Note 10 - Mortgage Notes Payable

12 Months Ended

Jan. 31, 2013

Mortgage Notes Payable Disclosure [Text Block]

10. MORTGAGE NOTES PAYABLE

At January 31, 2013 and 2012, the Trust had mortgage notes payable outstanding with respect to each of the Hotels.  The mortgage notes payable have various repayment terms and have scheduled maturity dates ranging from January 2015 to August 2022.  Weighted average interest rates on the mortgage notes payable for the fiscal years ended January 31, 2013 and 2012 were 4.97% and 6.70%, respectively.

The following table summarizes the Trust’s mortgage notes payable as of January 31:

	2013		2012
Mortgage note payable, due in monthly installments of $32,419 at an interest rate of 5.0% per year, through August 1, 2022, plus a balloon payment of $4,112,498 in September 2022, secured by the Yuma property with a carrying value of $5.5 million at January 31, 2013.	$	5,469,475	$	—
Mortgage note payable, due in monthly installments of $48,738, including interest at 8.0% per year, through May 1, 2016, secured by the Tucson Foothills property with a carrying value of $4.2 million at January 31, 2013.		1,706,278		2,135,796
Mortgage note payable, due in monthly installments of $31,701, including interest at 5.0% per year, through January 14, 2015, plus a balloon payment of $5,630,315 in January 2015, secured by the Ontario property with a carrying value of $5.9 million at January 31, 2013.		6,323,592		7,405,289
Mortgage note payable, due in monthly installments of $16,032, including interest at 7.75% per year, through November 1, 2021, secured by the Albuquerque property with a carrying value of $1.3 million at January 31, 2013. At the discretion of the lender, the interest rate can be increased to the market rate, as determined by lender, on November 1, 2014.		1,227,744		1,321,015
Mortgage note payable, due in variable monthly installments ($29,776 as of January 31, 2013) including interest at prime rate (3.25% per year as of January 31, 2013), through January 28, 2015, plus a balloon payment of $4,874,618 in January 2015, secured by the Tucson St. Mary’s property with a carrying value of $7.8 million at January 31, 2013.		5,227,835		5,409,156
Mortgage note payable, due in interest only monthly payments of $23,333 at an interest rate of 7.0% per year, through December 30, 2013, plus a balloon payment of $4,023,333 in December 2013, secured by the Yuma property. Satisfied in full in fiscal year 2013.	$	—	$	4,000,000
Mortgage note payable, due in interest only monthly payments of $6,667 at an interest rate of 8.0% per year, through December 30, 2013, plus a balloon payment of $1,006,667 in December 2013, secured by the Yuma property. Satisfied in full in fiscal year 2013.		—		1,000,000
Totals	$	19,954,924	$	21,271,256

The mortgage notes payable secured by the Albuquerque and Tucson St. Mary’s hotel properties are recourse to the Partnership and Trust as full guarantors. The mortgage note payable secured by the Yuma hotel property is recourse to the Trust as a full guarantor. None of the other mortgage notes are recourse to the Partnership or the Trust.

Mr. Wirth has guaranteed 100% of the Tucson St. Mary’s mortgage note payable.

The non-recourse mortgage note payable relating to our Ontario, California property, which is secured by the property and the rents, revenues and profits from the property, matured on May 11, 2011 and was modified on February 14, 2012. The lender reduced the principal balance by $500,000 and waived all penalties and accumulated interest in exchange for a $1.0 million pay down of the principal balance by the Trust. The interest rate was lowered from 8.28% to 5.0% reducing the monthly principal and interest payments to $31,700 from $71,100. The note was extended for three years to January 14, 2015. The Trust accounted for the modification as a troubled debt restructuring. Based on the terms of the modified mortgage note payable, the total future cash payments of $7,795,006 consists of $6,905,289 in principal payments and $889,717 interest payments. As such, total future cash payments exceeded the carrying value of the note payable (including accrued interest) of $7,646,030 at the date of restructure by $148,976. As a result, there was no gain or loss recorded during the period. In addition, no adjustment was made to the carrying value of the note at the date of restructure. Instead this requires the Trust to recognize interest expense using an effective interest rate on the debt after the restructuring, which results in $148,976 of interest expense being recognized over the remainder of the term.

           On August 24, 2012, we refinanced our mortgage notes payable secured by the Yuma, Arizona property with a new $5.5 million note payable, which bears interest at 5.0% per year.  The note is due in monthly installments of $32,419, an increase of $2,419 from the previous monthly interest-only installments of $30,000.  The proceeds of the mortgage refinancing were used for working capital purposes.

See Note 13 – “Minimum Debt Payments” for scheduled minimum payments.