Equity Investments

At December 31, 2014 and 2013, we had the following equity investments (in thousands):



	Ownership Percentage				Equity Investments				Equity in Earnings
	December 31,				December 31,				Year Ended December 31,
	2014		2013		2014		2013		2014			2013		2012
SIR	—	%	44.2	%	$	—	$	512,078	$	24,516		$	21,153	$	—
GOV	—	%	—	%	—		—		—			4,111		10,836
AIC	—	%	12.5	%	—		5,913		(56		)	490		584
					$	—	$	517,991	$	24,460		$	25,754	$	11,420

Investment in SIR

SIR is a REIT that is primarily focused on owning and investing in net leased, single tenant properties. SIR was one of our consolidated subsidiaries until July 2, 2013 and was an unconsolidated equity investment from July 2, 2013 until July 9, 2014. At December 31, 2013, we owned 22,000,000, or approximately 44.2%, of the common shares of beneficial interest of SIR, with a carrying value of $512.1 million and a market value, based on quoted market prices, of $588.3 million ($26.74 per share). On July 9, 2014, we sold our entire stake of 22,000,000 common shares of SIR. We received $704.8 million in cash representing $32.04 per share and recognized a gain on sale of equity investment of $171.6 million in our consolidated statement of operations. Proceeds from this sale were used to repay our revolving credit facility and certain mortgage loans (Note 9). As a result of this sale, we no longer hold any interest in SIR.

During the second quarter of 2014, SIR issued 10,000,000 common shares in a public offering for $29.00 per common share, raising net proceeds (after deducting underwriters’ discounts and commissions and expenses) of approximately $277.4 million. We recognized a gain on this sale by an equity investee of $16.9 million as a result of the per share sales price of this transaction being above our per share carrying value. Our ownership percentage in SIR was reduced to 36.7% as a result of the transaction.

On July 2, 2013, SIR issued and sold to the public 10,500,000 of its common shares for $28.25 per common share. Prior to the completion of this offering, our 22,000,000 common shares of SIR represented approximately 56.0% of SIR's outstanding common shares, and SIR was one of our consolidated subsidiaries. Following the completion of this offering, our 22,000,000 common shares of SIR represented approximately 44.2% of SIR's outstanding common shares and SIR ceased to be our consolidated subsidiary.

Accordingly, since the completion of this offering on July 2, 2013, we no longer consolidated our investment in SIR, but instead account for this investment under the equity method. Under the equity method, we recorded our percentage share of net earnings of SIR in our consolidated statements of operations. Prior to July 2, 2013, the operating results and investments of SIR were included in our consolidated results of operations and financial position. On July 2, 2013, our share of the underlying equity of SIR exceeded our carrying value by $17.6 million. As required under GAAP, we amortized this difference to equity in earnings of investees over a 34 year period, which approximates the average remaining useful lives of the buildings owned by SIR as of July 2, 2013. See Notes 1 and 19 for additional information regarding SIR.

For the period from July 2, 2013 through December 31, 2013, we received cash distributions from SIR totaling $19.8 million. For the period from January 1, 2014 through July 9, 2014, we received cash distributions from SIR totaling $20.7 million.

The following summarized financial data of SIR as reported in SIR's Annual Report on Form 10-K for the year ended December 31, 2013, or the SIR Annual Report, includes the financial position and results of operations for periods prior to July 2, 2013 (the date SIR ceased to be our consolidated subsidiary), which are included in our consolidated results of operations when SIR was our consolidated subsidiary. References in our financial statements to the SIR Annual Report are included as references to the source of the data only, and the information in the SIR Annual Report is not incorporated by reference into our financial statements. Summarized balance sheet information of SIR as of July 9, 2014, the date of sale, and December 31, 2013 and income statement information through July 9, 2014 is as follows (in thousands, except per share data):



	July 9, 2014		December 31, 2013
Real estate properties, net	$	1,772,684	$	1,579,234
Acquired real estate leases, net	125,163		129,426
Cash and cash equivalents	27,531		20,025
Rents receivable, net	60,474		55,335
Other assets, net	17,698		17,839
Total assets	$	2,003,550	$	1,801,859
Revolving credit facility	$	74,000	$	159,000
Term loan	350,000		350,000
Mortgage notes payable	19,069		27,147
Assumed real estate lease obligations, net	26,945		26,966
Other liabilities	44,225		40,055
Shareholders' equity	1,489,311		1,198,691
Total liabilities and shareholders' equity	$	2,003,550	$	1,801,859



	For the Period from January 1, 2014 through July 9, 2014			Year Ended December 31,
	For the Period from January 1, 2014 through July 9, 2014			2013			2012
Rental income	$	98,226		$	159,011		$	105,559
Tenant reimbursements and other income	16,980			29,312			17,231
Total revenues	115,206			188,323			122,790
Operating expenses	20,982			36,382			23,796
Depreciation and amortization	20,832			31,091			14,860
Acquisition related costs	374			2,002			2,470
General and administrative	7,731			12,423			8,203
Total expenses	49,919			81,898			49,329
Operating income	65,287			106,425			73,461
Interest expense	(7,287		)	(13,763		)	(7,565		)
Gain on early extinguishment of debt	243			—			—
Income before income tax expense and equity in earnings of an investee	58,243			92,662			65,896
Income tax (expense) benefit	(90		)	96			(290		)
Equity in earnings of an investee	32			334			269
Net income	$	58,185		$	93,092		$	65,875
Weighted average common shares outstanding	52,394			44,565			27,122
Net income per common share	$	1.11		$	2.09		$	2.43

Investment in GOV

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 $250.7 million ($239.6 million after deducting underwriters' discounts and commissions and expenses). We recognized a gain on this sale of an equity investment of $66.3 million 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 years ended December 31, 2013 and 2012, we received cash distributions from GOV totaling $4.3 million and $16.8 million, respectively.

The following summarized financial data of GOV for the year ended December 31, 2012, is as reported in GOV's Annual Report on Form 10-K for the year ended December 31, 2013, or the GOV Annual Report. References in our financial statements to the GOV Annual Report are included as references to the source of the data only, and the information in the GOV Annual Report is not incorporated by reference into our financial statements. Summarized income statement information for the year ended December 31, 2012 is as follows (in thousands, except per share data):



	Year Ended December 31, 2012
Rental income	$	203,700
Operating expenses	75,326
Depreciation and amortization	49,070
Acquisition related costs	1,614
General and administrative	11,924
Total expenses	137,934
Operating income	65,766
Interest and other income	29
Interest expense	(16,892		)
Income from continuing operations before income tax expense and equity in earnings of an investee	48,903
Income tax expense	(159		)
Equity in earnings of an investee	316
Income from continuing operations	49,060
Income from discontinued operations	900
Net income	$	49,960
Weighted average common shares outstanding	48,617
Per common share:
Income from continuing operations	$	1.01
Income from discontinued operations	$	0.02
Net income	$	1.03

Investment in AIC

As of May 9, 2014, we had a net investment of $5.8 million in AIC, an insurance company owned in equal proportion until May 9, 2014 by us, our former manager RMR, GOV, SIR and four other companies to which RMR provides management services. On May 9, 2014, as a result of the removal of the former Trustees and in accordance with the terms of the shareholders agreement between us and the other AIC shareholders, the other AIC shareholders exercised their right to purchase all of the 20,000 shares of AIC we then owned. We received $5.8 million in aggregate proceeds from this sale. We no longer own any interest in AIC. Our participation in the AIC property insurance program expired in June 2014. See Note 19 for additional information about our investment in AIC.