Related Person Transactions

12 Months Ended

Sep. 30, 2023

Related Party Transactions [Abstract]

Related Person Transactions

Related Person Transactions

Adam D. Portnoy, Chair of our Board, one of our Managing Directors and our President and Chief Executive Officer, is the sole trustee, an officer and the controlling shareholder 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 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 of each of the Perpetual Capital clients, the controlling shareholder and a director of Sonesta (and its parent) and was the 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. Mr. Portnoy was the chair of the board and a managing director of TA until May 15, 2023 when TA was acquired by BP. Ms. Clark is a managing trustee of OPI and 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 September 30, 2023, Adam D. Portnoy beneficially owned, 13.4% of SEVN’s outstanding common shares (including through Tremont and ABP Trust) and 9.8% of DHC’s outstanding common shares (including through ABP Trust). In addition, Mr. Portnoy beneficially owns shares of ILPT, OPI, SVC, and prior to May 15, 2023, 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 pursuant to management agreements with them. The officers of the Managed Equity REITs are officers or employees of RMR LLC. All the officers, overhead and required office space of SEVN are provided or arranged by Tremont, and prior to the Tremont Merger, Tremont provided or arranged for the officers, overhead and required office space for TRMT. All of SEVN’s officers are officers or employees of Tremont or RMR LLC. Some of the executive officers of TA (prior to May 15, 2023), one of the executive officers of AlerisLife and one of the executive officers of Sonesta are (or were with respect to TA) officers or employees of RMR LLC. Our executive officers are also managing trustees of certain of the Perpetual Capital clients.

Revenues from Related Parties

For the fiscal years ended September 30, 2023, 2022 and 2021, we recognized revenues from related parties as set forth in the following tables:

	Fiscal Year Ended September 30, 2023
	Total		Total
	Management and Advisory		Reimbursable		Total
	Services Revenues		Costs		Revenues
Perpetual Capital:
DHC	$	23,675	$	156,224	$	179,899
ILPT	36,834		40,438		77,272
OPI	38,163		334,208		372,371
SVC	40,543		117,421		157,964
Total Managed Equity REITs	139,215		648,291		787,506
SEVN	5,188		4,865		10,053
TA (1)	55,214		3,476		58,690
	199,617		656,632		856,249
Private Capital:
AlerisLife	5,414		97		5,511
Sonesta	9,471		544		10,015
Other private entities	21,531		68,879		90,410
	36,416		69,520		105,936
Total revenues from related parties	236,033		726,152		962,185
Revenues from unrelated parties	131		—		131
Total revenues	$	236,164	$	726,152	$	962,316

(1)On May 15, 2023, BP acquired TA and TA terminated its management agreement with us. In connection with the termination of TA’s management agreement, we received the applicable termination fee of $45,282. For further information, see “TA Merger” below.

	Fiscal Year Ended September 30, 2022
	Total		Total
	Management and Advisory		Reimbursable		Total
	Services Revenues		Costs		Revenues
Perpetual Capital: (1)
DHC	$	30,343	$	157,770	$	188,113
ILPT	31,354		33,593		64,947
OPI	42,204		308,139		350,343
SVC	44,193		67,844		112,037
Total Managed Equity REITs	148,094		567,346		715,440
SEVN	4,530		5,692		10,222
TA	15,926		2,060		17,986
	168,550		575,098		743,648
Private Capital: (1)
AlerisLife	4,908		309		5,217
Sonesta	8,726		396		9,122
Other private entities	17,697		56,720		74,417
	31,331		57,425		88,756
Total revenues from related parties	199,881		632,523		832,404
Revenues from unrelated parties	99		—		99
Total revenues	$	199,980	$	632,523	$	832,503

(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.

