Shareholders’ Equity

Common Shares

RMR Inc.’s authorized capital stock consists of 31,600,000 shares of Class A Common Shares, 1,000,000 Class B‑1 Common Shares and 15,000,000 Class B‑2 Common Shares.

Class A Common Shares—In the Up‑C Transaction, the Managed REITs contributed cash and equity interests in the Managed REITs with a combined fair value of $167,764 and received 15,000,000 shares of RMR Inc.’s Class A Common Shares. We recorded an increase of $15 to the par value of Class A Common Shares and $361,570 to additional paid in capital. The increase in the par value and additional paid in capital represents the combination of the cash, the fair value of the Managed REITs’ shares and the additional consideration received from the Managed REITs as described above in Note 6, Related Person Transactions. Class A Common Shares entitle holders to one vote for each share held of record on all matters submitted to a vote of shareholders. The additional authorized 600,000 Class A Common Shares represent the shares reserved for issuance under our 2016 Omnibus Equity Plan, or our 2016 Plan.

Class B‑1 Common Shares—In the Up‑C Transaction, ABP Trust contributed $11,520 in cash to RMR Inc. and RMR Inc. issued the 1,000,000 Class B‑1 Common Shares to ABP Trust. We recorded an increase of $1 to the par value of Class B‑1 Common Shares and $11,519 to additional paid in capital. Class B‑1 Common Shares entitle holders to ten votes for each share on all matters submitted to a vote of shareholders. Each Class B‑1 Common Share may, at the option of its holder, be converted into a Class A Common Share, on a one for one basis.

Class B‑2 Common Shares—In the Up‑C Transaction, we issued 15,000,000 Class B‑2 Common Shares to ABP Trust, which are paired with the 15,000,000 RMR LLC Class A Units owned by ABP Trust and have no independent economic interest in RMR Inc. We paid $167,764 to ABP Trust in exchange for 15,000,000 Class A Units of RMR LLC and recognized a deemed distribution of $165,796 as a result of recording the 15,000,000 RMR LLC Class A Units at ABP Trust’s carrying value because this transaction was considered to be between entities under common control. The deemed distribution represents the consideration of $167,764, the issuance of the Class B‑2 Common Shares ($15 of par value) less the historical basis of $1,983 in the portion of RMR LLC sold to RMR Inc. Class B‑2 Common Shares are entitled to ten votes for each share on all matters submitted to a vote of shareholders. The Class A Units may, at the option of the holder, be redeemed for Class A Common Shares on a one to one basis, and upon such redemption our Class B‑2 Common Shares that are paired with the Class A Units are automatically cancelled. RMR Inc. has the option to settle the redemption in cash. Holders of our Class A Common Shares, Class B‑1 Common Shares and Class B‑2 Common Shares vote together as a single class on all matters submitted to a vote of our common shareholders except as required by law and except for amendments to our charter that materially and adversely affect a single class of common shares, in which case, the affected class of shares shall have the right to vote separately on such amendments.

Issuances

On March 9, 2016, under our 2016 Plan, we granted 2,500 of our Class A Common Shares valued at $23.27 per share, the closing price of our Class A Common Shares on the Nasdaq Stock Market LLC, or Nasdaq, on that day, to each of our then three Independent Directors as part of their annual compensation. These Class A Common Shares awarded to our Independent Directors vested immediately. In connection with the grant of Class A Common Shares to our Independent Directors, and as required by the RMR LLC Operating Agreement, RMR LLC concurrently issued 7,500 Class A Units to RMR Inc.

On September 15, 2016, pursuant to our 2016 Plan, we granted an aggregate of 77,200 of our Class A Common Shares valued at $37.84 per share, the closing price of our Class A Common Shares on the Nasdaq on that day, to our Managing Directors and certain of our officers and employees. The 2,500 Class A Common Shares granted to each of our Managing Directors in their capacities as Managing Directors vested immediately and the 72,200 Class A Common Shares awarded to our officers and employees (including the Class A Common Shares granted to our Managing Directors in their capacities as our officers and employees) vest in five equal annual installments beginning on the date of the grant. In connection with the grant of Class A Common Shares to our Managing Directors and our officers and employees, and as required by the RMR LLC Operating Agreement, RMR LLC concurrently issued 77,200 Class A Units to RMR Inc.

