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Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

 

 

 

 

FORM 10-Q

 

 

 

 

 

 


(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 000-53203

 

 

 

 

 

 

AmREIT MONTHLY INCOME & GROWTH FUND IV, L.P.
(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware

 

20-5685431

(State or Other Jurisdiction of Incorporation or
Organization)

 

(I.R.S. Employer Identification No.)

 

 

 

8 Greenway Plaza, Suite 1000
Houston, Texas
(Address of Principal Executive Offices)

 

77046
(Zip Code)

 

 

 

713-850-1400
(Registrant’s Telephone Number, Including Area Code)

 

Not applicable
(Former Name, Former Address and Formal Fiscal Year, if Changed Since Last Report)


 

 

 

 

 

 

          Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

 

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x     

 

(Do not check if a smaller reporting company)

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x




TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

Page

Definitions

 

ii

Part I – Financial Information

 

 

 

Item 1.

Financial Statements.

 

1

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

13

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

16

 

Item 4.

Controls and Procedures.

 

16

 

 

 

 

 

Part II – Other Information

 

 

 

Item 1.

Legal Proceedings.

 

16

 

Item 1A.

Risk Factors.

 

16

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

16

 

Item 3.

Defaults Upon Senior Securities.

 

16

 

Item 4.

Mine Safety Disclosures.

 

17

 

Item 5.

Other Information.

 

17

 

Item 6.

Exhibits.

 

17

Signatures

 

18

Exhibit Index

 

19

 

i


Table of Contents

DEFINITIONS

          As used in this Report, the following abbreviations and terms have the meanings as listed below. Additionally, the terms “we,” “our,” “MIG IV,” the “Partnership” and “us” refer collectively to AmREIT Monthly Income & Growth Fund IV, L.P. and its subsidiaries, including joint ventures, unless the context clearly indicates otherwise.

 

 

 

ABBREVIATION

 

DEFINITION

 

 

 

AmREIT

 

AmREIT, Inc., a Maryland corporation, and parent of our General Partner.

 

 

 

ARIC

 

AmREIT Realty Investment Corporation and its consolidated subsidiaries, a taxable REIT subsidiary of AmREIT.

 

 

 

CEO

 

Chief Executive Officer.

 

 

 

CFO

 

Chief Financial Officer.

 

 

 

Exchange Act

 

Securities Exchange Act of 1934, as amended.

 

 

 

GAAP

 

U.S. generally accepted accounting principles.

 

 

 

General Partner

 

AmREIT Monthly Income & Growth IV Corporation, a subsidiary of AmREIT.

 

 

 

GLA

 

Gross leasable area.

 

 

 

LIBOR

 

London interbank offered rate.

 

 

 

Limited Partners

 

Owners / holders of our Units.

 

 

 

MIG III

 

AmREIT Monthly Income & Growth Fund III, Ltd.

 

 

 

MIG IV

 

AmREIT Monthly Income & Growth Fund IV, L.P.

 

 

 

Offering

 

Both the issuance and sale of our initial 40 Units pursuant to the terms of a private placement memorandum dated November 15, 2006, and the subsequent sale of Units through March 31, 2008 (a total of 1,991 Units).

 

 

 

Partners

 

Collectively our General Partner and Limited Partners.

 

 

 

REIT

 

Real Estate Investment Trust.

 

 

 

SEC

 

Securities and Exchange Commission.

 

 

 

Securities Act

 

Securities Act of 1933, as amended.

 

 

 

Units

 

Limited partnership units sold in our Offering.

 

 

 

Quarterly Report

 

Quarterly Report on Form 10-Q filed with the SEC for the three months ended March 31, 2012.

ii


Table of Contents

PART I – FINANCIAL INFORMATION

 

 

ITEM 1.

FINANCIAL STATEMENTS.

AmREIT MONTHLY INCOME & GROWTH FUND IV, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except Unit data)

 

 

 

 

 

 

 

 

 

 

March 31,
2012

 

December 31,
2011

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Real estate investments at cost:

 

 

 

 

 

 

 

Land

 

$

12,421

 

$

12,409

 

Buildings

 

 

13,120

 

 

13,002

 

Tenant improvements

 

 

434

 

 

337

 

 

 

 

25,975

 

 

25,748

 

Less accumulated depreciation and amortization

 

 

(2,011

)

 

(1,891

)

 

 

 

23,964

 

 

23,857

 

 

 

 

 

 

 

 

 

Investment in non-consolidated entities

 

 

9,474

 

 

9,373

 

Acquired lease intangibles, net

 

 

46

 

 

50

 

Net real estate investments

 

 

33,484

 

 

33,280

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

53

 

 

422

 

Tenant and accounts receivables, net

 

 

69

 

 

210

 

Accounts receivable - related party

 

 

14

 

 

4

 

Deferred costs, net

 

 

392

 

 

308

 

Other assets

 

 

202

 

 

141

 

TOTAL ASSETS

 

$

34,214

 

$

34,365

 

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITAL

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Notes payable

 

$

6,382

 

$

6,202

 

Notes payable - related party

 

 

2,339

 

 

2,026

 

Accounts payable and other liabilities

 

 

168

 

 

522

 

Accounts payable - related party

 

 

472

 

 

285

 

Acquired below-market lease intangibles, net

 

 

8

 

 

9

 

Security deposits

 

 

43

 

 

43

 

TOTAL LIABILITIES

 

 

9,412

 

 

9,087

 

 

 

 

 

 

 

 

 

Capital:

 

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

 

 

General partner

 

 

 

 

 

Limited partners, 1,988 Units outstanding at March 31, 2012 and December 31, 2011, respectively

 

 

17,951

 

 

18,481

 

TOTAL PARTNERS’ CAPITAL

 

 

17,951

 

 

18,481

 

 

 

 

 

 

 

 

 

Non-controlling interests

 

 

6,851

 

 

6,797

 

TOTAL CAPITAL

 

 

24,802

 

 

25,278

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND CAPITAL

 

$

34,214

 

$

34,365

 

See Notes to Consolidated Financial Statements.

