Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 21, 2018 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | Tremont Mortgage Trust | ||
Entity Central Index Key | 1,708,405 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Current Reporting Status | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY | ||
Entity Common Stock, Shares Outstanding | 3,126,439 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 0 |
BALANCE SHEET
BALANCE SHEET $ in Thousands | Dec. 31, 2017USD ($) |
Assets | |
Cash and cash equivalents | $ 61,666 |
Prepaid expenses | 259 |
Total assets | 61,925 |
Liabilities and Shareholders' Equity | |
Accounts payable and other accrued liabilities | 301 |
Due to related persons | 754 |
Total liabilities | 1,055 |
Commitments and contingencies | |
Shareholders' equity: | |
Common shares of beneficial interest, $0.01 par value per share; 25,000,000 shares authorized; 3,126,439 shares issued and outstanding | 31 |
Additional paid in capital | 62,135 |
Cumulative net loss | (1,296) |
Total shareholders’ equity | 60,870 |
Total liabilities and shareholders' equity | $ 61,925 |
BALANCE SHEET (Parenthetical)
BALANCE SHEET (Parenthetical) | Dec. 31, 2017$ / sharesshares |
Statement of Financial Position [Abstract] | |
Common shares of beneficial interest, par value (in dollars per share) | $ / shares | $ 0.01 |
Common shares of beneficial interest, shares authorized | 25,000,000 |
Common shares of beneficial interest, shares issued | 3,126,439 |
Common shares of beneficial interest, shares outstanding | 3,126,439 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS shares in Thousands, $ in Thousands | 7 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Interest Income: | |
Interest income from investments | $ 222 |
Expenses: | |
Management fees | 260 |
General and administrative expenses | 830 |
Shared services agreement reimbursement | 428 |
Loss before income tax expense | (1,296) |
Income tax expense | 0 |
Net loss | $ (1,296) |
Weighted average common shares outstanding (in shares) | shares | 1,524 |
Net loss per common share - basic and diluted (in dollars per share) | $ / shares | $ (0.85) |
STATEMENTS OF SHAREHOLDERS_ EQU
STATEMENTS OF SHAREHOLDERS’ EQUITY - 7 months ended Dec. 31, 2017 - USD ($) $ in Thousands | Total | Common Shares | Common SharesClass A | Additional Paid In Capital | Cumulative Net Loss |
Beginning balance at May. 31, 2017 | $ 0 | $ 0 | $ 0 | $ 0 | |
Beginning balance (in shares) at May. 31, 2017 | 0 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of shares (in shares) | 3,100,000 | ||||
Issuance of shares | 62,002 | 31 | 61,971 | ||
Share grants (in shares) | 27,000 | ||||
Share grants | 182 | 182 | |||
Share repurchases (in shares) | (1,000) | ||||
Share repurchases | (18) | (18) | |||
Net loss | (1,296) | (1,296) | |||
Ending balance at Dec. 31, 2017 | $ 60,870 | $ 31 | $ 62,135 | $ (1,296) | |
Ending balance (in shares) at Dec. 31, 2017 | 3,126,439 | 3,126,000 |
STATEMENT OF CASH FLOW
STATEMENT OF CASH FLOW $ in Thousands | 7 Months Ended |
Dec. 31, 2017USD ($) | |
Cash Flows from Operating Activities | |
Net loss | $ (1,296) |
Adjustments to reconcile net income to net cash from operating activities: | |
Share based compensation | 182 |
Changes in operating assets and liabilities: | |
Prepaid expenses | (259) |
Accounts payable and other accrued liabilities | 301 |
Due to related persons | 754 |
Net cash used in operating activities | (318) |
Cash Flows from Financing Activities | |
Proceeds from issuance of common shares | 62,002 |
Repurchase of common shares | (18) |
Net cash provided by financing activities | 61,984 |
Increase in cash and cash equivalents | 61,666 |
Cash and cash equivalents at beginning of period | 0 |
Cash and cash equivalents at end of period | $ 61,666 |
Organization
Organization | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization We were organized as a real estate investment trust, or REIT, under Maryland law on June 1, 2017. On September 18, 2017, we sold 2,500,000 of our common shares of beneficial interest, par value $0.01 per share, or our common shares, at a price of $20.00 per share in our initial public offering, or our IPO. Concurrently with our IPO, we sold an additional 600,000 of our common shares at a price of $20.00 per share to Tremont Realty Advisors LLC, or our Manager, in a private placement. The aggregate proceeds to us from these sales were $62,000 . |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. These consolidated financial statements include the accounts of us and our subsidiaries, all of which are 100% owned directly by us. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Cash and Cash Equivalents. We consider highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Fair Value of Financial Instruments. The accompanying balance sheet includes the following financial instruments: cash, accounts payable and other liabilities and due to related persons. We consider the carrying values of cash, accounts payable and other liabilities and due to related persons to approximate the fair values of these financial instruments based on the short duration between origination of these instruments and their expected realizations. Net Loss Per Common Share. We calculate basic earnings per common share by dividing net loss by the weighted average number of common shares outstanding during the period. We calculate diluted net income per share using the more dilutive of the two class method or the treasury stock method. |
Shareholders' Equity
Shareholders' Equity | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Shareholders' Equity | Shareholders' Equity On September 18, 2017, we sold 2,500,000 of our common shares at a price of $20.00 per share in our IPO. Concurrently with our IPO, we sold an additional 600,000 of our common shares at a price of $20.00 per share to our Manager in a private placement. The aggregate proceeds to us from these sales were $62,000 . We did not declare or pay any distributions on our common shares during the period from our inception (June 1, 2017) through December 31, 2017 . Common Share Awards We have common shares available for issuance under the terms of our 2017 Equity Compensation Plan, or the 2017 Plan. We granted annual awards of 20,000 of our common shares to our officers in 2017 with an aggregate market value of $317 . We also granted each of our five Trustees 1,500 of our common shares in 2017 with an aggregate market value of $119 . The values of the share grants were based upon the closing price of our common shares on The Nasdaq Stock Market LLC, or the Nasdaq, on the date of grant. The common shares granted to our Trustees vested immediately. The common shares granted to our officers vest in five equal annual installments beginning on the date of grant. A summary of shares granted and vested under the terms of the 2017 Plan for the year ended December 31, 2017 is as follows: 2017 Number of Grant Date Shares Fair Value Unvested shares, beginning of year — $ — Shares granted 27,500 $ 15.87 Shares vested (11,500 ) $ 15.87 Unvested shares, end of year 16,000 The 16,000 unvested shares as of December 31, 2017 are scheduled to vest as follows: 4,000 shares in 2018, 4,000 shares in 2019, 4,000 shares in 2020 and 4,000 shares in 2021. These unvested shares are re-measured at fair value on a recurring basis using quoted market prices of the underlying shares. As of December 31, 2017, the estimated future compensation expense for the unvested shares was $231 based on the closing share price of our common shares on the Nasdaq on December 31, 2017 of $14.69 . The weighted average period over which the compensation expense will be recorded is approximately 21 months . At December 31, 2017, 206,161 of our common shares remained available for issuance under the 2017 Plan. Common Share Repurchases On November 29, 2017, we purchased an aggregate of 1,161 of our common shares valued at $15.34 per common share, the closing price of our common shares on the Nasdaq on that day, from our officers in satisfaction of tax withholding and payment obligations in connection with awards of our common shares. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue From Contracts With Customers , which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU No. 2014-09 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services”. In August 2015, the FASB provided for a one year deferral of the effective date for ASU No. 2014-09, which is now effective for us beginning January 1, 2018. We have evaluated ASU No. 2014-09 and related clarifying guidance issued by the FASB and determined that interest income and gains and losses on financial instruments are outside of its scope; therefore, we do not expect the adoption of ASU No. 2014-09 to have a material impact in our financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses than is currently required. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We expect that the adoption of ASU No. 2016-13 will accelerate the timing for recognizing, and increase the carrying amounts of, our credit losses. We continue to assess the potential impact our adoption of ASU No. 2016-13 will have in our financial statements. |
Management Agreement With Our M
Management Agreement With Our Manager | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
Management Agreement With Our Manager | Management Agreement with our Manager We have no employees. The personnel and various services we require to operate our business are provided to us by our Manager. In connection with our IPO, we entered into a management agreement with our Manager, or our Management Agreement, which provides for the day to day management of our operations by our Manager, subject to the oversight and direction of our Board of Trustees. Fees and Expense Reimbursements. Under our Management Agreement, we are responsible to pay our Manager the following: • Base Management Fee. We are required to pay our Manager an annual base management fee equal to 1.5% of our “Equity”, payable in cash quarterly ( 0.375% per quarter) in arrears. Under our Management Agreement, “Equity” means (a) the sum of (i) the proceeds received by us from our IPO and the concurrent private placement of our common shares to our Manager, plus (ii) the net proceeds received by us from any future sale or issuance of shares of beneficial interest, plus (iii) our cumulative Core Earnings, as defined below, for the period commencing on the completion of our IPO to the end of the most recent calendar quarter, less (b) (i) any distributions previously paid to holders of our common shares, (ii) any incentive fee previously paid to our Manager and (iii) any amount that we may have paid to repurchase our common shares. All items in the foregoing sentence (other than clause (a)(iii)) are calculated on a daily weighted average basis. • Incentive Fee. Starting in the first full calendar quarter following the first anniversary of the closing of our IPO, or the quarter ending December 31, 2018, we will be required to pay our Manager quarterly an incentive fee in arrears in cash equal to the difference between: (a) the product of (i) 20% and (ii) the difference between (A) our Core Earnings for the most recent 12 month period (or such lesser number of completed calendar quarters, if applicable), including the calendar quarter (or part thereof) for which the calculation of the incentive fee is being made, and (B) the product of (1) our Equity in the most recent 12 month period (or such lesser number of completed calendar quarters, if applicable), including the calendar quarter (or part thereof) for which the calculation of the incentive fee is being made, and (2) 7% per year and (b) the sum of any incentive fees paid to our Manager with respect to the first three calendar quarters of the most recent 12 month period (or such lesser number of completed calendar quarters preceding the applicable period, if applicable). No incentive fee shall be payable with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters (or such lesser number of completed calendar quarters from the date of the completion of our IPO) in the aggregate is greater than zero. The incentive fee may not be less than zero. For purposes of the calculation of base management fees and incentive fees payable to our Manager, “Core Earnings” is defined as net income (or loss) attributable to our common shareholders, computed in accordance with GAAP, including realized losses not otherwise included in GAAP net income (loss), and excluding: (a) the incentive fees earned by our Manager; (b) depreciation and amortization (if any); (c) non-cash equity compensation expense (if any); (d) unrealized gains, losses and other similar non-cash items that are included in net income for the period of the calculation (regardless of whether such items are included in or deducted from net income or in other comprehensive income or loss under GAAP); and (e) onetime events pursuant to changes in GAAP and certain material non-cash income or expense items, in each case after discussions between our Manager and our Independent Trustees and approved by a majority of our Independent Trustees. Pursuant to the terms of our Management Agreement, the exclusion of depreciation and amortization from the calculation of Core Earnings shall only apply to owned real estate. Our shares of beneficial interest that are entitled to a specific periodic distribution or have other debt characteristics will not be included in “Equity” for the purpose of calculating incentive fees payable to our Manager. Instead, the aggregate distribution amount that accrues to such shares during the calendar quarter of such calculation will be subtracted from Core Earnings for purposes of calculating incentive fees, unless such distribution is otherwise already excluded from Core Earnings. Equity and Core Earnings as defined in our Management Agreement are non-GAAP financial measures and may be different than our shareholders’ equity and our net income calculated according to GAAP. Pursuant to our Management Agreement, for the period beginning on September 18, 2017, the date on which we entered into the agreement, through December 31, 2017, we recognized management fees of $260 and we incurred shared services costs of $428 payable to our Manager as reimbursement for shared services costs it paid to RMR LLC. Term and Termination. The initial term of our Management Agreement ends on December 31, 2020. Our Management Agreement automatically renews for successive one year terms beginning January 1, 2021 and each January 1 thereafter, unless it is sooner terminated upon written notice delivered no later than 180 days prior to a renewal date by the affirmative vote of at least two-thirds (2/3) of our Independent Trustees based upon a determination that (a) our Manager’s performance is unsatisfactory and materially detrimental to us or (b) the base management fee and incentive fee, taken as a whole, payable to our Manager are not fair to us (provided that in the instance of (b), our Manager will be afforded the opportunity to renegotiate the base management fee and incentive fee prior to termination). Our Management Agreement may be terminated by our Manager before each annual renewal upon written notice delivered to our Board of Trustees no later than 180 days prior to an annual renewal date. We may also terminate our Management Agreement at any time, including during the initial term, without the payment of any termination fee, with at least 30 days’ prior written notice from us upon the occurrence of a “cause event,” as defined in the Management Agreement. Our Manager may terminate our Management Agreement in certain other circumstances, including if we become required to register as an investment company under the Investment Company Act of 1940, as amended, for our uncured “material breach,” as defined in our Management Agreement, we materially reduce our Manager’s duties and responsibilities or scope of its authority under our Management Agreement or we cease or take steps to cease to conduct the business of originating or investing in