INVESTMENT IN NON-CONSOLIDATED ENTITIES

6 Months Ended

Jun. 30, 2014

Investment In Non-Consolidated Entities

3.	INVESTMENT IN NON-CONSOLIDATED ENTITIES

As of June 30, 2014, we have investments in four entities that are accounted for using the equity method of accounting due to our ability to exercise significant influence over them. Our investment balances as reported on our consolidated balance sheets are as follows (in thousands):


Investment	Ownership		June 30, 2014		December 31, 2013
Casa Linda		50%	$	2,950	$	3,104
Cambridge & Holcombe		50%		1,112		894
Shadow Creek Ranch		10%		3,869		3,996
Woodlake Square		6%		309		217
Total			$	8,240	$	8,211

Casa Linda - We own a 50% interest in AmREIT Casa Linda, LP, which owns a 325,000 square foot retail shopping center located in Dallas, Texas.. The remaining 50% is owned by MIG III, an affiliate of our General Partner. During 2012, we and MIG III initiated a lease-up strategy at Casa Linda. We expect to fund a total of approximately $1.5 million in capital expenditures representing our 50% share of a lease-up strategy at this property. The lease-up strategy includes certain tenant build-out and site improvements. As of June 30, 2014, the joint venture has incurred approximately $1.4 million of the planned capital expenditures. The property is secured by a $38.0 million mortgage loan that was refinanced on December 27, 2013, with a four-year, non-recourse mortgage on the property that includes additional funding of approximately $4.5 million for the potential acquisition of an adjacent property. The mortgage matures in December 2017.

The mortgage bears interest at a variable rate, but includes an interest rate cap of 3% per annum. The interest rate cap was not designated as a hedge for financial reporting purposes, and our portion of the change in fair value is recognized in income (loss) from non-consolidated entities. For the six months ended June 30, 2014 and 2013, our portion of the decrease in fair value totaled $47,000 and $0, respectively, and is included in income (loss) from non-consolidated entities on our Consolidated Statements of Operations.

Cambridge & Holcombe - We own a 50% interest in Cambridge & Holcombe, LP, which owns 2.02 acres of raw land adjacent to the Texas Medical Center in Houston, Texas. The remaining 50% is owned by an unaffiliated third party. In June 2011, the $8.1 million loan matured unpaid. On April 26, 2012, we successfully extended this debt until March 27, 2013 in exchange for a 10% principal reduction on the note and payment of accrued interest. Our 50% portion of this payment was $536,000, which was funded through a loan from AmREIT. We closed on a second extension of the loan on May 17, 2013. The extended loan matures in March 2015. In connection with this extension, we and our joint venture partner entered into a joint and several guaranty of up to 60% of the loan balance. We have reached an agreement with a third party to contribute the land into a multi-family development joint venture that would fully repay the debt outstanding and is estimated to yield a return that would allow us to recoup our investment in the site plus a nominal return. The due diligence period has expired and we expect to close on this transaction during the third quarter of 2014. However, we can provide no assurances that this transaction will close on the terms and timeline described herein or at all.

Shadow Creek Ranch - We own a 10% interest in Shadow Creek Holding Company LLC, which owns Shadow Creek Ranch, a multi-tenant retail property located in Pearland, Texas with a combined GLA of approximately 613,000 square feet. The remaining 90% is owned by an unaffiliated third party (80%) and AmREIT (10%). The property is secured by a loan in the amount of $65.0 million at an annual interest rate of 5.48% until its maturity in March 2015.

Woodlake Square – We previously owned a 6% interest in the Woodlake Square property through a joint venture arrangement with affiliates of our General Partner, MIG III (3% ownership interest), ARIC (1% ownership interest) and an unaffiliated third party institutional partner (the remaining 90% ownership interest). On September 18, 2013, VIF II/AmREIT Woodlake L.P. sold Woodlake Square to AmREIT for $41.6 million based on arms-length negotiations between AmREIT and our third party institutional partner that owned a 90% interest in the property. Our remaining interest at June 30, 2014 and December 31, 2013 represents undistributed sales proceeds as the joint venture winds up its operations.

Combined condensed financial information for the underlying investee entities (at 100%) is summarized for the three and six months ended June 30, 2014 and 2013, as follows (in thousands):


	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Revenue	$	4,016		$	5,017		$	7,912		$	9,706
Depreciation and amortization		(1,481	)		(1,710	)		(2,991	)		(3,427	)
Interese expense		(1,341	)		(1,639	)		(2,650	)		(3,273	)
Net income (loss)		(312	)		(253	)		(669	)		(762	)

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

+ References+ Details

AmREIT Monthly Income & Growth Fund IV LP 10-Q