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INVESTMENTS | 3 Months Ended
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Dec. 31, 2014
INVESTMENTS |
INVESTMENTS | 5.INVESTMENTS A summary of Barnwell’s investments is as follows:
| December 31, |  | September 30,
| 2014 |  | 2014
Investment in land |  | $ | 1,192,000 |  |  |  | $ | 1,192,000 |
Investment in land development partnerships |  | 4,746,000 |  |  |  | 4,658,000 |
Investment in leasehold land interest – Lot 4C |  | 50,000 |  |  |  | 50,000 |
Total investments |  | $ | 5,988,000 |  |  |  | $ | 5,900,000 |
Investment in residential parcels At December 31, 2014, Kaupulehu 2007 owned one residential parcel 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. A second residential parcel, which was included in investment held for sale at September 30, 2014, was sold in October 2014 for $1,250,000 for a nominal loss which is included in general and administrative expenses in the Condensed Consolidated Statements of Operations. 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 Acquisition, LLLP (“KD I”) and KD Acquisition II, LLLP (“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 income of its equity affiliates was $88,000 for the three months ended December 31, 2014 and the share of the loss of its equity affiliates was $147,000 for the three months ended December 31, 2013. 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 December 31, 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 for the three months ended December 31, 2014 was inconsequential and there was no basis difference adjustment for the three months ended December 31, 2013. 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 December 31, 2014 totaled approximately $4,830,000 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 December 31, 2014, Barnwell’s maximum loss exposure as a result of its investment in the Kukio Resort land development partnerships was approximately $9,576,000, consisting of the carrying value of the investment of $4,746,000 and $4,830,000 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:
|  | Three months ended |  | November 27, 2013 - |
|  | December 31, 2014 |  | December 31, 2013 |
Revenue |  | $ | 4,626,000 |  |  | $ | 269,000 |  |
Gross profit |  | $ | 1,427,000 |  |  | $ | 211,000 |  |
Net earnings (loss) |  | $ | 420,000 |  |  | $ | (381,000 | ) |
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 15). The following table summarizes the Increment I percentage of sales payment revenues received from KD I.
|  | Three months ended December 31, |
|  | 2014 |  | 2013 |
Sale of interest in leasehold land: |  |  |  |  |  |  |  |  |  |  |
Proceeds |  |  | $ | 1,200,000 |  |  |  | $ | 140,000 |  |
Fees |  |  |  | (168,000 | ) |  |  |  | (20,000 | ) |
Revenues – sale of interest in leasehold land, net |  |  | $ | 1,032,000 |  |  |  | $ | 120,000 |  |
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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