Note 11. Related Party Transactions and Arrangements

Cost Sharing Arrangements

In conjunction with the Spin-Off, the Company and SMTA entered into certain agreements, including the Separation and Distribution Agreement, Tax Matters Agreement, Registration Rights Agreement and Insurance Sharing Agreement. These agreements provide a framework for the relationship between the Company and SMTA after the Spin-Off, by which Spirit may incur certain expenses on behalf of SMTA that must be reimbursed in a timely manner. In connection with these arrangements, the Company had $0.1 million accrued receivable balances as of both June 30, 2019 and December 31, 2018. Additionally, the Company had accrued payable balances of $20 thousand and $1.8 million as of June 30, 2019 and December 31, 2018, respectively, in connection with these arrangements.

Asset Management Agreement

In conjunction with the Spin-Off, the Company entered into the Asset Management Agreement pursuant to which the Operating Partnership will provide various services subject to the supervision of SMTA's Board of Trustees, including, but not limited to: (i) performing all of SMTA's day-to-day functions, (ii) sourcing, analyzing and executing on investments and dispositions, (iii) determining investment criteria, (iv) performing investment and liability management duties, including financing and hedging, and (v) performing financial and accounting management. For its services, the Company is entitled to an annual management fee of $20.0 million per annum, payable monthly in arrears. Additionally, the Company may be entitled to, under certain circumstances, a promoted interest fee based on the total shareholder return of SMTA's common shares during the relevant period, as well as a termination fee. No revenue for the promoted interest fee or termination fee has been recognized as they do not meet the criteria for recognition under ASC 606-10 as of June 30, 2019. Asset management fees of $5.0 million and $10.0 million were earned during the three and six months ended June 30, 2019, compared to $1.7 million during the three and six months ended June 30, 2018, and are included in related party fee income in the consolidated statements of operations. Additionally, under the terms of this agreement, the Company recognized related party fee income of $0.4 million, which was fully offset by $0.4 million of general and expense, for other compensation awarded by SMTA to an employee of Spirit for the three and six months ended June 30, 2019. As of both June 30, 2019 and December 31, 2018, the Company had accrued receivable balances of $1.7 million related to the Asset Management Agreement.

Property Management and Servicing Agreement

The Operating Partnership provides property management services and special services for Master Trust 2014. The property management fees accrue daily at 0.25% per annum of the collateral value of the Master Trust 2014 collateral pool less any specially serviced assets, and the special servicing fees accrue daily at 0.75% per annum of the collateral value of any assets deemed to be specially serviced per the terms of the Property Management and Servicing Agreement dated May 20, 2014. Property management fees of $1.4 million and $3.0 million were earned during the three and six months ended June 30, 2019, respectively, compared to $0.5 million earned during both the three and six months ended June 30, 2018. Special servicing fees of $0.4 million and $0.8 million were earned during the three and six months ended June 30, 2019 compared to $52 thousand during both the three and six months ended June 30, 2018. These fees are included in related party fee income in the consolidated statements of operations. As of both June 30, 2019 and December 31, 2018, the Company had accrued receivable balances of $0.5 million related to the Property Management and Servicing Agreement.

Related Party Loans Payable

Wholly-owned subsidiaries of the Company are the borrower on four mortgage loans payable to SMTA and secured by six single-tenant commercial properties owned by the Company. In total, these mortgage notes had an outstanding principal balance of $26.4 million and $27.9 million at June 30, 2019 and December 31, 2018, respectively, which is included in mortgages and notes payable, net on the consolidated balance sheet. The notes incurred interest expense of $67 thousand and $0.1 million for the three and six months ended June 30, 2019, respectively, compared to $25 thousand for both the both the three and six months ended June 30, 2018, which is included in interest expense in the consolidated statements of operations. As of June 30, 2019, these mortgage notes have a weighted-average stated interest rate of 1.00%, a weighted-average term of 8.7 years and are eligible for early repayment without penalty.

Related Party Notes Receivable

In conjunction with the Master Trust 2014 Series 2017-1 notes issuance completed in December 2017, the Operating Partnership, as sponsor of the issuance, retained a 5.0% economic interest in the Master Trust 2014 Series 2017-1 notes as required by the risk retention rules issued under 17 CFR Part 246. The principal amount receivable under the notes was

$33.5 million as of both June 30, 2019 and December 31, 2018, respectively, which is reflected as Investment in Master Trust 2014 on the consolidated balance sheet. The notes generated interest income of $0.4 million and $0.8 million for the three and six months ended June 30, 2019, respectively, compared to $128 thousand for the both the three and six months ended June 30, 2018, which is included in interest income on loans receivable in the consolidated statements of operations. The notes have a weighted-average stated interest rate of 4.6% with a remaining term of 3.4 years to maturity as of June 30, 2019. The notes are classified as held-to-maturity and, as of June 30, 2019, the amortized cost basis is equal to carrying value.

Investments in SMTA

In conjunction with the Spin-Off, SMTA issued to the Operating Partnership and one of its affiliates, both wholly-owned subsidiaries of Spirit, a total of 6.0 million shares of Series A preferred stock with an aggregate liquidation preference of $150.0 million (the "SMTA Preferred Stock"). The SMTA Preferred Stock pays cash dividends at the rate of 10.0% per annum on the liquidation preference of $25.00 per share (equivalent to $0.625 per share on a quarterly basis and $2.50 per share on an annual basis). Spirit recognized $3.8 million and $7.5 million in dividend income during the three and six months ended June 30, 2019, respectively, compared to $1.3 million for both the three and six months ended June 30, 2018, which is reflected as preferred dividend income from SMTA in the consolidated statements of operations. Preferred dividend income is recognized when dividends are declared. As of both June 30, 2019 and December 31, 2018, the Company had accrued receivable balances of $3.8 million related to the preferred dividends. The carrying value of the SMTA Preferred Stock is $150.0 million as of both June 30, 2019 and December 31, 2018, which is reflected in the consolidated balance sheets and will be accounted for at cost, less impairments, if any.

Recent Developments

In June 2019, SMTA announced it reached a definitive agreement to sell the assets held in Master Trust 2014, subject to certain conditions including SMTA shareholder approval. In conjunction with this announcement, the Company has agreed to the following, subject to the completion of the sale:

Assuming a closing of the sale of the Master Trust 2014 assets at the end of the third quarter of 2019, the Company expects to: