Related-Party Transactions

6 Months Ended

Jun. 30, 2015

Related Party Transactions

Related-Party Transactions

14. Related-Party Transactions

The Company’s real estate brokerage operations pay advertising fees to regional and national advertising funds, which promote the RE/MAX brand. These advertising funds are corporations owned by a majority stockholder of RIHI, who is also the Company’s Chief Executive Officer, Chairman and Co-Founder, as trustee for RE/MAX agents, who does not receive any compensation from these corporations, as all funds received by the corporations are required to be spent on advertising for the respective regions. During the three months ended June 30, 2015 and 2014, the Company’s real estate brokerage operations paid $213,000 and $288,000, respectively, to these advertising funds. During the six months ended June 30, 2015 and 2014, the Company’s real estate brokerage operations paid $495,000 and $571,000, respectively, to these advertising funds. These payments are included in “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income.

Prior to October 7, 2013, the Company’s real estate brokerage operations in the Washington, D.C. area paid regional continuing franchise fees, broker fees and franchise sales revenue, as do all other RE/MAX franchisees in the Central Atlantic region, to Tails. Several of the Company’s officers and stockholders of RIHI were also stockholders and officers of Tails, and as such, prior to October 7, 2013, Tails was a related party to the Company. As described in Note 1, Business and Organization, a portion of the proceeds raised during the IPO was used to purchase certain assets of Tails. In addition, the Company’s owned real estate brokerage operations in the Washington, D.C. area recorded a payable to Tails’ affiliated regional advertising fund. As of June 30, 2015 and December 31, 2014, the amount of the payable was $1,102,000 and $1,031,000, respectively, and is included in “Accounts payable to affiliates” in the accompanying Condensed Consolidated Balance Sheets.

The majority stockholders of RIHI, including the Company’s current Chief Executive Officer, have made and continue to make a golf course they own available to the Company for business purposes. During the six months ended June 30, 2015 and 2014, the Company used the golf course for business purposes at no charge.

The Company also provides services to certain affiliated entities such as accounting, legal, marketing, technology, human resources and public relations services as it allows these companies to share its leased office space. During the three months ended June 30, 2015 and 2014, the total amounts allocated for services rendered and rent for office space provided on behalf of affiliated entities were $431,000 and $550,000, respectively. During the six months ended June 30, 2015 and 2014, the total amounts allocated for services rendered and rent for office space provided on behalf of affiliated entities were $847,000 and $1,112,000, respectively. Such amounts are generally paid within 30 days and no such amounts were outstanding at June 30, 2015 or December 31, 2014. 

The components of the Company’s “Accounts receivable from affiliates” and “Accounts payable to affiliates” in the accompanying Condensed Consolidated Balance Sheets consists of the following (in thousands):

	June 30,		December 31,
	2015		2014
Accounts receivable from affiliates:
RE/MAX of Texas Advertising Fund	$	—	$	246
Other		—		(15)
Total accounts receivable from affiliates		—		231
Accounts payable to affiliates:
Central Atlantic Region Advertising Fund		(1,102)		(1,031)
Other		(97)		(83)
Total accounts payable to affiliates		(1,199)		(1,114)
Net accounts payable to affiliates	$	(1,199)	$	(883)