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Commitments And Contingencies And Liquidity
9 Months Ended
Sep. 30, 2011
Commitments And Contingencies And Liquidity [Abstract] 
Commitments And Contingencies And Liquidity

NOTE 10. COMMITMENTS AND CONTINGENCIES AND LIQUIDITY

In conjunction with its sale of Four Hickory in November 2007, the Company agreed to fund approximately $1.0 million to satisfy its commitment to compensate LK-Four Hickory, LLC for move-in discounts and other concessions to existing tenants at the time of sale. The Company also has certain agreements with LK-Four Hickory, LLC to fund projection shortfalls, which, to date, we have not had to provide any additional funding. In addition, related parties of the Company have active lease agreements with LK-Four Hickory, LLC.

On December 17, 2007, both Limkwang Nevada, Inc., the majority owner of LK-Four Hickory, LLC, and ARL unconditionally guaranteed the punctual payment when due, whether at stated maturity, by acceleration or hereafter, including all fees and expenses incurred by the bank on collection of a $28.0 million note payable for LK-Four Hickory, LLC.

Liquidity. Management believes that ARL will generate excess cash flow from property operations in 2011, such excess however, will not be sufficient to discharge all of ARL's obligations as they became due. Management intends to sell land and income producing real estate, refinance real estate and obtain additional borrowings primarily secured by real estate to meet its liquidity requirements.

Partnership Buyouts. ARL is the limited partner in one partnership currently constructing a residential property and four partnerships in which the residential property is substantially complete. As permitted in the respective partnership agreements, ARL intends to purchase the interests of the general and any other limited partners in these partnerships subsequent to the completion of these projects. The amounts paid to buy out the non-affiliated partners are limited to development fees earned by the non-affiliated partners, and are set forth in the respective partnership agreements.

Litigation. On October 27, 2011, a settlement agreement was reached with an existing lender pertaining to a $12.0 million real estate note made by a consolidated subsidiary of the Company. The note is secured by 257.52 acres of land known as Pioneer Crossing located in Austin, Texas. Ownership of the land will be transferred to the existing lender and ARL will have a liability of $3.0 million owed to the lender. The note accrues interest at prime+2.0% and payments of interest and principal are due monthly based upon a 20-year amortization schedule. The note matures on November 1, 2014, at which time the unpaid balance shall be due and payable.

A lawsuit has been filed against the Company with regard to certain guaranties pertaining to three real estate notes from consolidated subsidiaries of the Company. The lender is claiming amounts owed of $30.2 million. The notes were secured by certain real estate assets owned by ARL subsidiaries that have since had ownership transferred to the lender, subsequent to the ARL subsidiaries transfer of ownership to a related party under common control. The Company is vigorously defending the lawsuit and has taken a reserve, as a current liability, in the amount of the gain the company would have recognized upon the ownership transfer to a third party. We believe this reserve is in excess of the potential deficiency.

 

The ownership of property and provision of services to the public as tenants entails an inherent risk of liability. Although the Company and its subsidiaries are involved in various items of litigation incidental to and in the ordinary course of its business, in the opinion of Management, the outcome of such litigation will not have a material adverse impact upon the Company's financial condition, results of operation or liquidity