RMR GROUP INC
For the period ended Dec 31, 2024. Filed Feb 5, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 5, 2025
RMR$15.60-2.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0001644378-24-000034
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-05.
0001644378-25-000015
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 88 previous paragraphs and 65 current paragraphs.
25 unchanged; 31 reworded; 7 added; 22 removed; 10 previous and 2 current paragraphs rearranged.
Tables are not compared: 7 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Although certain CRE investors are cautiously optimistic that the current period of elevated interest rates is nearing an end, other challenges remain. Special servicing rates for commercial mortgage-backed securities, or CMBS, and CRE collateralized loan obligations continue to increase and lenders have become more willing to foreclose on borrowers unable to support underperforming properties. Furthermore, certain segments of the CRE industry continue to experience headwinds in trying to improve operating fundamentals, whether it be post-pandemic shifts in work habits and weak demand for office space impacting the office sector or oversupply in certain markets adversely impacting the industrial and residential sectors.
Current report
Income from loan investments, net. Income from loan investments, net includes loan investment interest income of $1,409 for loans originated, partially offset by interest expense of $863 incurred as part of our private capital business which began in the fourth fiscal quarter of 2024.
Current report
Rental property revenues. Rental property revenues includes base rental income and non-cash straight line rent adjustments for our two rental properties which were owned for the full current fiscal period compared to the prior period.
Current report
Rental property expenses. Rental property expenses includes property operating expenses, such as real estate taxes, repairs and maintenance and utility costs incurred at our two owned properties.
Current report
In January 2025, we entered into a credit agreement, or our credit agreement, for a $100,000 senior secured revolving credit facility, or our revolving credit facility. Our revolving credit facility is secured by substantially all of our assets and provides us with enhanced financial flexibility as we continue to invest in our private capital business and position ourselves to capitalize on long term growth opportunities. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayments on borrowings under our credit agreement are due until maturity. The maturity date of our credit agreement is January 22, 2028 and, subject to the payment of an extension fee and meeting certain other requirements, we can extend the maturity date of our revolving credit facility by one year. Interest is payable on borrowings under our credit agreement at a rate of SOFR plus a margin of 225 basis points. We are also required to pay a fee of 50 basis points per annum on the amount of unused lending commitments. Our credit agreement contains a number of covenants, including covenants that require us to maintain certain financial ratios and restrict our ability to incur additional debt in excess of calculated amounts. Availability of borrowings under our credit agreement is subject to ongoing minimum performance, our satisfying certain financial covenants and other credit facility conditions. As of February 3, 2025, we had no amounts outstanding.
Current report
We have not invested in derivative instruments, borrowed through issuing debt securities or transacted in foreign currencies. As of December 31, 2024, our floating rate debt consisted of our purchased assets, which are governed by our master repurchase agreement with UBS AG, or UBS, or our UBS Master Repurchase Agreement and directly relate to our underlying loans held for investment. We are required to pay interest on our floating rate debt at a rate of SOFR plus a premium and earn interest on our underlying loans held for investment at a rate of SOFR plus a premium that is in excess of the premium paid on our floating rate debt. Changes in market interest rates would not impact the fixed spread that we earn between our purchased assets and our loans held for investment. As a result, we are not subject to significant direct market risk related to interest rate changes, changes to the market standard for determining interest rates, or commodity price changes; however, if any of these risks were to negatively impact our clients’ businesses or market capitalization, our revenues would likely decline. We are subject to the credit risk of our borrowers in connection with our loans held for investment. We seek to mitigate this risk by utilizing a comprehensive underwriting, diligence and investment selection process and by ongoing monitoring of our investments. Nevertheless, unanticipated credit losses could occur that may adversely impact our operating results.
Current report
In January 2025, we entered into our credit agreement governing our revolving credit facility. Interest payable on borrowings under our credit agreement is at a rate of SOFR plus a margin of 225 basis points. Accordingly, we may be vulnerable to changes in U.S. dollar based short term rates, specifically SOFR. Generally, a change in interest rates would not affect the value of our floating rate debt but would affect our operating results.
Removed paragraphs (22)
Previous report
On December 19, 2023, we completed our acquisition of MPC (now known as RMR Residential), a vertically integrated residential platform. This acquisition further advances our strategic focus on continuing to grow our private capital business, adding approximately $5.5 billion in assets under management and over 20 new institutional relationships. This acquisition also allows us to further diversify our revenue sources, to enter the only major commercial real estate sector in which we did not have a significant presence, and brings infrastructure and digital marketing capabilities that may be leveraged across our platform.
Previous report
However, despite recent economic data indicating slowing U.S. economic growth, including lower retail sales, consumer spending and a slight increase in the unemployment rate, the FOMC has made it clear that inflation remains elevated and that it intends to keep the federal funds rate steady at 5.25% to 5.50% until it is confident that inflation is on pace to reach its longer term objective of 2%. With no clear sight on the timing or magnitude of a future interest rate cut, CRE investors continue to adjust to a “higher for longer” interest rate environment.
Previous report
Additionally, concerns about the capital adequacy and liquidity of the banking sector due to the bank failures in 2023, as well as stricter lending standards, have resulted in decreased lending activity from traditional sources such as banks and life insurance companies and may negatively impact the businesses of our clients and our clients' tenants. Rising or sustained high interest rates also adversely impact our clients with floating rate debt, which they, in some instances, attempt to address with interest rate caps and other strategic actions to reduce leverage. The impact of rising costs, both for goods and services, insurance and human capital, are impacting us and our clients and we and our clients are continuing to implement mitigation strategies to minimize the impact of increased costs on our and our clients’ earnings, where possible.
Previous report
Termination and incentive fees. Termination and incentive fees decreased $45,104 primarily due to the $45,282 termination fee received from TA during the 2023 period. For further information about these fees, see Note 4, Revenue Recognition, and Note 8, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Previous report
Nine Months Ended June 30, 2024, Compared to the Nine Months Ended June 30, 2023
Previous report
n/m - not meaningful
Previous report
Management services revenue. Management services revenue decreased $167 primarily due to declines in management fees earned from TA of $9,932 as a result of the termination of its business management agreement with us on May 15, 2023 and decreases in construction supervision revenues earned from the Managed Equity REITs of $2,311, partially offset by growth in management services revenue of $11,864 related to our acquisition of MPC in the current period.
Previous report
Termination and incentive fees. Termination and incentive fees decreased $44,745 primarily due to the $45,282 termination fee received from TA during the 2023 period. For further information about these fees, see Note 2, Revenue Recognition, and Note 8, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Previous report
Reimbursable compensation and benefits. Reimbursable compensation and benefits increased $17,802 primarily due to the impact of our acquisition of MPC and annual merit increases that were effective October 1, 2023.
Previous report
Compensation and benefits. Compensation and benefits expense increased $21,932 primarily due to the impact of our acquisition of MPC and annual merit and benefit increases, which was partially offset by cost containment measures that reduced headcount.
Previous report
General and administrative. General and administrative costs increased $4,358 primarily due to the impact of our acquisition of MPC and increases in third party costs related to our expanded role in construction oversight.
Previous report
Interest income. Interest income increased $1,832 primarily due to higher interest earned during the 2024 fiscal period primarily as a result of higher interest rates and higher average cash balances invested compared to the prior period.
Previous report
Gain on equity method investments. Gain on equity method investments represents the unrealized and realized gains or losses on our investments in SEVN and TA common shares. For further information, see Note 5, Equity Method Investments, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Previous report
On December 19, 2023, we completed our acquisition of MPC for total cash consideration of $84,474. We are also obligated to pay the Earnout, if earned, which we currently estimate at $13,783 and which will be payable over the next three years, based on our current expectations for the deployment of capital remaining in investment funds managed by MPC prior to the end of such fund’s investment period. In addition to the Earnout, we agreed to pay Retention Payments to certain employees of MPC in an aggregate amount of $4,200 for their continued employment through December 31, 2025.
Previous report
Real Estate Lending Venture
Previous report
Our plan is to amass a small portfolio of loans, financed, in part, through a bank repurchase facility, in a Tremont managed vehicle and bring in third parties to invest in the vehicle. The vehicle would then continue growing by making additional loans.
Previous report
In July 2024, we made a floating rate first mortgage loan that is secured by a hotel property in Revere, MA for a total commitment of $40,000. This $40,000 loan requires the borrower to pay interest at the floating rate of SOFR plus a premium of 395 basis points per annum and has an initial term of two years with three one year extensions. Also in July 2024, we made a floating rate first mortgage loan that is secured by an industrial property in Wayne, PA for a total commitment of $27,000. This $27,000 loan requires the borrower to pay interest at the floating rate of SOFR plus a premium of 425 basis points per annum and has an initial term of three years with two one year extensions.
Previous report
RMR Residential Acquisition
Previous report
In July 2024, we acquired a 240 unit, garden style apartment community located in Denver, CO for a purchase price of $70,000, excluding acquisition costs. We financed this purchase with cash on hand and proceeds from a $46,500 mortgage loan with a 5.34% fixed interest rate. This mortgage loan requires monthly payments of interest only until maturity in July 2029.
Previous report
We plan either to syndicate this acquisition or use it to seed a small portfolio of multifamily assets we would subsequently syndicate to third party investors.
