INVESTMENTS IN AFFILIATES

At December 31, 2013 and 2012, investments consisted principally of equity in limited liability companies. The Company has the ability to exercise significant influence over the operating and financial policies of these investments and, accordingly, accounts for its investments using the equity method of accounting. The amount of the Company’s investment at December 31, 2013 that represents undistributed earnings of investments in affiliates was approximately $0.8 million. Dividends and distributions from unconsolidated affiliates totaled $6.6 million in 2013, $2.9 million in 2012 and $0.8 million for 2011. The Company’s investments in affiliates totaled $341.4 million and $319.9 million as of December 31, 2013 and 2012, respectively.

Operating results include the Company’s proportionate share of net income from its equity method investments. A summary of financial information for the Company’s equity method investments at December 31 is as follows (in millions):



	2013		2012
Current assets	$	43.5	$	23.7
Noncurrent assets	673.2		600.9
Total assets	$	716.7	$	624.6

Current liabilities	$	44.2	$	9.3
Noncurrent liabilities	107.9		120.2
Total liabilities	$	152.1	$	129.5



	Year Ended December 31,
	2013		2012			2011
Operating revenue	$	37.8	$	29.8		$	20.1
Operating costs and expenses	31.1		32.5			32.5
Operating (loss) income	$	6.7	$	(2.7	)	$	(12.4	)
Income (loss) from continuing operations	$	6.8	$	(11.5	)	$	(15.1	)
Net income (loss)	$	6.8	$	(11.5	)	$	(15.1	)

In April 2002, the Company entered into a joint venture with DMB Communities II, an affiliate of DMB Associates, Inc., an Arizona-based developer of master-planned communities (“DMB”), for the development of Kukui’ula, a master planned resort residential community located in Poipu, Kauai, planned for approximately 1,000 - 1,500 high-end residential units. The capital contributed by A&B to the joint venture, including the value of land initially contributed, net of joint venture earnings and losses, was $259.2 million as of December 31, 2013. Due to the joint venture’s obligation to complete improvements and amenities, the joint venture uses the percentage-of-completion method for revenue recognition. The Company does not have a controlling financial interest in the joint venture, but exercises significant influence over the operating and financial policies of the venture, and therefore, accounts for its investment using the equity method. Due to the complex nature of cash distributions to the members, net income of the joint venture is allocated to the members, including the Company, using the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, joint venture income or loss is allocated to the members based on the period change in each member’s claim on the net assets of the venture, excluding capital contributions and distributions made during the period.

The Company also had investments in various other joint ventures that operate or develop real estate. The Company does not have a controlling financial interest, but has the ability to exercise significant influence over the operating and financial policies of these joint ventures and, accordingly, accounts for its investments in these real estate ventures using the equity method of accounting.

On September 24, 2013, KDC LLC ("KDC"), a wholly owned subsidiary of the Company and member of Kukui'ula Village LLC ("Village"), entered into an Amended and Restated Limited Liability Company Agreement of Kukui'ula Village ("Agreement") with DMB Kukui'ula Village LLC ("DMB"), a Delaware limited liability company, as a member, and KKV Management LLC, a Hawaii limited liability company, as the manager and a member. Village owns and operates The Shops at Kukui'ula, a commercial retail center on the South shore of Kauai. At December 31, 2013, the assets and liabilities of Village were $43.3 million and $45.6 million, respectively.

Under the Agreement KDC assumed control of Village, and accordingly, consolidated Village's assets and liabilities at fair value, which included secured loans, which totaled approximately $44.0 million at December 31, 2013. Prior to the consolidation of the assets and liabilities of Village on September 24, 2013, the carrying value of the Company's investment in Village was approximately $6.3 million. Based on the other member's forfeiture of their interest in the joint venture for no consideration, there was an indication that the fair value of the Company's investment in Village was below its carrying value. Consequently, the Company wrote down its investment in Village in connection with the consolidation of Village in 2013.

During the second quarter of 2012, as a result of a change in its development strategy in connection with the Separation, A&B recorded non-cash impairments and equity losses totaling $9.8 million related to two of its three real estate development projects on the Mainland, of which $5.1 million relates to the Company’s Santa Barbara (CA) landholdings and $4.7 million relates to the Company’s joint venture investment in Bakersfield (CA) for a commercial development. The impairment write-downs to estimated fair values reflect the Company’s change to its development strategy to focus on development projects in Hawaii, and therefore, its related decision not to proceed with the development of these California real estate assets in the near term. In 2011, the Company recorded a $6.4 million reduction in the carrying value of its investment in Waiawa, a residential joint venture on Oahu, due to the joint venture’s termination of its development plans.

The fair values of the development projects that were written down were calculated based on valuation approaches that included the market approach, which utilized market comparables, as well as an expected cash flow approach in which cash flows under various scenarios are probability weighted and discounted to the present using an appropriate rate that corresponds to the timing of the cash flow.

The Company’s assets measured at fair value on a nonrecurring basis were as follows (in millions):



	Total Fair Value Measurement as of Year End		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un-observable Inputs (Level 3)		Total Loss for the Year
Year Ended December 31, 2013
The Shops at Kukui'ula Investment	$	—	$	—	$	—	$	6.3	$	6.3

Year Ended December 31, 2012:
Santa Barbara landholdings	$	5.9	$	—	$	—	$	5.9	$	5.1
Bakersfield (CA) joint venture*	7.0		—		—		7.0		4.7
Total	$	12.9	$	—	$	—	$	12.9	$	9.8

Year Ended December 31, 2011:
Waiawa joint venture	$	1.6	$	—	$	—	$	1.6	$	6.4


*	The Total Loss for the Year includes equity in losses of $3.9 million related to the write down of landholdings owned by the joint venture.