XML 40 R27.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Agreements and Transactions with Related Parties | 9 Months Ended
--- | ---
Sep. 30, 2017
Agreements and Transactions with Related Parties |
Agreements and Transactions with Related Parties | Note 19 — Agreements and Transactions with Related Parties Management Agreement. Prior to May 31, 2017, we, ARLP and Arbor Realty SR, Inc. had a management agreement with ACM, pursuant to which ACM provided us with a variety of professional and advisory services vital to our operations, including underwriting, accounting and treasury, compliance, marketing, information technology and human resources. Pursuant to the terms of the management agreement, we reimbursed ACM for its actual costs incurred in connection with managing our business through a base management fee, and, under certain circumstances, an annual incentive fee. In May 2017, we exercised our option to fully internalize our management team and terminate the existing management agreement. See Note 3 — Acquisition of Our Former Manager’s Agency Platform for details. The following table sets forth our base management fees and incentive fees incurred prior to the full internalization of our management team and termination of the existing management agreement:
|  | Three Months Ended |  | Nine Months Ended |
|  | September 30, |  | September 30, |
Management Fees: |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
Base |  | $ | — |  | $ | 3,325,000 |  | $ | 6,673,260 |  | $ | 8,875,000 |
Incentive |  | — |  | — |  | — |  | — |
Total management fee |  | $ | — |  | $ | 3,325,000 |  | $ | 6,673,260 |  | $ | 8,875,000 |
We have entered into a shared services agreement with our Former Manager where we will provide limited support services to our Former Manager and our Former Manager will reimburse us for the costs of performing such services. During the three and nine months ended September 30, 2017, we have incurred $0.3 million and $0.4 million, respectively, of costs for services provided to our Former Manager which are included in due from related party on the consolidated balance sheet. Other Related Party Transactions. Due from related party was $12.6 million and $1.5 million at September 30, 2017 and December 31, 2016, respectively, and consisted primarily of payoffs to be remitted and escrows held by our affiliated servicing operations related to real estate transactions. Due to related party was $6.0 million at December 31, 2016 and consisted primarily of base management fees due to our Former Manager that we remitted in the following quarter. Related party financing was $50.0 million at both September 30, 2017 and December 31, 2016 and represents a preferred equity interest financing agreement we entered into with ACM to finance a portion of the Acquisition purchase price. We incurred interest expense related to this financing of $1.0 million and $2.9 million in the three and nine months ended September 30, 2017, respectively, and $0.8 million during both the three and nine months ended September 30, 2016. See Note 11 — Debt Obligations for details. In January 2017, we modified a $5.0 million preferred equity investment, increasing our balance to $15.0 million, with a commitment to fund an additional $5.0 million. This investment has a fixed interest rate of 11% and matures in January 2020. In July 2017, we entered into an agreement with a consortium of investors consisting of certain of our officers, including Mr. Kaufman, which admitted them as a member to fund the remaining $5.0 million preferred equity investment, which is generally subordinate to our investment. Interest income recorded from our investment totaled $0.2 million and $0.5 million for the three and nine months ended September 30, 2017, respectively. In July 2017, we originated a $36.0 million bridge loan on a multifamily property owned by a consortium of investors. The consortium of investors includes certain of our officers, including Mr. Kaufman, who own an interest of approximately 41% in the borrowing entity. The loan has an interest rate of one-month LIBOR plus 4.5% with a LIBOR floor of 1% and matures in July 2020. Interest income recorded from this loan totaled $0.4 million for both the three and nine months ended September 30, 2017. In May 2017, we originated a $46.9 million Fannie Mae loan on a multifamily property owned by a consortium of investors, including an immediate family member of Mr. Kaufman, who owns an interest of approximately 17.2% in the borrowing entity. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 40% of the original UPB. In March 2017, a consortium of investors, including Mr. Kaufman and our Former Manager, invested $2.0 million for a 26.1% ownership interest in two portfolios of multifamily properties which has two bridge loans totaling $14.8 million originated by us in November 2016. The outstanding loans have an interest rate of LIBOR plus 5.25% with a LIBOR floor of 0.5% and mature in November 2018. Interest income recorded from these loans totaled $0.3 million and $0.8 million for the three and nine months ended September 30, 2017, respectively. In January 2017, Ginkgo Investment Company LLC (“Ginkgo”), of which one of our directors is a 33% managing member, purchased a multifamily apartment complex which assumed an existing $8.3 million Fannie Mae loan that we service. Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6% interest at September 30, 2017. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 20% of the original UPB. Upon the sale, we received a 1% loan assumption fee which was governed by existing loan agreements that were in place when the loan was originated in 2015, prior to such purchase. In September 2016, we originated $48.0 million of bridge loans on six multifamily properties owned by a consortium of investors consisting of certain of our officers, including Mr. Kaufman and our Former Manager, who together own interests ranging from approximately 7.8% to 9% in the borrowing entities. The loans have an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and mature in September 2019. In addition, in August 2017, a $6.8 million loan on one of the properties paid off in full. Interest income recorded from these loans totaled $0.7 million and $2.1 million for the three and nine months ended September 30, 2017, respectively, and $0.1 million for both the three and nine months ended September 30, 2016. In January 2016, we originated a $12.7 million bridge loan and a $5.2 million preferred equity investment on two multifamily properties owned by a consortium of investors consisting of certain of our officers, including Mr. Kaufman, who together own an interest of approximately 50% in the borrowing entity. The loan has an interest rate of one-month LIBOR plus 4.5% with a LIBOR floor of 0.25% and matures in January 2019. The preferred equity investment has a fixed interest rate of 10% and matures in November 2017. Interest income recorded from these loans totaled $0.3 million for both the three months ended September 30, 2017 and 2016 and $0.9 million for both the nine months ended September 30, 2017 and 2016. In January 2016, we originated a $19.0 million bridge loan on a multifamily property owned by a consortium of investors consisting of certain of our officers, including Mr. Kaufman, who together own an interest of approximately 7.5% in the borrowing entity. The loan has an interest rate of one-month LIBOR plus 4.5% with a LIBOR floor of 0.25% and matures in January 2019. Interest income recorded from this loan totaled $0.3 million and $0.8 million for the three and nine months ended September 30, 2017, respectively, and $0.3 million and $0.7 million for the three and nine months ended September 30, 2016, respectively. In 2015, we originated a $7.1 million bridge loan on a multifamily property owned by a consortium of investors consisting of certain of our officers, including Mr. Kaufman, who together own an interest of approximately 7.5% in the borrowing entity. In August 2017, this loan paid off in full. The loan had an interest rate of LIBOR plus 4.5%, with a LIBOR floor of 0.25%. Interest income recorded from this loan totaled $0.1 million for both the three months ended September 30, 2017 and 2016 and $0.3 million for both the nine months ended September 30, 2017 and 2016. In 2015, we originated two bridge loans totaling $16.7 million secured by multifamily properties acquired by a third party investor. The properties had been owned and were sold by a consortium of investors, consisting of certain of our officers, including Mr. Kaufman, certain other related parties and certain unaffiliated persons. The loans have an interest rate of LIBOR plus 5% with a LIBOR floor of 0.25% and were extended as of right to October 2018. Interest income recorded from these loans totaled $0.3 million for both the three months ended September 30, 2017 and 2016 and $0.8 million for both the nine months ended September 30, 2017 and 2016. In 2015, we originated a $3.0 million mezzanine loan on a multifamily property that has a $47.0 million first mortgage initially originated by our Former Manager. The loan bears interest at a fixed rate of 12.5% and matures in April 2025. Interest income recorded from this loan totaled $0.1 million for both the three months ended September 30, 2017 and 2016 and $0.3 million for both the nine months ended September 30, 2017 and 2016. In 2015, we originated a $6.3 million bridge loan on a multifamily property owned by a consortium of investors consisting of certain of our officers, including Mr. Kaufman and our Former Manager, who together own an interest of approximately 90% in the borrowing entity. The loan had an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and was to mature in April 2018. The loan was repaid in full in the fourth quarter of 2016. Interest income recorded from this loan totaled $0.1 million and $0.2 million for the three and nine months ended September 30, 2016, respectively. In 2015, we modified an $18.0 million preferred equity investment, increasing our balance to $23.0 million with a fixed interest rate of 10% and a maturity date in February 2018. To accomplish the modification, we formed a joint venture with a consortium of investors consisting of certain of our officers, including Mr. Kaufman, and other related parties, to invest an additional $2.0 million preferred equity investment that is generally subordinate to ours. During the second quarter of 2016, the preferred equity investment was repaid in full and we received proceeds of $1.0 million, which was allocated to the consortium of investors. Interest income recorded from this investment totaled $1.0 million for the nine months ended September 30, 2016. In 2015, we invested $9.6 million for 50% of our Former Manager’s indirect interest in a joint venture with a third party that was formed to invest in a residential mortgage banking business. As a result of this transaction, we had an initial indirect interest of 22.5% in this entity. Since the initial investment, we invested an additional $16.1 million through this joint venture in non-qualified residential mortgages purchased from the mortgage banking business’s origination platform (which $0.6 million was funded in the nine months ended September 30, 2017) and we received cash distributions totaling $14.0 million (that were classified as returns of capital) as a result of the joint venture selling most of its mortgage assets (which $0.9 million was received in the nine months ended September 30, 2017). We recorded a loss from these investments of $1.2 million and $1.8 million during the three and nine months ended September 30, 