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Business and Property Management Agreements with RMR
9 Months Ended
Sep. 30, 2023
Related Party Transactions [Abstract]  
Business and Property Management Agreements with RMR Business and Property Management Agreements with RMR
We have no employees. The personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR 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 many of our properties, including our medical office and life science properties, and major renovation or repositioning activities at our senior living communities that we may request RMR to manage from time to time. See Note 10 for further information regarding our relationship, agreements and transactions with RMR.
We recognized net business management fees of $3,692 and $3,763 for the three months ended September 30, 2023 and 2022, respectively, and $10,283 and $13,082 for the nine months ended September 30, 2023 and 2022, respectively. Based on our common share total return, as defined in our business management agreement, as of each of September 30, 2023 and 2022, no estimated incentive fees are included in the net business management fees we recognized for the three or nine months ended September 30, 2023 or 2022. The actual amount of annual incentive fees for 2023, if any, will be based on our common share total return as defined in our business management agreement, for the three-year period ending December 31, 2023, and will be payable in January 2024. We did not incur any incentive fee payable for the year ended December 31, 2022. We recognize business management and incentive fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).
We recognized aggregate net property management and construction supervision fees of $2,209 and $2,658 for the three months ended September 30, 2023 and 2022, respectively, and $6,403 and $7,567 for the nine months ended September 30, 2023 and 2022, respectively. For the three months ended September 30, 2023 and 2022, $1,363 and $1,521, respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $846 and $1,137, respectively, were capitalized as building improvements in our condensed consolidated balance sheets. For the nine months ended September 30, 2023 and 2022, $4,226 and $4,142, respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $2,177 and $3,425, respectively, were capitalized as building improvements in our condensed consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.
We are generally responsible for all our operating expenses, including certain expenses incurred or arranged by RMR on our behalf. We are generally not responsible for payment of RMR's employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR's employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR's centralized accounting personnel, our share of RMR's costs for providing our internal audit function, or as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR. We reimbursed RMR $3,671 and $3,498 for these expenses and costs for the three months ended September 30, 2023 and 2022, respectively, and $10,765 and $9,573 for the nine months ended September 30, 2023 and 2022, respectively. These amounts are included in property operating expenses or general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss) for these periods.
In connection with the Merger Agreement, we, OPI and RMR entered into a letter agreement pursuant to which we and RMR acknowledged and agreed that, effective upon consummation of the merger, we shall have terminated our business and property management agreements with RMR for convenience, and RMR shall have waived its right to receive payment of the
termination fee pursuant to each such agreement upon such termination. On September 1, 2023, we and OPI mutually agreed to terminate the Merger Agreement. Since the merger was not consummated, our business and property management agreements with RMR were not terminated and remain in effect.
Management Agreements Between Our Joint Ventures and RMR. We have two separate joint venture arrangements with third party institutional investors, the Seaport JV and the LSMD JV. RMR provides management services to both of these joint ventures. Our joint ventures are not our consolidated subsidiaries and, as a result, we are not obligated to pay management fees to RMR under our management agreements with RMR for the services it provides regarding the joint ventures. We wholly owned the 10 medical office and life science properties included in the LSMD JV until the contribution of these properties to the LSMD JV in January 2022, and we paid management fees to RMR for the management services it provided to us for those properties until the contribution of those properties to the LSMD JV.