Table of Contents
Background
Innsuites Hospitality Trust (IHT) has raised additional capital through warrant exercises, with more exercises expected in 2023. The company’s President, James Wirth, and Executive Vice President, Marc Berg, hold two of the six Board of Directors seats. They were elected in December 2019 to closely monitor and assist in the success of UNIGEN, a clean energy generation innovation in the power industry.
Investment in UniGen
The Trust has valued its investment in UniGen as a level 3 fair value measurement. This is because there are no identical actively traded instruments (level 1) or similar unobservable markets (level 2) for this investment. UniGen aims to revolutionize clean energy generation.
Sale of Non-Controlling Interests
To maintain minimum ownership percentages, the Trust has sold non-controlling interests in its subsidiaries, including Albuquerque Suite Hospitality, LLC and Tucson Hospitality Properties. The sales of these interests were detailed in the company’s Annual Report on Form 10-K filed on May 1, 2023, with the Securities and Exchange Commission. The units were sold for $10,000 each, with a two-unit minimum subscription. The Trust currently holds at least 50.1% of the units in each entity.
Ownership Interests in Albuquerque Entity
The ownership interests in the Albuquerque entity are allocated to three classes, with Class A units owned by unrelated third parties, Class B units owned by the Trust, and Class C units owned by Rare Earth or other affiliates of Mr. Wirth. Class A units have priority for distributions, followed by Class B units, and then Class C units. The Trust does not accrue for these distributions as the preference periods have expired.
Ownership Interests in Tucson Entity
Similarly, the ownership interests in the Tucson entity are allocated to three classes. Class A units have priority for distributions, followed by Class B units, and then Class C units. Again, the Trust does not accrue for these distributions as the preference periods have expired.
Albuquerque Entity as a Variable Interest Entity
The Trust has determined that the Albuquerque entity is a variable interest entity, with the Trust as the primary beneficiary. This determination was made based on qualitative and quantitative factors, including the Trust’s guarantee of material financial obligations and its controlling ownership interest in the entity. The Trust has not provided any implicit or explicit financial support to the entity during the three months ended April 30, 2023.
Net Value of Properties
As of April 30, 2023, the Trust’s hotel properties have a total net value of $7,108,524, while its corporate property, plant, and equipment have a net value of $41,076.
Mortgage Notes Payable
The Trust has mortgage notes payable for its properties. As of April 30, 2023, the mortgage loan balance for Tucson Hospitality Properties was approximately $9,475,000, while the balance for Albuquerque Suites Hospitality was approximately $1,299,000. These mortgage notes are paid in monthly installments.
Notes Payable and Receivable with Related Parties
The Trust has various notes payable and notes receivable with related parties. As of April 30, 2023, the Trust had an amount receivable of approximately $27,000 from Rare Earth Financial, LLC which is wholly owned by Mr. Wirth and his family members. The Trust also has promissory notes outstanding to unrelated third parties and an unsecured note payable with an individual lender.
Share Repurchases
The Trust repurchased 0 shares of beneficial interest during the three months ended April 30, 2023, at an average price of $0 per share. The Trust intends to continue repurchasing shares in compliance with legal and NYSE American requirements.
Ownership Interests of Mr. Wirth and Affiliates
Mr. Wirth and his affiliates hold a significant ownership interest in the Trust and its subsidiaries. As of April 30, 2023, they held a 22.51% ownership interest in the Albuquerque entity and a 51.01% ownership interest in the Tucson entity. They also hold a majority stake in the Trust, with 70.29% of the total issued and outstanding shares of beneficial interest.
Management of Hotels
The Trust manages its hotels through its wholly-owned subsidiary, RRF Limited Partnership. The subsidiary provides daily operations and management services, including personnel, for the Trust’s hotels. The Trust also employs Brian James Wirth, a family member of Mr. Wirth, who provides IT technology support services on a part-time basis.
Debt Obligations
The Trust has various debt obligations, including mortgage notes payable, notes payable to related parties, and other notes payable. The scheduled minimum payments of debt, net of debt discounts, as of April 30, 2023, are approximately $9,430,824.
Conclusion
In conclusion, Innsuites Hospitality Trust has successfully raised capital through warrant exercises and sold ownership interests in its subsidiaries. The company’s investments in clean energy generation and its diverse portfolio of hotel properties contribute to its overall financial performance. The Trust has established strategic relationships with related parties, including Mr. Wirth and his affiliates, and continues to manage its operations effectively. With its strong financial position and ongoing efforts to repurchase shares, the Trust is well-positioned for future growth and success.
Note that we may hold securities mentioned in this article. All data is based on recent SEC filings. Even though we have implemented various manual and automatic fact-checking and data acquisition processes, some incorrect information may have slipped through (false positive). Let us know if you find any inconsistencies!