Wolfe
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
193
|
|
|
|
193
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herrick Partners
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
91
|
|
|
|
91
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Anna MacLean
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
193
|
|
|
|
193
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Monier
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
304
|
|
|
|
304
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael White
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
96
|
|
|
|
96
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palmer Brown Madden
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
96
|
|
|
|
96
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Schmaltz
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
203
|
|
|
|
203
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Baylis
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
193
|
|
|
|
193
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sherman Bull
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
193
|
|
|
|
193
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Willingham Revocable Trust
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
96
|
|
|
|
96
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William H. Ingram
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
96
|
|
|
|
96
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William S. Urkiel
|
|
|
10.00
|
%
|
|
Sep-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
97
|
|
|
|
97
|
|
|
|
—
|
|
Class A limited partnership interests in Edina Park Plaza Associates,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
SCHEDULE IV
(Continued)
AMERICAN REALTY INVESTORS, INC.
MORTGAGE LOANS RECEIVABLES ON REAL ESTATE
December
31, 2018
Description
|
|
Interest Rate
|
|
Final Maturity
Date
|
|
Periodic Payment Terms
|
|
Prior Liens
|
|
|
Face Amount of
Mortgage
|
|
|
Carrying Amount
of Mortgage
|
|
|
Principal or
Loans Subject to Delinquent Principal or Interest
|
|
|
|
|
|
|
|
|
|
(dollars
in thousands)
|
|
Unified Housing Foundation, Inc. (Reserve at White Rock I)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
15,640
|
|
|
|
2,794
|
|
|
|
2,485
|
|
|
|
—
|
|
100% Interest in UH of Harvest Hill I, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Reserve at White Rock II)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
14,026
|
|
|
|
2,555
|
|
|
|
2,555
|
|
|
|
—
|
|
100% Interest in UH of Harvest Hill, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Trails at White Rock)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
21,712
|
|
|
|
3,815
|
|
|
|
3,815
|
|
|
|
—
|
|
100% Interest in UH of Harvest Hill III, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Lakeshore Villas/HFS of Humble, LLC) (68.5% of cash
flow)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
15,965
|
|
|
|
2,959
|
|
|
|
2,732
|
|
|
|
—
|
|
Unified Housing Foundation, Inc. (Kensington Park/UH of Kensington, LLC)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
18,723
|
|
|
|
4,310
|
|
|
|
3,933
|
|
|
|
—
|
|
100% Interest in UH of Kensington, LLC
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Walnut Park Crossing)
|
|
|
12
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
—
|
|
|
|
340
|
|
|
|
369
|
|
|
|
—
|
|
Unified Housing Foundation, Inc. (Samsung, Inc/Braker Lane)
|
|
|
12
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
—
|
|
|
|
2,794
|
|
|
|
720
|
|
|
|
—
|
|
Unified Housing Foundation, Inc. (Terraces of Marine Creek/Blue Lake at Marine Creek)
|
|
|
12
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
—
|
|
|
|
140
|
|
|
|
128
|
|
|
|
—
|
|
Unified Housing Foundation, Inc. (Inwood on the Park/UH of Inwood, LLC)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
22,227
|
|
|
|
5,462
|
|
|
|
3,639
|
|
|
|
—
|
|
100% Interest in UH of Inwood, LLC
|
|
|
|
|
|
|
|
Excess cash flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Plaza at Chase Oaks/UH of Chase Oaks)
|
|
|
12
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
—
|
|
|
|
143
|
|
|
|
132
|
|
|
|
—
|
|
H198, LLC
|
|
|
12.00
|
%
|
|
Jan-20
|
|
Excess cash flow
|
|
|
—
|
|
|
|
5,907
|
|
|
|
5,907
|
|
|
|
—
|
|
Las Vegas Land
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H198, LLC
|
|
|
12.00
|
%
|
|
Oct-19
|
|
Excess cash flow
|
|
|
—
|
|
|
|
496
|
|
|
|
496
|
|
|
|
—
|
|
Legacy at Pleasant Grove
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oulan-Chikh Family Trust
|
|
|
8.00
|
%
|
|
Mar-19
|
|
Excess cash flow
|
|
|
—
|
|
|
|
174
|
|
|
|
174
|
|
|
|
—
|
|
H198, LLC
|
|
|
12.00
|
%
|
|
Oct-19
|
|
Excess cash flow
|
|
|
—
|
|
|
|
4,554
|
|
|
|
4,554
|
|
|
|
—
|
|
McKinney Ranch Land
|
|
|
6
|
%
|
|
Sep-20
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forest Pines
|
|
|
5
|
%
|
|
Sep-19
|
|
Excess cash flow
|
|
|
—
|
|
|
|
2,223
|
|
|
|
2,223
|
|
|
|
—
|
|
Spyglass Apartments of Ennis, LP
|
|
|
5
|
%
|
|
Nov-19
|
|
Excess cash flow
|
|
|
—
|
|
|
|
5,083
|
|
|
|
5,083
|
|
|
|
—
|
|
Bellwether Ridge
|
|
|
5
|
%
|
|
May-20
|
|
Excess cash flow
|
|
|
—
|
|
|
|
3,429
|
|
|
|
3,429
|
|
|
|
—
|
|
Parc at Windmill Farms
|
|
|
5
|
%
|
|
May-20
|
|
Excess cash flow
|
|
|
—
|
|
|
|
6,066
|
|
|
|
6,066
|
|
|
|
—
|
|
Unified Housing Foundation, Inc. (Echo Station)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
9,719
|
|
|
|
2,794
|
|
|
|
1,481
|
|
|
|
—
|
|
100% Interest in UH of Temple, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Lakeshore Villas/HFS of Humble, LLC) (31.5% of cash
flow)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
15,756
|
|
|
|
8,836
|
|
|
|
6,369
|
|
|
|
—
|
|
Interest in Unified Housing Foundation Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Lakeshore Villas/HFS of Humble, LLC)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
15,965
|
|
|
|
2,959
|
|
|
|
2,000
|
|
|
|
—
|
|
100% Interest in HFS of Humble, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Limestone Ranch)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
18,641
|
|
|
|
12,335
|
|
|
|
7,953
|
|
|
|
—
|
|
100% Interest in UH of Vista Ridge, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Timbers of Terrell)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
7,294
|
|
|
|
1,702
|
|
|
|
1,323
|
|
|
|
—
|
|
100% Interest in UH of Terrell, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc. (Tivoli)
|
|
|
12.00
|
%
|
|
Dec-32
|
|
Excess cash flow
|
|
|
10,398
|
|
|
|
10,742
|
|
|
|
6,140
|
|
|
|
—
|
|
100% Interest in UH of Tivoli, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unified Housing Foundation, Inc (2015 Advisory Fee)
|
|
|
12.00
|
%
|
|
Dec-19
|
|
Excess cash flow
|
|
|
—
|
|
|
|
3,994
|
|
|
|
3,994
|
|
|
|
—
|
|
Unified Housing Foundation, Inc (2008-2014 Advisory Fee)
|
|
|
12.00
|
%
|
|
Dec-19
|
|
Excess cash flow
|
|
|
—
|
|
|
|
6,407
|
|
|
|
6,407
|
|
|
|
—
|
|
Unified Housing Foundation, Inc (2017 Advisory Fee)
|
|
|
12.00
|
%
|
|
Jun-19
|
|
Excess cash flow
|
|
|
|
|
|
|
5,760
|
|
|
|
5,760
|
|
|
|
—
|
|
Unified Housing Foundation, Inc (2018 Advisory Fee)
|
|
|
12.00
|
%
|
|
Jun-21
|
|
Excess cash flow
|
|
|
|
|
|
|
5,314
|
|
|
|
5,314
|
|
|
|
—
|
|
Realty Advisors Management, Inc.
|
|
|
2.28
|
%
|
|
Dec-19
|
|
Interest only paid quarterly.
|
|
|
—
|
|
|
|
20,387
|
|
|
|
20,387
|
|
|
|
—
|
|
One Realco Corporation
|
|
|
3.00
|
%
|
|
Jan-20
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
7,000
|
|
|
|
—
|
|
Various related party notes
|
|
|
various
|
|
|
various
|
|
Excess cash flow
|
|
|
—
|
|
|
|
1,349
|
|
|
|
2,890
|
|
|
|
—
|
|
Various non-related party notes
|
|
|
various
|
|
|
various
|
|
|
|
|
—
|
|
|
|
496
|
|
|
|
1,034
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
129,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
|
11,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for estimated
losses
|
|
|
|
(14,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
126,058
|
|
|
|
|
|
SCHEDULE IV
AMERICAN REALTY INVESTORS, INC.
|
MORTGAGE
LOANS RECEIVABLES ON REAL ESTATE
|
As
of December 31,
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
(dollars in thousands)
|
|
Balance at January 1,
|
|
|
127,865
|
|
|
|
143,601
|
|
|
|
137,280
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
New mortgage loans
|
|
|
13,123
|
|
|
|
15,741
|
|
|
|
11,703
|
|
Increase (decrease) of interest receivable on mortgage loans
|
|
|
(6,389
|
)
|
|
|
581
|
|
|
|
13,835
|
|
Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts received
|
|
|
(8,541
|
)
|
|
|
(32,058
|
)
|
|
|
(19,217
|
)
|
Balance at December 31,
|
|
|
126,058
|
|
|
|
127,865
|
|
|
|
143,601
|
|