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Business and Property Management Agreements with RMR LLC
9 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
Business and Property Management Agreements with RMR LLC
Business and Property Management Agreements with RMR LLC
We have no employees. The personnel and various services we require to operate our business are provided to us by RMR LLC. We have two agreements with RMR LLC to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to the property level operations of our MOBs. We also have a subsidiary level management agreement with RMR LLC related to one of our MOBs located in Boston, Massachusetts, which we entered in connection with the joint venture arrangement for that MOB. Under that agreement, our subsidiary pays RMR LLC certain business management fees directly, which fees are credited against the business management fees payable by us to RMR LLC.
Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $17,744 and $9,609 for the three months ended September 30, 2017 and 2016, respectively, and $50,956 and $27,199 for the nine months ended September 30, 2017 and 2016, respectively. The business management fees for the three and nine months ended September 30, 2017 also include $725 and $1,512, respectively, of management fees related to our subsidiary level management agreement with RMR LLC entered in connection with our joint venture arrangement. The business management fees for the three and nine months ended September 30, 2017 included estimated annual incentive fees for 2017 of $8,022 and $22,048, respectively, based on our common share total return, as defined, as of September 30, 2017. Although we recognized estimated incentive fees in accordance with GAAP, the actual amount of annual incentive fees payable to RMR LLC for 2017, if any, will be based on our common share total return, as defined, for the three year period ending December 31, 2017, and will be payable in 2018. The net business management fees we recognized for the 2017 and 2016 periods are included in general and administrative expense in our consolidated statements of comprehensive income.
Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $2,736 and $2,961 for the three months ended September 30, 2017 and 2016, respectively, and $8,034 and $8,193 for the nine months ended September 30, 2017 and 2016, respectively. These amounts are included in property operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.
We are generally responsible for all of our operating expenses, including certain expenses incurred by RMR LLC on our behalf. Our property level operating expenses, including certain payroll and related costs incurred by RMR LLC, are generally incorporated into rents charged to our tenants. We reimbursed RMR LLC $2,353 and $2,482 for property management related expenses for the three months ended September 30, 2017 and 2016, respectively, and $7,116 and $6,781 for the nine months ended September 30, 2017 and 2016, respectively, which amounts are included in property operating expenses in our condensed consolidated statements of comprehensive income. In addition, we are responsible for our share of RMR LLC's costs for providing our internal audit function. The amounts recognized as expense for internal audit costs were $72 and $34 for the three months ended September 30, 2017 and 2016, respectively, and $206 and $168 for the nine months ended September 30, 2017 and 2016, respectively, which amounts are included in general and administrative expense in our condensed consolidated statements of comprehensive income.