Equity Investments

6 Months Ended

Jun. 30, 2013

Equity Investments

Equity Investments

Note 6.  Equity Investments

At June 30, 2013 and December 31, 2012, we had the following equity investments in Government Properties Income Trust, or GOV, and Affiliates Insurance Company, or AIC (including 100% attribution of SIR’s 12.5% equity ownership interest in AIC):

	Ownership Percentage				Equity Investments				Equity in Earnings
									Three Months Ended				Six Months Ended
	June 30,		December 31,		June 30,		December 31,		June 30,				June 30,
	2013		2012		2013		2012		2013		2012		2013		2012
GOV	—	%	18.2	%	$	—	$	173,452	$	—	$	2,680	$	4,111	$	5,593
AIC	25.0	%	25.0	%	11,407		11,259		159		149		310		194
					$	11,407	$	184,711	$	159	$	2,829	$	4,421	$	5,787

On March 15, 2013, we sold all 9,950,000 common shares that we owned of GOV in a public offering for $25.20 per common share, raising gross proceeds of $250,740 ($239,576 after deducting underwriters’ discounts and commissions and expenses).  We recognized a gain on this sale of an equity investment of $66,293 as a result of the per share sales price of this transaction being above our per share carrying value.  GOV is a REIT which primarily owns properties that are majority leased to government tenants and was our wholly owned subsidiary until its initial public offering in June 2009 when it became a separate public entity.

During the six months ended June 30, 2013 and 2012, we received cash distributions from GOV totaling $4,279 and $8,358, respectively.

As of June 30, 2013, we and SIR have invested a total of $10,544 in AIC, an insurance company owned in equal proportion by Reit Management & Research LLC, our business and property manager, or RMR, us (excluding SIR’s AIC interest), SIR and five other companies to which RMR provides management services, including GOV.  We and SIR may invest additional amounts in AIC in the future if the expansion of this insurance business requires additional capital, but we and SIR are not obligated to do so.  At June 30, 2013, we (without SIR) and SIR each owned 12.5% of AIC with a combined carrying value of $11,407.  We and SIR 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.  Under the equity method, we record our and SIR’s percentage share of net earnings from AIC in our condensed consolidated statements of operations.  If we determine there is an “other than temporary” decline in the fair value of this investment, we would record a charge to earnings.  In evaluating the fair value of this investment, we have considered, among other things, the assets and liabilities held by AIC, AIC’s overall financial condition and the financial condition and prospects for AIC’s insurance business.  See Note 15 for additional information about our and SIR’s investment in AIC.