Previous report
We accounted for the Acquisition as a business combination. We used estimates and assumptions to assign fair values to assets acquired and liabilities assumed, including intangible assets. Determining the fair value of intangible assets requires us to use estimates and assumptions including, but not limited to, expected future cash inflows and outflows, useful lives, discount rates and income tax rates. Fair values were determined based on estimates and assumptions we believe to be reasonable, but that are unpredictable and inherently uncertain. Unanticipated events and circumstances may occur that could materially affect the accuracy of such estimates, assumptions or actual results.
Previous report
The fair value of our Earnout liability was determined using a Monte Carlo simulation model and is inherently uncertain. Inputs into the model require estimates and assumptions regarding the timing and deployment of future capital, the historical volatility of similar market transactions, and discount rates and credit ratings for companies similar to ours. The Earnout liability is remeasured on a quarterly basis and changes to our estimates and assumptions are likely to have a significant impact on the fair value estimate of the Earnout liability. In addition, actual payments required under the Earnout may differ significantly from our estimates and could have a material impact to our results of operations and financial condition.
Reworded paragraphs (31)
Previous wording
The continuation and growth of our business depends upon our ability to operate the Managed Equity REITs, our private capital clients and SEVN so as to maintain, grow and increase the value of their businesses, to assist AlerisLife and Sonesta to grow their businesses and operate profitably, and to successfully expand our business through the execution of new business ventures and additional investments, such as our recently completed acquisition of MPC. Our business and the businesses of our clients generally follow the business cycle of the U.S. real estate industry, but with certain property type and regional geographic variations. Typically, as the general U.S. economy expands, commercial real estate occupancies increase and new real estate development occurs; new development frequently leads to increased real estate supply and reduced occupancies; and then the cycle repeats. These general trends can be impacted by property type characteristics or regional factors; for example, demographic factors such as the aging U.S. population, the growth of e-commerce retail sales or net population migration across different geographic regions can slow, accelerate, overwhelm or otherwise impact general cyclical trends. Because of such multiple factors, we believe it is often possible to grow real estate based businesses in selected property types or geographic areas despite general national trends.
Current wording
The continuation and growth of our business depends upon our ability to manage the Managed Equity REITs, our private capital clients and SEVN so as to maintain, grow and increase the value of their businesses, to assist AlerisLife and Sonesta to grow their businesses and operate profitably, and to successfully expand our business through the execution of new business ventures and additional investments. Our business and the businesses of our clients generally follow the business cycle of the U.S. real estate industry, but with certain property type and regional geographic variations. Typically, as the general U.S. economy expands, commercial real estate, or CRE, occupancies increase and new real estate development occurs; new development frequently leads to increased real estate supply and reduced occupancies; and then the cycle repeats. These general trends can be impacted by property type characteristics or regional factors; for example, demographic factors such as the aging U.S. population, the growth of e-commerce retail sales or net population migration across different geographic regions can slow, accelerate, overwhelm or otherwise impact general cyclical trends. Because of such multiple factors, we believe it is often possible to grow real estate based businesses in selected property types or geographic areas despite general national trends.
Previous wording
Beyond general real estate industry trends, we also take into account general economic factors impacting our clients. Heading in to 2024, CRE investors seemed cautiously optimistic that inflation had peaked, that the U.S. economy was likely headed for a “soft-landing” and that the Federal Open Market Committee of the U.S. Federal Reserve, or the FOMC, would be poised to reduce the federal funds rate by 125 to 150 basis points as a result of five or six rate cuts in 2024. With the anticipation of lower interest rates in the future, investors chose to delay sale or refinancing decisions and overall CRE investment and transaction volume remained tepid well into the second quarter of calendar 2024.
Current wording
Beyond general CRE trends, we also take into account general economic factors impacting our clients. Heading in to 2024, certain CRE investors seemed cautiously optimistic that inflation had peaked, that the U.S. economy was likely headed for a “soft-landing” and that the Federal Open Market Committee of the U.S. Federal Reserve, or the FOMC, would be poised to reduce the federal funds rate by 125 to 150 basis points as a result of five or six rate cuts in 2024. With the anticipation of lower interest rates in the future, investors chose to delay sale or refinancing decisions and overall CRE investment and transaction volume remained tepid well into the later half of calendar 2024. In September 2024, the FOMC lowered the targeted federal funds rate by 50 basis points. In December 2024, citing progress toward its 2% inflation target, the FOMC lowered the targeted federal funds rate by 25 basis points, to a range of 4.25% to 4.50%, the second reduction since March 2020. With clarity on the intentions of the FOMC and the possible direction of future interest rates, we believe CRE owners are now better positioned to make sale or refinance decisions and opt between floating or fixed rate financing options.
