SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
Six Months Ended
|
|
|
June
30,
|
|
|
2013
|
|
2012
|
Conversion of operating partnership units to common stock
|
|
17
|
|
1,711
|
Conversion of
accounts payable to common stock
|
|
-
|
|
203
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
Cash paid for
interest
|
|
8,892
|
|
5,567
|
Cash paid for taxes
|
|
70
|
|
-
|
The accompanying notes are an
integral part of these consolidated financial statements
7
AMERICAN SPECTRUM REALTY,
INC.
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1 - DESCRIPTION OF
BUSINESS
We provide comprehensive
integrated real estate solutions for our own property portfolio (properties in
which we own a controlling interest or in properties where we are the primary
beneficiary of a variable interest entity, (a VIE)) and the portfolios of our
third party clients. We own and/or manage commercial, industrial, retail,
self-storage and multi-family, student housing income properties, and offer our
third party clients comprehensive integrated real estate solutions, including
management and transaction services based on our market expertise. We conduct
our business in the continental United States. American Spectrum Realty, Inc.
was incorporated in Maryland in August of 2000.
Our business is conducted through
an Operating Partnership in which we are the sole general partner and a limited
partner with a total equity interest of 93% at June 30, 2013. As the sole
general partner of the Operating Partnership, we have the exclusive power to
manage and conduct the business of the Operating Partnership. In general, the
Operating Partnership units that are not held by us (approximately 7% of the
outstanding units) are exchangeable for either common stock on a one-to-one
basis or cash equal to the value of such stock at our sole discretion.
At June 30, 2013, we consolidated
40 properties (including 19 properties primarily owned by us and 21 properties
owned by VIEs in which we were deemed the primary beneficiary), which consisted
of 12 office properties, 12 self-storage facilities, 8 commercial/industrial
properties, 5 multi-family properties, 2 retail properties and a parcel of land.
The properties are located in 16 states. At June 30, 2013, the Company has
determined to consider 800 & 888 Sam Houston Parkway and Gray Falls Center
& 12000 Westheimer as four separate properties rather than two as reported
in previous filings.
The operating segments in which
management assesses performance and allocates resources are rental operations
and management and leasing services. Our segments reflect managements resource
allocation and performance assessment in making decisions regarding our
Company.
We deliver integrated property,
facility, asset, business and engineering management services to a host of third
party clients as well as to our own properties. We offer customized programs
that focus on tenant retention through cost-efficient operations.
We are committed to expanding the
scope of products and services offered. We believe this expansion will help us
meet our own portfolio property needs as well as the needs of our third party
clients. During 2013, we intend to expand the number of third party properties
that we manage.
We refer to ourselves throughout
this report as the Company or ASR.
NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated
financial statements and related notes have been prepared in conformity with
generally accepted accounting principles in the United States and the rules and
regulations of the Securities and Exchange Commission (the SEC) for
preparation of interim financial statements. The information furnished in this
report reflects all adjustments that, in the opinion of management, are
necessary for a fair presentation of the Companys results of operations,
financial position and cash flows, and such adjustments consist of items of a
normal recurring nature. The results for such periods are not necessarily
indicative of the results to be expected for the full fiscal year or for any
other future period. The following unaudited condensed financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the company believes that the disclosures made are
adequate to make the information not misleading. These consolidated financial
statements included in this quarterly report on Form 10-Q should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the fiscal year ended December 31, 2012 included in the Companys Annual
Report on Form 10-K as filed with the SEC on April 1, 2013.
8
The preparation of financial
statements and related disclosures in conformity with generally accepted
accounting principles in the United States requires us to make judgments,
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an ongoing basis, we re-evaluate our
judgments and estimates. We base our estimates and judgments on our historical
experience, knowledge of current conditions and our belief of what could occur
in the future considering available information, including assumptions that we
believe to be reasonable under the circumstances. By their nature, these
estimates and judgments are subject to an inherent degree of uncertainty and
actual results could differ materially from the amounts reported based on these
policies.
The financial statements include
the accounts of the Operating Partnership, all subsidiaries of the Company, and
VIEs where the Company is the primary beneficiary. All significant intercompany
transactions, receivables and payables have been eliminated in consolidation.
The Company accounts for
unconsolidated real estate investments using the equity method of accounting.
Accordingly, the Companys share of earnings of these real estate investments is
included in the consolidated results of operations.
Certain prior year balances have
been reclassified to conform to the current year presentation.
Summary of Critical and
Significant Accounting Policies and Estimates
Reference is made to Summary of
Critical and Significant Accounting Policies and Estimates included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2012 as
filed with the SEC on April 1, 2013.
Segments
We have identified two reportable
business segments: (i) rental operations and (ii) management and leasing
services. We evaluate the performance of our operating segments based on
operating income (loss). All inter-segment sales pricing is based on current
market conditions. Unallocated corporate amounts include general expenses
associated with managing our two reportable operating segments.
Recent Accounting
Pronouncements
In July 2012, the FASB issued ASU
2012-02, Intangibles, Goodwill, and Other (Topic 350): Testing Indefinite-Lived
Intangibles for Impairment. This ASU adds new accounting guidance that
simplifies how an entity tests indefinite-lived intangible assets other than
goodwill for impairment. It permits an entity to first assess qualitative
factors to determine whether further testing for impairment of indefinite-lived
intangible assets other than goodwill is required. This accounting guidance will
be effective for annual and interim impairment tests performed for fiscal years
beginning after September 15, 2012. The adoption of this accounting guidance did
not have a material effect on our financial condition or results of operations.
