NOTE 9—FAIR VALUE MEASUREMENTS (Continued)
The derivative agreements in effect at December 31, 2021 provide that if the wholly-owned subsidiary of the Company which is a party to such agreement defaults or is capable of being declared in default on any of its indebtedness, then a default can be declared on such subsidiary’s derivative obligation. In addition, the Company is a party to the derivative agreements and if there is a default by the subsidiary on the loan subject to the derivative agreement to which the Company is a party and if there are swap breakage losses on account of the derivative being terminated early, the Company could be held liable for such swap breakage losses.
As of December 31, 2021 and 2020, the fair value of the derivatives in a liability position, including accrued interest of $84,000 and $120,000, respectively, but excluding any adjustments for non-performance risk, was approximately $1,632,000 and $5,314,000, respectively. In the event the Company had breaches of any of the contractual provisions of the derivative contracts, it would be required to settle its obligations thereunder at their termination liability value of $1,632,000 and $5,314,000 as of December 31, 2021 and 2020, respectively. This termination liability value, net of adjustments for non-performance risk of $34,000 and $182,000, is included in Accrued expenses and other liabilities on the consolidated balance sheets at December 31, 2021 and 2020, respectively.
NOTE 10—RELATED PARTY TRANSACTIONS
Compensation and Services Agreement
Pursuant to the compensation and services agreement with Majestic Property Management Corp. (“Majestic”), Majestic provides the Company with certain (i) executive, administrative, legal, accounting, clerical, property management, property acquisition, consulting (i.e., sale, leasing, brokerage, and mortgage financing), and construction supervisory services (collectively, the “Services”) and (ii) facilities and other resources. Majestic is wholly-owned by the Company’s vice chairman and it provides compensation to several of the Company’s executive officers.
In consideration for the Services, the Company paid Majestic $3,111,000 in 2021, $3,011,000 in 2020 and $2,826,000 in 2019. Included in these fees are $1,365,000 in 2021, $1,265,000 in 2020 and $1,307,000 in 2019, of property management services. The amounts paid for property management services is based on 1.5% and 2.0% of the rental payments (including tenant reimbursements) actually received by the Company from net lease tenants and operating lease tenants, respectively. The Company does not pay Majestic with respect to properties managed by third parties. The Company also paid Majestic, pursuant to the compensation and services agreement $295,000 in 2021, $275,000 in 2020 and $216,000 in 2019 for the Company’s share of all direct office expenses, including rent, telephone, postage, computer services, internet usage and supplies.
Executive officers and others providing services to the Company under the compensation and services agreement were awarded shares of restricted stock and RSUs under the Company’s stock incentive plans (described in Note 12). The related expense charged to the Company’s operations was $2,590,000, $2,349,000 and $1,973,000 in 2021, 2020 and 2019, respectively.
The amounts paid under the compensation and services agreement (except for the property management services which are included in Real estate expenses) and the costs of the stock incentive plans are included in General and administrative expense on the consolidated statements of income for 2021, 2020 and 2019.