AMERICAN SPECTRUM REALTY INC

CIK:0001121783|SEC Filings

DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

2013 Dispositions

In August 2013, the lender for Morenci Professional Park foreclosed on the asset after the Company defaulted on the debt secured by the property. ASR chose to discontinue paying the $1.6 million debt as it exceeded the market value of the property. The property securing the debt was held by a consolidated, wholly-owned subsidiary that had not guaranteed the debt. The transaction generated a gain of $0.2 million. No proceeds were received as a result of the transaction.

In August 2013, the Company deconsolidated the VIE that owned University Fountains at Lubbock (a student housing property) after determining ASR was no longer the primary beneficiary. The Company no longer manages or has a continuing involvement with this property. No loss or proceeds were recorded as a result of the transaction.

In July 2013, the lender for 1501 Mockingbird foreclosed on the asset after the Company defaulted on the debt secured by the property. ASR chose to discontinue paying the $3.1 million unpaid debt as it exceeded the market value of the property. The debt was held by a consolidated, wholly-owned subsidiary that had not guaranteed the debt. The transaction generated a loss of $0.2 million. No proceeds were received as a result of the transaction.

In July 2013, 2620/2630 Fountain View, an office property located in Houston, Texas, was sold for approximately $8.9 million. The sale generated net proceeds of approximately $3.1 million to the property’s partnership, in which the Company owns a 50% interest. The transaction generated a gain of $1.2 million. A portion of the total net proceeds is currently held in escrow due to a distribution dispute with the minority owner of the property. As a result, the Company holds the $2.8 million as restricted cash. Negotiations continue, but there can be no assurance that a favorable resolution will be obtained. The lawsuit is set for trial in December 2014.

In June 2013, the lender for the 11500 Northwest Freeway property foreclosed on the asset. ASR chose to discontinue paying the $3.9 million unpaid debt as it exceeded the market value of the property. The property securing the debt was held by a consolidated, wholly-owned subsidiary that had not guaranteed the debt. The transaction generated a loss of $0.1 million. No proceeds were received as a result of the transaction.

During the first quarter of 2013, the Company deconsolidated two VIEs after determining that it was no longer the primary beneficiary. The entities were Fishers Indiana and College Park. ASR no longer manages or has a continuing involvement with properties owned by these entities. There was no gain nor loss associated with these deconsolidations.

2012 Dispositions

In November 2012, the lender for Charleston Boulevard Self-Storage foreclosed on the asset after the Company chose to discontinue paying the $2.6 million unpaid debt as it exceeded the market value of the property. The property securing the debt was held by a consolidated VIE which had not guaranteed the debt. The transaction generated a gain upon disposition of $0.5 million. No proceeds were received as a result of the transaction.

In October 2012, the Company sold Beltway Industrial Park for $20.7 million. The transaction generated a gain on sale of approximately $5.6 million. Net proceeds received from the sale amounted to approximately $1.8 million. The proceeds were primarily used to reduce debt.

In October 2012, ASR sold a property in receivership located at 8300 Bissonnet. In exchange for the sale, the Company was released from all liability on the note. The transaction generated a gain on sale of approximately $1.4 million. No proceeds were received as a result of the transaction.

The Company’s preferred equity partner on 2855 Mangum acquired the mortgage loan from the property’s lender and foreclosed on the asset in July 2012. The Company had elected to sell the property to its preferred equity partner in 2011. ASR chose not to pay debt as the mortgage balance exceeded the market value of the property. The property securing the debt was held by a consolidated subsidiary that had not guaranteed the debt. The transaction generated a gain of approximately $0.01 million. No proceeds were received as a result of the transaction.

In April and May of 2012, lenders for the Bristol Bay and Pacific Spectrum properties notified the Company that they had foreclosed on the assets. The properties securing the debt were each held by consolidated, wholly-owned subsidiaries that had not guaranteed the debts. The transactions generated a gain upon disposition of approximately $2.9 million. No proceeds were received as a result of these transactions.

