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REAL ESTATE
 12 Months Ended
Dec. 31, 2011
REAL ESTATE  
REAL ESTATE

NOTE 2.   REAL ESTATE

 

Real estate consisted of the following at December 31, (dollars in thousands):

 

 

 

2011

 

 

2010

 

Land held for development or sale

 

$

24,511

 

 

$

29,561

 

 

 

$

24,511

 

 

$

29,561

 

 

Below is a summary of the real estate transactions for the year ended December 31, 2011:

 

On July 5, 2011, we recognized the September 21, 2010 sale of 13.0 acres of land with a 29,784 square foot storage warehouse known as Eagle Crest located in Farmers Branch, Texas, to Warren Road Farm, Inc., a related party under common control, for a sale price of $3.8 million.  The buyer assumed the existing mortgage of $2.4 million secured by the property.  We recorded a loss of $0.5 million when ownership transferred to the existing lender.

 

           On July 5, 2011, we recognized the December 23, 2010 sale of 6.6 acres of land known as Three Hickory land located in Farmers Branch, Texas, to Fenton Real Estate, Inc., a related party under common control, for a sales price of $1.3 million. There was no gain or loss recorded when ownership transferred to the existing lender.

 

In 2005, IOT purchased 10.08 acres of Centura land, located in Dallas County, Texas, from TCI (a related party) for $13.0 million. The purchase price was paid with cash of $6.1 million and the conveyance, to the seller, of $6.9 million in notes receivable held by IOT. The cash was obtained from financing the land acquired in the transaction. The agreement included a put option whereby IOT had the right to resell the property to the seller for a price of $13.0 million plus a preferred return of 9% per annum accruing from the closing date. Due to the related party nature of the transaction, including the likelihood that IOT would exercise its put option; this transaction had been treated as a financing transaction. IOT continued to carry the $6.9 million as a note payable and has recorded the $6.9 million as a receivable from TCI. TCI pays IOT interest in an amount equal to what IOT pays for its loan on the property.  On August 2, 2011, we recognized the sale of 10.08 acres of land known as Centura land located in Dallas, Texas, to ABCLD Real Estate, LLC (ABCLD), a related party under common control, for a sales price of $13.0 million. The buyer assumed the existing mortgage of $7.2 million secured by the property.  Ownership of this property was then transferred from ABCLD to the lender.  There was no gain or loss recorded on the sale.

 

As of December 31, 2011, there are no remaining properties that we have treated as “subject to sales contract” on the Consolidated Balance Sheets of which we deferred recognition of the sale to a related party.  These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and have ultimately resulted in ownership transfer to the lender or satisfactory resolution. These properties have mortgages that are secured by the property and many have corporate guarantees by our parent, TCI.  We do not believe that IOT is liable for any deficiencies that may have resulted from corporate guarantees after the lender took possession of the property from the related party owner.

 

 

Concentration of investment risk.    IOT has a high concentration of investment risk on properties in the southwest region of the United States, specifically Texas. This risk includes, but is not limited to, changes in local economic conditions, changes in real estate and zoning laws, increases in real estate taxes, floods, tornados and other acts of God and other factors beyond the control of management. In the opinion of management, this investment risk is partially mitigated by the diversification of property types in other geographical regions of the United States, management’s review of additional investments, acquisitions in other areas and by insurance.