NOTE 3 - DISCONTINUED
OPERATIONS
In June 2013, the lender for our
11500 Northwest Freeway property foreclosed on the asset. We had elected to
discontinue servicing the unpaid balance of the debt, which totaled $3.9
million, due to the balance exceeding 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. In July 2013,
we sold 2620-2630 Fountain View. See Note 16 Subsequent Events.
9
The consolidated statements of
operations of discontinued operations for the three and six months ended June
30, 2013 and 2012 are summarized below:
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
(In thousands)
|
|
(In thousands)
|
Rental Revenue
|
$
|
254
|
|
|
$
|
1,430
|
|
|
$
|
682
|
|
|
$
|
4,032
|
|
Less Expenses
(1)
|
|
(531
|
)
|
|
|
(2,030
|
)
|
|
|
(1,095
|
)
|
|
|
(5,902
|
)
|
Loss from discontinued operations before net (loss) gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on dispositions and income tax benefit (expense)
|
|
(277
|
)
|
|
|
(600
|
)
|
|
|
(413
|
)
|
|
|
(1,870
|
)
|
Net (loss) gain
on dispositions of real estate assets
|
|
(83
|
)
|
|
|
2,934
|
|
|
|
(83
|
)
|
|
|
7,542
|
|
Income tax benefit (expense)
|
|
123
|
|
|
|
(865
|
)
|
|
|
170
|
|
|
|
(1,741
|
)
|
(Loss) income
from discontinued operations
|
$
|
(237
|
)
|
|
$
|
1,469
|
|
|
$
|
(326
|
)
|
|
$
|
3,931
|
|
(1) Includes interest expense of
approximately $0.2 million and $0.6 million for the three months ended June 30,
2013 and 2012, respectively, and $0.4 million and $2.0 million, for the six
months ended June 30, 2013 and 2012, respectively. Mortgage debt related to the
properties included in discontinued operations were individually secured, and as
such, interest expense was based on the propertys debt.
Net loss from discontinued
operations for the three months ended June 30, 2013 includes the net loss from
the disposition of 11500 Northwest Freeway, its operating results thru the date
of disposition and the operating results of 2620-2630 Fountain View. Income from
discontinued operations for the three months ended June 30, 2012 includes the
net gain on the dispositions of Bristol Bay and Pacific Spectrum, and the
operating results of properties disposed of in 2013 and 2012.
Net loss from discontinued
operations for the six months ended June 30, 2013 includes the net loss from the
disposition of 11500 Northwest Freeway, its operating results thru the date of
disposition and the operating results of 2620-2630 Fountain View. Income from
discontinued operations for the six months ended June 30, 2012 includes the net
gain from the dispositions of Park Ten Place I and II, Sierra Southwest Pointe,
Foxborough Business Center Park, 6420 Atrium, Bristol Bay, and Pacific Spectrum,
and the operating the results of properties disposed of in 2013 and
2012.
NOTE 4 - ASSET
IMPAIRMENTS
Purchased Intangibles Subject
to Amortization
During the six months ended June
30, 2013 and 2012, we had our contractual relationships terminated or modified
by the entities that owned some of the third party properties we manage. Based
on this triggering event we evaluated the management contracts associated with
some of our purchased intangibles for impairment and determined that impairment
had occurred. We recorded impairment charges of $1.4 million and $0.5 million,
for the six months ended June 30, 2013 and 2012, respectively, which reduced the
fair value of the impaired contracts to zero. (See Note 6 Variable Interest
Entities for additional information).
NOTE 5 - ASSETS HELD FOR SALE
Below is a listing of the
consolidated properties we have listed for sale. We can make no guarantees as to
our ability to sell any of our consolidated properties. We further cannot assure
you that we will achieve a sales price that allows us to receive cash to fund
our operations. 1501 Mockingbird, a property listed for sale at March 31, 2013,
was foreclosed on in July 2013. See Note 16 - Subsequent Events.
|
|
|
|
ASR
|
|
|
|
|
|
|
|
|
Property
|
|
ownership
|
|
Carrying Values of
|
|
Carrying Value of
|
Property
Name
|
|
Type
|
|
Percentage
|
|
Properties
|
|
Debt
|
|
|
|
|
|
|
(in
thousands)
|
Fountain View Office Tower (1)
|
|
Office
|
|
51%
|
|
$
|
11,500
|
|
$
|
11,465
|
2620 & 2630 Fountain View
(2)
|
|
Office
|
|
51%
|
|
|
7,040
|
|
|
5,323
|
2640 & 2650
Fountain View
|
|
Office
|
|
100%
|
|
|
13,609
|
|
|
12,672
|
Windrose
|
|
Retail
|
|
100%
|
|
|
3,116
|
|
|
3,442
|
8100 Washington
|
|
Office
|
|
100%
|
|
|
1,802
|
|
|
2,052
|
|
|
|
|
|
|
$
|
37,067
|
|
$
|
34,954
|
1)
|
|
Property fell out of sale
contract with prospective buyer in second quarter of
2013.
|
2)
|
|
Property was sold in July
2013. See Note 16 Subsequent Events
|
10
NOTE 6 - VARIABLE INTEREST
ENTITIES
We have identified multiple
Variable Interest Entities where we are the primary beneficiary for accounting
purposes. As a result, these VIE entities were consolidated in the consolidated
financial statements, after eliminating intercompany transactions and presenting
the interests that are not owned by us as non-controlling interests in the
condensed consolidated balance sheets.
The entities consolidated as of
June 30, 2013 include 9 self-storage properties, 3 student housing properties, 7
commercial properties and 2 multifamily properties. The entities are generally
financed through cash flows from property operations.