Previous wording
Both we and our clients consider industry and general economic factors and attempt to take advantage of opportunities when they arise. For example: (i) since March 2020, ILPT and DHC have completed several joint venture transactions with institutional investors and subsequently grown some of those ventures by acquiring additional properties; (ii) SVC transitioned over 200 hotels from other hotel operators to Sonesta, which on March 17, 2021, completed its acquisition of RLH Corporation, establishing it as one of the largest hotel companies in the U.S. and expanding its franchising capabilities; and (iii) on February 25, 2022, ILPT completed its acquisition of 126 new, Class A, single tenant, net leased, e-commerce focused industrial properties as a result of its acquisition of Monmouth Real Estate Investment Corporation, or MNR, in an all-cash transaction valued at approximately $4.0 billion. More recently, on December 19, 2023, we completed our previously announced agreement to acquire 100% of the equity interest in MPC for total consideration of $99,021, which added residential capabilities to RMR LLC. In addition, we balance our pursuit of growth of our and our clients’ businesses by executing, on behalf of our clients, prudent capital recycling or business arrangement restructurings in an attempt to help our clients prudently manage leverage and increased operating costs. We also look to reposition their portfolios and businesses when circumstances warrant such changes or when other more desirable opportunities are identified.
Current wording
Both we and our clients consider industry and general economic factors and attempt to take advantage of opportunities when they arise. For example: (i) SVC transitioned over 200 hotels from other hotel operators to Sonesta, which on March 17, 2021, completed its acquisition of RLH Corporation, establishing it as one of the largest hotel companies in the U.S. and expanding its franchising capabilities; (ii) on February 25, 2022, ILPT completed its acquisition of 126 new, Class A, single tenant, net leased, e-commerce focused industrial properties as a result of its acquisition of Monmouth Real Estate Investment Corporation in an all-cash transaction valued at approximately $4.0 billion; and (iii) on December 19, 2023, we completed our acquisition of MPC Partnership Holdings LLC, or MPC, for total consideration of $99,021, which added residential capabilities to RMR LLC. In addition, we balance our pursuit of growth of our and our clients’ businesses by executing, on behalf of our clients, prudent capital recycling or business arrangement restructurings in an attempt to help our clients prudently manage leverage and increased operating costs. We also look to reposition their portfolios and businesses when circumstances warrant such changes or when other more desirable opportunities are identified.
Previous wording
The base business management fees we earn from the Managed Equity REITs are calculated monthly in accordance with the applicable business management agreement and are based on a percentage of the lower of (i) the average historical cost of each REIT’s properties and (ii) each REIT’s average market capitalization. The property management fees we earn from the Managed Equity REITs are principally based on a percentage of the gross rents collected at certain managed properties owned by the Managed Equity REITs, excluding rents or other revenues from hotels, travel centers, senior living properties and wellness centers, which are separately managed by AlerisLife, Sonesta or a third party. Also under the terms of the property management agreements, we receive construction supervision fees in connection with certain construction activities undertaken at the properties owned by the Managed Equity REITs based on a percentage of the cost of such construction. For further information regarding the fees we earn, see Note 4, Revenue Recognition, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Current wording
Managed Equity REITs are principally based on a percentage of the gross rents collected at certain managed properties owned by the Managed Equity REITs, excluding rents or other revenues from hotels, senior living properties and wellness centers, which are separately managed by AlerisLife, Sonesta or a third party. Also under the terms of the property management agreements, we receive construction supervision fees in connection with certain construction activities undertaken at the properties owned by the Managed Equity REITs based on a percentage of the cost of such construction. For further information regarding the fees we earn, see Note 4, Revenue Recognition, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Previous wording
The basis on which our base business management fees are calculated for the three and nine months ended June 30, 2024 and 2023 may differ from the basis at the end of the periods presented in the table above. As of June 30, 2024, the market capitalization was lower than the historical cost of assets under management for each of the Managed Equity REITs; the historical cost of assets under management for DHC, ILPT, OPI and SVC as of June 30, 2024, were $7,731,622, $5,696,515, $5,965,791 and $11,472,436, respectively.
Current wording
The basis on which our base business management fees are calculated for the three months ended December 31, 2024 and 2023 may differ from the basis at the end of the periods presented in the table above. As of December 31, 2024, the market capitalization was lower than the historical cost of assets under management for each of the Managed Equity REITs; the historical cost of assets under management for DHC, ILPT, OPI and SVC as of December 31, 2024, were $7,671,448, $5,703,224, $5,454,782 and $11,381,133, respectively.
Previous wording
The fee revenues we earned from the Managed Equity REITs for the three and nine months ended June 30, 2024 and 2023 are set forth in the following tables:
Current wording
The fee revenues we earned from the Managed Equity REITs for the three months ended December 31, 2024 and 2023 are set forth in the following table:
Previous wording
We provide business management services to AlerisLife, Sonesta and until May 15, 2023, TA. AlerisLife operates senior living communities throughout the U.S., many of which are owned by and managed for DHC. Sonesta manages and franchises hotels, resorts and cruise ships in the United States, Latin America, the Caribbean and the Middle East; many of the U.S. hotels that Sonesta operates are owned by SVC. TA operates, leases and franchises travel centers along the U.S. interstate highway system, many of which are owned by SVC, and standalone truck service facilities. Generally, our fees earned from business management services to AlerisLife, Sonesta and until May 15, 2023, TA, are based on a percentage of certain revenues. In connection with BP’s acquisition of TA on May 15, 2023, TA terminated its business management agreement with us and in accordance with its terms paid us the applicable termination fee of $45,282.
Current wording
We provide business management services to AlerisLife and Sonesta. AlerisLife operates senior living communities throughout the U.S., many of which are owned by and managed for DHC. Sonesta manages and franchises hotels, resorts and cruise ships in the United States, Latin America, the Caribbean and the Middle East; many of the U.S. hotels that Sonesta operates are owned by SVC. Generally, our fees earned from business management services to AlerisLife and Sonesta are based on a percentage of certain revenues.
Previous wording
In addition, we also provide management services to certain other Private Capital clients, including high-quality institutional investors relationships we assumed as part of our MPC acquisition, and earn fees based on a percentage of average invested capital, as defined in the applicable agreements, property management fees based on a percentage of rents collected from managed properties and construction supervision fees based on a percentage of the cost of construction activities. The recent MPC acquisition also provides us the potential to generate promote fees on any new co-investments in the future.
Current wording
In addition, we also provide management services to certain other Private Capital clients, including high-quality institutional investors relationships we maintain through RMR Residential, and earn fees based on a percentage of average invested capital, as defined in the applicable agreements, property management fees based on a percentage of rents collected from managed properties and construction supervision fees based on a percentage of the cost of construction activities. RMR Residential also provides us the potential to generate promote fees on any new co-investments in the future.
Previous wording
Our management fee revenues from services to these clients for the three and nine months ended June 30, 2024 and 2023, are set forth in the following tables and exclude termination fee revenue earned from TA of $45,282 for the three and nine months ended June 30, 2023:
Current wording
Our management fee revenues from services to these clients for the three months ended December 31, 2024 and 2023, are set forth in the following table:
Previous wording
Tremont earned advisory services revenue of $1,127 and $1,141 for the three months ended June 30, 2024 and 2023, respectively, and $3,378 and $3,371 for the nine months ended June 30, 2024 and 2023, respectively. Tremont also earned incentive fees from SEVN of $370 and $729 for the three and nine months ended June 30, 2024, respectively. Tremont did not earn incentive fees from SEVN for the three or nine months ended June 30, 2023.
Current wording
Tremont earned advisory services revenue of $1,141 and $1,125 for the three months ended December 31, 2024 and 2023, respectively. Tremont also earned incentive fees from SEVN of $68 and $299 for the three months ended December 31, 2024 and 2023, respectively.
Previous wording
Management services revenue. Management services revenue increased $1,897 primarily due to growth in management services revenue of $5,688 related to our acquisition of MPC in December 2023, partially offset by declines in management fees earned from TA of $1,956 as a result of the termination of its business management agreement with us on May 15, 2023 and decreases in construction supervision revenues earned from the Managed Equity REITs of $1,398.
Current wording
Management services revenue. Management services revenue increased $1,089 primarily due to growth in management services revenue of $4,451 related to our acquisition of MPC, partially offset by decreases in construction supervision revenues and business management fee revenues earned from the Managed Equity REITs and our Private Capital clients of $1,442 and $1,196, respectively.
Previous wording
Reimbursable compensation and benefits. Reimbursable compensation and benefits include reimbursements, at cost, that arise primarily from services our employees provide pursuant to our property management agreements at the properties of our clients. A significant portion of these compensation and benefits are charged or passed through to and paid by tenants of our clients. Reimbursable compensation and benefits increased $7,551 primarily due to the impact of our acquisition of MPC.
Current wording
Reimbursable compensation and benefits. Reimbursable compensation and benefits includes reimbursements, at cost, that arise primarily from services our employees provide pursuant to our property management agreements at the properties of our clients. A significant portion of these compensation and benefits are charged or passed through to and paid by tenants of our clients. Reimbursable compensation and benefits increased $4,962 primarily due to the impact of a full quarter RMR Residential’s operations following our MPC acquisition in December 2023.
Previous wording
Reimbursable equity based compensation. Reimbursable equity based compensation includes awards of common shares by our clients directly to certain of our officers and employees in connection with the provision of management services to those clients. We record an equal, offsetting amount as equity based compensation expense for the value of these awards. Reimbursable equity based compensation revenue decreased $534 primarily as a result of decreases in certain of our clients’ respective share prices.
