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Related Party Transactions and Investments in Non-Consolidated Entities | 12 Months Ended
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Dec. 31, 2015
Related Party Transactions and Investments in Non-Consolidated Entities |
Related Party Transactions and Investments in Non-Consolidated Entities | 3. Related Party Transactions and Investments in Non-Consolidated Entities Investment in Sponsored REITs The Company held a common stock interest in 9, 10 and 14 Sponsored REITs at December 31, 2015, 2014 and 2013, respectively. The Company holds a non-controlling preferred stock investment in two of these Sponsored REITs, FSP 303 East Wacker Drive Corp. (“East Wacker”) and FSP Grand Boulevard Corp. (“Grand Boulevard”), from which it continues to derive economic benefits and risks. During the year ended December 31, 2015, a property owned by one Sponsored REIT was sold and, thereafter, liquidating distributions for their preferred shareholders were declared and issued. During the year ended December 31, 2014, properties owned by four Sponsored REITs were sold and, thereafter, liquidating distributions for their preferred shareholders were declared and issued. The Company held a mortgage loan with two of these entities secured by the property owned by FSP Galleria North Corp. (Galleria) and the property owned by FSP Highland Place I Corp. (Highland). The loan with Galleria in the principal amount of $13,880,000 was repaid by the proceeds of the sale and the loan with Highland in the principal amount of $3,395,000 was repaid by the proceeds of the sale. In December 2013, the property owned by FSP 505 Waterford Corp. (“505 Waterford”), a Sponsored REIT, was sold and, thereafter, 505 Waterford declared and issued a liquidating distribution for its preferred shareholders. The Company held a mortgage loan secured by the property owned by 505 Waterford in the principal amount of $2,350,000, which was repaid from the proceeds of the sale. In September 2006, the Company purchased 48 preferred shares or 4.6% of the outstanding preferred shares of one of its Sponsored REITs, FSP Phoenix Tower Corp (“Phoenix Tower”). On December 20, 2012, the property owned by Phoenix Tower was sold and, thereafter, Phoenix Tower declared and issued a liquidating distribution for its preferred shareholders, from which the Company was entitled to $4,866,000. The Company received approximately $4,752,000 on January 4, 2013, $96,000 on September 30, 2013 and $18,000 on December 29, 2015. Equity in l osses of investment in non-consolidated REITs: The following table includes equity in losses of investments in non-consolidated REITs:
|  | Year Ended December 31, |
(in thousands) |  | 2015 |  | 2014 |  | 2013 |
Equity in losses of East Wacker |  |  | 1,352 |  |  | 1,568 |  |  | 1,021 |
Equity in losses of Grand Boulevard |  |  | 99 |  |  | 192 |  |  | 337 |
|  | $ | 1,451 |  | $ | 1,760 |  | $ | 1,358 |
Equity in losses of East Wacker is derived from the Company’s preferred stock investment in the entity. In December 2007, the Company purchased 965.75 preferred shares or 43.7% of the outstanding preferred shares of East Wacker for $82,813,000 (which represented $96,575,000 at the offering price net of commissions of $7,726,000, loan fees of $5,553,000 and acquisition fees of $483,000 that were excluded). Equity in losses of Grand Boulevard is derived from the Company’s preferred stock investment in the entity. In May 2009, the Company purchased 175.5 preferred shares or 27.0% of the outstanding preferred shares of Grand Boulevard for $15,049,000 (which represented $17,550,000 at the offering price net of commissions of $1,404,000, loan fees of $1,009,000 and acquisition fees of $88,000 that were excluded). The following table includes distributions received from non-consolidated REITs:
|  | Year Ended December 31, |
(in thousands) |  | 2015 |  | 2014 |  | 2013 |
Distributions from East Wacker |  | $ | — |  | $ | — |  | $ | — |
Distributions from Grand Boulevard |  |  | 107 |  |  | 107 |  |  | 107 |
|  | $ | 107 |  | $ | 107 |  | $ | 107 |
Non-consolidated REITs The operating data below for 2015 includes the operations of the 10 Sponsored REITs the Company held an interest in during the year and the 9 Sponsored REITs the Company held an interest in as of December 31, 2015. The operating data below for 2014 includes the operations of the 14 Sponsored REITs the Company held an interest in during the year and the 10 Sponsored REITs the Company held an interest in as of December 31, 2014. The operating data below for 2013 includes the operations of the 15 Sponsored REITs the Company held an interest in during the year ended December 31, 2013. Summarized financial information for the Sponsored REITs is as follows:
