Investments In Equity Method Investee Held For Sale

12 Months Ended

Dec. 31, 2014

Equity Method Investments and Joint Ventures [Abstract]

Investments In Equity Method Investee Held For Sale

NOTE E – INVESTMENTS IN EQUITY METHOD INVESTEE HELD FOR SALE

During May 2012, we, VRM I and VRM II foreclosed on a loan with a balance of approximately $6.0 million, of which our portion was approximately $1.5 million. The property held by VREO XXV includes 23 cottage units in a retirement community located in Eugene, Oregon. The property includes operations, which will be reported as an asset held for sale from the date of this foreclosure.

We account for investments using the equity method of accounting if the investments give us the ability to exercise significant influence, but not control, over the investees. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of an incorporated investee of between 20% and 50%, although other factors, such as representation on an investee’s board of managers, specific voting and veto rights held by each investor and the effects of commercial arrangements, are considered in determining whether equity method accounting is appropriate. We record our respective interests in the losses or income of such investees within the equity-method investees held for sale category on our statements of operations for each period. The carrying amount of our equity-method investments held for sale is recorded on our balance sheets as investments in equity-method investees held for sale.

We evaluate our investments in the equity-method investees for impairment each quarter by comparing the carrying amount of each investment to its fair value. Because no active market exists for the investees’ limited liability company membership interests, we evaluate our investments in the equity-method investees for impairment based on our evaluation of the fair value of the equity-method investees’ net assets relative to their carrying values. If we were to determine that the carrying values of our investments in equity-method investees were greater than their fair values, we would write the investments down to their fair values.

Our acquisition of VREO XXV was accounted for in accordance with this standard and the Company has allocated the purchase price of VREO XXV based upon the estimated fair value of the net assets acquired and liabilities assumed and the fair value of the non-controlling interest measured at the acquisition date. The estimated fair value of VREO XXV at the time of the acquisition totaled $4.1 million.

We performed an allocation as of the foreclosure date as follows:

Cash	$	308,000
Property and equipment		3,841,000
Current assets		14,000
Accounts payable and accrued liabilities		(23,000)

Net assets	$	4,140,000

In addition, we estimated the fair value of the asset at $1.0 million, which is 25% of the total asset.

On August 29, 2014, VRM I purchased the remaining 26% interest owned by us and VRM II for approximately $1.3 million, of which our portion was approximately $1.3 million. This resulted in a gain of approximately $314,000, of which our portion was approximately $300,000.

The following is a summary of the results of operations related to the investment in equity method investee held for sale for the eight months ended August 31, 2014:

		For The Eight Months Ended August 31, 2014

Revenue	$	475,000
Expenses		(320,000	)
Net Income		155,000
% of ownership		25%
Equity method income	$	39,000

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

+ References+ Details

VESTIN FUND III LLC 10-K