During the first quarter of 2013
we deconsolidated the VIEs which owned College Park (a student housing
property) and Fishers Indiana (a commercial property) after determining that we
were no longer the primary beneficiary. We no longer manage or have a continuing
involvement with these two properties.
The impact of the deconsolidation
of VIEs on our year to date Consolidated Financial Statements was a decrease in
total assets of $38.9 million, a decrease in total liabilities of $32.8 million,
and decrease in non-controlling interest of $6.1 million. No net income was
attributable to non-controlling interests from the deconsolidated VIEs for the
three and six months ended June 30, 2013. The deconsolidation of the VIEs did
not result in a gain or loss in the Consolidated Statement of Operations, as the
carrying amount of the non-controlling interest in the former subsidiaries at
the deconsolidation dates were the same as the carrying amount of the former
subsidiarys assets minus liabilities at the date of the deconsolidation.
We own an insignificant interest
in most of the VIEs, and therefore, substantially all related operating results
are included in the net income (loss) attributable to non-controlling interests.
The carrying amounts associated
with the VIEs, after eliminating the effect of intercompany transactions, were
as follows (in thousands):
|
|
June 30,
|
|
December 31,
|
|
|
2013
|
|
2012
|
Assets
|
|
|
|
|
|
|
Restricted cash
|
|
$
|
3,519
|
|
$
|
3,724
|
Receivables
|
|
|
3,204
|
|
|
2,988
|
Fixed Assets, net
|
|
|
247,443
|
|
|
290,549
|
Other
Assets
|
|
|
7,152
|
|
|
8,600
|
Total Assets
|
|
$
|
261,318
|
|
$
|
305,861
|
|
Liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
|
140
|
|
|
398
|
Notes
payable
|
|
|
189,071
|
|
|
221,899
|
Other liabilities
|
|
|
5,348
|
|
|
6,759
|
Total liabilities
|
|
$
|
194,559
|
|
$
|
229,056
|
|
Variable interest entity net carrying
amount
|
|
$
|
66,759
|
|
$
|
76,805
|
At June 30, 2013, the liabilities
in the above table are solely the obligations of the VIEs and are not
guaranteed by the Company. In addition, the Company does not have the ability to
leverage the assets of the above identified VIEs for the purpose of providing
ourselves cash. The notes payable are solely secured by the property of the
respective VIEs.
During the six months ended June
30, 2013, we did not provide short term advances to any properties that have
been consolidated or deconsolidated. An immaterial balance is still owed to us
as of June 30, 2013 relating to prior advances. We do not believe we have
significant exposure to losses related to the VIEs.
11
NOTE 7 - RELATED PARTY
TRANSACTIONS
We pay a guarantee fee to William
J. Carden and the estate of John N. Galardi (the Guarantors), in consideration
for their guarantees of certain
obligations of the Company. Mr. Carden is president, a principal shareholder and
a director of the Company. Mr. Galardi, who died in April 2013, was a principal
shareholder of the Company. The Guarantors are paid an annual guarantee fee
equal to between .25% and .75% (depending on the nature of the guarantee) of the
outstanding balance as of December 31 of the guaranteed obligations (Guarantee
Fee). Guarantee fees for the six months ended June 30, 2013 totaled
approximately $0.04 million, all of which was paid to Mr. Carden. The following
property notes are being guaranteed: 800/888 Sam Houston Parkway, 2620/2630
Fountain View, 2640/2650 Fountain View, Windrose and Northwest Spectrum Plaza.
There are also three corporate notes being guaranteed. The guaranteed notes
total $16.1 million at June 30, 2013.
In January 2013, William J. Carden
advanced $0.1 million to the Company.
NOTE 8 SEGMENTS
The operating segments in which
management assesses performance and allocates resources are rental operations
and management and leasing services. Our segments reflect managements resource
allocation and performance assessment in making decisions regarding our Company.
The following table sets forth our
