| Related Party Transactions | Note 11 — Related Party Transactions As of June 30, 2015 and December 31, 2014 , the Sponsor, the Special Limited Partner and a subsidiary of the Service Provider owned, in the aggregate, 244,444 shares of the Company's outstanding Common Stock. The Advisor, the Service Provider, and their affiliates may incur costs and fees on behalf of the Company. As of June 30, 2015 and December 31, 2014 , the Company had $0.2 million and $0.5 million of receivable from affiliated entities and $2.0 million and $0.4 million of payable to their affiliates, respectively. The Company is the sole general partner of the OP and holds the majority of OP Units. The Special Limited Partner, a limited partner, held 22 OP Units as of June 30, 2015 , which represented a nominal percentage of the aggregate OP ownership. On June 2, 2015 , the Advisor exchanged 1,726,323 previously-issued Class B units for 1,726,323 OP Units pursuant to the OP Agreement. These OP Units are exchangeable for shares of Common Stock of the Company on a one-for-one basis, or the cash value of shares of Common Stock (at the option of the Company), 12 months from the Listing Date subject to the terms of the limited partnership agreement of the OP. The Advisor and the OP also entered into a Contribution and Exchange Agreement pursuant to which the Advisor contributed $0.8 million in cash to the OP in exchange for 83,333 OP Units. As of June 30, 2015 , the Advisor held a total of 1,809,656 OP Units. OP Unit distributions of $0.3 million and $0.4 million were paid to the Advisor which relate to the converted Class B units during the three and six months ended June 30, 2015 , respectively. OP Unit distributions of $21,000 and $27,000 were paid to the Advisor during the three and six months ended June 30, 2014 , respectively. A holder of OP Units, other than the Company, has the right to convert OP Units for a corresponding number of shares of the Company's Common Stock, at the Company's option, or the cash value equivalent of those shares in accordance with the limited partnership agreement of the OP. The remaining rights of the holders of OP Units are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP's assets. During the six months ended June 30, 2015 , the Company invested $0.5 million in a real estate income fund managed by an affiliate of the Sponsor (see Note 6 — Fair Value of Financial Instruments). There is no obligation to purchase any additional shares and the shares can be sold at any time. Fees Paid in Connection with the IPO The Legacy Dealer Manager was paid fees and compensation in connection with the sale of the Company's Common Stock in the IPO which was completed on June 30, 2014 . Specifically, the Legacy Dealer Manager was paid selling commissions of up to 7.0% of the per share purchase price of offering proceeds before reallowance of commissions earned by participating broker-dealers. In addition, the Legacy Dealer Manager was paid 3.0% of the per share purchase price from the sale of the Company's shares, a portion of which was reallowed to participating broker-dealers. The following table details total selling commissions and dealer manager fees incurred from and payable to the Legacy Dealer Manager related to the sale of Common Stock as of and for the periods presented: Payable as of Three Months Ended June 30, Six Months Ended June 30, June 30, December 31, (In thousands) 2015 2014 2015 2014 2015 2014 Total commissions and fees to Legacy Dealer Manager $ — $ 97,303 $ (8 ) $ 146,556 $ — $ 13 The Advisor and its affiliates were paid compensation and received reimbursement for services relating to the IPO, including transfer agent services provided by an affiliate of the Legacy Dealer Manager. All offering costs incurred by the Company or the Advisor and its affiliated entities on behalf of the Company have been charged to additional paid-in capital on the accompanying consolidated balance sheets. The following table details fees and offering cost reimbursements incurred and payable to the Advisor and the Legacy Dealer Manager related to the sale of Common Stock as of and for the periods presented: Payable as of Three Months Ended June 30, Six Months Ended June 30, June 30, December 31, (In thousands) 2015 2014 2015 2014 2015 2014 Fees and expense reimbursements to the Advisor and Legacy Dealer Manager $ 40 $ 3,672 $ — $ 11,746 $ — $ 61 The Company was responsible for paying offering and related costs from the IPO, excluding commissions and dealer manager fees, up to a maximum of 1.5% of gross proceeds received from its ongoing offering of Common Stock, measured at the end of the offering. Offering costs in excess of the 1.5% cap as of the end of the offering are the Advisor's responsibility. During the six months ended June 30, 2015 , the Advisor reimbursed the Company $0.5 million of offering costs. Offering and related costs, excluding commissions and dealer manager fees, did not exceed 1.5% of gross proceeds received from the IPO. After the escrow break, the Advisor elected to cap cumulative offering costs incurred by the Company, net of unpaid amounts, to 11.5% of gross Common Stock proceeds during the offering period. As of June 30, 2015 , cumulative offering costs were $188.1 million . As of June 30, 2015 , cumulative offering costs net of unpaid amounts did not exceed 11.5% . Fees Paid in Connection With the Operations of the Company Until April 1, 2015, the Advisor was paid an acquisition fee of 1.0% of the contract purchase price of each acquired property and 1.0% of the amount advanced for a loan or other investment. Solely with respect to investment activities in Europe, the Service Provider was paid 50% of the acquisition