Transactions with Related Parties

12 Months Ended

Dec. 31, 2012

Transactions With Related Parties

Transactions with Related Parties

Note 14. Transactions with Related Parties

Transactions Related to Our External Manager

As further described in Note 1, in December 2012 we concluded multiple, related transaction with Blackstone and its affiliates, including: (i) the Investment Management Business Sale, (ii) the sale of 5.0 million shares of our class A common stock for $2.00 per share, and (iii) the execution of a new external management agreement with our Manager. In addition, Blackstone received the right to designate two members of our board of directors, and exercised that right by designating an employee and one of its senior advisors to replace two former members of our board of directors who resigned effective December 19, 2012. See Note 1 for further discussion.

As of December 31, 2012, our consolidated balance sheet included $9,000 of accrued management fees payable to our Manager.

There may be conflicts between us and our Manager with respect to certain of the investments in the CT Legacy REIT and CTOPI portfolios where an affiliate of our Manager holds a related investment that is senior, junior, or pari passu to the investments held by these portfolios.

The management agreement with our Manager excludes from the management fee calculation our interests in CT Legacy REIT, CTOPI, and our CT CDOs, which may result in further conflicts between the economic interests of us and our Manager. Certain of our former employees are now employed by an affiliate of our Manager. See Note 7 for further discussion of the management agreement with our Manager.

Transactions Related to Our Former Investment Management Business

Prior to our Investment Management Business Sale, we earned base management and incentive fees in our capacity as investment manager for multiple vehicles that we have sponsored. Due to the nature of our relationship with these vehicles, all management fees were considered revenue from related parties under GAAP.

On November 9, 2006, we commenced our CT High Grade MezzanineSM, or CT High Grade I, investment management initiative and entered into three separate account agreements with affiliates of W.-R. Berkley Corporation, or WRBC. Pursuant to these agreements, we invested capital on behalf of WRBC in commercial real estate mortgages, mezzanine loans and participations therein. The separate accounts were entirely funded with committed capital from WRBC and were managed by a subsidiary of CTIMCO. CTIMCO earned a management fee equal to 0.25% per annum on invested assets. WRBC beneficially owned class A common stock representing approximately 13.1% of our outstanding class A common stock and stock units as of March 25, 2013, and a member of our board of directors is an employee of WRBC.

Other Related Party Transactions

In conjunction with the Investment Management Business Sale, we entered into a letter agreement with WRBC pursuant to which we will not undertake any offering of our class A common stock, or other equity securities, in an aggregate amount greater than $30.0 million without prior approval of a majority of the independent members of our board of directors. The requirement to obtain this approval will terminate upon the closing of the first offering to exceed the aggregate $30.0 million threshold.

Wholly-owned subsidiaries of WRBC are investors in certain private funds under Five Mile Capital’s management. As discussed in Notes 1 and 3, Five Mile Capital provided an $83.0 million mezzanine loan to CT Legacy REIT in connection with our March 2011 restructuring, and holds a significant interest in the common equity of CT Legacy REIT. In February 2012 we refinanced CT Legacy REIT’s Five Mile Capital mezzanine loan and repurchase facility with a single, new $124.0 million repurchase facility with JPMorgan.