Related Party Transactions |
6 Months Ended |
|---|---|
Jun. 30, 2020 | |
| 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 between the Company and PRCM Advisers dated as of October 28, 2009 and subsequently amended, the Company incurred $11.4 million and $26.0 million as a management fee to PRCM Advisers for the three and six months ended June 30, 2020, respectively, and $13.6 million and $25.7 million as a management fee to PRCM Advisers for the three and six months ended June 30, 2019, respectively, which represents approximately 1.5% of stockholders’ equity on an annualized basis as defined by the Management Agreement. For purposes of calculating the management fee, stockholders’ equity is adjusted as discussed below, and to exclude any common stock repurchases, as well as any unrealized gains, losses or other items that do not affect realized net loss, among other adjustments, in accordance with the Management Agreement. In connection with the acquisition of CYS on July 31, 2018, the Management Agreement was amended to reduce PRCM Advisers’ base management fee with respect to the additional equity under management resulting from the merger to 0.75% from the effective time through the first anniversary of the effective time. Effective July 31, 2019, the management fee reduction on the equity acquired in the CYS transaction expired.
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 $4.3 million and $16.1 million for the three and six months ended June 30, 2020, respectively, and $5.1 million and $18.3 million for the three and six months ended June 30, 2019, respectively. The Company will continue to have certain costs allocated to it by PRCM Advisers for compensation, data services, technology and certain office lease payments, however, the Company has direct relationships with most of its third party vendors and pays those expenses directly.
The Company recognized $2.3 million and $4.6 million of compensation during the three and six months ended June 30, 2020, respectively, and $2.5 million and $4.4 million of compensation during the three and six months ended June 30, 2019, respectively, related to restricted common stock issued to employees of PRCM Advisers and the Company’s independent directors pursuant to the Plan. See Note 18 - Equity Incentive Plan for additional information.
On April 13, 2020, the Company announced that it had elected to not renew the Management Agreement with PRCM Advisers on the basis of unfair compensation payable to the manager pursuant to Section 13(a)(ii) of the Management Agreement. As a result, the Company had expected the Management Agreement to terminate on September 19, 2020, at which time the Company would have been required to pay a termination fee calculated pursuant to the terms of the Management Agreement.
Subsequent to quarter-end, on July 15, 2020, the Company provided PRCM Advisers with a notice of termination of the Management Agreement for “cause” on the basis of certain material breaches of the Management Agreement by PRCM Advisers, its agents and/or its assignees that are incapable of being cured within the time period set forth therein and certain events of gross negligence on the part of PRCM Advisers in the performance of its duties under the Management Agreement. The notice of termination specifies that the Management Agreement will terminate on August 14, 2020 and no termination fee will be payable to PRCM Advisers in connection with the termination pursuant to Section 15(a) of the Management Agreement.
Following the termination of the Management Agreement, the Company will become a self-managed company. The Company expects to continue to be managed by its current senior management team, along with the other personnel currently providing services to the Company.
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