12. RELATED PARTY TRANSACTIONS

Economic Dependency—We are dependent on PECO for certain services that are essential to us, including asset acquisition and disposition decisions, asset management, operating and leasing of our properties, and other general and administrative responsibilities. In the event that PECO is unable to provide such services, we would be required to find alternative service providers, which could result in higher costs and expenses.

Advisor—Our current advisory agreement became effective September 1, 2017. Pursuant to the Advisory Agreement, the Advisor is entitled to specified fees for certain services, including managing our day-to-day activities and implementing our investment strategy. The Advisor manages our day-to-day affairs and our portfolio of real estate investments subject to the board of directors’ supervision.

Asset Management Fee and Subordinated Participation



Date	Rate	Payable	Description
January 1, 2016 through August 31, 2017	1.00%	80% in cash; 20% in Class B units	The cash portion was paid on a monthly basis in arrears at the rate of 0.06667% multiplied by the cost of our assets as of the last day of the preceding monthly period. The Class B unit portion was issued on a quarterly basis at the rate of 0.05% multiplied by the lower of the cost of assets and the applicable quarterly net asset value (“NAV”), divided by the per share NAV.
Beginning September 1, 2017	0.85%	80% in cash; 20% in Class B units	The cash portion is paid on a monthly basis in arrears at the rate of 0.05667% multiplied by the cost of our assets as of the last day of the preceding monthly period. The Class B unit portion is issued on a quarterly basis at the rate of 0.0425% multiplied by the lower of the cost of assets and the applicable quarterly NAV, divided by the per share NAV.

The Advisor is entitled to receive distributions on the Class B units at the same rate as distributions are paid to common stockholders. Such distributions are in addition to the incentive compensation that the Advisor and its affiliates may receive from us. During the six months ended June 30, 2018 and 2017, the Operating Partnership issued 39,455 and 46,131 Class B units, respectively, to the Advisor for asset management services performed. Prior to September 2017, a portion of the asset management fee and subordinated participation, and distributions on Class B units, were paid to a former third-party advisor. Effective September 2017, this relationship was terminated.

Other Advisory Fees and Reimbursements Paid in Cash



Fee Type	Date	Rate	Description
Acquisition fee	January 1, 2015 though August 31, 2017	1.00%	Equal to the product of (x) the rate and (y) the cost of investments we acquired or originated, including any debt attributable to such investments.
Acquisition fee	Beginning September 1, 2017	0.85%
Acquisition expenses	Beginning January 1, 2015	N/A	Reimbursements for direct expenses, including certain personnel costs, incurred related to selecting, evaluating, and acquiring assets on our behalf.
Disposition fee⁽¹⁾	January 1, 2015 through August 31, 2017	2.00%	Equal to the lesser of: (i) the product of the rate and the contract sales price of each property or other investment sold; or (ii) one-half of the total brokerage commissions paid if a non-affiliated broker is also involved in the sale, provided that total real estate commissions paid (to the Advisor and others) in connection with the sale may not exceed the lesser of a competitive real estate commission or 6% of the contract sales price.
Disposition fee⁽¹⁾	Beginning September 1, 2017	1.70%


⁽¹⁾	We will not pay any disposition fees in connection with the Merger.

General and Administrative Expenses—As of June 30, 2018 and December 31, 2017, we owed the Advisor and their affiliates approximately $22,000 and $119,000, respectively, for general and administrative expenses paid on our behalf.

Summarized below are the fees earned by and the expenses reimbursable to the Advisor and former advisor for the three and six months ended June 30, 2018 and 2017. As of September 2017, pursuant to the termination of the relationship with our former advisor, they were no longer entitled to these fees and reimbursements. This table includes any related amounts unpaid as of June 30, 2018 and December 31, 2017, except for unpaid general and administrative expenses, which we disclose above (in thousands):



	Three Months Ended				Six Months Ended				Unpaid Amount as of
	June 30,				June 30,				June 30,		December 31,
	2018		2017		2018		2017		2018		2017
Acquisition fees and expenses⁽¹⁾	$	9	$	427	$	200	$	1,466	$	—	$	—
Asset management fees⁽²⁾	2,883		3,118		5,761		6,136		11		48
Class B units distribution⁽³⁾	181		182		367		351		63		56
Total	$	3,073	$	3,727	$	6,328	$	7,953	$	74	$	104


⁽¹⁾	The majority of acquisition fees and expenses are capitalized and allocated to the related investment in real estate assets on the consolidated balance sheet based on the acquisition-date fair values of the respective assets and liability acquired.


⁽²⁾	Asset management fees are presented in General and Administrative on the consolidated statements of operations.


⁽³⁾	Represents the distributions paid to holders of Class B units of the Operating Partnership and is presented in General and Administrative on the consolidated statements of operations.

Manager—All of our properties are managed and leased by the Manager. The Manager also manages properties owned by PECO affiliates or other third parties. Below is a summary of fees charged by and expenses reimbursable to the Manager as outlined in the Management Agreements.

Manager Fees and Reimbursements Paid in Cash



Fee Type	Rate	Description
Property Management	4.00%	Equal to the product of (x) the monthly gross cash receipts from the properties managed and (y) the rate.
Leasing Commissions	Market Rate	Fees for leasing services rendered with respect to a particular property, including if a tenant exercised an option to extend an existing lease. The fee may be increased by up to 50% if a co-broker is engaged to lease a particular vacancy.
Construction Management	Market Rate	Paid for construction management services rendered with respect to a particular property.
Other Expenses and Reimbursements	N/A	Costs and expenses incurred by the Manager on our behalf, including certain employee compensation, legal, travel, and other out-of-pocket expenses that were directly related to the management of specific properties and corporate matters, as well as fees and expenses of third-party accountants.

Summarized below are the fees earned by and the expenses reimbursable to the Manager for the three and six months ended June 30, 2018 and 2017, and any related amounts unpaid as of June 30, 2018 and December 31, 2017 (in thousands):



	Three Months Ended				Six Months Ended				Unpaid Amount as of
	June 30,				June 30,				June 30,		December 31,
	2018		2017		2018		2017		2018		2017
Property management fees⁽¹⁾	$	1,733	$	1,492	$	3,431	$	2,892	$	555	$	580
Leasing commissions⁽²⁾	1,405		985		2,669		1,621		363		202
Construction management fees⁽²⁾	127		143		202		221		51		260
Other fees and reimbursements⁽³⁾	621		961		1,258		1,755		563		491
Total	$	3,886	$	3,581	$	7,560	$	6,489	$	1,532	$	1,533


⁽¹⁾	The property management fees are included in Property Operating on the consolidated statements of operations.


⁽²⁾	Leasing commissions paid for leases with terms less than one year are expensed immediately and included in Depreciation and Amortization on the consolidated statements of operations. Leasing commissions paid for leases with terms greater than one year, and construction management fees, are capitalized and amortized over the life of the related leases or assets.


⁽³⁾	Other fees and reimbursements are included in Property Operating and General and Administrative on the consolidated statements of operations based on the nature of the expense.

Unconsolidated Joint Venture—We had a receivable from the Joint Venture of approximately $14,000 as of June 30, 2018, and a payable to the Joint Venture of approximately $52,000 as of December 31, 2017, all primarily related to activity at the six properties contributed by us to the Joint Venture.