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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 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)

Maryland | 47-4122583
(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 Class |  | Trading Symbol |  | Name Of Each Exchange On Which Registered
Class A common stock, $0.001 par value per share |  | RMR |  | The Nasdaq Stock Market LLC
|  |  |  | (Nasdaq Capital Market)

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting shares of Class A common stock, $0.001 par value, of the registrant held by non-affiliates was approximately $367.5 million based on the $24.00 closing price per common share on The Nasdaq Stock Market LLC, on March 31, 2024. For purposes of this calculation, an aggregate of 419,775 shares of Class A common stock, held directly by, or by affiliates of, the directors and executive officers of the registrant have been included in the number of common shares held by affiliates.
As of November 5, 2024, there were 15,845,601 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.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement for its 2025 annual meeting of shareholders are incorporated by reference in Part III of this Annual Report on Form 10-K.

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WARNING CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws that are subject to risks and uncertainties. These statements may include words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions. These forward-looking statements include, among others, statements about: our business strategy; economic and industry conditions; the impact and opportunities for our and our clients’ businesses from business cycles in the U.S. real estate industry as well as economic and industry conditions; our belief that it is possible to grow real estate based businesses in selected property types or geographic areas despite general national trends; our cash and cash equivalents, including their sufficiency to pursue a range of capital allocation strategies and fund our operations and enhance our technology infrastructure and risk exposure; and our sustainability practices.
Forward-looking statements reflect our current expectations, are based on judgments and assumptions, are inherently uncertain and are subject to risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from expected future results, performance or achievements expressed or implied in those forward-looking statements. Some of the risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:
•The dependence of our revenues on a limited number of clients,
•The variability of our revenues,
•Risks related to supply chain constraints, commodity pricing and inflation, including inflation impacting wages and employee benefits,
•Changing market conditions, practices and trends, which may adversely impact our clients and the fees we receive from them,
•Potential terminations of the management agreements with our clients,
•Uncertainty surrounding interest rates and sustained high interest rates, which may impact our clients and significantly reduce our revenues or impede our growth,
•Our dependence on the growth and performance of our clients,
•Our ability to obtain or create new clients for our business which is often dependent on circumstances beyond our control,
•The ability of our clients to operate their businesses profitably, optimize their capital structures and to grow and increase their market capitalizations and total shareholder returns,
•Our ability to successfully provide management services to our clients,
•Our ability to maintain or increase the distributions we pay to our shareholders,
•Our ability to successfully pursue and execute capital allocation and new business strategies,
•Our ability to prudently invest in our business to enhance our operations, services and competitive positioning,
•Our ability to successfully grow the RMR Residential business and realize our expected returns on our investment within the anticipated timeframe,
•Our ability to successfully integrate acquired businesses and realize our expected returns on our investments,
•The ability of Tremont to identify and close suitable investments for our new private capital debt vehicle, or our Real Estate Lending Venture, and SEVN and to monitor, service and administer existing investments,
•Our ability to obtain additional capital from third party investors in our Real Estate Lending Venture in order to make additional investments and to increase potential returns,
•Changes to our operating leverage or client diversity,
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•Risks related to the security of our network and information technology,
•Litigation risks,
•Risks related to acquisitions, dispositions and other activities by or among our clients,
•Allegations, even if untrue, of any conflicts of interest arising from our management activities,
•Our ability to retain the services of our managing directors and other key personnel,
•Our and our clients’ risks associated with our and our clients’ costs of compliance with laws and regulations, including securities regulations, exchange listing standards and other laws and regulations affecting public companies, and
•other risks described under “Risk Factors” beginning on page 12.
These risks, uncertainties and other factors are not exhaustive and should be read in conjunction with other cautionary statements that are included in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission, or SEC. Our filings with the SEC are available on the SEC’s website at www.sec.gov.
You should not place undue reliance upon our forward-looking statements.
Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
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THE RMR GROUP INC.
