13. 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 corporations owned by a majority stockholder of RIHI as trustee for RE/MAX agents. This stockholder 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 and on national advertising in the U.S. During the three months ended September 30, 2014 and 2013, the Company’s real estate brokerage operations paid $291,000 and $286,000, respectively, to these advertising funds. During the nine months ended September 30, 2014 and 2013, the Company’s real estate brokerage operations paid $862,000 and $859,000, respectively, to these advertising funds. These payments are included in “Selling, operating and administrative expenses” in the accompanying Condensed 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, a portion of the proceeds raised during the IPO was used to purchase certain assets of Tails. For the three and nine months ended September 30, 2013, the real estate brokerage operations expensed $97,000 and $244,000, respectively, in fees to Tails. These payments are included in “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. In addition, the Company’s owned real estate brokerage operations in the Washington, DC area recorded a payable to Tails’ affiliated regional advertising fund. As of September 30, 2014 and December 31, 2013, the amount of the payable was $988,000 and $945,000, respectively, and is included in “Accounts payable to affiliates” in the accompanying Condensed Consolidated Balance Sheets.

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. During the three and nine months ended September 30, 2013, the Company received $912,000 and $2,648,000, respectively, in total revenue from these entities. These amounts are included in continuing franchise fees, broker fees and franchise sales and other franchise revenue in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

The Company’s majority stockholders have made and continue to make a golf course they own available to the Company for business purposes. During the nine months ended September 30, 2014 and 2013, 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 September 30, 2014 and 2013, the total amounts allocated for services rendered and rent for office space provided on behalf of affiliated entities were $549,000 and $838,000, respectively. During the nine months ended September 30, 2014 and 2013, the total amounts allocated for services rendered and rent for office space provided on behalf of affiliated entities were $1,661,000 and $2,459,000, 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 September 30, 2014 or December 31, 2013.

The activity in 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):

	September 30, 2014			December 31, 2013
Accounts receivable from affiliates:
RE/MAX of Texas Advertising Fund	$	-		$	(6	)
International Advertising Fund		-			(10	)
Other		-			21
Total accounts receivable from affiliates		-			5
Accounts payable to affiliates:
RE/MAX Central Atlantic Region Advertising Fund	$	(988	)	$	(945	)
Other		(101	)		(72	)
Total accounts payable to affiliates		(1,089	)		(1,017	)
Net accounts payable to affiliates	$	(1,089	)	$	(1,012	)

In February 2013, the Company engaged Perella Weinberg Partners L.P. (“Perella Weinberg”), a Financial Industry Regulatory Authority member, to serve as its financial advisor in connection with the IPO. Two members of the Company’s Board of Directors are partners at an affiliate of Perella Weinberg. The engagement of Perella Weinberg as a financial advisor was approved by the independent members of RMCO’s Board of Managers prior to the IPO. For the services rendered during the three and nine months ended September 30, 2013, the Company paid Perella Weinberg $76,000 and $216,000, respectively. In addition, on October 7, 2013, the Company paid Perella Weinberg a completion fee of $632,500 when the IPO closed. No amounts were paid to Perella Weinberg during the nine months ended September 30, 2014.