NOTE 17 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of its business operations, the Company has sponsored and manages investment entities. Additionally, it has ongoing relationships with several related entities. The following table details these receivables and payables (in thousands):



	December 31,
	2015		2014
Receivables from managed entities and related parties, net:
Real estate investment entities	$	21,146	$	23,733
Commercial finance investment entities ⁽¹⁾	1,289		2,883
Financial fund management investment entities	1,582		663
RSO	2,331		2,442
Other	319		488
Loan to CVC Credit Partners	—		2,536
Receivables from managed entities and related parties, net	$	26,667	$	32,745

Payables due to managed entities and related parties, net:
Real estate investment entities ⁽²⁾	$	3,110	$	2,942
RSO	—		109
Other	35		73
Payables to managed entities and related parties, net	$	3,145	$	3,124

(1)

Reflected net of reserves for credit losses of $0 and $17 million, respectively, related to management fees owed from one of the commercial finance investment partnerships which, based on estimated cash distributions, were not expected to be collectible. This partnership was liquidated in July 2015 and the remaining lease portfolio was assumed by the Company in settlement of the outstanding receivable from the partnership.


(2)	Includes $3.0 million and $2.6 million, respectively, in self-insurance funds provided by the Company's real estate investment entities, which are held in escrow by the Company to cover claims.

The Company receives fees, dividends and reimbursed expenses from several related/managed entities. In addition, the Company pays fees to, and reimburses certain operating expenses of related entities. The following table details those activities (in thousands):



	Years Ended December 31,
	2015			2014			2013
Fees from unconsolidated investment entities:
Real estate ⁽¹⁾	$	13,276		$	5,969		$	12,320
Financial fund management	1,218			1,254			1,124
Commercial finance ⁽²⁾	—			—			—
RSO:
Management, incentive and servicing fees	12,083			11,917			10,179
Dividends paid	1,674			2,289			2,241
Reimbursement of costs and expenses	5,650			5,196			3,980
CVC Credit Partners: – reimbursement of net costs and expenses	859			1,037			1,195
Opportunity REIT I:
Fees	24,575			26,724			11,036
Reimbursement of costs and expenses	3,733			2,227			1,633
Dividends paid	175			117			114
Opportunity REIT II:
Fees	11,027			1,702			—
Reimbursement of costs and expenses	4,912			2,342			—
Dividends paid	82			—			—
Innovation Office REIT:
Reimbursement of costs and expenses	1,989			—			—
Resource Apartment REIT III:
Reimbursement of costs and expenses	739			—			—
LEAF:
Payment for sub-servicing the commercial finance investment partnerships⁽³⁾	(53		)	(293		)	(898		)
Payment for rent and related expenses	—			—			(543		)
Reimbursement of net costs and expenses	159			129			213
1845 Walnut Associates Ltd:
Payment for rent and related expenses	(843		)	(767		)	(702		)
Property management fees	170			205			122
Brandywine Construction & Management, Inc.: - payment for property management of hotel	(264		)	(232		)	(226		)
Atlas Energy, L.P.: – reimbursement of net costs and expenses	166			163			240
Ledgewood P.C.: – payment for legal services	(116		)	(180		)	(240		)
Graphic Images, LLC: – payment for printing services	(151		)	(156		)	(179		)
The Bancorp, Inc.: – reimbursement of net costs and expenses	—			111			114
9 Henmar LLC: – payment of broker/consulting fees	(37		)	(38		)	(41		)


(1)	Includes discounts recorded (reversed) of $(435,000), $82,000 and $179,000 in 2015, 2014 and 2013, respectively, in connection with management fees from the Company's real estate investment entities that it expects to receive in future periods.


(2)	The Company waived management fees from its commercial finance investment entities of $109,000, $683,000 and $1.8 million during 2015, 2014 and 2013, respectively.


(3)	LEAF ceased charging sub-servicing fees to LEAF Financial commencing in the fourth quarter of 2015.

Relationship with RSO. Since March 2005, the Company has had a management agreement with RSO pursuant to which it provides certain services, including investment management and certain administrative services, to RSO. The agreement, which had an original maturity date of March 31, 2009, continues to renew automatically for one-year terms unless at least two-thirds of the independent directors or a majority of the outstanding common shareholders agree to not renew it. The Company receives a base management fee, incentive compensation, property management fees and reimbursement for out-of-pocket expenses. The base management fee is equal to 1/12^th of the amount of RSO’s equity, as defined by the management agreement, multiplied by 1.50%. In October 2009, February 2010 and March 2012, the management agreement was further amended such that RSO will directly reimburse the Company for the wages and benefits of RSO's chief financial officer, an executive officer who devotes all of his time to serve as RSO’s chairman of the board, and a sufficient number of accounting professionals, each of whom will be exclusively dedicated to RSO's operations (number and amounts charged are reviewed and approved by RSO's Board of Directors), and a director of investor relations who will be 50% dedicated to RSO's operations. In August 2010, the agreement was further amended to reduce the incentive management fee earned by the Company for any fees paid directly by RSO to employees, agents and/or affiliates of the Company with respect to profits earned by a taxable REIT subsidiary of RSO.

Under a fee agreement, in connection with the April 2012 sale of Apidos to CVC, the Company is required to remit a portion of the base management fee and incentive compensation it receives from RSO to Apidos-CVC. The percentage paid to Apidos-CVC is determined by dividing the equity RSO holds in Apidos CLOs (one CLO as of December 31, 2015) by the calculated equity used to determine the base management fee. Any incentive compensation paid to Apidos-CVC excludes non-recurring items unrelated to Apidos-CVC. In October 2014, Apidos CLO I was liquidated, resulting in a $28.5 million reduction in RSO equity in Apidos CLOs and, therefore, a reduction in the base and incentive compensation due to Apidos-CVC.

In February 2011, the Company entered into a services agreement with RSO to provide sub-advisory collateral management and administrative services for five CLOs holding approximately $1.7 billion in bank loans whose management contracts RSO had acquired. In connection with services provided by Apidos-CVC, in February 2011 the management agreement was further amended to provide that RSO must pay Apidos-CVC 10% of all base and additional collateral management fees and 50% of all incentive collateral management fees it collects, and to reimburse Apidos-CVC expenses, relative to the management of these CLOs.

RSO also reimburses the Company for additional costs incurred related to its life care business, Long Term Care Conversion Funding, which originates and acquires life settlement contracts. The initial agreement, authorized in December 2012, provided for an annual fee of $550,000, with a two-year term. In March 2015, the agreement was amended for an additional year through 2016. This fee is paid quarterly.

Relationship with CVC Credit Partners. On May 6, 2014, the Company made a €1.5 million bridge loan to CVC Credit Partners with interest accruing at a rate of the Euro Interbank Offered Rate ("EURIBOR") plus 7%. In September 2014, the Company and CVC Credit Partners agreed to extend the maturity of the note until April 2015. In connection with the original loan agreement, on December 8, 2014, the Company funded CVC Credit Partners an additional €500,000. On September 28, 2015, the total loan and the associated interest were paid in full. On January 13, 2016, the Company entered into a new loan agreement with CVC Credit Partners which provides for borrowings of up to €3.6 million with interest at EURIBOR plus 7%. In February 2016, CVC Credit Partners borrowed €1.3 million under this loan.

Relationship with Opportunity REIT I. The Company formed Opportunity REIT I in 2009 to primarily focus on acquiring non-performing real estate loans and distressed real estate at a discount. In December 2013, the initial offering for Opportunity REIT I was closed having raised an aggregate of $635.0 million. The Company is entitled to receive reimbursements for costs associated with the formation and operating expenses of Opportunity REIT I. At December 31, 2015, the receivable outstanding from Opportunity REIT I was $277,000.

