INVESTMENTS IN ADVISED FUNDS

6 Months Ended

Jun. 30, 2014

Equity Method Investments and Joint Ventures [Abstract]

Investments In Advised Funds

5. INVESTMENTS IN ADVISED FUNDS

          As of June 30, 2014, our Advised Funds included one institutional joint venture with Goldman Sachs, one institutional joint venture with J.P. Morgan Investment Management, one joint venture with two of our high net worth investment funds, MIG III and MIG IV, and four high net worth investment funds. Our Advised Funds are accounted for under the equity method as we exercise significant influence over, but do not control, the investee. We record our pro rata share of income or loss from the underlying entities based on our ownership interest.

          The table below details our investments in our Advised Funds as of June 30, 2014, and December 31, 2013 (in thousands).

Investment	Ownership			June 30, 2014		December 31, 2013
Joint Ventures:
AmREIT MacArthur Park, LLC		30.0	%	$	8,532	$	8,519
AmREIT SPF Shadow Creek, L.P.		10.0	%		5,454		5,567
AmREIT Westheimer Gessner, L.P.		10.0	%		848		877
High net worth investment funds:
MIG		2.4	%		130		167
MIG II		2.6	%		164		204
MIG III		2.1	%		245		179
MIG IV		2.6	%		161		176
Total				$	15,534	$	15,689

Joint Ventures

         AmREIT MacArthur Park LLC – On March 26, 2013, we entered into the MacArthur Park Joint Venture with Goldman Sachs. We contributed our MacArthur Park property for a 30% interest in the joint venture, and Goldman Sachs contributed cash for a 70% interest in the joint venture. The MacArthur Park Joint Venture concurrently purchased the contiguous property to the north (“MacArthur Park Phase I”), excluding a Target store, for approximately $25.5 million and placed mortgage financing on the combined property of $43.9 million. The MacArthur Park Joint Venture fully defeased our existing mortgage loan secured by the MacArthur Park property of approximately $8.7 million (including a $2.1 million defeasance penalty). Upon closing the transaction, we received from the joint venture a cash distribution of approximately $35.2 million, which funds were used to repay borrowings under our $75 Million Facility. We recorded a gain of approximately $7.7 million representing the cash proceeds received in excess of 70% of the carrying value of the MacArthur Park net assets contributed by us.

          Our 30% ownership grants us the ability to exercise significant influence over the operation and management of the joint venture, and we account for our ownership under the equity method since the date of the formation of the joint venture. The MacArthur Park Joint Venture incurred acquisition costs of $547,000, of which $164,000 represents our 30% portion. Our portion of these costs has been included in loss from Advised Funds on our consolidated statements of operations for the six months ended June 30, 2013. We have recorded our 30% retained interest in the MacArthur Park Joint Venture at its historical carrying value. Such retained interest as of June 30, 2014, differs from our proportionate share of the joint venture’s net assets by $2.5 million. This basis difference represents the difference between the historical carrying value and the fair value of the MacArthur Park net assets that we retained. We amortize this basis difference over 10 years, which is the expected holding period of the joint venture, and include the amortization in income (loss) from Advised Funds on our consolidated statements of operations. We continue to manage and lease the property on behalf of the MacArthur Park Joint Venture and we retain a right of first offer to acquire the project in the future, after expiration of a two-year lock-out period.

          Our significant continuing involvement in MacArthur Park through our 30% ownership in the MacArthur Park Joint Venture precludes us from treating our contribution of the property to the joint venture as discontinued operations. Accordingly, MacArthur Park’s historical operating results prior to the formation of the joint venture will continue to be reported as a component of our income from continuing operations

          AmREIT SPF Shadow Creek, L.P. – In 2009, we acquired a 10% investment in AmREIT SPF Shadow Creek, L.P., which was formed to acquire, lease and manage Shadow Creek Ranch, a shopping center located in Pearland, Texas. The investment was recorded at $5.8 million on the date of the acquisition, net of acquisition costs of $441,000, which were recorded as an other-than-temporary impairment. MIG IV and a third-party institutional joint venture partner own the remaining 10% and 80% ownership interests, respectively.

          AmREIT Westheimer Gessner, L.P. – In 2007, we invested $3.8 million in AmREIT Westheimer Gessner, LP, for a 30% limited partner interest in the partnership. AmREIT Westheimer Gessner, L.P. was formed in 2007 to acquire, lease and manage the Woodlake Pointe Shopping Center, a shopping center located on the west side of Houston, Texas. In June 2008, we sold two-thirds of our interest (a 20% limited partner interest) in the Woodlake Pointe Shopping Center to MIG IV. Pursuant to the purchase agreement, our interest in the property was sold at its carrying value, resulting in no gain or loss to us. We, MIG III and MIG IV now hold a 10%, 30% and 60% interest in the Woodlake Pointe Shopping Center, respectively. On September 30, 2013, AmREIT Westheimer Gessner, L.P sold a building and a parcel of land at the Woodlake Pointe Shopping Center. AmREIT Westheimer Gessner, L.P recorded an impairment on sale of approximately $576,000 in the third quarter of 2013 related to accrued rent, our portion of which was $58,000.

High Net Worth Investment Funds

          Our four high net worth investment funds are limited partnerships for whom we (or a wholly-owned subsidiary) act as a general partner, subject to the right of the unrelated limited partners, with or without cause, to remove and replace the general partner by a vote of the unrelated limited partners owning a majority of the outstanding units. These high net worth investment funds were formed to develop, own, manage and add value to properties with an average holding period of two to four years. Our interests in these limited partnerships range from 2.1% to 2.6%. As sponsor, we maintain a 1% general partner interest in each of the Advised Funds. The funds are typically structured such that the limited partners receive 99% of the available cash flow until 100% of their original invested capital has been returned and a preferred return has been paid. Once the preferred return has been paid, the general partner begins sharing in the available cash flow at various promoted levels. Based on currently available information, we do not expect our high net worth investment funds to achieve their respective preferred returns prior to their dissolution and wind-up of operations. Our high net worth investment funds are designed to have a finite life with a specified liquidation commencement date, which may be extended depending upon approval from the majority of the limited partners. We, as general partner, have begun to actively market all operating properties, complete all development and redevelopment projects and wind up operations in an orderly fashion, which may take months or years to complete.