Related Person Transactions | Related Person TransactionsAdam D. Portnoy, Chair of our Board, one of our Managing Directors and our President and Chief Executive Officer, is the sole trustee of our controlling shareholder, ABP Trust, and owns all of ABP Trust’s voting securities and a majority of the economic interests of ABP Trust. RMR Inc.’s other executive officers are officers and employees of RMR LLC, and Jennifer B. Clark, our other Managing Director, and Matthew P. Jordan, our Executive Vice President, Chief Financial Officer and Treasurer, are also officers of ABP Trust. Mr. Portnoy is the chair of the board and a managing trustee or managing director of each of the Perpetual Capital clients, the controlling shareholder and a director of Sonesta (and its parent) and was chair of the board and a managing director of AlerisLife until March 20, 2023 when AlerisLife was acquired by ABP Trust. Since March 20, 2023, Mr. Portnoy is the sole director of AlerisLife. Ms. Clark is a managing trustee of OPI, a director of Sonesta (and its parent), and she previously served as a managing director of AlerisLife until March 20, 2023. Ms. Clark also serves as the secretary of all the Perpetual Capital clients, Sonesta and AlerisLife. As of March 31, 2023, Adam D. Portnoy beneficially owned 13.4% of SEVN’s outstanding common shares (including through Tremont and ABP Trust). Prior to the transactions pursuant to which ABP Trust’s subsidiary acquired AlerisLife, as further described below, Mr. Portnoy beneficially owned, in aggregate, 6.1% of AlerisLife’s outstanding common shares (including through ABP Trust). In addition, Mr. Portnoy beneficially owns shares of the Managed Equity REITs and TA comprising less than 5.0% of the outstanding shares of each of those respective companies. The Managed Equity REITs and SEVN have no employees. RMR LLC provides or arranges for all the personnel, overhead and services required for the operation of the Managed Equity REITs and ABP Trust pursuant to management agreements with them. The officers of the Managed Equity REITs and ABP Trust are officers or employees of RMR LLC. The officers, overhead and required office space of SEVN are provided or arranged by Tremont. SEVN’s officers are officers or employees of Tremont or RMR LLC. Some of the executive officers of TA, AlerisLife, and Sonesta are officers or employees of RMR LLC. Our executive officers are also managing directors or managing trustees of certain of the Perpetual Capital clients. Additional information about our related person transactions appears in Note 7, Shareholders’ Equity , below, and in our 2022 Annual Report. Revenues from Related Parties For the three months ended March 31, 2023 and 2022, we recognized revenues from related parties as set forth in the following table: Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 Total Total Management Management and Advisory Total and Advisory Total Services Reimbursable Total Services Reimbursable Total Revenues Costs Revenues Revenues Costs Revenues Perpetual Capital: DHC $ 5,482 $ 28,597 $ 34,079 $ 7,404 $ 32,720 $ 40,124 ILPT 9,244 9,215 18,459 7,227 5,581 12,808 OPI 9,877 83,449 93,326 10,518 70,479 80,997 SVC 9,970 20,230 30,200 11,722 22,494 34,216 Total Managed Equity REITs 34,573 141,491 176,064 36,871 131,274 168,145 SEVN 1,139 1,186 2,325 1,137 1,287 2,424 TA 3,785 1,748 5,533 3,447 161 3,608 39,497 144,425 183,922 41,455 132,722 174,177 Private Capital: AlerisLife (1) 1,369 — 1,369 1,226 61 1,287 Sonesta 2,032 29 2,061 1,787 38 1,825 Other private entities 5,311 15,756 21,067 4,820 15,545 20,365 8,712 15,785 24,497 7,833 15,644 23,477 Total revenues $ 48,209 $ 160,210 $ 208,419 $ 49,288 $ 148,366 $ 197,654 (1) On March 20, 2023, AlerisLife merged with and into ABP Acquisition 2 LLC, a subsidiary of ABP Trust, and ceased to be a public company. As a result, the revenues earned with respect to AlerisLife are characterized as Private Capital for all periods presented. For further information about this transaction, please see “ ABP Trust’s Acquisition of AlerisLife ” below. For the six months ended March 31, 2023 and 2022, we recognized revenues from related parties as set forth in the following table: Six Months Ended March 31, 2023 Six Months Ended March 31, 2022 Total Total Management Management and Advisory Total and Advisory Total Services Reimbursable