Note 7 - Real Estate Owned (REO), Held as Investment, Net

9 Months Ended

Sep. 30, 2011

Real Estate Disclosure [Text Block]

NOTE 7 – REAL ESTATE OWNED (REO), HELD AS INVESTMENT, NET

For REO, held as investment, the activity and changes in the impairment reserves are summarized in the following table for the nine months ended September 30 ($ in thousands).

	Net Realizable Value						Accumulated Depreciation
	2011			2010			2011			2010
Balance, January 1,	$	115,411		$	102,833		$	1,807		$	507
Acquisitions		68,340			35,025			—			—
Dispositions		(8,247	)		—			(41	)		—
Improvements/betterments		232			2,342			—			—
Designated REO, held for sale		(14,019	)		(16,380	)		—			(73
Changes in net realizable values		157			—			—			—
Depreciation		(1,130	)		(999	)		1,130			999
Balance, September 30,	$	160,744		$	122,821		$	2,896		$	1,433

REO, held as investment, summarized by property type is presented in the following table ($ in thousands).

	September 30,		December 31,
	2011		2010
Number of properties		20		13
Property type
Single family	$	10,272	$	9,399
Multi-family		132,995		86,813
Commercial		12,447		14,170
Land		5,030		5,029
Total REO, held as investment, net	$	160,744	$	115,411

At September 30, 2011, the partnership was holding three properties classified as Land until such time as the distressed market improves. Three single-family residences with a carrying value of $7,934,000 were under construction and/or rehabilitation.  At December 31, 2010, three properties with a carrying value of $7,537,000 were under construction and/or rehabilitation.

The results of operations for rental properties in REO, held as investment are presented in the following table for the three and nine months ended September 30 ($ in thousands).The table below reflects rental operations, net for those properties classified as REO, held as investment at September 30, 2011 and September 30, 2010.

	Three months ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
Number of properties		14		5		14		5
Rental income	$	1,807	$	1,059	$	4,556	$	3,555
Operating expenses
Property taxes		300		170		694		576
Management, administration and insurance		467		58		980		630
Utilities, maintenance and other		185		50		392		1,148
Advertising and promotions		10		5		24		20
Total operating expenses		962		283		2,090		2,374
Net operating income		845		776		2,466		1,181
Depreciation		391		311		1,130		926
Rental operations, net(1)	$	454	$	465	$	1,336	$	255

(1) Interest expense on the mortgages securing the rental property was $288,000 and $167,000 for the three months ended September 30, 2011 and 2010, respectively, and $891,000 and $369,000 for the nine months ended September 30, 2011 and 2010, respectively.

In the third quarter of 2011, the partnership acquired five properties through foreclosure.

-   Condominium units (4) in a 37 unit building in Alameda County, California.  The recorded investment was approximately $600,000.  An independent management firm has been engaged to oversee rental operations of the units.

-   Multi-family complex in Sacramento County, California (Elk Grove Property Company, LLC). The partnership acquired 257 of the 280 units.  The recorded investment was approximately $41,000,000. The property was subject to a mortgage loan with a balance at acquisition of approximately $13,780,000 and an interest rate of 7.50%.

-   Condominium units (15) in an 30 unit complex, in Alameda County, California (Second Street Midtown Property Company, LLC). The recorded investment was approximately $3,150,000. An independent management firm has been engaged to oversee rental operations of the units.

-   Condominium units (29) in an 50 unit complex, in Contra Costa County, California. The recorded investment was approximately $3,190,000. An independent management firm has been engaged to oversee rental operations of the units.

-   A 38 unit multi-family complex, in San Joaquin County, California (Winchester Property Company, LLC). The recorded investment was approximately $3,213,000. An independent management firm has been engaged to oversee rental operations of the units.

In the second quarter of 2011, the partnership acquired properties at two locations through foreclosure.

-   Condominium units (3) in a 19 unit building in San Francisco County, California. The recorded investment was approximately $1,362,000. Two of the units are subject to separate mortgages with an aggregate amount owed of $830,000, each with variable interest rates at acquisition between 2.8% and 3.9%, and were assigned to real estate held for sale in the third quarter.  The remaining unit, a common storage area and signage rental space, has been assigned to SF Stagehouse Property Company, LLC.

-   Condominium units (32) in an 81 unit complex, in Alameda County, California. The recorded investment was approximately $5,000,000. An independent management firm has been engaged to oversee rental operations of the units.

In the first quarter of 2011, the partnership acquired three properties through foreclosure.

-   Multi-family complex in Santa Clara County, California (The Element, LLC). The recorded investment was approximately $8,130,000. The property was subject to an interest-only mortgage loan with a balance at acquisition of approximately $6,800,000 and an interest rate of 6.25%. In June 2011, the Element, LLC was sold for $8,800,000.

-   Condominium units (9) in a 36 unit complex, in Sutter County, California (Lincoln Village LLC). The recorded investment was approximately $495,000. An independent management firm has been engaged to oversee rental operations of the units.

-   Recreation property (45.7 acres) in Amador County, California (Pine Acres LLC). The recorded investment was approximately $2,200,000. An independent management firm has been engaged to oversee rental operations of the units.