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| Related Party Transactions Disclosure [Text Block] |
Note 6 Related Party Transactions Initial Management Agreement On November 10, 2014, the Company entered into a management agreement, with an effective date of April 1, 2014, with the Advisor. Under the terms of this initial management agreement, the Advisor was responsible for designing and implementing the Company’s business strategy and administering its business activities and day-to-day operations. For performing these services, the Company was obligated to pay the Advisor a base management fee equal to the greater of (a) 2.0% per annum of the Company’s net asset value (the value of the Company’s assets less the value of the Company’s liabilities), or (b) $30 per calendar month.
In addition pursuant to the initial management agreement the Company owed the Advisor an acquisition fee computed at a rate of 2% of the purchase price of an acquired facility. Amended Management Agreement Upon completion of the Company’s initial public offering on July 1, 2016, the Company and the Advisor entered into an amended and restated management agreement (the “Amended Management Agreement”). Certain material terms of the Amended Management Agreement are summarized below: Term and Termination The Amended Management Agreement has an initial term of three years expiring on the third anniversary of the closing date of the initial public offering but will automatically renew for an unlimited number of successive one-year periods thereafter, unless the agreement is not renewed or is terminated in accordance with its terms. If the Board decides to terminate or not renew the Amended Management Agreement, the Company will generally be required to pay the Advisor a termination fee equal to three times the sum of the average annual base management fee and the average annual incentive compensation with respect to the previous eight fiscal quarters ending on the last day of the fiscal quarter prior to termination. Subsequent to the initial term, the Company may terminate the Amended Management Agreement only under certain circumstances. Base Management Fee The Company pays its Advisor a base management fee in an amount equal to 1.5% of its stockholders’ equity per annum, calculated quarterly for the most recently completed fiscal quarter and payable in quarterly installments in arrears in cash.
For purposes of calculating the base management fee, the Company’s stockholders’ equity means: (a) the sum of (1) the Company stockholders’ equity as of March 31, 2016, (2) the aggregate amount of the conversion price (including interest) for the conversion of the Company’s outstanding convertible debentures into common stock and OP Units upon completion of the initial public offering, and (3) the net proceeds from (or equity value assigned to) all issuances of equity and equity equivalent securities (including common stock, common stock equivalents, preferred stock, LTIP units and OP Units issued by the Company or the Operating Partnership) in the initial public offering, or in any subsequent offering (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), less (b) any amount that the Company pays to repurchase shares of its common stock or equity securities of the Operating Partnership. Stockholders’ equity also excludes (1) any unrealized gains and losses and other non-cash items (including depreciation and amortization) that have impacted stockholders’ equity as reported in the Company’s financial statements prepared in accordance with GAAP, and (2) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case after discussions between the Advisor and its independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the base management fee, could be greater or less than the amount of stockholders’ equity shown on its financial statements. The base management fee of the Advisor shall be calculated within 30 days after the end of each quarter and such calculation shall be promptly delivered to the Company. The Company is obligated to pay the quarterly installment of the base management fee calculated for that quarter in cash within five business days after delivery to the Company of the written statement of the Advisor setting forth the computation of the base management fee for such quarter. Incentive Fee The Company pays its Advisor an incentive fee with respect to each calendar quarter (or part thereof that the management agreement is in effect) in arrears. The incentive fee is an amount, not less than zero, equal to the difference between (1) the product of (x) 20% and (y) the difference between (i) the Company’s AFFO (as defined below) for the previous 12-month period, and (ii) the product of (A) the weighted average of the issue price of equity securities issued in the initial public offering and in future offerings and transactions, multiplied by the weighted average number of all shares of common stock outstanding on a fully-diluted basis (including any restricted stock units, any restricted shares of common stock, OP Units, LTIP units, and shares of common stock underlying awards granted under the 2016 Equity Incentive Plan (the “2016 Equity Plan”) or any future plan in the previous 12-month period, and (B) 8%, and (2) the sum of any incentive fee paid to the Advisor with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any calendar quarter unless AFFO is greater than zero for the four most recently completed calendar quarters. Per the terms of the Amended Management Agreement, AFFO is calculated by adjusting the Company’s funds from operations, or FFO, by adding back acquisition and disposition costs, stock-based compensation expenses, amortization of deferred financing costs and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of the Company’s properties, and subtracting loss on extinguishment of debt, straight line rent adjustment, recurring tenant improvements, recurring leasing commissions and recurring capital expenditures. To date the Company has not incurred or paid an incentive fee. Management Fees, Acquisition Fees, and Accrued Management Fees For the years ended December 31, 2017, 2016, and 2015 management fees of $3,123 and $1,434, and $360, respectively, were incurred and expensed by the Company. During the years ended December 31, 2017 and 2016 management fees of $2,680 and $1,443, respectively, were paid to the Advisor, resulting in accrued management fees due to the Advisor of $1,064 and $621, as of December 31, 2017 and 2016, respectively.
During the years ended December 31, 2016 and 2015, acquisition fees of $754 and $627, respectively were expensed and paid by the Company. Allocated General and Administrative Expenses Effective May 8, 2017, the Company and the Advisor entered into an agreement pursuant to which, for a period of one year commencing on May 8, 2017, the Company agreed to reimburse the Advisor for $125 of the annual salary of the General Counsel and Secretary of the Company for so long as he continues to be primarily dedicated to the Company in his capacity as its General Counsel and Secretary. In the future, the Company may receive additional allocations of general and administrative expenses from the Advisor that are either clearly applicable to or were reasonably allocated to the operations of the Company. Other than via the terms of the reimbursement agreement, there were no allocated general and administrative expenses from the Advisor for the years ended December 31, 2017 and 2016.
Due to Related Parties, Net All related party balances are due on demand and non-interest-bearing. A rollforward of the due (to) from related parties balance, net, as of December 31, 2017, is as follows:
1Net amount accrued of $443 consists of $3,123 in management fee expense incurred, net of $2,680 of accrued management fees that were paid to the Advisor. This represents a cash flow operating activity.
2Amount represents the overpayment of expenses that were previously paid by the Advisor on the Company’s behalf. This represents a cash flow financing activity.
3Amount represents the net receipt by the Company of previous loans made by the Company to those related parties. This represents a cash flow investing activity.
A rollforward of the due (to) from related parties balance, net as of December 31, 2016 is as follows:
1Net amount repaid of $9 consists of $1,434 in management fee expense incurred, net of $1,443 of accrued management fees that were repaid to the Advisor. This is a cash flow operating activity. 2Total amount of $395 consists of $240 repaid by the Company to the Advisor and $155 repaid by the Company to another related party. This is a cash flow financing activity. 3Net amount of $138 consists of loan repaid by Advisor in the amount of $178, net of $39 that the Company loaned to a related party for its general use, and $1 in additional funds loaned to related party. This is a cash flow investing activity. Convertible Debenture, due to Related Party Prior to 2016, the Company received funds from its prior majority stockholder, ZH USA, LLC, in the form of a convertible interest-bearing notes (8% per annum, payable in arrears) which was due on demand unsecured debt. The Company had the option to prepay the note at any time, in whole or in part, and ZH USA, LLC had the ability to convert all or a portion of the outstanding principal amount of the note into shares of common stock in an amount equal to the principal amount of the note, together with accrued but unpaid interest, divided by $12.748. The outstanding balance on the convertible debenture was zero as of December 31, 2017 and 2016. A rollforward of the funding from ZH USA, LLC classified as convertible debenture, due to related party as of December 31, 2016 is as follows:
On March 2, 2016, ZH USA, LLC converted $15,000 of principal under the Convertible Debenture into 1,177 shares of the Company’s then unregistered common stock based on a conversion rate of $12.748 per share.
On June 15, 2016, in anticipation of its initial public offering, the Company entered into a Pay-Off Letter and Conversion Agreement (the “Pay-Off Letter and Conversion Agreement”) with ZH USA, LLC with regards to the Convertible Debentures loaned to the Company. Under the terms of the Pay-Off Letter and Conversion Agreement, upon the closing date of the initial public offering on July 1, 2016, ZH USA, LLC converted $15,030 of the principal under the Convertible Debenture into 1,179 shares of the Company’s registered common stock based on a conversion rate of $12.748 per share. Additionally, in accordance with the Pay-Off Letter and Conversion Agreement, on July 8, 2016 the Company paid off the remaining principal amount of $10,000 outstanding under the Convertible Debentures. On July 8, 2016, also in accordance with the Pay-Off Letter and Conversion Agreement, the Company paid all accrued interest owed and outstanding on the Convertible Debentures in the amount of $1,717. Accrued interest was included in the line item “Accrued Expenses” in the accompanying Consolidated Balance Sheets. Additionally, during the year ended December 31, 2015, the Company received aggregate funds in the amount of $34,584, which were accounted for as Convertible Debentures. The funds were received in four separate transactions as follows: $20,900 to acquire the Tennessee facilities, $4,546 for the West Mifflin acquisition, $9,000 for the Plano acquisition, and $138 held by the Company to be used for future acquisitions. Interest expense on the Convertible Debentures was zero, $1,243, and $581 for the years ended December 31, 2017, 2016, and 2015, respectively. Notes Payable to Related Parties During the year ended December 31, 2016, the Company received $450 in the form of an interest bearing note payable from a related party. The note incurred interest at 4% per annum and was due on demand. Interest expense incurred on this note was $10 for the year ended December 31, 2016. This note was paid in full during the year ended December 31, 2016 and therefore had a zero balance as of December 31, 2017 and 2016, respectively. Prior to 2016 the Company received funds from ZH USA, LLC in the form of a non-interest bearing, due on demand note payable. The Company repaid this loan in full during 2017 and accordingly the balance of this note was zero and $421 as of December 31, 2017 and 2016, respectively. ZH USA, LLC Intercompany Loan
On June 7, 2016, the Company received an interest free intercompany loan from ZH USA, LLC in the principal amount of $1.5 million, which was repaid in full on July 8, 2016, using a portion of the proceeds from the initial public offering.
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