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RELATED PARTY TRANSACTIONS AND FEES | 12 Months Ended
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Dec. 31, 2015
Related Party Transactions [Abstract] |
RELATED PARTY TRANSACTIONS AND FEES | NOTE 7. RELATED PARTY TRANSACTIONS AND FEES We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests, or affiliates of the entity. The Company has historically engaged in and may continue to engage in certain business transactions with related parties, including but not limited to asset acquisition and dispositions. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest. Since April 30, 2011, Pillar, the sole shareholder of which is Realty Advisors, LLC, a Nevada limited liability company, the sole member of which is RAI, a Nevada corporation, the sole shareholder of which is MRHI, a Nevada corporation, the sole shareholder of which is a trust known as the May Trust, became the Company’s external Advisor and Cash Manager. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges, for the Company’s benefit, debt and equity financing with third party lenders and investors. Pillar also serves as an Advisor and Cash Manager to TCI and IOT. As the contractual advisor, Pillar is compensated by ARL under an Advisory Agreement that is more fully described in Part III, Item 10. “Directors, Executive Officers and Corporate Governance – The Advisor”. ARL has no employees. Employees of Pillar render services to ARL in accordance with the terms of the Advisory Agreement. Regis Realty Prime, LLC, dba Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, manages our commercial and provides brokerage services. Regis receives property management fees and leasing commissions in accordance with the terms of its property-level management agreement. Regis is also entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement. See Part III, Item 10. “Directors, Executive Officers and Corporate Governance – Property Management and Real Estate Brokerage”. Regis Hotel I, LLC, managed the Company’s hotel investments. ARL engages third-party companies to lease and manage its apartment properties. Below is a description of the related party transactions and fees between Pillar and Regis:
Fees, expenses, and revenue paid to and/or received from our advisor: |  |  |  |  |  |  |  |  |
|  | 2015 |  |  | 2014 |  |  | 2013 |
|  | (dollars in thousands) |
Fees: |  |  |  |  |  |  |  |  |  |  |  |
Advisory |  | $ | 9,775 |  |  | $ | 8,943 |  |  | $ | 10,166 |
Mortgage brokerage and equity refinancing |  |  | 1,612 |  |  |  | 1,152 |  |  |  | 1,878 |
Net income |  |  | 492 |  |  |  | 3,669 |  |  |  | 4,089 |
Property acquisition and sales |  |  | 921 |  |  |  | 177 |  |  |  | — |
|  | $ | 12,800 |  |  | $ | 13,941 |  |  | $ | 16,133 |
Other Expense: |  |  |  |  |  |  |  |  |  |  |  |
Cost reimbursements |  | $ | 3,675 |  |  | $ | 3,449 |  |  | $ | 3,466 |
Interest paid (received) |  |  | (1,233 | ) |  |  | (1,043 | ) |  |  | 431 |
|  | $ | 2,442 |  |  | $ | 2,406 |  |  | $ | 3,897 |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |
Rental |  | $ | 726 |  |  | $ | 701 |  |  | $ | 670 |
Fees paid to Regis and related parties: |  |  |  |  |  |  |  |  |  |  |  |
|  | 2015 |  |  | 2014 |  |  | 2015 |
|  | (dollars in thousands) |
Fees: |  |  |  |  |  |  |  |  |  |  |  |
Property acquisition |  | $ | 1,932 |  |  | $ | 348 |  |  | $ | — |
Property management, construction manaement and leasing commissions |  |  | 717 |  |  |  | 583 |  |  |  | 474 |
Real estate brokerage |  |  | 1,105 |  |  |  | 2,848 |  |  |  | 4,081 |
|  | $ | 3,754 |  |  | $ | 3,779 |  |  | $ | 4,555 |
The Company received rental revenue of $0.7 million in 2015, $0.7 million in 2014, and $0.7 million in 2013 from Pillar and its related parties for properties owned by the Company. As of December 31, 2015, the Company had notes and interest receivables, net of allowances, of $102.5 million and $7.9 million, respectively, due from UHF, a related party. See Part 2, Item 8. Note 3. “Notes and Interest Receivable”. During the current period, the Company recognized interest income of $10.9 million, originated $11.6 million, received principal payments of $4.7 million and received interest payments of $11.8 million from these related party notes receivables. On January 1, 2012, the Company’s subsidiary, TCI, entered into a development agreement with UHF, a non-profit corporation that provides management services for the development of residential apartment projects in the future. This development agreement was terminated December 31, 2013. The Company has also invested in surplus cash notes receivables from UHF and has sold several residential apartment properties to UHF in prior years. Due to this ongoing relationship and the significant investment in the performance of the collateral secured under the notes receivable, UHF has been determined to be a related party. The Company is the primary guarantor, on a $60.35 million mezzanine loan between UHF and a lender. In addition, ARL, and an officer of the Company are limited recourse guarantors of the loan. As of December 31, 2015 UHF was in compliance with the covenants to the loan agreement. The Company is part of a tax sharing and compensating agreement with respect to federal income taxes between ARL, TCI and IOT and their subsidiaries that was entered into in July of 2009. The expense (benefit) in each year was calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory tax rate of 35%. The following table reconciles the beginning and ending balances of accounts receivable from and (accounts payable) to related parties as of December 31, 2015 (dollars in thousands):
|  | Pillar |
Related party receivable, December 31, 2014 |  | $ | 21,414 |
Cash transfers |  |  | 66,824 |
Advisory fees |  |  | (9,775 | )
Net income fee |  |  | (492 | )
Cost reimbursements |  |  | (3,675 | )
Interest income |  |  | 1,233 |
Notes receivable purchased |  |  | (18,221 | )
Fees and commissions |  |  | (5,571 | )
Expenses paid by Advisor |  |  | (6,302 | )
Financing (mortgage payments) |  |  | (1,831 | )
Sales/purchases transactions |  |  | (26,317 | )
Tax sharing |  |  | — |
Related party receivable, December 31, 2015 |  | $ | 17,287 |
Below are transactions that involve a related party: As of December 31, 2015, the Company has approximately 91 acres of land, at various locations that were sold to related parties in multiple transactions. These transactions are treated as “subject to sales contract” on the Consolidated Balance Sheets. Due to the related party nature of the transactions TCI has deferred the recording of the sales in accordance with ASC 360-20.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph b -Article 3A + Details
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