Related Party Transactions |
6 Months Ended |
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Jun. 30, 2025 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | Related Party Transactions Transition and General Release Agreement with Former Chief Financial Officer On June 18, 2025 (the "Transition Date"), Robert B. Klein announced his intention to resign from his role as Chief Financial Officer of the Company but continued as an employee of the Company through June 30, 2025 (the “Separation Date,” the period from the Transition Date to the Separation Date is referred to as the “Transition Period”). Subject to the terms of Transition and General Release Agreement dated June 18, 2025 between the Company and Mr. Klein (the “Transition Agreement”), Mr. Klein will provide consulting services to the Company beginning on the day following the Separation Date until the date the Company files its Form 10-Q for the period ending June 30, 2025 (the “Completion Date” and such period, the “Consulting Period”). Mr. Klein will continue serving as the Company’s principal financial officer through the end of the Consulting Period. The Transition Agreement sets forth Mr. Klein’s separation benefits and the terms pursuant to which Mr. Klein will assist the Company in the transition of his roles through the Transition Period and the Consulting Period. During each of the Transition Period and the Consulting Period, Mr. Klein will continue to oversee and assist with the preparation of the Company’s Form 10-Q for the period ending on June 30, 2025 and, unless the Company determines otherwise, shall sign the Form 10-Q (and any related documentation) in his capacity as principal financial officer (the “Transition Support Duties”). In accordance with the Transition Agreement, during the Transition Period, subject to Mr. Klein’s performance of the Transition Support Duties, the Company will pay Mr. Klein his regular base salary, less applicable taxes, withholdings and deductions payable in accordance with the Company’s current payroll practices and Mr. Klein shall be entitled to continue to participate in any employee benefit plan that the Company has adopted or may adopt, until the Separation Date. As set forth in the Transition Agreement, pursuant to the terms of the Company's 2019 Equity Incentive Plan (the “Equity Plan”), including, but not limited to, the Alignment of Interest Program under the Equity Plan (the “AOI”), and the award agreements issued thereunder (the “Award Agreements” and collectively with the Equity Plan and AOI, the “Equity Plan Governing Documents”) Mr. Klein has been granted certain equity awards which remain outstanding, unconverted and unvested as of the Separation Date (the “Unvested Awards”). If Mr. Klein fully complies with the terms and conditions set forth in the Transition Agreement, including the execution of the supplemental release attached thereto and performance of the Transition Support Duties, the Company will pay Mr. Klein a gross amount equal to $500,000, less applicable taxes, withholdings and deductions (the “Consideration”). The Company will pay the Consideration in part by accelerating the vesting of 28,000 Unvested Awards (as determined in the Company’s sole discretion) (the “Selected Awards”), with the remainder to be paid in cash. The terms governing the acceleration of the Selected Awards and the payment of the Consideration are described in the Transition Agreement. Notwithstanding anything to the contrary in any Equity Plan Governing Document, (i) Mr. Klein’s Unvested Awards, other than the Selected Awards, will automatically and immediately be cancelled and forfeited, and will lapse for no consideration, effective as of July 1, 2025, (ii) the Selected Awards will remain outstanding and eligible to vest following the Separation Date in accordance with the terms of the Transition Agreement and (iii) to the extent the Consideration is not earned, the Selected Awards will automatically and immediately be cancelled and forfeited and will lapse for no consideration, effective as of the Completion Date (or such earlier date as determined by the Company, in its sole discretion). Pursuant to the terms of the Transition Agreement, Mr. Klein will be subject to continued compliance with confidentiality, non-disparagement and cooperation covenants. In conjunction with the Company's search for a new Chief Financial Officer, the Company has retained an executive search firm that employs an immediately family member of one of our directors. Jeremy Garber, who immediately prior to Mr. Klein's resignation as Chief Financial Officer of the Company was the Company's President, Secretary and Treasurer, is serving as the interim Chief Financial Officer of the Company while the search for Mr. Klein's successor is completed. Management Fee Income On May 5, 2025, REAC entered into amendments to the management agreements (as amended, the “Amended Management Agreements”) pursuant to which the Company provides property management services to 362 properties, owned by