| Related Person Transactions | 9 Months Ended |
| Sep. 30, 2014 |
| Related Person Transactions | ' |
| Related Person Transactions | ' |
| Note 9. Related Person Transactions |
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| RMR: We have no employees. Personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR to provide management and administrative services to us: (i) a business management agreement, which relates to our business generally, and (ii) a property management agreement, which relates to our property level operations. |
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| One of our Managing Trustees, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR. Our other Managing Trustee, Mr. Adam Portnoy, is the son of Mr. Barry Portnoy, and an owner, President, Chief Executive Officer and a director of RMR. Each of our executive officers is also an officer of RMR. Our Independent Trustees also serve as independent directors or independent trustees of other companies to which RMR provides management services. Messrs. Barry Portnoy and Adam Portnoy serve as managing directors or managing trustees of a majority of the companies to which RMR or its affiliates provide management services. In addition, officers of RMR serve as officers of those companies. |
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| Pursuant to our business management agreement with RMR, we recognized business management fees of $2,643 and $1,942 for the three months ended September 30, 2014 and 2013, respectively, and $7,578 and $6,924 for the nine months ended September 30, 2014 and 2013, respectively. These amounts are included in general and administrative expenses in our condensed consolidated financial statements. In accordance with the terms of our business management agreement, we issued 27,103 of our common shares to RMR during the nine months ended September 30, 2014 as payment for a portion of the base business management fee we recognized for such period. |
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| In connection with our property management agreement with RMR, the aggregate property management and construction supervision fees we recognized were $2,095 and $2,179 for the three months ended September 30, 2014 and 2013, respectively, and $6,034 and $5,794 for the nine months ended September 30, 2014 and 2013, respectively. These amounts are included in other operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements. |
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| On May 9, 2014, we and RMR entered into amendments to our business management agreement and property management agreement. As amended, RMR may terminate the agreements upon 120 days’ written notice. Prior to the amendments, RMR could terminate the agreements upon 60 days’ written notice and could also terminate the property management agreement upon five business days’ notice if we underwent a change of control. The amendments also provide for certain termination payments by us to RMR in the event that we terminate the agreements other than for cause. Also, as amended, RMR agrees to provide certain transition services to us for 120 days following an applicable termination by us or notice of termination by RMR. |
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| RMR leases from us office space for two of its regional offices. We earned approximately $14 and $8 in rental income from RMR for leased office space for the three months ended September 30, 2014 and 2013, respectively, and $47 and $23 for the nine months ended September 30, 2014 and 2013, respectively. Our office space leases with RMR are terminable by RMR if our management agreements with RMR are terminated. |
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| On July 8, 2014, we and RMR entered into an agreement with Equity Commonwealth (formerly known as CommonWealth REIT), or EQC, pursuant to which we and RMR purchased shares of SIR from EQC on July 9, 2014. For more information regarding this transaction, see below under “- EQC”. RMR provides management services to SIR; our Managing Trustees serve as managing trustees of SIR; one of our Independent Trustees, Mr. Jeffrey Somers, serves as an independent trustee of SIR; our President and Chief Operating Officer serves as an officer of SIR; and SIR’s other executive officer is an officer of RMR. SIR was not a contracting party to this transaction. |
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| EQC: EQC organized us as a 100% owned subsidiary. One of our Managing Trustees, Mr. Barry Portnoy, was a managing trustee of EQC until March 25, 2014. Our other Managing Trustee, Mr. Adam Portnoy, was the president of EQC until May 23, 2014 and was a managing trustee of EQC until March 25, 2014. RMR currently provides management services to EQC in respect of EQC’s Australian assets and certain transition services to EQC with respect to EQC’s other operations. |
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| On March 15, 2013, EQC sold all 9,950,000 of our common shares it owned in a public offering. In connection with this public offering, on March 11, 2013, we entered into a registration agreement with EQC under which EQC agreed to pay all expenses incurred by us relating to the registration and sale of our common shares owned by EQC in the offering, pursuant to which EQC paid us $310 during 2013. In addition, under the registration agreement, EQC agreed to indemnify us and our officers, Trustees and controlling persons, and we agreed to indemnify EQC and its officers, trustees and controlling persons, against certain liabilities related to the public offering, including liabilities under the Securities Act of 1933, as amended, or the Securities Act. |
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| On July 8, 2014, we and RMR entered into a stock purchase agreement, or the purchase agreement, with EQC, pursuant to which, on July 9, 2014, we acquired from EQC 21,500,000 common shares of beneficial interest, par value $.01 per share, of SIR, and RMR acquired from EQC 500,000 SIR common shares. Our cash purchase price was equal to approximately $677,500, or $31.51 per share, plus approximately $11,300, or $0.53 per share, of accrued dividends as defined in the purchase agreement, for a total of approximately $688,800, before acquisition related costs. RMR purchased its 500,000 SIR common shares on the same terms, including for the same per share amounts that we paid. Under the purchase agreement, in the event that we or RMR consummates any sale of SIR common shares prior to July 9, 2015 and the price per share paid by the purchaser is greater than $31.51, we or RMR, as applicable, are required to pay to EQC an amount equal to 50% of the product of (i) the number of SIR common shares sold in the transaction times (ii) the excess of (x) the price per share paid by the purchaser and (y) $31.51. The foregoing requirement applies to any SIR common shares we or RMR own. In addition, we and RMR agreed, among other things, to indemnify EQC for certain claims related to the acquisition. In connection with the indemnity, we and RMR entered into an allocation agreement with regard to our respective liabilities in the event of a claim for indemnification. As a result of this acquisition, we are SIR's largest shareholder. As of September 30, 2014, we owned 21,500,000 of SIR's common shares, representing approximately 35.9% of the issued and outstanding SIR common shares. |
