Item 1.01 Entry into a Material Definitive Agreement.
On January 5, 2021, the Securities and Exchange Commission (the "SEC") issued an
order pursuant to Section 8(f) of the Investment Company Act of 1940 (the "1940
Act") declaring that we have ceased to be an investment company under the 1940
Act (the "Deregistration Order"). The issuance of the Deregistration Order
enables us to proceed with full implementation of our new business mandate to
operate as a real estate investment trust ("REIT") that focuses primarily on
originating and investing in first mortgage whole loans secured by middle market
and transitional commercial real estate (the "Business Change").
Management Agreement
In connection with the Business Change, we terminated our investment advisory
agreement with RMR Advisors LLC ("RMR Advisors") and entered into a new
management agreement ("Management Agreement") with Tremont Realty Advisors LLC
("Tremont Advisors"), effective January 5, 2021 (the "Effective Date"). A
summary of the principal terms of the Management Agreements are as follows:
· Base Management Fee: We are required to pay Tremont Advisors an annual base
management fee equal to 1.5% of our equity, payable in cash quarterly (0.375%
per quarter) in arrears. Under the Management Agreement, "equity" means (a) the
sum of (i) our net asset value as of the Effective Date, plus (ii) the net
proceeds received by us from any future sale or issuance of our shares of
beneficial interest, plus (iii) our cumulative core earnings (as defined below)
for the period commencing on the Effective Date to the end of the applicable
most recent completed calendar quarter, less (b) (i) any distributions
previously paid to holders of our common shares, (ii) any incentive fee
previously paid to Tremont Advisors and (iii) any amount that we may have paid
to repurchase our common shares. All items in the foregoing sentence (other
than clause (a)(iii)) are calculated on a daily weighted average basis.
· Incentive Fee. Starting in the calendar quarter ending March 31, 2021, we are
required to pay Tremont Advisors quarterly an incentive fee in arrears in cash
equal to the difference between: (a) the product of (i) 20% and (ii) the
difference between (A) our core earnings for the most recent 12 month period
(or such lesser number of completed calendar quarters, if applicable),
including the calendar quarter (or part thereof) for which the calculation of
the incentive fee is being made, and (B) the product of (1) our equity in the
most recent 12 month period (or such lesser number of completed calendar
quarters, if applicable), including the calendar quarter (or part thereof) for
which the calculation of the incentive fee is being made, and (2) 7% per year
and (b) the sum of any incentive fees paid to Tremont Advisors with respect to
the first three calendar quarters of the most recent 12 month period (or such
lesser number of completed calendar quarters preceding the applicable period,
if applicable). No incentive fee shall be payable with respect to any calendar
quarter unless our core earnings for the 12 most recently completed calendar
quarters (or such lesser number of completed calendar quarters from January 5,
2021) in the aggregate is greater than zero. The incentive fee may not be less
than zero.
For purposes of the calculation of base management fees and incentive fees
payable to Tremont Advisors under the Management Agreement, "core earnings" is
defined as net income (or loss) attributable to common shareholders computed in
accordance with U.S. Generally Accepted Accounting Principles ("GAAP"),
including realized losses not otherwise included in GAAP net income (loss), and
excluding: (a) the incentive fees earned by Tremont Advisors; (b) depreciation
and amortization (if any); (c) non cash equity compensation expense (if any);
(d) unrealized gains, losses and other similar non-cash items that are included
in net income for the period of the calculation (regardless of whether such
items are included in or deducted from net income or in other comprehensive
income or loss under GAAP); and (e) one-time events pursuant to changes in GAAP
and certain material non cash income or expense items (in each case after
discussions between Tremont Advisors and our Independent Trustees and approved
by a majority of such Independent Trustees). Pursuant to the terms of the
Management Agreement, the exclusion of depreciation and amortization from the
calculation of core earnings shall only apply to owned real estate. Our shares
of beneficial interest that are entitled to a specific periodic distribution or
have other debt characteristics will not be included in equity for the purpose
of calculating incentive fees payable to Tremont Advisors. Instead, the
. . .
Item 1.02 Termination of a Material Definitive Agreement.
In connection with the Business Change, we terminated our custodian agreement
with State Street Bank and Trust Company ("State Street"), effective January 5,
2021, pursuant to which State Street previously performed custodial, fund
accounting and portfolio accounting services for us in connection with our
operation as a closed-end investment company. We also provided to RMR Advisors
notice of termination of our administration agreement with RMR Advisors
("Administration Agreement"), pursuant to which RMR Advisors previously
performed administrative functions for us in connection with our operation as a
closed-end investment company. The Administration Agreement shall be terminated
upon the termination of the sub-administration agreement between RMR Advisors
and State Street, which termination shall be effective on March 16, 2021 or such
later date as we make our final filing with the SEC pursuant to the requirements
of the 1940 Act.
The information regarding the termination of our former investment advisory
agreement with RMR Advisors under "Item 1.01. Entry into a Material Definitive
Agreement" is incorporated herein by reference.
Item 4.01 Changes in Registrant's Certifying Accountant.
On December 4, 2020, the Audit Committee (the "Committee") of our Board of
Trustees approved the engagement of Deloitte & Touche LLP ("Deloitte") as our
independent registered public accounting firm for our fiscal year 2021, subject
to and upon receipt of the Deregistration Order. RSM US LLP ("RSM") will remain
our independent registered public accounting firm for our fiscal year 2020.
During the fiscal years ended December 31, 2019 and 2020, and the subsequent
interim period through January 5, 2021, we did not, nor did anyone on our
behalf, consult with Deloitte with respect to (a) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on our financial statements, and no
written report or oral advice was provided to us that Deloitte concluded was an
important factor considered by us in reaching a decision as to any accounting,
auditing or financial reporting issue or (b) any matter that was either the
subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions) or a reportable event (as described in Item
304(a)(1)(v) of Regulation S-K).
The reports of RSM on our financial statements for each of the two fiscal years
ended December 31, 2018 and 2019, did not contain an adverse opinion or a
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with the audits of our
financial statements for the fiscal years ended December 31, 2018 and 2019,
there were no "disagreements" (as that term is defined in Item 304(a)(1)(iv) of
Regulation S-K and related instructions) between us and RSM on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures which, if not resolved to the satisfaction of RSM would have
caused RSM to make reference to the subject matter of the disagreement in their
report. During the fiscal years ended December 31, 2019 and 2020, there were no
"reportable events" (as that term is defined in Item 304(a)(1)(v) of Regulation
S-K).
3
We provided RSM with a copy of the disclosures contained in this Current Report
on Form 8-K and requested that RSM furnish us with a letter addressed to the SEC
stating whether it agrees with the statements contained herein. A copy of RSM's
letter, dated January 5, 2021, is filed as Exhibit 16.1 to this Current Report
on Form 8-K.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
In connection with the Business Change, we also announced changes to our Board
of Trustees and executive officers, effective January 5, 2021. The Board of
Trustees appointed Thomas J. Lorenzini as our President and G. Douglas Lanois as
our Chief Financial Officer and Treasurer. Mr. Lorenzini and Mr. Lanois succeed
Fernando Diaz and Brian E. Donley, respectively, who each resigned from the
Company, effective January 5, 2021.
Mr. Lorenzini, age 54, is a Vice President of RMR LLC and President of Tremont
Mortgage Trust, a real estate finance company. He is also a Vice President of
Tremont Advisors. Mr. Lorenzini has been Managing Director, Capital Markets, of
Tremont Realty Capital, which is the trade name of Tremont Advisors, since
October 2019. From 2016 until October 2019, Mr. Lorenzini served as Senior
Director, Capital Markets of Tremont Realty Capital. Mr. Lorenzini was a
founding member of Tremont Advisors's predecessor business. Prior to joining
Tremont Advisors's predecessor business in 2000, Mr. Lorenzini was midwest
regional director for Finova Realty Capital, and prior to that, Mr. Lorenzini
was a senior director for Belgravia Realty Capital.
Mr. Lorenzini has advised us that he has no arrangement or understanding with
any other person pursuant to which he was appointed as President, and, except as
set forth below, Mr. Lorenzini has no direct or indirect material interest in
any transaction required to be disclosed pursuant to Item 404(a) of Regulation
S-K. Mr. Lorenzini does not have a family relationship with any member of our
Board or any of our executive officers.
Mr. Lanois, age 60, is a Senior Vice President of RMR LLC and Senior Vice
President, Chief Financial Officer and Treasurer of Tremont Advisors. He has
also served as Chief Financial Officer and Treasurer of Tremont Mortgage Trust
since 2018. He served as a vice president of RMR Advisors since 2020 and
previously served as a vice president of Tremont Advisors and RMR LLC since RMR
LLC acquired substantially all of the Tremont business in 2016. Before joining
RMR LLC, Mr. Lanois was chief financial officer and portfolio manager of Tremont
Realty Capital since 2004. Prior to Tremont Realty Capital, Mr. Lanois was chief
financial officer of CRES Development Company, Inc., a multidisciplinary real
estate firm, from 2003 to 2004. Prior to CRES Development, Mr. Lanois was senior
vice president and chief financial officer at Pembroke Real Estate, the real
estate development and management division of FMR LLC, from 1998 to 2002. Prior
to Pembroke, Mr. Lanois was vice president and controller at Beacon Properties
Corporation, and he previously worked at AEW Capital Management and the
accounting firm of Laventhol & Horwath.
Mr. Lanois has advised us that he has no arrangement or understanding with any
other person pursuant to which he was appointed as Chief Financial Officer and
Treasurer, and, except as set forth below, Mr. Lanois has no direct or indirect
material interest in any transaction required to be disclosed pursuant to Item
404(a) of Regulation S-K. Mr. Lanois does not have a family relationship with
any member of our Board or any of our executive officers.
