file_name2.htm
[InnSuites
Hospitality Trust Letterhead]
August
14, 2008
By
EDGAR and Fax
Kevin
Woody
Accounting
Branch Chief
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
100 F
Street, N.E.
Washington,
D.C. 20549
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RE:
InnSuites Hospitality Trust
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Form
10-K for fiscal year ended January 31,
2008
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Form
10-Q for the period ended April 30,
2008
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Dear Mr.
Woody:
This
letter is in response to your letter dated August 1, 2008 addressed to Anthony
B. Waters, Chief Financial Officer of InnSuites Hospitality Trust (the
“Trust”).
Your
letter indicated that the Securities and Exchange Commission staff has reviewed
the above-referenced filings and requests further information in order to better
understand the Trust’s disclosure. In addition, you indicated that
the staff’s comments should be addressed by submitting a detailed response
letter on EDGAR within 10 business days. Further, your letter indicated that
where the Trust’s management felt appropriate, an explanation should be made as
to why a comment is considered to be inapplicable.
The Trust
believes that the filings that are the subject of your letter were in material
compliance with federal securities laws at the time of their filing, but
nonetheless agrees that disclosure practices are subject to continuous
refinement.
The
numbers of the items shown below in this response letter correspond to the
similarly-numbered staff comments in your August 1 letter.
Form 10-K for the fiscal
year ended January 31, 2008
Item 8. Financial Statements
and Supplementary Data
Consolidated Balance Sheets,
page 22
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1.
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We
note that you reclassified your hotel properties as held for sale at the
beginning of the third quarter of fiscal year 2008. Please tell us how you
complied with the recognition requirements of a long-lived asset to be
sold as outlined in paragraph 30 of SFAS 144, specifically addressing
whether sale of the properties is
probable.
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The
Trust’s management followed the recognition requirements in paragraph 30 of SFAS
144 when we reclassified our hotel properties as held for sale on August 1,
2007. On July 12, 2007, our Board of Trustees authorized us to list and/or
present for sale all five of the Trust’s hotels, as discussed in the 1st
paragraph on page 12 of the Form 10-K under “Hotel Properties Held for
Sale.” We believe that the remaining criteria outlined in paragraph 30 of SFAS
No. 144 for classification as held for sale were not met until August 1,
2007. The hotel properties were available and remain available for
immediate sale. Management listed the properties with brokers and marketed the
hotels through the normal marketing channels. Management believed the sale of
the hotel properties was likely to occur within one year due to the favorable
economic conditions of the hotel industry during the preceding two years and the
high level of interest we have received in purchasing our hotel properties. The
Trust’s management is actively marketing our properties at sales
prices we believe are reasonable based on opinions from our brokers who
specialize in the sale of hotel properties. It is highly unlikely that
significant changes to the Trust’s plans to sell the hotels will be made or that
the plan will be withdrawn. The sale of our properties is part of our long-term
plan to move our business focus toward providing hotel services rather than an
ownership focus. The hotel services that we will provide are management and
staffing, trademark licensing, reservation and advertising. We discussed these
long-term plans in detail on page 12 of the Form 10-K.
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Notes to Consolidated
Financial Statements;
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2. Summary of
Significant Accounting
Policies
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Property, Plant and
Equipment, Hotel Properties and Hotel Properties Held for Sale, page
27
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2.
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We
note management’s use of third party property appraisals in determining
the fair value of long-lived assets. Please tell us the nature and extent
of the third parties’ involvement in management’s decision making process
with respect to determining fair value of long-lived
assets.
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In the
decision making process to determine fair value of long-lived assets and to test
an asset for impairment, third party property appraisals are used as one of the
indicators (benchmarks) to determine the necessity for testing for an
impairment. Other indicators include a drop in the performance of a long-lived
asset, a decline in the hospitality industry and a decline in the
economy. Third party property appraisals are useful because they
consider historical occupancy and average rate levels in determining fair value.
We obtain copies of third party property appraisals from our mortgage
lenders.
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3. Property, Plant,
and Equipment, Hotel Properties Held for Sale, page
33
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3.
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We
note that the results of operations for the properties held for sale were
not reported as discontinued operations for the periods presented, as
management believes the Trust has the ability to significantly influence
the operating and financial policies of these properties. We further note
that you have no assurance you will be able to successfully retain future
management and/or licensing fee services on these held for sale properties
once they have been sold. Please tell us how this factored into your
determination that you will continue to significantly influence the
operating and financial policies of these properties. Refer to paragraph
42 SFAS 144.
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The
properties have not been reported as discontinued operations in the Trust’s
financial statements. Based on the criteria of EITF Abstract Issue
No. 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining
Whether to Report Discontinued Operations,” the Trust concluded it was not
necessary to report hotels “held for sale” or “disposed of” when the Trust
maintains significant continuing involvement. Based on its previous
experience in selling hotels, the Trust expects to provide management and/or
trademark services to the hotels after they are sold. The Trust reasonably
expects to obtain management or trademark licensing agreements because a buyer
entering into an agreement with the Trust 1) can avoid the expense of replacing
literature and signage, which can cost as much as $200,000, 2) has access to the
Trust’s reservation services for booking reservations online or by telephone,
which are significant market channels, 3) has immediate advertising services
including web sites and printed media, 4) has available an experienced
management service providing all staffing, and 5) has the goodwill that the
Trust has gained over many years of operations that would be lost if a buyer
changed the name of the purchased hotel property. The Trust’s management
believes that it is highly likely, as in the past, that buyers of the type of
hotels we have for sale will be small hotel chains or individual buyers who
would not immediately replace all the services the Trust offers upon purchase of
a property. The Trust’s management believes a management and/or a trademark
service agreement provides the Trust with the ability to significantly influence
the operating and financial policies of the hotel.
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Form 10-Q for the
period ended April 30, 2008
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Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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Funds from Operations
(FFO), page 10
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4.
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Please
tell us why you believe the presentation of FFO to be important to an
investor, considering that such disclosure was not included in your annual
report on Form 10-K for the fiscal year ended January 31, 2008 and that
such adjustments for the current period are diminished as your hotel
properties are currently classified as held for
sale.
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We agree
that the adjustments for the calculation of FFO are diminished due to the small
adjustment for depreciation. However, we continue to believe the FFO disclosure
is important to investors due to the comparative nature of the disclosure
showing an improvement in FFO of $243,000. The Trust has included FFO in its
10-Q filings since October 2006, but has not included FFO in our 10-K filings.
We will continue to evaluate and consider the importance to our investors of the
presentation of FFO on a quarterly basis.
The Trust
acknowledges that the Trust is responsible for the adequacy and accuracy of the
disclosure in its filings; staff comments or changes to disclosure in response
to staff comments do not foreclose the Commission from taking any action with
respect to the filings; and the Trust may not assert staff comments as a defense
in any proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Please
call me at (602) 944-1500 x207 if you have any questions.
Very
truly yours,
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/s/Anthony
B. Waters
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Anthony
B. Waters
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cc:
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James
Wirth, InnSuites Hospitality Trust
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Catherine
L. Miller, Thompson Hine LLP
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Mark
Weber, Moss Adams LLP
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