fees and the Advisor was paid the remaining 50% , as set forth in the service provider agreement. The Advisor was also reimbursed for insourced expenses incurred in the process of acquiring properties, which were fixed initially at 0.5% of the contract purchase price and 0.5% of the amount advanced for a loan or other investment. Additionally, the Company paid third party acquisition expenses. The Company's Advisor provides services in connection with the origination or refinancing of any debt that the Company obtained and used to acquire properties or to make other permitted investments, or that was assumed, directly or indirectly, in connection with the acquisition of properties. Until April 1, 2015, the Company paid the Advisor a financing coordination fee equal to 0.75% of the amount available and/or outstanding under such financing, subject to certain limitations. Solely with respect to the Company's investment activities in Europe, the Service Provider was paid 50% of the financing coordination fees and the Advisor received the remaining 50% , as set forth in the service provider agreement. Such fees were deducted from fees payable to the Advisor, pursuant to the service provider agreement. Until the Listing, the Company paid the Advisor an asset management fee equal to 0.75% per annum of the total of: the cost of the Company's assets (cost includes the purchase price, acquisition expenses, capital expenditures and other customarily capitalized costs, but excluding acquisition fees) plus costs and expenses incurred by the Advisor in providing asset management services, less the excess, if any, of dividends over FFO plus acquisition fees expenses and restricted share grant amortization. Until April 1, 2015, as payment for this arrangement, the Company caused the OP to issue (subject to periodic approval by the board of directors) to the Advisor performance-based restricted partnership units of the OP designated as "Class B units," which were intended to be profits interests and would vest, and no longer be subject to forfeiture, at such time as: (x) the value of the OP's assets plus all dividends made equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the "economic hurdle"); (y) any one of the following had occurred: (1) the termination of the advisory agreement by an affirmative vote of a majority of the Company's independent directors without cause; (2) a listing; or (3) another liquidity event; and (z) the Advisor is still providing advisory services to the Company (the "performance condition"). The value of issued Class B units was determined and expensed when the Company deemed the achievement of the performance condition was probable, which occurred as of the Listing. As of June 2, 2015 , in aggregate, the board of directors had approved the issuance of 1,726,323 Class B units to the Advisor in connection with this arrangement. The Advisor received dividends on unvested Class B units equal to the dividend rate received on the Company's Common Stock. Such dividends on issued Class B units in the amounts of $0.3 million and $0.4 million were included in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2015 , respectively. The Company has recorded dividends on issued Class B units in the amounts of $21,000 and $27,000 for the three and six months ended June 30, 2014 , respectively. The performance condition related to these Class B units was satisfied upon completion of the Listing, and the units vested resulting in $14.5 million of expense on June 2, 2015 . Concurrently, the Class B units were converted to OP Units on a one-to-one basis. The vested value was calculated based, in part, on the closing price of Company's Common Stock on June 2, 2015 less an estimated discount for the one year lock-out period of transferability or liquidity of the OP Units. From April 1, 2015 to the Listing Date, the asset management fees were paid in cash to the Advisor. On the Listing Date, the Company entered into the Fourth Amended and Restated Advisory Agreement (the “Amended Advisory Agreement”) by and among the Company, the OP and the Advisor, which, among other things, eliminated the acquisition fee and finance coordination fee payable to the Advisor under the original Advisory Agreement, as amended, except for fees with respect to properties under contract, letter of intent or under negotiation as of the Listing Date. Under the terms of the Amended Advisory Agreement, the Company pays the Advisor: (i) a base fee of $18.0 million per annum payable in cash monthly in advance (“Minimum Base Management Fee”); (ii) plus a variable fee, payable monthly in advance in cash, equal to 1.25% of the cumulative net proceeds realized by the Company from the issuance of any common equity, including any common equity issued in exchange for or conversion of preferred stock or exchangeable notes, as well as, from any other issuances of common, preferred, or other forms of equity of the Company, including units of any operating partnership (“Variable Base Management Fee”); and (iii) an incentive fee (“Incentive Compensation”), 50% payable in cash and 50% payable in shares of the Company’s Common Stock (which shares are subject to certain lock up restrictions), equal to: (a) 15% of the Company’s Core AFFO (as defined in the Amended Advisory Agreement) per weighted average share outstanding for the applicable period (“Core AFFO Per Share”)(1) in excess of an incentive hurdle based on an annualized Core AFFO Per Share of $0.73 , plus (b) 10% of the Core AFFO Per Share in excess of an incentive hurdle of an annualized Core AFFO Per Share of $0.95 . The $0.73 and $0.95 incentive hurdles are subject to annual increases of 1% to 3% . The Base Management Fee