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Related Party Transactions
12 Months Ended
Dec. 31, 2021
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
Management Agreement
In connection with our initial public offering in September 2009, we entered into a management agreement (the "Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing our day-to-day operations, subject to the direction and oversight of our board of directors.
Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.
The term of the Management Agreement was automatically renewed for a successive one-year term on September 29, 2021, and will automatically renew on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting by our independent directors in February 2022, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.
We incurred approximately $38.2 million, $39.8 million $40.7 million and in base management fees under the Management Agreement for the years ended December 31, 2021, 2020, and 2019, respectively.
In addition to the base management fee, we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf or for certain services provided by the Manager to us. For the years ended December 31, 2021,
2020, and 2019, we paid expenses totaling $4.0 million, $4.5 million, and $3.6 million respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement. Expenses incurred by the Manager and reimbursed by us are reflected in the respective consolidated statement of operations expense category or our consolidated balance sheet based on the nature of the item.
Included in payable to related party on our consolidated balance sheet at December 31, 2021 and 2020 is approximately $9.8 million and $9.6 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.
Loans receivable
In June 2015, we originated a $20.0 million mezzanine loan secured by pledges of equity interests in the property recorded as real estate owned on our consolidated balance sheet at December 31, 2021. The mezzanine loan was subordinate to (i) a $110.0 million mortgage loan, originated by a third party, and (ii) a $24.5 million senior mezzanine loan, originated by an affiliate of the Manager. On May 24, 2021, we purchased the $24.5 million senior mezzanine loan at par from the affiliate and acquired legal title to the hotel through a deed-in-lieu of foreclosure. Refer to "Note 5 – Real Estate Owned and Related Debt" for additional information.
In December 2019, we sold $30.3 million and $122.3 million in mezzanine loans secured by an urban retail property to
two funds managed by an affiliate of the Manager, that were originated by us in August 2019. This transaction was evaluated
under ASC 860 - "Transfers and Servicing," and we determined that it qualifies as a sale and accounted for as such (see "Note 4
-Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net"). We recorded no gain or loss related to this sale.
In January 2020, we sold £62.2 million ($81.3 million assuming conversion into USD) in a mezzanine loan and £50.0 million ($65.3 million assuming conversion into USD) unfunded commitment of a senior mortgage secured by a mixed-use property in London, United Kingdom to a fund managed by an affiliate of the Manager, that was originated by us in December 2019. This transaction was evaluated under ASC 860, "Transfers and Servicing," and we determined that it qualifies as a sale and accounted for as such (see "Note 4 - Commercial Mortgage Loans, Subordinate Loans and Other Lending Assets, Net").
In the second quarter of 2020, we sold our interests in three construction loans to entities managed by affiliates of the
Manager. Refer to "Note 4 - Commercial Mortgage, Subordinate Loans and Other Lending Assets, Net" for additional
information related to these sales.
As described in Note 4 above, we own three mezzanine loans, including Junior Mezzanine B Loan, that are secured by the same residential-for-sale property currently under construction in Manhattan, NY. During the third quarter of 2021, the Seller transferred its Junior Mezzanine B Loan position to the Company and in connection with this transfer, one of the property’s subordinate capital providers paid the Seller a price representing the Seller’s original principal balance on the Junior Mezzanine B Loan position with the Seller agreeing to forego its accrued interest on the Junior Mezzanine B Loan.
Term Loan
In May 2019, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of the five arrangers for the
issuance of our senior secured term loan and received $0.6 million of arrangement fees.
In March 2021, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of the eight arrangers for the issuance of our 2028 Term Loan and received $0.2 million of arrangement fees. In addition, funds managed by an affiliate of the Manager invested in $30.0 million of the 2028 Term Loan.
Senior Secured Notes
In June 2021, Apollo Global Securities, LLC, an affiliate of the Manager, served as one of the eight initial purchasers in the issuance of our 2029 Notes and received $0.4 million of initial purchasers' discounts and commissions.