In addition, on January 5, 2021, Jennifer B. Clark resigned as our Managing
Trustee, effective that day. Effective that same day, the Board of Trustees,
based on the recommendation of the Nominating Committee of the Board of
Trustees, elected Matthew P. Jordan, age 45, as successor Managing Trustee to
fill the vacancy created by Ms. Clark's resignation and for the remainder of Ms.
Clark's current term as a Class III Managing Trustee and until his successor
shall have been elected and shall have qualified or until his term as a Class
III Managing Trustee shall have terminated in accordance with the terms of our
governing documents.
4
Mr. Jordan, age 45, is the executive vice president, chief financial officer and
treasurer of The RMR Group Inc. ("RMR Inc.") and its majority-owned subsidiary,
RMR LLC. RMR Inc. is the managing member of RMR LLC. Mr. Jordan joined RMR LLC
in April 2012 as chief accounting officer; he became senior vice president,
chief financial officer and treasurer of RMR LLC in November 2012; and he became
executive vice president, chief financial officer and treasurer of RMR LLC in
October 2017. Mr. Jordan has served as an executive vice president of RMR Inc.
since 2018 and as its chief financial officer and treasurer since 2015. Mr.
Jordan has served as a director and the president and chief executive officer of
Tremont Advisors since January 2021 and previously served as executive vice
president, chief financial officer and treasurer of Tremont Advisors from
October 2017 to December 2020 and prior to that as senior vice president,
treasurer and chief financial officer of Tremont Advisors from September 2016
and treasurer, chief financial officer and assistant secretary of Tremont
Advisors from March 2016. Mr. Jordan has served as a director of RMR Advisors
since January 2019 and as executive vice president, chief financial officer and
treasurer of RMR Advisors since October 2017.
Mr. Jordan has advised us that he has no arrangement or understanding with any
other person pursuant to which he was elected as our Managing Trustee, and,
except as set forth below, Mr. Jordan has no direct or indirect material
interest in any transaction required to be disclosed pursuant to Item 404(a) of
Regulation S-K. Mr. Jordan does not have a family relationship with any member
of our Board or any of our executive officers. Mr. Jordan is not expected to be
appointed to any committees of our Board.
In accordance with our publicly disclosed Trustee compensation arrangements, Mr.
Jordan will not be entitled to any cash compensation for his service as a
Managing Trustee. A summary of our currently effective Trustee compensation is
contained in our proxy statement for our 2020 annual meeting of shareholders
held on May 22, 2020, which was filed with the SEC on April 23, 2020 , which
summary is incorporated herein by reference.
Information Regarding Certain Relationships and Related Person Transactions
We have relationships and historical and continuing transactions with Tremont
Advisors, RMR LLC, RMR Advisors and others related to them in addition to those
noted above. For example: we have no employees and the personnel and various
services we require to operate our business are provided to us by Tremont
Advisors pursuant to our management agreement with Tremont Advisors and were
historically provided to, or arranged for, us by RMR Advisors; Tremont Advisors
. . .
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
In connection with the Business Change, effective January 5, 2021, the Board of
Trustees adopted the Amended and Restated Agreement and Declaration of Trust and
Amended and Restated Bylaws, to among other things, reflect our new name, remove
provisions related to our former status under the 1940 Act as a registered
investment company, address matters relating to our proposed new tax status as a
REIT and, with respect to the Amended and Restated Bylaws, generally conform
them to the bylaws for another mortgage REIT managed by Tremont Advisors for
efficiency in administration.
The foregoing summary of the Amended and Restated Agreement and Declaration of
Trust and Amended and Restated Bylaws is qualified in its entirety by reference
to the text of the Amended and Restated Agreement and Declaration of Trust and
Amended and Restated Bylaws, which are attached hereto as Exhibit 3.1 and
Exhibit 3.2, respectively, to this Current Report on Form 8-K and are
incorporated herein by reference.
5
Item 8.01. Other Events.
The information relating to our receipt of the Deregistration Order under "Item
1.01. Entry into a Material Definitive Agreement" is incorporated herein by
reference.
Item 9.01. Other Events.
(d) Exhibits
Exhibit
Number Description
3.1 Amended and Restated Agreement and Declaration of Trust of RMR
Mortgage Trust, effective January 5, 2021
3.2 Amended and Restated Bylaws of RMR Mortgage Trust, effective
January 5, 2021
10.1 Management Agreement, dated January 5, 2021, by and between RMR
Mortgage Trust and Tremont Realty Advisors LLC
10.2 Form of Indemnification Agreement
16.1 Letter of RSM US LLP, dated January 5, 2021, to the Securities and
Exchange Commission
104 Cover Page Interactive Data File. (Embedded within the Inline XBRL
document.)
6
© Edgar Online, source Glimpses
SEVN HILL 
