Related Party Transactions

9 Months Ended

Sep. 30, 2019

Management Services

At September 30, 2019 and December 31, 2018, the Manager held 13,048,205 shares and 12,477,438 shares, respectively, of the Company’s common stock. Pursuant to the terms of the Third Amended and Restated Management Services Agreement (Management Services Agreement), the Manager may sell these shares at any time. Under the Management Services Agreement, the Manager, at its option, may reinvest base management fees and performance fees, if any, in shares of the Company.

Since January 1, 2018, the Company paid the Manager cash dividends on shares held for the following periods:

Declared

Period Covered

$ per
Share

Record Date

Payable Date

Cash Dividend Paid to Manager
(in millions)

October 29, 2019

Third quarter 2019

1.00

November 11, 2019

November 14, 2019

⁽¹⁾

July 30, 2019

Second quarter 2019

1.00

August 12, 2019

August 15, 2019

April 29, 2019

First quarter 2019

1.00

May 13, 2019

May 16, 2019

February 14, 2019

Fourth quarter 2018

1.00

March 4, 2019

March 7, 2019

October 30, 2018

Third quarter 2018

1.00

November 12, 2018

November 15, 2018

July 31, 2018

Second quarter 2018

1.00

August 13, 2018

August 16, 2018

May 1, 2018

First quarter 2018

1.00

May 14, 2018

May 17, 2018

February 19, 2018

Fourth quarter 2017

1.44

March 5, 2018

March 8, 2018

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(1)	The amount of dividend payable to the Manager for the third quarter of 2019 will be determined on November 11, 2019, the record date.

Under the Management Services Agreement, subject to the oversight and supervision of the Company’s Board, the Manager is responsible for and oversees the management of the Company’s operating businesses. In addition, the Manager has the right to appoint the Chairman of the Board, subject to minimum equity ownership, and to assign, or second, to the Company, two of its employees to serve as chief executive officer and chief financial officer of the Company and seconds or makes other personnel available as required.

In accordance with the Management Services Agreement, the Manager is entitled to a monthly base management fee based primarily on the Company’s market capitalization, and potentially a quarterly performance fee based on total shareholder returns relative to a U.S. utilities index. Currently, the Manager has elected to reinvest the future base management fees and performance fees, if any, in additional shares. For the quarter and nine months ended September 30, 2019, the Company incurred base management fees of $8 million and $23 million, respectively, compared with $12 million and $36 million for the quarter and nine months ended September 30, 2018, respectively. The Company did not incur any performance fees for the quarter and nine month periods ended September 30, 2019 and 2018.

Effective November 1, 2018, the Manager waived two elements of the base management fee to which it was entitled under the terms of the Management Services Agreement. In effect, the waivers cap the base management fee at 1% of the Company’s equity market capitalization less any cash balances at the holding company. The waiver applies only to the calculation of the base management fees and not to the remainder of the Management Services Agreement. The Manager reserves the right to revoke the waivers and revert to the prior terms of the Management Services Agreement, subject to providing the Company with not less than a one year notice. A revocation of the waiver would not trigger a recapture of previously waived fees. As part of the disposition agreement entered into between the Company and its Manager, the Manager has agreed not to revoke the waiver during the term of the disposition agreement. See Note 16, “Subsequent Events” for further discussions on disposition agreement.

The unpaid portion of the base management fees and performance fees, if any, at the end of each reporting period is included in Due to Manager-related party in the consolidated condensed balance sheets.



Period	Base Management Fee Amount ($ in millions)		Performance Fee Amount ($ in millions)		Shares Issued
2019 Activities:
Third quarter 2019	$	8	$	—	201,827	⁽¹⁾
Second quarter 2019	7		—		192,103
First quarter 2019	8		—		184,448

2018 Activities:
Fourth quarter 2018	$	9	$	—	220,208
Third quarter 2018	12		—		269,286
Second quarter 2018	11		—		277,053
First quarter 2018	13		—		265,002

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(1)	The Manager elected to reinvest all of the monthly base management fees for the third quarter of 2019 in new primary shares. The Company issued 201,827 shares for the quarter ended September 30, 2019, including 67,659 shares that were issued in October 2019 for the September 2019 monthly base management fee.

The Manager is not entitled to any other compensation and all costs incurred by the Manager, including compensation of seconded staff, are paid by the Manager out of its base management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries, income taxes, audit and legal fees, acquisitions and dispositions and its compliance with applicable laws and regulations. During the quarter and nine months ended September 30, 2019, the Manager charged the Company $76,000 and $653,000, respectively, for reimbursement of out-of-pocket expenses compared with $296,000 and $705,000, respectively, for quarter and nine months ended September 30, 2018. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in Due to Manager-related party in the consolidated condensed balance sheets. During the quarter ended September 30, 2019, the Company accrued $294,000 in legal fees incurred by the Manager related to the Shareholder Litigation. The unpaid expense is included in Accounts Payable in the consolidated condensed balance sheet. For additional information, see Note 15, "Legal Proceedings and Contingencies", for further discussions.

Macquarie Group - Other Services

The Company uses the resources of the Macquarie Group with respect to a range of advisory, procurement, insurance, hedging, lending and other services. Engagements involving members of the Macquarie Group are reviewed and approved by the Audit Committee of the Company’s Board. Macquarie Group affiliates are engaged on an arm’s length basis and frequently as a member of a syndicate of providers whose other members establish the terms of the interaction.

Advisory Services

The Macquarie Group, and wholly-owned subsidiaries within the Macquarie Group, including Macquarie Bank Limited (MBL) and Macquarie Capital (USA) Inc. (MCUSA) have provided various advisory and other services and incurred expenses in connection with the Company’s equity raising activities, acquisitions and debt structuring for the Company and its businesses. Underwriting fees are recorded in stockholders’ equity as a direct cost of equity offerings. Advisory fees and out-of-pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility.

Long-Term Debt

In January 2018, the Company completed the refinancing and upsizing of its senior secured revolving credit facility to $600 million from $410 million and extended the maturity through January 3, 2022. As part of the refinancing and upsizing, MIHI LLC’s $50 million commitment was replaced by a $40 million commitment from Macquarie Capital Funding LLC. As part of the closing, the Company paid Macquarie Capital Funding LLC $80,000 in closing fees.

For the quarter and nine months ended September 30, 2019, the Company incurred interest expense of $45,000 and $120,000 respectively, related to Macquarie Capital Funding LLC’s portion of the MIC senior secured revolving credit facility compared with $139,000 and $376,000 for the quarter and nine months ended September 30, 2018, respectively.

Other Transactions

In May 2018, the Company sold its equity interest in projects involving two properties to Macquarie Infrastructure and Real Assets, Inc. (MIRA Inc.), an affiliate of the Manager, for their cost of $27 million. The Company retained the right to 20% of any gain on a subsequent sale by MIRA Inc. to a third party of a more than 50% interest in either or both of the projects.

From time to time, indirect subsidiaries within Macquarie Group may enter into contracts with IMTT to lease capacity. For the nine months ended September 30, 2019, the revenue from these contracts were approximately $1 million and were insignificant for the prior comparable period.

Other Related Party Transactions

During the quarter ended September 30, 2019, the Company incurred $75,000 for advisory services from a former Board member.