Annual report pursuant to Section 13 and 15(d)

Related-Party Transactions

Related-Party Transactions
12 Months Ended
Dec. 31, 2013
Related Party Transactions [Abstract]  
Related-Party Transactions
6. Related-Party Transactions

Amounts due from (to) affiliates consisted of the following (in thousands):


     December 31,  
         2013          2012  

Cash sweep receivable from MMC

   $ —         $ 71,905   

Taxes payable to MMC

     —           (11,133

General and administrative expenses payable to MMC

     —           (383






   $       —         $ 60,389   







Prior to June 30, 2013, the majority of the cash generated and used in MMREIS’s operations was held in bank accounts with one financial institution that were included in a sweep arrangement with MMC. Pursuant to a treasury management service agreement with that financial institution, the cash was swept daily into MMC’s money market account. MMREIS collected interest income from MMC at the same interest rate as MMC earned on the money market account. Historically, other than for a 2-week period around MMC’s March 31 fiscal year end, the MMREIS had a receivable from MMC for the cash that was swept. When the sweep arrangement was not in effect, during the week before and the week after March 31, MMREIS’s cash balances remained in MMREIS’s bank accounts. As of June 30, 2013, the sweep arrangement with MMC was permanently terminated. MMREIS earned interest income from MMC of $0.1 million, $0.2 million and $0.1 million for the years ended December 31, 2013, 2012 and 2011, respectively, pertaining to the sweep arrangement.

MMC has a credit agreement under which, MMREIS, along with many other entities controlled by MMC, was a guarantor. The credit agreement is comprised of two components, a line of credit and a term loan which matures on December 26, 2015 and June 1, 2019, respectively. There were certain covenants that MMREIS was required to comply with, such as providing an annual audit report, and quarterly financial statements. MMREIS was required to satisfy the outstanding obligation upon an event of default as defined in the credit agreement. Under the terms of the guarantee, there was not a specific allocation of liability related to MMREIS as all guarantors would be combined for paying specific claims. MMREIS’s guarantee for each component of the credit agreement expired on the respective maturity date. The maximum amount of future payments that MMREIS could have been required to make under the guarantee as of December 31, 2012 was equal to the amount outstanding of $49.7 million ($30.7 million outstanding on the line of credit and $19.0 million advanced under the term loan component of the line). At December 31, 2012, MMC was in compliance with all debt covenants under the terms of the line of credit agreement. MMREIS was released from the guaranty effective November 5, 2013 in connection with the Spin-Off and the completion of the IPO.

Shared services arrangement

Under a shared services arrangement with MMC, MMC provided services to MMREIS. During the years ended December 31, 2013, 2012 and 2011, MMREIS incurred $0.6 million, $0.8 million and $0.9 million, respectively, to MMC pursuant to this arrangement.

Amounts representing health insurance premiums incurred by MMC on behalf of MMREIS during the years ended December 31, 2013, 2012, and 2011 were $3.2 million, $3.5 million and $2.8 million, respectively. Such expenses, paid by MMC on behalf of MMREIS, were allocated based on individual employee coverage costs.

During the years ended December 31, 2013, 2012 and 2011, MMC incurred $0.5 million, $0.5 million and $0.8 million, respectively, in other general and administrative expenses on behalf of MMREIS. Expenses incurred by MMC, such as rent, corporate compensation, and other corporate costs, are allocated on a pro rata basis.


Transition services

In connection with the IPO, the shared services arrangement with MMC was replaced by a Transition Services Agreement between the Company and MMC that became effective on October 31, 2013. In accordance with the Transition Services Agreement, MMC will continue to provide certain services to the Company for a limited period of time, including, but not limited to, the sharing of costs relating to certain insurance coverage and health plans, legal services and information technology management. During the year ended December 31, 2013, the Company incurred $0.8 million (of this amount, $0.7 million was incurred for reimbursement to MMC for health insurance premiums), pursuant to the Transition Services Agreement, which is included in selling, general, and administrative expense in the accompanying consolidated statements of income. Of this amount, $0.5 million was accrued as of December 31, 2013 in accounts payable and other accrued expenses – related party in the accompanying consolidated balance sheets.

Following the IPO, Mr. Marcus, the Company’s Founder and Co-Chairman, continues to own indirectly approximately 67.0% of the Company’s fully diluted shares, including shares to be issued upon settlement of vested DSUs. See Note 8 – “Stock-Based Compensation Plans” for additional information on DSUs.

Financing and brokerage services with the subsidiaries of MMC

MMC has wholly or majority owned subsidiaries that buy and sell commercial real estate properties. MMREIS has performed financing and brokerage services related to these transactions with the subsidiaries of MMC. Financing and brokerage service revenue from these transactions with the subsidiaries of MMC for the years ended December 31, 2013, 2012, and 2011, totaled $0.7 million $1.1 million and $0.8 million, respectively. MMREIS commission expense for these transactions totaled $0.4 million, $0.7 million and $0.5 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Operating lease with MMC

MMREIS has an operating lease with MMC for an office located in Palo Alto, California. The lease expires April 30, 2015. Following the IPO, the Company still has the operating lease. Rent expense for this office totaled $0.4 million, $0.3 million and $0.3 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Employee notes receivable

MMREIS issues loans to employees and concurrently recognizes an employee notes receivable. At December 31, 2013 and 2012, the aggregate principal amount outstanding was $0.4 million and $1.2 million, respectively which is included in employee notes receivable in the consolidated balance sheets.