|  | December 31, |  | December 31, |
(in thousands) |  | 2015 |  | 2014 |
Balance Sheet Data (unaudited): |  |  |  |  |  |  |
Real estate, net |  | $ | 418,959 |  | $ | 451,822 |
Other assets |  |  | 101,734 |  |  | 127,259 |
Total liabilities |  |  | (203,628) |  |  | (203,239) |
Shareholders’ equity |  | $ | 317,065 |  | $ | 375,842 |
|  | For the Year Ended |
|  | December 31, |
(in thousands) |  | 2015 |  | 2014 |  | 2013 |
Operating Data (unaudited): |  |  |  |  |  |  |  |  |  |
Rental revenues |  | $ | 57,777 |  | $ | 66,457 |  | $ | 93,608 |
Other revenues |  |  | 34 |  |  | 43 |  |  | 68 |
Operating and maintenance expenses |  |  | (31,693) |  |  | (34,318) |  |  | (48,718) |
Depreciation and amortization |  |  | (21,149) |  |  | (23,417) |  |  | (31,450) |
Interest expense |  |  | (9,920) |  |  | (9,627) |  |  | (13,752) |
Gain on sale, less applicable income tax |  |  | — |  |  | — |  |  | 5,851 |
Net income (loss) |  | $ | (4,951) |  | $ | (862) |  | $ | 5,607 |
Management fees and interest income from loans: Asset management fees range from 1% to 5% of collected rents and the applicable contracts are cancelable with 30 day notice. Asset management fee income from non-consolidated entities amounted to approximately $701,000, $945,000 and $1,078,000 for the years ended December 31, 2015, 2014 and 2013, respectively. From time to time the Company may make secured loans (“Sponsored REIT Loans”) to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes. The Company reviews Sponsored REIT loans for impairment each reporting period. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to coll ect all amounts recorded on the balance sheet. The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. None of the Sponsored REIT loans have been impaired. The Company anticipates that each Sponsored REIT Loan will be repaid at maturity or earlier from long term financings of the underlying properties, cash flows from the underlying properties or some other capital event. Each Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately one to three years. Except for two mortgage loans which bear interest at a fixed rate, advances under each Sponsored REIT Loan bear interest at a rate equal to the 30-day LIBOR rate plus an agreed upon amount of basis points and most advances also require a 50 basis point draw fee. The following is a summary of the Sponsored REIT Loans outstanding as of December 31, 2015:
|  |  |  |  |  | Maximum |  | Amount |  |  |  |  |  |  | Interest |
(dollars in thousands) |  |  |  | Maturity |  | Amount |  | Drawn at |  | Interest |  | Draw |  | Rate at |
Sponsored REIT |  | Location |  | Date |  | of Loan |  | 31-Dec-15 |  | Rate (1) |  | Fee (2) |  | 31-Dec-15 |
Secured revolving lines of credit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FSP Satellite Place Corp. |  | Duluth, GA |  | 31-Mar-17 |  | $ | 5,500 |  | $ | 5,500 |  | L+ | 4.4 | % | 0.5 | % | 4.64 | %
FSP 1441 Main Street Corp. |  | Columbia, SC |  | 31-Mar-16 |  |  | 10,800 |  |  | 9,000 |  | L+ | 4.4 | % | 0.5 | % | 4.64 | %
FSP Energy Tower I Corp. |  | Houston, TX |  | 30-Jun-17 |  |  | 20,000 |  |  | 12,600 |  | L+ | 5.0 | % | 0.5 | % | 5.24 | %
Secured construction loan |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FSP 385 Interlocken Development Corp. |  | Broomfield, CO |  | 30-Apr-16 |  |  | 42,000 |  |  | 37,541 |  | L+ | 4.4 | % | n/a |  | 4.64 | %
Mortgage loan secured by property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FSP Monument Circle LLC (3) |  | Indianapolis, IN |  | 7-Dec-18 |  |  | 21,000 |  |  | 21,000 |  |  | 4.90 | % | n/a |  | 4.90 | %
FSP Energy Tower I Corp. (4) |  | Houston, TX |  | 30-Jun-17 |  |  | 33,000 |  |  | 33,000 |  |  | 6.41 | % | n/a |  | 6.41 | %
|  |  |  |  |  | $ | 132,300 |  | $ | 118,641 |  |  |  |  |  |  |  |
| (1) |  | The interest rate is 30-day LIBOR rate plus the additional rate indicated, otherwise a fixed rate.
| (2) |  | The draw fee is a percentage of each new advance, and is paid at the time of each new draw.
| (3) |  | This mortgage loan includes an origination fee of $164,000 and an exit fee of $38,000 when repaid by the borrower.
| (4) |  | This mortgage loan was extended on June 30, 2015 and includes an annual extension fee of $108,900 paid by the borrower to the Company.
The Company recognized interest income and fees from the Sponsored REIT Loans of approximately $5,230,000, $5,296,000 and $5,568,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

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