	Fiscal Year Ended September 30, 2021
	Total		Total
	Management and Advisory		Reimbursable		Total
	Services Revenues		Costs		Revenues
Perpetual Capital:
DHC	$	36,372	$	135,146	$	171,518
ILPT	17,745		20,094		37,839
OPI	37,251		206,351		243,602
SVC	45,854		33,552		79,406
Total Managed Equity REITs	137,222		395,143		532,365
SEVN	2,798		2,129		4,927
TRMT (1)	1,778		3,620		5,398
TA	13,727		774		14,501
	155,525		401,666		557,191
Private Capital:
AlerisLife	7,123		368		7,491
Sonesta	4,497		196		4,693
Other private entities	8,066		29,330		37,396
	19,686		29,894		49,580
Total revenues from related parties	175,211		431,560		606,771
Revenues from unrelated parties	467		—		467
Total revenues	$	175,678	$	431,560	$	607,238

(1)As discussed in Note 1, Organization, TRMT merged with and into SEVN on September 30, 2021, with SEVN continuing as the surviving company. This table presents revenues for the fiscal year ended September 30, 2021, for TRMT separately as they relate to a period prior to the Tremont Merger.

For additional information regarding our management or advisory agreements with these related parties, see Note 2, Summary of Significant Accounting Policies.

Amounts Due From Related Parties

The following table presents amounts due from related parties as of the dates indicated:

	September 30,
	2023						2022
	Accounts		Reimbursable				Accounts		Reimbursable
	Receivable		Costs		Total		Receivable		Costs		Total
Perpetual Capital:
DHC	$	5,953	$	13,434	$	19,387	$	8,098	$	14,148	$	22,246
ILPT	4,597		5,869		10,466		3,235		13,717		16,952
OPI	7,427		51,912		59,339		335		47,943		48,278
SVC	5,528		8,423		13,951		5,627		5,357		10,984
Total Managed Equity REITs	23,505		79,638		103,143		17,295		81,165		98,460
SEVN	1,663		1,921		3,584		1,768		1,262		3,030
TA	—		—		—		124		11,635		11,759
	25,168		81,559		106,727		19,187		94,062		113,249
Private Capital:
AlerisLife	74		—		74		112		492		604
Sonesta	89		—		89		127		290		417
Other private entities	4,634		7,060		11,694		1,658		7,450		9,108
	4,797		7,060		11,857		1,897		8,232		10,129
	$	29,965	$	88,619	$	118,584	$	21,084	$	102,294	$	123,378

Leases

As of September 30, 2023, RMR LLC leased from ABP Trust and certain Managed Equity REITs office space for use as our headquarters and local offices. During the fiscal years ended September 30, 2023, 2022 and 2021, we incurred rental expense under related party leases aggregating $5,329, $5,859 and $5,667, respectively. Our related party leases have various termination dates and many have renewal options. Some of our related party leases are terminable on 30 days’ notice and many allow us to terminate early if our management agreements for the buildings in which we lease space are terminated. For additional information regarding these leases, see Note 10, Leases.

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. During the fiscal years ended September 30, 2023, 2022 and 2021, we paid $2,355, $2,209 and $2,158, respectively, to ABP Trust pursuant to the tax receivable agreement. As of September 30, 2023, our consolidated balance sheet reflects a liability related to the tax receivable agreement of $23,229, including $2,343 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 2024.

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 fiscal years ended September 30, 2023, 2022 and 2021, pursuant to the RMR LLC operating agreement, RMR LLC made required quarterly tax distributions to holders of its membership units totaling $65,486, $30,281 and $31,469, respectively, of which $34,541, $15,940 and $16,764, respectively, was distributed to us and $30,945, $14,341 and $14,705, 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 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.

Purchase of SEVN Shares

On May 11, 2022, Tremont purchased 882,407 SEVN common shares of beneficial interest from Diane Portnoy, the mother of Adam D. Portnoy, for an aggregate purchase price of $9,469.

ABP Trust’s Acquisition of AlerisLife

On March 20, 2023, ABP Trust acquired AlerisLife, or the AlerisLife Acquisition. In connection with the AlerisLife Acquisition, 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 such termination. In consideration of this waiver, RMR LLC and ABP Trust amended and restated their management agreement to provide that (i) RMR LLC will also provide services to AlerisLife at ABP Trust’s request, (ii) 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 (iii) AlerisLife’s properties will not be subject to ABP Trust’s property management agreement with RMR LLC.

TA Merger

On May 15, 2023, BP acquired TA for $86.00 per TA common share in cash, or the TA Merger. RMR LLC received $53,479 for its TA common shares in the transaction. Upon consummation of the acquisition, TA terminated its business management agreement with us and in accordance with its terms paid us the applicable termination fee of $45,282.

