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Related Party Transactions | 3 Months Ended
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Mar. 31, 2019
Related Party Transactions [Abstract] |
Related Party Transactions | Related Party Transactions Summarized below are the related party costs incurred by the Company for the three months ended March 31, 2019, and 2018, respectively, and amounts payable as of March 31, 2019 and December 31, 2018:
| Incurred for the Three Months Ended March 31, |  | Payable as of March 31, |  | Payable as of December 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Expensed |  |  |  |  |  |  |
Corporate operating expenses | $ | 829 |  |  | $ | 678 |  |  | $ | 892 |  |  | $ | 63 |
Other operating expenses (1) | — |  |  | — |  |  | 215 |  |  | 215 |
Property management fees | 481 |  |  | 459 |  |  | 165 |  |  | 157 |
Performance distribution allocation | 1,920 |  |  | 2,061 |  |  | 1,920 |  |  | 7,807 |
Advisory fees | 2,339 |  |  | 2,301 |  |  | — |  |  | 781 |
Capitalized/Offering |  |  |  |  |  |  |
Organization and offering expense | 3 |  |  | 240 |  |  | 1,316 |  | (5) | 1,312 |
Other costs advanced by the Advisor | 228 |  |  | 71 |  |  | 374 |  |  | 367 |
Selling commissions (2) | — |  |  | 11 |  |  | — |  |  | — |
Dealer Manager fees | — |  |  | 45 |  |  | — |  |  | — |
Stockholder servicing fee (3) | — |  |  | 82 |  |  | 7,252 |  |  | 8,302 |
Distribution fees | 5 |  |  | — |  |  | — |  |  | — |
Advisor advances: (4) |  |  |  |  |  |  |
Organization and offering expenses | — |  |  | 18 |  |  | 34 |  |  | 44 |
Dealer Manager fees | — |  |  | — |  |  | — |  |  | — |
Total | $ | 5,805 |  |  | $ | 5,966 |  |  | $ | 12,168 |  |  | $ | 19,048 |
(1) | Other operating expenses include costs incurred by the Company's former sponsor, GCC, related to acquisition transactions that failed to close.
(2) | On September 18, 2017, the Company and the Dealer Manager entered into a dealer manager agreement for the Follow-On Offering. See the "Dealer Manager Agreement" section below for details regarding selling commissions and dealer manager fees.
(3) | The Dealer Manager continues to receive a stockholder servicing fee with respect to Class AA shares as detailed in the Company's IPO prospectus. The stockholder servicing fee is paid quarterly and accrues daily in an amount equal to 1/365th of 1.0% of the NAV per share of the Class AA shares, up to an aggregate of 4% of the gross proceeds of Class AA shares sold. The Company will cease paying the stockholder servicing fee with respect to the Class AA shares at the earlier of (i) the date at which the aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the sale of shares in the Company's IPO (excluding proceeds from sales pursuant to the related DRP); (ii) the fourth anniversary of the last day of the fiscal quarter in which the Company's IPO terminated; (iii) the date that such Class AA share is redeemed or is no longer outstanding; and (iv) the occurrence of a merger, listing on a national securities exchange, or an extraordinary transaction.
(4) | Pursuant to the original advisory agreement, commencing November 2, 2015, the Company remained obligated to reimburse the Advisor for organizational and offering costs incurred after such date. Terms of the organizational and offering costs are included in the Company's 2016 Annual Report on Form 10-K filed on March 15, 2017.
(5) | Excludes amounts in excess of the 15% organization and offering costs limitation, which includes a receivable of approximately $1.3 million from the Company's Advisor and is included in "Due from Affiliates" on the consolidated balance sheet. See Note 7, Equity, for additional details.
On September 20, 2017, an affiliated entity of the Company purchased 264 Class T shares, 264 Class S shares, 264 Class D shares, and 263,200 Class I shares in the Follow-On Offering for $2.5 million. As of March 31, 2019 the total outstanding shares owned by affiliates (including DRP) was 280 Class T shares, 280 Class S shares, 283 Class D shares, 283,016 Class I shares, and 287,449 Class A shares. Advisory Agreement In connection with the Follow-On Offering, on September 20, 2017, the Company entered into the Advisory Agreement with the Advisor and the Operating Partnership. The Advisory Agreement is substantially similar to the original advisory agreement, except that the Company will not pay the Advisor any acquisition, financing or other similar fees from proceeds raised in the Follow-On Offering in connection with making investments and will instead pay the Advisor an advisory fee that will be payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 1.25% of the NAV for each class of common stock for each day. As a result of the Mergers, the Company no longer has an external advisor. See Note 12, Subsequent Events, for additional details. Performance Distribution So long as the Advisory Agreement has not been terminated (including by means of non-renewal), the Advisor will hold a special limited partnership interest in the Operating Partnership that entitles it to receive a distribution from the Operating Partnership equal to 12.5% of the total return, subject to a 5.5% hurdle amount and a high water mark, with a catch-up (terms of the performance distribution allocation are included in the Company's 2017 Annual Report on Form 10-K filed on March 9, 2018). Such distribution will be made annually and accrue daily. In February 2019, the Company paid in cash approximately $3.9 million and issued approximately $3.9 million in Class I limited partnership units to the Advisor. The Advisor elected to receive 50% in cash and the remaining in Class I limited partnership units. As a result of the Mergers, the special limited partnership interest that entitled the Operating Partnership to the performance distribution was automatically redeemed, canceled and retired. See Note 12, Subsequent Events, for additional details. Operating Expenses The Advisor and its affiliates are entitled to reimbursement for certain expenses incurred on behalf of the Company in connection with providing administrative services, including related personnel costs; provided, however, the Advisor must reimburse the Company for the amount, if any, by which total operating expenses (as defined), including advisory fees, paid during the previous 12 months then ended exceeded the greater of: (i) 2% of the Company’s average invested assets for that 12 months then ended; or (ii) 25% of the Company’s net income, before any additions to reserves for depreciation, bad debts or other expenses connected with the acquisition and disposition of real estate interests and before any gain from the sale of the Company’s assets, for that fiscal year, unless the Board has determined that such excess expenses were justified based on unusual and non-recurring factors. The Advisor may waive or defer all or a