family members and affiliates of Mr. Spodek. An additional property for which REAC provides management services to affiliates of Mr. Spodek was not amended by the Amended Management Agreements. The Amended Management Agreements provide that, as of April 1, 2025, the initial management fee to be received by REAC is equal to 4.0% per annum of each property’s gross revenue, payable quarterly. Each successive April 1, the management fee will be increased to 102.5% of the management fee previously in effect. The initial term of the Amended Management Agreements is through March 31, 2030 (the “Initial Term”), unless terminated earlier. After the Initial Term, the Amended Management Agreements will be automatically renewed for successive one-year terms, unless either party provides 30 days' advance notice of non-renewal. Furthermore, beginning October 1, 2025, the Amended Management Agreements may be terminated by either party at any time upon 60 days’ notice to the other party. The Amended Management Agreements also provide that, to the extent REAC provides services in connection with the financing of managed properties, REAC shall be entitled to an additional $5,000 fee per property being financed, whether such properties are financed individually, as part of a portfolio or pooled, provided that the total fees payable shall not exceed $50,000 per financing transaction. The Amended Management Agreements were unanimously approved by an independent Special Committee of the Company's Board of Directors (the "Board") consisting of all members of the Board other than Mr. Spodek. REAC recognized management fee income of $0.2 million and $0.6 million for the three and six months ended June 30, 2025, respectively, and $0.3 million and $0.7 million for the three and six months ended June 30, 2024, respectively, from various parties which were affiliated with the Company's CEO. These amounts are included in “Fee and other” in the Consolidated Statements of Operations and Comprehensive Income. Accrued management fees receivable of $0.2 million and $0.4 million as of June 30, 2025 and December 31, 2024, respectively, are included in “Rent and other receivables” on the Consolidated Balance Sheets. Related Party Lease In connection with the Company's IPO and the related formation transactions, the Company entered into a lease for office space in Cedarhurst, New York with an entity affiliated with the Company’s CEO (the “Prior Office Lease”). Pursuant to the Prior Office Lease, the monthly rent was $15,000 subject to escalations. The term of the Prior Office Lease was five years commencing on May 17, 2019 and expired on May 16, 2024. In May 2024, the Prior Office Lease was extended to December 31, 2024 at the same rental rate. In December 2024, the Company entered into a new lease with the Company's CEO (the "2025 Office Lease," and, collectively with the Prior Office Lease, the "Office Leases"). Pursuant to the 2025 Office Lease, the monthly rent is $18,750 subject to escalations. The term of the 2025 Office Lease is five years commencing on January 1, 2025 and will expire on December 31, 2029. The 2025 Office Lease was approved by a special committee of the Company’s Board of Directors consisting of four independent directors. Rental expenses associated with the Office Leases for the three and six months ended June 30, 2025 and 2024 were $0.06 million and $0.1 million, respectively, and $0.05 million and $0.1 million, respectively, and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive Income. The Company determined the Office Leases were an operating lease. For further details, see Note 7. Leases. Right of First Offer Transactions In connection with the Company's IPO and the related formation transactions, the Company entered into a Right of First Offer Agreement (the “ROFO Agreement”) with certain members of the family (the “Related Party”) of the Company’s CEO. Pursuant to the ROFO Agreement, the Company has the right of first offer to acquire from the Related Party 250 properties that are currently managed by the Company. On May 30, 2024, the Company acquired from the Related Party a portfolio of 36 properties currently leased to the USPS for approximately $12.5 million in cash, excluding closing costs. The transaction was approved by a special committee of the Company’s Board of Directors consisting of four independent directors. The Company has a remaining right of first offer to purchase 214 of 358 managed postal properties. Guarantees As disclosed above in Note 5. Debt, Mr. Spodek personally guaranteed a portion of or the entire amount outstanding under the Company's loans with First Oklahoma Bank and Vision Bank, totaling $1.8 million and $1.8 million as of June 30, 2025 and December 31, 2024, respectively. As a guarantor, Mr. Spodek's interests with respect to the amount of debt he is guaranteeing (and the terms of any repayment or default) may not align with the Company’s interests and could result in a conflict of interest.
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