2. Related Party Transactions and Investments in Non-Consolidated Entities

Investment in Sponsored REITs:

At June 30, 2018 and December 31, 2017, the Company held a common stock interest in five and six Sponsored REITs, respectively. The Company holds a non-controlling preferred stock investment in two of these Sponsored REITs, FSP 303 East Wacker Drive Corp. (“East Wacker”) and FSP Grand Boulevard Corp. (“Grand Boulevard”), from which it continues to derive economic benefits and risks.

Equity in losses of investment in non-consolidated REITs:

The following table includes equity in losses of investments in non-consolidated REITs


	Six Months Ended June 30,
(in thousands)	2018		2017

Equity in losses of East Wacker	$	26	$	251
Equity in losses of Grand Boulevard		52		347
Impairment charge		309		—
	$	387	$	598

Equity in losses of investments in non-consolidated REITs is derived from the Company’s share of income or loss in the operations of those entities. The Company exercises influence over, but does not control these entities, and investments are accounted for using the equity method.

Equity in losses of East Wacker is derived from the Company’s preferred stock investment in the entity. In December 2007, the Company purchased 965.75 preferred shares or 43.7% of the outstanding preferred shares of East Wacker for $82,813,000 (which represented $96,575,000 at the offering price net of commissions of $7,726,000, loan fees of $5,553,000 and acquisition fees of $483,000 that were excluded).

Equity in losses of Grand Boulevard is derived from the Company’s preferred stock investment in the entity. In May 2009, the Company purchased 175.5 preferred shares or 27.0% of the outstanding preferred shares of Grand Boulevard for $15,049,000 (which represented $17,550,000 at the offering price net of commissions of $1,404,000, loan fees of $1,009,000 and acquisition fees of $88,000 that were excluded).

At June 30, 2018, the Company recognized an impairment charge of $309,000, which represented the other-than-temporary decline in the fair value below the carrying value of one of the Company’s investments in non-consolidated REITs. The Company estimated the fair value of its equity investment by estimating the fair value of the property, less estimated costs to sell using a purchase and sale agreement to purchase the property made by third parties (Level 3 inputs, as there is no active market).

The Company received distributions of $710,000 and $691,000 from non-consolidated REITs during the six months ended June 30, 2018 and 2017, respectively.

Management fees and interest income from loans:

Asset management fees range from 1% to 5% of collected rents and the applicable contracts are cancelable with 30 days notice. Asset management fee income from non-consolidated entities amounted to approximately $271,000 and $316,000 for the six months ended June 30, 2018 and 2017, respectively.

From time to time the Company may make secured loans (“Sponsored REIT Loans”) to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes. The Company reviews Sponsored REIT loans for impairment each reporting period. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts recorded on the balance sheet. The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. None of the Sponsored REIT loans have been impaired.

The Company anticipates that each Sponsored REIT Loan will be repaid at maturity or earlier from long term financings of the underlying properties, cash flows from the underlying properties or some other capital event. Each Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately one to three years. Except for two mortgage loans which bear interest at a fixed rate, advances under each Sponsored REIT Loan bear interest at a rate equal to the 30-day LIBOR rate plus an agreed upon amount of basis points and also require a 50 basis point draw fee.

The following is a summary of the Sponsored REIT Loans outstanding as of June 30, 2018:


			Maximum		Amount							Interest
(dollars in thousands)		Maturity	Amount		Drawn at		Interest			Draw		Rate at
Sponsored REIT	Location	Date	of Loan		30-Jun-18		Rate (1)			Fee (2)		30-Jun-18

Secured revolving lines of credit
FSP Satellite Place Corp.	Duluth, GA	31-Dec-19	$	5,500	$	1,590	L+	4.4	%	0.5	%	6.40	%
FSP Energy Tower I Corp.	Houston, TX	30-Jun-19		20,000		15,600	L+	5.0	%	0.5	%	7.00	%

Mortgage loan secured by property
FSP Monument Circle LLC (3)	Indianapolis, IN	7-Dec-18		21,000		21,000		4.90	%	n/a		4.90	%
FSP Energy Tower I Corp. (4)	Houston, TX	30-Jun-19		33,000		33,000		6.41	%	n/a		6.41	%

			$	79,500	$	71,190

(1)

The interest rate is 30-day LIBOR rate plus the additional rate indicated, otherwise a fixed rate.

(2)

The draw fee is a percentage of each new advance, and is paid at the time of each new draw.

(3)

This mortgage loan includes an origination fee of $164,000 and an exit fee of $38,000 when repaid by the borrower.

(4)

This mortgage loan includes an annual extension fee of $108,900 paid by the borrower.

The Company recognized interest income and fees from the Sponsored REIT Loans of approximately $2,262,000 and $2,420,000 for the six months ended June 30, 2018 and 2017, respectively.

Non-consolidated REITs:

The balance sheet data below for 2018 and 2017 includes the 5 Sponsored REITs the Company held an interest in as of June 30, 2018 and the 6 Sponsored REITs the Company held an interest in as of December 31, 2017. The operating data below for 2018 and 2017 include the operations of the 6 and 7 Sponsored REITs in which the Company held an interest in during the six months ended June 30, 2018 and 2017, respectively.

Summarized financial information for these Sponsored REITs is as follows:


	June 30,		December 31,
(in thousands)	2018		2017

Balance Sheet Data (unaudited):
Real estate, net	$	296,588	$	312,861
Other assets		69,439		74,076
Total liabilities		(148,896)		(151,092)
Shareholders’ equity	$	217,131	$	235,845


	For the Six Months Ended
	June 30,
(in thousands)	2018		2017

Operating Data (unaudited):
Rental revenues	$	25,755	$	28,084
Other revenues		1		4
Operating and maintenance expenses		(13,175)		(14,466)
Depreciation and amortization		(8,606)		(9,943)
Interest expense		(4,030)		(4,226)
Gain (loss) on sale, less applicable income tax		9,393		—
Net income (loss)	$	9,338	$	(547)