NOTE 9: Related Party Transactions and Arrangements

Fees and Expenses Paid to Our External Advisor

On December 20, 2016, in connection with our management internalization, we acquired our external Advisor and, therefore, fees and expenses to our external Advisor are no longer incurred.

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

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

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Quarterly incentive fee equal to 20% of our core funds from operations, or Core FFO, as defined in the advisory agreement, 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 external Advisor was compensated as follows:

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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.

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An incentive fee based on our pre-incentive fee Core FFO. The incentive fee was computed at the end of each fiscal quarter as follows:

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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 we have obtained; and

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

For the years ended December 31, 2016, 2015 and 2014, our external Advisor earned $7,092, $4,984, and $1,582 of asset management fees, respectively. It is noted that the quarterly asset management fee for the period ended December 31, 2016 was calculated by adjusting for the effect of the repurchase of our shares held by RAIT as described in Note 7: Stockholder Equity and Non-Controlling Interest as well as the purchase price for our management internalization as described in Note 3: Management Internlization.

For the years ended December 31, 2016, 2015, and 2014 our external Advisor earned $350, $629, and $154 of incentive fees, respectively. These fees are included within asset management fees in our consolidated statements of operations.

As of December 31, 2016 and 2015 we had liabilities payable to our external Advisor for asset management fees and incentive fees of $0 and $1,854, respectively. These liabilities are presented within accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Property Management Fees Paid to Our Property Manager

On December 20, 2016, in connection with our management internalization, we acquired property management agreements with respect to each of our properties from RAIT Residential, our previous property manager, which is wholly owned by RAIT.

We had entered into property management agreements with our previous property manager with respect to each of our properties. Pursuant to these property management agreements, we paid our previous 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 have paid our previous property manager a separate fee for the one-time initial rent-up or leasing-up of newly constructed properties. For the years ended December 31, 2016, 2015 and 2014 our previous property manager earned $4,769, $3,675, and $1,759 , respectively, of property management and leasing fees. As of December 31, 2016 and 2015, we had liabilities payable to our property manager for property management and leasing fees of $0 and $440, respectively. These liabilities are presented within accounts payable and accrued expenses.

Dividends Paid to Affiliates of Our External Advisor

On October 5, 2016, we repurchased and retired all 7,269,719 shares of our common stock owned by RAIT.

As of December 31, 2016 and 2015, RAIT owned 0.0% and 15.5% of the outstanding shares of our common stock, respectively. For the years ended December 31, 2016, 2015 and 2014, we declared and subsequently paid dividends of $3,926, $5,234 and $5,126, respectively, related to shares of common stock owned by RAIT.

RAIT Indebtedness

During the year ended December 31, 2016, we repaid $38,075 of mortgage indebtedness with proceeds from two property dispositions. This indebtedness was held by RAIT. For the years ended December 31, 2016, we paid $486 in exit fees pursuant to the contractual terms of the mortgage indebtedness to RAIT. Also for the years ended December 31, 2016, 2015, and 2014, we paid $361 $965, and $966 respectively, of interest to RAIT. There was accrued interest payable outstanding as of December 31, 2016.

Other Transactions with RAIT Subsequent to our Management Internalization (December 20, 2016 to December 31, 2016)

IRT paid RAIT $50 pursuant to the shared services agreement for the period ended December 31, 2016. RAIT paid IRT $23 of property management fees. IRT reimbursed RAIT $253 for compensation expense that RAIT paid to IRT employees.