Business and Property Management Agreements with RMR LLC

9 Months Ended

Sep. 30, 2019

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. Prior to completion of the Merger, SIR had similar business and property management agreements with RMR LLC, which agreements were terminated in connection with the Merger. See Notes 4 and 11 for further information regarding our relationship, agreements and transactions with SIR and RMR LLC.

Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $5,159 and $20,575 for the three months ended September 30, 2019 and 2018, respectively, and $16,203 and $30,059 for the nine months ended September 30, 2019 and 2018, respectively. Based on our common share total return, as defined in our business management agreement, as of September 30, 2019, no estimated 2019 incentive fees are included in the net business management fees we recognized for the three and nine months ended September 30, 2019, respectively. The actual amount of annual incentive fees for 2019, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2019, and will be payable in 2020. The net business management fees recognized for the three and nine months ended September 30, 2018 included $16,236 and $16,973, respectively, of estimated business management incentive fees. We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).  

Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $5,622 and $3,415 for the three months ended September 30, 2019 and 2018, respectively, and $16,605 and $10,201 for the nine months ended September 30, 2019 and 2018, respectively. These amounts are included in other operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.

In January 2019, we paid RMR LLC $2,185 for SIR’s 2018 business management, property management and construction supervision fees that it had accrued, but not paid, as of December 31, 2018. We also paid RMR LLC a business management incentive fee of $25,817, which represented the incentive fee incurred, but not paid, by SIR for the year ended December 31, 2018. We had assumed the obligation to pay these amounts as a result of the Merger.

We are generally responsible for all our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf. We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR LLC’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR LLC's centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit function, or as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC. We reimbursed RMR LLC $6,850 and $5,150 for these expenses and costs for the three months ended September 30, 2019 and 2018, respectively, and $20,007 and $15,294 for these expenses and costs for the nine months ended September 30, 2019 and 2018, respectively. We included these amounts in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss).