Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 26, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | Government Properties Income Trust | |
Entity Central Index Key | 1,456,772 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 71,126,308 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Real estate properties: | ||
Land | $ 257,716 | $ 253,058 |
Buildings and improvements | 1,509,921 | 1,443,074 |
Total real estate properties, gross | 1,767,637 | 1,696,132 |
Accumulated depreciation | (265,843) | (255,879) |
Total real estate properties, net | 1,501,794 | 1,440,253 |
Equity investment in Select Income REIT | 493,259 | 491,369 |
Assets of discontinued operations | 12,502 | 12,468 |
Assets of property held for sale | 3,098 | 3,098 |
Acquired real estate leases, net | 123,300 | 118,267 |
Cash and cash equivalents | 15,698 | 8,785 |
Restricted cash | 713 | 1,022 |
Rents receivable, net | 46,617 | 45,269 |
Deferred leasing costs, net | 17,909 | 14,299 |
Other assets, net | 44,505 | 33,680 |
Total assets | 2,259,395 | 2,168,510 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
Unsecured revolving credit facility | 311,000 | 117,000 |
Unsecured term loans, net | 546,660 | 546,490 |
Senior unsecured notes, net | 346,095 | 345,809 |
Mortgage notes payable, net | 29,053 | 136,299 |
Liabilities of discontinued operations | 75 | 54 |
Liabilities of property held for sale | 32 | 43 |
Accounts payable and other liabilities | 48,979 | 50,543 |
Due to related persons | 4,380 | 2,886 |
Assumed real estate lease obligations, net | 12,224 | 12,735 |
Total liabilities | $ 1,298,498 | $ 1,211,859 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized, 71,126,308 shares issued and outstanding | $ 711 | $ 711 |
Additional paid in capital | 1,472,510 | 1,472,482 |
Cumulative net income | 55,873 | 38,486 |
Cumulative other comprehensive income (loss) | 2,548 | (14,867) |
Cumulative common distributions | (570,745) | (540,161) |
Total shareholders' equity | 960,897 | 956,651 |
Total liabilities and shareholders' equity | $ 2,259,395 | $ 2,168,510 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common shares of beneficial interest, shares authorized | 100,000,000 | 100,000,000 |
Common shares of beneficial interest, shares issued | 71,126,308 | 71,126,308 |
Common shares of beneficial interest, shares outstanding | 71,126,308 | 71,126,308 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Rental income | $ 63,611 | $ 62,659 |
Expenses: | ||
Real estate taxes | 7,653 | 7,410 |
Utility expenses | 4,174 | 4,571 |
Other operating expenses | 12,911 | 12,210 |
Depreciation and amortization | 18,324 | 17,215 |
Acquisition related costs | 152 | 6 |
General and administrative | 3,526 | 4,004 |
Total expenses | 46,740 | 45,416 |
Operating income | 16,871 | 17,243 |
Interest income | 6 | 12 |
Interest expense (including net amortization of debt premiums and discounts and debt issuance costs of $471 and $332, respectively) | (9,364) | (9,302) |
Gain on early extinguishment of debt | 104 | |
Loss on issuance of shares by Select Income REIT | (40,771) | |
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of investees | 7,617 | (32,818) |
Income tax expense | (15) | (30) |
Equity in earnings (losses) of investees | 9,934 | (316) |
Income (loss) from continuing operations | 17,536 | (33,164) |
Loss from discontinued operations | (149) | (206) |
Net income (loss) | 17,387 | (33,370) |
Other comprehensive income | ||
Unrealized gain on investment in available for sale securities | 12,871 | |
Equity in unrealized gain of investees | 4,544 | 58 |
Other comprehensive income | 17,415 | 58 |
Comprehensive income (loss) | $ 34,802 | $ (33,312) |
Weighted average common shares outstanding (basic and diluted) | 71,031 | 70,266 |
Per common share amounts (basic and diluted): | ||
Income (loss) from continuing operations (in dollars per share) | $ 0.25 | $ (0.47) |
Net income (loss) (in dollars per share) | $ 0.24 | $ (0.47) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Net amortization of debt premiums and discounts and deferred financing fees | $ 471 | $ 332 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ 17,387 | $ (33,370) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | ||
Depreciation | 10,237 | 9,626 |
Net amortization of debt premiums and discounts and debt issuance costs | 471 | 332 |
Gain on early extinguishment of debt | (104) | |
Straight line rental income | (149) | (663) |
Amortization of acquired real estate leases | 7,712 | 7,340 |
Amortization of deferred leasing costs | 709 | 556 |
Other non-cash (income) expense, net | (105) | 507 |
Equity in earnings (losses) of investees | (9,934) | 316 |
Loss on issuance of shares by Select Income REIT | 40,771 | |
Distributions of earnings from Select Income REIT | 9,117 | 2,176 |
Change in assets and liabilities: | ||
Restricted cash | 309 | (762) |
Deferred leasing costs | (1,989) | (412) |
Rents receivable | (1,215) | 1,587 |
Other assets | 1,849 | 2,699 |
Accounts payable and accrued expenses | (4,577) | (2,656) |
Due to related persons | 1,494 | 201 |
Net cash provided by operating activities | 31,212 | 28,248 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Real estate acquisitions and deposits | (79,244) | |
Real estate improvements | (4,964) | (2,678) |
Investment in Select Income REIT | (95,821) | |
Distributions in excess of earnings from Select Income REIT | 3,342 | 11,354 |
Proceeds from sale of properties, net | 30,521 | |
Net cash used in investing activities | (80,866) | (56,624) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Repayment of mortgage notes payable | (106,849) | (610) |
Borrowings on unsecured revolving credit facility | 204,000 | 75,000 |
Repayments on unsecured revolving credit facility | (10,000) | (20,000) |
Debt issuance costs | (16) | |
Distributions to common shareholders | (30,584) | (30,252) |
Net cash provided by financing activities | 56,567 | 24,122 |
Increase (decrease) in cash and cash equivalents | 6,913 | (4,254) |
Cash and cash equivalents at beginning of period | 8,785 | 13,791 |
Cash and cash equivalents at end of period | 15,698 | 9,537 |
Supplemental cash flow information: | ||
Interest paid | 12,319 | 12,078 |
Income taxes paid | $ 44 | $ 131 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Basis of Presentation | |
Basis of Presentation | Note 1 . Basis of Presentat ion The accompanying condensed consolidated financial statements of Government Properties Income Trust and its subsidiaries, or we, us or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2015, or our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior years’ condensed consolidated financial statements to conform to the current year’s presentation. The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets, impairment of real estate and equity method investments and the valuation of intangible assets. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2016 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | Note 2. Recent Accounting Pronouncements On January 1, 2016, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2015-02, Consolidation . Among other things, this update changes how an entity determines the primary beneficiary of a variable interest entity. The implementation of this update did not have an impact in our condensed consolidated financial statements. On January 1, 2016, we adopted FASB ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability, and ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting , which addresses the presentation of debt issuance costs related to line of credit arrangements. The implementation of these updates resulted in the reclassification of certain of our capitalized debt issuance costs as an offset to the associated debt liability in our condensed consolidated balance sheets. The classification of capitalized debt issuance costs related to our unsecured revolving credit facility remains unchanged in accordance with ASU No. 2015-15. As of December 31, 2015, debt issuance costs related to our unsecured term loans, senior unsecured notes and mortgage notes payable of $3,510 , $2,172 and $344 , respectively, were reclassified from assets to the associated debt liability in our condensed consolidated balance sheets. On January 1, 2016, we adopted FASB ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments , which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The implementation of this update did not have an impact in our condensed consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , which changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. This update is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted subject to certain conditions. Currently, changes in fair value of these investments are recorded through other comprehensive income. Under this ASU, these changes will be recorded through earnings. We are continuing to evaluate this guidance, but we expect the implementation of this guidance will affect available for sale equity investments we hold. In February 2016, the FASB issued ASU No. 2016-02, Leases , which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU No. 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently assessing the potential impact the adoption of ASU No. 2016-02 will have in our condensed consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation , which identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. ASU No. 2016-09 is effective for reporting periods beginning after December 15, 2016. We are currently assessing the potential impact that the adoption of ASU No. 2016-09 will have in our condensed consolidated financial statements. |
Per Common Share Amounts
Per Common Share Amounts | 3 Months Ended |
Mar. 31, 2016 | |
Per Common Share Amounts | |
Per Common Share Amounts | Note 3. Per Common Share Amounts The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands): For the Three Months Ended March 31, 2016 2015 Weighted average common shares for basic earnings per share Effect of dilutive securities: unvested share awards - - Weighted average common shares for diluted earnings per share |
Real Estate Properties
Real Estate Properties | 3 Months Ended |
Mar. 31, 2016 | |
