Real Estate Transactions

12 Months Ended

Dec. 31, 2011

Real Estate Transactions [Abstract]

Real Estate Transactions

Note 4 - Real Estate Held for Sale

On September 30, 2011, AITP sold the 287-acre property located in Dickinson, Texas, to Texas Community Bank, N.A. ("TXCB") as part of a settlement of lawsuit claims that American had against TXCB, for consideration of $3,701,824 in the form of a secured note receivable of $3,599,766 and interest receivable of $102,058.  American and TXCB have signed a sales proceeds sharing agreement for the 287-acre property.  In accordance with the sales proceeds sharing arrangement, if the 287-acre property is sold by TXCB at a minimum price of $5,000,000 to an unrelated third party on or before December 31, 2013, American will receive the difference between the first $5,000,000 in sales proceeds and $3,100,000 or $1,900,000.  In the event that the sales price of the 287-acre property exceeds $5,000,000 such amount over the $5,000,000 consideration shall be divided on a 50/50 basis between American and TXCB, in addition to the $1,900,000.  The settlement has resulted in a net gain of $3,476,824, which does not include the value of the sale proceeds sharing agreement. In November 2011, American foreclosed on the note receivable and obtained ownership of 17 condominium units at the waterfront Dawn Condominium complex located in Galveston, Texas.  In connection with the foreclosure, American re-evaluated the net realizable value of the condominium units and adjusted the gain by $1,613,333 for a net gain of $1,863,491 during 2011.  During November and December 2011, $213,682 was received from the sale of 2 of the units.  The remaining 15 units are listed for sale with a broker.  No assurance can be given on the likelihood of completing the sales.

On January 13, 2011, American entered into a letter of intent with Kemah Development Texas L.P. ("KDT") which is owned by an entity which is controlled by the brother of Daniel Dror (Daniel Dror disclaims any ownership in or control over KDT), pursuant to which KDT agreed to sell 65 acres of land located in Galveston County, Texas to American in consideration for restricted shares of common stock. Subsequently, the agreement was amended to provide for the purchase price to be paid by the issuance of 1,460,000 restricted shares of common stock with a fair market value of $919,800. These shares were issued on June 10, 2011. American has received an appraisal of the property from an independent third-party appraiser which concluded that the property had an estimated fair market value of approximately $1,900,000. The purchase of the property closed on July 9, 2011, and American recorded the land at $520,382, the original cost to KDT of this property, and recorded share-based compensation of $399,418 in July 2011. American's present intention is that the property will be held for sale by its wholly-owned real estate subsidiary, American International Texas Properties, Inc.

During the fourth quarter of 2009, American foreclosed on real property which was security for a note receivable owed to American, which was in default.  At December 31, 2009, American was carrying this property on the balance sheet for $4,611,233, which represented $3,332,543 in principal and accrued interest allocated to the property received at the time of default and the assumption of a $1,278,690 note payable secured by the property by another lien holder.  This property consisted of seven tracts, of which several are under contract for sale and the remainder are listed for sale with a broker. The appraised values of these properties exceeded the $4,611,233 owed to American. Values were allocated to the tracts of property based on their individual appraised values relative to the total appraised value. During the year ended December 31, 2010, American sold an 8-acre tract recorded at $175,480 for $340,445, which was used to reduce the note payable balance to $938,245.  American recognized in the consolidated statements of operations a $164,965 gain on sale of assets for this transaction.  On November 22, 2010, a 17-acre tract was transferred to NPI at the allocated cost of $1,155,359 and is included in Property and Equipment.  NPI obtained a $1,450,000 long-term loan from the bank using this property as collateral.  The proceeds from this loan were used to pay the remaining $938,245 note payable balance and NPI's warehouse property loan balance of $440,381.  NPI plans to build a new and larger facility on this site to accommodate business expansion.

During the fourth quarter of 2008, American received a 1.705-acre tract of land in Galveston County valued at $540,000 as a guarantor's extension fee.  The market value of this property was appraised at $460,000 in February 2012, and American recorded an impairment of $80,000 for the year ended December 31, 2011.  This property is listed for sale with a broker. 

During 2007, American purchased for investment a 174-acre tract of land in Waller County, Texas for $1,684,066. This property is listed for sale with a real estate broker.  This property is not going to be developed by nor is it being held as inventory by American.

American reviewed the accounting standards Real Estate - General (ASC 970-10) and Property, Plant, and Equipment (ASC 360-10) to determine the appropriate classification for these properties.  According to ASC 970-10, real estate that is held for sale in the ordinary course of business is classified as inventory, which is a current asset.  ASC 360-10 provides the following criteria for property to be classified as held for sale:

• Management with the appropriate authority commits to a plan to sell the asset;
• The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;
• An active program to locate a buyer and other actions required to complete the plan of sale have been initiated;
• The sale of the property or asset within one year is probable and will qualify for accounting purposes as a sale;
• The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and
• Actions required to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Management consulted with the real estate brokers for these properties and reviewed the recent interest for each property.  Based on our consultations and review, we believe that the sale of these properties within one year is probable.  We concluded that all of these criteria have been met for these properties and that they are appropriately classified as held for sale in current assets.