Related Person Transactions

9 Months Ended

Sep. 30, 2011

Related Person Transactions

Related Person Transactions

Note 11.  Related Person Transactions

We have no employees.  Instead, services that might be provided to us by employees are provided to us by RMR.  RMR provides both business and property management services to us under a business management agreement and a property management agreement.  In connection with these agreements with RMR, we recognized expenses of $9,432 and $8,378 during the three months ended September 30, 2011 and 2010, respectively.  During the nine months ended September 30, 2011 and 2010, we recognized $26,306 and $24,786, respectively, of expenses under these agreements.  These amounts are included in general and administrative expenses in our condensed consolidated statements of income.  RMR also provides management services to other companies including TA. One of our Managing Trustees, Barry Portnoy, is Chairman and majority owner of RMR and serves as managing director of TA.  Our other Managing Trustee, Adam Portnoy, is Mr. Barry Portnoy’s son, and is an owner, President, Chief Executive Officer and a director of RMR.  Our executive officers and TA’s executive officers are officers of RMR.  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 his son serves as a managing trustee of a majority of those companies.  On November 2, 2011, we and RMR amended our business management agreement to provide that, for purposes of determining the fees we pay to RMR under that agreement, which are based on a percentage of the value of our properties as determined under the agreement, the value of properties we may acquire from certain other companies to which RMR provides management services will be based upon the seller’s historical cost for those properties rather than our acquisition costs and to provide other companies to which RMR provides management services a right of first offer on properties of ours that we determine to sell if such properties are primarily of a type that are within the investment focus of such other companies.  This amendment is further described in Part II, Item 5 of this Quarterly Report on Form 10-Q.

TA was formerly our 100% owned subsidiary and it became a public company in a spin off transaction in 2007.  TA is our largest tenant and we are its largest shareholder.  As of September 30, 2011, we owned 2,540,000 common shares of TA (approximately 9.1% of its total shares outstanding).  RMR provides certain management services to both us and TA.  Our travel center leases with TA do not require FF&E escrow deposits.  However, TA is required to maintain the leased travel centers, including structural and non-structural components.  Under both of our leases with TA, TA may request that we fund additional amounts for capital improvements to the leased facilities in return for minimum rent increases.  We funded $45,563 for capital improvements to TA under this lease provision during the nine months ended September 30, 2011 and currently expect to fund additional amounts for capital improvements to our properties during the remainder of 2011 using funds from our existing cash balances or borrowings under our revolving credit facility. However, TA is not required to request that we fund those capital improvements it makes to our properties and we are not required to fund any such request.  See Note 10 above for more information about our leases with TA.

We and the other six shareholders of AIC each currently own approximately 14.29% of the outstanding equity of AIC.  The other shareholders of AIC are RMR and five other companies, including TA, to which RMR provides management services.  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.  Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC because all of our Trustees are directors of AIC.  As of September 30, 2011, we have invested approximately $5,209 in AIC.  We 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.  Our investment had a carrying value of $5,245 and $5,077 as of September 30, 2011 and December 31, 2010, respectively.  During the three and nine months ended September 30, 2011 and 2010 we recognized income of approximately $28 and $111 and income of approximately $34 and a loss of approximately $17, respectively, related to this investment.  In 2010, AIC designed a combination property insurance program for us and other AIC shareholders in which AIC participated as a reinsurer. This program was modified and extended in June 2011 for a one year term.  Our total premiums under this program for the policy years expiring May 31, 2011 and 2012 were approximately $5,773 and $4,816, respectively.  The amounts we expensed in relation to those insurance premiums for the nine months ended September 30, 2011 and 2010, were $4,010 and $1,924, respectively, and for the three months ended September 30, 2011 and 2010, were $1,204 and $1,443, respectively.  We are currently investigating the possibilities to expand our insurance relationships with AIC to include other types of insurance.  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.

For more information about these and other relationships among us, our Trustees, our executive officers, TA, RMR, AIC, other companies to which RMR provides management services, and others affiliated with or related to them and about the risks which may arise as a result of those and other related person transactions and relationships, please see elsewhere in this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations––Related Person Transactions” in Part I, Item 2 and “Warning Concerning Forward Looking Statements”, and our 2010 Annual Report, our Proxy Statement for our 2011 Annual Meeting of Shareholders dated February 22, 2011, or our Proxy Statement, and our other filings with the SEC, including 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”, in our 2010 Annual Report, and the information regarding our Trustees and executive officers and the section captioned “Related Person Transactions and Company Review of Such Transactions” in our Proxy Statement.  In addition, please see the “Risk Factors” section of our 2010 Annual Report for a description of risks which may arise from these transactions and relationships.  Our filings with the SEC, including our 2010 Annual Report and our Proxy Statement, are available at the SEC’s website at www.sec.gov.  In addition, copies of certain of our agreements with these parties are also publicly available as exhibits to our public filings with the SEC and accessible at the SEC’s website, including our business management agreement and property management agreement with RMR and our leases, deferral agreement and amendments to those leases and agreement with TA.