commercial real estate, or CRE, loans. Termination Fee. In the event our Management Agreement is terminated by us without a cause event or by our Manager for a material breach, we will be required to pay our Manager a termination fee equal to (a) three times the sum of (i) the average annual base management fee and (ii) the average annual incentive fee, in each case paid or payable to our Manager during the 24 month period immediately preceding the most recently completed calendar quarter prior to the date of termination or, if such termination occurs within 24 months of its initial commencement, the base management fee and the incentive fee will be annualized for such two year period based on such fees earned by our Manager during such period, plus (b) an amount equal to the initial organizational costs related to our formation and the costs of our IPO and the concurrent private placement paid by our Manager. No termination fee will be payable if our Management Agreement is terminated by us for a cause event or by our Manager without our material breach. Expense Reimbursement. Our Manager, and not us, is responsible for the costs of its employees who provide services to us, including the cost of our Manager’s personnel who originate our loans, unless any such payment or reimbursement is specifically approved by a majority of our Independent Trustees, is a shared services cost or relates to awards made under any equity compensation plan adopted by us from time to time. Generally, it is the practice of our Manager and The RMR Group LLC, or RMR LLC, to treat individuals who spend 50% or more of their business time providing services to our Manager as employees of our Manager. We are required to pay or to reimburse our Manager and its affiliates for all other costs and expenses of our operations, including but not limited to, the costs of rent, utilities, office furniture, equipment, machinery and other overhead type expenses, the costs of legal, accounting, auditing, tax planning and tax return preparation, consulting services, diligence costs related to our investments, investor relations expenses and other professional services, and other costs and expenses not specifically required under our Management Agreement to be borne by our Manager. Some of these overhead, professional and other services are provided by RMR LLC pursuant to a shared services agreement between our Manager and RMR LLC. In addition, we will also pay our pro rata portion of internal audit costs incurred by RMR LLC on behalf of us and other public companies to which RMR LLC or its subsidiaries provide management services. Our Audit Committee appoints our Director of Internal Audit and our Compensation Committee approves the costs of our internal audit function. The amounts recognized as expense for internal audit costs were $35 for the year ended December 31, 2017 . These amounts are included in general and administrative expenses in our statement of operations for this period. These amounts and all other related party costs which we may reimburse, if any, will be subject to approval by a majority of our Independent Trustees at least annually. If our cash flows are insufficient to pay reimbursements owed to our Manager, we may pay them from the proceeds of our IPO and the concurrent private placement, which would reduce the amount of cash we have available for investing and other purposes. Business Opportunities. Under our Management Agreement, we and our Manager have agreed that for so long as our Manager is managing us, neither our Manager nor any of its affiliates, including RMR LLC, will sponsor or manage any other publicly owned REIT that invests primarily in first mortgage loans secured by middle market and transitional CRE located in the United States, unless such activity is approved by our Independent Trustees. However, our Management Agreement does not prohibit our Manager or its affiliates (including RMR LLC) or their respective directors, trustees, officers, employees or agents from competing or providing services to other persons, funds, investment vehicles, REITs or other entities that may compete with us, including, among other things, with respect to the origination, acquisition, making, arranging or managing of first mortgage loans secured by middle market or transitional CRE or other investments like those we intend to make. Our Management Agreement also provides that if our Manager, its affiliates (including RMR LLC) or any of their respective directors, trustees, officers, employees or agents acquires knowledge of a potential business opportunity, we renounce any potential interest or expectation in, or right to be offered or to participate in, such business opportunity to the maximum extent permitted by Maryland law. Because our Manager and RMR LLC will not be prohibited from competing with us in all circumstances, and RMR LLC provides management services to other companies, conflicts of interest exist with regard to the allocation of investment opportunities and for the time and attention of our Manager, RMR LLC and their personnel. Our Management Agreement acknowledges these conflicts of interest and, in that agreement, we agree that our Manager, RMR LLC and their subsidiaries may resolve such conflicts in good faith in their fair and reasonable discretion. In the case of such a conflict, our Manager, RMR LLC and their