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Related Party Transactions and Arrangements
 12 Months Ended
Dec. 31, 2015
Related Party Transactions [Abstract]  
Related Party Transactions and Arrangements

NOTE 8: Related Party Transactions and Arrangements

 

Fees and Expenses Paid to Our Advisor

 

As of September 25, 2015 we entered into the Second Amendment to the Second Amended and Restated Advisory Agreement.  The Second Amendment amends the advisory agreement to extend its term to October 1, 2020, and so that, for periods subsequent to October 1, 2015, our Advisor is compensated as follows:

 

 

·

Quarterly base management fee of 0.375% of our cumulative equity raised; and

 

·

Quarterly incentive fee equal to 20% of our Core FFO in excess of $0.20 per share.

 

Prior to the Second Amendment, the Second Amended and Restated Advisory Agreement, which was effective as of May 7, 2013 through September 30, 2015, provided that our Advisor was compensated as follows:

 

 

·

Quarterly base management fee of 0.1875% of average gross real estate assets as of the last day of such quarter. Average gross real estate assets means the average of the aggregate book value of our real estate assets before reserves for depreciation or other similar noncash reserves and excluding the book values attributable to the eight properties that were acquired prior to August 16, 2013. We computed average gross real estate assets by taking the average of these book values at the end of each month during the quarter for which we calculated the fee.  

 

·

An incentive fee based on our pre-incentive fee core FFO, a non-GAAP measure, as defined in the advisory agreement. The incentive fee was computed at the end of each fiscal quarter as follows:

 

·

no incentive fee in any fiscal quarter in which our pre-incentive fee Core FFO does not exceed the hurdle rate of 1.75% (7% annualized) of the cumulative gross amount of our equity capital; and

 

·

20% of the amount of our pre-incentive fee Core FFO that exceeds 1.75% (7% annualized) of the cumulative gross proceeds from our issuance of equity securities.

 

For the years ended December 31, 2015, 2014 and 2013 our Advisor earned $4,984, $1,582, and $128 of asset management fees, respectively.

 

For the years ended December 31, 2015, 2014 and 2013 our Advisor earned $629, $154 and $144 of incentive fees, respectively. These fees are included within asset management fees in our consolidated statements of operations.

 

As of December 31, 2015 and December 31, 2014 we had liabilities payable to our Advisor for asset management fees and incentive fees of $1,854 and $644, respectively.  These liabilities are presented within accounts payable and accrued expenses.

 

Property Management Fees Paid to Our Property Manager

 

We have entered into property management agreements with RAIT Residential, or our property manager, which is wholly owned by RAIT, with respect to each of our properties. Pursuant to the property management agreements, we pay our property manager property management and leasing fees on a monthly basis up to 4.0% of the gross revenues from a property for each month. Additionally, we may pay our property manager a separate fee for the one-time initial rent-up or leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area. Each management agreement has an initial one year term, subject to automatic one-year renewals unless either party gives prior notice of its desire to terminate the management agreement. For the years ended December 31, 2015, 2014 and 2013 our property manager earned $3,675, $1,759, and $785, respectively, of property management and leasing fees. As of December 31, 2015 and December 31, 2014, we had liabilities payable to our property manager for property management and leasing fees of $440 and $205, respectively.  These liabilities are presented within accounts payable and accrued expenses.

 

Dividends Paid to Affiliates of our Advisor

 

As of December 31, 2015 and 2014, RAIT owned 15.5%, and 22.9% of the outstanding shares of our common stock, respectively.  For the years ended December 31, 2015, 2014 and 2013, we declared and subsequently paid dividends of $5,234, $5,126 and $3,533 related to shares of common stock owned by RAIT.