The value of the shares granted to our Managing Directors and Independent Directors are included in general and administrative expense in our consolidated financial statements. Shares granted to our officers and employees are included in compensation and benefits expense in our consolidated financial statements.

In the fiscal year ended September 30, 2016, officers and employees who were recipients of our share awards were permitted to elect to have us withhold the number of their then vesting common shares with a fair market value sufficient to fund the minimum required tax withholding obligations with respect to their vesting share awards in satisfaction of those tax withholding obligations. In September 2016, we acquired through this share withholding process 2,268 Class A Common Shares with an aggregate value of $91, which is reflected as a decrease to shareholders' equity in our consolidated balance sheets. In connection with the acquisition of 2,268 Class A Common Shares, and as required by the RMR LLC Operating Agreement, RMR LLC concurrently acquired 2,268 Class A Units from RMR Inc.

A summary of shares granted and vested under the terms of our 2016 Plan for the year ended September 30, 2016, is as follows:



			Weighted
			Average
			Grant Date
	Number of shares		Fair Value
Unvested shares, beginning of year	—		$	—
Shares granted	84,700		36.55
Shares repurchased	(2,268	)	40.25
Shares vested, net of shares repurchased	(24,672	)	33.41
Unvested shares, end of year	57,760		$	37.84

The 57,760 unvested shares as of September 30, 2016 are scheduled to vest in annual installments of 14,440 shares in each of fiscal 2017, 2018, 2019 and 2020. As of September 30, 2016, the estimated future compensation expense for the unvested shares was $2,186 based on grant date fair value of these shares. The weighted average period over which this compensation expense will be recorded is approximately 24 months. During the fiscal year ended September 30, 2016, we recorded general and administrative expenses of $364 and compensation and benefits expenses of $569 related to awards we made under our 2016 Plan. At September 30, 2016, 517,568 of our common shares remained available for issuance under our 2016 Plan.

Distributions

On December 15, 2015, we paid a dividend on our Class A Common Shares and Class B-1 Common Shares, in the amount of $0.5260 per Class A Common Share and Class B-1 Common Share, or $8,416. This dividend was paid to our shareholders of record as of the close of business on November 25, 2015, which included the Managed REITs and ABP Trust. The amount of this dividend was calculated as $0.25 per share per quarter pro rata for the period June 5, 2015 to December 14, 2015. This dividend was funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.5260 per unit, or $16,306, of which $8,416 was distributed to us based on our then aggregate ownership of 16,000,000 membership units of RMR LLC and $7,890 was distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC.

On May 19, 2016, we paid a dividend on our Class A Common Shares and Class B-1 Common Shares, in the amount of $0.2993 per Class A Common Share and Class B-1 Common Share, or $4,791. This dividend was paid to our shareholders of record as of the close of business on April 25, 2016. The amount of this dividend was calculated as $0.25 per share for the quarter ended March 31, 2016, plus a pro rata dividend in respect of the period from December 14, 2015 through and including December 31, 2015. This dividend was funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.2993 per unit, or $9,280, of which $4,791 was distributed to us based on our then aggregate ownership of 16,007,500 membership units of RMR LLC and $4,489 was distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC.

On August 18, 2016, we paid a dividend on our Class A Common Shares and Class B-1 Common Shares, in the amount of $0.25 per Class A Common Share and Class B-1 Common Share, or $4,002. This dividend was paid to our shareholders of record as of the close of business on July 22, 2016. The amount of this dividend was calculated as $0.25 per share for the quarter ended June 30, 2016. This dividend was funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.25 per unit, or $7,752, of which $4,002 was distributed to us based on our then aggregate ownership of 16,007,500 membership units of RMR LLC and $3,750 was distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC.

On November 17, 2016, we paid a dividend on our Class A Common Shares and Class B-1 Common Shares, in the amount of $0.25 per Class A Common Share and Class B-1 Common Share, or $4,021. This dividend was paid to our shareholders of record as of the close of business on October 21, 2016. The amount of this dividend was calculated as $0.25 per share for the quarter ended September 30, 2016. This dividend was funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.25 per unit, or $7,771, of which $4,021 was distributed to us based on our aggregate ownership of 16,082,432 membership units of RMR LLC and $3,750 was distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC.