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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-37616
 
THE RMR GROUP INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland47-4122583
(State of Organization)(IRS Employer Identification No.)
 
Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634
(Address of Principal Executive Offices)                            (Zip Code)
Registrant’s Telephone Number, Including Area Code 617-796-8230
Securities registered pursuant to Section 12(b) of the Act:
Title Of Each ClassTrading SymbolName Of Each Exchange On Which Registered
Class A common stock, $0.001 par value per shareRMRThe Nasdaq Stock Market LLC
 (Nasdaq Capital Market)
Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No
As of May 3, 2024, there were 15,730,629 shares of Class A common stock, par value $0.001 per share, 1,000,000 shares of Class B-1 common stock, par value $0.001 per share, and 15,000,000 shares of Class B-2 common stock, par value $0.001 per share outstanding.


THE RMR GROUP INC.

FORM 10-Q

March 31, 2024
 
Table of Contents

Page
 
 

2

PART I. Financial Information
Item 1. Financial Statements
The RMR Group Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
(unaudited)
March 31,September 30,
20242023
Assets
Cash and cash equivalents held by The RMR Group Inc.$25,918 $26,802 
Cash and cash equivalents held by The RMR Group LLC166,190 241,187 
Due from related parties87,336 111,323 
Prepaid and other current assets11,562 6,997 
Total current assets291,006 386,309 
Property and equipment, net of accumulated depreciation of $3,328 and $3,212, respectively
15,210 5,446 
Due from related parties, net of current portion6,236 7,261 
Equity method investments22,068 18,651 
Goodwill71,620 1,859 
Intangible assets, net of accumulated amortization of $1,991 and $983, respectively
20,477 167 
Operating lease right of use assets29,366 29,032 
Deferred tax asset16,947 18,220 
Other assets, net of accumulated amortization of $83,032 and $78,324, respectively
110,771 115,479 
Total assets$583,701 $582,424 
Liabilities and Equity
Reimbursable accounts payable and accrued expenses$51,103 $77,924 
Accounts payable and accrued expenses32,569 22,578 
Operating lease liabilities5,941 5,068 
Total current liabilities89,613 105,570 
Operating lease liabilities, net of current portion24,350 25,044 
Amounts due pursuant to tax receivable agreement, net of current portion20,886 20,886 
Other liabilities19,932 7,261 
Mortgage note payable4,759  
Total liabilities159,540 158,761 
Commitments and contingencies
Equity:
Class A common stock, $0.001 par value; 31,950,000 shares authorized; 15,731,049 and 15,712,007 shares issued and outstanding, respectively
16 16 
Class B-1 common stock, $0.001 par value; 1,000,000 shares authorized, issued and outstanding
1 1 
Class B-2 common stock, $0.001 par value; 15,000,000 shares authorized, issued and outstanding
15 15 
Additional paid in capital117,954 116,010 
Retained earnings425,955 413,096 
Cumulative common distributions(302,440)(289,072)
Total shareholders’ equity241,501 240,066 
Noncontrolling interest in The RMR Group LLC182,230 183,597 
Noncontrolling interest in consolidated entity430  
Total noncontrolling interests182,660 183,597 
Total equity424,161 423,663 
Total liabilities and equity$583,701 $582,424 
See accompanying notes.
3

The RMR Group Inc.
Condensed Consolidated Statements of Income
(amounts in thousands, except per share amounts)
(unaudited)
Three Months EndedSix Months Ended
March 31,March 31,
2024202320242023
Revenues:
Management services$48,460 $47,070 $93,554 $95,618 
Incentive fees60  359  
Advisory services1,126 1,139 2,251 2,230 
Total management, incentive and advisory services revenues49,646 48,209 96,164 97,848 
Reimbursable compensation and benefits22,629 14,883 39,457 29,206 
Reimbursable equity based compensation242 3,232 2,569 5,521 
Other reimbursable expenses145,232 142,095 341,230 326,584 
Total reimbursable costs168,103 160,210 383,256 361,311 
Total revenues217,749 208,419 479,420 459,159 
Expenses:
Compensation and benefits44,168 34,536 78,940 67,800 
Equity based compensation700 3,769 3,529 6,619 
Separation costs410 500 3,954 938 
Total compensation and benefits expense45,278 38,805 86,423 75,357 
General and administrative11,641 9,460 21,152 18,623 
Other reimbursable expenses145,232 142,095 341,230 326,584 
Transaction and acquisition related costs2,628  6,615  
Depreciation and amortization1,223 272 1,646 540 
Total expenses206,002 190,632 457,066 421,104 
Operating income11,747 17,787 22,354 38,055 
Interest income2,523 2,234 6,031 4,004 
Gain on equity method investments563 28,164 4,612 22,850 
Income before income tax expense14,833 48,185 32,997 64,909 
Income tax expense(2,120)(6,883)(4,758)(9,367)
Net income12,713 41,302 28,239 55,542 
Net income attributable to noncontrolling interest in The RMR Group LLC(6,863)(22,829)(15,394)(30,732)
Net loss attributable to noncontrolling interest in consolidated entity12  14  
Net income attributable to The RMR Group Inc.$5,862 $18,473 $12,859 $24,810 
Weighted average common shares outstanding - basic16,515 16,408 16,511 16,406 
Weighted average common shares outstanding - diluted31,539 31,430 31,525 31,422 
Net income attributable to The RMR Group Inc. per common share - basic
$0.35 $1.11 $0.77 $1.49 
Net income attributable to The RMR Group Inc. per common share - diluted$0.34 $1.11 $0.75 $1.48 
Substantially all revenues are earned from related parties. See accompanying notes.
4

