Note 10 - Commitments and Contingencies

3 Months Ended

Apr. 30, 2013

Commitments and Contingencies Disclosure [Text Block]

10. COMMITMENTS AND CONTINGENCIES

Two of the Hotels are subject to non-cancelable ground leases expiring in 2033 and 2050.  Total expense associated with the non-cancelable ground leases for the three months ended April 30, 2013 was $72,608, including a variable component based on gross revenues of each property that totaled approximately $28,921.

During fiscal year 2010, the Trust entered into a five-year office lease for its corporate headquarters. The Trust recorded $7,106 and $8,618 of general and administrative expense related to the lease during the three-month period ended April 30, 2013 and 2012, respectively. The lease includes a base rent charge of $24,000 for the first lease year with annual increases to a final year base rent of $39,600. The Trust has the option to cancel the lease after each lease year for penalties of four months rent after the first year with the penalty decreasing by one month’s rent each successive lease year. It is the Trust’s intention to remain in the office for the duration of the five-year lease period.

Future minimum lease payments under the non-cancelable ground leases and office lease are as follows:

Fiscal Year Ending
Remainder of 2014	$	190,690
2015		233,721
2016		212,121
2017		212,121
2018		212,121
Thereafter		5,014,895
Total	$	6,075,669

The Trust is obligated under loan agreements relating to three of its Hotels to deposit 4% of the individual Hotel’s room revenue into an escrow account to be used for capital expenditures.  The escrow funds applicable to the four Hotel properties for which a mortgage lender escrow exists are reported on the Trust’s Condensed Consolidated Balance Sheet as “Restricted Cash.”

Between August 28, 2012 and August 30, 2012, the Trust purchased 31.5 units at $10,000 per unit from Rare Earth. The purchase agreement allows the Trust to return the 31.5 units to Rare Earth at the original purchase price anytime before September 1, 2013.

The nature of the operations of the Hotels exposes them to risks of claims and litigation in the normal course of their business.  Although the outcome of these matters cannot be determined, management does not expect that the ultimate resolution of these matters will have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Trust.

The Trust is involved from time to time in various other claims and legal actions arising in the ordinary course of business.  In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Trust’s consolidated financial position, results of operations or liquidity.