3. Monty's Restaurant, Marina, and Office/Retail Property, Cocumut Grove, FL

12 Months Ended

Dec. 31, 2012

Nature of Operations [Text Block]

3. MONTY’S RESTAURANT, MARINA AND OFFICE/RETAIL PROPERTY, COCONUT GROVE, FLORIDA

The Company owns a 50% equity interest in two entities, Bayshore Landing, LLC (“Landing”) and Bayshore Rawbar, LLC (“Rawbar”), (collectively, “Bayshore”) which own and operate a restaurant, office/retail and marina property located in Coconut Grove (Miami), Florida known as Monty’s (“Monty’s”). The other 50% owner of Bayshore is The Christoph Family Trust (“CFT”). Members of CFT are experienced real estate and marina operators. The Monty’s property is subject to a ground lease with the City of Miami, Florida which expires on May 31, 2035. Under the lease, Bayshore pays percentage rents ranging from 8% to 15% of gross revenues from various components of the project. Total rent paid, including sales tax, for the years ended December 31, 2012 and 2011 was approximately $901,000 and $886,000, respectively.

The Monty’s property consists of a two story building with approximately 40,000 rentable square feet and approximately 3.7 acres of submerged land with a 132-boat slip marina. It includes a 16,000 square foot indoor-outdoor raw bar restaurant and 24,000 square feet of office/retail space of which approximately 15,000 square feet were leased to tenants operating boating and marina related businesses as of December 31, 2012.

The excess of capitalized cost assigned to specific assets over the 2004 purchase price of Monty’s was recorded as goodwill. Since goodwill is an indefinite-lived intangible asset it is reviewed for impairment at each reporting period or whenever an event occurs or circumstances change that would more likely than not reduce fair value below carrying amount. Goodwill is carried at historical cost if its estimated fair value is greater than its carrying amounts. However, if its estimated fair value is less than the carrying amount, goodwill is reduced to its estimated fair value through an impairment charge to the consolidated statements of comprehensive income. For the years ended December 31, 2012 and 2011 the Company did not recognize a loss from goodwill impairment.

Since the acquisition in August 2004, improvements totaling approximately $6.8 million have been made to the Monty’s property, net of disposals. These improvements primarily consisted of the expansion of the restaurant to provide an indoor area, improvements to the office/retail space which includes approximately 24,000 square feet leased or available for lease as of December 31, 2012 and parking lot and landscaping improvement to the property.

The Monty’s property is encumbered by a mortgage loan which is collateralized by substantially all of the property and equipment of Bayshore including the lease with the City of Miami. The loan is guaranteed by the members of Bayshore as well as a personal guarantee from the trustee of one of the members. As of December 31, 2012 and 2011 the outstanding balance of the loan was $8.2 million and $8.5 million, respectively. In March 2011the terms of this loan were amended and restated and the principal balance was paid down by approximately $1.6 million to $8.8 million. The modified loan calls for equal monthly installments of approximately $82,000 including principal and interest. Interest is calculated at the one month LIBOR Rate (.27% at December 31, 2012) plus 2.45%. The note is due, with a balloon payment, on August 19, 2020. The note includes certain covenants regarding income. As of December 31, 2012, Bayshore is in compliance with the covenants. Bayshore paid a fixed fee of $198,400 per the terms of the amended swap agreement to pay down the balance to that of the amended note.

Summarized combined statements of income for Landing and Rawbar for the years ended December 31, 2012 and 2011 are presented below (Note: the Company’s ownership percentage in these operations is 50%):

Summarized combined statements of income Bayshore Landing, LLC and Bayshore Rawbar, LLC	For the year ended December 31, 2012		For the year ended December 31, 2011
Revenues:
Food and Beverage Sales	$	6,179,000	$	5,857,000
Marina dockage and related		1,100,000		1,064,000
Retail/mall rental and related		663,000		630,000
Total Revenues		7,942,000		7,551,000
Expenses:
Cost of food and beverage sold		1,770,000		1,682,000
Labor and related costs		1,232,000		1,123,000
Entertainers		200,000		194,000
Other food and beverage related costs		535,000		553,000
Other operating costs (including bad debts)		562,000		498,000
Repairs and maintenance		411,000		340,000
Insurance		497,000		561,000
Utilities		238,000		260,000
Rent		901,000		886,000
Interest expense, net of interest income		645,000		691,000
Depreciation		663,000		810,000
Realized loss on interest rate swap		—		198,000
Total Expenses		7,654,000		7,796,000
Net income  (loss)	$	288,000	$	(245,000	)

(a) Reference is made to Note 1. Description of Business and Summary of Significant Accounting Policies