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INVESTMENTS | 12 Months Ended
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Sep. 30, 2014
INVESTMENTS |
INVESTMENTS | 6.INVESTMENTS A summary of Barnwell’s investments is as follows:
|  | September 30, |
|  | 2014 |  | 2013 |
Investment in land |  |  | $ | 1,192,000 |  |  |  | $ | 2,331,000 |  |
Investment in land development partnerships |  |  | 4,658,000 |  |  |  | - |  |
Investment in leasehold land interest – Lot 4C |  |  | 50,000 |  |  |  | 50,000 |  |
Total investments |  |  | $ | 5,900,000 |  |  |  | $ | 2,381,000 |  |
Investment in residential parcels At September 30, 2014, Kaupulehu 2007 owned 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. One residential parcel is being held for speculative purposes and is not expected to be sold within a year of the balance sheet date. In September 2014, Kaupulehu 2007 entered into a contract to sell the other residential parcel, which closed in October 2014 (see Note 20). The residential parcel to be sold was reclassified to investment held for sale as of September 30, 2014. Investment in land development partnerships On November 27, 2013, Barnwell, through a wholly-owned subsidiary, entered into two limited liability limited partnerships, KD Kona 2013 LLLP and KKM Makai, LLLP, and indirectly acquired a 19.6% non-controlling ownership interest in each of KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD Kaupulehu, LLLP for $5,140,000. These entities own certain real estate and development rights interests in the Kukio, Maniniowali and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations. KD Kaupulehu, LLLP, which is comprised of KD I and KD II, is the developer of Kaupulehu Lot 4A Increments I and II, the area in which Barnwell has interests in percentage of sales payments. Barnwell’s investment in these entities is accounted for using the equity method of accounting. The limited liability limited partnership agreements provide for a priority return of Barnwell’s investment prior to profit distributions. Net profits, losses and cash flows of the partnerships are allocated to Barnwell and the other partners at varying percentages based on whether the initial and any additional capital contributions have been repaid to the investors. Barnwell’s share of the loss of its equity affiliates was $482,000 during the year ended September 30, 2014. The equity in the underlying net assets of the Kukio Resort land development partnerships exceeds the carrying value of the investment in affiliates by approximately $324,000 as of September 30, 2014, which is attributable to differences in the value of capitalized development costs and a note receivable. The basis difference for the capitalized development costs will be recognized as the partnerships sell lots and recognize the associated costs. The basis difference for the note receivable will be recognized as the partnerships sell memberships for the Kukio Golf and Beach Club for which the receivable relates. The basis difference adjustment from the acquisition date to September 30, 2014 was inconsequential. Barnwell, as well as KD I, KD II and certain other owners of the partnerships, have jointly and severally executed a surety indemnification agreement. Bonds issued by the surety at September 30, 2014 totaled approximately $5,400,000 and relate to certain construction contracts of KD I and KD II. If any such performance bonds are called, we may be obligated to reimburse the issuer of the performance bond as Barnwell, KD I, KD II and certain other partners are jointly and severally liable, however we believe that it is remote that a material amount of any currently outstanding performance bonds will be called. Performance bonds do not have stated expiration dates. Rather, the performance bonds are released as the underlying performance is completed. As of September 30, 2014, Barnwell’s maximum loss exposure as a result of its investment in the Kukio Resort land development partnerships was approximately $10,058,000, consisting of the carrying value of the investment of $4,658,000 and $5,400,000 from the surety indemnification agreement of which we are jointly and severally liable. Summarized financial information for the Kukio Resort land development partnerships is as follows:
|  | November 27, 2013 - |
|  | September 30, 2014 |
Revenue |  |  | $ | 5,114,000 |  |
Gross profit |  |  | $ | 2,058,000 |  |
Net loss |  |  | $ | (1,614,000 | ) |
Percentage of sales payments Kaupulehu Developments has the right to receive payments from KD I and KD II resulting from the sale of lots and/or residential units within approximately 870 acres of the Kaupulehu Lot 4A area by KD I and KD II in two increments (“Increment I” and “Increment II”) (see Note 19). With respect to Increment I, Kaupulehu Developments is entitled to receive payments from KD I based on the following percentages of the gross receipts from KD I’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 KD I:
|  | Year ended September 30, |
|  | 2014 |  | 2013 |
Sale of interest in leasehold land: |  |  |  |  |  |  |  |  |
Proceeds |  |  | $ | 740,000 |  |  |  | $ | 300,000 |  |
Fees |  |  | (104,000 | ) |  |  | (18,000 | ) |
Revenues – sale of interest in leasehold land, net |  |  | $ | 636,000 |  |  |  | $ | 282,000 |  |
As of September 30, 2014, 32 of the 38 single-family lots in Phase I of Increment I have been sold by KD I. Forty-two single-family lots are planned for Phase II of Increment I, for a total of 80 single-family lots planned for Increment I. The developer released and began marketing a portion of the 42 single-family lots in Phase II of Increment I, and as of September 30, 2014, three of the lots have been sold. With respect to Increment II, of which only a portion is currently under development, Kaupulehu Developments is entitled to receive future payments from KD II based on a percentage of the sales prices of the residential lots or units, as well as additional payments after the members of KD II 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. Investment in leasehold land interest – Lot 4C Kaupulehu Developments holds an interest in an area of approximately 1,000 acres of vacant leasehold land zoned conservation located adjacent to Lot 4A. The lease terminates in December 2025. Investment in joint ventures On July 25, 2014, Kaupulehu Investors, LLC, an entity in which Barnwell has an 80% interest, received $3,297,000, with an additional $102,000 to be received pending the sale of an interest in a related utility, for the sale of Kaupulehu Investors, LLC’s 1.5% passive minority interests in the Hualalai Resort and Kona Village Resort to an independent third party. Kaupulehu Investors, LLC previously wrote off its investment in the Hualalai Resort due to its other-than-temporary decline in fair value and in Kona Village Resort as a result of the March 2011 tsunami which caused the resort to shut down indefinitely. As these previous write downs reduced the carrying value of the investments to zero, Barnwell recognized a $3,399,000 gain on this transaction, which is reflected in “Gain on sale of investments” in the Consolidated Statements of Operations, of which $679,000 relates to non-controlling interests. Kaupulehu Investors, LLC’s capital and operating cash call investments in the Hualalai Resort and the Kona Village Resort prior to the sale totaled $3,193,000.

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- Definition The entire disclosure for investments, including all tables. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 6 -Section 10 -Paragraph (c) -Subparagraph (1) + Details
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