Commitments, Contingencies and Related parties

Commitments and Contingencies

Presidential is not a party to any material legal proceedings. The Company may from time to time be a party to routine litigation incidental to the ordinary course of its business.

In the opinion of management, the Company’s Mapletree property is adequately covered by insurance in accordance with normal insurance practices.

A judgment of foreclosure was granted against PDL, Inc. & Associates, Limited Co-Partnership against the Hato Rey property in Puerto Rico. On September 23, 2013, U.S. Bank National Association, as trustee, as successor-in-interest to Bank of America, National Association, as trustee for the Registered Holders of GS Mortgage Securities Corporation II, Commercial Mortgage Pass-Through Certificates, Series 1998-C1, acting by and through Berkadia Commercial Mortgage LLC in its capacity as special servicer pursuant to the pooling and servicing agreement dated October 11, 1998 took possession of the Hato Rey property pursuant to the foreclosure judgment. We have been advised that the foreclosure sale price was less than the amount of the judgment. We have reported the Hato Rey property since March 31, 2012 as a discontinued operation.

On December 18, 2013, GS II SERIES 1998 C-1 HOME MORTGAGE PLAZA HATO REY LLC, (hereinafter “GS II”), a Delaware corporation, represented herein by U.S. Bank National Association, as Successor Trustee, successor-in-interest to Bank of America, N.A. (successor-by-merger to LaSalle National Bank Association, f/k/a LaSalle National Bank), as Trustee for the Registered Certificate-holders of GS Mortgage Securities Corporation II, Commercial Mortgage Pass-Through Certificates, Series 1998-C1, its Sole Member, represented in turn by Key Bank National Association, and Presidential Realty Corporation, entered into a Settlement and Release Agreement. Pursuant to the Settlement Agreement, GS II, the owner of the claims in the litigation and under the guarantees, PDL, Inc. and Presidential released each other and their respective officers, directors and affiliates from any claims each may have against the other, including any liability under the litigation and the guarantees. GS II also agreed to release the other guarantors from any claims GS II may have against those guarantors, including any liability under the litigation and the guarantees. GS II agreed to terminate the action against the guarantors, with prejudice, and in turn, Presidential Realty Corporation made a one-time payment of $200,000 to GS II.

Related Parties

Executive Employment Agreements

Nickolas W. Jekogian—On November 8, 2011, we entered into an employment agreement with Mr. Jekogian pursuant to which we employ Mr. Jekogian as a Director, Chairman of the Board of Directors and Chief Executive Officer. The employment agreement has a term of eighteen months and may be terminated at any time by the Board of Directors for “cause” or by Mr. Jekogian for “good reason,” each as defined in the employment agreement. Mr. Jekogian receives a base salary of $225,000 per annum. Commencing with our fiscal year beginning January 1, 2012 and for each fiscal year thereafter during the term of the employment agreement, Mr. Jekogian will have the opportunity to earn a bonus of up to $200,000, with the amount determined by the Compensation Committee in its absolute discretion. However, the payment of the bonus and base salary will be deferred until a “Capital Event” occurs, which is defined as the receipt by the Company of at least $20,000,000 in cash or property from capital raising activities.

Mr. Jekogian will not be exclusive to the Company. He will continue to own and operate Signature. As a result, Mr. Jekogian may be subject to conflicts of interest. The independent directors of the Board will review all transactions between the Company and Signature and the activities of Mr. Jekogian.

On November 8, 2011, we also entered into a stock option agreement with Mr. Jekogian. Subject to the terms and conditions set forth in the option agreement, the Company granted to Mr. Jekogian the right and option to purchase 370,000 shares of our Class B common stock at a price of $1.25 per share, of which 74,000 shares may be purchased six months after the grant date, 148,000 shares may be purchased upon and after the occurrence of the Capital Event, and the rest may be purchased upon and after the consummation of an underwritten registered public offering of our common stock with gross proceeds of not less than $40,000,000. However, if there is a “Change of Control,” as defined in the option agreement, the option automatically becomes fully vested and exercisable. The option is not a qualified option within the meaning of the Internal Revenue Code of 1986 nor was it granted pursuant to any stock option plan as the Company does not have a stock option plan in effect. The option has a term of ten years.

On January 8, 2014, subsequent to year-end, the Company and Mr. Jekogian entered into an amendment to this employment agreement. Refer to Note 15.

Alexander Ludwig—On November 8, 2011, we entered into an employment agreement with Mr. Ludwig pursuant to which we employ Mr. Ludwig as President and Chief Operating Officer. The employment agreement has a term of eighteen months and may be terminated at any time by the Board of Directors for “cause” or by Mr. Ludwig for “good reason,” each as defined in the employment agreement. Mr. Ludwig receives a base salary of $225,000 per annum. Commencing with our fiscal year beginning January 1, 2012 and for each fiscal year thereafter during the term of the employment agreement, Mr. Ludwig will have the opportunity to earn a bonus of up to $200,000, with the amount determined by the Compensation Committee in its absolute discretion.

Mr. Ludwig will continue to provide consulting services to and receive compensation from Signature. As a result, Mr. Ludwig may be subject to conflicts of interest. Mr. Ludwig has agreed to keep the independent directors of the Board advised of his activities for and compensation from Signature.

On November 8, 2011, we also entered into a stock option agreement with Mr. Ludwig. Subject to the terms and conditions set forth in the option agreement, the Company granted to Mr. Ludwig the right and option to purchase 370,000 shares of our Class B common stock at a price of $1.25 per share, of which 74,000 shares may be purchased six months after the grant date, 148,000 shares may be purchased upon and after the occurrence of the Capital Event, and the rest may be purchased upon and after the consummation of an underwritten registered public offering of our common stock with gross proceeds of not less than $40,000,000. However, if there is a “Change of Control,” as defined in the option agreement, the option automatically becomes fully vested and exercisable. The option is not a qualified option within the meaning of the Internal Revenue Code of 1986 nor was it granted pursuant to any stock option plan as the Company does not have a stock option plan in effect. The option has a term of ten years.

On January 8, 2014, subsequent to year-end, the Company and Mr. Ludwig entered into an amendment to this employment agreement. Refer to Note 15.

Other liabilities

Included in other liabilities is $593,750 owed to former officers of the Company in connection with their amended employment agreements. These amounts are payable November 8, 2014.

Property Management Agreement

On November 8, 2011, the Company and Signature entered into a Property Management Agreement pursuant to which the Company retained Signature as the exclusive managing and leasing agent for the Company’s Mapletree Industrial Center property in Palmer, Massachusetts (the “Mapletree Property”). Signature manages the Mapletree Property in accordance with specific management guidelines and leasing guidelines and meets specific reporting requirements and vendor insurance requirements. Signature receives compensation of 5% of monthly rental income actually received from tenants at the Mapletree Property. The Company reimburses Signature for all reasonable expenses incurred by Signature in performance of its duties under the Property Management Agreement that are either in accordance with the annual budget or which have been approved in writing by the Company. Such expense shall include, but not be limited to, Signature’s costs of the salaries, benefits and appropriate and prudent training for Signature’s employees who are engaged solely in management or operation of the Mapletree Property, but excluding certain expenses that will be borne by Signature, as specified in the Property Management Agreement. The property Management Agreement renewed for a one year term on November 8, 2013 and will be automatically renewable for one year terms until it is terminated by either party upon written notice. The Company paid management fees of approximately $27,000 for the years ended December 31, 2013 and 2012.

Asset Management Agreement

On November 8, 2011, the Company entered into an Asset Management Agreement with Signature pursuant to which the Company engaged Signature to oversee the Mapletree property and our Hato Rey center in Hato Rey, Puerto Rico. Signature’s duties include leasing, marketing and advertising, financing, construction and dispositions of the properties. Signature will receive a construction fee for any major renovations or capital projects, subject to the approval of our Board of Directors, an asset management fee of 1.5% of the monthly gross rental revenues collected for the properties, a finance fee of 1% on any debt placement, and a disposition fee of 1% on the sale of any assets, as specified in the Asset Management Agreement. The Asset Management Agreement renewed for a one year term on November 8, 2013 and will be automatically renewable for one year terms until it is terminated by either party upon written notice. On September 8, 2013 the Asset Management fee associated with the Hato Rey Center was terminated due to the foreclosure and loss of the property. No additional fees are due for the Hato Rey Center. The Company paid asset management fees of approximately $51,000 and $57,000 for the years ended December 31, 2013 and 2012, respectively.

Sublease

The Company subleases their executive office space under a month to month lease with Signature for a monthly rental payment of $433 or $5,200 per year. Either party may terminate the sublease upon 30 days prior written notice. On July 1, 2013 the Company moved their executive offices and amended its lease agreement with Signature for a monthly rental payment of $1,100 or $13,200 per year. All other terms of the sublease remained the same. For the years ended December 31, 2013 and 2012 the Company incurred approximately $9,099 and $5,196, respectively, in rent expense.