8. Equity Investments

Limco Del Mar, Ltd.

The Company has a 1.3% interest in Limco Del Mar, Ltd. (“Del Mar”) as a general partner and a 26.8% interest as a limited partner. In October of 2016, the Company purchased 14,468 units of Del Mar for $940,000, increasing our prior-year 22.1 % interest as a limited partner. The Company paid $615,000 in October 2016 and $325,000 in November 2016 for these additional units. Based on the terms of the partnership agreement, the Company may be removed without cause from the partnership upon the vote of the limited partners owning an aggregate of 50% or more interest in the partnership. Since the Company has significant influence, but less than a controlling interest, the Company’s investment in Del Mar is accounted for using the equity method of accounting.

The Company provides Del Mar with farm management, orchard land development and accounting services and received expense reimbursements of $146,000, $150,000 and $141,000 in fiscal years 2016, 2015 and 2014, respectively. The Company also performed contract lemon packing services for Del Mar and recognized revenues of $637,000, $568,000 and $675,000 in fiscal years 2016, 2015 and 2014, respectively. Fruit proceeds due to Del Mar were $791,000 and $712,000 at October 31, 2016 and 2015, respectively, and are included in grower’s payable in the accompanying consolidated balance sheets.

Romney Property Partnership

In May 2007, the Company and an individual formed the Romney Property Partnership (“Romney”) for the purpose of owning and leasing an office building and adjacent lot in Santa Paula, California. The Company paid $489,000 in 2007 for 75% interest in Romney, and contributed zero, $9,000 and $8,000 to the partnership in fiscal years 2016, 2015 and 2014, respectively. The terms of the partnership agreement affirm the status of the Company as a non-controlling investor in the partnership since the Company cannot exercise unilateral control over the partnership. Since the Company has significant influence, but less than a controlling interest, the Company’s investment in Romney is accounted for using the equity method of accounting. Net profits, losses and cash flows of Romney are shared by the Company, which receives 75% and the individual, who receives 25%.

Limoneira Chile SpA

On August 14, 2014, through its wholly owned subsidiary, Limoneira Chile SpA, the Company invested $1,750,000 for a 35% interest in Rosales S.A, (“Rosales”), a citrus packing, marketing and sales business located in La Serena, Chile. The Company’s investment includes certain preferred interest provisions through December 31, 2016, including cash distributions of the 50% and 40% of the net income of Rosales for the years ending December 31, 2014 and 2015, respectively, as well as a liquidation preference on its investment. In addition, the Company has the right to acquire the 52% interest of the majority shareholder of Rosales upon death or disability of Rosales’ general manager for the fair value of the interest on the date of the event as defined in the shareholders’ agreement. Since the Company has significant influence, but less than a controlling interest, the Company’s investment in Rosales is accounted for using the equity method of accounting.

Rosales’ functional currency is the Chilean Peso. The following financial information has been translated to U.S. dollars. In addition, as a result of the Company’s acquisition of its equity interest, basis differences were identified between the historical cost of the net assets of Rosales and the proportionate fair value of the net assets acquired. Such basis differences aggregated $1,683,000 on the acquisition date and are primarily comprised of intangible assets, including $343,000 of equity method goodwill. The remaining $1,340,000 in basis differences is being amortized over the estimated life of the underlying intangible assets as a reduction in the equity investment and an expense included in equity in earnings (losses) of investments. Amortization amounted to $208,000, $208,000 and $43,000 for fiscal year 2016, 2015 and 2014, respectively, and is estimated to be approximately $206,000 per year through October 31, 2018 and $55,000 per year for years ending October 31, 2019 through October 31, 2023.

Limoneira Lewis Community Builders (“LLC”)

As described in Note 7, on November 10, 2015, the Company entered into a joint venture with The Lewis Group of Companies for the residential development of its East Area 1 real estate development project.

The following is unaudited financial information of the equity method investees for fiscal years 2016, 2015 and 2014:

	Del Mar		Romney		Rosales		LLC		Total
2016
Assets	$	1,244,000	$	690,000	$	4,300,000	$	47,332,000	$	53,566,000
Liabilities	$	–	$	–	$	2,719,000	$	36,000	$	2,755,000
Equity		1,244,000		690,000		1,581,000		47,296,000		50,811,000
Total liabilities and equity	$	1,244,000	$	690,000	$	4,300,000	$	47,332,000	$	53,566,000
Revenues	$	3,452,000	$	11,000	$	7,639,000	$	–	$	11,102,000
Expenses		910,000		24,000		6,979,000		1,000		7,914,000
Net income (loss)	$	2,542,000	$	(13,000)	$	660,000	$	(1,000)	$	3,188,000
2015
Assets	$	1,204,000	$	652,000	$	2,103,000	$	–	$	3,959,000
Liabilities	$	–	$	–	$	1,113,000	$	–	$	1,113,000
Equity		1,204,000		652,000		990,000		–		2,846,000
Total liabilities and equity	$	1,204,000	$	652,000	$	2,103,000	$	–	$	3,959,000
Revenues	$	2,817,000	$	13,000	$	4,864,000	$	–	$	7,694,000
Expenses		876,000		17,000		4,838,000				5,731,000
Net income (loss)	$	1,941,000	$	(4,000)	$	26,000	$	–	$	1,963,000
2014
Assets	$	2,623,000	$	707,000	$	3,722,000	$	–	$	7,052,000
Liabilities	$	–	$	–	$	2,471,000	$	–	$	2,471,000
Equity		2,623,000		707,000		1,251,000		–		4,581,000
Total liabilities and equity	$	2,623,000	$	707,000	$	3,722,000	$	–	$	7,052,000
Revenues	$	2,003,000	$	6,000	$	2,175,000	$	–	$	4,184,000
Expenses		910,000		16,000		2,009,000		–		2,935,000
Net income (loss)	$	1,093,000	$	(10,000)	$	166,000	$	–	$	1,249,000

The Company’s investment and equity in earnings (losses) of the equity method investees are as follows:

	Del Mar		Romney		Rosales		LLC		Total

Investment balance October 31, 2013	$	1,265,000	$	535,000	$	–	$	–	$	1,800,000
Equity earnings (losses)		256,000		(8,000)		15,000		–		263,000
Cash distributions		(183,000)		–		–		–		(183,000)
Investment contributions		–		8,000		1,750,000		–		1,758,000
Investment balance October 31, 2014		1,338,000		535,000		1,765,000		–		3,638,000
Equity earnings (losses)		455,000		(13,000)		(199,000)		–		243,000
Cash distributions		(789,000)		–		(54,000)		–		(843,000)
Investment contributions		–		9,000		–		–		9,000
Investment balance October 31, 2015		1,004,000		531,000		1,512,000		–		3,047,000
Equity earnings (losses)		603,000		(9,000)		40,000		–		634,000
Cash distributions		(586,000)		–		(56,000)		–		(642,000)
Investment contributions		940,000		–		–		2,275,000		3,215,000
Investment balance October 31, 2016	$	1,961,000	$	522,000	$	1,496,000	$	2,275,000	$	6,254,000