| Related Party Transactions | RELATED PARTY TRANSACTIONS Economic Dependency —We are dependent on PE-NTR II, the Property Manager, and their respective affiliates for certain services that are essential to us, including asset acquisition and disposition decisions, asset management, operating and leasing of our properties, and other general and administrative responsibilities. In the event that PE-NTR II, the Property Manager, and/or their respective affiliates are unable to provide such services, we would be required to find alternative service providers, which could result in higher costs and expenses. Advisory Agreement —Pursuant to the PE-NTR II Agreement, PE-NTR II is entitled to specified fees for certain services, including managing our day-to-day activities and implementing our investment strategy. PE-NTR II manages our day-to-day affairs and our portfolio of real estate investments subject to the board’s supervision. Expenditures are reimbursed to PE-NTR II based on amounts incurred on our behalf. Acquisition Fee —We pay PE-NTR II under the PE-NTR II Agreement an acquisition fee related to services provided in connection with the selection and purchase or origination of real estate and real estate-related investments. The acquisition fee is equal to 1% of the contract purchase price of each property we acquire, including acquisition or origination expenses and any debt attributable to such investments. Due Diligence Fee —We reimburse PE-NTR II for expenses incurred related to selecting, evaluating, and acquiring assets on our behalf. Asset Management Fee and Subordinated Participation —Under the PE-NTR II Agreement, the asset management fee is equal to 1% of the cost of our assets, and is paid 80% in cash and 20% in Class B units of the Operating Partnership. The cash portion is paid on a monthly basis in arrears at the rate of 0.06667% multiplied by the cost of our assets as of the last day of the preceding monthly period. Under the first amendment to the Operating Partnership’s amended and restated agreement of limited partnership, within 60 days after the end of each calendar quarter (subject to the approval of our board of directors), we pay an asset management subordinated participation by issuing a number of restricted operating partnership units designated as Class B Units to PE-NTR II and pay American Realty Capital PECO II Advisors, LLC (“ARC”), equal to 0.05% multiplied by the lower of the cost of assets and the applicable quarterly NAV, divided by the per share NAV. Our board of directors established an estimated NAV per share of $22.50 on April 14, 2016, and approved an increased estimated NAV per share of $22.75 on May 9, 2017. The Class B units are subject to forfeiture provisions. PE-NTR II and ARC are entitled to receive distributions on the Class B units at the same rate as distributions are paid to common stockholders. Such distributions are in addition to the incentive compensation that PE-NTR II, ARC, and their affiliates may receive from us. During the six months ended June 30, 2017 and 2016 , the Operating Partnership issued 46,131 and 136,474 Class B units, respectively, to PE-NTR II and ARC under the PE-NTR II Agreement for asset management services performed by PE-NTR II. PE-NTR II or one of its affiliates must continue to provide advisory services through the date that such economic hurdle is met. The economic hurdle will be met when (a) the value of the Operating Partnership’s assets, plus all distributions made equal or exceeds (b) the total amount of capital contributed by investors, plus a 6% cumulative, pre-tax, non-compounded annual return on the capital contributed. Disposition Fee —We pay PE-NTR II for substantial assistance by PE-NTR II or its affiliates up to the lesser of: (i) 2% of the contract sales price of each property or other investment sold; or (ii) one-half of the total brokerage commissions paid if a non-affiliated broker is also involved in the sale, provided that total real estate commissions paid (to PE-NTR II and others) in connection with the sale may not exceed the lesser of a competitive real estate commission or 6% of the contract sales price. The conflicts committee of our board of directors determines whether PE-NTR II or its affiliates have provided substantial assistance to us in connection with the sale of an asset. Substantial assistance in connection with the sale of a property includes preparation of an investment package for the property (including an investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a structural report and exhibits) or such other substantial services performed by PE-NTR II or its affiliates in connection with a sale. General and Administrative Expenses —As of June 30, 2017 and December 31, 2016 , we owed PE-NTR II and its affiliates $100,362 and $43,021 , respectively, for general and administrative expenses paid on our behalf. Summarized below are the fees earned by and the expenses reimbursable to PE-NTR II and ARC, except for unpaid general and administrative expenses, which we disclose above, for the three and six months ended June 30, 2017 and 2016 , and any related amounts unpaid as of June 30, 2017 and December 31, 2016 (in thousands): Three Months Ended Six Months Ended Unpaid Amount as of June 30, June 30, June 30, December 31, 2017 2016 2017 2016 2017 2016 Acquisition fees (1) $ 356 $ 2,834 $ 1,222 $ 3,843 $ — $ 179 Due diligence fees (1) 71 546 244 754 — — Asset management fees (2) 3,118 2,497 6,136 4,613 1,091 1,007 Class B units distribution (3) 182 145 