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Related-Party Transactions
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6 Months Ended |
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Jun. 30, 2011
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| Related-Party Transactions [Abstract] | |
| Related-Party Transactions |
2. Related-Party Transactions
The Company is externally managed pursuant to contractual arrangements with its Adviser and
Gladstone Administration, LLC (the “Administrator”), which collectively employ all of the Company’s
personnel and pay their salaries, benefits, and general expenses directly. The Company has an
advisory agreement with its Adviser (the “Advisory Agreement”) and an administration agreement with
its Administrator (the “Administration Agreement”). The management services and administrative fees
under the Advisory and Administration Agreements are described below. As of June 30, 2011 and
December 31, 2010, respectively, $1,091 and $965 were due to the Adviser.
Advisory Agreement
The Advisory Agreement provides for an annual base management fee equal to 2% of the Company’s
total stockholders’ equity, less the recorded value of any preferred stock (“common stockholders’
equity”), and an incentive fee based on funds from operations (“FFO”). For the three and six months
ended June 30, 2011 the Company recorded a base management fee of $435 and $787, respectively, and
for the three and six months ended June 30, 2010, the Company recorded a base management fee of
$296 and $609, respectively.
For purposes of calculating the incentive fee, FFO includes any realized capital gains and capital
losses, less any distributions paid on preferred stock and senior common stock, but FFO does not
include any unrealized capital gains or losses. The incentive fee rewards the Adviser if the
Company’s quarterly FFO, before giving effect to any incentive fee (“pre-incentive fee FFO”),
exceeds 1.75%, or 7% annualized (the “hurdle rate”), of total common stockholders’ equity. The
Adviser receives 100% of the amount of the pre-incentive fee FFO that exceeds the hurdle rate, but
is less than 2.1875% of the Company’s common stockholders’ equity. The Adviser also receives an
incentive fee of 20% of the amount of the Company’s pre-incentive fee FFO that exceeds 2.1875% of
common stockholders’ equity.
For the three and six months ended June 30, 2011, the Company recorded an incentive fee of $840 and
$1,672, respectively, offset by a credit related to an unconditional and irrevocable voluntary
waiver issued by the Adviser of $445 and $931, respectively, resulting in a net incentive fee for
the three and six months ended June 30, 2011, of $395 and $741, respectively. For the three and six
months ended June 30, 2010, the Company recorded an incentive fee of $829 and $1,675, respectively,
offset by a credit related to an unconditional and irrevocable voluntary waiver issued by the
Adviser of $56 and $56, respectively, resulting in a net incentive fee for the three and six months
ended June 30, 2010, of $773 and $1,619, respectively. The Board of Directors of the Company
accepted the Adviser’s offer to waive on a quarterly basis a portion of the incentive fee for the
three and six months ended June 30, 2011 and 2010, respectively in order to support the current
level of distributions to the Company’s stockholders. This waiver may not be recouped by the
Adviser in the future.
Administration Agreement
Pursuant to the Administration Agreement, the Company pays for its allocable portion of the
Administrator’s overhead expenses in performing its obligations to the Company, including, but not
limited to, rent and the salaries and benefits of its personnel, including its chief financial
officer, chief compliance officer, internal counsel, treasurer, investor relations and their
respective staffs. The Company’s allocable portion of expenses is derived by multiplying the
Administrator’s total allocable expenses by the percentage of the Company’s total assets at the
beginning of each quarter in comparison to the total assets of all companies managed by the Adviser
under similar agreements. For the three and six months ended June 30, 2011, the Company recorded an
administration fee of $260 and $516, respectively, and for the three and six months ended June 30,
2010, the Company recorded an administration fee of $219 and $451, respectively.
Dealer Manager Agreement
In connection with the offering of the Company’s Senior Common Stock, see Note 6, “Stockholders’
Equity,” for further details, the Company entered into a Dealer Manager Agreement, dated March 25,
2011 (the “Dealer Manager Agreement”), with Gladstone Securities, LLC (the “Dealer Manager”),
pursuant to which the Dealer Manager agreed to act as the Company’s exclusive dealer manager in
connection with the offering. The Dealer Manager is an affiliate of the Company, as its parent
company is controlled by Mr. David Gladstone, the Company’s Chairman and Chief Executive Officer.
Pursuant to the terms of the Dealer Manager Agreement, the Dealer Manager is entitled to receive a
sales commission in the amount of 7.0% of the gross proceeds of the shares of Senior Common Stock
sold, plus a dealer manager fee in the amount of 3.0% of the gross proceeds of the shares of Senior
Common Stock sold. The Dealer Manager, in its sole and absolute discretion, may re-allow all of its
selling commissions attributable to a participating broker-dealer and may also re-allow a portion
of its Dealer Manager fee earned in respect of the proceeds generated by the participating
broker-dealer to any participating broker-dealer as a non-accountable marketing allowance. In
addition, the Company has agreed to indemnify the Dealer Manager against various liabilities,
including certain liabilities arising under the federal securities laws. The company has not made
any payments to date to the Dealer Manager pursuant to this agreement.
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