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Related Party Transactions
3 Months Ended
Mar. 31, 2016
Related Party Transactions
RELATED PARTY TRANSACTIONS
In March 2016, in connection with ESH REIT's $800.0 million issuance of its 2025 Notes discussed in Note 7, an affiliate of one of the Sponsors acted as an initial purchaser and purchased $24.0 million of the 2025 Notes. As such, the affiliate of one of the Sponsors earned approximately $0.4 million in fees related to the transaction for the three months ended March 31, 2016.
Investment funds of the Sponsors held 21,105 shares of the Corporation's outstanding mandatorily redeemable preferred stock as of March 31, 2016 and December 31, 2015.
ESH REIT  
Related Party Transactions
RELATED PARTY TRANSACTIONS
Leases and Related Rental Revenues—ESH REIT’s revenues are derived from four leases. The counterparty to each lease agreement is a wholly-owned subsidiary of the Corporation. Fixed rental revenues are recognized on a straight-line basis. For the three months ended March 31, 2016 and 2015, ESH REIT recognized fixed rental revenues from the Operating Lessees of approximately $116.2 million and $123.2 million, respectively. As scheduled rent payments begin to exceed straight-line rental revenues, this amount, approximately $41.2 million and $41.5 million, which is recorded as deferred rents receivable from the Operating Lessees in the accompanying unaudited condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015, respectively, will gradually decrease through the remainder of the lease term until it is fully extinguished at the end of the lease term in October 2018.
Due to the fact that percentage rental revenue thresholds specified in the leases were not achieved during the first quarter of 2016 or 2015, ESH REIT recognized no percentage rental revenues for the three months ended March 31, 2016 or 2015. As of March 31, 2016, unearned rental revenues related to percentage rent, as defined, were approximately $36.8 million, of which approximately $18.9 million had been received and approximately $17.9 million was outstanding and included as rents receivable on the accompanying unaudited condensed consolidated balance sheet. As of December 31, 2015, because all percentage rental revenue thresholds had been achieved for the year, no unearned contingent rental revenues existed, and approximately $4.3 million was outstanding and included as rents receivable on the accompanying unaudited condensed consolidated balance sheet.
As of December 31, 2015, unearned rental revenues related to prepaid January 2016 fixed rental revenues were approximately $38.3 million. As of March 31, 2016, ESH REIT had not received prepaid fixed rental payments related to future periods and therefore had no unearned rental revenues related to prepaid fixed rental revenues.
Distributions—The Corporation owns all of the Class A common stock of ESH REIT, which represents approximately 55% of the outstanding shares of common stock of ESH REIT. During the three months ended March 31, 2016, ESH REIT paid distributions of approximately $85.2 million (of which approximately $47.6 million had been declared as of December 31, 2015) to the Corporation in respect of the Class A common stock of ESH REIT. During the three months ended March 31, 2015, ESH REIT paid distributions of approximately $37.5 million to the Corporation in respect of the Class A common stock of ESH REIT.
Issuance of Common Stock—In March 2016, ESH REIT issued, and was compensated approximately $1.1 million for, approximately 199,000 shares of Class B common stock, each of which was attached to a share of Corporation common stock to form a Paired Share, used to settle vested restricted stock units. In March 2015, ESH REIT issued, and was compensated approximately $0.7 million for, approximately 97,000 shares of Class B common stock, each of which was attached to a share of Corporation common stock to form a Paired Share, used to settle vested restricted stock units. In March 2015, ESH REIT issued approximately 190,000 shares of Class A common stock to the Corporation for consideration of approximately $1.7 million.
Overhead Costs—ESA Management incurs costs under a services agreement with the Corporation and ESH REIT for certain overhead services performed on the entities' behalf. The services relate to executive management, accounting, financial analysis, training and technology. For the three months ended March 31, 2016 and 2015, ESH REIT incurred approximately $2.0 million and $2.4 million, respectively, related to this agreement, which is included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. The expenses ESH REIT incurs under this services agreement include expenses related to applicable employees that participate in the Corporation’s long-term incentive plan (as described in Note 10). Such charges were approximately $0.1 million and $0.3 million for the three months ended March 31, 2016 and 2015, respectively.
Working Capital—As of March 31, 2016, ESH REIT had an outstanding net payable of approximately $110.2 million due to the Corporation and its subsidiaries. This amount consists of monthly hotel receipts deposited into ESH REIT’s CMAs which were swept into the Corporation’s unrestricted cash accounts at the beginning of April 2016, as specified by the agreements governing the 2012 Mortgage Loan and the CMAs, and certain disbursements made by the Corporation on behalf of ESH REIT in the ordinary course of business. As of December 31, 2015, ESH REIT had an outstanding net payable of approximately $64.7 million due to the Corporation and its subsidiaries. This amount consisted of an unpaid special cash distribution ESH REIT declared on its Class A common shares of approximately $47.6 million and certain disbursements the Corporation made on behalf of ESH REIT in the ordinary course of business. Outstanding balances are typically repaid within 60 days.
Senior Note IssuanceIn March 2016, in connection with ESH REIT's $800.0 million issuance of its 2025 Notes discussed in Note 6, an affiliate of one of the Sponsors acted as an initial purchaser and purchased $24.0 million of the 2025 Notes. As such, the affiliate of one of the Sponsors earned approximately $0.4 million in fees related to the transaction for the three months ended March 31, 2016.