351 362 62 57 Total $ 3,727 $ 6,022 $ 7,953 $ 9,572 $ 1,153 $ 1,243 (1) Prior to January 1, 2017, acquisition and due diligence fees were presented as Acquisition Expenses on our consolidated statements of operations. The majority of these costs are now capitalized and allocated to the related investment in real estate assets on the consolidated balance sheet based on the acquisition-date fair values of the respective assets and liability acquired. (2) Asset management fees are presented in General and Administrative on the consolidated statements of operations. (3) Represents the distributions paid to PE-NTR II and ARC as holders of Class B units of the Operating Partnership and is presented in General and Administrative on the consolidated statements of operations. Property Manager —All of our real properties are managed and leased by the Property Manager. The Property Manager is wholly owned by our Phillips Edison sponsor. The Property Manager also manages real properties owned by Phillips Edison affiliates and other third parties. Property Management Fee —We pay to the Property Manager a monthly property management fee of 4% of the monthly gross cash receipts from the properties it manages. Leasing Commissions —In addition to the property management fee, if the Property Manager provides leasing services with respect to a property, we pay the Property Manager leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services based on national market rates. The Property Manager shall be paid a leasing fee in connection with a tenant’s exercise of an option to extend an existing lease, and the leasing fees payable to the Property Manager may be increased by up to 50% in the event that the Property Manager engages a co-broker to lease a particular vacancy. Construction Management Fee —If we engage the Property Manager to provide construction management services with respect to a particular property, we pay a construction management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the property. Expenses and Reimbursements —The Property Manager hires, directs, and establishes policies for employees who have direct responsibility for the operations of each real property it manages, which may include, but is not limited to, on-site managers and building and maintenance personnel. Certain employees of the Property Manager may be employed on a part-time basis and may also be employed by PE-NTR II or certain of its affiliates. The Property Manager also directs the purchase of equipment and supplies and supervises all maintenance activity. We reimburse the costs and expenses incurred by the Property Manager on our behalf, including employee compensation, legal, travel, and other out-of-pocket expenses that are directly related to the management of specific properties and corporate matters, as well as fees and expenses of third-party accountants. Summarized below are the fees earned by and the expenses reimbursable to the Property Manager for the three and six months ended June 30, 2017 and 2016 , and any related amounts unpaid as of June 30, 2017 and December 31, 2016 (in thousands): Three Months Ended Six Months Ended Unpaid Amount as of June 30, June 30, June 30, December 31, 2017 2016 2017 2016 2017 2016 Property management fees (1) $ 1,492 $ 1,178 $ 2,892 $ 2,170 $ 491 $ 423 Leasing commissions (2) 985 741 1,621 1,565 240 386 Construction management fees (2) 143 157 221 306 62 185 Other fees and reimbursements (3) 961 837 1,755 1,704 532 367 Total $ 3,581 $ 2,913 $ 6,489 $ 5,745 $ 1,325 $ 1,361 (1) The property management fees are included in Property Operating on the consolidated statements of operations. (2) Leasing commissions paid for leases with terms less than one year are expensed immediately and included in Depreciation and Amortization on the consolidated statements of operations. Leasing commissions paid for leases with terms greater than one year, and construction management fees, are capitalized and amortized over the life of the related leases or assets. (3) Other fees and reimbursements are included in Property Operating and General and Administrative on the consolidated statements of operations based on the nature of the expense. Transfer Agent —Prior to February 2016, we utilized transfer agent services provided by an affiliate of Realty Capital Securities, LLC, our former dealer manager. Fees incurred from this transfer agent represented amounts paid by PE-NTR II to the affiliate of the Dealer Manager for such services. We reimbursed PE-NTR II for these fees through the payment of organization and offering costs. The transfer agent ceased services and the agreement was terminated in connection with the bankruptcy of the transfer agent and its parent company. The following table details fees paid to the transfer agent for the three and six months ended June 30, 2017 and 2016 , and any related amounts unpaid, which are included as a component of total unpaid organization and offering costs, as of June 30, 2017 and December 31, 2016 (in thousands): Three Months Ended Six Months Ended Unpaid Amount as of June 30, June 30, June 30, December 31, 2017 2016 2017 2016 2017 2016 Transfer agent fees incurred related to offering costs $ — $ — $ — $ — $ 140 $ 140 Other fees incurred from transfer agent — — — 140 560 560 Unconsolidated Joint Venture —As of June 30, 2017 and December 31, 2016 , we owed the Joint Venture $51,065 and $152,104 , respectively, for real estate tax, property operating, and other general and administrative expenses paid on our behalf. |