The RMR Group Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(dollars in thousands)
(unaudited)
Noncontrolling Interests in:
Class A Common StockClass B-1 Common StockClass B-2 Common StockAdditional Paid In CapitalRetained EarningsCumulative Common DistributionsTotal Shareholders' EquityThe RMR Group LLCConsolidated EntityTotal Equity
Balance at September 30, 2023$16 $1 $15 $116,010 $413,096 $(289,072)$240,066 $183,597 $ $423,663 
Share awards, net— — — 588 — — 588 — — 588 
Net income— — — — 6,997 — 6,997 8,531 (2)15,526 
Tax distributions to member— — — — — — — (4,102)— (4,102)
Common share distributions— — — — — (6,684)(6,684)(4,800)— (11,484)
Acquisition of MPC Partnership Holdings LLC
— — — — — — — — 444 444 
Balance at December 31, 202316 1 15 116,598 420,093 (295,756)240,967 183,226 442 424,635 
Share awards, net— — — 1,356 — — 1,356 — — 1,356 
Net income— — — — 5,862 — 5,862 6,863 (12)12,713 
Tax distributions to member— — — — — — — (3,059)— (3,059)
Common share distributions— — — — — (6,684)(6,684)(4,800)— (11,484)
Balance at March 31, 2024$16 $1 $15 $117,954 $425,955 $(302,440)$241,501 $182,230 $430 $424,161 
Balance at September 30, 2022$16 $1 $15 $113,136 $355,949 $(262,496)$206,621 $163,118 $ $369,739 
Share awards, net— — — 594 — — 594 — — 594 
Net income— — — — 6,337 — 6,337 7,903 — 14,240 
Tax distributions to member— — — — — — — (3,839)— (3,839)
Common share distributions— — — — — (6,642)(6,642)(4,800)— (11,442)
Balance at December 31, 202216 1 15 113,730 362,286 (269,138)206,910 162,382  369,292 
Share awards, net— — — 1,015 — — 1,015 — — 1,015 
Net income— — — — 18,473 — 18,473 22,829 — 41,302 
Tax distributions to member— — — — — — — (4,545)— (4,545)
Common share distributions— — — — — (6,641)(6,641)(4,800)— (11,441)
Balance at March 31, 2023$16 $1 $15 $114,745 $380,759 $(275,779)$219,757 $175,866 $ $395,623 
See accompanying notes.
5

The RMR Group Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Six Months Ended March 31,
20242023
Cash Flows from Operating Activities:
Net income$28,239 $55,542 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization1,646 540 
Straight line office rent(155)(147)
Amortization expense related to other assets4,708 4,708 
Provision for deferred income taxes1,273 3,860 
Operating expenses paid in The RMR Group Inc. common shares2,068 1,688 
Distributions from investments1,195 1,025 
Gain on equity method investments(4,612)(22,850)
Changes in assets and liabilities:
Due from related parties29,366 (8,718)
Prepaid and other current assets(3,192)(158)
Reimbursable accounts payable and accrued expenses(26,821)598 
Accounts payable and accrued expenses1,301 6,027 
Net cash from operating activities35,016 42,115 
Cash Flows from Investing Activities:
Acquisition of MPC Partnership Holdings LLC, net of cash acquired(78,771) 
Purchase of property and equipment(1,873)(1,878)
Net cash used in investing activities(80,644)(1,878)
Cash Flows from Financing Activities:
Distributions to noncontrolling interests(16,761)(17,984)
Distributions to common shareholders(13,368)(13,283)
Repurchase of common shares(124)(79)
Net cash used in financing activities(30,253)(31,346)
(Decrease) increase in cash and cash equivalents(75,881)8,891 
Cash and cash equivalents at beginning of period267,989 189,088 
Cash and cash equivalents at end of period$192,108 $197,979 
Supplemental Disclosures:
Income taxes paid$6,537 $5,857 
Non-cash investing and financing activities:
Recognition of right of use assets and related lease liabilities$2,961 $4,023 
Recognition of earnout liability$14,547 $ 
Write-off of fully depreciated property and equipment$522 $229 
Assumption of mortgage note payable$5,429 $ 
6

RMR Group Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(dollars in thousands)
(unaudited)
Supplemental Reconciliation of Cash and Cash Equivalents:
The following table provides a reconciliation of cash and cash equivalents reported within the consolidated balance sheets to the amounts shown in the consolidated statements of cash flows:
March 31,
20242023
Cash and cash equivalents held by The RMR Group Inc.$25,918 $22,052 
Cash and cash equivalents held by The RMR Group LLC166,190 175,927 
Total cash and cash equivalents shown in the statements of cash flows
$192,108 $197,979 
See accompanying notes.
7


The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in thousands, except per share amounts)


Note 1. Organization
The RMR Group Inc., or RMR Inc., is a holding company and substantially all of its business is conducted by its majority owned subsidiary, The RMR Group LLC, or RMR LLC. RMR Inc. is a Maryland corporation and RMR LLC is a Maryland limited liability company. RMR Inc. serves as the sole managing member of RMR LLC and, in that capacity, operates and controls the business and affairs of RMR LLC. In these condensed consolidated financial statements, unless otherwise indicated, “we”, “us” and “our” refer to RMR Inc. and its direct and indirect subsidiaries, including RMR LLC.
As of March 31, 2024, RMR Inc. owned 15,731,049 class A membership units of RMR LLC, or Class A Units, and 1,000,000 class B membership units of RMR LLC, or Class B Units. The aggregate RMR LLC membership units RMR Inc. owns represented 52.7% of the economic interest of RMR LLC as of March 31, 2024. We refer to economic interest as the right of a holder of a Class A Unit or Class B Unit to share in distributions made by RMR LLC and, upon liquidation, dissolution or winding up of RMR LLC, to share in the assets of RMR LLC after payments to creditors. A wholly owned subsidiary of ABP Trust, a Maryland statutory trust, owns 15,000,000 redeemable Class A Units, representing 47.3% of the economic interest of RMR LLC as of March 31, 2024, which is presented as noncontrolling interest in The RMR Group LLC within the condensed consolidated financial statements. Adam D. Portnoy, the Chair of our Board, one of our Managing Directors and our President and Chief Executive Officer, is the sole trustee of ABP Trust, and owns all of ABP Trust’s voting securities.
RMR LLC provides management services to four publicly traded equity real estate investment trusts, or REITs: Diversified Healthcare Trust, or DHC, which owns medical office and life science properties, senior living communities and other healthcare related properties; Industrial Logistics Properties Trust, or ILPT, which owns and leases industrial and logistics properties; Office Properties Income Trust, or OPI, which owns and leases office properties primarily to single tenants and those with high credit quality characteristics; and Service Properties Trust, or SVC, which owns a diverse portfolio of hotels and service-focused retail net lease properties. DHC, ILPT, OPI and SVC are collectively referred to as the Managed Equity REITs.
RMR LLC’s wholly owned subsidiary, Tremont Realty Capital LLC, or Tremont, an investment adviser registered with the Securities and Exchange Commission, or SEC, provides advisory services for Seven Hills Realty Trust, or SEVN. SEVN is a publicly traded mortgage REIT that focuses on originating and investing in first mortgage loans secured by middle market and transitional commercial real estate. Tremont may also act as a transaction broker for non-investment advisory clients for negotiated fees, which we refer to as the Tremont business.
RMR LLC also provided management services to TravelCenters of America Inc., or TA, until it was acquired by BP Products North America Inc., or BP, on May 15, 2023. TA, a publicly traded operating company until the time BP acquired it, operates and franchises travel centers primarily along the United States, or U.S., interstate highway system, many of which are owned by SVC, and standalone truck service facilities. The Managed Equity REITs, SEVN, and until May 15, 2023, TA, are collectively referred to as the Perpetual Capital clients.
RMR LLC provides management services to AlerisLife Inc., or AlerisLife, an operator of senior living communities, many of which are owned by DHC, and Sonesta International Hotels Corporation, or Sonesta, a privately owned franchisor and operator of hotels, resorts and cruise ships in the United States, Latin America, the Caribbean and the Middle East, and many of the U.S. hotels that Sonesta operates are owned by SVC.
On December 19, 2023, or the Acquisition Date, RMR LLC acquired MPC Partnership Holdings LLC, or MPC, or the Acquisition. In connection with the Acquisition, RMR LLC started providing management services through MPC and its subsidiaries to multiple private funds and the underlying residential real estate assets of the funds, as well as property management services to third party owners. The residential real estate we manage through MPC and its subsidiaries are presented as RMR Residential in these condensed consolidated financial statements. For additional information regarding the Acquisition, see Note 3, Acquisition of MPC Partnership Holdings LLC.
In addition, RMR LLC provides management services to other private capital vehicles including ABP Trust and other private entities that own commercial real estate, of which certain of our Managed Equity REITs own minority equity interests. These other private clients, along with AlerisLife, Sonesta and clients of RMR Residential are collectively referred to as the Private Capital clients.
8

