12. Related Party Transactions

We sometimes pay to and/or receive fees from Penske Corporation and its affiliates for services rendered in the normal course of business, or to reimburse payments made to third parties on each other’s behalf. These transactions are reviewed periodically by our Audit Committee and reflect the provider’s cost or an amount mutually agreed upon by both parties. During 2016, 2015, and 2014, Penske Corporation and its affiliates billed us $6.9 million, $6.7 million, and $7.3 million, respectively, and we billed Penske Corporation and its affiliates $148 thousand, $101 thousand, and $56 thousand, respectively, for such services. As of December 31, 2016 and 2015, we had $98 thousand and $64 thousand of receivables from and $0.8 million and $0.6 million of payables to Penske Corporation and its subsidiaries, respectively.

On July 27, 2016, we acquired an additional 14.4% ownership interest in PTL, a leading provider of transportation services and supply chain management, from GE Capital for approximately $498.5 million in cash. After the transaction, PTL is owned 41.1% by Penske Corporation, 23.4% by us, 20.0% by Mitsui, and 15.5% by GE Capital. In connection with this transaction, the PTL partners agreed to amend and restate the existing partnership agreement among the partners which, among other things, provides us with specified partner distribution and governance rights and restricts our ability to transfer our interests. Specifically, as a limited partner, we are now entitled to one of seven representatives of PTL’s Advisory Committee and approval rights over significant governance items of PTL. We continue to have the right to pro rata quarterly distributions equal to 50% of PTL’s consolidated net income, and we expect to realize significant cash tax savings.

We may only transfer our 23.4% ownership interest in PTL with the unanimous consent of the other partners, or if we provide the remaining partners with a right of first offer to acquire our interests, except that we may transfer up to 9.02% of our interests to Penske Corporation without complying with the right of first offer to the remaining partners. We and Penske Corporation have previously agreed that (1) in the event of any transfer by Penske Corporation of their partnership interests to a third party, we shall be entitled to “tag-along” by transferring a pro rata amount of our partnership interests on similar terms and conditions, and (2) Penske Corporation is entitled to a right of first refusal in the event of any transfer of our partnership interests, subject to the terms of the partnership agreement. Additionally, PTL has agreed to indemnify the general partner for any actions in connection with managing PTL, except those taken in bad faith or in violation of the partnership agreement.

The partnership agreement allows GE Capital or Penske Corporation, beginning December 31, 2017, to give notice to require PTL to begin to effect an initial public offering of equity securities, subject to certain limitations, as soon as practicable after the first anniversary of the initial notice. The party that is not exercising this right may seek to find a third party to purchase all of the partnership interests from the exercising party or to propose another alternative to such equity offers. In connection with the right to cause PTL to conduct an initial public offering, the PTL partners have agreed to customary demand and piggyback registration rights. As part of the transaction, beginning in 2025, PAG and Mitsui have been granted a similar right to require PTL to begin an initial public offering of equity securities, subject to certain limitations, as soon as reasonably practicable. The term of the partnership agreement was extended to December 31, 2035 or such later date as the limited partners may agree.

In 2016, 2015, and 2014, we received $21.7 million, $13.8 million, and $11.6 million, respectively, from PTL in pro rata cash dividends. In 2014, we formed a venture with PTL, Penske Commercial Leasing Australia. This venture combines PTL’s fleet operations expertise with our market knowledge of commercial vehicles to rent heavy-duty commercial vehicles in Australia. This venture is accounted for as an equity method investment as discussed in Note 2.

In September 2016, PTG completed the sale of certain assets to PTL, a related party. The assets sold consisted of approximately 300 vehicles, together with the associated full-service truck leasing and truck rental contracts with various PTG customers. PTL purchased these assets at fair value, which exceeded our carrying value for these assets, for a total purchase price of approximately $17.0 million.

In 2014, we acquired Transportation Resource Partners’ (“TRP”) ownership interest in PTG for $58.8 million, increasing our ownership to 91%. TRP is an organization that invests in transportation-related industries in which our CEO, Roger S. Penske, is a managing member.

Joint Venture Relationships

From time to time we enter into joint venture relationships in the ordinary course of business, pursuant to which we own and operate automotive dealerships together with other investors. We may also provide these dealerships with working capital and other debt financing at costs that are based on our incremental borrowing rate. As of December 31, 2016, our automotive joint venture relationships were as follows:



Location	Dealerships	Ownership Interest
Fairfield, Connecticut	Audi, Mercedes-Benz, Sprinter, Porsche, smart	80.00	% (A) (B)
Greenwich, Connecticut	Mercedes-Benz	80.00	% (A) (B)
Northern Italy	BMW, MINI, Maserati, Porsche, Audi, Land Rover, Volvo, Nissan	84.00	% (B) (E)
Aachen, Germany	Audi, Maserati, SEAT, Skoda, Volkswagen	68.00	% (C)
Frankfurt, Germany	Lexus, Toyota, Volkswagen	50.00	% (D)
Barcelona, Spain	BMW, MINI	50.00	% (D)
Tokyo, Japan	BMW, MINI, Rolls-Royce, Ferrari, ALPINA	49.00	% (D)

(a)

An entity controlled by one of our directors, Lucio A. Noto, owns a 20% interest in this joint venture.

(b)

Entity is consolidated in our financial statements.

(c)

Entity is consolidated in our financial statements as a result of our purchase of an additional 10% interest in this joint venture in the third quarter of 2015. In March 2016, we acquired an additional 8% interest in this joint venture.

(d)

Entity is accounted for using the equity method of accounting.

(e)

In October 2016, we made an additional investment in this joint venture, which increased our ownership interest from 70% to 84%. This additional investment funded our acquisition of seven retail automotive franchises in October 2016, consisting of three Porsche franchises, one Audi franchise, one Land Rover franchise, one Volvo franchise, and one Nissan franchise in the Bologna, Italy market.

Additionally, we are party to non-automotive joint ventures including our investments in Penske Commercial Leasing Australia (33%), Penske Vehicle Services (31%), PTL (23.4%), and National Powersport Auctions (7%) that are accounted for under the equity method, as more fully discussed in Note 2.