NOTE 4. LONG-TERM DEBT

During the three months ended March 31, 2016, net proceeds from the Company’s hotel sales (see Note 3) were used to pay off the associated loans totaling $5,272, to reduce the balance of the revolving credit facility with Great Western Bank, and set aside to fund future acquisitions. These dispositions also decreased the total availability under the Great Western Bank revolver from $5,733 at December 31, 2015 to $2,625 at March 31, 2016.

Long-term debt, including debt related to hotel properties held for sale, consisted of the following loans payable at March 31, 2016:



Lender		Balance at March 31, 2016	Interest rate at March 31, 2016	Maturity	Amortization provision	Properties encumbered at March 31, 2016		Balance at December 31, 2015
Fixed rate debt
GE Capital Franchise Finance Corporation	$	10,683	7.17%	02/2017	15 years	4	$	10,819
GE Capital Franchise Finance Corporation		2,983	4.75%	02/2018	15 years	3		3,864
Cantor Commercial Real Estate Lending		5,798	4.25%	11/2017	30 years	1		5,826
Morgan Stanley Mortgage Capital Holdings, LLC		25,924	5.83%	12/2017	25 years	21		27,542
Total fixed rate debt		45,388						48,051

Variable rate debt
Great Western Bank		- (6)	4.50% (1)	06/2018	Interest only	2		3,215
GE Capital Franchise Finance Corporation		4,961	3.88% (2)	11/2020	25 years	1		4,990
GE Capital Franchise Finance Corporation		10,022	3.88% (2)	11/2020	25 years	1		10,079
The Huntington National Bank		9,923	2.69% (3)	11/2020	25 years	4		9,981
LMREC 2015 - CREI, Inc. (Latitude)		11,220	6.75% (4)	05/2018	$12 monthly (5)	1		11,220
Total variable rate debt		36,126				38		39,485

Total Long-term debt	$	81,514					$	87,536
Less: Deferred financing costs		(1,322)						(1,525)
Total long-term debt, net of deferred financing costs		80,192						86,011
Less: Long-term debt related to hotel properties held for sale, net of deferred financing costs of $215 and $292		(13,746)						(18,508)
Long-term debt related to hotel properties held for use, net of deferred financing costs of $1,107 and $1,233	$	66,446					$	67,503

(1) Prime rate plus 1%

(2) 90-day LIBOR plus 3.25%

(3) 30-day LIBOR plus 2.25%, fixed at 4.13% after giving effect to interest rate swap (see Note 6)

(4) 30-day LIBOR plus 6.25%

(5) $12 monthly payment begins May 2016

(6) Total availability under this revolving credit facility was $2,625 at March 31, 2016; commitment fee on unused facility is 0.25%

Debt is classified as held for sale if the properties collateralizing it are held for sale. Debt associated with assets held for sale is classified in the table below based on its contractual maturity although the balances are expected to be repaid within one year upon the sale of the related hotel properties. Aggregate annual principal payments on debt for the remainder of 2016 and thereafter are as follows:



	Held for sale		Held for use		Total
Remainder of 2016	$	577	$	1,585	$	2,162
2017		10,831		31,160		41,991
2018		2,553		11,630		14,183
2019		-		676		676
2020		-		22,502		22,502
Total	$	13,961	$	67,553	$	81,514

Financial Covenants

The Company’s debt agreements contain requirements as to the maintenance of minimum levels of debt service and fixed charge coverage and required loan-to-value and leverage ratios, and place certain restrictions on dividends. As of March 31, 2016, we were in compliance with our financial covenants.

If we fail to pay our indebtedness when due, fail to comply with covenants or otherwise default on our loans, unless waived, we could incur higher interest rates during the period of such loan defaults, be required to immediately pay our indebtedness, and ultimately lose our hotels through lender foreclosure if we are unable to obtain alternative sources of financing with acceptable terms. Our Great Western Bank and certain of our GE facilities contain cross-default provisions which would allow Great Western Bank and GE to declare a default and accelerate our indebtedness to them if we default on our other loans and such default would permit that lender to accelerate our indebtedness under any such loan. As of March 31, 2016, we are not in default of any of our loans.