Related Party Transactions

9 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Related Party Transactions

Note 8: Related Party Transactions

The Company entered into a sublease agreement with the Company’s shareholders to occupy their current facility. The agreement expires July 1, 2012 and requires the Company to pay rent of $500 per month.  The Company also made improvements to facilities owned by the majority shareholder totaling $4,428 that were capitalized as part of property and equipment and were fully depreciated as of March 31, 2012. 

The Company entered into real estate sales contracts with DGPM to purchase residential real estate properties. During the three and nine months ended March 31, 2012 the Company paid DGPM $0 and $ 8,445, respectively for one residential property.

The Company uses DGPM to perform certain renovations on the Company’s properties. During the three and nine months ended March 31, 2012, DGPM was paid per an agreement a set amount per property ($31,000) for renovations services of $433,790 and $1,015,864 on properties the Company owned. These amounts have been allocated to individual properties and included in investments in real estate assets. The labor and materials is a flat fee per property and is based on a non-arm’s length transaction between the Company and DGPM and is prorated if renovations on a property are not complete as of the end of the period. The properties shall be renovated to a condition into which they can be sold for a price at around, or above the after repaired value estimate as estimated by the Company. Any amount paid by the Company to DGPM that is in excess of renovations performed is recognized as due from shareholders on the balance sheet.

From time to time, the Company’s shareholders pay for Company-related expenses. Such amounts are recognized as amounts due to shareholders on the balance sheet. These amounts are payable on demand and are non-interest bearing. As of March 31, 2012, there were no amounts due to shareholders.

The Company entered into four agreements for the sale of land contract interests. The purchasers in all four agreements were limited partnerships, which consisted of general partner The Diversified Group Partnership Management, LLC, a related party, and multiple limited partners, who were not related parties to the Company (see Note 4: Investment in Real Estate Assets).

As of March 31, 2012, the Company entered into promissory notes with five limited partnerships, which consisted of general partner The Diversified Group Partnership Management, LLC, a related party, and multiple limited partners, who were not related parties to the Company (see Note 5: Notes Payable).

The underwriter for the offering of the preferred shares is WR Rice Financial Services, Inc. which is owned by the Company’s Co-Chief Executive Officers who will receive 10% of the gross proceeds from the offering (see Note 7: Shareholders’ Equity).