SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

SCHEDULE 13D/A

 

(Rule 13d-101)

 

Information to be Included in Statements Filed Pursuant

to Rule 13d-1(a) and Amendments Thereto Filed

Pursuant to Rule 13d-2(a)

 

Under the Securities Exchange Act of 1934

 

(Amendment No. 3)*

 

SELECT INCOME REIT

(Name of Issuer)

 

Common Shares of Beneficial Interest, $0.01 par value

(Title of Class of Securities)

 

81618T-100

(CUSIP Number)

 

John C. Popeo

CommonWealth REIT

Two Newton Place, 255 Washington Street, Suite 300

Newton, MA 02458

(617) 332-3990

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

 

July 2, 2013

(Date of Event Which Requires Filing of This Statement)

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ].

 

Note.  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits.  See § 240.13d-7 for other parties to whom copies are to be sent.

 

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

 

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 1 of 14 Pages

 

 

1	NAMES OF REPORTING PERSONS CommonWealth REIT
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)      (a)  o      (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) OO
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Maryland
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 22,000,000
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 22,000,000
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 22,000,000
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES   o (See Instructions)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 44.2%
14	TYPE OF REPORTING PERSON (See Instructions) HC

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 2 of 14 Pages

 

 

1	NAMES OF REPORTING PERSONS Reit Management & Research LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)      (a)  o      (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) N/A
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES   [ X ] (See Instructions)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0%
14	TYPE OF REPORTING PERSON (See Instructions) OO

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 3 of 14 Pages

 

 

1	NAMES OF REPORTING PERSONS Reit Management & Research Trust
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)      (a)  o      (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) N/A
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Massachusetts
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES   [ X ] (See Instructions)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0%
14	TYPE OF REPORTING PERSON (See Instructions) OO

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 4 of 14 Pages

 

 

1	NAMES OF REPORTING PERSONS Barry M. Portnoy
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)      (a)  o      (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) N/A
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     o
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 4,031.239
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 4,031.239
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,031.239
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES   [ X ] (See Instructions)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less than 1%
14	TYPE OF REPORTING PERSON (See Instructions) IN

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 5 of 14 Pages

 

 

1	NAMES OF REPORTING PERSONS Adam D. Portnoy
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)      (a)  o      (b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) N/A
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     o
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 4,000
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 4,000
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,000
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES   [ X ] (See Instructions)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less than 1%
14	TYPE OF REPORTING PERSON (See Instructions) IN

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 6 of 14 Pages

 

 

This Amendment No. 3 to Schedule 13D, which amends and supplements the Schedule 13D initially filed with the Securities and Exchange Commission (the “SEC”) on September 21, 2012 (the “Original Schedule 13D”), as amended by Amendment No. 1 to the Original Schedule 13D filed with the SEC on December 12, 2012 and Amendment No. 2 to the Original Schedule 13D filed with the SEC on March 26, 2013 (as amended, the “Schedule 13D”) by CommonWealth REIT (“CommonWealth”), Reit Management & Research LLC, a Delaware limited liability company (“RMR”), Reit Management & Research Trust, a Massachusetts business trust (“RMR Trust”), Barry M. Portnoy and Adam D. Portnoy (individually, a “Reporting Person”, and together, the “Reporting Persons”), is being filed to reflect a material decrease in the percentage of the common shares of beneficial interest, $0.01 par value per share (the “Shares”), of Select Income REIT, a Maryland real estate investment trust (the “Issuer”), beneficially owned by CommonWealth, due to the issuance of additional Shares by the Issuer on July 2, 2013, as more fully described below.

 

ITEM 1.                                     SECURITY AND ISSUER.

 

The class of equity securities to which this Amendment No. 3 relates is the Shares of the Issuer.  The Issuer’s principal executive offices are located at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458.

 

ITEM 2.                                     IDENTITY AND BACKGROUND.

 

The persons filing this statement are the Reporting Persons.  There have been no material changes to the information previously reported in the Schedule 13D with respect to the Reporting Persons.

 

ITEM 3.                                     SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

 

“Item 3. Source and Amount of Funds or Other Consideration” of the Schedule 13D is hereby amended and restated as follows:

 

On May 20, 2013, Barry M. Portnoy acquired 31.239 Shares pursuant to his participation in the Issuer’s dividend reinvestment plan (the “DRIP”).

