Related Party Transactions | 3 Months Ended |
Mar. 31, 2015 |
Related Party Transactions [Abstract] | |
Related Party Transactions | 13. Related Party Transactions |
Fees and Expenses Paid to Affiliates |
All of our executive officers and our non-independent directors are also executive officers and employees and/or holders of a direct or indirect interest in our advisor, one of our co-sponsors or other affiliated entities. We are affiliated with our advisor and American Healthcare Investors; however, we are not affiliated with Griffin Capital or Griffin Securities. We entered into the Advisory Agreement, which entitles our advisor and its affiliates to specified compensation for certain services, as well as reimbursement of certain expenses. In the aggregate, for the three months ended March 31, 2015 and 2014, we incurred $9,506,000 and $174,000, respectively, in fees and expenses to our affiliates as detailed below. |
Offering Stage |
Other Organizational and Offering Expenses |
Our other organizational and offering expenses were paid by our advisor or its affiliates on our behalf. Our advisor or its affiliates were reimbursed for actual expenses incurred up to 2.0% of the gross offering proceeds from the sale of shares of our common stock in our offering other than shares of our common stock sold pursuant to the DRIP. For the three months ended March 31, 2015, we incurred $519,000 in other organizational and offering expenses to our advisor. Other organizational expenses were expensed as incurred and offering expenses were charged to stockholders' equity as such amounts were reimbursed to our advisor or its affiliates from the gross proceeds of our offering. We did not incur other organizational and offering expenses to our advisor for the three months ended March 31, 2014. |
Acquisition and Development Stage |
Acquisition Fee |
Our advisor or its affiliates receive an acquisition fee of up to 2.25% of the contract purchase price, including any contingent or earn-out payments that may be paid, for each property we acquire or 2.0% of the origination or acquisition price, including any contingent or earn-out payments that may be paid, for any real estate-related investment we originate or acquire. Until January 30, 2015, the acquisition fee for property acquisitions was paid as follows: (i) in cash equal to 2.00% of the contract purchase price and (ii) the remainder in shares of our common stock in an amount equal to 0.25% of the contract purchase price, at the established offering price as of the date of closing, net of selling commissions and dealer manager fees, which was $9.00 per share. Since January 31, 2015, the acquisition fee for property acquisitions is paid in cash equal to 2.25% of the contract purchase price. Our advisor or its affiliates are entitled to receive these acquisition fees for properties and real estate-related investments we acquire with funds raised in our offering including acquisitions completed after the termination of the Advisory Agreement, or funded with net proceeds from the sale of a property or real estate-related investment, subject to certain conditions. |
Acquisition fees in connection with the acquisition of properties are expensed as incurred in accordance with ASC Topic 805, Business Combinations, or ASC Topic 805, and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. Acquisition fees in connection with the acquisition of real estate-related investments are capitalized as part of the associated investment in our accompanying condensed consolidated balance sheets. |
For the three months ended March 31, 2015, we incurred $7,894,000 in acquisition fees to our advisor or its affiliates, which included 55,684 shares of our common stock issued for the three months ended March 31, 2015. We did not incur any acquisition fees to our advisor or its affiliates for the three months ended March 31, 2014. |
Development Fee |
In the event our advisor or its affiliates provide development-related services, our advisor or its affiliates receive a development fee in an amount that is usual and customary for comparable services rendered for similar projects in the geographic market where the services are provided; however, we will not pay a development fee to our advisor or its affiliates if our advisor or its affiliates elect to receive an acquisition fee based on the cost of such development. |
For the three months ended March 31, 2015 and 2014, we did not incur any development fees to our advisor or its affiliates. |
Reimbursement of Acquisition Expenses |
Our advisor or its affiliates are reimbursed for acquisition expenses related to selecting, evaluating and acquiring assets, which are reimbursed regardless of whether an asset is acquired. The reimbursement of acquisition expenses, acquisition fees and real estate commissions paid to unaffiliated parties will not exceed, in the aggregate, 6.0% of the contract purchase price or total development costs, unless fees in excess of such limits are approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in the transaction. For the three months ended March 31, 2015, such fees and expenses did not exceed 6.0% of the contract purchase price of our acquisitions. We did not incur such fees and expenses for the three months ended March 31, 2014. |
Reimbursements of acquisition expenses are expensed as incurred in accordance with ASC Topic 805 and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. Reimbursements of acquisition expenses in connection with the acquisition of real estate-related investments are capitalized as part of the associated investment in our accompanying condensed consolidated balance sheets. |
For the three months ended March 31, 2015 and 2014, we did not incur any acquisition expenses to our advisor or its affiliates. |
Operational Stage |
Asset Management Fee |
Our advisor or its affiliates are paid a monthly fee for services rendered in connection with the management of our assets equal to one-twelfth of 0.75% of average invested assets, subject to our stockholders receiving distributions in an amount equal to 5.0% per annum, cumulative, non-compounded, of invested capital. For such purposes, average invested assets means the average of the aggregate book value of our assets invested in real estate properties and real estate-related investments, before deducting depreciation, amortization, bad debt and other similar non-cash reserves, computed by taking the average of such values at the end of each month during the period of calculation; and invested capital means, for a specified period, the aggregate issue price of shares of our common stock purchased by our stockholders, reduced by distributions of net sales proceeds by us to our stockholders and by any amounts paid by us to repurchase shares of our common stock pursuant to our share repurchase plan. |