In March 2012, the Company sold Park Ten Place I and II for $10.7 million and Sierra Southwest Pointe for $3.9 million. These transactions generated a gain on sale of approximately $4.4 million. Net proceeds received from the sales amounted to approximately $3.0 million. The proceeds were used to reduce corporate bank debt by $2.0 million and other debt by $1.0 million.

In March 2012, the Company sold VIE-owned property Foxborough Business Park Center for $4.9 million. The transaction generated a loss of approximately $0.7 million. ASR had less than 1% ownership interest in the VIE. Net proceeds received from the sale amounted to $0.9 million, which was distributed to non-controlling interests.

In March 2012, the lender for the Atrium 6420 property foreclosed on the asset. The Company chose to discontinue paying the $6.3 million unpaid debt as the balance exceeded the market value of the property. The property securing the debt was held by a consolidated, wholly-owned subsidiary that had not guaranteed the debt. The transaction generated a gain upon disposition of $0.9 million. No proceeds were received as a result of the transaction.

The consolidated statements of discontinued operations for the years ending December 31, 2013 and 2012 are summarized below:



	Year Ended December 31,
	2013			2012
	(In thousands)
Rental Revenue	$	4,798		$	16,503
Operating Expenses (1)	(5,697		)	(21,008		)
Loss from discontinued operations before gain on dispositions and income tax expense	(899		)	(4,505		)
Gain on dispositions of real estate assets	439			15,082
Income tax expense	(194		)	(4,083		)
Income/(loss) from discontinued operations	$	(654	)	$	6,494

(1) Includes interest expense of approximately $1.3 million and $6.2 million for the years ending December 31, 2013 and December 31, 2012, respectively. Mortgage debt related to the property and included in discontinued operations was individually secured, and as such, interest expense is based on the property’s debt.

Loss from discontinued operations for the year ended December 31, 2013 includes: the net gain from the dispositions of Morenci Professional Park, 1501 Mockingbird, 2620/2630 Fountain View and 11500 Northwest Freeway and the operating results of these properties through the date of disposition.

Income from discontinued operations for the year ending December 31, 2012 includes: the net gain resulting from the dispositions of Beltway Industrial Park, Park Ten Place I and II, Sierra Southwest Pointe, Bristol Bay, Pacific Spectrum, 8300 Bissonnet, 2855 Mangum, 6420 Richmond, Foxborough Business Center Park, and Charleston Blvd, and the operating results of properties disposed of in 2012 and 2013.

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss, including noncontrolling interests	$ (15,183)	$ (1,785)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	17,252	22,572
Impairment expense	1,844	982
Income tax expense	1,968	815
Gain on extinguishment of debt	(10,327)	(682)
Loss on litigation settlement	3,928	0
Gain on disposition of real estate assets	(439)	(15,082)
Stock-based compensation	420	205
Deferred rental income	(587)	(753)
Changes in operating assets and liabilities:
Increase in tenant and other receivables	(902)	(75)
Increase in prepaid and other assets	(1,642)	(2,720)
Increase in accounts payable	3,446	1,815
Increase in accrued and other liabilities	2,188	2,823
Change in restricted cash	(3,490)	(103)
Net cash (used in) provided by operating activities:	(1,524)	8,012
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds received from sales of real estate assets	8,913	42,881
Capital improvements to real estate assets	(1,043)	(1,521)
Investments in unconsolidated real estate assets	0	0
Net cash provided by investing activities:	7,870	41,360
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings	26,361	19,877
Repayment of borrowings-scheduled payments	(5,236)	(37,761)
Repayment of borrowings-scheduled payments	(5,526)	(11,639)
Repayment of borrowings-other	(15,303)	(14,555)
Contributions from noncontrolling interests	11	1,972
Distributions to noncontrolling interests	(8,282)	(7,680)
Net cash used in financing activities:	(7,975)	(49,786)
Increase (decrease) in cash and cash equivalents	(1,629)	(414)
Cash and cash equivalents, beginning of period	4,216	4,630
Cash and cash equivalents, end of period	2,587	4,216
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of operating partnership units to common stock	21	1,711
Conversion of accounts payable to note payable	1,295	1,417
Conversion of accounts payable to common stock	0	203
Debt assumed in connection with real estate acquisition	17,167	0
Issuance of Series B Preferred in connection with real estate acquisition	67,481	0
Conversion of Series A Preferred to Series C Preferred	1,540	0
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	17,114	21,126
Cash paid for income taxes	$ 0	$ 62

CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2013	Dec. 31, 2012
ASSETS
Real estate held for investment (includes $253,928 and $327,676 from consolidated Variable Interest Entities (VIE's), respectively)	$ 416,982,000	$ 438,675,000
Accumulated depreciation (includes $39,828 and $37,127 from consolidated VIE's, respectively)	(70,208,000)	(71,775,000)
Real estate held for investment, net (includes $214,100 and $290,549 from consolidated VIE's, respectively)	346,774,000	366,900,000
Cash and cash equivalents (includes $2,475 and $3,724 from consolidated VIE's, respectively)	2,587,000	4,216,000
Restricted cash	2,805,000	0
Tenant and other receivables (includes $970 and $784 from consolidated VIE's, respectively), net of allowance for doubtful accounts of $417 and $673 (includes $236 and $473 from consolidated VIE's, respectively)	1,687,000	1,281,000
Assets held for sale, net of accumulated depreciation of $1,485	2,870,000	0
Deferred rents receivable (includes $2,811and $2,204 from consolidated VIE's, respectively)	3,546,000	3,269,000
Purchased intangibles subject to amortization, net of accumulated amortization of $5,417 and $3,114, respectively	2,920,000	5,946,000
Deferred tax assets	9,340,000	11,308,000
Goodwill	12,756,000	6,687,000
Investment in unconsolidated real estate assets from related parties	389,000	332,000
Receivables from Evergreen	0	1,686,000
Prepaid and other assets, net (includes $7,668 and $8,600 from consolidated VIE's, respectively)	12,981,000	15,753,000
Total Assets	398,655,000	417,378,000
LIABILITIES AND EQUITY
Notes payable (includes $168,433 and $221,899 from consolidated VIE's, respectively)	259,600,000	312,662,000
Notes payable on assets held for sale	3,794,000	0
Accounts payable (includes $284 and $398 from consolidated VIE's, respectively)	8,868,000	7,458,000
Accrued and other liabilities (includes $5,773 and $6,759 from consolidated VIE's, respectively)	13,357,000	15,241,000
Long-term liabilities - Series B Preferred and Series C Preferred	69,022,000	0
Total liabilities	354,641,000	335,361,000
Commitments and Contingencies
American Spectrum Realty, Inc, stockholders' equity (deficit):
Common Stock, par value $.01 per share, 100,000,000 authorized shares, 4,174,492 and 4,039,191 shares issued at December 31, 2013 and December 31, 2012, respectively; 3,703,142 and 3,567,779 shares outstanding at December 31, 2013 and December 31, 2012, respectively	42,000	34,000
Additional paid-in capital	60,412,000	61,158,000
Accumulated deficit	(68,865,000)	(55,096,000)
Treasury stock, at cost, 471,350 shares at December 31, 2013 and December 31, 2012	(3,095,000)	(3,095,000)
Total American Spectrum Realty, Inc. stockholders' equity (deficit)	(11,506,000)	3,002,000
Noncontrolling interest	55,520,000	79,015,000
Total Equity	44,014,000	82,017,000
Total Liabilities and Equity	398,655,000	417,378,000
Series A Preferred, 15% cumulative, par value $.01 per share, 68,965 authorized shares, 18,390 and 55,170 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively
American Spectrum Realty, Inc, stockholders' equity (deficit):
Preferred stock	0	1,000
Series B Preferred, 8% cumulative, par value $.01 per share, 17,000,000 authorized shares, 16,870,609 shares issued and outstanding at December 31, 2013
American Spectrum Realty, Inc, stockholders' equity (deficit):
Preferred stock	0	0
Series C Preferred, 8% cumulative, par value $.01 per share, 55,170 authorized shares, 36,780 shares issued and outstanding at December 31, 2013
American Spectrum Realty, Inc, stockholders' equity (deficit):
Preferred stock	$ 0	$ 0