2017, respectively, and income of $4.2 million and $8.9 million during the three and nine months ended September 30, 2016, respectively. In 2014, we invested $0.1 million for a 5% interest in a joint venture that owns two multifamily properties. The joint venture is comprised of a consortium of investors consisting of certain of our officers, including Mr. Kaufman, and other related parties, who together own an interest of 95%. In 2014, we originated two bridge loans totaling $5.0 million to the joint venture with an interest rate of 5.5% over one-month LIBOR and a maturity date extended as of right to September 2016. During the third quarter of 2016, one of the loans was repaid in full and we received proceeds of $3.3 million, which was allocated to the consortium of investors. The remaining loan was extended to December 2017. Interest income recorded from these loans was less than $0.1 million and $0.1 million for the three and nine months ended September 30, 2017, respectively, and $0.1 million and $0.2 million for the three and nine months ended September 30, 2016, respectively. In 2014, we originated a $30.4 million bridge loan for an office property owned by a consortium of investors, including Mr. Kaufman and his affiliates, who together own an interest of approximately 24% in the borrowing entity. The loan matured in August 2017 and was refinanced with a $43.2 million bridge loan that has an interest rate of 4% over one-month LIBOR with a LIBOR floor of 1.23% and an August 2020 maturity date. We also originated a $4.6 million mezzanine loan in January 2016 to this entity that had a fixed interest rate of 12% and paid off at maturity in August 2017. Interest income recorded from these loans totaled $0.8 million and $2.4 million for the three and nine months ended September 30, 2017, respectively, and $0.9 million and $2.6 million for the three and nine months ended September 30, 2016, respectively. In 2014, our Former Manager purchased a property subject to two loans originated by us, a first mortgage of $14.6 million and a second mortgage of $5.1 million, both with maturity dates of April 2016 and an interest rate of 4.8% over LIBOR. In the first quarter of 2016, the $5.1 million second mortgage was repaid in full by our Former Manager and the $14.6 million first mortgage was extended to March 2018. Interest income recorded from these loans totaled $0.2 million and $0.7 million for the three and nine months ended September 30, 2017, respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 2016, respectively. In 2011, we restructured a preferred equity investment on the Lexford Portfolio (“Lexford”), which is a portfolio of multifamily assets. In connection with this restructuring, we, along with an executive officer of ours and a consortium of independent outside investors, made an additional preferred and direct equity investment. Both of our preferred equity investments and our direct equity investment were repaid in full in the third quarter of 2015. As a result of the direct equity investment, we received distributions totaling $0.7 million and $2.0 million during the three and nine months ended September 30, 2017, respectively, and $0.7 million and $2.1 million during the three and nine months ended September 30, 2016, respectively, which were recorded as income from equity affiliates. In addition, under the terms of the restructuring, Lexford’s first mortgage lender required a change of property manager for the underlying assets. The new management company is owned primarily by a consortium of affiliated investors including Mr. Kaufman and an executive officer of ours, and has a contract with the new entity for 7.5 years and is entitled to 4.75% of gross revenues of the underlying properties, along with the potential to share in the proceeds of a sale or refinancing of the debt should the management company remain engaged by the new entity at the time of such capital event. We have provided limited (“bad boy”) guarantees for certain debt controlled by Lexford. The bad boy guarantees may become a liability for us upon standard “bad” acts such as fraud or a material misrepresentation by Lexford or us. At September 30, 2017, this debt had an aggregate outstanding balance of $845.8 million and is scheduled to mature between 2017 and 2025. Several of our executives, including our chief financial officer, general counsel and Mr. Kaufman, our chairman, chief executive officer and president, hold similar positions for our Former Manager. Mr. Kaufman and his affiliated entities (“the Kaufman Entities”) together beneficially own approximately 70% of the outstanding membership interests of our Former Manager and certain of our employees and directors also hold an ownership interest in our Former Manager. Furthermore, one of our directors serves as the trustee of one of the Kaufman Entities that holds a majority of the outstanding membership interests in our Former Manager and co-trustee of another Kaufman Entity that owns an equity interest in our Former Manager. Our Former Manager holds 5,349,053 shares of our common stock, and upon the closing of the Acquisition in July 2016, was issued 21,230,769 OP Units, each paired with one share of our Special Voting Preferred Shares, which, in total, represents approximately 32% of the voting power of our outstanding stock. Our Board of Directors approved a resolution under our charter allowing Mr. Kaufman and our Former Manager, (which Mr. Kaufman has a controlling equity interest in), to own more than the 5% ownership interest limit of our common stock as stated in our amended charter.

X
- References No definition available. + Details
Name: | us-gaap_RelatedPartyTransactionsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
Name: | us-gaap_RelatedPartyTransactionsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration