Note 6 - Real Estate Owned (REO), Held as Investment, Net

12 Months Ended

Dec. 31, 2012

Real Estate Disclosure [Text Block]

NOTE 6 – REAL ESTATE OWNED (REO), HELD AS INVESTMENT, NET

For REO, held as investment, the activity in net book value (NBV) and changes in the impairment reserves are summarized in the following table for the years ended December 31 ($ in thousands).

	NBV						Accumulated Depreciation
	2012			2011			2012			2011
Balance, January 1	$	161,402		$	115,411		$	3,594		$	1,807
Acquisitions		1,649			70,350			—			—
Dispositions		7			(8,044	)		(7	)		(85	)
Improvements/betterments		2,925			486			—			—
Designated from REO held for sale		18,337			—			—			—
Designated to REO held for sale		—			(8,929	)
Changes in net book values (NBV)		(648	)		(6,000	)		—			—
Depreciation		(2,339	)		(1,872	)		2,339			1,872
Balance, December 31	$	181,333		$	161,402		$	5,926		$	3,594

During 2012, the partnership designated four properties to REO held as investment previously designated as REO held for sale.

REO, held as investment, summarized by property type is presented in the following table as of December 31, ($ in thousands).

	2012				2011
	Properties		NBV		Properties		NBV
Property type
Residential
Single family (1)		4	$	14,624		2	$	4,984
Apartments		1		376		—		—
Condominiums (2)		4		68,448		3		65,633
Fractured Condominiums (3)		10		72,292		10		73,262
Commercial (4)		4		20,683		3		12,493
Land (5)		2		4,910		2		5,030
Total REO, held as investment, net		25	$	181,333		20	$	161,402

(1)  Properties of note at December 31, 2012 include.

A property under construction of two separate units, with a carrying value of $5,000,000 with remaining construction costs of approximately $910,000. At December 31, 2011, the carrying value of the property was $3,148,000 with remaining construction costs of approximately $2,154,000.  The property is located in San Francisco, California.

A property with 7 remaining of the 13 original tenants-in-common units, with a book value of approximately $6,398,000.  The units may be further developed or sold “as is”.  At December 31, 2011, the book value of the 9 remaining units was approximately $12,609,000.  The property is located in San Francisco, California

(2)  Includes units in condominium complexes wholly owned by the partnership.

(3)  Includes units in condominium complexes partially owned by the partnership.

(4)  Includes one development property located in Long Beach, California, presently zoned and entitled as commercial, being developed and re-entitled to residential.  At December 31, 2012 and 2011 the net book value of the property was approximately $8,824,000 and $8,250,000, respectively.

(5)  Includes at December 31, 2012 and 2011, approximately 12 acres located in Ceres, California with no zoning restrictions, and 13 acres located in San Rafael, California, presently zoned residential.

REO, held as investment, summarized by geographic area is presented in the following table as of December 31, ($ in thousands).

	2012						2011
	Non-Rental			Rental			Non-Rental			Rental
	No.	NBV		No.	NBV		No.	NBV		No.	NBV
San Francisco	2	$	11,398	5	$	17,962	1	$	3,141	4	$	14,235
San Francisco Bay Area (6)	1		1,210	7		22,553	1		1,210	7		23,371
Northern California (6)	2		5,335	5		45,480	1		3,820	4		45,992
Southern California	1		8,824	2		68,571	—		—	2		69,633
Total REO Held as investment	6	$	26,767	19	$	154,566	3	$	8,171	17	$	153,231

        (6)  Excluding line(s) above.

Rental properties summarized by property type is presented in the following table ($ in thousands).

	2012						2011
Property type	Units		Properties		NBV		Units		Properties		NBV
Residential
Single family		1		1	$	1,592		1		1	$	1,843
Apartments		8		1		376		—		—		—
Condominiums (7)		220		4		68,447		212		3		65,633
Fractured Condominiums (8)		440		10		72,292		440		10		73,262
Commercial		3		3		11,859		3		3		12,493
Total rental properties		672		19	$	154,566		656		17	$	153,231

(7)  Includes units in condominium complexes wholly-owned by the partnership.

(8)  Includes units in condominium complexes where some units had been sold prior to the partnership’s acquisition.

The earnings/(loss) from rental operations of the real estate owned, held as investment is presented in the following table for the years ended December 31 ($ in thousands).

	2012		2011
Rental income	$	11,557	$	8,200
Operating expenses
Administration and payroll		1,431		893
Homeowner association fees		865		381
Receiver fees		239		410
Utilities and maintenance		1,238		930
Advertising and promotions		128		80
Property taxes		1,849		1,278
Other		280		190
Total operating expenses		6,030		4,162
Net operating income		5,527		4,038
Depreciation		2,328		1,831
Rental operations, net	$	3,199	$	2,207

Interest expense on the mortgages securing the rental properties was $2,395,000 and $1,675,000 for 2012 and 2011, respectively.

During the second quarter of 2012, the partnership acquired through foreclosure a partially completed home subdivision in Fresno County, California. The recorded investment was approximately $1,649,000.

In the fourth quarter of 2011, the partnership acquired through foreclosure condominium units (14) in a 41 unit building in San Francisco County, California. The recorded investment was approximately $2,860,000. An independent management firm has been engaged to oversee rental operations of the units.

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. 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 a 30 unit complex, in Alameda County, California. 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 a 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. The recorded investment was approximately $2,505,000. An independent management firm has been engaged to oversee rental operations of the units.

In the second quarter of 2011, the partnership acquired two properties 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 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. 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. The recorded investment was approximately $2,200,000. An independent management firm has been engaged to oversee rental operations of the units.