16. Related-Party Transactions

The Company’s real estate brokerage operations pay advertising fees to regional and international advertising funds, which promote the RE/MAX brand. These advertising funds are companies owned by a majority stockholder of RIHI as trustee for RE/MAX agents. This stockholder does not receive any compensation from these companies, as all funds received by the companies are required to be spent on advertising for the respective regions. During the years ended December 31, 2013, 2012 and 2011, the Company’s real estate brokerage operations paid $1,148,000, $1,153,000 and $1,190,000, respectively, to these advertising funds. These payments are included in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income and Comprehensive Income.

Prior to October 7, 2013, the Company’s real estate brokerage operations in the Washington, DC 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 5, Acquisitions and Dispositions a portion of the proceeds raised during the IPO was used to purchase certain assets of Tails. For the period from January 1, 2013 to October 7, 2013, the real estate brokerage operations expensed $244,000 in fees to Tails. During the years ended December 31, 2012 and 2011, the real estate brokerage operations expensed $267,000 and $227,000, respectively, in fees to Tails. These payments are included in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income and Comprehensive Income. In addition, the Company’s owned real estate brokerage operations in the Washington, DC area recorded a corresponding payable to Tails and its affiliated regional advertising fund. As of December 31, 2012, the amount of the payable was $2,270,000 and is included in “Accounts payable to affiliates” in the accompanying Consolidated Balance Sheets. The Company began to consolidate the financial position of Tails on October 7, 2013 and therefore, no payable to Tails was recorded as of December 31, 2013; however a payable of $945,000 to the Central Atlantic regional advertising fund is included in “Accounts payable to affiliates” as of December 31, 2013.

The Company receives continuing franchise fees, broker fees, franchise sales and other franchise revenue from regional franchisors. Several of the Company’s officers and stockholders of RIHI were also stockholders and officers of two of these regional franchisors, HBN and Tails. The business assets of HBN and Tails were acquired by RE/MAX Holdings on October 7, 2013 as described in Note 5, Acquisitions and Dispositions. During the year ended December 31, 2012 and 2011, the Company received $3,364,000 and $3,299,000, respectively, in revenue from these entities. During the period from January 1, 2013 to October 7, 2013, the Company received $2,648,000 in revenue from these entities. These amounts are included in continuing franchise fees, broker fees and franchise sales and other franchise revenue in the accompanying Consolidated Statements of Income and Comprehensive Income.

Prior to 2013, the Company paid an annual sponsorship fee to Sanctuary, Inc., a private golf course owned by majority stockholders of RIHI. The Company was named as the presenting sponsor of all charity golf tournaments held at Sanctuary, Inc. Further, the majority stockholders make the golf course available to the Company for business purposes. During the years ended December 31, 2012 and 2011, the Company paid $709,000 and $960,000, respectively, in sponsorship fees and green fees to Sanctuary, Inc. These payments are included in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income and Comprehensive Income.

The Company provides services to certain affiliated entities such as accounting, legal, marketing, technology, human resources and public relations as well as allows these companies to share its leased office space. During the years ended December 31, 2013, 2012 and 2011, the total amounts allocated for services rendered and rent for office space provided on behalf of affiliated entities were $3,064,000, $3,354,000 and $3,325,000, respectively. In these cases, the Company bills affiliated companies for their actual or pro rata share of such expenses. Such amounts are generally paid within 30 days and no such amounts were outstanding at December 31, 2013 and 2012. In addition, affiliated regional franchisors have current outstanding continuing franchise fees, broker fees and franchise sales revenue amounts due to the Company. Such amounts are included in “Accounts receivable from affiliates” and “Accounts payable to affiliates” in the accompanying Consolidated Balance Sheets and comprise the balances from the following entities (in thousands):

	As of December 31
	2013			2012
Accounts receivable from affiliates:
RE/MAX Southwest Region	$	-		$	11
RE/MAX Central Atlantic Region, Inc.		-			21
RE/MAX of Texas Advertising Fund		(6	)		-
International Advertising Fund		(10	)		-
Other		21			23
Total accounts receivable from affiliates		5			55
Accounts payable to affiliates:
Other	$	(1,017	)	$	(2,385	)
Total accounts payable to affiliates		(1,017	)		(2,385	)
Net accounts payable to affiliates	$	(1,012	)	$	(2,330	)

In February 2013, RMCO engaged Perella Weinberg Partners L.P. (“Perella Weinberg”), a FINRA member, to serve as its financial advisor in connection with the IPO. Two members of RMCO’s Board of Managers and the Company’s Board of Directors (collectively, the “Board”) are partners at an affiliate of Perella Weinberg. The engagement of Perella Weinberg as a financial advisor was approved by the independent members of the Company’s Board. For the services rendered during the year ended December 31, 2013, the Company paid Perella Weinberg $848,500. In addition, the Company paid Perella Weinberg a completion fee of $700,000 on October 7, 2013 upon closing of the IPO, and such completion fee was reimbursed entirely by the underwriters.