Total Services Reimbursable Total Revenues Costs Revenues Revenues Costs Revenues Perpetual Capital: (1) DHC $ 11,938 $ 80,469 $ 92,407 $ 16,529 $ 67,923 $ 84,452 ILPT 18,264 19,951 38,215 11,742 12,261 24,003 OPI 20,085 178,984 199,069 21,082 141,166 162,248 SVC 19,738 40,825 60,563 23,392 33,229 56,621 Total Managed Equity REITs 70,025 320,229 390,254 72,745 254,579 327,324 SEVN 2,230 2,323 4,553 2,255 3,557 5,812 TA 7,976 3,476 11,452 7,058 708 7,766 80,231 326,028 406,259 82,058 258,844 340,902 Private Capital: (1) AlerisLife (2) 2,633 97 2,730 2,371 146 2,517 Sonesta 4,158 544 4,702 3,601 38 3,639 Other private entities 10,826 34,642 45,468 7,220 24,891 32,111 17,617 35,283 52,900 13,192 25,075 38,267 Total revenues from related parties 97,848 361,311 459,159 95,250 283,919 379,169 Revenues from unrelated parties — — — 53 — 53 Total revenues $ 97,848 $ 361,311 $ 459,159 $ 95,303 $ 283,919 $ 379,222 (1) On December 23, 2021, DHC sold a 35% equity interest in its existing joint venture with an institutional investor. Following this sale, DHC owned a 20% equity interest in this joint venture. As a result, the revenues earned with respect to this joint venture are characterized as Private Capital for periods on and after December 23, 2021 and as Perpetual Capital for periods prior to December 23, 2021. On June 29, 2022, DHC sold an additional 10% equity interest in this joint venture. Following this additional sale, DHC owns a 10% equity interest in this joint venture. (2) On March 20, 2023, AlerisLife merged with and into ABP Acquisition 2 LLC, a subsidiary of ABP Trust, and ceased to be a public company. As a result, the revenues earned with respect to AlerisLife are characterized as Private Capital for all periods presented. For further information about this transaction, please see “ ABP Trust’s Acquisition of AlerisLife ” below. Amounts Due From Related Parties The following table presents amounts due from related parties as of the dates indicated: March 31, 2023 September 30, 2022 Accounts Reimbursable Accounts Reimbursable Receivable Costs Total Receivable Costs Total Perpetual Capital: DHC $ 4,795 $ 11,422 $ 16,217 $ 8,098 $ 14,148 $ 22,246 ILPT 4,458 5,660 10,118 3,235 13,717 16,952 OPI 7,417 55,640 63,057 335 47,943 48,278 SVC 4,703 7,411 12,114 5,627 5,357 10,984 Total Managed Equity REITs 21,373 80,133 101,506 17,295 81,165 98,460 SEVN 2,370 1,204 3,574 1,768 1,262 3,030 TA 155 27,269 27,424 124 11,635 11,759 23,898 108,606 132,504 19,187 94,062 113,249 Private Capital: AlerisLife (1) 105 — 105 112 492 604 Sonesta 555 — 555 127 290 417 Other private entities 4,646 9,660 14,306 1,658 7,450 9,108 5,306 9,660 14,966 1,897 8,232 10,129 $ 29,204 $ 118,266 $ 147,470 $ 21,084 $ 102,294 $ 123,378 (1) On March 20, 2023, AlerisLife merged with and into ABP Acquisition 2 LLC, a subsidiary of ABP Trust, and ceased to be a public company. As a result, the amounts due from related parties with respect to AlerisLife are characterized as Private Capital for all periods presented. For further information about this transaction, please see “ ABP Trust’s Acquisition of AlerisLife ” below. Leases As of March 31, 2023, RMR LLC leased from ABP Trust and certain Managed Equity REITs office space for use as our headquarters and local offices. We incurred rental expense under related party leases aggregating $1,398 and $1,468 for the three months ended March 31, 2023 and 2022, respectively, and $2,831 and $2,974 for the six months ended March 31, 2023 and 2022, respectively. Tax-Related Payments Pursuant to our tax receivable agreement with ABP Trust, RMR Inc. pays to ABP Trust 85.0% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that RMR Inc. realizes as a result of (a) the increases in tax basis attributable to our dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be paid by us as a result of the tax receivable agreement. As of March 31, 2023, our condensed consolidated balance sheet reflects a liability related to the tax receivable agreement of $25,583, including $2,275 classified as a current liability in accounts payable and accrued expenses that we expect to pay to ABP Trust during the fourth quarter of fiscal year 2023. Under the RMR LLC operating agreement, RMR LLC is also required to make certain pro rata distributions to each member of RMR LLC quarterly on the basis of the estimated tax liabilities of its members, subject to future adjustment based on actual results. For the six months ended March 31, 2023 and 2022, pursuant to the RMR LLC operating agreement, RMR LLC made required quarterly tax distributions to holders of its membership units totaling $17,755 and $13,186, respectively, of which $9,371 and $6,930, respectively, was distributed to us and $8,384 and $6,256, respectively, was distributed to ABP Trust, based on each membership unit holder’s respective ownership percentage. The amounts distributed to us were eliminated in our condensed consolidated financial statements, and the amounts distributed to ABP Trust were recorded as a reduction of its noncontrolling interest. We use funds from these distributions to pay certain of our U.S. federal and state income tax liabilities and to pay part of our obligations under the tax receivable agreement. ABP Trust’s Acquisition of AlerisLife On February 2, 2023, AlerisLife entered into an Agreement and Plan of Merger, or the AlerisLife Merger Agreement, with ABP Acquisition LLC, or ABP Acquisition, and its wholly owned subsidiary, ABP Acquisition 2 LLC, or ABP Acquisition 2. ABP Acquisition is a wholly owned subsidiary of ABP Trust and Adam D. Portnoy, AlerisLife’s then managing director and chair of the board, is the sole trustee and controlling shareholder and an officer of ABP Trust. Pursuant to the AlerisLife Merger Agreement, ABP Acquisition 2 commenced and consummated a tender offer to acquire all of the outstanding AlerisLife common shares (other than the AlerisLife common shares held by ABP Trust, ABP Acquisition or their subsidiaries), at a price of $1.31 per share, net to the seller in cash, without interest, subject to any withholding of taxes. Following the consummation of the tender offer, on March 20, 2023, ABP Acquisition 2 merged with and into AlerisLife, or the AlerisLife Merger, with AlerisLife as the surviving corporation. In connection with the consummation of the transactions contemplated by the AlerisLife Merger Agreement, AlerisLife terminated its management agreement with RMR LLC, and RMR LLC waived its right to receive payment of the termination fee that would have otherwise resulted due to the AlerisLife Merger. In consideration of this waiver, RMR LLC and ABP Trust amended and restated their management agreement to provide that (A) RMR LLC will also provide services to AlerisLife at ABP Trust’s request, (B) ABP Trust will pay to RMR LLC management fees with respect to AlerisLife, which fees are calculated based upon AlerisLife’s revenues in the same manner as such fees would have been calculated under AlerisLife’s terminated management agreement with RMR LLC, and (C) AlerisLife’s properties will not be subject to ABP Trust’s property management agreement with RMR LLC. TA’s Merger Agreement On February 15, 2023, TA entered into an Agreement and Plan of Merger, or the TA Merger Agreement, with BP Products North America Inc., or BP, and Bluestar RTM Inc., an indirect wholly-owned subsidiary of BP, or TA Merger Subsidiary, pursuant to which TA Merger Subsidiary will merge with and into TA, or the TA Merger, with TA surviving the TA Merger. Subject to the satisfaction or waiver of the conditions to the closing of the TA Merger, including, among others, the approval of the stockholders of TA by the affirmative vote of the holders of a majority of the outstanding shares of common stock, TA expects the closing of the transactions contemplated by the TA Merger Agreement to occur on May 15, 2023. As a result of the TA Merger, at the effective time of the TA Merger, each TA common share outstanding immediately prior to the effective time of the TA Merger (other than TA common shares (i) owned by BP or TA Merger Subsidiary immediately prior to the effective time of the TA Merger, or (ii) held by any subsidiary of TA or BP (other than TA Merger Subsidiary) immediately prior to the effective time of the Merger), will be converted into the right to receive $86.00 in cash, without interest. In connection with the TA Merger Agreement, RMR LLC, which owns an aggregate amount of 4.1% of TA’s outstanding common shares, entered into a voting agreement with BP pursuant to which RMR LLC agreed to vote all of its TA common shares to approve the TA Merger. Upon consummation of the TA Merger, TA will terminate its business management agreement