9. Leases

The Company’s investment in EIP is leased to PNM under net operating leases with various terms. PNM is referred to as the “Major Tenant”. Upon the execution of the Purchase Agreement on November 1, 2012, the schedule of the rental payments under the lease, prior to the anticipated April 1, 2015 closing date, were changed from a semi-annual basis. The last scheduled semi-annual lease payment per the Lease Agreement was received by the Company on October 1, 2012. In accordance with the Purchase Agreement, PNM’s remaining basic rent payments due to the Company are to be accelerated. The semi-annual payments of approximately $1.42 million that were originally scheduled to be due on April 1, and October 1, 2013, respectively, were received by the Company on November 1, 2012. Therefore, as of November 30, 2012, PNM had paid $2,370,762 in future minimum rental payments in advance. The amount is reported as an unearned income liability within the Consolidated Balance Sheets.

The future contracted minimum rental receipts for all net leases as of November 30, 2012 are as follows:

See discussion within Footnote 7 as to the $7.68 million that is anticipated to be received by the Company from PNM upon the pending sale of the Company’s 40 percent undivided interest in the EIP to PNM on April 1, 2015.

In view of the fact that the Major Tenant leases a substantial portion of the Company’s net leased property which is a significant source of revenues and operating income, its financial condition and ability and willingness to satisfy its obligations under its lease with the Company, have a considerable impact on the results of operation.

The Major Tenant is currently subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. The audited financial statements and unaudited financial statements of the Major Tenant can be found on the SEC’s website at www.sec.gov. The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of the Major Tenant but has no reason not to believe the accuracy or completeness of such information. In addition, the Major Tenant has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information. None of the information in the public reports of the Major Tenant that are filed with the SEC is incorporated by reference into, or in any way form part of this filing.

On February 9, 2010, Mowood sold one of its wholly owned subsidiaries to an unrelated third party. As part of that agreement, Mowood retained a lease obligation, including insurance and other maintenance costs, for office space to be used by the subsidiary that was sold through April 2013. The fair value of the future minimum lease payments and estimated costs were recorded as a liability upon the sale of the subsidiary.