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Note 2. Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, or our 2023 Annual Report. In the opinion of management, all adjustments considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.
We report our results in a single reportable segment, which reflects how our chief operating decision maker, or the CODM, allocates resources and evaluates our financial results. Preparation of these financial statements in conformity with GAAP requires our management to make certain estimates and assumptions that may affect the amounts reported in these condensed consolidated financial statements and related notes. Significant estimates in the accompanying condensed consolidated financial statements include purchase price allocations, useful lives of intangibles and the fair value of certain assets and liabilities. The actual results could differ from these estimates.
Recent Accounting Pronouncements
Segments. On November 27, 2023, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU No. 2023-07, which requires public entities to: i) provide disclosures of significant segment expenses and other segment items if they are regularly provided to the CODM and included in each reported measure of segment profit or loss; ii) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Accounting Standards Codification, or ASC, 280, Segment Reporting, or ASC 280, in interim periods; and iii) disclose the CODM’s title and position, as well as an explanation of how the CODM uses the reported measures and other disclosures. Public entities with a single reportable segment must apply all the disclosure requirements of ASU No. 2023-07, as well as all the existing segment disclosures under ASC 280. The amendments in ASU No. 2023-07 are incremental to the requirements in ASC 280 and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. ASU No. 2023-07 should be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact ASU No. 2023-07 will have on our consolidated financial statements and disclosures.
Income Taxes. On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, or ASU No. 2023-09, which requires public entities to enhance its annual income tax disclosures by requiring: i) consistent categories and greater disaggregation of information in the rate reconciliation, and ii) income taxes paid disaggregated by jurisdiction. ASU No. 2023-09 should be applied prospectively but entities have the option to apply it retrospectively to all prior periods presented in the financial statements. ASU No. 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact ASU No. 2023-09 will have on our consolidated financial statements and disclosures.
Note 3. Acquisition of MPC Partnership Holdings LLC
On the Acquisition Date, RMR LLC acquired all of the issued and outstanding equity interests of MPC, excluding certain assets (including co-investment interests of legacy investment funds managed by MPC and the rights to future distributions and income allocations in respect of such interests) and liabilities (including liabilities related to such excluded assets), for $80,000 in cash, subject to customary adjustments for cash, debt, transaction expenses and working capital at closing, which are expected to be finalized during this fiscal year, plus up to an additional $20,000 subject to the deployment of remaining capital commitments in investment funds managed by MPC prior to the end of such funds’ investment period, or the Earnout. 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, or the Retention Payments. The Retention Payments are recognized as transaction and acquisition related costs and are forfeitable upon termination of employment prior to the end of the service period.
9

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
The Earnout represents contingent consideration of the Acquisition. The fair value of the Earnout was determined using a Monte Carlo simulation model based on significant unobservable inputs (Level 3), including management’s estimates of the deployment of capital remaining in investment funds managed by MPC, adjusted for historical volatility of similar transactions, and a discount rate based on credit ratings of companies similar to RMR LLC. For additional information, see Note 7, Fair Value of Financial Instruments.
The following table summarizes the consideration transferred as of the Acquisition Date, excluding transaction costs:
Cash consideration paid by RMR LLC
$84,474 
Earnout
14,547 
Total consideration
$99,021 
The Acquisition was accounted for as a business combination under the FASB ASC Topic 805, Business Combinations. The purchase price has been allocated to the assets acquired and liabilities assumed based on estimates of fair values as of the Acquisition Date. We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the Acquisition Date.
Goodwill of $69,762 has been recognized based on the amount that the purchase price exceeds the fair value of the net identifiable assets acquired less the amounts attributable to noncontrolling interests in consolidated entity. Goodwill is expected to be deductible for income tax purposes and is primarily attributable to the workforce of the acquired business and synergies that can be achieved subsequent to the Acquisition.
The following table summarizes the fair value amounts recognized for the assets acquired and liabilities assumed and resulting goodwill as of the Acquisition Date:
Assets acquired:
Cash and cash equivalents
$5,703 
Real estate
8,460 
Due from related parties
6,788 
Prepaid and other current assets
1,373 
Intangible assets:
Property management and investment management agreements
13,694 
Trade name
5,047 
Investor relationships
1,874 
Acquired leases
703 
Total intangible assets
21,318 
Total assets acquired43,642 
Liabilities assumed:
Mortgage note payable
4,726 
Other liabilities
9,213 
Total liabilities
13,939 
Net identifiable assets acquired
29,703 
Noncontrolling interests in consolidated entity
(444)
Goodwill
69,762 
Total consideration
$99,021 
10

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Real estate, acquired leases and mortgage note payable
We acquired a 90.0% economic ownership interest in 260 Woodstock Investor, LLC, a mixed-use apartment complex located in Woodstock, GA, or the Woodstock Property. The allocation of the fair value of the Woodstock Property and related acquired leases as of the Acquisition Date is as follows:
Land$1,400 
Building and improvements7,060 
Acquired leases703 
Total real estate and acquired leases
$9,163 
We determined the fair value of the Woodstock Property and related acquired leases using Level 3 inputs and standard industry valuation methods, including discounted cash flow analyses and sales comparisons. Building and improvements had a remaining useful life of 25 years and the weighted average amortization period for acquired leases was 2.9 years as of the Acquisition Date.
A mortgage note payable with an acquisition date fair value of $4,726 and an aggregate principal amount outstanding of $5,429 is secured by the Woodstock Property, bears interest at a fixed rate of 3.71% per annum and matures in August 2029. Interest only payments are due on a monthly basis until September 2025, at which time payments of principal and interest are due monthly until the loan matures in August 2029. We determined the fair value of the mortgage note payable by discounting the expected cash flows at a rate comparable with interest rates for similar debt as of the Acquisition Date (Level 3 inputs). Principal payments due during the next five fiscal years are: $0 in 2024, $8 in 2025, $98 in 2026, $102 in 2027 $5,221 in 2028 and thereafter.
The Woodstock Property is consolidated in these condensed consolidated financial statements. The Woodstock Property is included in property and equipment, net, and the related acquired leases are included in goodwill and intangibles assets, net of amortization, in our condensed consolidated balance sheets. The Acquisition Date fair value of the noncontrolling interest in the Woodstock Property (10% ownership we did not acquire) of $444 is reflected in noncontrolling interests in consolidated entity in our condensed consolidated balance sheets.
Property management and investment management agreements
As of the Acquisition Date, MPC managed 66 properties, including 14 in which MPC did not have an economic ownership interest in, or the Third Party Managed Properties, through its property management agreements and managed four funds through its investment management agreements. The property management agreements may be terminated upon written notice and generally provide for property management fees ranging from 2.5% to 3.5% of gross collected rents, construction management fees of 5.0% of construction costs and reimbursement of costs incurred to manage the properties. The investment management agreements generally provide for fees that are based on the lesser of a percentage of invested capital and a fixed fee ranging from $100 to $200 annually. The weighted average remaining useful life of these agreements was 5.6 years.
Trade name
MPC operates many of its residential properties under the trade name ARIUM. We concluded this asset has an indefinite life.
Investor relationships
MPC has relationships with institutional investors that have invested in, and may continue to invest in, the funds managed by MPC. The weighted average remaining useful life of these relationships was 5.0 years.
Managed funds
As of the Acquisition Date and pursuant to the Equity Purchase Agreement, dated as of July 29, 2023, by and among RMR LLC, MPC, and the sellers and seller owners set forth therein, we managed four funds that invest in residential real estate. Three of the four funds have no unfunded capital commitments remaining. As of the Acquisition Date, CARROLL Multifamily Venture VII, LP, or Fund VII, had $208,026 in unfunded capital commitments remaining from total capital commitments of $342,825. In the future, we will be eligible to participate in distributions and profits interests on investments from capital
11

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
commitments we provide to Fund VII, or Investment Interest; however, we had no Investment Interest in Fund VII as of the Acquisition Date, and as of the Acquisition Date, we had no obligations nor rights to any distributions or profits interests from investments of capital contributed on or prior to the Acquisition Date.
As of March 31, 2024, we have not contributed any capital to Fund VII or any of the other funds we manage. Accordingly, the results of such funds are not reflected in our condensed consolidated financial statements.
Pro Forma Financial Information
Unaudited pro forma financial information for the three and six months ended March 31, 2024 and 2023, is presented below. Pro forma financial information presented does not include adjustments related to the Earnout or to reflect any potential synergies that may be achievable in connection with the Acquisition. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of future operations or results had the Acquisition been completed as of October 1, 2022.
Three Months Ended March 31,Six Months Ended March 31,
2024202320242023
Total revenues$217,749 $225,331 $491,038 $492,983 
Net income 14,406 36,247 24,350 40,341 
Net income attributable to The RMR Group Inc.6,617 16,267 11,132 18,135 
The amounts above reflect certain pro forma adjustments that were directly attributable to the Acquisition as follows:
adjustments to eliminate the revenues and expenses attributable to certain assets and liabilities of MPC excluded from the Acquisition, including co-investment interests of investment funds owned by MPC and the rights to future distributions and income allocations of those co-investment interests, and the liabilities related to such assets;
adjustments to amortize the intangible assets recognized as a result of the Acquisition;
adjustments to the historical depreciation of MPC’s property and equipment to reflect the depreciation resulting from the fair value measurement of such property and equipment;
adjustments to interest expense resulting from the fair value measurement of the mortgage note payable; and
adjustments to reflect the related transaction costs of $5,962 as if they had occurred as of October 1, 2022.
Note 4. Revenue Recognition
Revenues from services we provide are recognized as earned over time as the services provided represent performance obligations that are satisfied over time.
Management Agreements with the Managed Equity REITs
We are party to a business management and a property management agreement with each Managed Equity REIT. The following is a summary of the fees we earn pursuant to our business management agreements with the Managed Equity REITs. For a summary of the fees we earn pursuant to our property management agreements with the Managed Equity REITs, see Property Management Agreements, below.
Base Business Management Fees We earn annual base business management fees from the Managed Equity REITs by providing continuous services pursuant to business management agreements equal to the lesser of:
the sum of (a) 0.5% of the historical cost of transferred real estate assets, if any, as defined in the applicable business management agreement, plus (b) 0.7% of the average invested capital (exclusive of the transferred real estate assets), as defined in the applicable business management agreement, up to $250,000, plus (c) 0.5% of the average invested capital exceeding $250,000; and
12

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
the sum of (a) 0.7% of the average market capitalization, as defined in the applicable business management agreement, up to $250,000, plus (b) 0.5% of the average market capitalization exceeding $250,000.
The foregoing base business management fees are paid in cash monthly in arrears. 
We earned aggregate base business management fees from the Managed Equity REITs of $21,246 and $21,484 for the three months ended March 31, 2024 and 2023, respectively, and $42,796 and $42,857 for the six months ended March 31, 2024 and 2023, respectively.
Incentive Business Management Fees We also may earn annual incentive business management fees from the Managed Equity REITs under the business management agreements. The incentive business management fees, which are payable in cash, are contingent performance based fees recognized only when earned at the end of each respective measurement period. Incentive business management fees are excluded from the transaction price until it becomes probable that there will not be a significant reversal of cumulative revenue recognized.
The incentive business management fees are calculated for each Managed Equity REIT as 12.0% of the product of (a) the equity market capitalization of the Managed Equity REIT, as defined in the applicable business management agreement, on the last trading day of the year immediately prior to the relevant measurement period and (b) the amount, expressed as a percentage, by which the Managed Equity REIT’s total return per share, as defined in the applicable business management agreement, exceeded the applicable benchmark total return per share, as defined in the applicable business management agreement, of a specified REIT index identified in the applicable business management agreement for the measurement period, as adjusted for net share issuances during the period and subject to caps on the values of the incentive fees. The measurement period for the annual incentive business management fees is defined as the three year period ending on December 31 of the year for which such fee is being calculated.
We did not earn incentive business management fees from the Managed Equity REITs for calendar years 2023 or 2022.
Other Management Agreements
We earn management fees by providing continuous services pursuant to the management agreements with ABP Trust regarding AlerisLife; with Sonesta and, until May 15, 2023, with TA; equal to 0.6% of: (i) in the case of AlerisLife, AlerisLife’s revenues from all sources reportable under GAAP, less any revenues reportable by AlerisLife with respect to properties for which it provides management services, plus the gross revenues at those properties determined in accordance with GAAP, payable in cash monthly in arrears; (ii) in the case of Sonesta, Sonesta’s estimated revenues from all sources reportable under GAAP, less any estimated revenues reportable by Sonesta with respect to hotels for which it provides management services, plus the estimated gross revenues at those hotels determined in accordance with GAAP, payable in cash monthly in advance; and (iii) in the case of TA, the sum of TA’s gross fuel margin, as defined in the applicable agreement, plus TA’s total nonfuel revenues, payable in cash monthly in advance.
We also earn management fees from certain other Private Capital clients based on a percentage of average invested capital, as defined in the applicable management agreements. These management fees are payable in cash monthly in arrears.
We earned aggregate base business management fees from TA and the Private Capital clients of $6,613 and $10,162 for the three months ended March 31, 2024 and 2023, respectively, and $13,295 and $20,740 for the six months ended March 31, 2024 and 2023, respectively.
Property Management Agreements
We earn property management fees by providing continuous services pursuant to property management agreements with the Managed Equity REITs, SEVN, RMR Residential and certain Private Capital clients. We generally earn fees under these agreements between 2.5% to 3.5% of gross collected rents. Also, under the terms of the property management agreements, we receive additional fees for construction supervision services up to 5.0% of the cost of such construction. In addition, we earn fees under our RMR Residential property management agreements for providing certain marketing, information technology and other management services, as defined in the applicable management agreements, and the related costs are included in general and administrative expenses in our condensed consolidated financial statements. These management fees are payable in cash monthly in arrears.
13

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
For the three months ended March 31, 2024 and 2023, we earned aggregate property management fees of $20,601 and $15,424, respectively, including construction supervision fees of $3,611 and $4,016, respectively. For the six months ended March 31, 2024 and 2023, we earned aggregate property management fees of $37,463 and $32,021, respectively, including construction supervision fees of $8,882 and $9,702, respectively.
Management Agreements with Advisory Clients
Tremont is primarily compensated pursuant to its management agreement with SEVN at an annual rate of 1.5% of equity, as defined in the applicable agreement. Tremont may also earn an incentive fee under its management agreement with SEVN equal to the difference between: (a) the product of (i) 20% and (ii) the difference between (A) core earnings, as defined in the agreement, 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) 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 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 core earnings for the 12 most recently completed calendar quarters in the aggregate is greater than zero. The incentive fee may not be less than zero. Tremont earned incentive fees from SEVN of $60 and $359 for the three and six months ended March 31, 2024, respectively. Tremont did not earn incentive fees from SEVN for the three or six months ended March 31, 2023.
We earned advisory services revenue of $1,126 and $1,139 for the three months ended March 31, 2024 and 2023, respectively, and $2,251 and $2,230 for the six months ended March 31, 2024 and 2023, respectively.
Reimbursable Costs
We determined we control the services provided by third parties for certain of our clients and therefore account for the cost of these services and the related reimbursement revenue on a gross basis.
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. We recognize the revenue for reimbursements when we incur the related reimbursable compensation and benefits expense on behalf of our clients.
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. The revenue in respect of each award is based on the fair value as of the award date for those shares that have vested, with subsequent changes in the fair value of the unvested awards being recognized in our condensed consolidated statements of income over the requisite service periods. We record an equal, offsetting amount as equity based compensation expense for the value of these awards.
Other Reimbursable Expenses Other reimbursable expenses include reimbursements that arise from services we provide pursuant to our property management agreements, which include third party costs related to matters such as maintenance and repairs, development costs, security and cleaning services, a significant portion of which are charged or passed through to and paid by tenants of our clients.
Note 5. Equity Method Investments
Seven Hills Realty Trust
As of March 31, 2024, Tremont owned 1,708,058, or approximately 11.5%, of SEVN’s outstanding common shares. We account for our investment in SEVN using the equity method of accounting because we are deemed to exert significant influence, but not control, over SEVN’s most significant activities. We elected the fair value option to account for our equity method investment in SEVN and determine fair value using the closing price of SEVN’s common shares as of the end of the period, which is a Level 1 fair value input. The aggregate market value of our investment in SEVN as of March 31, 2024 and September 30, 2023, based on quoted market prices, was $22,068 and $18,651, respectively. The unrealized gain in our condensed consolidated statements of income related to our investment in SEVN was $563 and $2,221 for the three months
14

