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Related Party Transactions | 9 Months Ended
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Sep. 30, 2019
Related Party Transactions [Abstract] |
Related Party Transactions | 9. Related Party Transactions Chesapeake Hospitality. Chesapeake Hospitality is owned and controlled by individuals including Andrew M. Sims, our chairman and chief executive officer, and Kim E. Sims and Christopher L. Sims, each a former director of Sotherly and immediate family member of our chairman and chief executive officer. As of September 30, 2019, Andrew M. Sims, Kim E. Sims and Christopher L. Sims, beneficially owned, directly or indirectly, approximately 19.3375%, 20.0%, and 20.0%, respectively, of the total outstanding ownership interests of Chesapeake Hospitality. Kim E. Sims and Christopher L. Sims are currently officers and employees of Chesapeake Hospitality. The following is a summary of the transactions between Chesapeake Hospitality and us: Accounts Receivable – At September 30, 2019 and December 31, 2018, we were due $96,599 and $91,987, respectively, from Chesapeake Hospitality. Management Agreements – As of September 30, 2019, all of our wholly-owned hotels (with the exception of the Hyatt Centric Arlington hotel) and the Hyde Resort & Residences operated under various management agreements with Chesapeake Hospitality. On December 15, 2014, we entered into a master agreement and a series of individual hotel management agreements that became effective on January 1, 2015. The master agreement has a five-year term but may be extended for such additional periods as long as an individual management agreement remains in effect. The base management fee for the Whitehall and the Georgian Terrace remained at 2.00% through 2015, increased to 2.25% in 2016 and increased to 2.50% thereafter. The base management fees for the remaining properties in the current portfolio was 2.65% through 2017 and decreased to 2.50% thereafter. For new individual hotel management agreements, Chesapeake Hospitality will receive a base management fee of 2.00% of gross revenues for the first full year from the commencement date through the anniversary date, 2.25% of gross revenues the second full year, and 2.50% of gross revenues for every year thereafter. Each management agreement sets an incentive management fee equal to 10.0% of the amount by which gross operating profit, as defined in the management agreement, for a given year exceeds the budgeted gross operating profit for such year; provided, however, that the incentive management fee payable in respect of any such year shall not exceed 0.25% of the gross revenues of the hotel included in such calculation. Base management and administrative fees earned by Chesapeake Hospitality for our properties was approximately $1.1 million and $1.0 million for the three months ended September 30, 2019 and 2018, respectively and approximately $3.6 million and $3.2 million for the nine months ended September 30, 2019 and 2018, respectively. In addition, estimated incentive management fees each of approximately $0.1 million were accrued for the nine months ended September 30, 2019 and 2018, respectively. On July 15, 2019 we notified Chesapeake Hospitality of our intent not to renew or extend the management agreements for ten of our wholly-owned hotels when they expire on January 1, 2020. Employee Medical Benefits – We purchase employee medical benefits through Maryland Hospitality, Inc. (d/b/a MHI Health), an affiliate of Chesapeake Hospitality for those employees that are employed by Chesapeake Hospitality that work exclusively for our hotel properties. Gross premiums for employee medical benefits paid by the Company (before offset of employee co-payments) were each approximately $1.4 million for the three months ended September 30, 2019 and 2018, respectively and were approximately $4.2 million and $4.3 million for the nine months ended September 30, 2019 and 2018, respectively. Workers’ Compensation Insurance – Pursuant to our management agreements with Chesapeake Hospitality, we pay the premiums for workers’ compensation insurance under a self-insured policy owned by Chesapeake Hospitality or its affiliates, and which covers those employees of Chesapeake Hospitality that work exclusively for the properties managed by Chesapeake Hospitality. For the three months ended September 30, 2019 and 2018, we paid approximately $0.2 million and $0.3 million, respectively, and for the nine months ended September 30, 2019 and 2018, we paid approximately $0.8 million and $0.8 million, respectively, in premiums for the portion of the plan covering those employees that work exclusively for our properties under our management agreements with Chesapeake Hospitality. Loan Receivable – Affiliate. As of September 30, 2019 and December 31, 2018, approximately $4.3 million and $4.4 million, respectively, was due to the Operating Partnership for advances to the Company under a loan agreement dated December 29, 2016. The Company used the proceeds to make advances to the ESOP to purchase shares of the Company’s common stock. Others. We employ Ashley S. Kirkland, the daughter of our Chief Executive Officer as a legal analyst and Robert E. Kirkland IV, her husband, as our compliance officer. We also employ Andrew M. Sims Jr., the son of our Chief Executive Officer, as a manager. Total compensation, including salary and benefits, for the three months ended September 30, 2019 and 2018 totaled $103,585 and $95,568, respectively and for the nine months ended September 30, 2019 and 2018 totaled $309,875 and $290,144, respectively, for all three individuals. During the three-month period ending September 30, 2019 and 2018, the Company reimbursed $26,157 and $27,491, respectively, and during the nine-month period ending September 30, 2019 and 2018, the Company reimbursed $113,415 and $87,847, respectively to a partnership controlled by the Chief Executive Officer for business-related air travel pursuant to the Company’s travel reimbursement policy.

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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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