 

On May 13, 2013, the Issuer, pursuant to the Select Income REIT 2012 Equity Compensation Plan, filed as Exhibit 10.7 to the Issuer’s Current Report on Form 8-K, dated March 12, 2012 (the “Equity Compensation Plan”), granted 2,000 Shares valued at $27.61, the closing price of the Issuer’s Shares on the New York Stock Exchange on that day, to each of Barry M. Portnoy and Adam D. Portnoy. The Share grants to Barry M. Portnoy and Adam D. Portnoy were a part of the Share grants made by the Issuer on the same date and in the same amount to each of its trustees pursuant to the Issuer’s trustee compensation arrangements, which such trustee compensation arrangements are filed as Exhibit 10.1 to the Issuer’s Current Report on Form 8-K, dated May 16, 2013.

 

On September 14, 2012, the Issuer, pursuant to the Equity Compensation Plan, granted 2,000 Shares valued at $24.84, the closing price of the Issuer’s Shares on the New York Stock Exchange on that day, to each of Barry M. Portnoy and Adam D. Portnoy.  The share grants to Barry M. Portnoy and Adam D. Portnoy were a part of the share grants made by the Issuer on the

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 7 of 14 Pages

 

 

same date and in the same amount to each to its trustees pursuant to the Issuer’s trustee compensation arrangements.

 

To the Reporting Persons’ knowledge, the other individuals named in Item 2 above beneficially own an aggregate of 18,450 Shares.  These 18,450 Shares were acquired pursuant to the Issuer’s equity compensation plan for services to RMR or the Issuer, and include (i) 3,000 Shares granted to Mr. Popeo, who serves as the Treasurer and Chief Financial Officer of CommonWealth and the Issuer and is an officer of RMR, and (ii) 4,000 Shares granted to Mr. Lamkin, who serves as an independent trustee of CommonWealth, in his capacity as an independent trustee of the Issuer.

 

On February 16, 2012, CommonWealth transferred 251 of its properties to the Issuer, which was, at that time, a wholly owned subsidiary of CommonWealth.  In return, the Issuer issued to CommonWealth 22,000,000 Shares (including 1,000 Shares initially issued to CommonWealth on December 21, 2011) and a $400 million demand promissory note.

 

Also see Item 6 below.

 

ITEM 4.                                     PURPOSE OF TRANSACTION.

 

There have been no material changes to the information previously reported in the Schedule 13D with respect to the Reporting Persons.

 

ITEM 5.                                     INTEREST IN SECURITIES OF THE ISSUER.

 

“Item 5. Interest in Securities of the Issuer” of the Schedule 13D is hereby amended and restated as follows:

 

(a)                   Amount beneficially owned and percentage of class:

 

As described in the Original Schedule 13D, CommonWealth beneficially owns 22,000,000 Shares.  As of July 2, 2013, these 22,000,000 Shares represent approximately 44.2% of the Issuer’s issued and outstanding Shares.

 

Neither RMR nor RMR Trust holds any Shares.  RMR, as manager of CommonWealth, and RMR Trust, as the sole member of RMR, may, under applicable regulatory definitions, be deemed to beneficially own (and have shared voting and dispositive power over) the 22,000,000 Shares beneficially owned by CommonWealth, but each expressly disclaims any beneficial ownership of CommonWealth’s 22,000,000 Shares.

 

Mr. Barry M. Portnoy beneficially owns 4,031.239 Shares, and Mr. Adam D. Portnoy beneficially owns 4,000 Shares.  In their respective positions with RMR and RMR Trust described in Item 2 above, Mr. Barry M. Portnoy and Mr. Adam D. Portnoy may also be deemed to beneficially own (and have shared voting and dispositive power over) the 22,000,000 Shares beneficially owned by CommonWealth, but each expressly disclaims any beneficial ownership of CommonWealth’s 22,000,000 Shares.

