RMR GROUP INC

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) 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.

Current wording

Both we and our clients will continue to 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

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.

Current 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, 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 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.

Current wording

The basis on which our base business management fees are calculated for the three and six months ended March 31, 2025 and 2024 may differ from the basis at the end of the periods presented in the table above. As of March 31, 2025, 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 March 31, 2025, were $7,416,599, $5,703,960, $5,352,300 and $11,363,702, respectively.

Previous 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:

Current wording

The fee revenues we earned from the Managed Equity REITs for the three and six months ended March 31, 2025 and 2024 are set forth in the following tables:

Previous 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.

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 a carried interest on any new co-investments in the future.

Previous 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:

Current wording

Our management fee revenues from services to these clients for the three and six months ended March 31, 2025 and 2024, are set forth in the following tables:

Previous 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.

Current wording

Tremont earned advisory services revenue of $1,104 and $1,126 for the three months ended March 31, 2025 and 2024, respectively, and $2,245 and $2,251 for the six months ended March 31, 2025 and 2024, respectively. Tremont also earned incentive fees from SEVN of $19 and $60 for the three months ended March 31, 2025 and 2024, respectively, and $87 and $359 for the six months ended March 31, 2025 and 2024, respectively.

Previous wording

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 wording

Income from loan investments, net. Income from loan investments, net includes loan investment interest income of $1,454 for loans originated, partially offset by interest expense of $808 incurred as part of our private capital business which began in the fourth fiscal quarter of 2024.

Previous wording

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 wording

Rental property expenses. Rental property expenses includes property operating expenses, such as real estate taxes, repairs and maintenance and utility costs incurred at our owned properties. Rental property expenses increased $329 primarily due to our acquisition of a property in Denver, CO in the fourth fiscal quarter of 2024.

Previous 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.

Current wording

Interest income. Interest income decreased $1,146 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

Income tax expense. The decrease in income tax expense of $162 is primarily attributable to lower taxable income.

Current wording

Income tax expense. The decrease in income tax expense of $742 is primarily attributable to lower taxable income.

Previous wording

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 wording

Rental property revenues. Rental property revenues includes base rental income and non-cash straight line rent adjustments for our rental properties. Rental property revenues increased $2,823 due to our acquisition of a property in Denver, CO in the fourth fiscal quarter of 2024.

Previous 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.

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 $2,944 primarily due to the impact of a full period 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

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.

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 $1,867 primarily as a result of decreases in certain of our clients’ respective share prices.

Previous 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.

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 $5,673 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. 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.

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 $1,797 primarily as a result of decreases in certain of our clients’ respective share prices.

Previous 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.

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 $1,323 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

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.

Current wording

Depreciation and amortization. Depreciation and amortization increased $3,158 primarily due to full period amortization of MPC acquisition related intangible assets and depreciation of our owned properties in the current fiscal period.

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 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.

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 March 31, 2025 and September 30, 2024, we had cash and cash equivalents of $137,186 and $141,599, respectively, of which $21,317 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 March 31, 2025 and September 30, 2024, $82,925 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 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.

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 carried interest.

Previous 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.

Current wording

The $2,978 increase in net cash flows provided by operating activities for the six months ended March 31, 2025 compared to the prior period reflects favorable changes in working capital, partially offset by a decrease in net income. The $69,512 decrease in net cash flows used in investing activities for the six months ended March 31, 2025 compared to the prior period was due to our acquisition of MPC in the prior period. Net cash flows used in financing activities for the six months ended March 31, 2025 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 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.

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 March 31, 2025, 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

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.

Current wording

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. As of April 30, 2025, we had no amounts outstanding.