subsidiaries will endeavor to allocate such investment opportunities in a fair and reasonable manner, taking into account such factors as they deem appropriate. Liability and Indemnification . Our Manager maintains a contractual as opposed to a fiduciary relationship with us. Pursuant to our Management Agreement, our Manager does not assume any responsibility other than to render the services called for thereunder in good faith and is not responsible for any action of our Board of Trustees in following or declining to follow its advice or recommendations. Under the terms of our Management Agreement, our Manager and its affiliates, including RMR LLC, and their respective directors, trustees, officers, shareholders, owners, members, managers, employees and personnel will not be liable to us or any of our Trustees, shareholders or subsidiaries, or any of the trustees, directors or shareholders of any of our subsidiaries, for any acts or omissions related to the provision of services to us under our Management Agreement, except by reason of acts or omissions that have been determined in a final, non-appealable adjudication to have constituted bad faith, fraud, intentional misconduct, gross negligence or reckless disregard of the duties of our Manager under our Management Agreement. In addition, under the terms of our Management Agreement, we agree to indemnify, hold harmless and advance expenses to our Manager and its affiliates, including RMR LLC, and their respective directors, trustees, officers, shareholders, owners, members, managers, employees and personnel from and against any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever, including all reasonable attorneys’, accountants’ and experts’ fees and expenses, arising from any acts or omissions related to the provision of services to us or the performance of any matters pursuant to an instruction by our Board of Trustees, except to the extent there is a final, non-appealable adjudication that such acts or omissions constituted bad faith, fraud, intentional misconduct, gross negligence or reckless disregard of the duties of our Manager under our Management Agreement. Such persons will also not be liable for trade errors that may result from ordinary negligence, including errors in the investment decision making or trade process. Other. In addition to the fees and expense reimbursements payable to our Manager under our Management Agreement, our Manager and its affiliates may benefit from other fees paid to it in respect of our investments. For example, if we seek to securitize some of our CRE loans, our Manager or its affiliates may act as collateral manager. In any of these or other capacities, our Manager and its affiliates may receive fees for their services if approved by a majority of our Independent Trustees. |
Related Person Transactions
Related Person Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Person Transactions | Related Person Transactions We have relationships and historical and continuing transactions with our Manager, RMR LLC, The RMR Group Inc., or RMR Inc., and others related to them. Our Manager is a subsidiary of RMR LLC, which is a majority owned subsidiary of RMR Inc. and RMR Inc. is the managing member of RMR LLC. Our Managing Trustees, Adam Portnoy and Barry Portnoy, are the controlling shareholders (through ABP Trust) of RMR Inc. and own (through ABP Trust) all the class A membership units of RMR LLC not owned by RMR Inc. Adam Portnoy is a director of our Manager, an officer of RMR LLC and a managing director, president and chief executive officer of RMR Inc. Barry Portnoy is a director of our Manager, an officer of RMR LLC and a managing director of RMR Inc. Each of our executive officers is also an officer of our Manager or RMR LLC. Our Independent Trustees also serve as independent directors or independent trustees of other companies to which RMR LLC or its subsidiaries provide management services. Barry Portnoy serves as a managing director or managing trustee of all of the public companies to which RMR LLC or its subsidiaries provide management services and Adam Portnoy serves as a managing director or managing trustee of most of those companies. In addition, officers of our Manager, RMR LLC and RMR Inc. serve as our officers and officers of other companies to which RMR LLC or its subsidiaries provide management services. Our Manager, Tremont Realty Advisors LLC. Our Manager provides management services to us pursuant to our Management Agreement. See Note 5 for further information regarding our Management Agreement. We were formed as a 100% owned subsidiary of our Manager. Our Manager is our largest shareholder and, as of December 31, 2017 , owned 600,100 of our common shares, or approximately 19.2% of our outstanding common shares. Our Manager agreed to pay the initial organizational costs related to our formation and the other costs of our IPO, including the underwriting discounts and commissions; as of December 31, 2017 , our Manager incurred approximately $6,823 in such costs. Each of our Managing Trustees and officers is also a director or officer of our Manager and RMR LLC. We and our Manager entered into a private placement purchase agreement concurrently with our IPO, pursuant to which our Manager acquired 600,000 of our common shares at a price of $20.00 per share, which was the same price at which we sold our common shares in our IPO. Under the private placement purchase agreement, we granted to our Manager certain demand and piggyback registration rights, subject to certain limitations, covering our common shares owned by our Manager. RMR Inc. and RMR LLC . Our Manager is a subsidiary of RMR LLC, which is a majority owned subsidiary of RMR Inc. and RMR Inc. is the managing member of RMR LLC. The controlling shareholder of RMR Inc., ABP Trust, is owned by our Managing Trustees. RMR LLC provides certain shared services to our Manager which are applicable to us, and we reimburse our Manager for the amount it pays for those services. See Note 5 for further information regarding this shared services arrangement. Directors’ and Officers’ Liability Insurance. We, RMR Inc., RMR LLC and certain other companies to which RMR LLC or its subsidiaries provide management services participate in a combined directors’ and officers’ liability insurance policy. This combined policy expires in September 2019. We paid aggregate premiums of $224 for this policy in 2017. These amounts are included in general and administrative expenses in our statement of operations for this period. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We intend to elect and qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC, for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2017, and to maintain such qualification thereafter. As of December 31, 2017, we had net operating loss of $1,296 . As a REIT we will not be able to realize the future benefit of these losses and accordingly have provided a 100% valuation allowance. |
Weighted Average Common Shares
Weighted Average Common Shares | 12 Months Ended |
Dec. 31, 2017 | |
Earnings Per Share [Abstract] | |
Weighted Average Common Shares | Weighted Average Common Shares We calculated earnings per share, or EPS, for the year ended December 31, 2017 using the weighted average number of common shares outstanding during the periods. When applicable, diluted EPS reflects the more dilutive earnings per common share amount calculated using the two class method or the treasury stock method. The year ended December 31, 2017 had 3,581 of potentially dilutive restricted unvested common shares that were not included in the calculation of diluted EPS because to do so would have been antidilutive. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments As of December 31, 2017 , the fair values of our financial instruments, which include cash and cash equivalents, prepaid expenses, due to related parties, accounts payable, and accrued expenses, were not materially different from their carrying values due to the short term nature of these financial instruments. |
Selected Quarterly Financial Da
Selected Quarterly Financial Data (Unaudited) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
Selected Quarterly Financial Data (Unaudited) | Selected Quarterly Financial Data (Unaudited) The following is a summary of our unaudited quarterly results of operations for June 1, 2017 (inception) through December 31, 2017 : Third Fourth Quarter Quarter Interest income $ 23 $ 199 Net loss $ (238 ) $ (1,058 ) Weighted average common shares 438 3,106 Per share data: Net loss per common share - basic and diluted $ (0.54 ) $ (0.34 ) |
Subsequent Event
Subsequent Event | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On February 9, 2018, one of our wholly owned subsidiaries entered into a master repurchase agreement, or our master repurchase agreement, with Citibank, N.A., or Citibank, for a $100.0 million master repurchase facility, or our master repurchase facility, pursuant to which we may sell to Citibank, and later repurchase, floating-rate mortgage loans and other related assets, or purchased assets. Our master repurchase agreement has a stated expiration date of February 9, 2021, unless terminated earlier according to its terms. Under our master repurchase facility, the initial purchase price paid by Citibank for each purchased asset is up to 75% of the lesser of the market value of the purchased asset and the unpaid principal balance of such purchased asset, subject to Citibank’s approval. Upon the repurchase of a purchased asset, we are required to pay Citibank the outstanding purchase price of the purchased asset, accrued interest and all accrued and unpaid expenses of Citibank relating to such purchased asset. The price differential (or interest rate) relating to a purchased asset is equal to one month LIBOR plus a premium of 200 to 250 basis points, determined by the yield of the purchased asset and the property type of the purchased asset’s real estate collateral. In connection with our master repurchase facility, we entered into a guaranty which requires us to fully and promptly pay the purchase price, purchase price differential and any costs and expenses of Citibank related to the facility. This guaranty also requires us to comply with customary financial covenants which include a minimum tangible net worth, minimum cash liquidity, a total indebtedness to tangible net worth ratio and a minimum interest coverage ratio. Our master repurchase agreement also contains margin maintenance provisions that provide Citibank with the right, in certain circumstances related to a credit event, as defined in our master repurchase agreement, to re-determine the value of purchased assets. Where a decline in the value of such purchased assets has resulted in a margin deficit, Citibank may require us to eliminate any margin deficit through a combination of purchased asset repurchases and cash transfers to Citibank, subject to its approval. Our master repurchase agreement provides for acceleration of the date of repurchase of the purchased assets and Citibank’s liquidation of the purchased assets upon the occurrence and continuation of certain events of default, including a change of control of us, which includes our Manager ceasing to act as our sole manager or be a wholly owned subsidiary RMR LLC. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. These consolidated financial statements include the accounts of us and our subsidiaries, all of which are 100% owned directly by us. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. |
Cash and Cash Equivalents | Cash and Cash Equivalents. We consider highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments. The accompanying balance sheet includes the following financial instruments: cash, accounts payable and other liabilities and due to related persons. We consider the carrying values of cash, accounts payable and other liabilities and due to related persons to approximate the fair values of these financial instruments based on the short duration between origination of these instruments and their expected realizations. |
Net Loss Per Common Share | Net Loss Per Common Share. We calculate basic earnings per common share by dividing net loss by the weighted average number of common shares outstanding during the period. We calculate diluted net income per share using the more dilutive of the two class method or the treasury stock method. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue From Contracts With Customers , which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU No. 2014-09 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services”. In August 2015, the FASB provided for a one year deferral of the effective date for ASU No. 2014-09, which is now effective for us beginning January 1, 2018. We have evaluated ASU No. 2014-09 and related clarifying guidance issued by the FASB and determined that interest income and gains and losses on financial instruments are outside of its scope; therefore, we do not expect the adoption of ASU No. 2014-09 to have a material impact in our financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses than is currently required. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We expect that the adoption of ASU No. 2016-13 will accelerate the timing for recognizing, and increase the carrying amounts of, our credit losses. We continue to assess the potential impact our adoption of ASU No. 2016-13 will have in our financial statements. |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of unvested share activity | A summary of shares granted and vested under the terms of the 2017 Plan for the year ended December 31, 2017 is as follows: 2017 Number of Grant Date Shares Fair Value Unvested shares, beginning of year — $ — Shares granted 27,500 $ 15.87 Shares vested (11,500 ) $ 15.87 Unvested shares, end of year 16,000 |
Selected Quarterly Financial 20
Selected Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of quarterly financial data | The following is a summary of our unaudited quarterly results of operations for June 1, 2017 (inception) through December 31, 2017 : Third Fourth Quarter Quarter Interest income $ 23 $ 199 Net loss $ (238 ) $ (1,058 ) Weighted average common shares 438 3,106 Per share data: Net loss per common share - basic and diluted $ (0.54 ) $ (0.34 ) |
Organization (Details)
Organization (Details) - USD ($) $ / shares in Units, $ in Thousands | Sep. 18, 2017 | Dec. 31, 2017 |
Subsidiary, Sale of Stock [Line Items] | ||
Common shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Proceeds from sale of common shares | $ 62,000 | |
IPO | ||
Subsidiary, Sale of Stock [Line Items] | ||
Number of shares issued (in shares) | 2,500,000 | |
Price of shares issued (in dollars per share) | $ 20 | |
Private Placement | ||
Subsidiary, Sale of Stock [Line Items] | ||
Number of shares issued (in shares) | 600,000 | |
Price of shares issued (in dollars per share) | $ 20 |
Shareholders' Equity - Narrativ
Shareholders' Equity - Narrative (Details) $ / shares in Units, $ in Thousands | Nov. 29, 2017$ / sharesshares | Sep. 18, 2017USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017USD ($)installmenttrustee$ / sharesshares | May 31, 2017shares |
Subsidiary, Sale of Stock [Line Items] | |||||
Proceeds from sale of common shares | $ | $ 62,000 | ||||
Share granted, value | $ | $ 182 | ||||
Shares repurchased (in shares) | 1,161 | ||||
Shares repurchased (in dollars per share) | $ / shares | $ 15.34 | ||||
IPO | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Number of shares issued (in shares) | 2,500,000 | ||||
Price of shares issued (in dollars per share) | $ / shares | $ 20 | ||||
Private Placement | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Number of shares issued (in shares) | 600,000 | ||||
Price of shares issued (in dollars per share) | $ / shares | $ 20 | ||||
2017 Plan | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Number of installments | installment | 5 | ||||
Fully vested common shares | 2017 Plan | Officers | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Shares granted (in shares) | 20,000 | ||||