Real Estate Properties | |
Real Estate Properties | Note 4. Real Estate Properties As of March 31, 201 6 , we owned 72 properties ( 92 buildings), with an undepreciated carrying value of $1,770,983 , excluding one property ( one building) classified as discontinued operations with an undepreciated carrying value of $12,260 . We generally lease space at our properties on a gross lease or modified gross lease basis pursuant to fixed term operating leases expiring between 2016 and 20 32 . Our leases generally require us to pay all or some property operating expenses and to provide all or most property management services. During the three months ended March 31, 201 6, we entered into 20 leases for 522,962 rentable square feet, including a 25,579 square foot expansion to be constructed at an existing property, for a weighted (by rentable square feet) average lease term of 11. 6 years and we made commitments for approximately $20,469 of leasing related costs. We have estimated unspent leasing related obligations of $22,752 as of March 31, 201 6 . In addition, prior to the commencement of the lease, we have committed to redevelop and expand the existing property referenced above at an estimated cost of approximately $12,800 . Acquisition Activities During the three months ended March 31, 2016, we acquired one office property (one building) located in Sacramento, CA with 337,811 rentable square feet. This property was 86% leased, of which 71% was leased to the State of California and occupied by three separate agencies on the date of acquisition. The purchase price was $79,244 , excluding acquisition costs. Our allocation of the purchase price of this acquisition based on the estimated fair values of the acquired assets and assumed liabilities is presented in the table below. The allocation of the purchase price is based on preliminary estimates and may change upon completion of third party appraisals. Number of Buildings Acquired Other Acquisition Properties/ Square Purchase and Acquired Lease Assumed Date Location Type Buildings Feet Price Land Improvements Leases Obligations Liabilities January 2016 Sacramento, CA Office 1 / 1 $ $ $ $ $ $ — In April 2016, we exercised our option to purchase for $1,623 an adjacent land parcel at one of our existing properties in Atlanta, GA. We expect this transaction to close during the third quarter of 2016. We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of our long lived assets. If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives. Disposition Activities – Continuing Operations In 2015, we began marketing for sale an office property ( one building) in Savannah, GA with 35,228 rentable square feet and a net book value of $3,071 at March 31, 2016. In March 2016, we entered into an agreement to sell this property. The contract sales price is $4,500 , which amount is before transaction costs we may incur. This sale is subject to conditions and is currently expected to occur in the third quarter of 2016. We can provide no assurance that the sale of this property will occur, that the sale will not be delayed or that its terms will not change. We have classified this property as held for sale as of March 31, 2016. The results of operations for this property are included in continuing operations in our condensed consolidated financial statements. Summarized balance sheet information for the property is as follows: March 31, December 31, 2016 2015 Real estate properties, net $ $ Rents receivable - Other assets Assets of property held for sale $ $ Other liabilities $ $ Liabilities of property held for sale $ $ Disposition Activities – Discontinued Operations In March 2016, we entered into an agreeme nt to sell an office property ( one building) in Falls Church, VA with 164,746 rentable square feet and a net book value of $12,282 at March 31, 2016. The contract sales price is $14,750 , which amount is before transaction costs we may incur. This sale is subject to conditions, including the purchaser obtaining certain zoning entitlements, and is currently expected to occur in the first quarter of 2017. We can provide no assurance that the sale of this property will occur, that the sale will not be delayed or that its terms will not change. We have classified this property, which was held for sale prior to our adoption of ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, as a discontinued operation in our condensed consolidated financial statements. Summarized balance sheet and income statement information for the property is as follows: Balance Sheets: March 31, December 31, 2016 2015 Real estate properties, net $ $ Rents receivable - Other assets Assets of discontinued operations $ $ Other liabilities $ $ Liabilities of discontinued operations $ $ Statements of Operations Three Months ended March 31, 2016 2015 Rental income $ $ Real estate taxes Utility expenses Other operating expenses General and administrative Loss from discontinued operations $ $ |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2016 | |
Revenue Recognition | |
Revenue Recognition | Note 5. Revenue Recognition We recognize rental income from operating leases that contain fixed contractual rent changes on a straight line basis over the term of the lease agreements. Certain of our leases with government tenants provide the tenant the right to terminate before the lease expiration date if its respective legislature or other funding authority does not appropriate the funding necessary for the government tenant to meet its lease obligations; we have determined the fixed non-cancelable lease term of these leases to be the fully executed term of the lease because we believe the occurrence of early terminations to be remote contingencies based on both our historical experience and our assessment of the likelihood of lease cancellation on a separate lease basis. We increased rental income to record revenue on a straight line basis by $149 and $663 for the three months ended March 31, 201 6 and 2015, respectively. Rents receivable include $19,144 and $18,995 of straight line rent receivables at March 31, 2016 and December 31, 2015, respectively. |
Concentration
Concentration | 3 Months Ended |
Mar. 31, 2016 | |
Concentration | |
Concentration | Note 6. Concentration Tenant and Credit Concentration We define annualized rental income as the annualized contractual base rents from our tenants pursuant to our lease agreements as of the measurement date, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization. The U.S. Government, 12 state governments, and three other government tenants combined were responsible for approximately 92. 8 % and 92.7% of our annualized rental income, excluding one property ( one building) classified as discontinued operations, as of March 31, 201 6 and 2015, respectively. The U.S. Government is our largest tenant by annualized rental income and was responsible for approximately 64. 6 % and 67.7% of our annualized rental income, excluding one property classified as discontinued operations, as of March 31, 2016 and 2015, respectively. Geographic Concentration At March 31, 201 6 , our 72 properties ( 92 buildings), excluding one property ( one building) classified as discontinued operations, were located in 31 states and the District of Columbia. Properties located in California , Virginia , the District of Columbia , Georgia , Maryland , New York and Massachusetts were responsible for approximately 14. 6 % , 10. 0 % , 9. 9 % , 8. 8 % , 8. 2 % , 8. 0 % and 5. 3 % of our annualized rental income as of March 31, 201 6 , respectively. |
Indebtedness
Indebtedness | 3 Months Ended |
Mar. 31, 2016 | |
Indebtedness | |
Indebtedness | Note 7. Indebtedness Our principal debt obligations at March 31, 2016 were: (1) outstanding borrowings under our $750,000 unsecured revolving credit facility; (2) $550,000 aggregate outstanding principal amount of term loans (3) $350,000 of senior unsecured notes; and (4) $28,592 aggregate principal amount of mortgage notes. Our $750,000 unsecured revolving credit facility is available for general business purposes, including acquisitions. The maturity date of our unsecured revolving credit facility is January 31, 2019 and, subject to the payment of an extension fee and meeting other conditions, we have an option to extend the stated maturity date of our unsecured revolving credit facility by one year to January 31, 2020. We can borrow, repay and reborrow funds available under our unsecured revolving credit facility until maturity and no principal repayment is due until maturity. We are required to pay interest at a rate of LIBOR plus a premium, which was 125 basis points per annum at March 31, 2016, on borrowings under our unsecured revolving credit facility. We also pay a facility fee on the total amount of lending commitments under our unsecured revolving credit facility, which was 25 basis points per annum at March 31, 2016. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. As of March 31, 201 6 , the annual interest rate payable on borrowings under our unsecured revolving credit facility was 1.6% and the weighted average annual interest rate for borrowings under our unsecured revolving credit facility was 1.6% and 2.0% , respectively, for the three months ended March 31, 201 6 and 2015 . As of March 31, 201 6 and April 26 , 2016, we had $ 311,000 and $303,000 outstanding under our unsecured revolving credit facility, respectively. Our $300,000 unsecured term loan, which matures on March 31, 2020, is prepayable without penalty at any time. We are required to pay interest at a rate of LIBOR plus a premium, which was 140 basis points per annum at March 31, 2016, on the amount outstanding under our $300,000 unsecured term loan. The interest rate premium is subject to adjustment based upon changes to our credit ratings. As of March 31, 201 6 , the annual interest rate for the amount outstanding under our $300,000 unsecured term loan was 1.8% . The weighted average annual interest rate under our $300,000 unsecured term loan was 1.8% and 1.6% , respectively, for the three months ended March 31, 201 6 and 2015 . Our $250,000 unsecured term loan, which matures on March 31, 2022, is prepayable at any time. If our $250,000 unsecured term loan is repaid on or prior to November 21, 2016, a prepayment premium of 1.0% of the amount repaid will be payable. Subsequent to November 21, 2016, no prepayment premium will be payable. We are required to pay interest at a rate of LIBOR plus a premium, which was 180 basis points per annum as of March 31, 2016, on the amount outstanding under our $250,000 unsecured term loan. The interest rate premium is subject to adjustment based upon changes to our credit ratings. As of March 31, 201 6 , the annual interest rate for the amount outstanding under our $250,000 unsecured term loan was 2.2 % . The weighted average annual interest rate under our $250,000 unsecured term loan was 2.2% and 2.0% , respectively, for the three months ended March 31, 201 6 and 2015 . Our $750,000 unsecured revolving credit facility, our $300,000 unsecured term loan and our $250,000 unsecured term loan are governed by a credit agreement with a syndicate of institutional lenders that includes a number of features common to all of these credit arrangements. This credit agreement also includes a feature under which the maximum aggregate borrowing availability may be increased to up to $2,500,000 on a combined basis in certain circumstances. Our $350,000 of 3.75% senior unsecured notes due 2019 are governed by an indenture and a supplement to the indenture, and require semi-annual payments of interest only through maturity. The outstanding amount of these notes may be prepaid at par (plus accrued and unpaid interest) on or after July 15, 2019 or before that date together with a make whole premium. Our credit agreement and senior unsecured notes indenture and its supplement provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes The RMR Group LLC, or RMR LLC, ceasing to act as our business manager and property manager. Our credit agreement and our senior unsecured notes indenture and its supplement also contain a number of covenants, including covenants that restrict our ability to incur debts, require us to maintain certain financial ratios and, in the case of our credit agreement, restrict our ability to make distributions under certain circumstances. We believe we were in compliance with the terms and conditions of the respective covenants under our credit agreement and senior unsecured notes indenture and its supplement at March 31, 2016 . In February 2016, we repaid, at par, a $23,473 mortgage note requiring annual interest of 6.21% which was secured by one office property ( one building) located in Landover, MD. This mortgage note was scheduled to mature in August 2016. We recorded a loss on extinguishment of debt of $21 in the three months ended March 31, 2016, which represented unamortized debt issuance costs related to this note. In March 2016, we repaid, at par, an $83,000 mortgage note requiring annual interest of 5.55% which was secured by one office property ( two buildings) located in Reston, VA. This mortgage note was scheduled to mature in April 2016. We recorded a gain on extinguishment of debt of $125 in the three months ended March 31, 2016, which represented the net unamortized debt premium and debt issuance costs related to this note. At March 31, 201 6 , t hree of our properties ( three buildings) with an aggregate net book value of $54, 684 secured three mortgage notes with an aggregate principal amount of $28,592 . Our mortgage notes are non-recourse, subject to certain limited exceptions and do not contain any material financial covenants. |
Fair Value of Assets and Liabil
Fair Value of Assets and Liabilities | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value of Assets and Liabilities | |
Fair Value of Assets and Liabilities | Note 8. Fair Value of Assets and Liabilities The table below presents certain of our assets measured at fair value at March 31, 2016, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset: Fair Value at Reporting Date Using Quoted Prices in Significant Estimated Active Markets for Significant Other Unobservable Fair Identical Assets Observable Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) Recurring Fair Value Measurements Assets: Investment in RMR Inc. (1) $ $ 30,368 $ — $ — Non-Recurring Fair Value Measurements Assets: Property held for sale and classified as discontinued operations (2) $ $ — $ — $ (1) Our 1,214,225 shares of class A common stock of The RMR Group Inc., or RMR Inc., which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is $26,888 as of March 31, 2016. The net unrealized gain of $3,480 for these shares as of March 31, 2016 is included in cumulative other comprehensive income (loss) in our condensed consolidated balance sheets. (2) We estimated the fair value of this property at March 31, 2016 based upon broker estimates of value less estimated sale costs (Level 3 inputs as defined in the fair value hierarchy under GAAP). In addition to the assets described in the table above, our financial instruments include cash and cash equivalents, restricted cash, rents receivable, mortgage notes payable, accounts payable, senior unsecured notes, an unsecured revolving credit facility, unsecured term loans, amounts due to related persons, other accrued expenses and security deposits. At March 31, 201 6 and December 31, 2015, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements due to their short term nature or variable interest rates, except as follows: As of March 31, 2016 As of December 31, 2015 Carrying Amount (1) Fair Value Carrying Amount (1) Fair Value Senior unsecured notes, 3.75% interest rate, due in 2019 $ $ $ $ Mortgage note payable, 6.21% interest rate, due in 2016 (2) (3) — — Mortgage note payable, 5.55% interest rate, due in 2016 (2) (4) — — Mortgage note payable, 5.88% interest rate, due in 2021 (2) Mortgage note payable, 7.00% interest rate, due in 2019 (2) Mortgage note payable, 8.15% interest rate, due in 2021 (2) $ $ $ $ (1) Carrying amount includes certain unamortized debt issuance costs and unamortized premiums and discounts. (2) We assumed these mortgages in connection with our acquisitions of the encumbered properties. The stated interest rates for these mortgage debts are the contractually stated rates. We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value premiums, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition. (3) This mortgage note was repaid, at par, in February 2016. (4) This mortgage note was repaid, at par, in March 2016. We estimate the fair value of our senior unsecured notes using an average of the bid and ask price of the notes as of the measurement date (Level 2 inputs as defined in the fair value hierarchy under GAAP). We estimate the fair values of our mortgage notes payable by using discounted cash flow analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined in the fair value hierarchy under GAAP). Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value. |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Mar. 31, 2016 | |
Shareholders' Equity | |
Shareholders' Equity | Note 9. Shareholders’ Equity Distributions On February 25, 2016, we paid a regular quarterly distribution to common shareholders of record on January 22, 2016 of $0.43 per share, or $30 , 584 . On April 13, 2016, we declared a regular quarterly distribution payable to common shareholders of record on April 25, 2016, in the amount of $0.43 per share, or $30,584 . We expect to pay this distribution on or about May 23, 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 unrealized gain on the RMR Inc. shares we own and our share of the comprehensive income (loss) of Select Income REIT, or SIR, and Affiliates Insurance Company, or AIC . The following table presents changes in the amounts we recognized in cumulative other comprehensive income (loss) by component for the three months ended March 31, 2016: Unrealized Gain (Loss) Equity in on Investment in Unrealized Gain Available for (Loss) of Sale Securities Investees Total Balance at December 31, 2015 $ $ $ Other comprehensive income before reclassifications Amounts reclassified from cumulative other comprehensive income (loss) to net income (1) - Net current period other comprehensive income Balance at March 31, 2016 $ $ $ (1) Amounts reclassified from cumulative other comprehensive income (loss) are included in equity in earnings (losses) of investees in our condensed consolidated statements of comprehensive income (loss). |
Related Person Transactions
Related Person Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Person Transactions | |
Related Person Transactions | Note 10. Related Person Transactions We have relationships and historical and continuing transactions with RMR LLC and others related to it, including other companies to which RMR LLC provides management services and which have trustees, directors and officers who are also trustees or officers of us. These relationships include our ownership of approximately 27.9% of the outstanding common shares of SIR, at March 31, 2016. For further information about these and other such relationships and certain other related person transactions, please refer to our Annual Report. RMR LLC : Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $2,508 and $2,561 for the three months ended March 31, 2016 and 2015, respectively. No incentive fees were estimated to be payable to RMR LLC for the three months ended March 31, 2016 and 2015, respectively. The net business management fees we recognized for the 2016 and 2015 periods are included in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss). In accordance with the terms of our business management agreement, we issued 11,157 of our common shares to RMR LLC for the three months ended March 31, 2015 as payment for a part of the business management fee we recognized for that period. Beginning June 2015, all management fees under our business management agreement are paid in cash. Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $2,109 and $2,016 for the three months ended March 31, 2016 and 2015, 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 of our operating expenses, including certain expenses incurred by RMR LLC on our behalf. Our property level operating expenses are generally incorporated into rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC. We reimbursed RMR LLC $2,944 and $2,510 for property management related expenses for the three months ended March 31, 2016 and 2015 , respectively ; these amounts are included in other operating expenses in our condensed consolidated statements of comprehensive income (loss). We have historically awarded share grants to certain RMR LLC employees under our equity compensation plan. In addition, under our business management agreement we reimburse RMR LLC for our allocable costs for internal audit services. The amounts recognized as expense for share grants to RMR LLC employees and internal audit costs were $234 and $314 for the three months ended March 31, 2016 and 2015, respectively; these amounts are included in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss). We lease office space to RMR LLC in certain of our properties for its property management offices. Pursuant to our lease agreements with RMR LLC, we recognized rental income from RMR LLC for leased office space of approximately $91 and $15 for the three months ended March 31, 2016 and 2015, respectively. RMR Inc. : In June 2015, we and three other real estate investment trusts, or REITs, to which RMR LLC provides management services, including SIR, or collectively, the Other REITs, participated in a transaction whereby we and the Other REITs each acquired shares of class A common stock of RMR Inc. and simultaneously amended our business and property management agreements with RMR LLC to, among other things, provide for continuing 20 year terms. RMR Inc. is the managing member of RMR LLC and RMR LLC is a subsidiary of RMR Inc. The controlling shareholder of RMR Inc., ABP Trust, is owned by our Managing Trustees. In connection with our acquisition of shares of class A common stock of RMR Inc., we recorded a liability for the amount by which the estimated fair value of these shares exceeded the price we paid for these shares; this liability is included in accounts payable and other liabilities in our condensed consolidated balance sheets. We are amortizing this liability ratably through December 31, 2035 as a reduction to our management fees expense. For the three months ended March 31, 2016, we amortized $272 of this liability, which amount is reflected in the net business management and property management fee amounts for the period referenced above. As of March 31, 2016, the unamortized amount of this liability was $21,482 . As of March 31, 2016, we own 1,214,225 shares of class A common stock of RMR Inc. We receive dividends on these shares as declared and paid by RMR Inc. to all holders of shares of RMR Inc. class A common stock. We did not receive any dividends on these shares during the three months ended March 31, 2016. However, on April 13, 2016, RMR Inc. declared a dividend of $0.2993 on its shares of class A common stock payable to shareholders of record on April 25, 2016. RMR Inc. has indicated that this dividend represents a regular quarterly dividend of $0.25 per share of class A common stock for the quarter ended March 31, 2016 plus a pro rata dividend of $0.0493 per share of class A common stock for the period from December 14, 2015 to December 31, 2015. RMR Inc. has indicated that it expects to pay this dividend on or about May 19, 2016. SIR : We receive distributions on the common shares of SIR we own as declared and paid by SIR to all holders of its common shares. During the three months ended March 31, 2016 and 2015, we received distributions of $12,459 and $13,530 , respectively, on our SIR common shares. In addition, on April 13, 2016, SIR declared a dividend of $0.50 per common share payable to shareholders of record on April 25, 2016. SIR has indicated that it expects to pay this dividend on or about May 19, 2016. For additional information about our ownership of SIR shares, see Note 11 below. AIC : We and six other companies to which RMR LLC provides management services each own in equal amounts of AIC. We and the other AIC shareholders participate in a combined property insurance program arranged and reinsured in part by AIC. As of March 31, 2016, our investment in AIC had a carrying value of $7,075 ; this amount is included in other assets in our condensed consolidated balance sheets. We recognized income of $77 and $72 related to our investment in AIC for the three months ended March 31, 2016 and 2015, respectively. Our other comprehensive income (loss) includes our proportional share of unrealized gains on securities which are owned by AIC of $52 and $45 for the three months ended March 31, 2016 and 2015, respectively. |
Equity Investment in Select Inc
Equity Investment in Select Income REIT | 3 Months Ended |
Mar. 31, 2016 | |
Equity Investment in Select Income REIT | |
Equity Investment in Select Income REIT | Note 11. Equity Investment in Select Income REIT As of March 31, 2016, we owned 24,918,421 , or approximately 27. 9 % , of the then outstanding SIR common shares. SIR is a REIT that is primarily focused on owning and investing in net leased, single tenant properties. We account for our investment in SIR under the equity method. Under the equity method, we record our proportionate share of SIR’s net income as equity in earnings of an investee in our condensed consolidated statements of comprehensive income (loss). For the three months ended March 31, 2016 and 2015 , we recorded $ 9,8 57 and $ 2,176 of equity in the earnings of SIR, respectively. Our other comprehensive income (loss) includes unrealized gains attributable to our investment in SIR of $4,492 and $13 for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, our investment in SIR had a carrying value of $493,259 and a market value, based on the closing price of SIR common shares on the New York Stock Exchange on March 31, 2016, of $574,370 . We periodically evaluate our equity investment in SIR for possible indicators of other than temporary impairment whenever events or changes in circumstances indicate the carrying amount of the investment might not be recoverable. These indicators may include the length of time the market value of our investment is below our cost basis, the financial condition of SIR, our intent and ability to be a long term holder of the investment and other considerations. If the decline in fair value is judged to be other than temporary, we may record an impairment charge to adjust the basis of the investment to its fair value. During the three months ended March 31, 2015, SIR issued 28,453, 447 common shares, which included 28,439,111 common shares issued in connection with SIR’s acquisition of Cole Corporate Income Trust, Inc. on January 29, 2015. We recognized a loss on issuance of shares by SIR of $ 40,771 during the three months ended March 31, 2015 as a result of the per share issuance price of these SIR common shares being below the then average per share carrying value of our SIR common shares. The cost of our investments in SIR exceeded our proportionate share of SIR’s total shareholders’ equity book value on their dates of acquisition by an aggregate of $166,272 . As required under GAAP, we were amortizing this difference to equity in earnings of investees over the average remaining useful lives of the real estate assets and intangible assets and liabilities owned by SIR as of the respective dates of our acquisitions. This amortization decreased our equity in the earnings of SIR by $2,564 for the three months ended March 31, 2015. We recorded a loss on impairment of our SIR investment during the three months ended June 30, 2015 resulting in the carrying value of our SIR investment to be less than our proportionate share of SIR’s total shareholders’ book equity as of June 30, 2015. As a result, the previous basis difference was eliminated and we are currently amortizing a basis difference of ( $95,035 ) to earnings over the estimated remaining useful lives of the real estate assets and intangible assets and liabilities owned by SIR as of June 30, 2015. This amortization increased our equity in the earnings of SIR by $ 740 for the three months ended March 31, 2016. During the three months ended March 31, 201 6 and 2015 , we received cash distributions from SIR totaling $12, 459 and $ 13,530 , respectively. The following summarized financial data of SIR as reported in SIR’s Quarterly Report on Form 10-Q for the three months ended March 31, 201 6, or the SIR Quarterly Report. References in our financial statements to the SIR Quarterly Report are included as references to the source of the data only, and the information in the SIR Quarterly Report is not incorporated by reference into our financial statements. Condensed Consolidated Balance Sheets: March 31, December 31, 2016 2015 Real estate properties, net $ $ Acquired real estate leases, net Cash and cash equivalents Rents receivable, net Other assets, net Total assets $ $ Unsecured revolving credit facility $ $ Unsecured term loan, net Senior unsecured notes, net Mortgage notes payable, net Assumed real estate lease obligations, net Other liabilities Shareholders' equity Total liabilities and shareholders' equity $ $ Condensed Consolidated Statements of Income: Three Months Ended March 31, 2016 2015 Rental income $ $ Tenant reimbursements and other income Total revenues Real estate taxes Other operating expenses Depreciation and amortization Acquisition related costs General and administrative Total expenses Operating income Interest expense Loss on early extinguishment of debt — Income before income tax expense and equity in earnings of an investee Income tax expense Equity in earnings of an investee Net income Net income allocated to noncontrolling interest Net income attributed to SIR $ $ Weighted average common shares outstanding (basic) Weighted average common shares outstanding (diluted) Net income attributed to SIR per common share (basic and diluted) $ $ |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2016 | |
Segment Information | |
Segment Information | Note 12. Segment Information We operate in two separate reportable business segments: ownership of properties that are primarily leased to government tenants and our equity method investment in SIR. Three Months Ended March 31, 2016 Investment Investment in Real Estate in SIR Corporate Consolidated Rental income $ $ — $ — $ Expenses: Real estate taxes — — Utility expenses — — Other operating expenses — — Depreciation and amortization — — Acquisition related costs — — General and administrative — — Total expenses — Operating income (loss) — Interest income — — Interest expense — Gain on early extinguishment of debt — — Income (loss) from continuing operations before income taxes and equity in earnings of investees — Income tax expense — — Equity in earnings of investees — Income (loss) from continuing operations Loss from discontinued operations — — Net income (loss) $ $ $ $ As of March 31, 2016 Investment Investment in Real Estate in SIR Corporate Consolidated Total Assets $ $ $ $ Three Months Ended March 31, 2015 Investment Investment in Real Estate in SIR Corporate Consolidated Rental income $ $ — $ — $ Expenses: Real estate taxes — — Utility expenses — — Other operating expenses — — Depreciation and amortization — — Acquisition related costs — — General and administrative — — Total expenses — Operating income (loss) — Interest income — — Interest expense — Loss on issuance of shares by Select Income REIT — Income (loss) from continuing operations before income taxes and equity in earnings (losses) of investees Income tax expense — — Equity in earnings (losses) of investees — Income (loss) from continuing operations Loss from discontinued operations — — Net income (loss) $ $ $ $ As of December 31, 2015 Investment Investment in Real Estate in SIR Corporate Consolidated Total Assets $ $ $ $ |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | Recent Accounting Pronouncements On January 1, 2016, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2015-02, Consolidation . Among other things, this update changes how an entity determines the primary beneficiary of a variable interest entity. The implementation of this update did not have an impact in our condensed consolidated financial statements. On January 1, 2016, we adopted FASB ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability, and ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting , which addresses the presentation of debt issuance costs related to line of credit arrangements. The implementation of these updates resulted in the reclassification of certain of our capitalized debt issuance costs as an offset to the associated debt liability in our condensed consolidated balance sheets. The classification of capitalized debt issuance costs related to our unsecured revolving credit facility remains unchanged in accordance with ASU No. 2015-15. As of December 31, 2015, debt issuance costs related to our unsecured term loans, senior unsecured notes and mortgage notes payable of $3,510 , $2,172 and $344 , respectively, were reclassified from assets to the associated debt liability in our condensed consolidated balance sheets. On January 1, 2016, we adopted FASB ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments , which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The implementation of this update did not have an impact in our condensed consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , which changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. This update is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted subject to certain conditions. Currently, changes in fair value of these investments are recorded through other comprehensive income. Under this ASU, these changes will be recorded through earnings. We are continuing to evaluate this guidance, but we expect the implementation of this guidance will affect available for sale equity investments we hold. In February 2016, the FASB issued ASU No. 2016-02, Leases , which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU No. 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently assessing the potential impact the adoption of ASU No. 2016-02 will have in our condensed consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation , which identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. ASU No. 2016-09 is effective for reporting periods beginning after December 15, 2016. We are currently assessing the potential impact that the adoption of ASU No. 2016-09 will have in our condensed consolidated financial statements. |
Per Common Share Amounts (Table
Per Common Share Amounts (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Per Common Share Amounts | |
Weighted Average Common Share Amounts | For the Three Months Ended March 31, 2016 2015 Weighted average common shares for basic earnings per share Effect of dilutive securities: unvested share awards - - Weighted average common shares for diluted earnings per share |
Real Estate Properties (Tables)
Real Estate Properties (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Real Estate Properties | |
Schedule of purchase prices of acquisitions allocated based on the estimated fair values of the acquired assets and assumed liabilities | Number of Buildings Acquired Other Acquisition Properties/ Square Purchase and Acquired Lease Assumed Date Location Type Buildings Feet Price Land Improvements Leases Obligations Liabilities January 2016 Sacramento, CA Office 1 / 1 $ $ $ $ $ $ — |
Summarized balance sheet information for properties classified as held for sale | March 31, December 31, 2016 2015 Real estate properties, net $ $ Rents receivable - Other assets Assets of property held for sale $ $ Other liabilities $ $ Liabilities of property held for sale $ $ |
Summarized balance sheet and income statement information for properties classified as discontinued operations | Balance Sheets: March 31, December 31, 2016 2015 Real estate properties, net $ $ Rents receivable - Other assets Assets of discontinued operations $ $ Other liabilities $ $ Liabilities of discontinued operations $ $ Statements of Operations Three Months ended March 31, 2016 2015 Rental income $ $ Real estate taxes Utility expenses Other operating expenses General and administrative Loss from discontinued operations $ $ |
Fair Value of Assets and Liab22
Fair Value of Assets and Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value of Assets and Liabilities | |
Schedule of assets measured on a recurring and non-recurring basis at fair value, categorized by the level of inputs used in the valuation assets | The table below presents certain of our assets measured at fair value at March 31, 2016, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset: Fair Value at Reporting Date Using Quoted Prices in Significant Estimated Active Markets for Significant Other Unobservable Fair Identical Assets Observable Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) Recurring Fair Value Measurements Assets: Investment in RMR Inc. (1) $ $ 30,368 $ — $ — Non-Recurring Fair Value Measurements Assets: Property held for sale and classified as discontinued operations (2) $ $ — $ — $ (1) Our 1,214,225 shares of class A common stock of The RMR Group Inc., or RMR Inc., which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is $26,888 as of March 31, 2016. The net unrealized gain of $3,480 for these shares as of March 31, 2016 is included in cumulative other comprehensive income (loss) in our condensed consolidated balance sheets. (2) We estimated the fair value of this property at March 31, 2016 based upon broker estimates of value less estimated sale costs (Level 3 inputs as defined in the fair value hierarchy under GAAP). |
Schedule of fair value and carrying value of financial instruments | As of March 31, 2016 As of December 31, 2015 Carrying Amount (1) Fair Value Carrying Amount (1) Fair Value Senior unsecured notes, 3.75% interest rate, due in 2019 $ $ $ $ Mortgage note payable, 6.21% interest rate, due in 2016 (2) (3) — — Mortgage note payable, 5.55% interest rate, due in 2016 (2) (4) — — Mortgage note payable, 5.88% interest rate, due in 2021 (2) Mortgage note payable, 7.00% interest rate, due in 2019 (2) Mortgage note payable, 8.15% interest rate, due in 2021 (2) $ $ $ $ (1) Carrying amount includes certain unamortized debt issuance costs and unamortized premiums and discounts. (2) We assumed these mortgages in connection with our acquisitions of the encumbered properties. The stated interest rates for these mortgage debts are the contractually stated rates. We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value premiums, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition. (3) This mortgage note was repaid, at par, in February 2016. (4) This mortgage note was repaid, at par, in March 2016. |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Shareholders' Equity | |
Schedule of changes in each component of cumulative other comprehensive income (loss) | Unrealized Gain (Loss) Equity in on Investment in Unrealized Gain Available for (Loss) of Sale Securities Investees Total Balance at December 31, 2015 $ $ $ Other comprehensive income before reclassifications Amounts reclassified from cumulative other comprehensive income (loss) to net income (1) - Net current period other comprehensive income Balance at March 31, 2016 $ $ $ (1) Amounts reclassified from cumulative other comprehensive income (loss) are included in equity in earnings (losses) of investees in our condensed consolidated statements of comprehensive income (loss). |
Equity Investment in Select I24
Equity Investment in Select Income REIT (Tables) - SIR | 3 Months Ended |
Mar. 31, 2016 | |
Schedule Of Summarized Balance Sheet Information Of Equity Method Investee Table Text Block | March 31, December 31, 2016 2015 Real estate properties, net $ $ Acquired real estate leases, net Cash and cash equivalents Rents receivable, net Other assets, net Total assets $ $ Unsecured revolving credit facility $ $ Unsecured term loan, net Senior unsecured notes, net Mortgage notes payable, net Assumed real estate lease obligations, net Other liabilities Shareholders' equity Total liabilities and shareholders' equity $ $ |
Schedule Of Summarized Income Statement Information Of Equity Method Investee Table Text Block | Three Months Ended March 31, 2016 2015 Rental income $ $ Tenant reimbursements and other income Total revenues Real estate taxes Other operating expenses Depreciation and amortization Acquisition related costs General and administrative Total expenses Operating income Interest expense Loss on early extinguishment of debt — Income before income tax expense and equity in earnings of an investee Income tax expense Equity in earnings of an investee Net income Net income allocated to noncontrolling interest Net income attributed to SIR $ $ Weighted average common shares outstanding (basic) Weighted average common shares outstanding (diluted) Net income attributed to SIR per common share (basic and diluted) $ $ |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Segment Information | |
Schedule of ownership of properties that are primarily leased to government tenants and our equity method investment in SIR | Three Months Ended March 31, 2016 Investment Investment in Real Estate in SIR Corporate Consolidated Rental income $ $ — $ — $ Expenses: Real estate taxes — — Utility expenses — — Other operating expenses — — Depreciation and amortization — — Acquisition related costs — — General and administrative — — Total expenses — Operating income (loss) — Interest income — — Interest expense — Gain on early extinguishment of debt — — Income (loss) from continuing operations before income taxes and equity in earnings of investees — Income tax expense — — Equity in earnings of investees — Income (loss) from continuing operations Loss from discontinued operations — — Net income (loss) $ $ $ $ As of March 31, 2016 Investment Investment in Real Estate in SIR Corporate Consolidated Total Assets $ $ $ $ |
Recent Accounting Pronounceme26
Recent Accounting Pronouncements (Details) - Accounting Standards Update 2015-03 $ in Thousands | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Unsecured term loan | |
New Accounting Pronouncements or Change in Accounting Principle | |
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 3,510 |
Senior Notes. | |
New Accounting Pronouncements or Change in Accounting Principle | |
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | 2,172 |
Mortgage Notes Payable | |
New Accounting Pronouncements or Change in Accounting Principle | |
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 344 |
Per Common Share Amounts (Detai
Per Common Share Amounts (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Per Common Share Amounts | ||
Weighted average common shares outstanding (basic) (in shares) | 71,031 | 70,266 |
Weighted average common shares outstanding (diluted) (in shares) | 71,031 | 70,266 |
Real Estate Properties (Details
Real Estate Properties (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | ||||||
Jan. 31, 2016USD ($)ft²propertybuilding | Mar. 31, 2016USD ($)ft²property | Apr. 28, 2016USD ($)property | Mar. 31, 2016building | Mar. 31, 2016item | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Mar. 31, 2015propertybuilding | |
Real estate properties | ||||||||
Number of properties owned | property | 72 | |||||||
Number of buildings | 92 | 92 | ||||||
Total real estate properties, gross | $ 1,767,637 | $ 1,696,132 | ||||||
Number of leases entered | property | 20 | |||||||
Expansion of area square foot | ft² | 25,579 | |||||||
Square Feet | ft² | 522,962 | |||||||
Weighted average lease term | 11 years 7 months 6 days | |||||||
Expenditures committed on leases | $ 20,469 | |||||||
Committed but unspent tenant related obligations estimated | 22,752 | |||||||
Continuing operations | ||||||||
Real estate properties | ||||||||
Total real estate properties, gross | 1,770,983 | |||||||
Discontinued operations | ||||||||
Real estate properties | ||||||||
Number of properties owned | property | 1 | 1 | ||||||
Number of buildings | 1 | 1 | 1 | |||||
Real estate properties, net | $ 12,260 | |||||||
Square foot expansion cost | $ 12,800 | |||||||
Sacramento, CA | ||||||||
Real estate properties | ||||||||
Property leased | 86.00% | |||||||
Sacramento, CA | State of California | ||||||||
Real estate properties | ||||||||
Property leased | 71.00% | |||||||
Number of agencies | item | 3 | |||||||
Sacramento, CA | Office | ||||||||
Real estate properties | ||||||||
Square Feet | ft² | 337,811 | |||||||
Number of Properties Acquired | property | 1 | |||||||
Number of Buildings Acquired | building | 1 | |||||||
Purchase Price | $ 79,244 | |||||||
Land | 4,658 | |||||||
Buildings and Improvement | 61,330 | |||||||
Acquired leases | 13,525 | |||||||
Acquired Lease obligation | $ (269) | |||||||
Atlanta, GA | ||||||||
Real estate properties | ||||||||
Number of properties owned | property | 1 | |||||||
Land | $ 1,623 |
Real Estate Properties Disposit
Real Estate Properties Disposition Acitivities (Details) $ in Thousands | 3 Months Ended | |||||
Mar. 31, 2016USD ($)ft² | Mar. 31, 2015USD ($) | Mar. 31, 2016building | Mar. 31, 2016item | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Real estate properties | ||||||
Number of Buildings | 92 | 92 | ||||
Net book value | $ 1,501,794 | $ 1,440,253 | ||||
Balance Sheets: | ||||||
Assets of property held for sale | 3,098 | 3,098 | ||||
Assets of discontinued operations | 12,502 | 12,468 | ||||
Liabilities of property held for sale | 32 | 43 | ||||
Liabilities of discontinued operations | 75 | 54 | ||||
Statement of Operations: | ||||||
Income (loss) from discontinued operations | $ (149) | $ (206) | ||||
Continuing operations. | ||||||
Balance Sheets: | ||||||
Real estate properties, net | 3,071 | 3,071 | ||||
Rents receivable | 1 | |||||
Other assets | 27 | 26 | ||||
Assets of property held for sale | 3,098 | 3,098 | ||||
Other liabilities | 32 | 43 | ||||
Liabilities of property held for sale | 32 | 43 | ||||
Continuing operations. | Office | Savannah GA | ||||||
Real estate properties | ||||||
Number of Buildings | building | 1 | |||||
Discontinued operations | ||||||
Balance Sheets: | ||||||
Real estate properties, net | 12,260 | |||||
Rents receivable | 17 | |||||
Other assets | 225 | |||||
Assets of discontinued operations | 12,502 | |||||
Other liabilities | 75 | |||||
Liabilities of discontinued operations | 75 | |||||
Statement of Operations: | ||||||
Rental income | 28 | 31 | ||||
Real estate taxes | (23) | (70) | ||||
Utility expenses | (50) | (67) | ||||
Other operating expenses | (76) | (71) | ||||
General and administrative | (28) | (29) | ||||
Income (loss) from discontinued operations | $ (149) | $ (206) | ||||
Discontinued operations | Discontinued Operations, Held-for-sale | ||||||
Balance Sheets: | ||||||
Real estate properties, net | 12,260 | |||||
Other assets | 208 | |||||
Assets of discontinued operations | 12,468 | |||||
Other liabilities | 54 | |||||
Liabilities of discontinued operations | $ 54 | |||||
One building | Continuing operations. | Office | Savannah GA | ||||||
Real estate properties | ||||||
Rentable square feet of properties | ft² | 35,228 | |||||
Net book value | 3,071 | |||||
Option purchase price | 4,500 | |||||
One building | Discontinued Operations, Held-for-sale | Office | Falls Church, VA | ||||||
Real estate properties | ||||||
Number of Buildings | building | 1 | |||||
Rentable square feet of properties | ft² | 164,746 | |||||
Net book value | 12,282 | |||||
Aggregate sale price of properties sold, excluding closing costs | $ 14,750 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Revenue Recognition | |||
Increase in rental income to record revenue on straight line basis | $ 149 | $ 663 | |
Straight line rent receivables (liabilities) | $ 19,144 | $ 18,995 |
Concentration (Details)
Concentration (Details) | 3 Months Ended | ||||
Mar. 31, 2016state | Mar. 31, 2015propertybuilding | Mar. 31, 2016property | Mar. 31, 2016building | Mar. 31, 2016item | |
Concentration | |||||
Number of properties owned | property | 72 | ||||
Number of buildings | 92 | 92 | |||
Number of states in which acquired properties located | state | 31 | ||||
Number of state governments | state | 12 | ||||
Number of other governments | item | 3 | ||||
Annualized rental income, excluding properties classified as discontinued operations | California | |||||
Concentration | |||||
Annualized Rental income percent | 14.6 | ||||
Annualized rental income, excluding properties classified as discontinued operations | Virginia | |||||
Concentration | |||||
Annualized Rental income percent | 10 | ||||
Annualized rental income, excluding properties classified as discontinued operations | District of Columbia | |||||
Concentration | |||||
Annualized Rental income percent | 9.9 | ||||
Annualized rental income, excluding properties classified as discontinued operations | Georgia | |||||
Concentration | |||||
Annualized Rental income percent | 8.8 | ||||
Annualized rental income, excluding properties classified as discontinued operations | New York | |||||
Concentration | |||||
Annualized Rental income percent | 8 | ||||
Annualized rental income, excluding properties classified as discontinued operations | Maryland | |||||
Concentration | |||||
Annualized Rental income percent | 8.2 | ||||
Annualized rental income, excluding properties classified as discontinued operations | Massachusetts | |||||
Concentration | |||||
Annualized Rental income percent | 5.3 | ||||
Annualized rental income, excluding properties classified as discontinued operations | Tenant concentration | U.S. Government, state governments and Other Three Government | |||||
Concentration | |||||
Concentration risk, percentage | 92.80% | 92.70% | |||
Annualized rental income, excluding properties classified as discontinued operations | Tenant concentration | U.S. Government | |||||
Concentration | |||||
Concentration risk, percentage | 64.60% | 67.70% | |||
Discontinued operations | |||||
Concentration | |||||
Number of properties owned | property | 1 | 1 | |||
Number of buildings | 1 | 1 | 1 |
Indebtedness (Details)
Indebtedness (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | ||||
Mar. 31, 2016USD ($)propertybuildingitem | Feb. 29, 2016USD ($)propertybuilding | Mar. 31, 2016USD ($)propertybuildingitemloan | Mar. 31, 2015 | Apr. 26, 2016USD ($) | Dec. 31, 2015USD ($) | |
Indebtedness | ||||||
Unsecured revolving credit facility | $ 311,000 | $ 311,000 | $ 117,000 | |||
Unsecured term loans, net | 546,660 | 546,660 | 546,490 | |||
Senior Notes | 346,095 | 346,095 | 345,809 | |||
Mortgage notes payable, net | 29,053 | 29,053 | $ 136,299 | |||
Maximum borrowing capacity on debt instruments may be increased under certain conditions | $ 2,500,000 | 2,500,000 | ||||
Gain (Loss) on early extinguishment of debt | $ 104 | |||||
Number of properties secured by mortgage notes | property | 3 | 3 | ||||
Number of buildings secured by mortgage notes | item | 3 | 3 | ||||
Aggregate net book value of secured properties | $ 54,684 | $ 54,684 | ||||
Number of assumed secured mortgage loans | loan | 3 | |||||
Aggregate principal amount on secured properties | 28,592 | $ 28,592 | ||||
Unsecured revolving credit facility | ||||||
Indebtedness | ||||||
Unsecured revolving credit facility | $ 311,000 | $ 311,000 | $ 303,000 | |||
Interest rate (as a percent) | 1.60% | 1.60% | ||||
Maximum borrowing capacity on revolving credit facility | $ 750,000 | $ 750,000 | ||||
Option to extend the maturity date subject to certain conditions and the payment of a fee | 1 year | |||||
The weighted average annual interest rate (as a percent) | 1.60% | 2.00% | ||||
Term loan, interest rate basis | LIBOR | |||||
Interest rate premium (as a percent) | 1.25% | |||||
Facility fee (as a percent) | 0.25% | |||||
Unsecured term loan, due in 2020 | ||||||
Indebtedness | ||||||
Face amount | $ 300,000 | $ 300,000 | ||||
Interest rate (as a percent) | 1.80% | 1.80% | ||||
The weighted average annual interest rate (as a percent) | 1.80% | 1.60% | ||||
Term loan, interest rate basis | LIBOR | |||||
Interest rate premium (as a percent) | 1.40% | |||||
Unsecured term loan, due in 2022 | ||||||
Indebtedness | ||||||
Face amount | $ 250,000 | $ 250,000 | ||||
Interest rate (as a percent) | 2.20% | 2.20% | ||||
The weighted average annual interest rate (as a percent) | 2.20% | 2.00% | ||||
Term loan, interest rate basis | LIBOR | |||||
Interest rate premium (as a percent) | 1.80% | |||||
Loan prepayment premium prior to November 21, 2016 (as a percent) | 1.00% | |||||
Loan prepayment premium subsequent to November 21, 2016 (as a percent) | 0.00% | |||||
3.75% Senior unsecured note due In 2019 | ||||||
Indebtedness | ||||||
Face amount | $ 350,000 | $ 350,000 | ||||
Interest rate (as a percent) | 3.75% | 3.75% | 3.75% | |||
5.55% Mortgage notes due in 2016 | ||||||
Indebtedness | ||||||
Interest rate (as a percent) | 5.55% | 5.55% | 5.55% | |||
Mortgage note repaid | $ 83,000 | |||||
Gain (Loss) on early extinguishment of debt | $ 125 | |||||
Number of properties secured by mortgage notes | property | 1 | 1 | ||||
Number of buildings secured by mortgage notes | building | 2 | 2 | ||||
6.21% Mortgage notes due in 2016 | ||||||
Indebtedness | ||||||
Interest rate (as a percent) | 6.21% | 6.21% | 6.21% | 6.21% | ||
Mortgage note repaid | $ 23,473 | |||||
Gain (Loss) on early extinguishment of debt | $ (21) | |||||
Number of properties secured by mortgage notes | property | 1 | |||||
Number of buildings secured by mortgage notes | building | 1 | |||||
5.88% Mortgage notes due in 2021 | ||||||
Indebtedness | ||||||
Interest rate (as a percent) | 5.88% | 5.88% | 5.88% | |||
7% Mortgage notes due in 2019 | ||||||
Indebtedness | ||||||
Interest rate (as a percent) | 7.00% | 7.00% | 7.00% | |||
8.15% Mortgage notes due in 2021 | ||||||
Indebtedness | ||||||
Interest rate (as a percent) | 8.15% | 8.15% | 8.15% |
Fair Value of Assets and Liab33
Fair Value of Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Feb. 29, 2016 | Dec. 31, 2015 |
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | $ 29,053 | $ 136,299 | |
Senior Notes | $ 346,095 | $ 345,809 | |
3.75% Senior unsecured note due In 2019 | |||
Fair Value of Financial Instruments | |||
Interest rate (as a percent) | 3.75% | 3.75% | |
5.55% Mortgage notes due in 2016 | |||
Fair Value of Financial Instruments | |||
Interest rate (as a percent) | 5.55% | 5.55% | |
6.21% Mortgage notes due in 2016 | |||
Fair Value of Financial Instruments | |||
Interest rate (as a percent) | 6.21% | 6.21% | 6.21% |
5.88% Mortgage notes due in 2021 | |||
Fair Value of Financial Instruments | |||
Interest rate (as a percent) | 5.88% | 5.88% | |
7% Mortgage notes due in 2019 | |||
Fair Value of Financial Instruments | |||
Interest rate (as a percent) | 7.00% | 7.00% | |
8.15% Mortgage notes due in 2021 | |||
Fair Value of Financial Instruments | |||
Interest rate (as a percent) | 8.15% | 8.15% | |
Carrying Amount | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | $ 375,148 | $ 482,108 | |
Carrying Amount | 3.75% Senior unsecured note due In 2019 | |||
Fair Value of Financial Instruments | |||
Senior Notes | 346,095 | 345,809 | |
Carrying Amount | 5.55% Mortgage notes due in 2016 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 83,375 | ||
Carrying Amount | 6.21% Mortgage notes due in 2016 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 23,476 | ||
Carrying Amount | 5.88% Mortgage notes due in 2021 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 13,994 | 14,045 | |
Carrying Amount | 7% Mortgage notes due in 2019 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 9,055 | 9,145 | |
Carrying Amount | 8.15% Mortgage notes due in 2021 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 6,004 | 6,258 | |
Fair Value | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 389,403 | 490,221 | |
Fair Value | 3.75% Senior unsecured note due In 2019 | |||
Fair Value of Financial Instruments | |||
Senior Notes | 358,376 | 351,692 | |
Fair Value | 5.55% Mortgage notes due in 2016 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 83,457 | ||
Fair Value | 6.21% Mortgage notes due in 2016 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 24,038 | ||
Fair Value | 5.88% Mortgage notes due in 2021 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 14,921 | 14,678 | |
Fair Value | 7% Mortgage notes due in 2019 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | 9,600 | 9,645 | |
Fair Value | 8.15% Mortgage notes due in 2021 | |||
Fair Value of Financial Instruments | |||
Mortgage notes payable, net | $ 6,506 | $ 6,711 |
Fair Value of Assets and Liab34
Fair Value of Assets and Liabilities Financial Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Fair Value of Assets and Liabilities | ||
Property held for sale | $ 1,501,794 | $ 1,440,253 |
Common shares owned in RMR Inc. | 1,214,225 | |
Historical cost | $ 26,888 | |
Unrealized gain on investment in available for sale securities | 3,480 | |
Recurring | ||
Fair Value of Assets and Liabilities | ||
Investment in RMR Inc. | 30,368 | |
Recurring | Level 1 inputs | ||
Fair Value of Assets and Liabilities | ||
Investment in RMR Inc. | 30,368 | |
Discontinued Operations, Held-for-sale | Nonrecurring | ||
Fair Value of Assets and Liabilities | ||
Property held for sale and classified as discontinued opeations (2) | 12,260 | |
Discontinued Operations, Held-for-sale | Nonrecurring | Level 3 inputs | ||
Fair Value of Assets and Liabilities | ||
Property held for sale and classified as discontinued opeations (2) | 12,260 | |
Discontinued operations | ||
Fair Value of Assets and Liabilities | ||
Property held for sale and classified as discontinued opeations (2) | $ 12,260 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 13, 2016 | Feb. 25, 2016 | Mar. 31, 2016 |
Distributions | |||
Cash distribution to common shareholders (in dollars per share) | $ 0.43 | ||
Distribution payable to common shareholders (in dollars per share) | $ 0.43 | ||
Distribution paid to common shareholders | $ 30,584 | $ 30,584 | |
Cumulative Other Comprehensive Income (Loss) | |||
Balance at the beginning of the period | $ (14,867) | ||
Other comprehensive loss before reclassifications | 17,416 | ||
Amounts reclassified from cumulative other comprehensive loss to net income | (1) | ||
Net current period other comprehensive loss | 17,415 | ||
Balance at the end of the period | 2,548 | ||
Unrealized Loss on Investment in Available for Sale Securities | |||
Cumulative Other Comprehensive Income (Loss) | |||
Balance at the beginning of the period | (9,391) | ||
Other comprehensive loss before reclassifications | 12,871 | ||
Net current period other comprehensive loss | 12,871 | ||
Balance at the end of the period | 3,480 | ||
Equity in Unrealized Gain (Loss) of an Investee | |||
Cumulative Other Comprehensive Income (Loss) | |||
Balance at the beginning of the period | (5,476) | ||
Other comprehensive loss before reclassifications | 4,545 | ||
Amounts reclassified from cumulative other comprehensive loss to net income | (1) | ||
Net current period other comprehensive loss | 4,544 | ||
Balance at the end of the period | $ (932) |
Related Person Transactions - R
Related Person Transactions - RMR LLC Management Fees and Reimbursements (Details) - RMR LLC - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Related Person Transaction | ||
Business management fees | $ 2,508 | $ 2,561 |
Number of shares issued | 11,157 | |
Incentive fees payable | 0 | $ 0 |
Property management and construction supervision fees | 2,109 | 2,016 |
Related party reimbursement expenses | 2,944 | 2,510 |
Accrual for RMR LLC employee share grants and internal audit services | 234 | 314 |
Rental income earned | $ 91 | $ 15 |
Percentage of ownership interest | 27.90% |
Related Person Transactions -37
Related Person Transactions - REITs, for which RMR LLC provides Management Services (Details) $ / shares in Units, $ in Thousands | Apr. 13, 2016$ / shares | Jun. 30, 2015agreement | Mar. 31, 2016USD ($)agreementshares | Mar. 31, 2015USD ($)shares | Apr. 25, 2016$ / shares | Dec. 31, 2015USD ($)$ / shares |
Related Person Transaction | ||||||
Proceeds from Equity Method Investment, Dividends or Distributions | $ 9,117 | $ 2,176 | ||||
Investment at carrying value | 493,259 | $ 491,369 | ||||
Recognized income (loss) related to investment | $ 9,934 | (316) | ||||
SIR | ||||||
Related Person Transaction | ||||||
Percentage of ownership interest | 27.90% | |||||
Quarterly dividend payable on common stock (in dollars per share) | $ / shares | $ 0.50 | |||||
Proceeds from Equity Method Investment, Dividends or Distributions | $ 12,459 | 13,530 | ||||
SIR | ||||||
Related Person Transaction | ||||||
Percentage of ownership interest | 27.90% | |||||
Proceeds from Equity Method Investment, Dividends or Distributions | $ 12,459 | 13,530 | ||||
Investment at carrying value | 493,259 | |||||
Recognized income (loss) related to investment | 9,857 | $ 2,176 | ||||
SIR | SIR | ||||||
Related Person Transaction | ||||||
Number of common shares sold in public offering | shares | 28,453,447 | |||||
Recognized income (loss) related to investment | $ 77 | $ 72 | ||||
RMR LLC | ||||||
Related Person Transaction | ||||||
Percentage of ownership interest | 27.90% | |||||
AIC | ||||||
Related Person Transaction | ||||||
Investment at carrying value | $ 7,075 | |||||
Recognized income (loss) related to investment | 77 | 72 | ||||
Other Comprehensive Income, Other, Net of Tax | $ 52 | $ 45 | ||||
AIC | RMR LLC | ||||||
Related Person Transaction | ||||||
Number of entities to whom RMR provides management services | agreement | 6 | |||||
RMR Inc | RMR LLC | ||||||
Related Person Transaction | ||||||
Number of entities to whom RMR provides management services | agreement | 3 | |||||
Management agreement continuing terms (in years) | 20 years | |||||
Class A common shares | RMR LLC | ||||||
Related Person Transaction | ||||||
Shares holding | shares | 1,214,225 | |||||
Common distributions declared (in dollars per share) | $ / shares | $ 0.2993 | |||||
Quarterly dividend payable on common stock (in dollars per share) | $ / shares | $ 0.25 | $ 0.0493 | ||||
RMR Inc | ||||||
Related Person Transaction | ||||||
Initial Other Liabilities | $ 21,482 | |||||
Recognized amortization of the liability | $ 272 |
Equity Investment in Select I38
Equity Investment in Select Income REIT (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | |
Equity Investment in Select Income REIT | |||||
Income (Loss) from Equity Method Investments | $ 9,934 | $ (316) | |||
Equity in unrealized gain of investees | 4,544 | 58 | |||
Investment at carrying value | 493,259 | $ 491,369 | |||
Loss on issuance of shares by Select Income REIT | (40,771) | ||||
Proceeds from Equity Method Investment, Dividends or Distributions | 9,117 | 2,176 | |||
Equity Method Investment Summarized Balance Sheet Information Abstract | |||||
Real estate properties, net | 1,501,794 | 1,440,253 | |||
Acquired real estate leases, net | 123,300 | 118,267 | |||
Cash and cash equivalents | 15,698 | 9,537 | 8,785 | $ 13,791 | |
Rents receivable, net | 46,617 | 45,269 | |||
Other assets, net | 44,505 | 33,680 | |||
Total assets | 2,259,395 | 2,168,510 | |||
Unsecured revolving credit facility | 311,000 | 117,000 | |||
Unsecured term loan, net | 546,660 | 546,490 | |||
Senior unsecured notes, net | 346,095 | 345,809 | |||
Mortgage notes payable, net | 29,053 | 136,299 | |||
Assumed real estate lease obligations, net | 12,224 | 12,735 | |||
Other Liabilities | 48,979 | 50,543 | |||
Shareholders' equity | 960,897 | 956,651 | |||
Total liabilities and shareholders' equity | 2,259,395 | 2,168,510 | |||
Income Statements: | |||||
Total revenues | 63,611 | 62,659 | |||
Real estate taxes | 7,653 | 7,410 | |||
Other operating expenses | 12,911 | 12,210 | |||
Depreciation and amortization | 18,324 | 17,215 | |||
Acquisition related costs | 152 | 6 | |||
General and administrative | 3,526 | 4,004 | |||
Total expenses | 46,740 | 45,416 | |||
Operating income | 16,871 | 17,243 | |||
Interest expense | (9,364) | (9,302) | |||
Gain (Loss) on early extinguishment of debt | 104 | ||||
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of investees | 7,617 | (32,818) | |||
Income tax expense | (15) | (30) | |||
Equity in earnings (losses) of investees | $ 9,934 | $ (316) | |||
Weighted average common shares outstanding (basic) (in shares) | 71,031,000 | 70,266,000 | |||
Weighted average common shares outstanding (diluted) (in shares) | 71,031,000 | 70,266,000 | |||
Basic and diluted net income attributed to SIR per common share | $ 0.24 | $ (0.47) | |||
SIR | |||||
Equity Investment in Select Income REIT | |||||
Percentage of outstanding shares owned | 27.90% | ||||
Proceeds from Equity Method Investment, Dividends or Distributions | $ 12,459 | $ 13,530 | |||
SIR | |||||
Equity Investment in Select Income REIT | |||||
Equity investments, common shares owned | 24,918,421 | ||||
Percentage of outstanding shares owned | 27.90% | ||||
Income (Loss) from Equity Method Investments | $ 9,857 | 2,176 | |||
Equity in unrealized gain of investees | 4,492 | 13 | |||
Investment at carrying value | 493,259 | ||||
Equity Investments, market value | 574,370 | ||||
The amount of investment in exceed the underlying equity of the investee | 166,272 | ||||
Amortization of the difference between carrying value and share of underlying equity | 2,564 | ||||
Difference in basis to be amortized over remaining period | $ 95,035 | ||||
Amortization of the difference between carrying value and share of underlying equity upon recording loss on impairment | 740 | ||||
Proceeds from Equity Method Investment, Dividends or Distributions | 12,459 | 13,530 | |||
Income Statements: | |||||
Equity in earnings (losses) of investees | 9,857 | 2,176 | |||
SIR | SIR | |||||
Equity Investment in Select Income REIT | |||||
Income (Loss) from Equity Method Investments | 77 | $ 72 | |||
Number of common shares issued during period | 28,453,447 | ||||
Common share issuance | 28,439,111 | ||||
Loss on issuance of shares by Select Income REIT | $ 40,771 | ||||
Equity Method Investment Summarized Balance Sheet Information Abstract | |||||
Real estate properties, net | 3,936,299 | 3,954,889 | |||
Acquired real estate leases, net | 550,664 | 566,195 | |||
Cash and cash equivalents | 31,294 | 17,876 | |||
Rents receivable, net | 106,741 | 99,307 | |||
Other assets, net | 67,812 | 46,078 | |||
Total assets | 4,692,810 | 4,684,345 | |||
Unsecured revolving credit facility | 328,000 | 303,000 | |||
Unsecured term loan, net | 348,000 | 347,876 | |||
Senior unsecured notes, net | 1,427,169 | 1,426,025 | |||
Mortgage notes payable, net | 286,516 | 286,706 | |||
Assumed real estate lease obligations, net | 84,255 | 86,495 | |||
Other Liabilities | 117,793 | 137,283 | |||
Shareholders' equity | 2,101,077 | 2,096,960 | |||
Total liabilities and shareholders' equity | 4,692,810 | $ 4,684,345 | |||
Income Statements: | |||||
Rental income | 97,860 | 80,478 | |||
Tenant Reimbursements And Other income | 19,372 | 13,937 | |||
Total revenues | 117,232 | 94,415 | |||
Real estate taxes | 10,288 | 8,357 | |||
Other operating expenses | 12,958 | 9,007 | |||
Depreciation and amortization | 33,469 | 24,719 | |||
Acquisition related costs | 58 | 20,539 | |||
General and administrative | 6,976 | 6,792 | |||
Total expenses | 63,749 | 69,414 | |||
Operating income | 53,483 | 25,001 | |||
Interest expense | (20,609) | (14,179) | |||
Gain (Loss) on early extinguishment of debt | (6,845) | ||||
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of investees | 32,874 | 3,977 | |||
Income tax expense | (139) | (31) | |||
Equity in earnings (losses) of investees | 77 | 72 | |||
Net income | 32,812 | 4,018 | |||
Net income allocated to noncontrolling interest | 33 | 41 | |||
Net income attributed to SIR | $ 32,779 | $ 3,977 | |||
Weighted average common shares outstanding (basic) (in shares) | 89,286,000 | 79,489,000 | |||
Weighted average common shares outstanding (diluted) (in shares) | 89,295,000 | 79,498,000 | |||
Basic and diluted net income attributed to SIR per common share | $ 0.37 | $ 0.05 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016USD ($)item | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) | |
Segment Information. | |||
Number of segments | item | 2 | ||
Rental income | $ 63,611 | $ 62,659 | |
Expenses: | |||
Real estate taxes | 7,653 | 7,410 | |
Utility expenses | 4,174 | 4,571 | |
Other operating expenses | 12,911 | 12,210 | |
Depreciation and amortization | 18,324 | 17,215 | |
Acquisition related costs | 152 | 6 | |
General and administrative | 3,526 | 4,004 | |
Total expenses | 46,740 | 45,416 | |
Operating income (loss) | 16,871 | 17,243 | |
Interest income | 6 | 12 | |
Interest expense | (9,364) | (9,302) | |
Gain on early extinguishment of debt | 104 | ||
Loss on issuance of shares by Select Income REIT | (40,771) | ||
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of investees | 7,617 | (32,818) | |
Income tax expense | (15) | (30) | |
Equity in earnings (losses) of investees | 9,934 | (316) | |
Income (loss) from continuing operations | 17,536 | (33,164) | |
Loss from discontinued operations | (149) | (206) | |
Net income (loss) | 17,387 | (33,370) | |
Total assets | 2,259,395 | $ 2,168,510 | |
Operating Segments | Investment in Real Estate | |||
Segment Information. | |||
Rental income | 63,611 | 62,659 | |
Expenses: | |||
Real estate taxes | 7,653 | 7,410 | |
Utility expenses | 4,174 | 4,571 | |
Other operating expenses | 12,911 | 12,210 | |
Depreciation and amortization | 18,324 | 17,215 | |
Acquisition related costs | 152 | 6 | |
Total expenses | 43,214 | 41,412 | |
Operating income (loss) | 20,397 | 21,247 | |
Interest expense | (8,269) | (2,267) | |
Gain on early extinguishment of debt | 104 | ||
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of investees | 12,232 | 18,980 | |
Income (loss) from continuing operations | 12,232 | 18,980 | |
Loss from discontinued operations | (149) | (206) | |
Net income (loss) | 12,083 | 18,774 | |
Total assets | 1,708,910 | 1,639,462 | |
Operating Segments | Investment in SIR | |||
Expenses: | |||
Loss on issuance of shares by Select Income REIT | (40,771) | ||
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of investees | (40,771) | ||
Equity in earnings (losses) of investees | 9,857 | (388) | |
Income (loss) from continuing operations | 9,857 | (41,159) | |
Net income (loss) | 9,857 | (41,159) | |
Total assets | 493,259 | 491,369 | |
Corporate, Non-Segment | |||
Expenses: | |||
General and administrative | 3,526 | 4,004 | |
Total expenses | 3,526 | 4,004 | |
Operating income (loss) | (3,526) | (4,004) | |
Interest income | 6 | 12 | |
Interest expense | (1,095) | (7,035) | |
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of investees | (4,615) | (11,027) | |
Income tax expense | (15) | (30) | |
Equity in earnings (losses) of investees | 77 | 72 | |
Income (loss) from continuing operations | (4,553) | (10,985) | |
Net income (loss) | (4,553) | $ (10,985) | |
Total assets | $ 57,226 | $ 37,679 |