Current wording
Reimbursable equity based compensation. Reimbursable equity based compensation includes awards of common shares by our clients directly to certain of our officers and employees in connection with the provision of management services to those clients. We record an equal, offsetting amount as equity based compensation expense for the value of these awards. Reimbursable equity based compensation revenue decreased $2,757 primarily as a result of decreases in certain of our clients’ respective share prices.
Previous wording
Compensation and benefits. Compensation and benefits consist of employee salaries and other employment related costs, including health insurance expenses and contributions related to our employee retirement plan. Compensation and benefits expense increased $10,792 primarily due to the impact of our acquisition of MPC, which was partially offset by cost containment measures that reduced headcount.
Current wording
Compensation and benefits. Compensation and benefits consists of employee salaries and other employment related costs, including health insurance expenses and contributions related to our employee retirement plan. Compensation and benefits expense increased $7,790 due to the impact of a full quarter of RMR Residential’s operations following our MPC acquisition in December 2023, partially offset by cost containment measures that included headcount reductions over the last twelve months.
Previous wording
Equity based compensation. Equity based compensation consists of the value of vested shares awarded to certain of our employees under our and our clients’ equity compensation plans. Equity based compensation decreased $486 primarily as a result of decreases in certain of our clients’ respective share prices.
Current wording
Equity based compensation. Equity based compensation consists of the value of vested shares awarded to certain of our employees under our and our clients’ equity compensation plans. We record an equal offsetting amount as reimbursable equity based compensation revenue for the value of awards under our clients’ equity compensation plans to certain of our employees. Equity based compensation decreased $2,703 primarily as a result of decreases in certain of our clients’ respective share prices.
Previous wording
Separation costs. Separation costs consist of employment termination costs. For further information about these costs, see Note 8, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Current wording
Separation costs. Separation costs consists of employment termination costs. For further information about these costs, see Note 10, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Previous wording
General and administrative. General and administrative expenses consist of office related expenses, information technology related expenses, employee training, travel, professional services expenses, director compensation and other administrative expenses. General and administrative costs increased $1,829 primarily due to the incremental costs to support RMR Residential that results from our acquisition of MPC.
Current wording
General and administrative. General and administrative expenses consists of office related expenses, information technology related expenses, employee training, travel, professional services expenses, director compensation and other administrative expenses. General and administrative costs increased $1,770 primarily due to the incremental costs generated by RMR Residential and other professional fees, partially offset by decreases in third party construction supervision fees.
Previous wording
Transaction and acquisition related costs. Transaction and acquisition related costs in the 2024 fiscal period primarily represent costs associated with our acquisition of MPC and related integration expenses.
Current wording
Transaction and acquisition related costs. Transaction and acquisition related costs primarily represent costs associated with our acquisition of MPC and related integration expenses.
Previous wording
Depreciation and amortization. Depreciation and amortization increased $2,059 primarily due to amortization of MPC acquisition related intangible assets in the current period.
Current wording
Depreciation and amortization. Depreciation and amortization increased $1,924 primarily due to full quarter amortization of MPC acquisition related intangible assets and depreciation of our two owned properties in the current fiscal period.
Previous wording
Change in fair value of Earnout liability. For further information about the Earnout liability, see Note 3, Acquisition of MPC Partnership Holdings LLC and Note 7. Fair Value of Financial Instruments to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Current wording
Change in fair value of Earnout liability. For further information about the Earnout liability, see Note 9. Fair Value of Financial Instruments to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Previous wording
Interest income. Interest income decreased $195 due to a lower amount of investable cash during the 2024 period partially offset by higher average interest rates compared to the prior period.
Current wording
Interest income. Interest income decreased $1,952 due to a lower amount of investable cash and lower average interest rates during the current fiscal period compared to the prior period.
Previous wording
Gain on equity method investments. Gain on equity method investments represents the unrealized and realized gains or losses on our investments in SEVN and TA common shares. For further information, see Note 5, Equity Method Investments, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Current wording
(Loss) gain on investments.(Loss) gain on investments represents the unrealized and realized gains or losses on our investment in SEVN common shares and on our consolidation of Carroll MF VII, LLC’s, or MF VII, investment in Carroll Multifamily Venture VII, LP, or Fund VII. For further information, see Note 7, Investments, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Previous wording
Income tax expense. The decrease in income tax expense of $5,557 is primarily attributable to lower taxable income for the 2024 fiscal period compared to the same period in the prior fiscal year.
Current wording
Income tax expense. The decrease in income tax expense of $162 is primarily attributable to lower taxable income.
Previous wording
Our current assets have historically been comprised predominantly of cash, cash equivalents and receivables for business management, property management and advisory services fees. As of June 30, 2024 and September 30, 2023, we had cash and cash equivalents of $207,976 and $267,989, respectively, of which $25,368 and $26,802, respectively, was held by RMR Inc., with the remainder being held at RMR LLC. Cash and cash equivalents include all short term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. As of June 30, 2024 and September 30, 2023, $195,320 and $265,800, respectively, of our cash and cash equivalents were invested in money market bank accounts.
Current wording
Our current assets have historically been comprised predominantly of cash, cash equivalents and receivables for business management, property management and advisory services fees. As of December 31, 2024 and September 30, 2024, we had cash and cash equivalents of $147,580 and $141,599, respectively, of which $24,398 and $23,189, respectively, was held by RMR Inc., with the remainder being held at RMR LLC and its subsidiaries. Cash and cash equivalents include all short term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. As of December 31, 2024 and September 30, 2024, $89,849 and $92,326, respectively, of our cash and cash equivalents were invested in money market bank accounts.
Previous wording
We believe that our cash and cash equivalents leave us well positioned to pursue a range of capital allocation strategies, with a focus on the growth of our private capital business, to fund our operations and enhance our technology infrastructure, in the next twelve months. Our experienced platform and existing relationships with institutional investors has provided us with significant opportunities to continue expanding our private capital business. We intend to diversify and further grow our private capital revenues by sponsoring and managing new real estate related investment funds that may invest in the equity of real estate or provide commercial mortgage loans secured by middle market and transitional real estate in the U.S. We anticipate that using our capital for possible formation costs and co-investment in these funds will diversify our revenues and generate management fees, incentive fees and potential promote income.
Current wording
We believe that our cash and cash equivalents leave us well positioned to pursue a range of capital allocation strategies, with a focus on the growth of our private capital business, to fund our operations and cash distributions and enhance our technology infrastructure, in the next twelve months. Our experienced platform and existing relationships with institutional investors has provided us with significant opportunities to continue expanding our private capital business. We intend to diversify and further grow our private capital revenues by sponsoring and managing new real estate related investment funds and joint ventures that may invest in the equity of real estate or provide commercial mortgage loans secured by middle market and transitional real estate in the U.S. We anticipate that using our capital for possible formation costs and co-investment in these ventures will diversify our revenues and generate management fees, incentive fees and potential promote fees.
Previous wording
Our liquidity is highly dependent upon our receipt of fees from the businesses that we manage. Historically, we have funded our working capital needs with cash generated from our operating activities and we currently do not maintain any credit facilities. We expect that our future working capital needs will relate largely to our operating expenses, primarily consisting of employee compensation and benefits costs, our obligation to make quarterly tax distributions to the members of RMR LLC, our plan to make quarterly distributions on our Class A Common Shares and Class B-1 Common Shares and our plan to pay quarterly distributions to the members of RMR LLC in connection with the quarterly dividends to RMR Inc. shareholders.
Current wording
Our liquidity is highly dependent upon our receipt of fees from the businesses we manage. Historically, we have funded our working capital needs with cash generated from our operating activities. We expect that our future working capital needs will relate largely to our operating expenses, primarily consisting of employee compensation and benefits costs, our obligation to make quarterly tax distributions to the members of RMR LLC, our plan to make quarterly distributions on our Class A Common Shares and Class B-1 Common Shares and our plan to pay quarterly distributions to the members of RMR LLC in connection with the quarterly dividends to RMR Inc. shareholders.
Previous wording
The $46,623 decrease in net cash from operating activities for the nine months ended June 30, 2024 compared to the prior period reflects a decrease in net income partially offset by favorable changes in working capital. The $131,647 change in net cash flows from investing activities for the nine months ended June 30, 2024 compared to the prior period was due to our acquisition of MPC in the current fiscal period compared to the proceeds received from the sale of TA’s common shares in the prior period. Net cash used in financing activities for the nine months ended June 30, 2024 decreased $11,922 primarily due to higher tax distributions in the prior period, partially offset by increased distributions paid to shareholders of our Class A Common Shares and Class B-1 Common Shares in the current period.
Current wording
The $4,902 decrease in net cash flows from operating activities for the three months ended December 31, 2024 compared to the prior period reflects a decrease in net income and unfavorable changes in working capital. The $76,257 decrease in net cash flows from investing activities for the three months ended December 31, 2024 compared to the prior period was due to our acquisition of MPC in the prior period. Net cash flows from financing activities for the three months ended December 31, 2024 was relatively unchanged compared to the prior period.
Previous wording
We are party to a tax receivable agreement which provides for the payment by RMR Inc. to ABP Trust of 85.0% of the amount of savings, if any, in U.S. federal, state and local income tax or franchise tax that RMR Inc. realizes as a result of (a) the increases in tax basis attributable to RMR Inc.’s dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be paid by it as a result of the tax receivable agreement. See Note 8, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and “Business—Our Organizational Structure—tax receivable agreement” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. As of June 30, 2024, our condensed consolidated balance sheet reflects a liability related to the tax receivable agreement of $23,229, of which we expect to pay $2,343 to ABP Trust during the fourth quarter of fiscal year 2024.