Share granted, value | $ | $ 317 | ||||
Fully vested common shares | 2017 Plan | Trustees | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Shares granted (in shares) | 1,500 | ||||
Share granted, value | $ | $ 119 | ||||
Number of trustees | trustee | 5 | ||||
Restricted unvested common shares | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Shares granted (in shares) | 27,500 | ||||
Unvested shares outstanding (in shares) | 16,000 | 16,000 | 0 | ||
Closing share price (in dollars per share) | $ / shares | $ 14.69 | $ 14.69 | |||
Restricted unvested common shares | 2017 Plan | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Unvested shares outstanding (in shares) | 16,000 | 16,000 | |||
Future compensation expense | $ | $ 231 | $ 231 | |||
Future compensation expense, period of recognition | 21 months | ||||
Common shares available for issuance (in shares) | 206,161 | 206,161 | |||
Restricted unvested common shares | 2017 Plan | 2018 | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Unvested shares outstanding (in shares) | 4,000 | 4,000 | |||
Restricted unvested common shares | 2017 Plan | 2019 | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Unvested shares outstanding (in shares) | 4,000 | 4,000 | |||
Restricted unvested common shares | 2017 Plan | 2020 | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Unvested shares outstanding (in shares) | 4,000 | 4,000 | |||
Restricted unvested common shares | 2017 Plan | 2021 | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Unvested shares outstanding (in shares) | 4,000 | 4,000 |
Shareholders' Equity - Nonveste
Shareholders' Equity - Nonvested Share Activity (Details) - Restricted unvested common shares | 7 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Number of Shares | |
Unvested shares, beginning of year (in shares) | 0 |
Shares granted (in shares) | 27,500 |
Shares vested (in shares) | (11,500) |
Unvested shares, end of year (in shares) | 16,000 |
Grant Date Fair Value | |
Unvested shares, beginning of year (in dollars per share) | $ / shares | $ 0 |
Shares granted (in dollars per share) | $ / shares | 15.87 |
Shares vested (in dollars per share) | $ / shares | $ 15.87 |
Management Agreement With Our24
Management Agreement With Our Manager (Details) $ in Thousands | 3 Months Ended | 7 Months Ended | 12 Months Ended |
Dec. 31, 2017USD ($)employee | Dec. 31, 2017USD ($)employee | Dec. 31, 2017USD ($)employee | |
Related Party Transaction [Line Items] | |||
Number of employees | employee | 0 | 0 | 0 |
Annualized base management fee | 1.50% | 1.50% | 1.50% |
Quarterly base management fee | 0.375% | 0.375% | 0.375% |
Incentive fee percentage | 20.00% | 20.00% | 20.00% |
Incentive fee percentage per year | 7.00% | 7.00% | 7.00% |
Management fees | $ 260 | ||
Related party expense | $ 428 | ||
Principal Owner | |||
Related Party Transaction [Line Items] | |||
Management fees | $ 260 | ||
Internal Audit Costs | Principal Owner | |||
Related Party Transaction [Line Items] | |||
Related party transaction | $ 35 | ||
Shared Service Costs | Principal Owner | |||
Related Party Transaction [Line Items] | |||
Related party expense | $ 428 |
Related Person Transactions (De
Related Person Transactions (Details) - USD ($) $ / shares in Units, $ in Thousands | Sep. 29, 2017 | Sep. 18, 2017 | Dec. 31, 2017 | Dec. 31, 2017 |
Related Party Transaction [Line Items] | ||||
Related party expense | $ 428 | |||
Initial organizational and IPO costs | RMR, LLC | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction | $ 6,823 | |||
Property insurance premiums | ||||
Related Party Transaction [Line Items] | ||||
Related party expense | $ 224 | |||
Private Placement | ||||
Related Party Transaction [Line Items] | ||||
Number of shares issued (in shares) | 600,000 | |||
Price of shares issued (in dollars per share) | $ 20 | |||
Tremont Mortgage Trust | Tremont Realty Advisors LLC | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 100.00% | |||
Shares owned (in shares) | 600,100 | 600,100 | ||
Noncontrolling ownership interest | 19.20% | 19.20% |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) $ in Thousands | Dec. 31, 2017USD ($) |
Income Tax Disclosure [Abstract] | |
Net operating loss | $ 1,296 |
Weighted Average Common Shares
Weighted Average Common Shares (Details) | 12 Months Ended |
Dec. 31, 2017shares | |
Restricted unvested common shares | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Antidilutive securities (in shares) | 3,581 |
Selected Quarterly Financial 28
Selected Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 7 Months Ended | |
Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |||
Interest income from investments | $ 199 | $ 23 | $ 222 |
Net loss | $ (1,058) | $ (238) | $ (1,296) |
Weighted average common shares (in shares) | 3,106 | 438 | 1,524 |
Net loss per common share - basic and diluted (in dollars per share) | $ (0.34) | $ (0.54) | $ (0.85) |
Subsequent Event (Details)
Subsequent Event (Details) - Citibank, N.A. - Mortgages and Related Assets - Subsequent Event | Feb. 09, 2018USD ($) |
Subsequent Event [Line Items] | |
Authorized amount | $ 100,000,000 |
Percentage of purchased asset, initial purchase price | 75.00% |
LIBOR | Minimum | |
Subsequent Event [Line Items] | |
Variable basis spread | 2.00% |
LIBOR | Maximum | |
Subsequent Event [Line Items] | |
Variable basis spread | 2.50% |