Related Person Transactions

9 Months Ended

Jun. 30, 2020

Adam D. Portnoy, one of our Managing Directors, is the sole trustee of our controlling shareholder, ABP Trust, and owns all of ABP Trust’s voting securities and a majority of the economic interests of ABP Trust. As of June 30, 2020, Adam D. Portnoy beneficially owned, in aggregate, (i) 147,502 shares of Class A common stock of RMR Inc., or Class A Common Shares; (ii) all the outstanding shares of Class B-1 common stock of RMR Inc., or Class B-1 Common Shares; (iii) all the outstanding shares of Class B-2 common stock of RMR Inc., or Class B-2 Common Shares; and (iv) 15,000,000 Class A Units of RMR LLC. Adam D. Portnoy and Jennifer B. Clark, our other Managing Director, are also officers of ABP Trust and RMR Inc. and officers and employees of RMR LLC. Matthew P. Jordan, our Executive Vice President, Chief Financial Officer and Treasurer is also an officer of ABP Trust and an officer and employee of RMR LLC.

Adam D. Portnoy is also the chair of the board of trustees of each of the Managed Equity REITs, the chair of the board of directors of each of Five Star and TA, a managing trustee or managing director of each of the Managed REITs, Five Star, RMRM and TA, a director of Sonesta (and its parent) and is a controlling shareholder of Sonesta. Jennifer B. Clark, our other Managing Director, is a managing trustee of DHC and RMRM, a managing director of FVE and a director of Sonesta, and she serves as the secretary of all the publicly traded Client Companies and Sonesta and as an officer of ABP Trust. Prior to its dissolution on February 13, 2020, Mr. Portnoy was a director of AIC and Ms. Clark was the president and chief executive officer of AIC. As of June 30, 2020, Adam D. Portnoy beneficially owned, in aggregate, 6.4% of Five Star’s outstanding common shares, 1.1% of SVC’s outstanding common shares, 1.2% of ILPT’s outstanding common shares, 1.5% of OPI’s outstanding common shares, 1.1% of DHC’s outstanding common shares, 4.0% of TA’s outstanding common shares (including through RMR LLC), 2.3% of RMRM’s outstanding common shares, and 19.5% of TRMT’s outstanding common shares (including through Tremont Advisors). Until its dissolution on February 13, 2020, ABP Trust owned 14.3% of AIC.

The Managed Equity REITs, the Open End Fund, TRMT and RMRM all have no employees. RMR LLC provides or arranges for all the personnel, overhead and services required for the operation of the Managed Equity REITs, the Open End Fund (until its dissolution on July 28, 2020) and AIC (until its dissolution on February 13, 2020), pursuant to management agreements with them. All the officers of the Managed Equity REITs and the Open End Fund are officers or employees of RMR LLC. All the officers, overhead and required office space of TRMT are provided or arranged by Tremont Advisors. All of TRMT’s officers are officers or employees of Tremont Advisors or RMR LLC. All officers, overhead and required office space of RMRM are provided or arranged by RMR Advisors. All of RMRM’s officers are officers or employees of RMR Advisors or RMR LLC. Many of the executive officers of the Managed Operators are officers or employees of RMR LLC. Some of our executive officers are also managing directors or managing trustees of certain of the Managed REITs, the Managed Operators and RMRM.

As of June 30, 2020, ABP Trust owned 100% of Centre Street and 206,300 limited partnership units, or 100%, of the Open End Fund. RMR LLC owned no limited partnership units of the Open End Fund, but as of June 30, 2020, had committed to contributing $100,000 to, the Open End Fund. The general partner of the Open End Fund is a subsidiary of ABP Trust and is not entitled to any compensation for services rendered to the Open End Fund in its capacity as general partner. On July 28, 2020, the Open End Fund was dissolved and RMR LLC’s $100,000 commitment was terminated as a result. In connection with the dissolution of the Open End Fund, the Transaction Agreement, dated as of July 31, 2018, between ABP Trust and RMR LLC was terminated.

Additional information about our related person transactions appears in Note 8, Shareholders’ Equity, below and in our 2019 Annual Report.

Revenues from Related Parties

For the three and nine months ended June 30, 2020 and 2019, we recognized revenues from related parties as set forth in the following table:



	Three Months Ended June 30,								Nine Months Ended June 30,
	2020				2019				2020				2019
	$		%		$		%		$		%		$		%
Managed Equity REITs:
DHC⁽¹⁾	$	43,472	31.4	%	$	43,483	30.3	%	$	128,076	29.1	%	$	166,313	30.0	%
ILPT	10,034		7.2		12,664		8.8		36,649		8.3		27,998		5.1
OPI ⁽²⁾	58,443		42.1		57,374		39.9		179,895		41.0		171,731		31.0
SIR ^{(1) (2)}	—		—		—		—		—		—		47,843		8.6
SVC⁽¹⁾	12,156		8.8		11,887		8.3		48,341		11.0		89,731		16.2
	124,105		89.5		125,408		87.3		392,961		89.4		503,616		90.9

Managed Operators:
Five Star	2,227		1.6		2,466		1.7		6,953		1.6		7,318		1.3
Sonesta	209		0.2		881		0.6		1,477		0.3		2,420		0.4
TA	3,130		2.3		3,455		2.4		10,021		2.3		10,536		1.9
	5,566		4.1		6,802		4.7		18,451		4.2		20,274		3.6

Other Client Companies:
ABP Trust	3,024		2.2		3,476		2.5		9,195		2.2		10,746		1.9
AIC	2		—		187		0.1		98		—		307		0.1
Open End Fund	4,738		3.4		5,583		3.9		13,653		3.1		13,693		2.5
RMRM	585		0.4		767		0.5		2,139		0.5		2,225		0.4
TRMT	577		0.4		1,283		0.9		1,932		0.4		2,857		0.5
Centre Street	18		—		—		—		108		—		—		—
	8,944		6.4		11,296		7.9		27,125		6.2		29,828		5.4
Total revenues from related parties	138,615		100.0		143,506		99.9		438,537		99.8		553,718		99.9
Revenues from unrelated parties	34		—		209		0.1		865		0.2		406		0.1
	$	138,649	100.0	%	$	143,715	100.0	%	$	439,402	100.0	%	$	554,124	100.0	%


(1)	The amounts for the nine months ended June 30, 2019 include incentive business management fees of $40,642, $25,817 and $53,635, which RMR LLC earned for the 2018 calendar year from DHC, SIR and SVC, respectively, and which were paid in January 2019.


(2)	OPI acquired SIR by merger on December 31, 2018. This table presents revenues for the nine months ended June 30, 2019 from SIR separately as they relate to a period prior to this merger.

Amounts Due From Related Parties

The following table represents amounts due from related parties as of the dates indicated:



	June 30,		September 30,
	2020		2019
Managed Equity REITs:
DHC	$	28,374	$	25,505
ILPT	5,835		10,630
OPI	35,640		39,233
SVC	10,089		18,933
	79,938		94,301

Managed Operators:
Five Star	361		136
Sonesta	69		37
TA	454		392
	884		565

Other Client Companies:
ABP Trust	1,108		2,580
AIC	7		7
Open End Fund	2,161		4,567
RMRM	165		75
TRMT	877		664
Centre Street	9		—
	4,327		7,893
	$	85,149	$	102,759

Leases

As of June 30, 2020, RMR LLC leased from ABP Trust and certain Managed Equity REITs office space for use as our headquarters and local offices. We incurred rental expense under related party leases of $1,367 and $1,366 for the three months ended June 30, 2020 and 2019, respectively, and $4,230 and $4,224 for the nine months ended June 30, 2020 and 2019, respectively.

Tax-Related Payments

Pursuant to our tax receivable agreement with ABP Trust, RMR Inc. pays to ABP Trust 85.0% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that RMR Inc. realizes as a result of (a) the increases in tax basis attributable to our dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be paid by us as a result of the tax receivable agreement. As of June 30, 2020, our condensed consolidated balance sheet reflects a liability related to the tax receivable agreement of $32,061, including $2,111 classified as a current liability that we expect to pay to ABP Trust during the fourth quarter of fiscal year 2020.

Under the RMR LLC operating agreement, RMR LLC is also required to make certain pro rata distributions to each member of RMR LLC quarterly on the basis of the estimated tax liabilities of its members, subject to future adjustment based on actual results. For the nine months ended June 30, 2020 and 2019, pursuant to the RMR LLC operating agreement, RMR LLC made required quarterly tax distributions to holders of its membership units totaling $23,062 and $59,279, respectively, of which $12,127 and $30,807, respectively, was distributed to us and $10,935 and $28,472, respectively, was distributed to ABP Trust, based on each membership unit holder’s respective ownership percentage. The amounts distributed to us were eliminated in our condensed consolidated financial statements, and the amounts distributed to ABP Trust were recorded as a reduction of

its noncontrolling interest. We used funds from these distributions to pay certain of our U.S. federal and state income tax liabilities and to pay part of our obligations under the tax receivable agreement.

Separation Arrangements

We entered into retirement agreements with each of Mark L. Kleifges, Bruce J. Mackey Jr. and John C. Popeo, each a former Executive Vice President of RMR LLC, between October 25, 2018 and December 11, 2018 in connection with their retirements. Pursuant to these agreements, we made various cash payments and accelerated the vesting of unvested shares RMR Inc. previously awarded to these retiring officers. We also enter into separation arrangements from time to time with other nonexecutive officers and employees of ours. There remains no further substantive performance obligations with respect to any such arrangements, and we in turn recognized all applicable provisions in our condensed consolidated statements of income as separation costs.

In December 2019, we entered into a retirement agreement with TA and a former executive officer of RMR LLC, Andrew J. Rebholz. Mr. Rebholz was also a managing director and chief executive officer of TA. Pursuant to his retirement agreement, Mr. Rebholz served as an employee of RMR LLC through June 30, 2020. Under Mr. Rebholz’s retirement agreement, RMR LLC paid Mr. Rebholz an annual base salary of $75 until June 30, 2020 and RMR LLC paid him a cash bonus in respect of 2019 of $250 in December 2019. RMR LLC also paid Mr. Rebholz an additional cash payment of $250 in 2020. In addition, in January 2020, we accelerated the vesting of all 7,300 unvested shares of RMR Inc. owned by Mr. Rebholz as of his retirement date, June 30, 2020. We recorded approximately $281 of equity based separation costs related to the acceleration of these shares for the nine months ended June 30, 2020.

For the three and nine months ended June 30, 2020 and 2019, we recognized cash and equity based separation costs as set forth in the following table:



	Three Months Ended June 30,				Nine Months Ended June 30,
	2020		2019		2020		2019
Former executive officers:
Cash separation costs	$	—	$	—	$	260	$	5,312
Equity based separation costs	—		—		281		1,488
	—		—		541		6,800
Former nonexecutive officers:
Cash separation costs	—		142		80		153
Equity based separation costs	—		97		24		97
	—		239		104		250
Total separation costs	$	—	$	239	$	645	$	7,050