Current wording
We are party to a tax receivable agreement which provides for the payment by RMR Inc. to ABP Trust of 85.0% of the amount of savings, if any, in U.S. federal, state and local income tax or franchise tax that RMR Inc. realizes as a result of (a) the increases in tax basis attributable to RMR Inc.’s dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be paid by it as a result of the tax receivable agreement. See Note 10, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and “Business—Our Organizational Structure—tax receivable agreement” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. As of December 31, 2024, our condensed consolidated balance sheet reflects a liability related to the tax receivable agreement of $20,863, of which we expect to pay $2,421 to ABP Trust during the fourth quarter of fiscal year 2025.
Previous wording
We have not invested in derivative instruments, borrowed through issuing debt securities or transacted in foreign currencies. As a result, we are not subject to significant direct market risk related to interest rate changes, changes to the market standard for determining interest rates, commodity price changes or credit risks; however, if any of these risks were to negatively impact our clients’ businesses or market capitalization, our revenues would likely decline. To the extent we change our approach on the foregoing activities, or engage in other activities, our market and credit risks could change. See Part I, Item 1A “Risk Factors” of our 2023 Annual Report for the risks to us and our clients.
Current wording
To the extent we change our approach on the foregoing activities, or engage in other activities, our market and credit risks could change. See Part I, Item 1A “Risk Factors” of our 2024 Annual Report for the risks to us and our clients.
Previous wording
We have relationships and historical and continuing transactions with Adam D. Portnoy, the Chair of our Board and one of our Managing Directors, as well as our clients. For further information about these and other such relationships and related person transactions, please see Note 8, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2023 Annual Report, our definitive Proxy Statement for our 2024 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” in our 2023 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.
Current wording
We have relationships and historical and continuing transactions with Adam Portnoy, the Chair of our Board and one of our Managing Directors, as well as our clients. For further information about these and other such relationships and related person transactions, please see Note 10, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2024 Annual Report, our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” in our 2024 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.
Previous wording
The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. A discussion of our critical accounting estimates is included in our 2023 Annual Report. In addition to the critical accounting estimates identified in our 2023 Annual Report, the estimation of fair values represents a critical accounting estimate in these condensed consolidated financial statements. The estimation of fair value involves a significant level of judgment and estimation uncertainty, and actual results could be materially different and have a material impact on our financial condition and results of operations.
Current wording
The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates that impact the condensed consolidated financial statements include the revenue recognized during the reporting periods, the estimation of fair values and our principles of consolidation.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The base business management fees we earn from the Managed Equity REITs are calculated monthly in accordance with the applicable business management agreement and are based on a percentage of the lower of (i) the average historical cost of each REIT’s properties and (ii) each REIT’s average market capitalization. The property management fees we earn from the
Current report — wording carried from elsewhere
A discussion of our critical accounting estimates is included in our 2024 Annual Report. There have been no significant changes in our critical accounting estimates since the fiscal year ended September 30, 2024.
Rearranged previous paragraphs (10)
Previous report — wording carried elsewhere
Acquisition of MPC Partnership Holdings LLC
Previous report — wording carried elsewhere
Transaction and acquisition related costs. Transaction and acquisition related costs primarily represent costs associated with integration expenses related to our acquisition of MPC and the evaluation of various other strategic initiatives.
Previous report — wording carried elsewhere
Depreciation and amortization. Depreciation and amortization increased $953 primarily due to amortization of MPC related intangible assets in the current period.
Previous report — wording carried elsewhere
The following table presents the changes in our operating results for the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023:
Previous report — wording carried elsewhere
Reimbursable equity based compensation. Reimbursable equity based compensation decreased $3,486 primarily as a result of decreases in certain of our clients’ respective share prices.
Previous report — wording carried elsewhere
Other reimbursable expenses. For further information about these reimbursements, see Note 4, Revenue Recognition, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Previous report — wording carried elsewhere
Equity based compensation. Equity based compensation decreased $3,576 primarily as a result of decreases in certain of our clients’ respective share prices.
Previous report — wording carried elsewhere
Separation costs. For further information about these costs, see Note 8, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Previous report — wording carried elsewhere
Change in fair value of Earnout liability. For further information about the Earnout liability, see Note 3, Acquisition of MPC Partnership Holdings LLC and Note 7. Fair Value of Financial Instruments to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Previous report — wording carried elsewhere
Income tax expense. The decrease in income tax expense of $10,166 is primarily attributable to lower taxable income for the 2024 fiscal period compared to the same period in the prior fiscal year.