with us in accordance with its terms and pay us the applicable termination fee currently estimated to be approximately $45,000. OPI’s Merger Agreement with DHC On April 11, 2023, DHC and OPI entered into an Agreement and Plan of Merger, or the DHC-OPI Merger Agreement, pursuant to which, on the terms and subject to the satisfaction or waiver of the conditions thereof, DHC will be merged with and into OPI, with OPI continuing as the surviving entity in the merger, or the DHC-OPI Merger. Subject to the satisfaction or waiver of the conditions to closing, the DHC-OPI Merger is expected to close during the third quarter of calendar 2023. Contemporaneously with the execution of the DHC-OPI Merger Agreement, we, DHC and OPI entered into a letter agreement, or the RMR Letter Agreement, pursuant to which, on the terms and subject to conditions contained therein, we and DHC have acknowledged and agreed that, effective upon consummation of the DHC-OPI Merger, DHC shall have terminated its business and property management agreements with us for convenience, and we shall have waived our right to receive payment of the termination fee pursuant to each such agreement upon such termination. We will continue to manage the surviving entity following the DHC-OPI Merger. Contemporaneously with the execution of the DHC-OPI Merger Agreement, RMR LLC and OPI entered into a Third Amended and Restated Property Management Agreement, or the Amended Property Management Agreement. The effectiveness of the Amended Property Management Agreement is conditioned upon and will be concurrent with the consummation of the DHC-OPI Merger. If the DHC-OPI Merger is not consummated, the Amended Property Management Agreement will not become effective and the Second Amended and Restated Property Management Agreement, or the Current Property Management Agreement, will remain in effect. Pursuant to the Amended Property Management Agreement, at the effective time, properties then owned by DHC that are subject to its existing property management agreement with RMR LLC, including its medical office and life science properties, will become subject to the terms and conditions of the OPI Amended Property Management Agreement. Also pursuant to the Amended Property Management Agreement, we will be entitled to a renovation and repositioning fee equal to 3% of the cost of any major capital projects and repositionings at senior living communities owned by DHC that the surviving entity may request us to oversee from time to time, consistent with DHC’s existing property management agreement. The terms of the Amended Property Management Agreement are otherwise consistent with the terms of the Current Property Management Agreement. Separation Arrangements We entered into retirement agreements with certain of our former executive officers. Pursuant to these agreements, we made various cash payments and accelerated the vesting of unvested shares RMR Inc. previously awarded to these retiring officers. We also enter into separation arrangements from time to time with other executive and nonexecutive officers and employees of ours. All costs associated with separation arrangements, for which there remain no substantive performance obligations, are recorded in our condensed consolidated statements of income as separation costs. RMR LLC entered into a letter agreement, or the Separation Agreement, dated March 27, 2023, with Jonathan M. Pertchik, an Executive Vice President of RMR LLC. Mr. Pertchik also serves as chief executive officer and a managing director of TA. Mr. Pertchik will continue to serve in his role as an officer of RMR LLC, until 11:59 p.m. on the day preceding the closing of the transaction contemplated by the TA Merger Agreement, or the Separation Date. Under the Separation Agreement, RMR LLC agreed to pay Mr. Pertchik a lump sum cash payment equal to a pro rata portion of the total annual bonus that RMR LLC paid him for the calendar year 2022 within ten (10) days after his Separation Date. Pursuant to the Separation Agreement, on March 29, 2023, our Compensation Committee approved the acceleration of vesting of Mr. Pertchik’s unvested shares of RMR Inc., effective as of the Separation Date. The Separation Agreement contains other customary terms and conditions, including confidentiality, non-solicitation, and other covenants and a waiver and release. |