and the Incentive Compensation are each subject to an annual adjustment. The annual aggregate amount of the Minimum Base Management Fee and Variable Base Management Fee (collectively, the “Base Management Fee”) that may be paid under the Advisory Agreement will also be subject to varying caps based on assets under management (“AUM”) (2) , as defined in the Advisory Agreement. _______________________________ (1) For purposes of the Amended Advisory Agreement, Core AFFO per share means (i) Net income adjusted for the following items (to the extent they are included in Net income): (a) real estate related depreciation and amortization; (b) Net income from unconsolidated partnerships and joint ventures; (c) one-time costs that the Advisor deems to be non-recurring; (d) non-cash equity compensation (other than any Restricted Share Payments); (e) other non-cash income and expense items; (f) non-cash dividends related to the Class B Units of the OP and certain non-cash interest expenses related to securities that are convertible to Common Stock; (g) gains (or losses) from the sale of Investments; (h) impairment losses on real estate; (i) acquisition and transaction related costs; (j) straight-line rent; (k) amortization of above and below market leases and liabilities; (l) amortization of deferred financing costs; (m) accretion of discounts and amortization of premiums on debt investments; (n) mark-to-market adjustments included in Net income; (o) unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and (p) consolidated and unconsolidated partnerships and joint ventures. (ii) divided by the weighted average outstanding shares of Common Stock on a fully diluted basis for such period. (2) For purposes of the Advisory Agreement, "AUM" means, for a specified period, an amount equal to (A) (i) the aggregate costs of the Company's investments (including acquisition fees and expenses) at the beginning of such period (before reserves for depreciation of bad debts, or similar non-cash reserves) plus (ii) the aggregate cost of he Company's investment at the end of such period (before reserves fro depreciation or bad debts, or similar non-cash reserves) divided by (B) two (2). In addition, the per annum aggregate amount of the Base Management Fee and the Incentive Compensation to be paid under the Amended Advisory Agreement is capped at (a) 1.25% of the AUM for the previous year if AUM is less than or equal to $5.0 billion ; (b) 0.95% if the AUM is equal to or exceeds $15.0 billion ; or (c) a percentage equal to: (A) 1.25% less (B) (i) a fraction, (x) the numerator of which is the AUM for such specified period less $5.0 billion and (y) the denominator of which is $10.0 billion multiplied by (ii) 0.30% if AUM is greater than $5.0 billion but less than $15.0 billion . The Variable Base Management Fee is also subject to reduction if there is a sale or sales of one or more Investments in a single or series of related transactions exceeding $200.0 million and, the special dividend(s) related thereto. In connection with providing strategic advisory services related to certain portfolio acquisitions, the Company has entered into arrangements in which the investment banking division of the Legacy Dealer Manager is paid a transaction fee of 0.25% of the Transaction Value for such portfolio acquisition transactions. Pursuant to such arrangements to date, the Transaction Value has been defined as: (i) the value of the consideration paid or to be paid for all the equity securities or assets in connection with the sale transaction or acquisition transaction (including consideration payable with respect to convertible or exchangeable securities and option, warrants or other exercisable securities and including dividends or dividends and equity security repurchases made in anticipation of or in connection with the sale transaction or acquisition transaction), or the implied value for all the equity securities or assets of the Company or acquisition target, as applicable, if a partial sale or purchase is undertaken, plus (ii) the aggregate value of any debt, capital lease and preferred equity security obligations (whether consolidated, off-balance sheet or otherwise) of the Company or acquisition target, as applicable, outstanding at the closing of the sale transaction or acquisition transaction), plus (iii) the amount of any fees, expenses and promote paid by the buyer(s) on behalf of the Company or the acquisition target, as applicable. Should the Legacy Dealer Manager provide strategic advisory services related to additional portfolio acquisition transactions, the Company will enter into new arrangements with the Legacy Dealer Manager on such terms as may be agreed upon between the two parties. Property Manager provides property management and leasing services for properties owned by the Company, for which the Company pays fees equal to: (i) with respect to stand-alone, single-tenant net leased properties which are not part of a shopping center, 2.0% of gross revenues from the properties managed and (ii) with respect to all other types of properties, 4.0% of gross revenues from the properties managed. For services related to overseeing property management and leasing services provided by any person or entity that is not an affiliate of the Property Manager, the Company pays the Property Manager an oversight fee equal to 1.0% of gross revenues of the property managed. Solely with respect to the Company's investments in properties located in Europe, the Service Provider receives a portion of the fees payable to the Advisor equal to: (i) with respect to single-tenant net leased properties which are not part of a shopping center, 1.75% of the gross revenues from such properties and (ii) with respect to all other types of properties, 3.5% of the gross revenues from such properties. The Property Manager is paid 0.25% of the gross revenues from European single-tenant net leased properties which are not part of a shopping center and 0.5% of the gross revenues from all other types of properties, reflecting a split of the oversight fee with the Service Provider. The following table reflects related party fees incurred, forgiven and contractually due as of and for the periods presented: Three Months Ended June 30, Six Months Ended June 30, Payable as of 2015 2014 2015 2014 (In thousands) Incurred Forgiven Incurred Forgiven Incurred Forgiven Incurred Forgiven June 30, 2015 December 31, 2014 One-time fees and reimbursements: Acquisition fees and related cost reimbursements $ 128 $ — $ 4,224 $ — $ 708 $ — $ 9,155 $ — $ — $ 2 Financing coordination fees 498 — 1,703 — 498 — 2,847 — — — Ongoing fees: Asset management fees (1) (2) 4,501 — — — 4,501 — — — — — Property management and leasing fees 1,009 612 124 118 2,013 1,205 187 203 82 52 Strategic advisory fees — — 108 — — — 215 — — — Dividends on Class B units 309 — 21 — 433 — 27 — 310 — Vesting of Class B units (1) 14,480 — — — 14,480 — — — — — Total related party operational fees and reimbursements $ 20,925 $ 612 $ 6,180 $ 118 $ 22,633 $ 1,205 $ 12,431 $ 203 $ 392 $ 54 ___________________________________________________________________________ (1) From January 1, 2013 to April 1, 2015 , the Company paid asset management fees to the Advisor in the form of restricted performance based Class B units, which would vest if certain conditions occur. From April 1, 2015 until the Listing Date, the Company paid the Advisor asset management fees in cash (as elected by the Advisor). From Listing Date, the Advisor received asset management fees in cash in accordance with the Amended and Restated Advisory Agreement. At Listing Date, all Class B units held by the Advisor converted to OP Units. (2) For the three months ended June 30, 2015, the asset management fees noted above is inclusive of $0.8 million of Listing related fees. The Company reimburses the Advisor's costs of providing administrative services, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company's operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Additionally, the Company reimburses the Advisor for personnel costs in connection with other services, in addition to paying an asset management fee; however, the Company does not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives acquisition fees or real estate commissions. No reimbursement was incurred from the Advisor for providing services during the three and six months ended June 30, 2015 and 2014 . In order to improve operating cash flows and the ability to pay dividends from operating cash flows, the Advisor may waive certain fees including asset management and property management fees. Because the Advisor may waive certain fees, cash flow from operations that would have been paid to the Advisor may be available to pay dividends to stockholders. The fees that may be forgiven are not deferrals and accordingly, will not be paid to the Advisor. In certain instances, to improve the Company's working capital, the Advisor may elect to absorb a portion of the Company's general and administrative costs or property operating expenses. These absorbed costs are presented net in the accompanying consolidated statements of operations and comprehensive loss. During the three and six months ended June 30, 2015 and 2014 , there were no property operating and general administrative expenses absorbed by our Advisor. For the six months ended June 30, 2015 , the Company has incurred approximately $0.6 million of recurring transfer agent services fees to American National Stock Transfer, LLC ("ANST"), an affiliate of Realty Capital Securities, LLC, which were included in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Fees Paid in Connection with the Liquidation or Listing of the Company's Real Estate Assets On December 31, 2014, the Company entered into an agreement with RCS Capital, the investment banking and capital markets division of the Legacy Dealer Manager, for strategic and financial advice and assistance in connection with (i) a possible sale transaction involving the Company (ii) the possible listing of the Company’s securities on a national securities exchange, and (iii) a possible acquisition transaction involving the Company. The Company also retained Barclays Capital Inc. as a strategic advisor. Both RCS Capital and Barclays Capital Inc., were each entitled to receive a transaction fee equal to 0.23% of the transaction value in connection with a possible sale transaction, listing or acquisition, if any. In connection with Listing, the Company incurred approximately $18.5 million of listing related fees during the three and six months ended June 30, 2015 of which $6.0 million was paid to RCS Capital and $6.1 million to Barclays Capital Inc., including out of pocket expense in connection with these agreements. In addition, the Company incurred and paid to RCS Capital $2.5 million for personnel and support services in connection with the Listing. The Company also incurred $0.5 million of transfer agent fees to ANST in relation to the Listing. In connection with the Listing and the Amended Advisory Agreement, the Company terminated the subordinated termination fee that would be due to the Advisor in the event of termination of the advisory agreement. All costs noted above were included in listing fees in the consolidated statements of operations and comprehensive income (loss) under listing fees for the three and six months ended June 30, 2015 . |
