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INVESTMENTS

12 Months Ended

Sep. 30, 2012

6. INVESTMENTS

A summary of Barnwell’s investments is as follows:

	September 30,
	2012			2011
Investment in two residential parcels		$	2,331,000		$	2,331,000
Investment in joint ventures			-			1,754,000
Investment in land interests:
Leasehold land zoned conservation – Lot 4C			50,000			50,000
Lot acquisition rights – Mauka Lands			-			488,000
Total investments		$	2,381,000		$	4,623,000

Investment in two residential parcels

Kaupulehu 2007 owns two residential parcels in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka’upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

During the year ended September 30, 2011, Kaupulehu 2007 recorded a $689,000 reduction of the carrying value of its investment in residential parcels as a result of changes in fair values for real estate in the Lot 4A Increment I area of Kaupulehu, North Kona, Hawaii. The writedown is included in the Consolidated Statements of Operations under the caption “Reduction of carrying value of assets.” No reduction was necessary during the year ended September 30, 2012.

Investment in joint ventures

Kaupulehu Investors, LLC owns passive minority interests in Hualalai Investors JV, LLC and Hualalai Investors II, LLC (hereinafter collectively referred to as “Hualalai Investors”), owners of Hualalai Resort, and a passive minority interest in Kona Village Investors, LLC, owner of Kona Village Resort. Kaupulehu Investors, LLC accounts for these passive investments under the cost method.

Due to recent uncertainty regarding the financial condition of the joint venture entities in which the Company has passive interests and the duration of current economic conditions and the corresponding impact of such conditions on the Company’s ability to recover its investment within the Company’s currently estimated holding period, the Company wrote off its remaining $1,754,000 investment in joint ventures in fiscal 2012 as management has concluded that there has been an other-than-temporary impairment of these investments. The write-off is included in the Consolidated Statements of Operations under the caption “Reduction of carrying value of assets.”

Kona Village Resort sustained considerable damage as a result of the March 2011 tsunami and subsequently shut down indefinitely. As such, Barnwell wrote-off its remaining investment in Kona Village Investors, LLC of $121,000 during the year ended September 30, 2011. The writedown is included in the Consolidated Statements of Operations under the caption “Reduction of carrying value of assets.”

Development Rights

Kaupulehu Developments received its final development rights option payment in December 2010. Revenues related to sales of development rights under option are summarized as follows:

	Year ended September 30,
	2012			2011
Sale of development rights under option:
Proceeds		$	-		$	2,656,000
Fees			-			(159,000	)
Revenues – sale of development rights, net		$	-		$	2,497,000

Percentage of Sales Payments

Kaupulehu Developments has the right to receive payments from WB and WBKD, entities not affiliated with Barnwell and its subsidiaries, resulting from the sale of lots and/or residential units within approximately 870 acres of the Kaupulehu Lot 4A area by WB and WBKD in two increments (“Increment I” and “Increment II”).

With respect to Increment I, Kaupulehu Developments is entitled to receive payments from WB based on the following percentages of the gross receipts from WB’s sales of single-family residential lots in Increment I: 9% of the gross proceeds from single-family lot sales up to aggregate gross proceeds of $100,000,000; 10% of such aggregate gross proceeds greater than $100,000,000 up to $300,000,000; and 14% of such aggregate gross proceeds in excess of $300,000,000.

The following table summarizes the Increment I percentage of sales payment revenues received from WB:

	Year ended September 30,
	2012				2011
Sale of interest in leasehold land:
Proceeds		$	512,000			$	1,325,000
Fees			(30,000	)			(80,000	)
Revenues – sale of interest in leasehold land, net		$	482,000			$	1,245,000

As of September 30, 2012, 31 of the 80 single-family lots planned in Increment I have been sold by WB.

With respect to Increment II, which is not yet developed, Kaupulehu Developments is entitled to receive future payments from WBKD based on a percentage of the sales prices of the residential lots or units, as well as additional payments after the members of WBKD have received distributions equal to the capital they invested in the project.

There is no assurance with regards to the amounts of future payments to be received.

Lot 4C

Kaupulehu Developments holds an interest in Lot 4C, an area of approximately 1,000 acres of vacant leasehold land zoned conservation located adjacent to Lot 4A. WB and/or WBKD have the exclusive right to negotiate with Kaupulehu Developments with respect to Lot 4C until June 2013 unless extended by Barnwell.

There is no assurance that the required land use reclassification and rezoning from regulatory agencies will be obtained, that the necessary development terms and agreements will be successfully negotiated for Lot 4C, or that WB and/or WBKD will enter into an agreement with Kaupulehu Developments regarding Lot 4C.

Lot acquisition rights

Barnwell, through wholly-owned Kaupulehu Mauka Investors, LLC, owns acquisition rights as to 14 lots within agricultural-zoned leasehold land in the upland area of Kaupulehu (“Mauka Lands”) situated between the Queen Kaahumanu Highway and the Mamalahoa Highway at Kaupulehu, on the island of Hawaii. The acquisition rights give Barnwell the right to acquire the aforementioned residential lots, currently estimated to be two to five acres in size, which may be developed on the Mauka Lands. These lands are currently classified as agricultural by the state of Hawaii and, accordingly, the developer of these lands (Hualalai Investors) will need to pursue both state and county of Hawaii approvals for reclassification and rezoning to permit the development of residential lots and negotiate development terms.

Due to recent heightened uncertainty regarding the likelihood of development of the Mauka Lands, and accordingly, the corresponding impact of such conditions on the Company’s ability to recover its investment in lot acquisition rights, the Company wrote off its remaining $488,000 investment in lot acquisition rights in fiscal 2012. The write-off is included in the Consolidated Statements of Operations under the caption “Reduction of carrying value of assets.”