Relationship with Opportunity REIT II. Opportunity REIT II will focus on acquiring under-performing multifamily rental properties, distressed real estate and performing loans. Opportunity REIT II raised $512.7 million in equity as of December 31, 2015. Resource Real Estate, a subsidiary of the Company, is the external manager. As of December 31, 2015, the Company had a $4.9 million receivable due from Opportunity REIT II, which included $3.0 million for acquisition and management fees and $1.9 million for offering costs and operating expense reimbursements. On June 14, 2014, the Company provided a $1.3 million short-term bridge loan to Opportunity REIT II with interest at LIBOR plus 300 basis points basis points which was repaid in full by June 30, 2014.

Relationship with Innovation Office REIT. As of December 31, 2015, the Company had a receivable of $2.4 million from the Innovation Office REIT for reimbursement of offering costs and expenses.

Relationship with Resource Apartment REIT III. As of December 31, 2015, the Company had a receivable of $739,000 from Resource Apartment REIT III for reimbursement of offering costs and expenses.

Advances to Real Estate Limited Partnership. The Company made an advance to one of its affiliated real estate limited partnerships under a revolving note of up to $3.0 million, bearing interest at the prime rate. Advances outstanding of $2.3 million as of September 30, 2014 were repaid in full on December 16, 2014. The Company recorded interest income on this loan of $56,000 as of September 30, 2014.

Relationship with LEAF. The Company maintains a shared service agreement with LEAF for the reimbursement of various costs and expenses it incurs on behalf of LEAF. In addition, the Company sublet office space in Philadelphia, Pennsylvania from LEAF under a lease that expired in August 2013.

Sub-servicing agreement with LEAF for the commercial finance investment funds. The Company had a sub-servicing agreement with LEAF to provide management services for the commercial finance investment funds. The fee is equal to LEAF's costs to provide these services up to a maximum of 1% of the net present value of all lease and loan contracts comprising each commercial finance fund's borrowing base under its credit facilities or securitizations; effective as of the fourth quarter of 2015 and for all future periods, the parties agreed to waive this fee due to the diminished number of leases being managed.

Relationship with Atlas Energy, L.P. (“Atlas”). Mr. E. Cohen, the Company’s Chairman of the Board, also serves as the chief executive officer (“CEO”) and president of the general partner of Atlas. Mr. Jonathan Z. Cohen (“Mr. J. Cohen”), the Company’s CEO and President, is the general partner’s chairman of the board. Atlas reimburses the Company for certain shared services. At December 31, 2015, there were $12,000 in outstanding receivables from Atlas.

Relationship with 1845 Walnut Associates Ltd. The Company owns a 7% investment in a real estate partnership that owns a building at 1845 Walnut Street, Philadelphia in which the Company also leases office space. In February 2009, the Company amended its lease for its offices in this building to extend the lease termination date through May 2013. In October 2012, the Company signed a new ten-year lease which was amended in May 2013 for 34,476 square feet of office space in the same building commencing in August 2013. The Company was provided a tenant allowance of $1.5 million for renovation of the office and the lease provides for a five-year extension. In March 2013, the Company assumed the property management of the building.

Relationship with Ledgewood P.C. (“Ledgewood”). Until March 2006, Mr. Jeffrey F. Brotman was the managing member of Ledgewood, which provides legal services to the Company. Mr. Brotman remained of counsel to Ledgewood through June 2007, at which time he became an Executive Vice President of the Company. In addition, Mr. Brotman was a trustee of the SERP retirement trusts until he joined the Company. In connection with his separation, Mr. Brotman will receive payments from Ledgewood.

Mr. E. Cohen, who was of counsel to Ledgewood until April 1996, receives certain debt service payments from Ledgewood related to the termination of his affiliation with Ledgewood and its redemption of his interest in the firm.

Relationship with Graphic Images, LLC (“Graphic Images”). The Company utilizes the services of Graphic Images, a printing company, whose principal owner is the father of the Company’s Chief Financial Officer.

Relationship with Retirement Trusts. The Company has established two trusts to fund the SERP for Mr. E. Cohen. The 1999 Trust, a secular trust, purchased 100,000 shares of the common stock of TBBK ($1.1 million fair value at December 31, 2015). See “Relationship with TBBK,” below. This trust and its assets are not included in the Company’s consolidated balance sheets. However, trust assets are considered in determining the amount of the Company’s liability under the SERP. The 2000 Trust, a “Rabbi Trust,” held 103,494 shares of TBBK common stock at December 31, 2010, all of which were sold during 2011 and 2012. The SERP liability of $6.5 million is included in accrued expenses and other liabilities.

Relationship with 9 Henmar LLC (“9 Henmar”). The Company owns interests in the Trapeza entities that have sponsored CDO issuers and manage pools of trust preferred securities acquired by the CDO issuers. The Trapeza entities and CDO issuers were originated and developed in large part by Mr. Daniel G. Cohen (“Mr. D. Cohen”). The Company agreed to pay Mr. D. Cohen’s company, 9 Henmar, 10% of the fees the Company receives, before expenses, in connection with the first four Trapeza CDOs that the Company sponsored and manages.

Relationship with TBBK. Mr. D. Cohen is the chairman of the board of TBBK. Mrs. Betsy Z. Cohen (“Mrs. B. Cohen”, who is the wife of Mr. E. Cohen and, together with Mr. E. Cohen are the parents of Messrs. J. Cohen and D. Cohen) was, until December 31, 2014, the CEO of TBBK and its subsidiary bank. From June 2011 until January 2015, the Company sublet a portion of its New York office space to TBBK. In addition, TBBK provides banking and operational services to LEAF Financial. As of December 31, 2015, the Company held $29,000 in cash deposits at TBBK.

Relationship with Certain Directors, Officers, Employees and Other Related Parties. The Company serves as the general partner of seven partnerships that invest in regional domestic banks. The general partner may receive a carried interest of up to 20% upon meeting specific investor return rates. Some of the partnerships’ investors wanted to ensure that certain individuals who are critical to the success of the partnerships would participate in the carried interest. For four of these partnerships, the total participation authorized by the Company’s compensation committee was 48.5% of the 20% carried interest, of which Mr. J. Cohen is entitled to receive 10%. Nine individuals, three of whom are employees of the Company, are entitled to receive the remaining 38.5%. For the remaining three partnerships, the total participation authorized by the Company's compensation committee was 50% of the 20% carried interest. Six individuals, four of whom are employees of the Company, are entitled to receive the remaining 50%. No carried interest had been earned by any of the individuals through December 31, 2015.

In February 2014, the Company loaned a non-executive employee $300,000 under a promissory note bearing interest at 3-month LIBOR plus 3%, resetting annually. In December 2014, the Company amended the terms of the note to provide for an initial repayment of $50,000 plus accrued interest, which was paid on March 15, 2015, with the remaining principal and interest due on March 15, 2016; the loan was repaid in full on March 8, 2016.

Relationship with Brandywine Construction & Management, Inc. (“BCMI”). BCMI manages the property underlying one of the Company’s real estate investments. Mr. E. Cohen is the chairman of BCMI.

In March 2008, the Company sold a 19.99% interest in two indirect subsidiaries that hold a hotel property in Savannah, Georgia to a limited liability company owned by Mr. Adam Kauffman ("Mr. A. Kauffman") for $1.0 million plus $130,000 in fees, and recognized a gain of $612,000. The terms of the sale agreement provided an option to Mr. A. Kauffman, who is president of BCMI, to purchase up to the balance of the Company’s interest in the hotel for $50,000 per 1% interest purchased. The purchase option expired in July 2011. Mr. A. Kauffman now has a right-of-first-offer to purchase the balance of the Company’s interest in the hotel.