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 8 of 14 Pages

 

 

Mr. Barry M. Portnoy and Mr. Adam D. Portnoy each beneficially own less than 1% of the Shares, and RMR and RMR Trust beneficially own none of the Shares.  Reference is made to Item 5(a) above as to the Shares beneficially owned by CommonWealth that may, under applicable regulatory definitions, be deemed to be beneficially owned by RMR, RMR Trust, Mr. Barry M. Portnoy or Mr. Adam D. Portnoy.  If all Shares beneficially owned by CommonWealth were beneficially owned by the other Reporting Persons, the percentage beneficial ownership of the Issuer’s Shares by each such Reporting Person would be approximately 44.2%.

 

To the Reporting Persons’ knowledge, the other individuals named in Item 2 above beneficially own an aggregate of 18,450 Shares (a portion of which are subject to vesting requirements), which represent less than 1% of the issued and outstanding Shares and which are not included in the percentages owned by the Reporting Persons.  The Reporting Persons expressly disclaim any beneficial ownership of these Shares.

 

(b)	Number of Shares as to which such person has:
	(i)	Sole power to vote or direct the vote:
		CommonWealth:	22,000,000
		RMR:	0
		RMR Trust:	0
		Barry M. Portnoy:	4,031.239
		Adam D. Portnoy:	4,000
	(ii)	Shared power to vote or direct the vote:
		CommonWealth:	0
		RMR:	0
		RMR Trust:	0
		Barry M. Portnoy:	0
		Adam D. Portnoy:	0
	(iii)	Sole power to dispose or to direct the disposition of:
		CommonWealth:	22,000,000
		RMR:	0
		RMR Trust:	0

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 9 of 14 Pages

 

 

		Barry M. Portnoy:	4,031.239
		Adam D. Portnoy:	4,000
	(iv)	Shared power to dispose or to direct the disposition of:
		CommonWealth:	0
		RMR:	0
		RMR Trust:	0
		Barry M. Portnoy:	0
		Adam D. Portnoy:	0

 

Reference is made to Item 5(a) above as to the Issuer’s Shares beneficially owned by CommonWealth, which may, under applicable regulatory definitions, be deemed to be beneficially owned by RMR, RMR Trust, Mr. Barry M. Portnoy or Mr. Adam D. Portnoy.

 

To the Reporting Persons’ knowledge, the other individuals named in Item 2 above have sole power to vote or to direct the vote, and to dispose or direct the disposition of, all of the Shares they beneficially own.

 

(c)                  Transactions effected in the past sixty days:

 

Other than the acquisition of Shares by Barry M. Portnoy under the DRIP and the grant of Shares on May 13, 2013, each as described in Item 3 above, no transactions in Shares have been effected during the past sixty days by any of the Reporting Persons or the trustees, directors or executive officers, if applicable, of any Reporting Person.

 

(d)                No other person is known to have the right to receive, or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities covered by this statement.

 

(e)                   Not applicable.

 

ITEM 6.                                     CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.

 

“Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer” of the Schedule 13D is hereby amended and restated as follows:

 

The Issuer was formed on December 19, 2011 as a real estate investment trust that is focused on owning and investing in net leased, single tenant properties.  On February 16, 2012, CommonWealth transferred 251 properties to the Issuer, and, in return, the Issuer issued to CommonWealth 22,000,000 Shares (including the 1,000 Shares initially issued to

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 10 of 14 Pages

 

 

CommonWealth) and a $400 million demand promissory note.  The Issuer filed a registration statement on Form S-11 with respect to its initial public offering of Shares, which was declared effective by the SEC on March 6, 2012, at which time the registration of the Shares under the Act also became effective.  On March 12, 2012, the Issuer completed its issuance and sale of 9,200,000 Shares in its initial public offering (including 1,200,000 Shares sold pursuant to an underwriters’ over allotment option).  Giving effect to its initial public offering, the Issuer remains a subsidiary of CommonWealth, and three of the Issuer’s five trustees, including both of its managing trustees, are also Trustees of CommonWealth.

 

In connection with the Issuer’s initial public offering, CommonWealth and the Issuer entered into or amended various agreements and arrangements with each other and RMR, which provides management services to both CommonWealth and the Issuer, including:  (i) a transaction agreement between CommonWealth and the Issuer, which provides, among other things, that CommonWealth and the Issuer will cooperate to enforce the ownership limitations in its respective declarations of trust as may be appropriate to qualify for and maintain REIT tax status and otherwise to promote its respective orderly governance and future relations; (ii) a business management agreement between the Issuer and RMR, which provides, among other things, that under certain circumstances RMR may be entitled to an incentive fee payable in Shares, in addition to its cash compensation; (iii) a property management agreement between the Issuer and RMR; and (iv) an amendment to the business management agreement between CommonWealth and RMR (which such business management agreement has subsequently been amended and restated).