segment information for the periods presented:
|
|
Three Months
Ended
|
|
Six
Months Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Rental
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
11,219
|
|
|
$
|
12,378
|
|
|
$
|
22,738
|
|
|
$
|
25,334
|
|
Intersegment revenues
|
|
|
114
|
|
|
|
144
|
|
|
|
228
|
|
|
|
240
|
|
Net loss
|
|
|
(1,174
|
)
|
|
|
167
|
|
|
|
(1,748
|
)
|
|
|
(747
|
)
|
Total
segment assets
|
|
|
339,028
|
|
|
|
423,134
|
|
|
|
339,028
|
|
|
|
423,134
|
|
|
|
|
|
|
|
|
|
|
|
|
Management
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unaffiliated external
customers
|
|
$
|
867
|
|
|
$
|
728
|
|
|
$
|
1,877
|
|
|
$
|
1,622
|
|
Intersegment revenues
|
|
|
411
|
|
|
|
546
|
|
|
|
845
|
|
|
|
1,175
|
|
Net loss
|
|
|
(388
|
)
|
|
|
(262
|
)
|
|
|
(1,610
|
)
|
|
|
(1,500
|
)
|
Total
segment assets
|
|
|
14,302
|
|
|
|
17,071
|
|
|
|
14,302
|
|
|
|
17,071
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenues
|
|
$
|
12,611
|
|
|
$
|
13,796
|
|
|
$
|
25,688
|
|
|
$
|
28,371
|
|
Elimination of intersegment revenues
|
|
|
(525
|
)
|
|
|
(690
|
)
|
|
|
(1,073
|
)
|
|
|
(1,415
|
)
|
Interest income
|
|
|
3
|
|
|
|
40
|
|
|
|
4
|
|
|
|
86
|
|
Total
consolidated revenues
|
|
$
|
12,089
|
|
|
$
|
13,146
|
|
|
$
|
24,619
|
|
|
$
|
27,042
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net
loss
|
|
$
|
(1,562
|
)
|
|
$
|
(95
|
)
|
|
$
|
(3,358
|
)
|
|
$
|
(2,247
|
)
|
Unallocated expenses
|
|
|
(1,361
|
)
|
|
|
(2,044
|
)
|
|
|
(2,793
|
)
|
|
|
(4,156
|
)
|
Other income
(expense)
|
|
|
173
|
|
|
|
-
|
|
|
|
173
|
|
|
|
(151
|
)
|
Deferred income tax
benefit
|
|
|
679
|
|
|
|
985
|
|
|
|
1,724
|
|
|
|
1,500
|
|
(Loss) income
from discontinued operations
|
|
|
(237
|
)
|
|
|
1,469
|
|
|
|
(326
|
)
|
|
|
3,931
|
|
Net loss (income) attributable to
non
-
controlling interests
|
|
|
914
|
|
|
|
(308
|
)
|
|
|
1,299
|
|
|
|
1,542
|
|
Net (loss) income
attributable to ASR
|
|
$
|
(1,394
|
)
|
|
$
|
7
|
|
|
$
|
(3,281
|
)
|
|
$
|
419
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment
assets
|
|
$
|
353,330
|
|
|
$
|
440,205
|
|
|
$
|
353,330
|
|
|
$
|
440,205
|
|
Unallocated corporate
assets
|
|
|
13,633
|
|
|
|
12,349
|
|
|
|
13,633
|
|
|
|
12,349
|
|
Total
assets
|
|
$
|
366,963
|
|
|
$
|
452,554
|
|
|
$
|
366,963
|
|
|
$
|
452,554
|
|
12
NOTE 9 - NOTES
PAYABLE
We had the following notes payable
outstanding, as of June 30, 2013 and December 31, 2012, secured by the following
properties (dollars in thousands):
|
|
|
June 30, 2013
|
December 31, 2012
|
Property
(unless otherwise noted)
|
Maturity Date
|
|
Principal
|
Interest
|
Principal
|
Interest
|
Balance
|
Rate
|
Balance
|
Rate
|
Owned Properties - Fixed Rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Atrium 6430 (2)
|
05/11/2012
|
|
|
|
2,062
|
|
7.45%
|
|
|
2,050
|
|
7.45%
|
Corporate Unsecured (2) (3)
|
05/31/2012
|
|
|
|
1,000
|
|
9.50%
|
|
|
1,000
|
|
9.50%
|
2640 - 2650 Fountain View (2)
(3)
|
08/29/2012
|
|
|
|
726
|
|
10.00%
|
|
|
726
|
|
10.00%
|
Corporate - Secured by Northwest Spectrum Plaza (4)
|
03/28/2013
|
|
|
|
-
|
|
5.50%
|
|
|
1,145
|
|
5.50%
|
Corporate - Secured
|
03/31/2014
|
|
|
|
1,500
|
|
8.00%
|
|
|
1,500
|
|
8.00%
|
Corporate - Secured (5)
|
03/31/2014
|
|
|
|
1,750
|
|
12.00%
|
|
|
-
|
|
-
|
11500 Northwest Freeway
(10)
|
06/01/2014
|
|
|
|
-
|
|
5.93%
|
|
|
3,861
|
|
5.93%
|
11500 Northwest Freeway (10)
|
06/01/2014
|
|
|
|
-
|
|
5.93%
|
|
|
279
|
|
5.93%
|
Morenci Professional Park
(1)
|
07/01/2014
|
|
|
|
1,578
|
|
7.25%
|
|
|
1,578
|
|
7.25%
|
FMC Technology
|
09/01/2014
|
|
|
|
8,242
|
|
5.32%
|
|
|
8,309
|
|
5.32%
|
8100 Washington
|
02/22/2015
|
|
|
|
2,052
|
|
5.59%
|
|
|
2,005
|
|
5.59%
|
Corporate Secured by Management Contracts (2) (3)
|
06/05/2015
|
|
|
|
379
|
|
5.50%
|
|
|
463
|
|
5.50%
|
2620 - 2630 Fountain View
(3)
|
06/30/2015
|
|
|
|
5,323
|
|
7.00%
|
|
|
5,341
|
|
7.00%
|
1501 Mockingbird Lane
|
07/01/2015
|
|
|
|
3,089
|
|
5.28%
|
|
|
3,089
|
|
5.28%
|
5450 Northwest Central
|
09/01/2015
|
|
|
|
2,459
|
|
5.38%
|
|
|
2,499
|
|
