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Related Party Transactions (Notes)
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12 Months Ended |
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Dec. 31, 2012
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| Related Party Transactions [Abstract] | |
| Related Party Transactions |
Related Party Transactions
The following summary provides disclosure of the material transactions with affiliates of the Company.
In accordance with the Management Agreement with PRCM Advisers, the Company incurred $33.2 million, $14.2 million and $3.0 million as a management fee to PRCM Advisers for the years ended December 31, 2012, 2011 and 2010, respectively, which represents approximately 1.5% of stockholders' equity on an annualized basis as defined by the Management Agreement. In addition, the Company reimbursed PRCM Advisers for direct and allocated costs incurred by PRCM Advisers on behalf of the Company. These direct and allocated costs totaled approximately $11.8 million, $8.1 million and $5.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.
During the year ended December 31, 2012, the Company established an accounts payable function and direct relationships with the majority of its third party vendors. The Company will continue to have certain costs allocated to it by PRCM Advisers for compensation, data services and proprietary technology, but most direct expenses with third party vendors will be paid directly by the Company.
The Company recognized $0.5 million, $0.3 million and $0.2 million of compensation expense during the years ended December 31, 2012, 2011 and 2010, respectively, associated with the amortization of shares of restricted stock issued to the Company's independent directors as part of their annual compensation.
As of December 31, 2012, there were 13,531,429 warrants to purchase 13,531,429 shares of common stock issued and outstanding. Of the 13,531,429 warrants remaining at December 31, 2012, 1,000,000 were beneficially owned by Pine River Master Fund Ltd. and Nisswa Acquisition Master Fund Ltd., which are investment funds managed by Pine River. The Company is required to maintain a resale registration statement for the warrants and common stock issuable upon exercise thereof that are held by Pine River Master Fund Ltd. and Nisswa Acquisition Master Fund Ltd.
On February 3, 2012, a subsidiary of the Company entered into an acquisition services agreement, a property management agreement and a side letter agreement regarding certain fees with Silver Bay Property Management LLC, or Silver Bay, which is a joint venture between Provident Real Estate Advisors LLC and an affiliate of PRCM Advisers and Pine River. Under the acquisition services agreement, Silver Bay assisted the Company's subsidiaries in identifying and acquiring a portfolio of residential real properties in various geographic areas throughout the U.S. Under the property management agreement, Silver Bay operated, maintained, repaired, managed and leased the residential properties and collected rental income for the benefit of the Company and its subsidiaries. Pursuant to the side letter, the Company's subsidiary was obligated to pay Silver Bay for various services provided under the acquisition services and property management agreements. For the year ended December 31, 2012, the Company incurred $3.9 million in acquisition fees and $0.8 million in renovation oversight fees payable to Silver Bay, which were capitalized as part of the property acquisition cost. In addition, for the year ended December 31, 2012, the Company incurred $590,411 in property management fees payable to Silver Bay, of which $306,415 were expensed within discontinued operations in the consolidated statement of comprehensive income. The remaining $283,996 were deferred on the consolidated balance sheet and included in the contribution to Silver Bay.
On December 19, 2012, the Company completed the contribution of its portfolio of single-family rental properties to Silver Bay, a newly organized Maryland corporation intended to qualify as a REIT and focused on the acquisition, renovation, leasing and management of single-family residential properties for rental income and long-term capital appreciation. The Company contributed its equity interests in its wholly owned subsidiary, Two Harbors Property Investment LLC to Silver Bay, and in exchange for its contribution, received shares of common stock of Silver Bay. Silver Bay completed its initial public offering, or IPO, of its common stock on December 19, 2012. See Note 3 - Discontinued Operations for additional information. In connection with the closing of the contribution, the acquisition services agreement, property management agreement and side letter agreement referenced above were each terminated, except for certain designated provisions (e.g., protection of confidential information and indemnification), which the parties agreed would survive the closing. Not included in the gain recorded on the contribution are certain adjustments that will be recognized in 2013. These include an installment sales gain of approximately $4.0 million from Silver Bay, a reduction of future management fees payable to PRCM Advisers of $4.3 million, and additional working capital adjustments which are anticipated to be immaterial but subject to final determination in accordance with the contribution agreement entered into with Silver Bay.
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