RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2022

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 12 – RELATED PARTY TRANSACTIONS

Effective January 1, 2021, Alloy Enterprises, Inc. was formed to act as the holding company for Sterling Management, LLC and GOLDMARK Property Management, Inc. In connection with this restructuring transaction, the owners of Alloy Enterprises, Inc. indirectly own Sterling Management, LLC and GOLDMARK Property Management, Inc. Alloy Enterprises, Inc. is owned in part by the Trust’s Chief Executive Officer and Trustee Mr. Kenneth P. Regan, by Trustee Mr. James S. Wieland, and by President Joel S. Thomsen. In addition, Mr. Regan serves as the Executive Chairman of the Advisor, and Messrs. Wieland, and Thomsen serve on the Board of Governors of both the Advisor and GOLDMARK Property Management, Inc.

Sterling Management, LLC (the “Advisor”), is a North Dakota limited liability company formed in November 2002. The Advisor is responsible for managing day-to-day affairs, overseeing capital projects, and identifying, acquiring, and disposing investments on behalf of the trust.

GOLDMARK Property Management, Inc., is a North Dakota corporation formed in 1981. GOLDMARK Property Management, Inc. performs property management services for the Trust.

We have a historical and ongoing relationship with Bell Bank. Bell Bank has provided the Trust certain financial services throughout the relationship. Mr. Wieland, a Trustee, also serves as a Board Member of Bell Bank. Mr. Wieland could have an indirect material interest in any such engagement and related transactions.

The Trust has a historical and ongoing relationship with Trumont Group and Trumont Construction. Trumont Group provides development services for current joint venture projects in which the Operating Partnership is an investor. Trumont Construction has been engaged to construct the properties associated with these joint ventures. Mr. Regan, Chief Executive Officer and trustee, is a partner in both Trumont Group and Trumont Construction and has a direct material interest in any engagement or related transaction, the Trust enters into, with these entities.

Property Management Fees

During the nine months ended September 30, 2022 and 2021, we paid property management and administrative fees to GOLDMARK Property Management, Inc. of $10,485, and $9,634, respectively. Management fees which approximate 5% of net collected rents, account for $4,107 and $3,862 of these fees during the nine months ended September 30, 2022 and 2021. In addition, during the nine months ended September 30, 2022 and 2021, we paid repair and maintenance expenses, and payroll related expenses to GOLDMARK Property Management, Inc. totaling $5,578 and $5,012, respectively.

Advisory Agreement

We are an externally managed trust and as such, although we have a Board of Trustees and executive officers responsible for our management, we have no paid employees. The Advisor may receive fees related to management of the Trust, acquiring, disposing, or developing real estate property, project management fees, and financing fees related to lending relationships, under the Advisory Agreement, which must be renewed on an annual basis and approved by a majority of the independent trustees. The Advisory Agreement was approved by the Board of Trustees (including all the independent Trustees) on March 24, 2022, and is effective until March 31, 2023.

The below table summarizes the fees incurred to our Advisor.

	Nine Months ended September 30,
	2022		2021
	(in thousands)
Fee:
Advisory	$	2,739	$	2,474
Acquisition	$	934	$	375
Disposition	$	631	$	146
Financing	$	83	$	146
Project Management	$	420	$	409

The below table summarizes the fees payable to our Advisor.

	Payable at
	September 30,		December 31,
	2022		2021
	(in thousands)
Fee:
Advisory	$	313	$	296
Acquisition	$	58	$	-
Development	$	-	$	79
Disposition	$	30	$	-
Financing	$	4	$	38
Project Management	$	3	$	98

Operating Partnership Units Issued in Connection with Acquisitions

During the nine months ended September 30, 2022, 510,000 Operating Partnership units were issued to an entity affiliated with Messrs. Regan and Wieland, two of our trustees, in connection with the acquisition of various properties. The aggregate value of these units was $11,741.

During the nine months ended September 30, 2021, there were no Operating Partnership units issued directly or indirectly, to affiliated entities.

Commissions

During the nine months ended September 30, 2022 and 2021, we incurred real estate commissions of $371 and $297, respectively, to GOLDMARK Commercial Real Estate, Inc., in which Messrs. Regan and Wieland jointly own a controlling interest. As of September 30, 2022 total commissions payable to Goldmark Commercial Real Estate was $29. As of December 30, 2021, there were no unpaid commissions to GOLDMARK Commercial Real Estate.

During the nine months ended September 30, 2022 and 2021, we incurred real estate commissions of $319 and $217, respectively, to GOLDMARK Property Management. As of September 30, 2022 total commissions payable to Goldmark Property Management was $59. As of December 30, 2021, there were no unpaid commissions to GOLDMARK Property Management.

Rental Income

During the nine months ended September 30, 2022 and 2021, we received rental income of $97 and $77, respectively, under an operating lease agreement with our Advisor.

During the nine months ended September 30, 2022 and 2021, we received rental income of $- and $19, respectively, under an operating lease agreement with GOLDMARK Commercial Real Estate, Inc.

During the nine months ended September 30, 2022 and 2021, we received rental income of $200 and $224, respectively, under operating lease agreements with GOLDMARK Property Management, Inc.

During the nine months ended September 30, 2022 and 2021, we received rental income of $639 and $278, respectively, under operating lease agreements with Bell Bank.

Other operational costs

During the nine months ended September 30, 2022 and 2021, the Trust incurred $420 and $187, respectively, for general costs related to business operations as well as capital expenditures related to construction in progress that were paid to related parties. At September 30, 2022 and December 31, 2021, operational outstanding liabilities were $3 and $-, respectively.

Other operational receipts

At September 30, 2022 and December 31, 2021, operational outstanding receivables from related parties were $42 and $128, respectively.

Debt Financing

At September 30, 2022 and December 31, 2021, the Trust had $64,691 and $66,365, respectively, of outstanding principal on loans entered into with Bell Bank. During the nine months ended September 30, 2022 and 2021, the Trust incurred interest expense on debt held with Bell Bank of $491 and $1,511, respectively. Accrued interest as of September 30, 2022 and December 31, 2021, related to this debt was $125 and $148, respectively.

Development Arrangements

During the nine months ended September 30, 2022 and 2021, the Trust incurred $717 and $51, respectively, in development fees to Trumont Group. At September 30, 2022 and December 31, 2021, the Trust owed $103 and $51, respectively, for development fees to Trumont Group.

During the nine months ended September 30, 2022 and 2021, the Trust incurred $734 and $12, respectively, in construction fees to Trumont Construction. At September 30, 2022 and December 31, 2021, the Trust owed $94 and $29, respectively for construction fees to Trumont Construction.

During the nine months ended September 30, 2022 and 2021, the Trust incurred $284 and $41, respectively, in general construction costs to Trumont Construction. At September 30, 2022 and December 31, 2021, the Trust owed $49 and $-, respectively, for general construction costs.