Shareholders' Equity

12 Months Ended

Dec. 31, 2015

Shareholders' Equity

Shareholders' Equity

4. Shareholders’ Equity

Common Share Issuances and Repurchase

During the year ended December 31, 2015, we issued 63,119 of our common shares to RMR LLC as part of the business management fees payable by us under our business management agreement. See Note 9 for further information regarding this agreement.

During the year ended December 31, 2015, we issued 1,490,000 of our common shares in connection with our acquisition of shares of RMR Inc., as further described in Note 9. 

On September 24, 2015, we purchased an aggregate of 16,340 of our common shares for $25.62 per share, the closing price of our common shares on the New York Stock Exchange, or NYSE, on that day, from certain of our officers and other employees of RMR LLC in satisfaction of tax withholding and payment obligations associated with the vesting of awards of restricted common shares.

Common Share Awards

We have common shares available for issuance under the terms of our equity compensation plan, or our Share Award Plan. During the years ended December 31, 2015, 2014 and 2013, we awarded 76,250 common shares with an aggregate market value of $1,957 and79,725 common shares with an aggregate market value of $2,272 and 84,125 common shares with an aggregate market value of $2,307, respectively, to our officers and certain employees of our manager, RMR LLC, pursuant to the Share Award Plan. See Note 9 for a further discussion of the grants we made to our officers and certain employees of RMR LLC. In addition, we awarded each of our Trustees 2,500 common shares in 2015 and 2014 and 2,000 common shares in 2013 with an aggregate market value of $445($74 per trustee), $366($73 per trustee) and $307($61 per trustee), respectively, as part of their annual compensation. The values of the share grants were based upon the closing price of our common shares on the NYSE on the dates of the grants.  The shares awarded to our Trustees vest immediately. The shares awarded to our officers and certain employees of RMR LLC vest in five annual installments beginning on the date of grant. Share awards are expensed over their vesting period and the value of such share awards are included in general and administrative expense in our consolidated statements of comprehensive income. At December 31, 2015,  2,656,438 of our common shares remain reserved for issuance under our current Share Award Plan.

A summary of shares granted and vested under the terms of the Share Award Plan for the years ended December 31, 2015, 2014 and 2013 is as follows:

	2015			2014			2013
		Weighted			Weighted			Weighted
	Number	Average		Number	Average		Number	Average
	of	Grant Date		of	Grant Date		of	Grant Date
	Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
Unvested shares, beginning of year	150,192	$	28.52	145,365	$	27.55	127,654	$	24.88
Shares granted	91,250		26.32	92,225		28.61	94,125		27.77
Shares vested	(93,248)		27.16	(87,398)		28.69	(75,889)		28.10
Shares repurchased or forfeited	(1,190)		—	—		—	(525)		26.61
Unvested shares, end of year	147,004	$	25.95	150,192	$	28.52	145,365	$	27.55

The 147,004unvested shares as of December 31, 2015 are scheduled to vest as follows: 57,308 shares in 2016, 44,490 shares in 2017, 29,955 shares in 2018 and 15,251 shares in 2019. As of December 31, 2015, the estimated future compensation expense for the unvested shares was $3,844 based on the closing price on December 31, 2015 of our common shares of $26.15. The weighted average period over which the compensation expense will be recorded is approximately 22 months. During the years ended December 31, 2015, 2014 and 2013, we recorded $2,475,  $2,437 and $2,400, respectively, of compensation expense related to the Share Award Plan.

Preferred Shares

Each of our Series D cumulative redeemable preferred shares has a distribution rate of $1.78125 per annum($20,664), or 7.125%, payable in equal quarterly amounts, and has a liquidation preference of $25.00 per share ($290,000 in aggregate). The Series D cumulative redeemable preferred shares are redeemable for $25.00 per share each plus accrued and unpaid distributions at our option at any time on or after January 15, 2017, or at the option of the holders of the Series D cumulative redeemable preferred shares if a change of control occurs which results in our common shares (or the common securities of an acquiring or surviving entity) not being listed or quoted on the NYSE or certain other exchanges or quotation systems. Also, upon the occurrence of such a change of control, holders of our Series D cumulative redeemable preferred shares that are not redeemed may at their option convert those Series D cumulative redeemable preferred shares into our common shares (or certain alternative consideration) at a conversion rate generally based on their $25.00 liquidation preference and the market price of our common shares at the time of conversion, subject to a cap.

Common Share Distributions

Cash distributions paid or payable by us to our common shareholders for the years ended December 31, 2015, 2014 and 2013 were $1.99 per share, or $299,963,  $1.95 per share, or $292,029, and $1.89 per share, or $256,587, respectively. As described in Note 9, on December 14, 2015, we distributed 2,515,344, or 0.0166 a share for each of our common shares, of RMR Inc. shares of class A common stock we owned, to our common shareholders as a special distribution.  This distribution resulted in a taxable in kind distribution of0.1974 for each of our common shares.The characterization of our distributions paid in 2015 was 90.67% ordinary income,  8.58% return of capital 0.75% and qualified dividend. The characterization of our distributions paid in 2014 was 100% ordinary income.  The characterization of our distributions paid in 2013 was 95.90% ordinary income, 2.95% return of capital and 1.15% qualified dividend.

On January 11, 2016, we declared a distribution of $0.50 per common share which we paid on February 23, 2016, to shareholders of record on January 22, 2016 using cash on hand and borrowings under our unsecured revolving credit facility.

Cumulative Other Comprehensive Income (Loss)

Cumulative other comprehensive income (loss) represents the net unrealized gain(loss) on our available for sale equity investments and our share of the comprehensive income (loss) of AIC. See Notes 9 and 13 for further information regarding these investments.