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
ended March 31, 2024 and 2023, respectively, and $4,612 and $2,597 for the six months ended March 31, 2024 and 2023, respectively. We received distributions from SEVN of $597 and $598 for the three months ended March 31, 2024 and 2023, respectively, and $1,195 and $1,025 for the six months ended March 31, 2024 and 2023, respectively.
TravelCenters of America Inc.
Until BP acquired TA on May 15, 2023, we owned 621,853, or approximately 4.1%, of TA’s outstanding common shares, that had a cost of $13,701. We previously accounted for our investment in TA using the equity method of accounting because we were deemed to exert significant influence, but not control, over TA’s most significant activities. Under the fair value option, we determined fair value using the closing price of TA’s common shares as of the end of the period, which was a Level 1 fair value input, and recorded changes in fair value in earnings in our condensed consolidated statements of income. We recorded gains in our consolidated statements of income related to our investment in TA of $25,943 and $20,253 for the three and six months ended March 31, 2023, respectively.
Note 6. Income Taxes
We are the sole managing member of RMR LLC. We are a corporation subject to U.S. federal and state income tax with respect to our allocable share of any taxable income of RMR LLC and its tax consolidated subsidiaries. RMR LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, RMR LLC is generally not subject to U.S. federal and most state income taxes. Any taxable income or loss generated by RMR LLC is passed through to and included in the taxable income or loss of its members, including RMR Inc. and ABP Trust, based on each member’s respective ownership percentage.
For the three months ended March 31, 2024 and 2023, we recognized estimated income tax expense of $2,120 and $6,883, respectively, which includes $1,635 and $5,043, respectively, of U.S. federal income tax and $485 and $1,840, respectively, of state income taxes. For the six months ended March 31, 2024 and 2023, we recognized estimated income tax expense of $4,758 and $9,367, respectively, which includes $3,336 and $6,863, respectively, of U.S. federal income tax and $1,422 and $2,504, respectively, of state income taxes.
A reconciliation of the statutory income tax rate to the effective tax rate is as follows:
Three Months Ended March 31,Six Months Ended March 31,
2024202320242023
Income taxes computed at the federal statutory rate21.0 %21.0 %21.0 %21.0 %
State taxes, net of federal benefit2.5 %3.1 %2.6 %3.0 %
Permanent items0.5 %0.2 %0.6 %0.3 %
Net income attributable to noncontrolling interest(9.7)%(10.0)%(9.8)%(9.9)%
Total14.3 %14.3 %14.4 %14.4 %
ASC 740, Income Taxes, provides a model for how a company should recognize, measure and present in its financial statements uncertain tax positions that have been taken or are expected to be taken with respect to all open years and in all significant jurisdictions. Pursuant to this topic, we recognize a tax benefit only if it is “more likely than not” that a particular tax position will be sustained upon examination or audit. To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50.0% likely to be realized upon settlement. As of March 31, 2024 and 2023, we had no uncertain tax positions.
Note 7. Fair Value of Financial Instruments
As of March 31, 2024 and September 30, 2023, the fair values of our financial instruments, which include cash and cash equivalents, amounts due from related parties, accounts payable and reimbursable accounts payable, were not materially different from their carrying values due to the short term nature of these financial instruments. As of March 31, 2024, our fixed rate mortgage note payable had a carrying value of $4,759 and a fair value of $4,824. We estimate the fair value of our fixed rate mortgage note payable using significant unobservable inputs (Level 3), including discounted cash flow analyses and prevailing market interest rates.
On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices. ASC 820, Fair Value Measurements, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques
15

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
used to measure fair value. The hierarchy gives the highest priority to inputs from unadjusted quoted prices in active markets for identical assets and liabilities, or Level 1, the lowest priority to unobservable inputs, or Level 3, and significant other observable inputs, or Level 2. A financial asset’s or financial liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The tables below presents our financial assets and liabilities measured at fair value on a recurring basis:
March 31, 2024
Total
Level 1
Level 2
Level 3
Due from related parties related to share based payment awards
$8,261 $8,261 $ $ 
Equity method investment in SEVN22,068 22,068   
Employer compensation liability related to share based payment awards
8,261 8,261   
Earnout liability
14,847   14,847 
September 30, 2023
Total
Level 1
Level 2
Level 3
Due from related parties related to share based payment awards
$10,695 $10,695 $ $ 
Equity method investment in SEVN18,651 18,651   
Employer compensation liability related to share based payment awards10,695 10,695   
The following table presents additional information about the valuation techniques and significant unobservable inputs for financial assets and liabilities that are measured at fair value and categorized within Level 3 as of March 31, 2024:
Fair Value
Valuation Technique
Unobservable Input
Range
Earnout liability
$14,847 
Monte Carlo
Capital deployment volatility
15.00%
Discount rate
5.80%
The table below presents a summary of the changes in fair value for our Earnout liability measured on a recurring basis:
Three Months EndedSix Months Ended
March 31, 2024March 31, 2024
Beginning balance
$14,547 $ 
Acquisition of MPC Partnership Holdings LLC
 14,547 
Changes in fair value for our Earnout liability measured on a recurring basis
300 300 
Ending balance
$14,847 $14,847 
Note 8. Related Person Transactions
Adam D. Portnoy, Chair of our Board, one of our Managing Directors and our President and Chief Executive Officer, is the sole trustee, an officer and the controlling shareholder of our controlling shareholder, ABP Trust, and owns all of ABP Trust’s voting securities and a majority of the economic interests of ABP Trust. RMR Inc.’s executive officers are officers and employees of RMR LLC, and Jennifer B. Clark, our other Managing Director, and Matthew P. Jordan, our Executive Vice President, Chief Financial Officer and Treasurer, are also officers of ABP Trust.
Mr. Portnoy is the chair of the board and a managing trustee of each of the Perpetual Capital clients, the controlling shareholder and a director of Sonesta (and its parent) and was the chair of the board and a managing director of AlerisLife until March 20, 2023 when AlerisLife was acquired by ABP Trust. Since March 20, 2023, Mr. Portnoy is the sole director of AlerisLife. Mr. Portnoy was the chair of the board and a managing director of TA until May 15, 2023 when TA was acquired by BP. Ms. Clark is a managing trustee of OPI and a director of Sonesta (and its parent), and she previously served as a managing director of AlerisLife until March 20, 2023. Ms. Clark also serves as the secretary of all the Perpetual Capital clients, Sonesta and AlerisLife.
16