 

On December 11, 2012, the Issuer issued 8,050,000 additional Shares in an underwritten public offering (including 1,050,000 Shares sold pursuant to an underwriters’ option to acquire additional Shares).

 

On March 25, 2013, CommonWealth entered into the Registration Agreement with the Issuer, pursuant to which the Issuer agreed to, among other things, file a registration statement with respect to a possible public offering (an “Offering”) of up to all of the 22,000,000 Shares that CommonWealth owns (the “SIR Shares”), and CommonWealth agreed to pay all expenses incurred by the Issuer relating to the registration and sale of the SIR Shares in an Offering.  The Issuer’s obligation to register the SIR Shares for resale in an Offering is subject to certain conditions and may be terminated in certain circumstances, in each case, as described in the Registration Agreement.  The Issuer agreed to indemnify CommonWealth, CommonWealth’s officers, trustees and controlling persons, and CommonWealth agreed to indemnify the Issuer and the Issuer’s officers, trustees and controlling persons, against certain liabilities in connection with an Offering, including liabilities under the Securities Act of 1933, as amended; and the Issuer and CommonWealth also agreed to reimburse payments that the other may make in respect of those liabilities. The foregoing description of the Registration Agreement is not complete and is subject to and qualified in its entirety by reference to the Registration Agreement, a copy of which is attached as Exhibit 99.7 hereto, which is incorporated herein by reference.

 

The Issuer has an effective registration statement on Form S-3, which permits resales of the Issuer’s Shares by selling shareholders, pursuant to which, and subject to the terms of the

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 11 of 14 Pages

 

 

registration agreement, CommonWealth may be able to sell the SIR Shares in a registered offering. However, CommonWealth has not made a decision to sell the SIR Shares at this time. Further, in connection with the Issuer’s underwritten public offering of its common shares on July 2, 2013, as further described below, CommonWealth agreed not to sell the SIR Shares prior to August 27, 2013 without the consent of the designated underwriter.

 

On July 2, 2013, the Issuer issued 10,500,000 additional Shares in an underwritten public offering and, consequently, CommonWealth will account for the SIR Shares under the equity method rather than treating the Issuer as a consolidated subsidiary.

 

For additional information relating to the relationships and other transactions among the Issuer, CommonWealth, RMR, the other Reporting Persons and other companies to which RMR provides management services and others affiliated with or related to them, please refer (1) (i) to CommonWealth’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC (including the portion of the sections captioned “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related Person Transactions” and Note 10 to the notes to CommonWealth’s consolidated financial statements appearing therein, a copy of which portions is incorporated by reference as Exhibit 99.2 hereto); (ii) to the portion of the section captioned “Related Person Transactions and Company Review of Such Transactions” in CommonWealth’s definitive Proxy Statement for the 2013 Annual Meeting of Shareholders held on May 14, 2013, dated February 25, 2013, a copy of which portion is incorporated by reference as Exhibit 99.2 hereto; and (iii) to the excerpt from Item 8.01 appearing in CommonWealth’s Current Report on Form 8-K filed with the SEC on March 18, 2013, a copy of which excerpt is incorporated by reference as Exhibit 99.2 hereto, and (2) to CommonWealth’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed with the SEC (including the portion of the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related Person Transactions” and Note 14 to the notes to CommonWealth’s condensed consolidated financial statements appearing therein that appear in Exhibit 99.8 hereto). Exhibits 99.2 and 99.8 are incorporated herein by reference. The information contained in Exhibits 99.2 and 99.8 is presented as of the respective dates the documents, as identified in the respective Exhibits, were filed with the SEC.

 

Also, see Item 3, Item 4 and Item 5 above.

 

ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.

