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INVESTMENTS | 9 Months Ended
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Jun. 30, 2014
INVESTMENTS |
INVESTMENTS | 5. INVESTMENTS A summary of Barnwell’s investments is as follows:
|  | June 30, |  |  |  | September 30, |
|  | 2014 |  |  |  | 2013 |
Investment in two residential parcels |  | $ | 2,331,000 |  |  |  | $ | 2,331,000 |
Investment in land development partnerships |  | 4,764,000 |  |  |  | - |
Investment in leasehold land interest – Lot 4C |  | 50,000 |  |  |  | 50,000 |
Total investments |  | $ | 7,145,000 |  |  |  | $ | 2,381,000 |
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. 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% ownership interest in each WB Kukio Resorts, LLC, WB Maniniowali, LLC and WB Kaupulehu, LLC 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. WB Kaupulehu, LLC, which is comprised of WB KD Acquisition, LLC (“WB”) and WB KD Acquisition II, LLC (“WBKD”), is the developer of Kaupulehu Lot 4A Increments I and II, the area in which Barnwell has interests in percentage of sales payments. Barnwell, through affiliated entities, borrowed $5,000,000 under a new bank loan to fund the acquisition. 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. The initial accounting for the acquisition by the controlling general partner of the investees is incomplete as the general partner is currently in the process of performing an acquisition date audit. Based on the investees’ unaudited financial statements from the general partner, Barnwell was allocated partnership losses of $113,000 and $376,000 during the three and nine months ended June 30, 2014, respectively. The adjustment to the estimated basis difference between the underlying equity in net assets of the investees and the carrying value of Barnwell’s investment as a limited partner as a result of activity during the three and nine months ended June 30, 2014, based on the unaudited information from the investees, was not material. The unaudited financial information for the investees from the general partner is subject to change upon completion of the audit and the change could have a material impact on Barnwell’s reported results of operations. Barnwell, as well as WB, WBKD and certain other owners of the partnerships, have jointly and severally executed a surety indemnification agreement. Bonds issued by the surety at June 30, 2014 totaled approximately $5,400,000 and relate to certain construction contracts of WB and WBKD. If any such performance bonds are called, we may be obligated to reimburse the issuer of the performance bond as Barnwell, WB, WBKD and certain other owners 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 June 30, 2014, Barnwell’s maximum loss exposure as a result of its investment in the land development partnerships was $10,164,000, consisting of the carrying value of the investment of $4,764,000 and $5,400,000 from the surety indemnification agreement of which we are jointly and severally liable. Summarized financial information for the land development partnerships is as follows:
|  |  | Three months ended |  |  | November 27, 2013 - |
|  |  | June 30, 2014 |  |  | June 30, 2014 |
Revenue |  |  | $ | 2,499,000 |  |  | $ | 4,121,000 |
Gross profit |  |  | $ | 1,410,000 |  |  | $ | 3,003,000 |
Loss from operations |  |  | $ | (431,000) |  |  | $ | (1,259,000) |
Net loss |  |  | $ | (417,000) |  |  | $ | (1,226,000) |
Percentage of sales payments Kaupulehu Developments has the right to receive payments resulting from the sale of lots and/or residential units within approximately 870 acres of the Kaupulehu Lot 4A area in two increments (“Increment I” and “Increment II”) (see Note 15). The following table summarizes the Increment I percentage of sales payment revenues received from WB:
|  |  | Three months ended |  |  | Nine months ended
|  |  | June 30, |  |  | June 30,
|  |  | 2014 |  |  |  | 2013 |  |  |  | 2014 |  |  |  | 2013 |
Sale of interest in leasehold land: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds |  |  | $ | 300,000 |  |  |  | $ | - |  |  |  | $ | 440,000 |  |  |  | $ | 300,000 |
Fees |  |  | (42,000 | ) |  |  | - |  |  |  | (62,000 | ) |  |  | (18,000 | )
Revenues – sale of interest in leasehold land, net |  |  | $ | 258,000 |  |  |  | $ | - |  |  |  | $ | 378,000 |  |  |  | $ | 282,000 |
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.

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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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