Real Estate Investments

9 Months Ended

Sep. 30, 2016

Real Estate [Abstract]

Real Estate Disclosure [Text Block]

(3)  Real Estate Investments –

On March 17, 2015, the Company purchased a Zales store in Enid, Oklahoma for $1,600,000.  The Company allocated $256,370 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles of $183,764 and above-market lease intangibles of $72,606.  The Company incurred $48,817 of acquisition expenses related to the purchase that were expensed.  The property is leased to Zale Delaware, Inc. under a Lease Agreement with a remaining primary term of 9.6 years (as of the date of purchase) and annual rent of $105,600.

On February 3, 2016, the Company purchased a Dollar Tree store in West Point, Mississippi for $1,535,714.  The Company allocated $232,977 of the purchase price to Acquired Intangible Lease Assets, representing in-place lease intangibles, and allocated $283,495 to Acquired Below-Market Lease Intangibles.  The Company incurred $55,479 of acquisition expenses related to the purchase that were expensed.  The property is leased to Dollar Tree Stores, Inc. under a Lease Agreement with a remaining primary term of 9.7 years and annual rent of $107,500.

For the nine months ended September 30, 2016 and 2015, the value of in-place lease intangibles amortized to expense was $38,457 and $19,482, the decrease to rental income for above-market leases was $5,682 and $3,788, and the increase to rental income for below-market leases was $17,256 and $0, respectively.  For lease intangibles not held for sale as of September 30, 2016, the weighted average remaining life is 110 months for in-place lease intangibles, 97 months for above-market leases and 108 months for below-market leases.  The estimated amortization expense is $56,680, the estimated decrease to rental income for above-market leases is $7,576 and the estimated increase to rental income for below-market leases is $29,584 for each of the next five succeeding years.

In November 2015, the Company entered into an agreement to sell its 40% interest in the Sports Authority store in Wichita, Kansas to an unrelated third party. In May 2016, the agreement was terminated by the buyer.  If the sale was completed, the Company expected to receive net sale proceeds of approximately $1,190,000.  Based on its long-lived asset valuation analysis, the Company determined the Sports Authority store was impaired.  As a result, in the fourth quarter of 2015, a charge to operations for real estate impairment of $445,828 was recognized, which was the difference between the carrying value at December 31, 2015 of $1,635,828 and the estimated fair value of $1,190,000.  The charge was recorded against the cost of the land and building.

On March 2, 2016, the tenant of the Sports Authority store, TSA Stores, Inc., and its parent company, The Sports Authority, Inc., the guarantor of the lease, filed for Chapter 11 bankruptcy reorganization.  In June 2016, the tenant filed a motion with the bankruptcy court to reject the lease for this store effective June 30, 2016, at which time the tenant returned possession of the property to the owners.  As of September 30, 2016, the tenant owed $19,366 of past due rent, which was not accrued for financial reporting purposes.  The owners have listed the property for lease with a real estate broker in the Wichita area.  While the property is vacant, the Company is responsible for its 40% share of real estate taxes and other costs associated with maintaining the property.  The annual rent from this property represented approximately 19% of the total annual rent of the Fund’s property portfolio.  The loss of rent and increased expenses related to this property will decrease the Fund’s cash flow.  Consequently, beginning with the third quarter of 2016, the Fund reduced its regular quarterly cash distribution rate from $0.1313 per Unit to $0.0946 per Unit.