15. Related Party Transactions

The Company leases aircraft from entities in which two of its former executive officers have an ownership interest. For the three months ended March 31, 2015 and 2014, the Company incurred lease payments related to these entities of $0.1 million and $0.1 million, respectively. In addition to the minimum lease payments, the Company incurred related operating expenses in connection to the running of the aircrafts. For the three months ended March 31, 2015 and 2014, the Company incurred operating costs of $0.2 million and $0.6 million, respectively.

The Company is party to an agreement with an initial term of five years with a subsidiary of an entity affiliated with one of the Company’s directors pursuant to which it offers its tenants a program of insurance services and products. Pursuant to the agreement, the Company received an upfront payment of $100,000 and will receive fees for each tenant it referred that enrolls in the program. Additionally, the Company remits fees paid by the tenant for insurance services and products to the entity affiliated with its Executive Chairman. The Company is not the insurer for such insurance services and products sold. The Company remitted $0.4 million and $0.3 million for the three months ended March 31, 2015 and 2014, respectively.

The Company is party to an arrangement with an entity, CB Townhome Communities, LLP (“CBTC, LLP”), in which a nominee for the Company’s board of directors, Dr. John McWhirter, has an ownership interest. Historically, the Copper Beech properties have paid CBTC, LLP for the use of a plane owned by another entity in which Dr. McWhirter has an ownership interest, Blackberry Aviation, LLC (“Blackberry”). CBTC, LLP operates the plane which is owned by Blackberry and, based upon estimated expenses to operate the plane (including pilots, fuel, storage, debt service, taxes, and other related operating expenses) determines a cost per flight hour for the upcoming fiscal year. The Copper Beech properties collectively purchase a certain number of hours of flight time and allocate the aggregate cost to the Copper Beech properties based upon the number of beds at each property relative to the total number of beds in the Copper Beech Portfolio. The fiscal year for this arrangement runs from August 1 through July 31 and for year beginning August 1, 2014, the Copper Beech entities agreed to purchase 70 flight hours with a cost of $0.4 million which will be incurred ratably throughout the year.

In connection with the consummation of the acquisition of additional membership interests in the Copper Beech Portfolio, the Company and the Operating Partnership entered into a tax protection agreement with certain of the Sellers, including one or more entities in which Dr. John R. McWhirter, a nominee for election as director of the Company, has an ownership interest. Pursuant to the tax protection agreement, unless the Company and the Operating Partnership indemnify the applicable Sellers for certain resulting tax liabilities, the Company and the Operating Partnership have agreed not to sell or otherwise to dispose of in a taxable exchange during the 7-year tax protection period, any of the seventeen protected properties set forth in the tax protection agreement. Further, the Company and the Operating Partnership also agreed to allocate to the Sellers, during the 7-year tax protection period, an aggregate amount of at least $100 million of debt of the Operating Partnership (which amount decreases ratably as the number of OP Units held by the Sellers decreases) without any requirement that any Seller guarantee or directly bear the risk for such indebtedness and, after the end of the 7-year period, to use commercially reasonable efforts to permit the Sellers to enter into guarantees of “qualifying” debt or agreements to return a portion of their deficit capital account so as to permit the Sellers to avoid certain adverse tax consequences. In connection with the acquisition of additional membership interests in the Copper Beech Portfolio, the Company also entered into a registration rights agreement with certain of the Sellers, including one or more entities in which Dr. John R. McWhirter has an ownership interest, pursuant to which the Company agreed to file a shelf registration statement no later than December 31, 2015, covering resales of shares of the Company’s common stock, issuable upon redemption of the OP Units issued to the Sellers as consideration for the acquisition. In addition, the Company agreed to use commercially reasonable efforts to have the registration statement declared effective as soon as practicable after filing and to keep the registration statement effective until such time as the Sellers no longer own any OP Units or shares of the Company’s common stock issued upon conversion of the OP Units. Additionally, as of March 31, 2015, one or more entities in which Dr. McWhirter has an ownership interest owned an interest in joint ventures with the Company and the other Sellers, which own 7 of the Copper Beech Portfolio properties (see Note 1).

The unimproved real property located in Charlotte, North Carolina and owned by Copper Beech Townhome Communities Thirty One LLC serves as collateral for a loan in the original principal amount of $1.5 million extended by Clearfield Bank & Trust Company to John R. McWhirter and Jeanette D. McWhirter on December 23, 2008, which loan has a current outstanding principal balance of $1.5 million.

The Company is party to another arrangement with CBTC, LLP whereby CBTC, LLP employs all but one of the people who directly operate the Company’s Copper Beech properties (at the property level and in the Company’s State College, PA satellite office). The individual who has direct responsibilities related to the Company’s Copper Beech properties who is not an employee of CBTC, LLP is a party to a consulting agreement with one of the Company’s wholly-owned entities. CBTC, LLP does not earn any profit as a result of this arrangement as there is no mark-up of the direct costs associated with the employment of the CBTC, LLP personnel.

As described in Notes 1, 6 and 7, the Company retains a noncontrolling interest in several Copper Beech entities in which Dr. John McWhirter also holds an interest.

The Company has net payables of $3.4 million related to borrowings between properties, that were consolidated into the Company’s balance sheet upon acquisition. These net payables are a result of a combination of amounts due to other non-consolidated Copper Beech entities and entities in which Dr. John McWhirter has an ownership interest, but in which Campus Crest has no ownership interest. Additionally, the Company’s balance sheet includes $2.6 million of outstanding amounts due to certain CB Investors, which related to amounts funded prior to Campus Crest’s involvement with Copper Beech. Both the $3.4 million and $2.6 million are currently the subject of on-going negotiations with certain of the CB Investors, the result of which may decrease the amount payable to the CB Investors, thereby potentially increasing the gain on the purchase of Copper Beech.