NOTE 5 Other Investments

Investment in Joint Venture – Majestic 21 – During fiscal 1997, the Company contributed $250,000 for a 50% interest in a joint venture engaged in providing mortgage financing on manufactured homes. This investment is accounted for under the equity method of accounting.

While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50% interest in this entity and all allocations of profit and loss are on a 50/50 basis. Since all allocations are to be made on a 50/50 basis and the Company’s maximum exposure is limited to its investment in Majestic 21, management has concluded that the Company would not absorb a majority of Majestic 21’s expected losses nor receive a majority of Majestic 21’s expected residual returns; therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with ASC 810.

See Note 15 for discussion of the Company’s guarantee of a $5 million note payable of Majestic 21.

The following is summarized financial information of the Company’s joint venture:


	November 5, 2016		October 31, 2015
Total Assets	$	11,207,304	$	14,499,423
Total Liabilities	$	8,972,312	$	10,511,965
Total Equity	$	2,234,992	$	3,987,458
Net Income	$	247,545	$	276,945

Distributions received from the joint venture amounted to approximately $1,000,000 and $500,000 for fiscal year 2016 and 2015 respectively.

With regard to our investment in Majestic 21, there are no differences between our investment balance and the amount of underlying equity in net assets owned by Majestic 21.

Investment in Retirement Community Limited Partnerships – The Company has a 31.3% investment interest in Walden Woods South LLC (“Walden Woods”), which owns and operates a retirement manufactured home community named Walden Woods located in Homosassa, Florida. The Company’s investment in Walden Woods is fully impaired. The majority owner of Walden Woods is the Company’s principal shareholder. The Company’s principal shareholder guaranteed the financing used to purchase Walden Woods Park, which created an implicit guarantee from the Company. The implicit guarantee caused Walden Woods Park to be a variable interest entity as defined in ASC 810. The Company is considered to currently have an implicit guarantee with Walden Woods because it is a related party to the primary guarantor. In determining the primary beneficiary of the variable interest entity, the Company has determined the principal shareholder has the power to direct the activities that most significantly impact the economic performance of Walden Woods. As a result, in accordance with ASC 810, Walden Woods has not been consolidated in the financial statements of the Company.

On March 31, 2016, the Company sold its 48.5% limited partnership interest in CRF III, Ltd. (“Cypress Creek”) for $3,990,000. Cypress Creek is a retirement manufactured home community located in Winter Haven, Florida. The Company received $960,000 cash, net of $40,000 cost paid and a note receivable for $3,030,000, plus interest at 3.0%, which is payable to the Company in $500,000 installments each July 1^st and January 1^st, commencing January 1, 2017 through July 1, 2019. The Company received its first $500,000 payment in June 2016 prior to the required date. Payments are applied first to any outstanding principal and then to accrued interest at the end of the term. The Company recognized a gain of $3,990,000. During 2015, the Company’s investment in Cypress Creek was reduced to zero from recurring operating losses.

The investment in Walden Woods and Cypress Creek are accounted for under the equity method of accounting and all allocations of profit and loss are on pro-rata basis. Since the Company’s maximum exposure is limited to its investment in Walden Woods and Cypress Creek, management has concluded that the Company would not absorb a majority of Walden Woods’ and Cypress Creek’s expected losses nor receive a majority of Walden Woods’ and Cypress Creek’s expected residual returns; therefore, the Company is not required to consolidate Walden Woods and Cypress Creek with the accounts of Nobility Homes in accordance with ASC 810.

The following is summarized financial information of Walden Woods as of September 30, 2016 and Walden Woods and Cypress Creek as of September 30, 2015*:


	September 30,2016 (unaudited)			September 30, 2015 (unaudited)
Total Assets	$	3,747,081		$	13,273,488
Total Liabilities	$	5,902,402		$	17,101,517
Total Deficit	$	(2,155,321	)	$	(3,828,029	)

*	Due to Walden Woods, and Cypress Creek having a calendar year-end, the summarized financial information provided is from their most recent quarter. The Company’s investment in Cypress Creek was sold in 2016 and its summarized financial information is not included as of September 30, 2016.

The Company has no obligation to fund future operating losses of Walden Woods and accordingly, has not reduced the investment carrying value to less than zero.