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Business and Property Management Agreements with RMR LLC
9 Months Ended
Sep. 30, 2018
Property Management Fee [Abstract]  
Business and Property Management Agreements with RMR LLC
Business and Property Management Agreements with RMR LLC

We have no employees. The personnel and various services we require to operate our business are provided to us by RMR LLC. We have two agreements with RMR LLC to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to our property level operations.

Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $20,575 and $1,891 for the three months ended September 30, 2018 and 2017, respectively, and $30,059 and $8,241 for the nine months ended September 30, 2018 and 2017, respectively. The net business management fees payable to RMR LLC include $16,236 and $16,973 of estimated business management incentive fees for the three and nine months ended September 30, 2018, respectively, based on our common share total return, as defined, as of September 30, 2018. Although we recognized estimated business management incentive fees in accordance with GAAP, the actual amount of business management incentive fees payable by us to RMR LLC for 2018, if any, will be based on our common share total return, as defined, for the three year period ending December 31, 2018, and will be payable in 2019. The net business management fees recognized for the three months ended September 30, 2017 included the reversal of $893 of previously accrued estimated business management incentive fees as of June 30, 2017. As of September 30, 2017, based on our common share total return, as defined, as of such date, no annual business management incentive fees were estimated to be payable by us to RMR LLC for 2017. No incentive management fee was payable by us to RMR LLC for the year ended December 31, 2017. The net business management fees we recognize are included in general and administrative expenses in our condensed consolidated statements of comprehensive income.  

Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $3,415 and $2,338 for the three months ended September 30, 2018 and 2017, respectively, and $10,201 and $7,371 for the nine months ended September 30, 2018 and 2017, respectively. These amounts are included in other operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.

We are generally responsible for all our operating expenses, including certain expenses incurred by RMR LLC on our behalf. Our property level operating expenses, including certain payroll and related costs incurred by RMR LLC, are generally incorporated into rents charged to our tenants. We reimbursed RMR LLC $5,100 and $3,436 for property management related expenses for the three months ended September 30, 2018 and 2017, respectively, and $15,121 and $10,482 for property management related expenses for the nine months ended September 30, 2018 and 2017, respectively, which amounts are included in other operating expenses in our condensed consolidated statements of comprehensive income. In addition, we are responsible for our share of RMR LLC’s costs for providing our internal audit function. The amounts we recognized as expense for internal audit costs were $50 and $67 for the three months ended September 30, 2018 and 2017, respectively, and $173 and $202 for the nine months ended September 30, 2018 and 2017, respectively. These amounts are included in general and administrative expenses in our condensed consolidated statements of comprehensive income.