SECURITIES AVAILABLE FOR SALE

12 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

SECURITIES AVAILABLE FOR SALE

NOTE 6 – SECURITIES AVAILABLE FOR SALE

Our Securities Available for Sale at Fair Value consists primarily of marketable common and preferred stock of other REITs with a fair value of $185.3 million as of September 30, 2019. Historically, we have aimed to limit the size of our REIT securities portfolio to no more than approximately 10% of our undepreciated assets, which we define as total assets excluding accumulated depreciation. As we announced earlier this year, it is now our goal to gradually reduce the size of our REIT securities portfolio to no more than 5% of our undepreciated assets. We continue to believe that our REIT securities portfolio provides us with diversification, income, a source of potential liquidity when needed and also serves as a proxy for real estate when more favorable risk adjusted returns are not available in the private real estate markets. Our decision to reduce this threshold mainly stems from the implementation of accounting rule ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”, which took effect at the beginning of this fiscal year. This new rule requires that quarterly changes in the market value of our marketable securities flow through our Consolidated Statements of Income. The implementation of this accounting rule has resulted in increased volatility in our reported earnings and some of our key performance metrics. Going forward, to achieve our threshold investment goal, we will continually evaluate opportunities to optimize our REIT securities portfolio. Total assets excluding accumulated depreciation were $2.1 billion as of September 30, 2019. Our $185.3 million investment in marketable REIT securities as of September 30, 2019 represented 8.7% of our undepreciated assets.

During the fiscal year ended September 30, 2019, we did not sell or redeem any securities. We received proceeds of $2.6 million and $17.3 million on sales or redemptions of securities available for sale during fiscal years 2018 and 2017, respectively.

We recorded the following realized Gain on Sale of Securities Transactions, net for the fiscal years ended September 30 (in thousands):

	2019		2018			2017
Gross realized gains	$	0	$	112		$	2,321
Gross realized losses		0		(1	)		(9	)
Gains on Sale of Securities Transactions, net	$	0	$	111		$	2,312

We recognized dividend income from our portfolio of REIT investments for the fiscal years ended September 30, 2019, 2018 and 2017 of $15.1 million, $13.1 million and $6.9 million, respectively. We also made purchases of $55.0 million in Securities Available for Sale at Fair Value during the fiscal year ended September 30, 2019. As of September 30, 2019, we had total net unrealized holding losses on our securities portfolio of $49.4 million. As a result of the adoption of ASU 2016-01, $24.7 million of the net unrealized holding losses have been reflected as Unrealized Holding Gains (Losses) Arising During the Periods in the accompanying Consolidated Statements of Income for the fiscal year ended September 30, 2019 and the remaining $24.7 million of the net unrealized holding losses have been reflected as a reclass to beginning Undistributed Income (Loss).

We normally hold REIT securities long-term and have the ability and intent to hold these securities to recovery. We have determined that none of our security holdings are other than temporarily impaired and therefore all unrealized gains and losses from these securities have been recognized as Unrealized Holding Gains (Losses) Arising During the Periods in our Consolidated Statements of Income. If we were to determine any of our securities to be other than temporarily impaired, we would present these unrealized holding losses as an impairment charge in our Consolidated Statements of Income (Loss).

The following is a listing of our investments in securities at September 30, 2019 (in thousands):

Description	Series		Interest Rate/ Dividend			Number of Shares		Cost		Fair Value
Equity Securities - Preferred Stock:
CBL & Associates Properties, Inc.		D		7.375	%		400	$	7,967	$	3,444
Cedar Realty Trust, Inc.		B		7.25	%		6		136		144
Dynex Capital, Inc.		A		8.50	%		10		250		256
iStar Financial, Inc.		D		8.00	%		10		232		261
iStar Financial, Inc.		I		7.50	%		60		1,301		1,547
Pennsylvania Real Estate Investment Trust		D		6.875	%		120		2,150		2,431
Pennsylvania Real Estate Investment Trust		B		7.375	%		120		2,216		2,484
UMH Properties, Inc. (1)		B		8.00	%		100		2,500		2,600
Total Equity Securities - Preferred Stock								$	16,752	$	13,167

Description	Number of Shares		Cost		Fair Value
Equity Securities - Common Stock:
CBL & Associates Properties, Inc.		4,000	$	33,525	$	5,160
Franklin Street Properties		1,000		8,478		8,460
Industrial Logistics Property Trust		700		13,789		14,875
Kimco Realty Corporation		1,700		27,937		35,496
Office Properties Income Trust		659		37,892		20,192
Pennsylvania Real Estate Investment Trust		1,800		13,443		10,296
Senior Housing Property Trust		1,100		17,871		10,181
Tanger Factory Outlet REIT Centers		600		12,300		9,288
VEREIT, Inc.		3,500		27,891		34,230
Washington Prime Group, Inc.		1,500		11,860		6,210
UMH Properties, Inc. (1)		1,257		12,935		17,693
Total Equity Securities - Common Stock			$	217,921	$	172,081

Description	Interest Rate/ Dividend			Number of Shares		Cost		Fair Value
Modified Pass-Through Mortgage-Backed Securities:
Government National Mortgage Association (GNMA)		6.50	%		500	$	2	$	2
Total Securities Available for Sale						$	234,675	$	185,250

(1) Investment is in a related company. See Note No. 11 for further discussion.

The following is a listing of our investments in securities at September 30, 2018 (in thousands):

Description	Series		Interest Rate/ Dividend			Number of Shares		Cost		Fair Value
Equity Securities - Preferred Stock:
CBL & Associates Properties, Inc.		D		7.375	%		200	$	4,808	$	3,194
Cedar Realty Trust, Inc.		B		7.25	%		6		136		143
Dynex Capital, Inc.		A		8.50	%		10		250		254
iStar Financial, Inc.		D		8.00	%		3		71		86
iStar Financial, Inc.		I		7.50	%		41		872		1,006
UMH Properties, Inc. (1)		B		8.00	%		100		2,500		2,626
Total Equity Securities - Preferred Stock								$	8,637	$	7,309

Description	Number of Shares		Cost		Fair Value
Equity Securities - Common Stock:
CBL & Associates Properties, Inc.		4,000	$	33,525	$	15,960
Franklin Street Properties		700		6,419		5,593
Government Properties Income Trust		1,580		26,156		17,838
Industrial Logistics Property Trust		100		2,117		2,301
Kimco Realty Corporation		1,200		20,338		20,088
Pennsylvania Real Estate Investment Trust		200		1,993		1,892
Select Income REIT		800		17,395		17,552
Senior Housing Property Trust		900		15,463		15,804
VEREIT, Inc.		3,100		25,016		22,506
Washington Prime Group, Inc.		1,300		10,542		9,490
UMH Properties, Inc. (1)		1,188		12,061		18,584
Total Equity Securities - Common Stock			$	171,025	$	147,608

Description	Interest Rate/ Dividend			Number of Shares		Cost		Fair Value
Modified Pass-Through Mortgage-Backed Securities:
Government National Mortgage Association (GNMA)		6.50	%		500	$	3	$	4
Total Securities Available for Sale						$	179,665	$	154,921

(1) Investment is in a related company. See Note No. 11 for further discussion.