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| On July 23, 2014, we and EQC agreed to terminate the provisions of a transaction agreement we entered with EQC in connection with our initial public offering that had provided us a right of first refusal to acquire any property owned by EQC that EQC determined to divest, if the property was then majority leased to a government tenant. The agreement had also placed restrictions on both our and EQC’s investments in real property, which we and EQC also agreed to terminate. |
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| SIR: In connection with the proposed acquisition by SIR of Cole Corporate Income Trust, Inc., a Maryland corporation, or CCIT, pursuant to an agreement and plan of merger, or the merger agreement, dated August 30, 2014, by and among SIR, SC Merger Sub LLC, a Maryland limited liability company and SIR's wholly owned subsidiary, or SIR Merger Sub, and CCIT, on August 30, 2014, concurrently with the execution and delivery of the merger agreement, we entered into a voting and standstill agreement with CCIT and American Realty Capital Properties, Inc., a Maryland corporation and parent of the manager of CCIT, or ARCP, or the voting agreement. Pursuant to the voting agreement, we have agreed to vote in favor of the issuance of SIR common shares in the merger as contemplated by the merger agreement, upon the terms and subject to the conditions set forth in the voting agreement and the merger agreement. In the voting agreement we also agreed, among other things, subject to certain exceptions, not to sell or otherwise assign or dispose of or pledge SIR common shares that we own or to deposit those shares into any voting trust or enter into any other voting agreement or arrangement with respect to those shares. The voting agreement will terminate upon certain circumstances, including upon termination of the merger agreement or the closing of the merger. The voting agreement also contains standstill provisions pursuant to which ARCP has agreed, among other things, not to make unsolicited proposals to acquire us or SIR for a period of 36 months. Concurrently with our entering into the voting agreement, RMR, which provides management services to SIR, and Messrs. Barry Portnoy and Adam Portnoy, RMR’s principals, our Managing Trustees and managing trustees of SIR, also entered into a voting and standstill agreement on terms and conditions substantially similar to our voting agreement that also includes a standstill in respect of Senior Housing Properties Trust, a Maryland real estate investment trust, or SNH. SNH has agreed to acquire from SIR, substantially concurrently with the completion of the merger of CCIT with and into SIR Merger Sub pursuant to the merger agreement, the subsidiaries of CCIT which own 23 healthcare properties that SIR will acquire through such merger. RMR provides management services to SNH and our Managing Trustees are also managing trustees of SNH. Two of our Independent Trustees also serve as independent trustees of SNH and one of our Independent Trustees also serves as an independent trustee of SIR. Our President and Chief Operating Officer also serves as the president and chief operating officer of SIR. |
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| AIC: We, RMR, SIR and four other companies to which RMR provides management services currently own Affiliates Insurance Company, or AIC, an Indiana insurance company. All of our Trustees and most of the trustees and directors of the other AIC shareholders currently serve on the board of directors of AIC. RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC. |
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| On March 25, 2014, as a result of the removal, without cause, of all of the trustees of EQC, this shareholder of AIC underwent a change in control, as defined in the shareholders’ agreement among us, the other shareholders of AIC and AIC. As a result of that change in control and in accordance with the terms of the shareholders agreement, on May 9, 2014, we and those other shareholders purchased pro rata the AIC shares EQC owned. Pursuant to that purchase, we purchased 2,857 AIC shares from EQC for $825. Following these purchases, we and the other remaining six shareholders each owns approximately 14.3% of AIC. |
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| In June 2014, we and the other shareholders of AIC renewed our participation in an insurance program arranged by AIC. In connection with that renewal, we purchased a one-year property insurance policy providing $500,000 of coverage, with respect to which AIC is a reinsurer of certain coverage amounts. We paid AIC a premium, including taxes and fees, of approximately $526 in connection with that policy, which amount may be adjusted from time to time as we acquire or dispose of properties that are covered in the policy. As of September 30, 2014, we had invested $6,019 in AIC. Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC as all of our Trustees are also directors of AIC. Our investment in AIC had a carrying value of $6,925 and $6,031 as of September 30, 2014 and December 31, 2013, respectively, which amounts are included in other assets on our condensed consolidated balance sheet. We recognized income of $38 and $64 for the three months ended September 30, 2014 and 2013, respectively, and $59 and $219 for the nine months ended September 30, 2014 and 2013, respectively, related to our investment in AIC. |
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| Directors’ and Officers’ Liability Insurance: In June 2014, we, RMR and four other companies to which RMR provides management services extended our and their combined directors’ and officers’ liability insurance policy, and we extended our separate directors’ and officers’ liability insurance policy, in each case for an interim period. We paid an aggregate premium of approximately $50 for these extensions. Further information about those policies is contained in Note 5 to our audited financial statements contained in our Annual Report. In September 2014, we purchased a two year combined directors' and officers' insurance policy with RMR and five other companies managed by RMR that provides $10,000 in aggregate primary coverage, including certain errors and omission coverage. At that time, we also purchased separate additional one year directors' and officers' liability insurance policies that provide $20,000 of aggregate excess coverage plus $5,000 of excess non-indemnifiable coverage. The total premium payable by us for these policies purchased in September 2014 was approximately $455. |
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