7. INTEREST RATE SWAP CONTRACT

9 Months Ended

Sep. 30, 2011

Description of Interest Rate Cash Flow Hedge Activities

7. INTEREST RATE SWAP CONTRACT

The Company is exposed to interest rate risk through its borrowing activities. In order to minimize the effect of changes in interest rates, the Company has entered into an interest rate swap contract under which the Company agrees to pay an amount equal to a specified rate of 7.57% times a notional principal approximating the outstanding loan balance, and to receive in return an amount equal to 2.45% plus the one-month LIBOR Rate times the same notional amount. The Company designated this interest rate swap contract as a cash flow hedge.

In conjunction with amendment of the Bayshore bank loan in March 2011 (Note 3), the interest rate swap contract liability was paid down by $198,400 (in the same proportion as the amount of the loan principal paid down). This amount represents a previously unrealized loss which upon pay down of the swap was reclassified from accumulated other comprehensive income and recorded as a realized loss on interest rate swap contract within the condensed consolidated statements of comprehensive income for the nine months ended September 30, 2011.

As of September 30, 2011 the fair value of this hedge was an unrealized loss of $1,976,000, as compared with an unrealized loss of $1,462,000 as of December 31, 2010 which resulted in an unrealized loss of $514,000 (or $257,000, net of noncontrolling interest) for the nine months ended September 30, 2011. This amount has been recorded as other comprehensive income and will be reclassified to interest expense over the life of the contract.

The following tables present the required disclosures in accordance with ASC Topic 815-10:

	Liability Derivative
Fair Values of Derivative Instruments:	September 30, 2011			December 31, 2010
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swap contract	Liabilities	$	1,976,000	Liabilities	$	1,462,000
Total derivatives designated as hedging instruments under ASC Topic 815		$	1,976,000		$	1,462,000

The Effect of Derivative Instruments on the Statements of Comprehensive Income

Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)
	For the three			For the three			For the nine			For the nine
	Months ended			Months ended			Months ended			Months ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010
Interest rate swap contracts	$	(298,000	)	$	(133,500	)	$	(257,000	)	$	(404,500	)
Total	$	(298,000	)	$	(133,500	)	$	(257,000	)	$	(404,500	)