For the three months ended March 31, 2015, we incurred $957,000 in asset management fees to our advisor or its affiliates. We did not incur any asset management fees to our advisor or its affiliates for the three months ended March 31, 2014. Asset management fees are included in general and administrative in our accompanying condensed consolidated statements of operations. |
Property Management Fee |
Our advisor or its affiliates may directly serve as property manager of our properties or may sub-contract their property management duties to any third party and provide oversight of such third party property manager. Our advisor or its affiliates are paid a monthly management fee equal to a percentage of the gross monthly cash receipts of such property as follows: (i) a 1.0% property management oversight fee for any stand-alone, single-tenant net leased property, (ii) a 1.5% property management oversight fee for any property that is not a stand-alone, single-tenant net leased property and for which our advisor or its affiliates will provide oversight of a third party that performs the duties of a property manager with respect to such property, or (iii) a fair and reasonable property management fee that is approved by a majority of our directors, including a majority of our independent directors, that is not less favorable to us than terms available from unaffiliated third parties for any property that is not a stand-alone, single-tenant net leased property and for which our advisor or its affiliates will directly serve as the property manager without sub-contracting such duties to a third party. |
For the three months ended March 31, 2015, we incurred $136,000 in property management fees to our advisor or its affiliates. For the three months ended March 31, 2014, we did not incur any property management fees to our advisor or its affiliates. Property management fees are included in rental expenses in our accompanying condensed consolidated statements of operations. |
Lease Fees |
We pay our advisor or its affiliates a separate fee for any leasing activities in an amount not to exceed the fee customarily charged in arm's-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area. Such fee is generally expected to range from 3.0% to 6.0% of the gross revenues generated during the initial term of the lease. |
For the three months ended March 31, 2015 and 2014, we did not incur any lease fees to our advisor or its affiliates. When incurred by us, lease fees will be capitalized as lease commissions and included in other assets, net in our accompanying condensed consolidated balance sheets. |
Construction Management Fee |
In the event that our advisor or its affiliates assist with planning and coordinating the construction of any capital or tenant improvements, our advisor or its affiliates are paid a construction management fee of up to 5.0% of the cost of such improvements. For the three months ended March 31, 2015 and 2014, we did not incur any construction management fees to our advisor or its affiliates. |
Construction management fees are capitalized as part of the associated asset and included in real estate investments, net in our accompanying condensed consolidated balance sheets or are expensed and included in our accompanying condensed consolidated statements of operations, as applicable. |
Operating Expenses |
We reimburse our advisor or its affiliates for operating expenses incurred in rendering services to us, subject to certain limitations. However, we cannot reimburse our advisor or its affiliates at the end of any fiscal quarter for total operating expenses that, in the four consecutive fiscal quarters then ended, exceed the greater of: (i) 2.0% of our average invested assets, as defined in the Advisory Agreement, or (ii) 25.0% of our net income, as defined in the Advisory Agreement, unless our independent directors determined that such excess expenses were justified based on unusual and nonrecurring factors which they deem sufficient. |
For the 12 months ended March 31, 2015, our operating expenses did not exceed this limitation. Our operating expenses as a percentage of average invested assets and as a percentage of net income were 1.6% and (29.7)%, respectively, for the 12 months ended March 31, 2015. |
For the three months ended March 31, 2015 and 2014, our advisor or its affiliates incurred operating expenses on our behalf of $0 and $174,000, respectively. Operating expenses are generally included in general and administrative in our accompanying condensed consolidated statements of operations. |
Compensation for Additional Services |
Our advisor and its affiliates are paid for services performed for us other than those required to be rendered by our advisor or its affiliates under the Advisory Agreement. The rate of compensation for these services has to be approved by a majority of our board of directors, including a majority of our independent directors, and cannot exceed an amount that would be paid to unaffiliated parties for similar services. For the three months ended March 31, 2015 and 2014, our advisor and its affiliates were not compensated for any additional services. |
Liquidity Stage |
Disposition Fees |
For services relating to the sale of one or more properties, our advisor or its affiliates are paid a disposition fee up to the lesser of 2.0% of the contract sales price or 50.0% of a customary competitive real estate commission given the circumstances surrounding the sale, in each case as determined by our board of directors, including a majority of our independent directors, upon the provision of a substantial amount of the services in the sales effort. The amount of disposition fees paid, when added to the real estate commissions paid to unaffiliated parties, will not exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price. For the three months ended March 31, 2015 and 2014, we did not incur any disposition fees to our advisor or its affiliates. |
Subordinated Participation Interest |
Subordinated Distribution of Net Sales Proceeds |
In the event of liquidation, our advisor will be paid a subordinated distribution of net sales proceeds. The distribution will be equal to 15.0% of the remaining net proceeds from the sales of properties, after distributions to our stockholders, in the aggregate, of: (i) a full return of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) plus (ii) an annual 7.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock, as adjusted for distributions of net sales proceeds. Actual amounts to be received depend on the sale prices of properties upon liquidation. For the three months ended March 31, 2015 and 2014, we did not incur any such distributions to our advisor. |
Subordinated Distribution Upon Listing |
Upon the listing of shares of our common stock on a national securities exchange, in redemption of our advisor's limited partnership units, our advisor will be paid a distribution equal to 15.0% of the amount by which (i) the market value of our outstanding common stock at listing plus distributions paid prior to listing exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the amount of cash that, if distributed to stockholders as of the date of listing, would have provided them an annual 7.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the date of listing. Actual amounts to be received depend upon the market value of our outstanding stock at the time of listing, among other factors. For the three months ended March 31, 2015 and 2014, we did not incur any such distributions to our advisor. |
Subordinated Distribution Upon Termination |
Pursuant to the Agreement of Limited Partnership, as amended, of our operating partnership, upon termination or non-renewal of the Advisory Agreement, our advisor will also be entitled to a subordinated distribution in redemption of its limited partnership units from our operating partnership equal to 15.0% of the amount, if any, by which (i) the appraised value of our assets on the termination date, less any indebtedness secured by such assets, plus total distributions paid through the termination date, exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the total amount of cash equal to an annual 7.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the termination date. In addition, our advisor may elect to defer its right to receive a subordinated distribution upon termination until either a listing or other liquidity event, including a liquidation, sale of substantially all of our assets or merger in which our stockholders receive in exchange for their shares of our common stock, shares of a company that are traded on a national securities exchange. |
As of March 31, 2015 and December 31, 2014, we had not recorded any charges to earnings related to the subordinated distribution upon termination. |
Stock Purchase Plans |
On March 5, 2014, our Chairman of the Board of Directors and Chief Executive Officer, Jeffrey T. Hanson, our President and Chief Operating Officer, Danny Prosky, and our Executive Vice President, General Counsel, Mathieu B. Streiff, each executed stock purchase plans, or the 2014 Stock Purchase Plans, whereby they each irrevocably agreed to invest 100% of their net after-tax base salary and cash bonus compensation earned as employees of American Healthcare Investors directly into our company by purchasing shares of our common stock. In addition, on March 5, 2014, our Chief Financial Officer, Shannon K S Johnson, our Senior Vice President — Acquisitions, Stefan K.L. Oh, our Secretary, Cora Lo, and our Vice President — Asset Management, Chris Rooney, each executed similar 2014 Stock Purchase Plans whereby they each irrevocably agreed to invest 15.0%, 15.0%, 10.0%, and 15.0%, respectively, of their net after-tax base salaries that were earned as employees of American Healthcare Investors directly into our company by purchasing shares of our common stock. Such arrangements terminated on December 31, 2014. |
Effective January 1, 2015, Messrs. Hanson, Prosky, Streiff, Oh and Rooney, and Mses. Johnson and Lo, each adopted a stock purchase plan, or the 2015 Stock Purchase Plans, on terms similar to each of the 2014 Stock Purchase Plans described above. The 2015 Stock Purchase Plans each terminated in connection with the termination of the primary portion of our offering. |
Purchases of shares of our common stock pursuant to the 2014 Stock Purchase Plans commenced after the initial release from escrow of the minimum offering amount, beginning with the officers' regularly scheduled payroll payment on May 20, 2014. The shares of common stock were purchased at a price of $9.00 per share, reflecting the purchase price of the shares in our offering, exclusive of selling commissions and the dealer manager fee. |
For the three months ended March 31, 2015, our officers invested the following amounts and we issued the following shares of our common stock pursuant to the applicable stock purchase plan: |
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| | | | | | | | | |
| | | | Three Months Ended |
| | | | March 31, 2015 |
Officer's Name | | Title | | Amount | | Shares |
Jeffrey T. Hanson | | Chairman of the Board of Directors and Chief Executive Officer | | $ | 17,000 | | | 1,902 | |
|
Danny Prosky | | President, Chief Operating Officer and Director | | 20,000 | | | 2,246 | |
|
Mathieu B. Streiff | | Executive Vice President, General Counsel | | 19,000 | | | 2,062 | |
|
Shannon K S Johnson | | Chief Financial Officer | | 1,000 | | | 165 | |
|
Stefan K.L. Oh | | Senior Vice President — Acquisitions | | 2,000 | | | 168 | |
|
Cora Lo | | Secretary | | 1,000 | | | 106 | |
|
Chris Rooney | | Vice President — Asset Management | | 1,000 | | | 135 | |
|
| | | | $ | 61,000 | | | 6,784 | |
|
Accounts Payable Due to Affiliates |
The following amounts were outstanding to our affiliates as of March 31, 2015 and December 31, 2014: |
| |
| | | | | | | | | |
| | March 31, | | December 31, | |
Fee | | 2015 | | 2014 | |
Offering costs | | $ | 117,000 | | | $ | 415,000 | | |
|
Asset and property management fees | | 445,000 | | | 131,000 | | |
|
Acquisition fees | | 118,000 | | | 31,000 | | |
|
| | $ | 680,000 | | | $ | 577,000 | | |
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