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Related Party Transactions
 6 Months Ended
Jun. 30, 2012
Related Party Transactions [Abstract]  
Related Party Transactions Disclosure [Text Block]

5. RELATED PARTY TRANSACTIONS

 

The Company had entered into a property management agreement with CHG Properties, Inc. (“CHG”), a wholly-owned subsidiary of CI, to manage all of its properties at rates up to 5% of gross income. For the six months ended June 30, 2013 and June 30, 2012, the Company paid CHG total management fees of approximately $113,000 and $324,000, respectively.

 

During the term of the property management agreement, the Company had an option to acquire the business conducted by CHG. The option is exercisable, with the approval of a majority of the Company's directors not otherwise interested in the transaction, without any consent of the property manager, its board or its shareholders. The option price is shares of the Company to be determined by a predefined formula based on the net income of CHG during the 6-month period immediately preceding the month in which the acquisition notice is delivered. The Company has elected to exercise its option to purchase CHG. See Note 1, “Organization and Basis of Presentation” for further discussion.

 

The Company leases a portion of its corporate headquarters at Pacific Oaks Plaza in Escondido, California to C.I. Holding Group, Inc. and Subsidiaries (“CI”), a small shareholder in the Company that is approximately 35% owned by the Company's executive management. Total rents charged and paid by these affiliates was approximately $11,000 and $15,000 for the three months ended June 30, 2013 and 2012, respectively. Total rents charged and paid by these affiliates was approximately $20,000 and $29,000 for the six months ended June 30, 2013 and 2012, respectively.

 

In January 2012, the limited partner of NetREIT 01, LP (the “Partnership”) that owned the 7-Eleven property exercised its option to convert approximately 30.0% of its ownership interests in the Partnership in exchange for approximately 17,060 shares of Company common stock. In March 2012, the Company bought back all of these shares from the limited partner at a price per share that was determined when the partnership was formed, which, adjusted for stock dividends, was $8.44 per share. After conversion, our interest in the Partnership increased to approximately 77%. The stock buy-back transaction was subjected to the Company's related party transaction policy which requires a review of the transaction by the uninterested parties of the Audit Committee and a subsequent vote by the Company's Board of Directors. In 2012, the 7-Eleven property was sold. Also in 2012, the Partnership acquired The Presidio property.

 

 

The limited partner of NetREIT 01, LP is the Allen Trust DTD 7-9-1999. William H. Allen, a Director of the Company and Chairman of the Audit Committee, is a beneficiary and a trustee of the trust. The Partnership was formed approximately one year before Mr. Allen became a Board Member.