Management Agreement |
6 Months Ended |
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Jun. 30, 2021 | |
| Agreements [Abstract] | |
| MANAGEMENT AGREEMENT | MANAGEMENT AGREEMENT On February 4, 2021, the Company entered into a Contribution Agreement with Richard C. Green, Rick Kreul, Rebecca M. Sandring, Sean DeGon, Jeff Teeven, Jeffrey E. Fulmer, David J. Schulte (as Trustee of the DJS Trust under Trust Agreement dated July 18, 2016), and Campbell Hamilton, Inc., which is an entity controlled by David J. Schulte (collectively, the "Contributors"), and Corridor InfraTrust Management, LLC ("Corridor" or the "Manager"), the Company's external manager. Consummation of the transactions contemplated in the Contribution Agreement resulted in the internalization of the Manager (the "Internalization"), which was approved by stockholders on June 29, 2021.
In payment of the aggregate Internalization consideration (the "Internalization Consideration"), the Company issued to the Contributors, on a pro rata basis (i) 1,153,846 shares of Common Stock, (ii) 683,761 shares of the newly created Class B Common Stock, and (iii) 170,213 depositary shares of Series A Preferred (collectively with the Common Stock and Class B Common Stock, the "REIT Stock").
Contemporaneously with execution of the Contribution Agreement, the Company and Corridor entered into the First Amendment (the "First Amendment") to the Management Agreement dated as of May 8, 2015 (as amended, the "Management Agreement") that has the effect, beginning February 1, 2021, of (i) eliminating the management fee, (ii) providing a one-time, $1.0 million advance to Corridor to fund bonus payments to its employees in connection with the Internalization and (iii) providing payments to Corridor for actual employee compensation and office related expenses. Further, the First Amendment provides that, beginning April 1, 2021, the Company will pay Corridor additional cash fees equivalent to the aggregate amount of all distributions that would accrue, if declared, on and after such date with respect to the securities to be issued as the Internalization Consideration pursuant to the Contribution Agreement (an amount, assuming payment on a cash basis equal to approximately $172 thousand per quarter). This agreement is in effect until the closing of the Internalization or termination of the Contribution Agreement.
Fees incurred under the Management Agreement for the three and six months ended June 30, 2021 were $914 thousand and $2.8 million, respectively, compared to $1.6 million and $3.2 million for the three and six months ended June 30, 2020. For the three months ended June 30, 2021, the fees all related to reimbursement of Corridor employee compensation and office related expenses under the First Amendment. For the six months ended June 30, 2021, the fees incurred include $1.0 million related to a transaction bonus outlined in the Contribution Agreement, $321 thousand for January 2021 management fees under the Management Agreement and $1.5 million for reimbursement of Corridor employee compensation and office related expenses under the First Amendment. The Company also reimbursed Corridor for approximately $50 thousand in legal fees incurred in connection with the Internalization and paid investment advisors $1.9 million in connection with the execution of the Contribution Agreement. Fees incurred under the Management Agreement are reported in the general and administrative line item on the Consolidated Statements of Operations.
The Company pays its administrator, Corridor, pursuant to an Administrative Agreement. Fees incurred under the Administrative Agreement for the three and six months ended June 30, 2021 were $0 and $13 thousand, respectively, compared to $64 thousand and $128 thousand for the three and six months ended June 30, 2020. Fees incurred under the Administrative Agreement are reported in the general and administrative line item on the Consolidated Statements of Operations.
On June 29, 2021, the CorEnergy stockholders approved the internalization of the manager, Corridor InfraTrust Management, LLC. The internalization transaction was completed on July 6, 2021. Pursuant to a Contribution Agreement, the Company issued to the Contributors, based on each Contributor's percentage ownership in Corridor, an aggregate of: (i) 1,153,846 shares of Common Stock, (ii) 683,761 shares of the newly created Class B Common Stock, and (iii) 170,213 depositary shares of the Company’s 7.375% Series A Cumulative Redeemable Preferred Stock (collectively, the "Internalization Consideration").
As a result of the Internalization Transaction, the Company now (i) owns all material assets of Corridor used in the conduct of the business, and (ii) is managed by officers and employees who previously worked for Corridor, and have become employees of the Company. Both the Management Agreement and the Administrative Agreement were terminated upon the closing of the Internalization Transaction. Additional information on the Internalization Transaction can be found on our Current Report in Form 8-K filed with the SEC on July 12, 2021. See also Note 17 (“Subsequent Events”) to our interim financial statements on Form 10-Q.
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