5.38%
|
Ocala Self Storage
|
10/03/2015
|
|
|
|
1,412
|
|
4.25%
|
|
|
1,412
|
|
4.25%
|
Tampa Self Storage
|
10/03/2015
|
|
|
|
1,483
|
|
4.25%
|
|
|
1,504
|
|
4.25%
|
800 & 888 Sam Houston Parkway (3)
|
12/29/2015
|
|
|
|
4,234
|
|
6.25%
|
|
|
4,289
|
|
6.25%
|
Fountain View Office
Tower
|
03/01/2016
|
|
|
|
11,465
|
|
5.82%
|
|
|
11,540
|
|
5.82%
|
Gray Falls and 12000 Westheimer
|
01/01/2017
|
|
|
|
7,021
|
|
5.70%
|
|
|
7,077
|
|
5.70%
|
2640 - 2650 Fountain
View
|
04/29/2018
|
|
|
|
11,946
|
|
6.50%
|
|
|
12,010
|
|
6.50%
|
Corporate Secured by Management Contracts
|
12/31/2019
|
|
|
|
9,280
|
|
5.00%
|
|
|
9,380
|
|
5.00%
|
Sabo Road Self Storage
|
07/01/2022
|
|
|
|
1,996
|
|
5.55%
|
|
|
2,015
|
|
5.55%
|
Corporate Unsecured
|
Various
|
|
|
|
2,644
|
|
Various
|
|
|
1,514
|
|
Various
|
Corporate - Secured
|
Various
|
|
|
|
1,077
|
|
Various
|
|
|
1,163
|
|
Various
|
|
Subtotal
|
|
|
$
|
82,718
|
|
|
|
$
|
85,749
|
|
|
Owned Properties - Variable
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Unsecured (3)
|
12/12/2013
|
|
|
|
125
|
|
6.00%
|
|
|
175
|
|
6.00%
|
Northwest Spectrum Plaza (3)
(6)
|
03/29/2018
|
|
|
|
4,490
|
|
5.00%
|
|
|
2,381
|
|
2.66%
|
Windrose Plaza (3) (7)
|
02/27/2023
|
|
|
|
3,442
|
|
5.50%
|
|
|
2,458
|
|
2.66%
|
|
Subtotal
|
|
|
$
|
8,057
|
|
|
|
$
|
5,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal ASR Principally Owned
Properties
|
|
|
|
90,775
|
|
|
|
|
90,763
|
|
|
13
Consolidated VIE Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishers Indiana
Distribution Center (8)
|
10/01/2012
|
|
|
-
|
|
5.42
|
%
|
|
|
17,058
|
|
5.42
|
%
|
University
Springs San Marcos
|
12/01/2015
|
|
|
9,281
|
|
5.55
|
%
|
|
|
9,359
|
|
5.55
|
%
|
University
Fountains Lubbock
|
01/01/2016
|
|
|
20,657
|
|
5.57
|
%
|
|
|
20,828
|
|
5.57
|
%
|
Dixon & 51st
Logistics Center
|
01/01/2016
|
|
|
17,109
|
|
5.69
|
%
|
|
|
17,258
|
|
5.69
|
%
|
Campus Court
Student Housing
|
05/11/2016
|
|
|
4,601
|
|
5.78
|
%
|
|
|
4,617
|
|
5.78
|
%
|
Houston South
Mason (11)
|
06/25/2016
|
|
|
2,816
|
|
5.25
|
%
|
|
|
2,817
|
|
5.25
|
%
|
Grissom Road
Self Storage
|
06/01/2017
|
|
|
2,295
|
|
7.00
|
%
|
|
|
2,308
|
|
7.00
|
%
|
Loop 1604 Self
Storage
|
09/11/2017
|
|
|
4,222
|
|
6.70
|
%
|
|
|
4,249
|
|
6.70
|
%
|
College Park
Student Apartments (8)
|
11/06/2017
|
|
|
-
|
|
6.35
|
%
|
|
|
14,283
|
|
6.35
|
%
|
Ohio II
Residences at Newark & Sheffield
|
01/01/2018
|
|
|
9,277
|
|
6.74
|
%
|
|
|
9,334
|
|
6.74
|
%
|
Muirwood
Village
|
02/01/2018
|
|
|
7,660
|
|
6.58
|
%
|
|
|
7,708
|
|
6.58
|
%
|
Aldine Westfield
Self Storage
|
10/31/2018
|
|
|
1,017
|
|
4.76
|
%
|
|
|
1,031
|
|
4.76
|
%
|
Aldine
|
08/14/2019
|
|
|
1,156
|
|
6.07
|
%
|
|
|
1,171
|
|
6.07
|
%
|
Attic Space Self
Storage - Blanco Rd.
|
04/01/2021
|
|
|
1,300
|
|
6.63
|
%
|
|
|
1,300
|
|
6.63
|
%
|
Attic Space Self
Storage - Laredo Rd.
|
04/01/2021
|
|
|
1,694
|
|
6.63
|
%
|
|
|
1,721
|
|
6.63
|
%
|
Ft. Worth River
Oaks Self Storage
|
07/01/2021
|
|
|
2,098
|
|
6.00
|
%
|
|
|
2,118
|
|
6.00
|
%
|
Ft. Worth
Northwest Self Storage
|
04/01/2022
|
|
|
2,106
|
|
5.82
|
%
|
|
|
2,125
|
|
5.82
|
%
|
San Antonio III
- AAA Stowaway / FOE
|
11/01/2022
|
|
|
9,545
|
|
5.50
|
%
|
|
|
9,635
|
|
5.50
|
%
|
Commerce
Distribution Center (9)
|
05/07/2023
|
|
|
9,834
|
|
4.68
|
%
|
|
|
9,402
|
|
6.12
|
%
|
Strongsville
Corporate Center
|
11/11/2034
|
|
|
13,428
|
|
5.50
|
%
|
|
|
13,882
|
|
5.50
|
%
|
Ohio Commerce
Center
|
06/11/2035
|
|
|
18,245
|
|
5.64
|
%
|
|
|
18,412
|
|
5.64
|
%
|
Springs Commerce
Center I
|
05/11/2036
|
|
|
16,388
|
|
5.75
|
%
|
|
|
16,548
|
|
5.75
|
%
|
Springs
Office
|
06/11/2036
|
|
|
14,164
|
|
5.75
|
%
|
|
|
14,301
|
|
5.75
|
%
|
Spring Commerce
Center II
|
07/11/2036
|
|
|
19,916
|
|
6.00
|
%
|
|
|
20,100
|
|
6.00
|
%
|
Other Unsecured
Notes
|
Various
|
|
|
262
|
|
6.00
|
%
|
|
|
334
|
|
6.00
|
%
|
|
Subtotal
Consolidated VIE Properties
|
|
$
|
189,071
|
|
|
|
|
$
|
221,899
|
|
|
|
|
Grand
Total
|
|
|
$
|
279,846
|
|
|
|
|
$
|
312,662
|
|
|
|
(1)
|
|
Property is in
receivership.
|
|
|
|
(2)
|
|
We are currently negotiating
extension terms with lender.
|
|
|
|
(3)
|
|
Loan or certain indemnification
obligations are guaranteed by us and in some cases by Mr. Carden and/or
the estate of Mr. Galardi.
|
|
|
|
(4)
|
|
Loan was paid in March 2013.
|
|
|
|
(5)
|
|
Represents new loan obtained in
March 2013.
|
|
|
|
(6)
|
|
Loan was
refinanced in March 2013.
|
|
|
|
(7)
|
|
Loan was
refinanced in February 2013.
|
|
|
|
(8)
|
|
The VIE which owned the property
was deconsolidated during the first quarter of 2013.
|
|
|
|
(9)
|
|
Loan was refinanced in May 2013.
The new loan, in the amount of $9.9 million is for a ten-year term.
|
|
|
|
(10)
|
|
Lender foreclosed on the property
in June 2013.
|
|
|
|
(11)
|
|
Lender extended maturity for an
additional three year term in June 2013.
|
We are in default on the notes
listed below due to non-payment of scheduled debt service. The balances
disclosed on the table below exclude additional fees that may be the result of
non-payment.
14
|
|
|
|
Balance
|
|
|
ASR Ownership
|
|
June 30, 2013
|
Property Secured by
|
|
Percentage
|
|
(in
thousands)
|
Morenci Professional Park
|
|
100%
|
|
$
|
1,578
|
1501
Mockingbird
|
|
100%
|
|
|
3,089
|
6430 Richmond
|
|
100%
|
|
|
2,062
|
2640/2650
Fountain View
|
|
100%
|
|
|
726
|
Corporate - Unsecured
|
|
100%
|
|
|
1,000
|
TOTAL
|
|
|
|
$
|
8,455
|
As of June 30, 2013, we were in
default on our debt secured by 1501 Mockingbird due to past due debt service. In
July 2013, the lender foreclosed on the asset. See Note 16 Subsequent
Events.
We have elected not to make
payment on the debt secured by Morenci Professional Park to operating deficiency
of the property and the unpaid balances of the mortgage exceeding the market
value of the property. The lender holding the debt on this property has placed
this asset into receivership and has initiated foreclosure
proceedings.
Two additional loans: one secured
by 6430 Richmond and one by 2640/2650 Fountain View are matured. We are
currently negotiating extensions with the lenders on these loans.
All of the properties securing the
debt in default are held by consolidated wholly owned subsidiaries. These
mortgages are not guaranteed by us. All of the notes in default have payment
acceleration clauses and payment in full, including additional fees and
interest, could be demanded by the lenders holding these notes.
We also are in default on a $1.0
million corporate note, which matured in May 2012. The loan is guaranteed by the
estate of John N. Galardi. The lender on the note has initiated legal
proceedings to collect on the debt. Negotiations are in progress to settle this
debt.
Unamortized financing costs at
June 30, 2013 and December 31, 2012 were $1.4 million and $0.8 million,
respectively. Most of our mortgage debt is not cross-collateralized. We have
four mortgage loans that are cross-collateralized with a second
property.
NOTE 10 - NON-CONTROLLING
INTERESTS AND OPERATING PARTNERSHIP UNITS
The following table summarizes the
activity for the OP Units:
|
OP Units
|
|
(in thousands)
|
Balance, January 1, 2013
|
3,819
|
|
Issuances
|
-
|
|
Redemptions
|
(13
|
)
|
Balance, June
30, 2013
|
3,806
|
|
|
Ownership of Operating Partnership Units
|
|
|
ASR
|
3,557
|
|
All others
|
249
|
|
|
3,806
|
|
15
The following represents the
effects of changes in our equity related to non-controlling interests:
|
Six Months Ended
|
|
June 30,
|
|
2013
|
|
2012
|
|
(in thousands)
|
Net (loss) income attributable to the Company
|
$
|
(3,281
|
)
|
|
$
|
419
|
Increase in the
Company's paid-in-capital on exchange of OP Units for shares
|
|
|
|
|
|
|
of common
stock
|
|
17
|
|
|
|
1,711
|
Increase in the Company's paid-in-capital on redemption of OP Units
for cash
|
|
-
|
|
|
|
8,000
|
Change from net
(loss) income attributable to the Company related to non-
|
|
|
|
|
|
|
controlling
interest transactions
|
$
|
(3,264
|
)
|
|
$
|
10,130
|
NOTE 11 - NET (LOSS) INCOME PER
SHARE
Net (loss) income per share is
calculated based on the weighted average number of common shares outstanding.
Stock options outstanding, OP Units and preferred shares have not been included
in the net loss per share calculation since their effect on the losses would be
antidilutive. Net (loss) income per share for the three and six months ended
June 30, 2013 and 2012 is as follows (in thousands, except for shares and per
share amounts):
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June 30,
|
|
June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Loss from
continuing operations
|
$
|
(2,071
|
)
|
|
$
|
(1,154
|
)
|
|
$
|
(4,254
|
)
|
|
$
|
(5,054
|
)
|
Net loss (income) attributable to
non-controlling interests from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
|
|
890
|
|
|
|
(179
|
)
|
|
|
1,267
|
|
|
|
2,216
|
|
Loss from
continuing operations attributable to American
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spectrum Realty
Inc. common stockholders
|
$
|
(1,181
|
)
|
|
$
|
(1,333
|
)
|
|
$
|
(2,987
|
)
|
|
$
|
(2,838
|
)
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations
|
|
(277
|
)
|
|
|
(600
|
)
|
|
|
(413
|
)
|
|
|
(1,870
|
)
|
(Loss) gain on disposition of discontinued
operations
|
|
(83
|
)
|
|
|
2,934
|
|
|
|
(83
|
)
|
|
|
7,542
|
|
Income
tax benefit (expense)
|
|
123
|
|
|
|
(865
|
)
|
|
|
170
|
|
|
|
(1,741
|
)
|
|
|
Net loss (income) attributable to
non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from
discontinued operations
|
|
24
|
|
|
|
(129
|
)
|
|
|
32
|
|
|
|
(674
|
)
|
(Loss) income from discontinued
operations
|
|
(213
|
)
|
|
|
1,340
|
|
|
|
(294
|
)
|
|
|
3,257
|
|
|
|
Preferred stock
dividend
|
|
(60
|
)
|
|
|
(60
|
)
|
|
|
(120
|
)
|
|
|
(120
|
)
|
Net (loss) income attributable to
American Spectrum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realty
Inc. common stockholders
|
$
|
(1,454
|
)
|
|
$
|
(53
|
)
|
|
$
|
(3,401
|
)
|
|
$
|
299
|
|
|
|
Basic per share
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
attributable to American
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spectrum
Realty, Inc. common stockholders
|
$
|
(0.33
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.84
|
)
|
|
$
|
(0.79
|
)
|
|
|
|
|
(Loss) income
from discontinued operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Spectrum
Realty, Inc. common stockholders
|
|
(0.06
|
)
|
|
|
0.38
|
|
|
|
(0.08
|
)
|
|
|
0.91
|
|
Net (loss) income attributable to
American Spectrum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realty Inc.
common stockholders
|
$
|
(0.39
|
)
|
|
$
|
-
|
|
|
$
|
(0.92
|
)
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average shares used
|
|
3,564,304
|
|
|
|
3,564,783
|
|
|
|
3,566,041
|
|
|
|
3,571,283
|
|
16
The following weighted average
preferred shares, stock options and OP units outstanding that may be redeemed
for common stock on a one-for-one basis were excluded from the computation of
diluted net (loss) income per share as they had an anti-dilutive effect:
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
(unaudited)
|
|
(unaudited)
|
Preferred
shares
|
55,172
|
|
55,172
|
|
55,172
|
|
55,172
|
Stock options
|
-
|
|
17,500
|
|
-
|
|
17,500
|
OP
Units
|
249,978
|
|
519,130
|
|
250,333
|
|
785,796
|
Total
|
305,150
|
|
591,802
|
|
305,505
|
|
858,468
|
NOTE 12 - STOCK-BASED
COMPENSATION
Share-based compensation expense
is measured at grant date, based on the fair value of the instrument, and is
recognized as expense over the requisite service period.
The following table sets forth the
total share-based compensation expense included in our Consolidated Statements
of Operations:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June
30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
|
2012
|
|
|
(in
thousands)
|
|
(in thousands)
|
General and administrative
|
|
$
|
7
|
|
$
|
27
|
|
$
|
30
|
|
$
|
158
|
Total
|
|
$
|
7
|
|
$
|
27
|
|
$
|
30
|
|
$
|
158
|
As of June 30, 2013 approximately
$0.1 million total unrecognized share-based compensation expense related to
non-vested awards is expected to be recognized over the respective vesting terms
of each award over the weighted average period of 2.8 years.
Valuation
Assumptions
The fair value of our restricted
stock awards (RSA) is estimated on the date of grant based on the closing price
of our stock on the grant date. Share-based compensation expense related to RSAs
is recognized over the requisite service period.
Equity Incentive Program and
Restricted Stock Awards
We grant RSAs to employees and
directors under the Omnibus Stock Incentive Plan (the Plan). New shares are
issued for RSAs released. RSAs give the recipient the right to vote all
shares, to receive and retain all cash dividends payable to holders of shares of
record on or after the date of issuance and to exercise all other rights, powers
and privileges of a holder of our shares, with the exception that the recipient
may not transfer the shares during the restriction period that lapses over
various periods ranging from one to five years.
We have reserved 360,000 shares
under the Plan. As of June 30, 2013, we had issued 121,712 shares under the
Plan.
17
The following table summarizes the
combined activity under the equity incentive plan for the indicated periods:
|
|
|
|
|
Weighted average
|
|
|
Number of
|
|
Grant-date fair value
|
|
|
RSAs
|
|
per Share
|
Balances at
December 31, 2012
|
|
22,070
|
|
|
$
|
13.54
|
|
|
|
|
|
|
|
Granted
|
|
-
|
|
|
$
|
-
|
RSA
Releases
|
|
(1,334
|
)
|
|
$
|
14.32
|
Forfeited/Expired
|
|
(11,068
|
)
|
|
$
|
16.42
|
Balances at June
30, 2013
|
|
9,668
|
|
|
$
|
10.14
|
The RSAs had no intrinsic value
as of June 30, 2013. The aggregate intrinsic value of the restricted stock
awards outstanding at June 30, 2013 represents the total pretax intrinsic value,
based on our closing stock price of $2.41 per share as of June 30, 2013, which
would have been received by the grant holders if all restricted stock awards
were vested as of June 30, 2013.
There was no incentive or
nonqualified stock options outstanding at June 30, 2013 or December 31, 2012.
NOTE 13 - COMMITMENTS AND
CONTINGENCIES
On March 2, 2011, we filed an
action against Evergreen Realty Group, LLC and certain of its affiliates
("Evergreen") relating to its acquisition of assets from Evergreen in January
2010. The purchase price of the assets was $18.0 million, subject to adjustment
as provided in the purchase agreement, and was paid in the form of (a) the
assumption of $500,000 of payables, (b) the issuance of a $9.5 million
promissory note and (c) the issuance of 800,000 operating partnership units
which would be redeemable by Evergreen after June 30, 2011 for a number of
shares of our common stock (or, at our option, the cash equivalent) equal to the
quotient obtained by dividing $8.0 million by the greater of our share price or
net asset value as of December 31, 2010. (Our share price as of December 31,
2010 was $17.52; our net asset value as of December 31, 2010 has not been
definitively determined.) In our action, we are alleging various offsets and
adjustments to the purchase price, as well as defaults by Evergreen, and are
seeking damages and a declaration that the principal amount of the promissory
note should be reduced to zero, that the operating partnership units should be
cancelled and that Evergreen should refund to us payments of at least $578,000
which have been made on the promissory note. On March 7, 2011, New West Realty,
Inc. (New West), an affiliate of Evergreen, filed a complaint for damages in
Orange County Superior Court against ASR and other related entities. New West
alleges in the complaint that ASR had failed to pay amounts then due under a
$9.5 million promissory note held by New West. We have subsequently paid all
amounts currently due and payable under the note and therefore dispute the claim
and deny that any payment is now due under the note, and we have filed a
separate lawsuit against New West and others seeking damages in excess of the
amount of New Wests claim.
In January 2013, we reached a
tentative agreement with Evergreen to settle the $9.5 million promissory note.
That agreement provides that we will pay $4.6 million in a combination of cash,
a new note, and nonconvertible preferred stock as settlement of the note. The
new debt will mature in 2017. However, that agreement has not been formalized.
Negotiations are continuing to reach a settlement, but there can be no assurance
that a resolution will be obtained. The lawsuit is set for trial in April
2014.
During the second quarter of 2012,
we repurchased all of the operating partnership units (OP Units) issued to
Evergreen Realty Group, LLC and certain of its affiliates (Evergreen) in 2010.
We had issued the OP Units to Evergreen in connection with the acquisition of
assets from Evergreen on January 17, 2010. The OP Units issued to Evergreen were
repurchased by the Company for one dollar as provided in the purchase and sell
agreement.
We are in default on a $1.0
million unsecured note, which matured in May 2012. The loan is guaranteed by Mr.
Galardi. The lender on the note has initiated legal proceedings to collect on
the debt. Negotiations are in progress to settle this debt.
Some of our notes payable require
that we maintain minimum cash and tangible net worth. We believe we are in
compliance with these requirements, except as to our loans in default.
Certain other claims and lawsuits
have arisen against us in our normal course of business including lawsuits by
creditors with respect to past due accounts payable. We believe that such claims
and lawsuits will not have a material adverse effect on our financial position,
cash flows or results of operations.
18
NOTE 14 - PREFERRED STOCK
We are authorized to issue up to
25.0 million shares of one or more classes or series of preferred stock with a
par value of $.01 per share.
On December 30, 2008, we filed
Articles Supplementary to our Articles of Incorporation, which authorized the
issuance of 68,965 of Series A Preferred Stock (Preferred Stock).
On December 31, 2008, we issued
55,172 shares of the Preferred Stock to Mr. Carden, Mr. Galardi and Timothy R.
Brown. Each share of Preferred Stock was sold for $29.00 and is entitled to
annual dividends, payable quarterly, at an annual rate of 15%, and to a
preference on liquidation equal to the following: (a) if on or prior to December
31, 2011, the sum of $29.00 and any accrued and unpaid dividends or (b) if after
December 31, 2011, the greater of (x) the sum of $29.00 and any accrued and
unpaid dividends or (y) the amount which would be paid on account of each share
of common stock upon liquidation if each share of Preferred Stock had
hypothetically been converted into one share of common stock. The Preferred
Stock is not required to be redeemed by us and the holders will have no right to
require redemption. The Preferred Stock is redeemable at our option at any time
after December 31, 2011. The shares were issued in a private transaction exempt
from registration pursuant to Section 4(2) under the Securities Act of 1933, as
amended.
As of June 30, 2013 there were
accrued and unpaid dividends on the outstanding preferred shares of $0.5
million, or $.13 per common share
.
NOTE 15 INCOME TAXES
For the six months ended June 30,
2013 we recorded an income tax benefit of $1.9 million. The income tax benefit
was recorded solely on the net loss attributable to the Company. We utilized an
effective tax rate of 36.6% on our net loss.
NOTE 16 SUBSEQUENT EVENTS
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 $3.0 million to
the propertys partnership, in which we own a 51% interest. The net proceeds are
currently held in escrow due to a distribution dispute with the minority owner
of the property. We anticipate we will reach an agreement on the distribution of
the net proceeds with the minority owner in the third quarter of
2013.
In July 2013, the lender for 1501
Mockingbird foreclosed on the asset. We do not anticipate recording a
significant gain or loss on the transaction in the third quarter of
2013.
We had forecasted cash proceeds of
$1.8 million related to the above transactions as part of our plan to meet our
cash needs for on-going operations. In addition, a contract in place to sale a
building held for sale that would have generated
$2.0 million of cash flow in a subsequent period has terminated. We are forecasting the funds held in escrow of approximately $1.5 million related to 2620-2630 Fountain View to be released in the third quarter. We have also received offers in the form of letters of intent for two other held
for sale properties that would generate $2.0 million to $4.0 million of cash flow
expected to occur in third or fourth quarter of 2013. There can be no assurance
that these sales and/or the sales of our other held for sale properties will occur.