Related Party Transactions

9 Months Ended

Sep. 30, 2022

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

We engage in certain business transactions with related parties, including but not limited to asset acquisition and dispositions of real estate. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest.

Pillar and Regis are wholly owned by an affiliates of the May Realty Holdings, Inc., which also owns approximately 90.8% of ARL. Pillar is compensated for advisory services in accordance with an agreement. Regis receives property management fees and leasing commissions in accordance with the terms of its property-level management agreement. In addition, Regis is entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement.

Rental income includes $223 and $312 for the three months ended September 30, 2022 and 2021, respectively, and $702 and $867 for the nine months ended September 30, 2022 and 2021, respectively, for office space leased to Pillar and Regis.

Property operating expense includes $110 and $178 for the three months ended September 30, 2022 and 2021, respectively, and $337 and $755 for the nine months ended September 30, 2022 and 2021, respectively, for management fees on commercial properties payable to Regis.

General and administrative expense includes $1,199 and $947 for the three months ended September 30, 2022 and 2021, respectively, and $3,133 and $3,195 for the nine months ended September 30, 2022 and 2021, respectively, for employee compensation and other reimbursable costs payable to Pillar.

Advisor fees paid to Pillar were $1,434 and $3,234 for the three months ended September 30, 2022 and 2021, respectively, and $6,885 and $10,144 for the nine months ended September 30, 2022 and 2021, respectively.

Notes receivable include amounts held by UHF and Pillar (See Note 9 – Notes Receivable). UHF is deemed to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable. In addition, we have receivables from related parties. Interest income on these notes and related party receivables was $5,194 and $4,337 for the three months ended September 30, 2022 and 2021, respectively, and $13,429 and $11,961 for the nine months ended September 30, 2022 and 2021, respectively.

Interest expense on payable to Pillar was $708 and $413 for the three months ended September 30, 2022 and 2021, respectively, and $1,645 and $1,200 for the nine months ended September 30, 2022 and 2021, respectively.

Related party receivables, net represents the net amounts outstanding from Pillar for loans and advances, net of unreimbursed fees, expenses and costs as provided above.