portion of these reimbursements or elect to receive Class I shares or Class I units of the Operating Partnership in lieu of these reimbursements at any time and from time to time, in its sole discretion. For the three months ended March 31, 2019 and 2018, the Company’s total operating expenses did not exceed the 2%/25% guideline. The Company reimbursed the Advisor and its affiliates a portion of the compensation paid by the Advisor and its affiliates for the Company's principal financial officer, Javier F. Bitar, executive vice president, David C. Rupert, and vice president and secretary, Howard S. Hirsch in the amount of approximately $0.23 million and $0.15 million, which is partially included in offering costs with the remaining amount included in corporate operating expenses to affiliates for the three months ended March 31, 2019 and 2018, respectively, for services provided to the Company, for which the Company does not pay the Advisor a fee. In addition, the Company incurred approximately $0.05 million and $0.01 million in reimbursable expenses to the Advisor for services provided to the Company by certain of its other executive officers for each of the three months ended March 31, 2019 and 2018, respectively. The reimbursable expenses include components of salaries, bonuses, benefits and other overhead charges and are based on the percentage of time each executive officer spends on the Company's affairs. Dealer Manager Agreement The Company entered into a dealer manager agreement and associated form of participating dealer agreement (the "Dealer Manager Agreement") with the Dealer Manager. The terms of the Dealer Manager Agreement are substantially similar to the terms of the dealer manager agreement from the Company's IPO, except as it relates to the share classes offered and the fees to be received by the Dealer Manager (terms of the Dealer Manager Agreement are included in the Company's 2018 Annual Report on Form 10-K filed on March 14, 2019). Distribution Fees Subject to Financial Industry Regulatory Authority, Inc.'s limitations on underwriting compensation, under the Dealer Manager Agreement the Company will pay the Dealer Manager a distribution fee for ongoing services rendered to stockholders by participating broker-dealers or broker-dealers servicing investors’ accounts, referred to as servicing broker-dealers. The fee accrues daily and is paid monthly in arrears and is calculated based on the average daily NAV for the applicable month (the “Average NAV”) (terms of the distribution fees are included in the Company's 2018 Annual Report on Form 10-K filed on March 14, 2019). Property Management Agreement In the event that the Company contracts directly with non-affiliated third party property managers with respect to its individual properties, the Company pays the Property Manager an oversight fee equal to 1.0% of the gross revenues of the property managed, plus reimbursable costs as applicable (terms of the property management agreement are included in the Company's 2018 Annual Report on Form 10-K filed on March 14, 2019). As a result of the Mergers, these fees are now eliminated in consolidation. See Note 12, Subsequent Events, for additional details. Conflicts of Interest The Sponsor, Advisor, Property Manager and their officers and certain of their key personnel and their respective affiliates currently serve as key personnel, advisors and managers to GCEAR. Certain of the Company's officers are also officers to some or all of 12 other programs affiliated with the Company's former sponsor, including, Griffin-American Healthcare REIT III, Inc. ("GAHR III"), Phillips Edison Grocery Center REIT III, Inc. ("PECO III"), and Griffin-American Healthcare REIT IV, Inc. ("GAHR IV"), all of which are publicly-registered, non-traded real estate investment trusts, and Griffin Institutional Access Real Estate Fund ("GIA Real Estate Fund") and Griffin Institutional Access Credit Fund ("GIA Credit Fund"), both of which are non-diversified, closed-end management investment companies that are operated as interval funds under the Investment Company Act of 1940, as amended (the "1940 Act"). Because these persons have competing demands on their time and resources, they may have conflicts of interest in allocating their time between the Company’s business and these other activities. Some of the material conflicts that the Advisor or its affiliates will face are: (1) competing demand for time of the Advisor’s executive officers and other key personnel from the Sponsor and other affiliated entities; (2) determining if certain investment opportunities should be recommended to the Company or GCEAR; and (3) influence of the fee structure under the Advisory Agreement and distribution structure of the operating partnership agreement that could result in actions not necessarily in the long-term best interest of the Company's stockholders. The Board has adopted the Sponsor’s acquisition allocation policy as to the allocation of acquisition opportunities among GCEAR and the Company, which is as follows: The Sponsor will allocate potential investment opportunities to the Company and GCEAR based on the following factors:
• | the investment objectives of each program;
• | the amount of funds available to each program;
• | the financial impact of the acquisition on each program, including each program’s earnings and distribution ratios;
• | various strategic considerations that may impact the value of the investment to each program;
• | the effect of the acquisition on concentration/diversification of each program’s investments; and
• | the income tax effects of the investment on each program.
In the event all acquisition allocation factors have been exhausted and an investment opportunity remains equally suitable for the Company and GCEAR, the Sponsor will offer the investment opportunity to the REIT that has had the longest period of time elapse since it was offered an investment opportunity. As a result of the Mergers, most of the conflict of interests described above are no longer applicable. In addition, the operating partnership agreement was amended and restated. See Note 12, Subsequent Events, for additional details. Economic Dependency The Company will be dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company's shares of common stock available for issue, the identification, evaluation, negotiation, purchase and disposition of properties and other investments, management of the daily operations of the Company’s real estate portfolio, and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other resources. As a result of the Mergers, the Company is no longer dependent on the Advisor. See Note 12, Subsequent Events, for additional details.

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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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