 

Exhibit 99.1		Joint Filing Agreement, dated as of September 21, 2012, by and among CommonWealth, RMR, RMR Trust, Barry M. Portnoy and Adam D. Portnoy. (Incorporated by reference to Exhibit 99.1 of the Original Schedule 13D dated September 21, 2012, File No. 005-86986.)
Exhibit 99.2		Selected sections from CommonWealth’s filings with the Securities and Exchange Commission as incorporated by reference into Item 6 of this Amendment No. 3. (Incorporated by reference to Exhibit 99.2 of Amendment No. 2 to Original Schedule 13D dated March 26, 2013, File No. 005-86986.)

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 12 of 14 Pages

 

 

Exhibit 99.3		Transaction Agreement, dated March 12, 2012, between CommonWealth REIT and Select Income REIT. (Incorporated by reference to Exhibit 10.1 to CommonWealth REIT’s Current Report on Form 8-K dated March 12, 2012, File No. 001-09317.)
Exhibit 99.4		Amended and Restated Business Management Agreement, dated as of December 12, 2012, between Select Income REIT and Reit Management & Research LLC. (Incorporated by reference to Exhibit 10.1 to Select Income REIT’s Current Report on Form 8-K dated December 12, 2012, File No. 001-35442.)
Exhibit 99.5		Property Management Agreement, dated as of March 12, 2012, between Select Income REIT and Reit Management & Research LLC. (Incorporated by reference to Exhibit 10.4 to Select Income REIT’s Current Report on Form 8-K dated March 6, 2012, File No. 001-35442.)
Exhibit 99.6		First Amendment to Property Management Agreement, dated as of December 12, 2012, between Select Income REIT and Reit Management & Research LLC. (Incorporated by reference to Exhibit 10.2 to Select Income REIT’s Current Report on Form 8-K dated December 12, 2012, File No. 001-35442.)
Exhibit 99.6		Amended and Restated Business Management Agreement, dated as of December 11, 2012, by and between CommonWealth REIT and Reit Management & Research LLC. (Incorporated by reference to Exhibit 10.1 to CommonWealth REIT’s Current Report on Form 8-K dated December 13, 2012, File No. 001-09317.)
Exhibit 99.7		Registration Agreement, dated March 25, 2013, by and between CommonWealth REIT and Select Income REIT. (Incorporated by reference to Exhibit 99.7 to Amendment No. 2 to the Original Schedule 13D dated March 26, 2013, File No. 005-86986.)
Exhibit 99.8		Selected sections from CommonWealth’s filings with the Securities and Exchange Commission as incorporated by reference into Item 6 of this Amendment No. 3. (Filed herewith.)

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 13 of 14 Pages

 

 

SIGNATURES

 

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

 

	July 8, 2013
	(Date)
	COMMONWEALTH REIT
	/s/ John C. Popeo
	(Signature)
	John C. Popeo, Treasurer and Chief Financial Officer
	(Name/Title)
	REIT MANAGEMENT & RESEARCH LLC
	/s/ Adam D. Portnoy
	(Signature)
	Adam D. Portnoy, President and Chief Executive Officer
	(Name/Title)
	REIT MANAGEMENT & RESEARCH TRUST
	/s/ Adam D. Portnoy
	(Signature)
	Adam D. Portnoy, President and Chief Executive Officer
	(Name/Title)
	BARRY M. PORTNOY
	/s/ Barry M. Portnoy
	(Signature)

 

 

SCHEDULE 13D/A

 

CUSIP NO. 81618T-100

Page 14 of 14 Pages

 

 

	ADAM D. PORTNOY
	/s/ Adam D. Portnoy
	(Signature)

 

Attention. Intentional misstatements or omissions of fact constitute Federal criminal violations (see 18 U.S.C. 1001

 

Exhibit 99.8

 

Selected sections from CommonWealth REIT’s (“CommonWealth”) filings (individually, a “Filing”) with the Securities and Exchange Commission (the “SEC”) and incorporated by reference into Item 6 of Amendment No. 3 to the Schedule 13D, filed by CommonWealth with the SEC on July 2, 2013 (the “Amendment No. 3”) by the Reporting Persons (as defined in Amendment No. 3).

 

All defined terms used in the selected sections herein without definition shall have the meanings ascribed to such terms in the respective Filing from which such selected section is excerpted.

 

“Note 14 to the Notes to Consolidated Financial Statements” appearing in CommonWealth’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, filed with the SEC on May 9, 2013.