1


Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND IV, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per Unit data)
(unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

2012

 

2011

 

Revenues:

 

 

 

 

 

 

 

Rental income from operating leases

 

$

318

 

$

220

 

Total revenues

 

 

318

 

 

220

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

General and administrative

 

 

17

 

 

6

 

General and administrative - related party

 

 

69

 

 

61

 

Asset management fees - related party

 

 

38

 

 

108

 

Property expense

 

 

164

 

 

138

 

Property management fees - related party

 

 

11

 

 

11

 

Legal and professional

 

 

104

 

 

86

 

Depreciation and amortization

 

 

131

 

 

133

 

Total operating expenses

 

 

534

 

 

543

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(216

)

 

(323

)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest and other income

 

 

 

 

2

 

Interest expense

 

 

(117

)

 

(102

)

Equity in losses from non-consolidated entities

 

 

(238

)

 

(276

)

Margin tax income (expense)

 

 

(2

)

 

1

 

Total other income (expense)

 

 

(357

)

 

(375

)

 

 

 

 

 

 

 

 

Net loss, including non-controlling interests

 

 

(573

)

 

(698

)

 

 

 

 

 

 

 

 

Net loss attributable to non-controlling interests

 

 

43

 

 

68

 

 

 

 

 

 

 

 

 

Net loss attributable to partners

 

$

(530

)

$

(630

)

 

 

 

 

 

 

 

 

Weighted average Units outstanding

 

 

1,988

 

 

1,988

 

Net loss per Unit

 

$

(266.60

)

$

(316.90

)

See Notes to Consolidated Financial Statements.

2


Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND IV, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CAPITAL
For the three months ended March 31, 2012
(in thousands)
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital

 

 

 

 

 

 

 

General
Partner

 

Limited
Partners

 

Non-Controlling
Interests

 

Total

 

Balance at December 31, 2011

 

$

 

$

18,481

 

$

6,797

 

$

25,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to partners (1)

 

 

 

 

(530

)

 

(43

)

 

(573

)

Contributions from non-controlling interests

 

 

 

 

 

 

97

 

 

97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2012

 

$

 

$

17,951

 

$

6,851

 

$

24,802

 


 

 

 

 

(1)

The allocation of net loss includes a curative allocation to increase the General Partner’s capital account by $5 for the period. The cumulative curative allocation since inception of the Partnership is $256. The Partnership Agreement provides that no Partner shall be required to fund a deficit balance in their capital account.

See Notes to Consolidated Financial Statements.

3


Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND IV, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

2012

 

2011

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss, including non-controlling interests

 

$

(573

)

$

(698

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Bad debt expense

 

 

38

 

 

22

 

Loss from non-consolidated entities

 

 

238

 

 

276

 

Depreciation and amortization

 

 

134

 

 

131

 

Decrease in tenant and accounts receivable

 

 

103

 

 

 

(Increase) decrease in accounts receivable - related party

 

 

(10

)

 

7

 

Increase in deferred costs

 

 

 

 

(13

)

(Increase) decrease in other assets

 

 

(61

)

 

70

 

Decrease in accounts payable and other liabilities

 

 

(402

)

 

(281

)

Increase (decrease) in accounts payable - related party

 

 

211

 

 

(44

)

Net cash used in operating activities

 

 

(322

)

 

(530

)

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Improvements to real estate

 

 

(211

)

 

(84

)

Payments received on notes receivable

 

 

 

 

2

 

Investment in non-consolidated entities

 

 

(325

)

 

(282

)

Net proceeds applied to land basis

 

 

36

 

 

36

 

Net cash used in investing activities

 

 

(500

)

 

(328

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

203

 

 

 

Payments on notes payable

 

 

(23

)

 

(22

)

Proceeds from notes payable - related party

 

 

176

 

 

 

Contributions from non-controlling interests

 

 

97

 

 

137

 

Net cash provided by financing activities

 

 

453

 

 

115

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(369

)

 

(743

)

Cash and cash equivalents, beginning of period

 

 

422

 

 

1,309

 

Cash and cash equivalents, end of period

 

$

53

 

$

566

 

 

 

 

 

 

 

 

 

Supplemental schedule of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

 

$

83

 

$

84

 

 

 

 

 

 

 

 

 

Supplemental schedule of noncash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capitalization of accrued property taxes into the basis of our land at Woodlake Pointe

 

$

48

 

$

57

 

 

 

 

 

 

 

 

 

Reclassification from accounts payable - related party to notes payable - related party

 

$

137

 

$

79

 

 

 

 

 

 

 

 

 

Construction fees included in accounts payable

 

$

113

 

$

 

See Notes to Consolidated Financial Statements.

4


Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND IV, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012

(unaudited)

 

 

1.

DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

          We were formed on October 10, 2006, to acquire, develop and operate, directly or indirectly through joint venture arrangements, a portfolio of commercial real estate consisting primarily of multi-tenant shopping centers and mixed-use developments. Our General Partner is a subsidiary of AmREIT, an SEC reporting, non-traded Maryland corporation that has elected to be taxed as a REIT. As of March 31, 2012, our investments included a wholly-owned property comprising approximately 36,000 square feet of GLA, a property in which we own a controlling interest comprising approximately 82,000 square feet of GLA and four properties in which we own a non-controlling interest through joint ventures comprising approximately 1.1 million square feet of GLA.

          Our operating period will continue until November 15, 2013 (our scheduled liquidation date); however, the operating period may be extended to November 15, 2015 with the consent of holders of the majority of our Units held by our Limited Partners. During our operating period, our General Partner intends to hold our properties until such time as sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that such objectives will not be met. When deciding whether to sell properties during our operating period, our General Partner will consider factors such as potential capital appreciation, cash flow, the availability of other attractive investment opportunities and federal income tax considerations. Our General Partner currently believes that it is not likely that the real estate market will sufficiently recover prior to our scheduled liquidation commencement date of November 2013, and our General Partner is considering extending the operating period. If the determination that extending the operating period is in the best interest of the Partners, our General Partner will seek to obtain majority consent from the Limited Partners; however, there can be no assurance that we will be successful in obtaining majority consent.

          At the end of our operating period, our General Partner will in good faith actively market for sale all of our properties other than those in the development or redevelopment stage and commence an orderly Partnership liquidation. Properties in the development or redevelopment stage at the end of the operating period will be marketed for sale upon completion. Once our General Partner has marketed for sale all of our properties, it may take months or years for our General Partner to sell all of our properties and wind up our operations.

          Our results of operations may be sensitive to changes in overall economic conditions that impact tenant leasing practices. Adverse economic conditions affecting tenant income, such as employment levels, business conditions, interest rates, tax rates, fuel and energy costs and other matters, could reduce overall tenant leasing or cause tenants to shift their leasing practices. In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, could result in a general decline in rents or an increased incidence of defaults under existing leases. The U.S. economy is still experiencing weakness from the past economic recession, which resulted in increased unemployment, weakening of tenant financial condition, large-scale business failures and tight credit markets. High levels of unemployment have persisted, and rental rates and valuations for retail space have not fully recovered to pre-recession levels and may not for a number of years. Furthermore, the uncertainty surrounding the rapidly increasing national debt of the U.S. and continuing global economic upheaval have kept markets volatile. These unstable conditions could continue for a prolonged period of time. It is difficult to determine the breadth and duration of the financial market problems and the many ways in which they may affect our tenants and our business in general. A significant additional deterioration in the U.S. economy or the bankruptcy or insolvency of one or more of our significant tenants could cause our current plans to meet our projected cash shortfalls to be insufficient.

          We face significant liquidity challenges in implementing our investment strategy. Projected cash sources (including cash on hand) and uses for cash indicate periods of cash shortfalls during the year ended December 31, 2012. However, we believe that we will be able to generate sufficient liquidity to satisfy any cash shortfalls through (1) managing the timing of forecasted capital expenditures related to the lease-up of properties, (2) managing the timing of operating expense payments and, to the extent possible, accelerating cash collections, (3) deferral of fees paid to our General Partner and its affiliates, (4) financings of unencumbered properties, and (5) sales of certain of our investments in non-consolidated entities.

5


Table of Contents

          AmREIT has agreed to continue to provide financial support to us through and including January 1, 2013 in the form of continued deferral of payment of advisory fees earned and payable to the extent such deferral of fees is necessary for our continued operation. Such fees may include property management, asset management, development fees and reimbursement of certain of AmREIT’s general and administrative costs. Additionally, AmREIT has agreed that it will not require us to repay the $2.3 million notes payable – related party we owe to AmREIT as of March 31, 2012 until a date subsequent to January 1, 2013. AmREIT’s agreement to provide such financial support and defer payment is limited to its continued ability to do so.

          We may have liquidity demands based upon our requirement to perform under guarantees of certain of our joint ventures to the extent they are unable to fully satisfy certain guaranteed debts. The above steps may not be sufficient to restore our long term viability and we could incur individual setbacks and possible significant losses. Even with the deferral agreements with AmREIT, we still may incur cash shortfalls, we may be required to perform under certain guarantees of our joint ventures or be unable to refinance certain debt as it comes due that could result in lender repossession of one or more properties owned by us and/or our joint ventures or we may be forced to sell one or more properties at a time when it is disadvantageous to do so, potentially resulting in losses on the disposition of those properties. We continually work to maximize the returns and work for the best interests of our Limited Partners and are examining a range of alternatives, which may include:

 

 

postponement of the liquidation date in order to hold and operate the property for a period of time;

 

 

obtaining additional partner capital through sales/creation of new partnerships and joint ventures;

 

 

dispositions of certain properties, even if at a loss;

 

 

delivery of the property to the lender; or

 

 

a combination of all or certain aspects of the above.

          Based on the foregoing, it is possible that investors may not recover all of their original investment. We currently do not expect to distribute net sales proceeds or any net cash flows from operations to our Partners until we enter the liquidation phase. If the real estate market has not sufficiently recovered prior to our liquidation period commencement date of November 2013, we may seek to postpone liquidation if we feel it is in the best interests of our Limited Partners at that time.

 

 

2.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

          Our financial records are maintained on the accrual basis of accounting whereby revenues are recognized when earned and expenses are recorded when incurred. The consolidated financial statements include our accounts as well as the accounts of any wholly- or majority-owned subsidiaries in which we have a controlling financial interest. Investments in joint ventures and partnerships in which we have the ability to exercise significant influence but do not exercise financial and operating control are accounted for using the equity method (see Note 3). The significant accounting policies of our non-consolidated entities are consistent with those of our subsidiaries in which we have a controlling financial interest. As of March 31, 2012, we do not have any interests in variable interest entities. All significant inter-company accounts and transactions have been eliminated in consolidation.

          The consolidated financial statements included in this Quarterly Report have been prepared pursuant to the rules and regulations of the SEC and are unaudited. In our opinion, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted of normal recurring items. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from these statements pursuant to the SEC rules and regulations and, accordingly, these financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2011.

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Table of Contents

Use of Estimates

          The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

          We consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of demand deposits at commercial banks and money market funds.

Revenue Recognition

          Rental income from operating leases – We lease space to tenants under agreements with varying terms. Our leases are accounted for as operating leases, and, although certain leases of the properties provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases, revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, possession or control occurs on the lease commencement date. In all cases, we have determined that we are the owner of any tenant improvements that we fund pursuant to the lease terms. In cases where significant tenant improvements are made prior to lease commencement, the leased asset is considered to be the finished space, and revenue recognition therefore begins when the improvements are substantially complete. Revenue from tenant reimbursements of taxes, maintenance expenses and insurance is recognized in the period the related expense is recorded. Accrued rents are included in tenant and accounts receivable, net.

Receivables and Allowance for Uncollectible Accounts

          Tenant and Accounts Receivables, net - Included in tenant and accounts receivables are base rents, tenant reimbursements and adjustments related to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rents and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Bad debt expenses and any related recoveries related to tenant receivables are included in property expense. As of March 31, 2012 and December 31, 2011, our allowance for uncollectible accounts related to our tenant receivables was $32,000 and $140,000, respectively.

          Accounts Receivable - Related Party - Included in accounts receivable - related party are short-term cash advances provided to certain of our affiliated investment entities primarily for their working capital needs. These cash advances are due upon demand.

Development Properties

          Expenditures related to the development of real estate are capitalized as part of construction in progress, which includes carrying charges, primarily interest, real estate taxes and loan acquisition costs, and direct and indirect development costs related to buildings under construction. The capitalization of such costs ceases at the earlier of one year from the date of completion of major construction or when the property, or any completed portion, becomes available for occupancy. We capitalize costs associated with pending acquisitions of raw land once the acquisition of the property is determined to be probable. During the three months ended March 31, 2012 or 2011, we capitalized interest or taxes in the amount of $48,000 and $57,000, respectively.

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Acquired Properties and Acquired Intangibles

          We account for operating real estate acquisitions as an acquisition of a business as we believe most operating real estate meets the definition of a “business” under GAAP. Accordingly, we allocate the purchase price of acquired properties to land, building and improvements, identifiable intangible assets and to the acquired liabilities based on their respective fair values. Identifiable intangibles include amounts allocated to acquired above and below market leases, the value of in-place leases and customer relationship value, if any. We determine fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends and specific market and economic conditions that may affect the property. Factors considered by management in our analysis of determining the as-if-vacant property value include (i) an estimate of carrying costs during the expected lease-up periods, considering market conditions, and (ii) costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and estimates of lost rentals at market rates during the expected lease-up periods, tenant demand and other economic conditions. Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related expenses. Intangibles related to in-place lease value and above and below-market leases are recorded as acquired lease intangibles and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. Below market leases include fixed-rate renewal periods where we believe the renewal is reasonably assured. Premiums or discounts on debt are amortized to interest expense over the remaining term of such debt. Costs related to acquiring operating properties are expensed as incurred.

Depreciation

          Depreciation is computed using the straight-line method over an estimated useful life of up to 36 years for buildings, up to 11 years for site improvements and over the term of the lease for tenant improvements. We re-evaluate the useful lives of our buildings and improvements as warranted by changing conditions at our properties. As part of this re-evaluation, we may also consider whether such changing conditions indicate a potential impairment, and we perform an impairment analysis, as necessary, at the property level. In the case of a property redevelopment, we reassess the useful lives of specific buildings or other improvements to be demolished as part of that redevelopment once the redevelopment is probable of occurring.

Impairment

          We review our properties for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including acquired lease intangibles and accrued rental income, may not be recoverable through operations. We determine whether an impairment in value occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the residual value of the property, with the carrying value of the individual property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its fair value. Both the estimated undiscounted cash flow analysis and fair value determination are based upon various factors that require complex and subjective judgments to be made by management. Such assumptions include projecting lease-up periods, holding periods, cap rates, rental rates, operating expenses, lease terms, tenant creditworthiness, tenant improvement allowances, terminal sales value and certain macroeconomic factors among other assumptions to be made for each property. For our multi-building retail centers, we consider the entire retail center as the asset group for purposes of our impairment analysis. We review our investments in non-consolidated entities for impairment based on a similar review of the properties held by the investee entity. No impairment charges were recognized during the three months ended March 31, 2012 and 2011.

Fair Value Measurements

          GAAP emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. GAAP requires the use of observable market data, when available, in making fair value measurements. Observable inputs are inputs that the market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of ours. When market data inputs are unobservable, we utilize inputs that we believe reflect our best estimate of the assumptions market participants would use in pricing the asset or liability. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs that are classified within Level 3 of the hierarchy). The three levels of inputs used to measure fair value are as follows:

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Level 1 Inputs – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access.

 

 

 

 

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

 

 

 

 

Level 3 Inputs – Unobservable inputs for the asset or liability, which are typically based on the Partnership’s own assumptions, as there is little, if any, related market activity.

          Recurring Fair Value Measurements and Financial Instruments Our consolidated financial instruments consist of cash and cash equivalents, tenant and accounts receivable, accounts receivable – related party, notes payable, notes payable – related party, accounts payable – related party, and accounts payable and other liabilities. The carrying values of all of the financial instruments, except for our notes payable are representative of the fair values due to the short-term nature of the instruments. See Note 4 for fair value disclosures of our notes payable.

Subsequent Events

          Except as otherwise disclosed in this Quarterly Report, we did not have any material subsequent events as of the date of this filing that impacted our consolidated financial statements.

 

 

3.

INVESTMENT IN NON-CONSOLIDATED ENTITIES

          We have investments in four entities that are accounted for using the equity method of accounting due to our ability to exercise significant influence over them. Our investment balances as reported on our consolidated balance sheet are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Investment

 

 

Ownership

 

March 31,
2012

 

December 31,
2011

 

Casa Linda

 

50%

 

$

3,235

 

$

3,439

 

Cambridge & Holcombe

 

50%

 

 

201

 

 

163

 

Shadow Creek Ranch

 

10%

 

 

4,411

 

 

4,433

 

Woodlake Square

 

  6%

 

 

1,627

 

 

1,338

 

Total

 

 

 

$

9,474

 

$

9,373

 

          Casa Linda - We own a 50% interest in AmREIT Casa Linda, LP, which owns Casa Linda Plaza, a multi-tenant retail property located in Dallas, Texas with a combined GLA of approximately 325,000 square feet. The remaining 50% is owned by MIG III. The property is secured by a seven-year mortgage loan that matures in January 2014. The loan was in the amount of $38.0 million, bears an annual interest rate of 5.48% and is interest-only until maturity.

          Cambridge & Holcombe - We own a 50% interest in Cambridge & Holcombe, LP, which owns 2.02 acres of raw land that may be developed, sold or contributed to a joint venture in the future. The property is located adjacent to the Texas Medical Center in Houston, Texas. The remaining 50% is owned by an unaffiliated third party. During 2011, the joint venture defaulted on its loan in the amount of $8.1 million, which matured in June 2011. On April 26, 2012, we successfully extended this debt until March 27, 2013 in exchange for a 10% principal reduction on the note and payment of accrued interest. Our portion of this payment (50%) was $536,000, which was funded via a loan from AmREIT. Our Cambridge & Holcombe joint venture is in discussions with various developers and joint venture partners to either sell or develop the site.

          Shadow Creek Ranch - We own a 10% interest in Shadow Creek Holding Company LLC, which owns Shadow Creek Ranch, a multi-tenant retail property located in Pearland, Texas with a combined GLA of approximately 624,000 square feet. The remaining 90% is owned by an unaffiliated third party (80%) and AmREIT (10%). The property is secured by a loan in the amount of $65.0 million at an annual interest rate of 5.48% until its maturity in March 2015.

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          Woodlake Square - We own a 6% interest in AmREIT Woodlake, LP (Woodlake LP), which owns Woodlake Square, a grocery-anchored, multi-tenant retail property located at the corner of Westheimer and Gessner in Houston, Texas with a combined GLA of approximately 161,000 square feet. The remaining 94% is owned by the third-party institutional partner (90%), ARIC (1%) and by MIG III (3%), an affiliated AmREIT entity. Our interest in Woodlake Square, also carries a promoted interest in profits and cash flows once an 11.65% return is met on the project. We account for this investment using the equity method given our ability to significantly influence the property’s operations. The joint venture commenced redevelopment of this property in the third quarter of 2010 and was completed in April 2011. As of March 31, 2012, Woodlake Square has incurred approximately $6.5 million in redevelopment costs with a total expected cost of approximately $8.2 million including additional tenant improvements and leasing costs. On February 23, 2012, this entity sold a parcel of land that resulted in a gain of approximately $437,000. Our 6% share of this gain (approximately $26,000) is included in our equity losses in non-consolidated entities on our consolidated statement of operations.

          Combined condensed financial information for the underlying investee entities (at 100%) is summarized for the three months ended March 31, 2012 and 2011, as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

2012

 

2011

 

Revenue

 

$

4,768

 

$

3,765

 

Depreciation and amortization

 

 

(1,840

)

 

(1,577

)

Interest expense

 

 

(1,698

)

 

(1,725

)

Net loss

 

 

(397

)

 

(986

)


 

 

4.

NOTES PAYABLE

          Our outstanding debt as of March 31, 2012 and December 31, 2011 are as follows (in thousands).

 

 

 

 

 

 

 

 

 

Notes payable

 

 

March 31,
2012

 

December 31,
2011

 

Village on the Green

 

$

5,958

 

$

5,982

 

Woodlake Pointe

 

 

424

 

 

220

 

Total

 

$

6,382

 

$

6,202

 

          The Village on the Green note payable is a fixed rate mortgage loan that matures in April 2017 and may be prepaid, but is subject to a yield-maintenance premium or prepayment penalty. As of March 31, 2012, the weighted-average interest rate on our fixed-rate debt was 5.2%, and the weighted average remaining life of such debt was 5.0 years.

          Our Woodlake Pointe construction loan was obtained in November 2011 and allows for a total of $6.7 million in construction draws to fund the redevelopment of Woodlake Pointe. Total costs, including tenant improvements and leasing costs, are expected to approximate the $6.7 million construction loan with completion anticipated later in 2012. During the first quarter of 2012, we drew approximately $200,000 on our Woodlake Pointe construction loan to fund the redevelopment of that property.

          We serve as the guarantor of debt in the amount of $40.4 million that is the primary obligation of our non-consolidated joint ventures. In June 2011, the $8.1 million mortgage held by our Cambridge & Holcombe joint venture matured unpaid. However, Cambridge & Holcombe executed a forbearance agreement which extended the maturity of the loan and deferred a portion of the interest payments through March 27, 2012. On April 26, 2012, we successfully extended this debt until March 27, 2013 in exchange for a 10% principal reduction on the note and payment of accrued interest. Our portion of this payment (50%) was $536,000, which was funded via a loan from AmREIT.

          The remaining debt for which we serve as guarantor matures in 2014 and 2015. We have not accrued any liability with respect to these guarantees as we believe it is unlikely we would be required to perform and, therefore, the fair value of any obligation would be insignificant.

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          Notes Payable – Related Party As of March 31, 2012 and December 31, 2011, the balance of our notes payable – related party was $2.3 million and $2.0 million, respectively. During the first quarter of 2012, we borrowed an additional $176,000 primarily to fund the payment of real estate taxes and $137,000 related to the deferral of payment of fees and interest owed to our General Partner and its affiliates as part of our strategy to manage cash in the near-term. The note accrues interest monthly at LIBOR plus a spread of 3.5% with a floor of 5.0% and is secured by our investment interest in the Woodlake Pointe property.

          Fair Value of Notes Payable – We record our debt instruments based on contractual terms, net of any applicable premium or discount on our consolidated balance sheet. We did not elect to apply the alternative GAAP provisions of the fair value option for recording financial assets and financial liabilities. In determining the fair value of our debt instruments, we determine the appropriate treasury bill rate based on the remaining time to maturity for each of the debt instruments. We then add the appropriate yield spread to the treasury bill rate. The yield spread is a risk premium estimated by investors to account for credit risk involved in debt financing. The spread is typically estimated based on the property type and loan-to-value ratio of the debt instrument. The result is an estimate of the market interest rate a typical investor would expect to receive given the underlying subject asset (property type) and remaining time to maturity. We believe the fair value of our notes payable is classified in Level 2 of the fair value hierarchy. Based on these estimates, the fair value of notes payable was $6.4 million at March 31, 2012 and December 31, 2011.

 

 

5.

CONCENTRATIONS

          As of March 31, 2012 and December 31, 2011, each of our two consolidated properties individually comprised greater than 10% of our consolidated total assets. Consistent with our strategy of investing in areas that we know well, both properties are located in Texas metropolitan areas. These Texas properties represent 100% of our rental income for the three months ended March 31, 2012 and 2011.

          The following table details the base rents generated by our top tenants during the three months ended March 31, 2012 and 2011 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

Tenant

 

 

2012

 

2011

 

Paesano’s

 

$

49

 

$

49

 

Alamo Heights Pediatrics

 

 

18

 

 

18

 

Rouse Dental

 

 

14

 

 

12

 

Café Salsita

 

 

9

 

 

9

 

The Mutual Fund Store

 

 

9

 

 

9

 

Total

 

$

99

 

$

97

 


 

 

6.

PARTNERS’ CAPITAL AND NON-CONTROLLING INTEREST

          Distributions We suspended all distribution payments in July 2009 and do not anticipate reinstating distributions until improvements in the real estate and liquidity markets warrant such payment. All distributions to date have been a return of capital. During the liquidation stage of the Partnership (anticipated to commence in November 2013, unless extended), net cash flow, as defined, will be distributed among the limited partners and the General Partner in the following manner:

 

 

 

 

First - 100% to the limited partners (in proportion to their unreturned actual invested capital) until such time as the limited partners have received cumulative distributions from all sources equal to 100% of their actual invested capital (calculated using the actual purchase price per Unit);

 

 

 

 

Second - 100% to the General Partner until it has received cumulative distributions from all sources equal to 100% of its actual invested capital of $1,000;

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Third - 1% to the General Partner and 99% to the limited partners on a per Unit basis until such time as the limited partners have received cumulative distributions from all sources equal to 8.5% per annum, cumulative, uncompounded return on their unreturned deemed capital contributions (which will be equal to (i) the product of $25,000 per Unit (regardless of the purchase price paid for a Unit) multiplied by the number of Units owned by a partner, reduced by (ii) the aggregate amount of any distributions received that constitute a return of capital contributions);

 

 

 

 

Fourth – 100% to the General Partner until it has received cumulative distributions from all sources (other than with respect to the Units it purchased) in an amount equal to 40% of the net cash flow paid to date to the limited partners in excess of their actual invested capital; and

 

 

 

 

Thereafter - 60% to the limited partners on a per Unit basis and 40% to the General Partner.

          Non-controlling Interest Non-controlling interests includes a 40% ownership interest that our affiliates have in our Woodlake Pointe property that we consolidate as a result of our 60% controlling financial interest in such partnership.

 

 

7.

RELATED PARTY TRANSACTIONS

          Certain of our affiliates received fees and compensation during the organizational stage of the Partnership, including securities commissions and due diligence reimbursements, marketing reimbursements and reimbursement of organizational and offering expenses. Certain of these affiliates also receive fees for ongoing property management and administrative services. In the event that these companies are unable to provide us with the respective services, we would be required to find alternative providers of these services. The following table summarizes the amount of such compensation incurred by us during the three months ended March 31, 2012 and 2011 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

Type of service

 

 

2012

 

2011

 

Asset management fees

 

$

38

 

$

108

 

Property management fees

 

 

11

 

 

11

 

Leasing costs

 

 

95

 

 

12

 

Development costs

 

 

86

 

 

 

Administrative costs reimbursements

 

 

69

 

 

61

 

 

 

$

299

 

$

192

 

          In addition to the above fees incurred by us, the non-consolidated entities in which we have investments paid $485,000 and $177,000 in property management and leasing fees to one of our affiliated entities for the three months ended March 31, 2012 and 2011, respectively. See also Note 3 regarding investments in non-consolidated entities.

 

 

8.

COMMITMENTS AND CONTINGENCIES

          Litigation - In the ordinary course of business, we may become subject to litigation or claims. There are no material pending legal proceedings known to be contemplated against us.

          Environmental matters - In connection with the ownership and operation of real estate, we may be potentially liable for costs and damages related to environmental matters. We have not been notified by any governmental authority of any non-compliance, liability or other claim.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

          The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

          Certain information presented in this Quarterly Report constitutes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include the following: changes in general economic conditions, changes in real estate market conditions, continued availability of proceeds from our debt or equity capital, our ability to locate suitable tenants for our properties, the ability of tenants to make payments under their respective leases, timing of acquisitions, development starts and sales of properties, the ability to meet development schedules and other risks, uncertainties and assumptions. Any forward-looking statement speaks only as of the date on which it was made, and the Partnership undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operation results over time.

OVERVIEW

          We are a Delaware limited partnership formed to acquire, develop and operate, directly or indirectly through joint venture arrangements, a portfolio of commercial real estate consisting primarily of multi-tenant shopping centers and mixed-use properties. Our Units are not currently listed on a securities exchange, and there currently is no established public trading market for our Units. We do not intend to list our Units at this time and have no plans to list our Units on a securities exchange in the future.

          Our general partner is a Delaware corporation and a wholly-owned subsidiary of AmREIT, an SEC reporting, non-traded Maryland corporation that has elected to be taxed as a REIT. Our General Partner has the exclusive right to manage our business and affairs on a day-to-day basis pursuant to our limited partnership agreement. The Limited Partners have the right to remove and replace our General Partner, with or without cause, by a vote of the Limited Partners owning a majority of the outstanding Units (excluding any Units held by our General Partner). Our General Partner is responsible for all of our investment decisions, including decisions relating to the properties to be developed, the method and timing of financing or refinancing the properties, the selection of tenants, the terms of the leases, the method and timing of the sale of our properties and the reinvestment of net sales proceeds. Our General Partner utilizes the services of AmREIT and its affiliates in performing its duties under our limited partnership agreement.

          Rental income accounted for 100% of our total revenue during the three months ended March 31, 2012 and 2011, primarily from net leasing arrangements where most of the operating expenses of the properties are absorbed by our tenants. As a result, our operating results and cash flows are primarily influenced by rental income from our properties and interest expense on our property indebtedness. As of March 31, 2012, our properties had an average occupancy of 87%, and the average debt leverage ratio of the properties in which we have an investment was approximately 58%, with 87% of such debt carrying a fixed rate of interest.

RESULTS OF OPERATIONS

          Below is a discussion of our results of operations for the three months ended March 31, 2012, as compared to the same period in 2011.

Comparison of the Three Months Ended March 31, 2012 to the Three Months Ended March 31, 2011

          Revenue. Revenue increased approximately $98,000 during the three months ended March 31, 2012 as compared to the same period in 2011 ($318,000 in 2012 versus $220,000 in 2011). The increase is primarily due to a favorable reconciliation and resolution of prior year common area maintenance recoveries received during the first quarter of 2012.

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          Asset Management Fees – Related Party. Asset management fees – related party decreased approximately $70,000 during the three months ended March 31, 2012 as compared to the same period in 2011 ($38,000 in 2012 versus $108,000 in 2011). Our asset management fees are calculated based upon the net value of our assets, which has decreased between the 2011 and the 2012 periods.

          Property Expense. Property expense increased approximately $26,000 during the three months ended March 31, 2012 as compared to the same period in 2011 ($164,000 in 2012 versus $138,000 in 2011). The increase is primarily due to property tax consulting fees related to property tax appraisal protests.

          Interest Expense. Interest expense increased approximately $15,000 during the three months ended March 31, 2012 as compared to the same period in 2011 ($117,000 of interest expense in 2012 versus $102,000 in 2011). This increase in interest is primarily related to an increase in our notes payable - related party.

          Equity in Losses From Non-Consolidated Entities. Loss from non-consolidated entities decreased approximately $38,000 during the three months ended March 31, 2012 as compared to the same period in 2011 ($238,000 in 2012 versus $276,000 in 2011). These amounts represent our ownership portion of our joint ventures’ net income or loss for the period. The decrease in loss is attributable to an increase in occupancy at our Shadow Creek Ranch property along with the sale of a parcel of land at our Woodlake Square property that occurred during the first quarter 2012, which resulted in a gain on sale of approximately $437,000 (our portion of which was $26,000).

LIQUIDITY AND CAPITAL RESOURCES

          As of March 31, 2012 and December 31, 2011, our cash and cash equivalents totaled approximately $53,000 and approximately $422,000, respectively.

           Our short-term liquidity requirements consist primarily of operating expenses and other expenditures associated with our properties, regular debt service requirements, capital expenditures and, potentially, acquisitions. We anticipate that our primary long-term liquidity requirements will include, but will not be limited to, operating expenses, making scheduled debt service payments, funding renovations, expansions, and other significant capital expenditures for our existing portfolio of properties and acquiring new assets compatible with our investment strategy, subject to the availability of attractive properties and our ability to consummate acquisitions on satisfactory terms.

           We face significant liquidity challenges in implementing our investment strategy on both a short-term and long-term basis. Projected cash sources (including cash on hand) and uses for the Partnership indicate periods of cash shortfalls during the year ended December 31, 2012. However, we believe that we will be able to generate sufficient liquidity to satisfy any cash shortfalls through (1) managing the timing of forecasted capital expenditures related to the lease-up of properties, (2) managing the timing of operating expense payments and, to the extent possible, accelerating cash collections, (3) deferral of fees paid to our General Partner and its affiliates, (4) financings of unencumbered properties, and (5) sales of certain of our investments in non-consolidated entities. No assurance can be given that we will be able to generate such liquidity.

          AmREIT has agreed to continue to provide financial support to us through and including January 1, 2013 in the form of continued deferral of payment of advisory fees earned and payable to the extent such deferral of fees is necessary for our continued operation. Such fees may include property management, asset management, development fees and reimbursement of certain of AmREIT’s general and administrative costs. Additionally, AmREIT has agreed that it will not require us to repay the $2.3 million notes payable – related party we owe to AmREIT as of March 31, 2012 until a date subsequent to January 1, 2013. AmREIT’s agreement to provide such financial support and defer payment is limited to its continued ability to do so.

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          The above steps by themselves may not be sufficient to restore the long term viability and we could incur individual setbacks and possible significant losses. Even with the deferral agreements with AmREIT, we still may incur cash shortfalls, we may be required to perform under certain guarantees of our joint ventures or be unable to refinance certain debt as it comes due that could result in lender repossession of one or more properties owned by us and/or our joint ventures or we may be forced to sell one or more properties at a time when it is disadvantageous to do so, potentially resulting in losses on the disposition of those properties. We continually work to maximize the returns and work for the best interests of our Limited Partners and are examining a range of alternatives, which may include:

 

 

 

 

postponement of the liquidation date in order to hold and operate the property for a period of time;

 

 

 

 

obtaining additional partner capital through sales/creation of new partnerships and JVs or new financing for future development similar to our Woodlake Square property;

 

 

 

 

dispositions of undesirable properties, even if at a loss;

 

 

 

 

delivery of the property to the lender; or

 

 

 

 

a combination of all or certain aspects of the above.

          Based on the foregoing, it is possible that investors may not recover all of their original investment. We currently do not expect to distribute net sales proceeds or any net cash flows from operations to our Partners until we enter the liquidation phase. If the real estate market has not sufficiently recovered prior to our liquidation period commencement date of November 2013, we may seek to postpone liquidation if we feel it is in the best interests of our Limited Partners at that time.

Current Market Conditions

          Our results of operations may be sensitive to changes in overall economic conditions that impact tenant leasing practices. Adverse economic conditions affecting tenant income, such as employment levels, business conditions, interest rates, tax rates, fuel and energy costs and other matters, could reduce overall tenant leasing or cause tenants to shift their leasing practices. In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, could result in a general decline in rents or an increased incidence of defaults under existing leases. The U.S. economy is still experiencing weakness from the past economic recession, which resulted in increased unemployment, weakening of tenant financial condition, large-scale business failures and tight credit markets. High levels of unemployment have persisted, and rental rates and valuations for retail space have not fully recovered to pre-recession levels and may not for a number of years. Furthermore, the uncertainty surrounding the rapidly increasing national debt of the U.S. and continuing global economic upheaval have kept markets volatile. These unstable conditions could continue for a prolonged period of time. It is difficult to determine the breadth and duration of the financial market problems and the many ways in which they may affect our tenants and our business in general. A significant additional deterioration in the U.S. economy or the bankruptcy or insolvency of one or more of our significant tenants could cause our current plans to meet our projected cash shortfalls to be insufficient.

Cash Flow Activities for the Three Months Ended March 31, 2012 and 2011

          Cash flows provided by (used in) operating activities, investing activities and financing activities for the three months ended March 31, 2012 and 2011 are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

2012

 

2011

 

Operating activities

 

$

(322

)

$

(530

)

Investing activities

 

 

(500

)

 

(328

)

Financing activities

 

 

453

 

 

115

 

          Net cash flows used in operating activities improved approximately $208,000 during the three months ended March 31, 2012 as compared to the same period in 2011 ($322,000 in 2012 versus $530,000 in 2011). This decrease in operating cash outflows was primarily attributable to an increase in accounts payable – related party during the three months ended March 31, 2012 as compared to the same period in 2011.

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          Net cash flows used in investing activities increased approximately $172,000 during the three months ended March 31, 2012 as compared to the same period in 2011 ($500,000 in 2012 versus $328,000 in 2011). This increase in investing outflows was primarily due to $202,000 in real estate improvements spent at our Woodlake Pointe property as part of the redevelopment during the first quarter of 2012.

          Net cash flows provided by financing activities increased approximately $338,000 during the three months ended March 31, 2012 as compared to the same period in 2011 ($453,000 in 2012 versus $115,000 in 2011). The increase was primarily attributable to a $203,000 draw on our Woodlake Pointe construction loan to fund the redevelopment of that property along with $176,000 in proceeds received from our notes receivable – related party during the first quarter of 2012.

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

          Not applicable.

 

 

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

          Under the supervision and with the participation of our General Partner’s CEO and CFO, our General Partner’s management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) as of March 31, 2012. Based on that evaluation, our General Partner’s CEO and CFO concluded that, as of March 31, 2012, our disclosure controls and procedures were effective in causing material information relating to us to be recorded, processed, summarized and reported by management on a timely basis and to ensure the quality and timeliness of our public disclosures in accordance with SEC disclosure obligations.

Changes in Internal Controls Over Financial Reporting

          There has been no change to our internal control over financial reporting during the quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

 

 

ITEM 1.

LEGAL PROCEEDINGS.

          We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict with certainty the amounts involved, our management and counsel are of the opinion that, when such litigation is resolved, any additional liability, if any, will not have a material effect on our consolidated financial statements.

 

 

ITEM 1A.

RISK FACTORS.

          Not applicable.

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

          Not applicable.

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

          None.

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ITEM 4.

MINE SAFETY DISCLOSURES.

          Not applicable.

 

 

ITEM 5.

OTHER INFORMATION.

          None.

 

 

ITEM 6.

EXHIBITS.

          The exhibits listed on the accompanying Exhibit Index are filed, furnished, or incorporated by reference (as stated therein) as part of this Report.

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Table of Contents

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

AmREIT Monthly Income & Growth Fund IV, L.P.

 

 

 

 

By:

AmREIT Monthly Income & Growth IV
Corporation, its General Partner

 

 

 

Date: May 14, 2012

 

 

 

 

 

 

By:

/s/ H. Kerr Taylor

 

 

H. Kerr Taylor

 

 

President, Chief Executive Officer and Director

 

 

 

Date: May 14, 2012

 

 

 

 

 

 

By:

/s/ Chad C. Braun

 

 

Chad C. Braun

 

 

Executive Vice President, Chief Operating Officer, Chief
Financial Officer, Treasurer and Secretary

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Table of Contents

EXHIBIT INDEX

 

 

Exhibit 3.1

Certificate of Limited Partnership of AmREIT Monthly Income & Growth Fund IV, L.P., dated October 10, 2006 (incorporated herein by reference from Exhibit 3.1 to the Partnership’s Registration Statement on Form 10-12G dated April 29, 2008).

 

 

Exhibit 3.2

Agreement of Limited Partnership of AmREIT Monthly Income & Growth Fund IV, L.P., dated November 15, 2006 (incorporated herein by reference from Exhibit 3.2 to the Partnership’s Registration Statement on Form 10-12G dated April 29, 2008).

 

 

Exhibit 3.2.1

Amendment No. 1 to Agreement of Limited Partnership of AmREIT Monthly Income & Growth Fund IV, L.P., dated December 7, 2006 (incorporated herein by reference from Exhibit 3.3 to the Partnership’s Registration Statement on Form 10-12G dated April 29, 2008).

 

 

Exhibit 31.1

Certification of the Chief Executive Officer of the Partnership’s General Partner pursuant to Exchange Act Rule 13a-14(a) (filed herewith).

 

 

Exhibit 31.2

Certification of the Chief Financial Officer of the Partnership’s General Partner pursuant to Exchange Act Rule 13a-14(a) (filed herewith).

 

 

Exhibit 32.1

Certification of the Chief Executive Officer of the Partnership’s General Partner pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

 

 

Exhibit 32.2

Certification of the Chief Financial Officer of the Partnership’s General Partner pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).


 

 

Exhibit 101.INS

XBRL Instance Document*

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document*

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document*

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document*

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document*

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document*


 

 

 

 

 

 

 

 

 

*

Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011, (ii) the Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011, (iii) the Consolidated Statement of Capital for the three months ended March 31, 2012, (iv) the Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011 and (v) the Notes to the Consolidated Financial Statements.

 

 

 

 

 

 

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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