v3.20.2

Related-Party Transactions | 6 Months Ended
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Jun. 30, 2020
Related Party Transactions [Abstract] |
Related-Party Transactions | 3. Related-Party Transactions Prior to the Internalization on February 7, 2020, BRE, a related party in which certain directors of the Corporation had either a direct or indirect ownership interest, and the Asset Manager were considered to be related parties. Property Management Agreement The Corporation and the OP were parties to a property management agreement (as amended, the “Property Management Agreement”) with BRE. Under the terms of the Property Management Agreement, BRE managed and coordinated certain aspects of the leasing of the Corporation’s rental property. In exchange for services provided under the Property Management Agreement, BRE received certain fees and other compensation as follows:
| (i) | 3% of gross rentals collected each month from the rental property for property management services (other than one property, which called for 5% of gross rentals under the Property Management Agreement); and
| (ii) | Re-leasing fees for existing rental property equal to one month’s rent for a new lease with an existing tenant and two months’ rent for a new lease with a new tenant.
Upon completion of the Internalization, the Property Management Agreement was terminated and there will be no future property management fees payable to BRE. The Internalization was not considered a “Termination Event” under the Property Management Agreement, so no fees were payable to BRE as a result of the Internalization. See Note 4 for further discussion regarding the Internalization, including the associated payments related thereto. Asset Management Agreement The Corporation and the OP were parties to an asset management agreement (as amended, the “Asset Management Agreement”) with the Asset Manager, a single member limited liability company of which BRE was the sole member, and therefore a related party in which certain directors of the Corporation had an indirect ownership interest. Under the terms of the Asset Management Agreement, the Asset Manager was responsible for, among other things, the Corporation’s acquisition, initial leasing, and disposition strategies, financing activities, and providing support to the Corporation’s Independent Directors Committee (“IDC”) for its valuation functions and other duties. The Asset Manager also nominated two individuals to serve on the Board of Directors of the Corporation. Under the terms of the Asset Management Agreement, the Asset Manager was compensated as follows:
| (i) | a quarterly asset management fee equal to 0.25% of the aggregate value of common stock, based on the per share value as determined by the IDC each quarter, on a fully diluted basis as if all interests in the OP had been converted into shares of the Corporation’s common stock;
| (ii) | 0.5% of the proceeds from future equity closings as reimbursement for offering, marketing, and brokerage expenses;
| (iii) | 1% of the gross purchase price paid for each rental property acquired (other than acquisitions described in (iv) below), including any property contributed in exchange for membership interests in the OP;
| (iv) | 2% of the gross purchase price paid for each rental property acquired in the event that the acquisition of a rental property required a new lease (as opposed to the assumption of an existing lease), such as a sale-leaseback transaction;
| (v) | 1% of the gross sale price received for each rental property disposition; and
| (vi) | 1% of the Aggregate Consideration, as defined in the Asset Management Agreement, received in connection with a disposition event, as defined in the Asset Management Agreement.
Upon completion of the Internalization, the Asset Management Agreement was terminated and there will be no future asset management fees payable to the Asset Manager. The Internalization was not considered a “Termination Event” under the Asset Management Agreement, so no fees were payable to the Asset Manager as a result of the Internalization. See Note 4 for further discussion regarding the Internalization, including the associated payments related thereto. Total fees incurred under the Property Management Agreement and Asset Management Agreement were as follows:
(in thousands) |  |  |  | For the three months ended June 30, |  |  | For the six months ended June 30, |
Type of Fee |  | Financial Statement Presentation |  | 2020(a) |  |  | 2019 |  |  | 2020(a) |  |  | 2019 |
Asset management fee |  | Asset management fees |  | $ | — |  |  | $ | 5,318 |  |  | $ | 2,461 |  |  | $ | 10,438 |
Property management fee |  | Property management fees |  |  | — |  |  |  | 1,935 |  |  |  | 1,275 |  |  |  | 3,820 |
Total management fee expense |  |  |  |  | — |  |  |  | 7,253 |  |  |  | 3,736 |  |  |  | 14,258 |
Marketing fee (offering costs) |  | Additional paid-in capital |  |  | — |  |  |  | 300 |  |  |  | — |  |  |  | 600 |
Acquisition fee |  | Capitalized as a component of assets acquired |  |  | — |  |  |  | 1,275 |  |  |  | — |  |  |  | 2,005 |
Leasing fee and re-leasing fees |  | Leasing fees, net |  |  | — |  |  |  | 177 |  |  |  | — |  |  |  | 435 |
Disposition fee |  | Gain on sale of real estate |  |  | — |  |  |  | 238 |  |  |  | 109 |  |  |  | 351 |
Total management fees |  |  |  | $ | — |  |  | $ | 9,243 |  |  | $ | 3,845 |  |  | $ | 17,649 |
(a) | Fees were payable under the Property Management Agreement and Asset Management Agreement from January 1, 2020 through February 6, 2020. The Internalization was effective February 7, 2020.
There were no unpaid management fees at June 30, 2020 and December 31, 2019. All fees related to the Property Management Agreement and the Asset Management Agreement were paid for in cash within the Company’s normal payment cycle for vendors. Tax Protection Agreement Upon closing of the Internalization, the Company entered into an agreement with Amy L. Tait, the Company’s founder, and certain members of her family (“Founding Owners”), pursuant to which the OP agreed to indemnify the Founding Owners against the applicable income tax liabilities resulting from the sale, exchange, transfer or other disposal of the assets of BRE that the Company acquired in the Internalization, through February 7, 2030, or the Company’s failure to allocate specific types of the OP’s indebtedness to the Founding Owners (the “Founding Owners’ Tax Protection Agreement”). The maximum amount the Company may be liable for under the Founding Owners’ Tax Protection Agreement is $10,000. Earnout Consideration In connection with the Internalization, the Company incurred a contingent liability that would be payable to certain members of the Company’s Board of Directors and employees who had previously been owners and/or employees of BRE, upon the occurrence of certain events (see Note 4). The fair value of the earnout liability was $37,975 as of June 30, 2020. Related Party Lease In connection with the Internalization, the Company assumed the lease agreement relating to the Company’s principal executive office with Clinton Asset Holdings Associates, L.P., an affiliated third party, approximately 1.6% of which is indirectly owned by the Company’s Chairman and member of the Board of Directors. The lease of 24,072 square feet of office space expires on August 31, 2023, and contains two five-year renewal options. The annual rent for 2020 is approximately $547, with 2% annual increases thereafter. See further discussion in Note 16.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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