 

Note 14.  Related Person Transactions

 

We have no employees.  Personnel and various services we require to operate our business are provided to us by RMR.  We have two agreements with RMR to provide management and administrative services to us: (1) a business management agreement, which relates to our business generally, and (2) a property management agreement, which relates to our property level operations.

 

Under our business management agreement with RMR, we acknowledge that RMR also provides management services to other companies, which include GOV and SIR.  One of our Managing Trustees, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR.  Our other Managing Trustee, Mr. Adam Portnoy, who is also our President, is the son of Mr. Barry Portnoy, and an owner, President, Chief Executive Officer and a director of RMR.  Each of our other executive officers is also an officer of RMR.  GOV’s and SIR’s executive officers are officers of RMR.  A majority of our Independent Trustees also serve as independent directors or independent trustees of other public companies to which RMR provides management services.  Mr. Barry Portnoy serves as a managing director or managing trustee of those companies and Mr. Adam Portnoy serves as a managing trustee of a majority of those companies.  In addition, officers of RMR serve as officers of those companies.

 

Pursuant to our business management agreement with RMR and the business management agreement between SIR and RMR, the business management fees we and SIR recognized on a consolidated basis were $11,905 and $10,383 for the three months ended March 31, 2013 and 2012, respectively.  Excluding fees recognized by SIR, the business management fees we recognized were $9,738 and $10,136 for the three months ended March 31, 2013 and 2012, respectively.  These amounts are included in general and administrative expenses and loss from discontinued operations, as appropriate, in our condensed consolidated financial statements.

 

In connection with our property management agreement with RMR and the property management agreement between SIR and RMR, the aggregate property management and construction supervision fees we and SIR recognized on a consolidated basis were $8,376 and $7,924 for the three months ended March 31, 2013 and 2012, respectively.  Excluding fees recognized by SIR, the property management fees we recognized were $7,118 and $7,766 for the

 

 

three months ended March 31, 2013 and 2012, respectively.  These amounts are included in operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.

 

MacarthurCook Fund Management Limited, or MacarthurCook, previously provided us with business and property management services with respect to our investments in Australia.  Our contract with MacarthurCook terminated on January 31, 2013, and on that date we entered into a business and property management agreement, or the Australia Management Agreement, with RMR Australia Asset Management Pty Limited, or RMR Australia, for the benefit of CWH Australia Trust (formerly the MacarthurCook Industrial Property Fund), a subsidiary of ours, or CWHAT.  The terms of the Australia Management Agreement are substantially similar to the terms of the management agreement we had with MacarthurCook. RMR Australia is owned by our Managing Trustees and it has been granted an Australian financial services license by the Australian Securities & Investments Commission.  The Australia Management Agreement provides for fees payable to RMR Australia for business management and real estate investment services at an annual rate equal to 0.5% of the average historical cost, including the cost of capital improvements, of CWHAT’s real estate investments, as described in the Australia Management Agreement.  The Australia Management Agreement also provides for additional compensation to RMR Australia for property management services at an annual rate equal to 50% of the difference between 3.0% of collected gross rents, including reimbursed operating expenses and taxes, and the aggregate of all amounts paid or payable by or on behalf of CWHAT to third party property managers. Additionally, the Australia Management Agreement provides for further compensation to RMR Australia for construction supervision services at an annual rate equal to 50% of the difference between 5.0% of constructions costs and any amounts paid to third parties for construction management and/or supervision.  Similar to our prior arrangement with respect to fees we paid to MacarthurCook, RMR has agreed to waive half of the fees payable by us under our property management agreement with RMR and half of the business management fees otherwise payable by us under our business management agreement with RMR related to real estate investments that are subject to the Australia Management Agreement for so long as the Australia Management Agreement is in effect and we or any of our subsidiaries are paying the fees under that agreement.  Pursuant to the Australia Management Agreement, the business and property management fees we recognized during the first quarter of 2013 totaled $264 and $56, respectively.  The Australia Management Agreement was approved by our Compensation Committee, which is composed solely of Independent Trustees.

 

GOV was formerly our 100% owned subsidiary.  Our two Managing Trustees, Mr. Barry Portnoy and Mr. Adam Portnoy, are also managing trustees of GOV, and our President, Mr. Adam Portnoy, was the President of GOV from its formation in 2009 until January 2011.  RMR provides management services to both us and GOV.