Termination of OPI’s Merger Agreement with DHC

On September 1, 2023, DHC and OPI mutually agreed to terminate the Agreement and Plan of Merger, dated April 11, 2023, or the DHC-OPI Merger Agreement. Contemporaneously with the execution of the DHC-OPI Merger Agreement, we, DHC and OPI entered into a letter agreement, pursuant to which, we and DHC acknowledged and agreed that, effective upon the consummation of the transactions contemplated by the DHC-OPI Merger Agreement, or 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. Since the DHC-OPI Merger was not consummated, DHC’s business and property management agreements with us were not terminated and remain in effect. 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 OPI Amended Property Management Agreement. The effectiveness of the OPI Amended Property Management Agreement was conditioned upon the consummation of the DHC-OPI Merger. Since the DHC-OPI Merger was not consummated, the OPI Amended Property Management Agreement did not become effective, and OPI’s existing property management agreement with us remains in effect.

Registration and Lock-up Agreements

The following registration rights and lock-up agreements are in effect:

•ABP Trust Registration Rights Agreement. RMR Inc. is party to a registration rights agreement with ABP Trust pursuant to which RMR Inc. has granted ABP Trust demand and piggyback registration rights, subject to certain limitations, covering the Class A Common Shares ABP Trust owns, including the shares received on conversion of Class B-1 Common Shares or redemption of the paired Class B-2 Common Shares and Class A Units of RMR LLC.

•Founders Registration Rights and Lock-Up Agreements. Adam D. Portnoy and ABP Trust are parties to a registration rights and lock-up agreement with each of DHC, OPI and SVC with respect to each such Managed Equity REITs’ common shares. Pursuant to that agreement, ABP Trust and Adam D. Portnoy agreed not to transfer the Managed Equity REITs’ common shares they acquired in connection with RMR LLC’s reorganization in June 2015 for a period of ten years, subject to certain exceptions, and each of those Managed Equity REITs has granted ABP Trust and Adam D. Portnoy demand and piggyback registration rights, subject to certain limitations.

Separation Arrangements

We enter into retirement agreements with certain of our former executive officers. Pursuant to these agreements, we make various cash payments and accelerate the vesting of unvested shares of RMR Inc. previously awarded to these retiring officers. We also enter into separation arrangements from time to time with 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 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, a former Executive Vice President of RMR LLC. Mr. Pertchik also served as chief executive officer and was a managing director of TA. Mr. Pertchik resigned as our Executive Vice President, effective 11:59 p.m. on May 14, 2023, the date prior to the closing of the TA Merger, or the Separation Date. Pursuant to the Separation Agreement, RMR LLC paid Mr. Pertchik $211 following the TA Merger and 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.

For the fiscal years ended September 30, 2023, 2022 and 2021, we recognized separation costs of $2,002, $1,315 and $4,525, respectively, including cash separation costs of $1,520, $1,152 and $4,042, respectively, and equity based separation costs of $482, $163 and $483, respectively.

SEVN Property Management Agreement

We entered into a property management agreement with SEVN in July 2023 with respect to an office property SEVN owns. Pursuant to this agreement, we provide property management services and SEVN pays us fees equal to 3.0% of gross collected rents. Also under the terms of this property management agreement, SEVN pays us additional fees for construction supervision services equal to 5.0% of the cost of such construction. Either we or SEVN may terminate this agreement upon 30 days’ prior notice. No termination fee would be payable as a result of terminating the agreement.

Other

The Managed Equity REITs and SEVN award, and during calendar years 2021 and 2022, AlerisLife and TA awarded, common shares directly to certain of our officers and employees in connection with the provision of services to those companies. For a description of the accounting implications to us of these share awards, see Note 2, Summary of Significant Accounting Policies, and Note 6, Shareholders’ Equity.

The compensation of certain senior executives of TA (prior to May 15, 2023), one senior executive of AlerisLife and one senior executive of Sonesta, who are also employees or officers of RMR LLC, is the sole responsibility of the party to or on behalf of which the individual renders services. In the past, because at least 80.0% of each of these executives’ business time was devoted to services to TA, AlerisLife or Sonesta, as applicable, 80.0% of their total cash compensation was paid by TA, AlerisLife or Sonesta, as applicable, and the remainder was paid by RMR LLC.