REAL ESTATE ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2013

REAL ESTATE ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

REAL ESTATE ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

3. REAL ESTATE ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

FASB ASC Topic 360-10, Property, Plant and Equipment - Overall requires a long-lived asset to be classified as “held for sale” in the period in which certain criteria are met.  Roberts Realty classifies real estate assets as held for sale after the following conditions have been satisfied; (1) receipt of approval from its board of directors to sell the asset, (2) the initiation of an active program to sell the asset, and (3) the asset is available for immediate sale and it is probable that the sale of the asset will be completed within one year.  When assets are classified as held for sale, they are recorded at the lower of the assets’ carrying amount or at their fair value, less the estimated selling costs.

Roberts Realty periodically classifies real estate assets as held for sale, and these assets and their liabilities are stated separately on the accompanying condensed consolidated balance sheets.  The real estate assets held for sale and the liabilities related to real estate assets held for sale as of September 30, 2013 and December 31, 2012, were as follows:

	Real Estate Assets Held for Sale
	9/30/13		12/31/12
Northridge Land	$	4,373,789	$	4,373,789
Peachtree Parkway Land	—		6,225,167
North Springs Land	11,000,000		11,000,000
Northridge Office Building	3,184,558		3,200,919
Commercial Site in Johns Creek	500,000		500,000
Total Real Estate Assets Held for Sale	$	19,058,347	$	25,299,875

	Liabilities Related toReal Estate Assets Held for Sale
	9/30/13		12/31/12
Northridge Land	$	—	$	2,000,000
Peachtree Parkway Land	—		7,000,200
North Springs Land	5,500,000		—
Northridge Office Building	2,432,943		2,538,334
Total Loans for Real Estate Assets Held for Sale	$	7,932,943	$	11,538,534
Other Liabilities	174,063		65,909
Total Liabilities Related to Real Estate Assets
Held for Sale	$	8,107,006	$	11,604,443

On February 7, 2013, Roberts Realty sold its 20.6-acre Peachtree Parkway land for $7,590,000 ($7,090,000 net of a $500,000 payment required to release a restrictive covenant on the property).  See Note 7 — Related Party Transactions.  Roberts Realty used $7,000,200 of the sale proceeds to repay the Peachtree Parkway loan.  Roberts Realty recorded a $1,214,192 gain on this sale.

On March 20, 2013, Roberts Realty sold the remaining 1.5 acres of the Peachtree Parkway land for $450,000.  Roberts Realty recorded a $39,741 gain on this sale.

Roberts Realty reports the results of operations and the gains or losses from operating properties that are sold in accordance with FASB ASC Topic 360-10, Property, Plant and Equipment — Overall.  Gains and losses, the results of operations, interest expense and all expenses related to the retirement of debt from operating properties that are sold are included in discontinued operations in the period incurred and are shown separately in the condensed consolidated statements of operations as income or loss from discontinued operations.

As Roberts Realty has previously stated in its annual and quarterly reports, its objective is to exit the office and retail business to focus exclusively on developing, constructing, and managing multifamily apartment communities.  Given that objective, on January 31, 2013, Roberts Realty listed the Northridge Office Building for sale and classified it as a real estate asset held for sale.  On August 6, 2013, Roberts Realty completed the transfer of the Spectrum retail center to the lender, in satisfaction of the $4,691,528 in debt secured by the property.  Roberts Realty recorded a $298,543 loss on the extinguishment of debt related to this transaction.  Accordingly, the operations of the Northridge Office Building and Spectrum retail center have been accounted for as discontinued operations.  See Note 11 — Subsequent Events.

The following table summarizes the discontinued operations for the three and nine months ended September 30, 2013 and 2012 (unaudited):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
OPERATING REVENUES:
Rental operations	$	132,904		$	174,449		$	468,066		$	547,619
Other operating income	12,359			36,504			44,358			190,876
Total operating revenues	145,263			210,953			512,424			738,495
OPERATING EXPENSES:
Utilities	23,355			33,357			81,595			95,342
Repairs and maintenance	18,096			19,716			60,894			62,687
Real estate taxes	17,077			20,831			61,968			74,422
Marketing, insurance and other	8,003			10,508			27,427			30,815
General and administrative	1,945			25,475			28,292			29,302
Impairment loss on real estate assets	—			1,709,646			—			1,709,646
Depreciation and amortization expense	8,313			96,873			74,844			289,545
Total operating expenses	76,789			1,916,406			335,020			2,291,759
OTHER (EXPENSE) INCOME:
Loss on extinguishment of debt	(298,543		)	—			(298,543		)	—
Interest income	—			4			64			12
Interest expense	(75,096		)	(98,431		)	(356,924		)	(295,646		)
Amortization of deferred financing and leasing costs	(1,038		)	(8,208		)	(9,096		)	(23,708		)
Total other expense	(374,677		)	(106,635		)	(664,499		)	(319,342		)
LOSS FROM DISCONTINUED
OPERATIONS	$	(306,203	)	$	(1,812,088	)	$	(487,095	)	$	(1,872,606	)