 

In 2009, GOV completed an initial public offering pursuant to which GOV ceased to be a majority owned subsidiary of ours.  In connection with this offering, we and GOV entered into a transaction agreement that governs our separation from and relationship with GOV.  Pursuant to this transaction agreement, among other things, we granted GOV the right of first refusal to acquire any property owned by us that we determine to divest, if the property is then majority leased to a government tenant.  This right of first refusal applies in the event of an indirect sale of any such properties as a result of a change of control of us.

 

 

Until March 15, 2013, we were GOV’s largest shareholder.  On March 15, 2013, we sold all of our 9,950,000 common shares of GOV in a public offering for net proceeds of $239,576 (after deducting underwriters’ discounts and commissions and estimated expenses).  In connection with this public offering, on March 11, 2013, we entered into a registration agreement with GOV under which we agreed to pay all expenses incurred by GOV relating to the registration and sale of our GOV common shares.  In addition, under the registration agreement, GOV agreed to indemnify CWH, our officers, Trustees and controlling persons, and we agreed to indemnify GOV and GOV’s officers, trustees and controlling persons, against certain liabilities related to the public offering, including liabilities under the Securities Act of 1933, as amended; and we and GOV agreed to reimburse payments that the other may make in respect of those liabilities.

 

SIR was formerly our 100% owned subsidiary.  We are SIR’s largest shareholder and SIR continues to be one of our consolidated subsidiaries.  As of March 31, 2013, we owned 22,000,000 common shares of SIR, which represented approximately 56.0% of SIR’s outstanding common shares.  Our two Managing Trustees, Mr. Barry Portnoy and Mr. Adam Portnoy, are also managing trustees of SIR, and Mr. John Popeo, our Treasurer and Chief Financial Officer, also serves as the Treasurer and Chief Financial Officer of SIR.  In addition, one of our Independent Trustees, Mr. William Lamkin, is an independent trustee of SIR.  RMR provides management services to both us and SIR.

 

On March 12, 2012, SIR completed an initial public offering pursuant to which it issued 9,200,000 of its common shares for net proceeds (after deducting underwriters’ discounts and commissions and estimated expenses) of $180,814.  SIR applied those net proceeds, along with proceeds from drawings under SIR’s revolving credit facility, to repay in full a $400,000 demand promissory note that we received from SIR on February 16, 2012.  SIR issued the $400,000 demand promissory note, along with 22,000,000 SIR common shares, in exchange for our transfer to SIR of 251 properties (approximately 21,400,000 rentable square feet).  SIR also reimbursed us for costs that we incurred in connection with SIR’s organization and preparation for its initial public offering.

 

In connection with the SIR IPO, we and SIR entered into a transaction agreement that governs our separation from and relationship with SIR.  The transaction agreement provides that, among other things, (1) the current assets and liabilities of the 251 properties that we transferred to SIR, as of the time of closing of the SIR IPO, were settled between us and SIR so that we will retain all pre-closing current assets and liabilities and SIR will assume all post-closing current assets and liabilities and (2) SIR will indemnify us with respect to any liability relating to any property transferred by us to SIR, including any liability which relates to periods prior to SIR’s formation, other than the pre-closing current assets and current liabilities that we retained with respect to the 251 transferred properties.

 

On March 25, 2013, we entered into a registration agreement with SIR, and pursuant to the registration agreement, SIR filed a Registration Statement on Form S-11 for a possible public offering, or an Offering, by us of up to all of the 22,000,000 common shares of SIR that we own.  Under the registration agreement, SIR agreed to, among other things, file a registration statement with respect to an Offering of up to all of the 22,000,000 common shares of SIR that we own, and we agreed to pay all expenses incurred by SIR relating to the registration and sale

 

 

of the shares in an Offering.  SIR’s obligation to register the shares for resale in an Offering is subject to certain conditions and may be terminated in certain circumstances, in each case, as described in the registration agreement.  SIR agreed to indemnify us, our officers, Trustees and controlling persons, and we agreed to indemnify SIR and SIR’s officers, trustees and controlling persons, against certain liabilities in connection with an Offering, including liabilities under the Securities Act of 1933, as amended; and we and SIR agreed to reimburse payments that the other may make in respect of those liabilities.  We have not made a decision to sell these shares at this time.

