Commitments, Contingencies and Related Parties

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

7.    Commitments, Contingencies and Related parties

A. Commitments and Contingencies

1) Except as described in item 3 below, Presidential is not a party to any material legal proceedings. The Company may from time to time be a party to routine litigation incidental to the ordinary course of its business.

2) In the opinion of management, all of the Company’s properties are adequately covered by insurance in accordance with normal insurance practices.

3) On April 4, 2012, a mortgage foreclosure action was filed in the Court of First Instance, San Juan Superior Part, in the Commonwealth of Puerto Rico to foreclose on the Company’s Hato Rey property. The action is entitled U.S. Bank National Association, as trustee, as successor-in-interest to Bank of America, National Association, as trustee for the Registered Holders of GS Mortgage Securities Corporation II, Commercial Mortgage Pass-Through Certificates, Series 1998-C1, acting by and through Berkadia Commercial Mortgage LLC in its capacity as special servicer pursuant to the pooling and servicing agreement dated October 11, 1998 against PDL, Inc. & Associates, Limited Co-partnership; PDL, Inc., Presidential Realty Corporation; Lester Cohen and F.D. Rich Company of Puerto Rico, Inc. The complaint seeks a judgment against the Hato Rey Partnership in the amount of not less than $19,512,591, consisting of i) $14,484,138 in principal, ii) $1,119,406 in accrued interest, iii) $685,985 in default interest, iv) $48,371 in late charges, v) $1,424,691 in deferred interest and vi) $1,750,000 in liquidated damages as well as additional interest and default charges which continue to accrue under the mortgage loan on the Hato Rey property and foreclosure of the mortgage notes in order to sell the Hato Rey property and apply the proceeds of sale against the indebtedness. The Company’s wholly owned subsidiary, PDL, Inc., is the general partner of the partnership and the Company’s wholly owned subsidiary, Presidential Matmor Corporation, is a limited partner of the partnership. The complaint also seeks judgments against PDL, Inc., the Company, Lester Cohen and F.D. Rich Company of Puerto Rico, Inc., with liability among them to be allocated 1%, 45%, 9% and 45%, respectively, under the terms of certain guarantees issued by them in connection with the mortgage loans, for alleged physical waste to the Property and, the costs of certain repairs to the property of not less than $1,100,000 and the reasonable legal costs and expenses in connection with the enforcement of the loan documents.

In 1998, at the time the mortgage loan was made, F.D. Rich Company of Puerto Rico, Inc. was a limited partner of the partnership. In April 2006, Presidential Matmor Corp. acquired the limited partnership interest in the partnership owned by F.D. Rich Company of Puerto Rico, Inc. In connection with the acquisition of that interest, the parties executed a release and indemnification agreement which provides, among other things, that the Company and Presidential Matmor Corp. agree to indemnify F.D. Rich of Puerto Rico, Inc. against any liability under the guaranty.

The guarantees provide that the guarantors will pay the lender any loss, damage, cost, expense, liability, claim or other obligation incurred by the lender arising out of fraud, intentional material misrepresentation, willful misconduct, physical waste committed on the subject property, failure to pay any valid taxes and assessments to the extent rents from the property are sufficient to pay such taxes, mechanics liens, materialmen’s liens or other liens which could create liens superior to the mortgage lien, reasonable legal costs and expenses incurred by lender in connection with litigation or other legal proceedings to enforce the loan, the breach of any material representation, covenant and warranty under the related environmental and hazardous substance indemnification agreement, misapplication or conversion of any insurance proceeds, awards or other amounts received in connection with condemnation of all or a portion of the property or any rents following an event of default and any security deposits not delivered to the lender. The lender has not asserted any claims against the Company other than those asserted under the guarantees as referenced above. The Company believes that the likelihood that the Company will be held liable for the claims asserted under the guarantees is remote.

The plaintiff has made a motion for the entry of judgment against the Partnership and PDL Inc. and the right to sell the property in foreclosure.  Plaintiff’s motion for the entry of a monetary judgment against the Partnership and PDL under the loan and for the right to sell the property in foreclosure has been granted, however the parties have agreed to hold the entry of judgment in abeyance while they continue negotiations.  The plaintiff lender has also obtained a default judgment against F. D. Rich Company of Puerto Rico, Inc. That company was dissolved in 2009.

B. Related Parties

Property Management Agreement

On November 8, 2011, the Company and Signature entered into a Property Management Agreement pursuant to which the Company has retained Signature as the exclusive managing and leasing agent for the Company’s Mapletree Industrial Center property in Palmer, Massachusetts (the “Mapletree Property”). Signature shall manage the Mapletree Property in accordance with specific management guidelines and leasing guidelines and shall meet specific reporting requirements and vendor insurance requirements. Signature will receive compensation of 5% of monthly rental income actually received from tenants at the Mapletree Property. The Company will reimburse Signature for all reasonable expenses incurred by Signature in performance of its duties under the Property Management Agreement that are either in accordance with the annual budget or which have been approved in writing by the Company. Such expense shall include, but not be limited to, Signature’s costs of the salaries, benefits and appropriate and prudent training for Signature’s employees who are engaged solely in management or operation of the Mapletree Property, but excluding certain expenses that will be borne by Signature, as specified in the Property Management Agreement. The Property Management Agreement renewed for a one year term on November 8, 2012 and will be automatically renewable for one year terms until it is terminated by either party upon written notice. For the three months ended June 30, 2013 and 2012 the Company incurred management fees of approximately $9,300 and $9,200, respectively. For the six months ended June 30, 2013 and 2012 the Company incurred management fees of approximately $18,600 and $17,700, respectively.

Asset Management Agreement

On November 8, 2011, the Company and Signature entered into an Asset Management Agreement pursuant to which the Company engaged Signature to oversee the Company’s Mapletree Industrial Center property in Palmer, Massachusetts and an office building at Hato Rey, Puerto Rico (the “Properties”). Signature’s duties include leasing, marketing and advertising, financing, construction and dispositions of the Properties. Signature will receive a construction fee for any major renovations or capital projects, subject to the approval of the Company’s Board of Directors, an asset management fee of 1.5% of the monthly gross rental revenues collected for the Properties, a finance fee of 1% on any debt placement, and a disposition fee of 1% on the sale of any assets, as specified in the Asset Management Agreement. The Asset Management Agreement renewed for a one year term on November 8, 2012 and will be automatically renewable for one year terms until it is terminated by either party upon written notice. For the three months ended June 30, 2013 and 2012 the Company incurred an asset management fee of approximately $12,200 and $0, respectively. For each of the Six months ended June 30, 2013 and 2012 the Company incurred an asset management fee of $26,000 and $25,000, respectively.

Sublease

The Company subleases their executive office space under a month to month lease with Signature for a monthly rental payment of $433 or $5,200 per year. Either party may terminate the sublease upon 30 days prior written notice. For each of the three and six month periods ended June 30, 2013 and 2012 the Company incurred approximately $1,300 and $2,600, respectively, in rent expense. On July 1, 2013 the Company moved their executive offices and amended its lease agreement with Signature for a monthly rental payment of $1,100 or $13,200 per year. All other terms of the sublease remained the same.