NOTE 12: RELATED PARTY TRANSACTIONS

In the ordinary course of our business operations, we have ongoing relationships and have engaged in transactions with the related entities described below. All of these relationships and transactions were approved or ratified by our audit committee as being on terms comparable to those available from an unaffiliated third party or otherwise not creating a conflict of interest.

Almanac

Andrew M. Silberstein serves as a trustee on our board of trustees, as designated pursuant to the purchase agreement. Mr. Silberstein is an equity owner of Almanac and an officer of the investor and holds indirect equity interests in the investor. The transactions pursuant to the purchase agreement are described above in Note 9: Series D Preferred Shares.

Ballard Spahr LLP

As of June 27, 2017, Justin P. Klein has been appointed as a trustee on our board of trustees. Mr. Klein is a partner at Ballard Spahr LLP. RAIT has paid Ballard Spahr LLP $29 and $46 during the three and nine months ended September 30, 2016 and $15 and $134 during the three and nine months ended September 30, 2017. The approximate dollar value of Mr. Klein’s interest in these fees was less than $1 for the three and nine months ended September 30, 2016, based on Mr. Klein’s Ballard partnership interest.

Highland Capital Management, L.P.

On May 26, 2017, RAIT entered into a cooperation agreement with Highland Capital Management, L.P. and its affiliates (Highland). Pursuant to the cooperation agreement with Highland, Highland, among other things, agreed to terminate its proxy contest against us and withdraw the notice of proposed trustee candidates it submitted to us and we agreed to reimburse Highland $250 for the out-of-pocket expenses incurred by Highland in connection with its activist campaign against us and its unsolicited and nonbinding externalization of management proposal.

IRT

As described in Note 16: Discontinued Operations, we deconsolidated IRT as of October 5, 2016. RAIT’s relationships with IRT are discussed below.

Fees and Expenses Received as IRT’s Former External Advisor

On December 20, 2016, in connection with IRT’s management internalization, we sold IRT’s Advisor and, therefore, these fees and expenses are no longer earned.

On September 25, 2015, we entered into the Second Amendment to the Second Amended and Restated Advisory Agreement. The Second Amendment amended the advisory agreement to extend its term to October 1, 2020, and to provide for compensation to us for periods subsequent to October 1, 2015, as follows:

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Quarterly base management fee of 0.375% of IRT’s cumulative equity raised; and

•

Quarterly incentive fee equal to 20% of IRT’s core funds from operations, or Core FFO, as defined in the advisory agreement, in excess of $0.20 per share.

For the three and nine months ended September 30, 2016, we earned $1,727 and $5,141 of asset management fees and $206 and $350 of incentive fees, which were eliminated in consolidation. As of September 30, 2017, and December 31, 2016, we had no amounts due from IRT related to the advisory agreement.

Property Management Fees Paid to Our Property Manager

On December 20, 2016, in connection with our management internalization, we sold our multifamily property management business to IRT, which included all of the property management agreements for IRT’s properties.

We had entered into property management agreements with IRT with respect to each of IRT’s properties. Pursuant to these property management agreements, IRT paid our multifamily property manager property management and construction management fees on a monthly basis up to 4.0% of the gross revenues from a property for each month. For the three and nine months ended September 30, 2016, we earned $1,219 and $3,710 of property management and construction management fees, which were eliminated in consolidation. As of September 30, 2017, and December 31, 2016, we had no amounts due from IRT related to these property management agreements.

IRT Dividends and IRT Repurchase of its Common Stock

On October 5, 2016, we sold all 7,269,719 shares of IRT’s common stock that we owned to IRT and received aggregate proceeds of approximately $62,156.

For the three and nine months ended September 30, 2016, we earned and subsequently received dividends of $1,309, and $3,927, respectively, which were eliminated in consolidation. As of September 30, 2017, and December 31, 2016, we had no amounts due from IRT related to our previous ownership of shares of IRT’s common stock.

Indebtedness

During the three and nine months ended September 30, 2016, we earned $486 of interest from IRT related to $38,075 of mortgage indebtedness held by us. As of September 30, 2017, and December 31, 2016, we had no amounts due from IRT related to this mortgage indebtedness.

Other Transactions with IRT

On June 30, 2017, we sold South Terrace, a multifamily property, to IRT for $42,950. The sales price was supported by a recent appraisal provided by a third-party commercial real estate information services firm. RAIT recognized a gain of $9,189 on the sale.

As of September 30, 2017, the joint shared services agreement between RAIT and IRT has ended. Pursuant to that shared services agreement, IRT reimbursed RAIT $0 and $727 for general and administrative services for the three and nine months ended September 30, 2017, respectively. In addition, during the three and nine months ended September 30, 2017, IRT reimbursed RAIT for $155 of general and administrative expenses that were paid on IRT’s behalf.

Pursuant to property management agreements with IRT with respect to RAIT’s multifamily properties, RAIT paid IRT $27 and $239 of property management fees for the three and nine months ended September 30, 2017, respectively. These amounts are reflected within real estate operating expense in our consolidated statements of operations.

Other

On December 20, 2016, Scott F. Schaeffer resigned from his position as Chief Executive Officer of RAIT and became the full-time Chief Executive Officer of IRT. On the same date, Scott F. Schaeffer entered into a one year consulting agreement with RAIT for which he will receive compensation of $375. For the three and nine months ended September 30, 2017, $94 and $282, respectively, was earned and paid related to this consulting agreement, which is reflected in general and administrative expenses in our consolidated statements of operations. In accordance with the Memorandum of Understanding dated September 26, 2016, which memorialized the terms of Scott F. Schaeffer’s resignation, RAIT granted Scott F. Schaeffer 150,000 unvested shares of common stock on December 23, 2016, and made a $500 cash payment in January 2017. The shares vest 50% on the six month anniversary and 50% on the one year anniversary of the grant date.

In accordance with the Memorandum of Understanding dated September 26, 2016, which memorialized the terms of James J. Sebra’s resignation, he was owed a cash bonus, payable in 2017, equal to 25% of his cash bonus for the year ended December 31, 2016. During the nine months ended September 30, 2017, this bonus of $110 was paid.