 

We (excluding SIR), RMR, GOV, SIR and four other companies to which RMR provides management services each currently own 12.5% of AIC, an Indiana insurance company.  All of our Trustees, all of the trustees and directors of the other publicly held AIC shareholders and nearly all of the directors of RMR currently serve on the board of directors of AIC.  RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC.

 

As of March 31, 2013, we and SIR collectively have invested $10,544 in AIC since AIC’s formation in November 2008.  SIR became a shareholder of AIC during the quarter ended June 30, 2012.  We and SIR each use the equity method to account for this investment because we and SIR believe that we each have significant influence over AIC because all of our Trustees and all of SIR’s trustees are also directors of AIC.  We and the other shareholders of AIC have purchased property insurance providing $500,000 of coverage pursuant to an insurance program arranged by AIC and with respect to which AIC is a reinsurer of certain coverage amounts.  This program was modified and extended in June 2012 for a one year term, and we and SIR collectively paid premiums, including taxes and fees, of $6,560 in connection with that renewal, which amount may be adjusted from time to time as we or SIR acquire or dispose of properties that are included in this program.  We periodically consider the possibilities for expanding our insurance relationships with AIC to include other types of insurance and may in the future participate in additional insurance offerings AIC may provide or arrange.  We and SIR may invest additional amounts in AIC in the future if the expansion of this insurance business requires additional capital, but we are not obligated to do so.  By participating in this insurance business with RMR and the other companies to which RMR provides management services, we expect that we may benefit financially by possibly reducing our insurance expenses or by realizing our pro rata share of any profits of this insurance business.

 

Excerpts from “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Related Person Transactions” appearing in CommonWealth’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, filed with the SEC on May 9, 2013.

 

Related Person Transactions

 

We have relationships and historical and continuing transactions with our Trustees, our executive officers, RMR, GOV, SIR, AIC and other companies to which RMR provides management services and others affiliated with them.  For example, we have no employees and

 

 

personnel and various services we require to operate our business are provided to us by RMR pursuant to management agreements; and RMR is owned by our Managing Trustees.  Also, as a further example, we have or had relationships with other companies to which RMR provides management services and which have trustees, directors and officers who are also trustees, directors or officers of ours or RMR, including: GOV, which is also our former subsidiary, to which we have previously sold properties; SIR, which is a consolidated subsidiary of ours and to which we have transferred 251 properties in connection with SIR’s initial public offering; and we (separately from SIR), RMR, GOV, SIR and four other companies to which RMR provides management services each currently own 12.5% of AIC, and we and the other shareholders of AIC have property insurance in place providing $500.0 million of coverage pursuant to an insurance program arranged by AIC and with respect to which AIC is a reinsurer of certain coverage amounts.  For further information about these and other such relationships and related person transactions, please see Note 14 to the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report, which is incorporated herein by reference.  In addition, for more information about these transactions and relationships, please see elsewhere in this Quarterly Report, including “Warning Concerning Forward Looking Statements” in Part I, and our Annual Report, our definitive Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on May 14, 2013, or our Proxy Statement, and our other filings with the SEC, including Note 10 to our consolidated financial statements included in our Annual Report, the sections captioned “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Related Person Transactions” and “Warning Concerning Forward Looking Statements” of our Annual Report and the section captioned “Related Person Transactions and Company Review of Such Transactions” and the information regarding our Trustees and executive officers in our Proxy Statement.  In addition, please see the section captioned “Risk Factors” of our Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships.  Our filings with the SEC, including our Annual Report and our Proxy Statement, are available at the SEC’s website at www.sec.gov.  Copies of certain of our agreements with these related parties, including our and SIR’s business management agreements and property management agreements with RMR, various agreements we have entered into with GOV and SIR and our shareholders agreement with AIC and its shareholders, are publicly available as exhibits to our public filings with the SEC and accessible at the SEC’s website.

 

We believe that our agreements with RMR, GOV, SIR and AIC are on commercially reasonable terms.  We also believe that our relationships with RMR, GOV, SIR and AIC and their affiliated and related persons and entities benefit us and, in fact, provide us with competitive advantages in operating and growing our business.