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
As of March 31, 2024, Mr. Portnoy beneficially owned 13.5% of SEVN’s outstanding common shares (including through Tremont and ABP Trust) and 9.8% of DHC’s outstanding common shares (including through ABP Trust). In addition, Mr. Portnoy beneficially owns shares of ILPT, OPI, SVC, and prior to May 15, 2023, TA, comprising less than 5.0% of the outstanding shares of each of those respective companies.
The Managed Equity REITs and SEVN have no employees. RMR LLC provides or arranges for all the personnel, overhead and services required for the operation of the Managed Equity REITs pursuant to management agreements with them. The officers of the Managed Equity REITs are officers or employees of RMR LLC. All the officers, overhead and required office space of SEVN are provided or arranged by Tremont. All of SEVN’s officers are officers or employees of Tremont or RMR LLC. Some of the executive officers of TA (prior to May 15, 2023), one of the executive officers of AlerisLife and one of the executive officers of Sonesta are (or were with respect to TA) officers or employees of RMR LLC. Our executive officers are also managing trustees of certain of the Perpetual Capital clients.
Additional information about our related person transactions appears in Note 9, Shareholders’ Equity, and in our 2023 Annual Report.
Revenues from Related Parties
For the three months ended March 31, 2024 and 2023, we recognized revenues from related parties as set forth in the following table:
Three Months Ended March 31, 2024Three Months Ended March 31, 2023
TotalTotal
ManagementManagement
and AdvisoryTotaland AdvisoryTotal
ServicesReimbursableTotalServicesReimbursableTotal
RevenuesCostsRevenuesRevenuesCostsRevenues
Perpetual Capital:
DHC$6,089 $26,789 $32,878 $5,482 $28,597 $34,079 
ILPT9,289 8,939 18,228 9,244 9,215 18,459 
OPI7,708 47,914 55,622 9,877 83,449 93,326 
SVC11,090 60,139 71,229 9,970 20,230 30,200 
Total Managed Equity REITs34,176 143,781 177,957 34,573 141,491 176,064 
SEVN1,195 1,478 2,673 1,139 1,186 2,325 
TA (1)
   3,785 1,748 5,533 
35,371 145,259 180,630 39,497 144,425 183,922 
Private Capital:
AlerisLife (2)
1,451  1,451 1,369  1,369 
Sonesta2,000  2,000 2,032 29 2,061 
RMR Residential
5,462 7,413 12,875    
Other private entities5,362 15,431 20,793 5,311 15,756 21,067 
14,275 22,844 37,119 8,712 15,785 24,497 
Total revenues$49,646 $168,103 $217,749 $48,209 $160,210 $208,419 
(1)On May 15, 2023, BP acquired TA and TA terminated its management agreement with us.
(2)On March 20, 2023, AlerisLife merged with and into a subsidiary of ABP Trust and ceased to be a public company. As a result, the revenues earned with respect to AlerisLife are characterized as Private Capital for all periods presented. For further information about this transaction please see “ABP Trust’s Acquisition of AlerisLife” below.
17

The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
For the six months ended March 31, 2024 and 2023, we recognized revenues from related parties as set forth in the following table:
Six Months Ended March 31, 2024Six Months Ended March 31, 2023
TotalTotal
ManagementManagement
and AdvisoryTotaland AdvisoryTotal
ServicesReimbursableTotalServicesReimbursableTotal
RevenuesCostsRevenuesRevenuesCostsRevenues
Perpetual Capital:
DHC$12,410 $72,005 $84,415 $11,938 $80,469 $92,407 
ILPT18,330 19,615 37,945 18,264 19,951 38,215 
OPI16,187 116,291 132,478 20,085 178,984 199,069 
SVC22,713 133,938 156,651 19,738 40,825 60,563 
Total Managed Equity REITs69,640 341,849 411,489 70,025 320,229 390,254 
SEVN2,628 3,012 5,640 2,230 2,323 4,553 
TA (1)
   7,976 3,476 11,452 
72,268 344,861 417,129 80,231