2024 FORM 10-K ANNUAL REPORT
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|  | Page
| Part I |
Item 1. | Business | 1
Item 1A. | Risk Factors | 12
Item 1B. | Unresolved Staff Comments | 27
Item 1 C. | Cybersecurity | 27
Item 2. | Properties | 28
Item 3. | Legal Proceedings | 28
Item 4. | Mine Safety Disclosures | 28
| Part II |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 29
Item 6. | [Reserved] | 29
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 39
Item 8. | Financial Statements and Supplementary Data | 39
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 40
Item 9A. | Controls and Procedures | 40
Item 9B. | Other Information | 40
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 40
| Part III |
Item 10. | Directors, Executive Officers and Corporate Governance | 41
Item 11. | Executive Compensation | 41
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 41
Item 13. | Certain Relationships and Related Person Transactions, and Director Independence | 41
Item 14. | Principal Accountant Fees and Services | 41
| Part IV |
Item 15. | Exhibits and Financial Statement Schedules | 42
Item 16. | Form 10-K Summary | 45
| Signatures |

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PART I
Item 1. Business
Our Company
The RMR Group Inc., or RMR Inc., is a holding company incorporated as a Maryland corporation and substantially all of its business is conducted by its majority owned subsidiary, The RMR Group LLC, or RMR LLC. 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 this Annual Report on Form 10-K, unless otherwise indicated, “we”, “us” and “our” refers to RMR Inc. and its direct and indirect subsidiaries, including RMR LLC.
As of September 30, 2024, RMR Inc. owned 15,846,025 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 represent approximately 52.9% of the economic interest of RMR LLC. A subsidiary of ABP Trust owns 15,000,000 redeemable Class A Units, representing approximately 47.1% of the economic interest of RMR LLC.
Adam D. Portnoy, the 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 interest of ABP Trust. As of September 30, 2024, Adam D. Portnoy beneficially owned (including through ABP Trust), in aggregate, (i) 211,561 shares of Class A common stock of RMR Inc., or Class A Common Shares; (ii) all the outstanding shares of Class B-1 common stock of RMR Inc., or Class B-1 Common Shares; and (iii) all the outstanding shares of Class B-2 common stock of RMR Inc., or Class B-2 Common Shares.
Since its founding in 1986, RMR LLC has substantially grown assets under management and the number of real estate businesses it manages. As of September 30, 2024, we had $40.9 billion of assets under management.
We provide management services to four publicly traded equity real estate investment trusts, or REITs, whose securities are listed on The Nasdaq Stock Market LLC, or Nasdaq: Diversified Healthcare Trust, a Maryland REIT, including its subsidiaries, or DHC; Industrial Logistics Properties Trust, a Maryland REIT, including its subsidiaries, or ILPT; Office Properties Income Trust, a Maryland REIT, including its subsidiaries, or OPI; and Service Properties Trust, a Maryland REIT, including its subsidiaries, or SVC. DHC, ILPT, OPI and SVC are collectively referred to as the Managed Equity REITs.
As manager of the Managed Equity REITs, we are responsible for implementing investment strategies and managing day-to-day operations, subject to supervision and oversight by each Managed Equity REIT’s board of trustees. The Managed Equity REITs have no employees, and we provide the personnel and services necessary for each Managed Equity REIT to conduct its business. The Managed Equity REITs invest in diverse income producing properties across multiple real estate asset classes as follows:
•DHC (Nasdaq: DHC) owns medical office and life science properties, senior living communities and other healthcare related properties. As of September 30, 2024, DHC owned 368 properties located in 36 states and the District of Columbia.
•ILPT (Nasdaq: ILPT) owns and leases industrial and logistics properties. As of September 30, 2024, ILPT owned 411 properties, including 226 buildings, leasable land parcels and easements in Oahu, Hawaii and 185 properties located in 38 other states.
•OPI (Nasdaq: OPI) owns office properties primarily leased to single tenants and those with high credit quality characteristics. As of September 30, 2024, OPI owned 145 properties located in 30 states and the District of Columbia.
•SVC (Nasdaq: SVC) owns a diverse portfolio of hotels and service-focused retail net lease properties. As of September 30, 2024, SVC owned 959 properties (214 hotels and 745 net lease properties) located in 46 states, the District of Columbia, Puerto Rico and Canada.
RMR LLC’s wholly owned subsidiary, Tremont Realty Capital LLC, or Tremont, an investment adviser registered with the 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.
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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 is a real estate operating company that 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 consolidated financial statements.
In addition, RMR LLC provides management services to 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. The clients of the other private capital vehicles, along with AlerisLife, Sonesta and clients of RMR Residential are collectively referred to as the Private Capital clients.
Our Business Strategy
Our business strategy is to provide an expanded range of management services to our existing clients, as well as to diversify the number of clients to which we provide services and the sources of capital upon which those clients may rely for growth.
We believe we have several strengths that distinguish our business from other alternative asset managers:
•Strong Revenue Base, Operating Margins and Resulting Cash Flows. Our revenues are primarily earned from long term agreements with credit quality companies, many of which are permanent capital vehicles. Our agreements with the Managed Equity REITs are 20 year term evergreen contracts with significant termination fees payable in certain circumstances. For the fiscal year ended September 30, 2024, revenues earned from the Managed Equity REITs represented 69.6% of our total management and advisory services revenue, excluding termination fee revenue. We continued to generate strong operating margins resulting in net cash from operating activities of $61.4 million and net income of $53.1 million and our regular dividend of $0.45 per share per quarter ($1.80 per share per year) remains well covered by our cash flows.
•Diverse Portfolio of Managed Real Estate. We provide management services to a wide range of real estate assets and businesses that include healthcare facilities, senior living and other apartments, hotels, office buildings, industrial buildings, leased lands, net-lease service-focused retail, multifamily residential communities, and various specialized properties such as properties leased to government tenants and properties specially designed for medical and biotech research. The properties and businesses we managed as of September 30, 2024, are located throughout the United States in 48 states and Washington D.C., and in Puerto Rico and Canada. The diversity of our managed portfolio helps provide balance throughout economic cycles, as the impacts to each respective real estate sector can vary.
•Growth. Since the founding of RMR LLC in 1986, we have substantially grown our assets under management and the number and variety of real estate businesses we manage. As of September 30, 2024, we had $40.9 billion of assets under management, including over 2,000 properties. The synergies among our clients may also facilitate their and our growth. We assist our clients in realizing investment opportunities by working together to make acquisitions, obtain financing, identifying possible joint venture partners, completing redevelopment activities, facilitating capital recycling from strategic property dispositions and assisting in portfolio repositioning and other business arrangements and strategic restructurings.
In addition, we expect to use cash on hand, future operating cash flows and may issue equity or incur debt to fund our growth and diversify our operations through additional acquisition opportunities or seeding new clients. In
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recent years, we sought to expand the sources of capital underlying our assets under management, with our Private Capital clients representing $12.8 billion of our assets under management as of September 30, 2024, an increase of $11.1 billion from September 30, 2021. During the fiscal year ended September 30, 2024, we executed on this growth strategy through the acquisition of MPC, which added approximately $5.5 billion in assets under management as of the Acquisition Date.
•Quality and Depth of Management. Our highly qualified and experienced management team provides a broad base of deep expertise to our clients. Our senior management has worked together through several business cycles in which they acquired, financed, managed and disposed of real estate assets and started real estate businesses. We are a vertically integrated manager and as of September 30, 2024, we employed over 1,000 real estate professionals in more than 35 offices throughout the United States. We have also assisted our clients to grow by successfully accessing the capital markets; since our founding in 1986, our clients have successfully completed over $46.0 billion of financing in approximately 190 capital raising transactions.
•Alignment of Interests. We believe our structure fosters strong alignment of interests between our principal executive officer and our shareholders because our principal executive officer, Adam D. Portnoy, has a 50.9% economic interest in RMR LLC. Alignment of interests also exists between us and our Managed Equity REITs due to the manner upon which we earn base management fees and incentive management fees under our management agreements with the Managed Equity REITs, as described in more detail below.
We can provide no assurance that we will be able to implement our business strategy or achieve our desired growth. Our business and the businesses of our clients are subject to a number of risks and uncertainties. See “Risk Factors” beginning on page 12.
Our Management Agreements with the Managed Equity REITs
RMR LLC is party to a business management agreement and a property management agreement with each Managed Equity REIT. The following is a summary of the terms of our business and property management agreements with the Managed Equity REITs. The summary does not purport to be complete and is subject to, and qualified in its entirety by, reference to the actual agreements, copies of which are filed or incorporated as exhibits to this Annual Report on Form 10-K.
Business Management Agreements
Each business management agreement requires RMR LLC to use its reasonable best efforts to present the Managed Equity REIT with a continuing and suitable real estate investment program consistent with the REIT’s real estate investment policies and objectives.
Subject to the overall management, direction and oversight of the Board of Trustees of each Managed Equity REIT, RMR LLC has the responsibility to:
•provide research and economic and statistical data in connection with the Managed Equity REIT’s real estate investments and recommend changes in the Managed Equity REIT’s real estate investment policies when appropriate;
•investigate, evaluate and negotiate contracts for the investment in, or the acquisition or disposition of, real estate and related interests, financing and refinancing opportunities and make recommendations concerning specific real estate investments to the Board of Trustees of the Managed Equity REIT;
•investigate, evaluate, prosecute and negotiate any of the Managed Equity REIT’s claims in connection with its real estate investments or otherwise in connection with the conduct of the Managed Equity REIT’s business;
•administer bookkeeping and accounting functions as required for the Managed Equity REIT’s business and operation, contract for audits and prepare or cause to be prepared reports and filings required by a governmental authority in connection with the conduct of the Managed Equity REIT’s business, and otherwise advise and assist the Managed Equity REIT with its compliance with applicable legal and regulatory requirements;
•advise and assist in the preparation of all equity and debt offering documents and all registration statements, prospectuses or other documents filed by the Managed Equity REIT with the SEC or any state;
•retain counsel, consultants and other third party professionals on behalf of the Managed Equity REIT;
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•provide internal audit services;
•advise and assist with the Managed Equity REIT’s risk management and business oversight function;
•advise and assist the Managed Equity REIT with respect to the Managed Equity REIT’s public relations, preparation of marketing materials, internet website and investor relations services;
•provide communication facilities for the Managed Equity REIT and its officers and trustees and provide meeting space as required;
•provide office space, equipment and experienced and qualified personnel necessary for the performance of the foregoing services; and
•to the extent not covered above, advise and assist the Managed Equity REIT in the review and negotiation of the Managed Equity REIT’s contracts and agreements, coordination and supervision of all third party legal services and oversight for processing of claims by or against the Managed Equity REIT.
Property Management Agreements
Under each property management agreement, subject to the overall management and supervision of the Board of Trustees of each Managed Equity REIT, RMR LLC is required to act as managing agent for each Managed Equity REIT’s properties and devote such time, attention and effort as may be appropriate to operate and manage the Managed Equity REIT’s properties in a diligent, orderly and efficient manner.
Term and Termination
The business and property management agreements with each Managed Equity REIT automatically extend on December 31st of each year and have terms thereafter that end on the 20th anniversary of the date of each extension. A Managed Equity REIT has the right to terminate its management agreements with RMR LLC: (1) at any time upon 60 days’ written notice for convenience, (2) immediately upon written notice for cause, as defined in the agreements, (3) upon written notice given within 60 days after the end of an applicable calendar year for a performance reason, as defined in the agreements, and (4) by written notice during the 12 months following a manager change of control, as defined in the agreements. RMR LLC has the right to terminate the management agreements for good reason, as defined in the agreements.
If a Managed Equity REIT terminates a management agreement for convenience, or if RMR LLC terminates a management agreement with a Managed Equity REIT for good reason, the Managed Equity REIT is obligated to pay RMR LLC a termination fee equal to the sum of the present values of the monthly future fees, as defined in the agreement, payable for the remaining term of the agreement, assuming it had not been terminated. If a Managed Equity REIT terminates a management agreement for a performance reason, as defined in the agreement, the Managed Equity REIT is obligated to pay RMR LLC the termination fee calculated as described above, but assuming a remaining term of ten years.
A Managed Equity REIT is not required to pay any termination fee if it terminates its business or property management agreements for cause, or as a result of a manager change of control, in each case as defined in such agreements.
Business Management Agreement Fees and Expense Reimbursement
Each business management agreement between RMR LLC and a Managed Equity REIT provides for (i) an annual base management fee, payable monthly in arrears, and (ii) an annual incentive business management fee.
The annual base management fee generally is calculated as 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 $250.0 million, plus (c) 0.5% of the average invested capital exceeding $250.0 million; and
•the sum of (a) 0.7% of the average market capitalization, as defined in the applicable business management agreement, up to $250.0 million, plus (b) 0.5% of the average market capitalization exceeding $250.0 million.
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The annual incentive business management fee payable by each Managed Equity REIT, if any, is calculated as follows:
•The incentive business management fee is calculated as an amount equal to 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 measurement period, and (b) the amount, expressed as a percentage, by which the Managed Equity REIT’s total return per share realized by its common shareholders (i.e. share price appreciation plus dividends) or the “total return per share,” exceeds the total shareholder return of a specified REIT index, the “benchmark return per share,” for the relevant measurement period, with each of (a) and (b) subject to adjustments for net common shares issued by the Managed Equity REIT during the measurement period.
•The measurement period for an annual incentive business management fee is defined as the three year period ending on December 31 of the year for which such fee is being calculated.
•The specified REIT index utilized to calculate the benchmark return per share for each of our Managed Equity REITs when calculating the incentive business management fees is as follows:

| DHC |  |  |  |  |  | MSCI U.S. REIT/Health Care Index
| ILPT |  |  |  |  |  | MSCI U.S. REIT/Industrial REIT Index
| OPI |  |  |  |  |  | MSCI U.S. REIT/Office REIT Index
| SVC |  |  |  |  |  | MSCI U.S. REIT/Hotel & Resort REIT Index

•No incentive business management fee is payable by the Managed Equity REIT unless its total return per share during the measurement period is positive.
•If the Managed Equity REIT’s total return per share exceeds 12% per year in the measurement period, the benchmark return per share is adjusted to be the lesser of the total shareholder return of the specified REIT index for such measurement period and 12% per year, or the “adjusted benchmark return per share.” In instances where the adjusted benchmark return per share applies, the incentive fee will be reduced if the Managed Equity REIT’s total return per share is between 200 basis points and 500 basis points below the specified REIT index in any year, by a low return factor, as defined in the applicable business management agreement, and there will be no incentive business management fee paid if, in these instances, the Managed Equity REIT’s total return per share is more than 500 basis points below the specified REIT index in any year, determined on a cumulative basis (i.e., between 200 basis points and 500 basis points per year multiplied by the number of years in the measurement period and below the applicable market index).
•The incentive business management fee payable by the Managed Equity REIT is subject to a cap equal to the value of the number of its common shares which would, after issuance, represent (a) 1.5% of the number of its common shares outstanding on December 31 of the year for which such fee is being calculated multiplied by (b) the average closing price of its common shares during the 10 consecutive trading days having the highest average closing prices during the final 30 trading days of the relevant measurement period.
•Incentive fees paid by the Managed Equity REIT for any measurement period may be subject to certain “clawback” if the financial statements of the Managed Equity REIT for that measurement period are restated due to material non-compliance with any financial reporting requirements under the securities laws as a result of the bad faith, fraud, willful misconduct or gross negligence of RMR LLC and the amount of the incentive fee paid by the Managed Equity REIT was greater than the amount it would have paid based on the restated financial statements.
If the business management agreement is terminated, the base business management fee and incentive business management fee due in respect of any partial period prior to the date of termination will be prorated as provided in the agreement.
Under each business management agreement: the Managed Equity REIT pays or reimburses RMR LLC for all of the expenses relating to the Managed Equity REIT’s activities, including the costs and expenses of investigating, acquiring, owning and disposing of its real estate (third party property diligence costs, appraisal, reporting, audit and legal fees), its costs of borrowing money, its costs of securities listing, transfer, registration and compliance with reporting requirements and its costs of third party professional services, including legal and accounting fees, and as otherwise agreed; and RMR LLC bears its general and administrative expenses relating to its performance of its obligations under the agreement,
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including expenses of its personnel, rent and other office expenses. Also, the allocable cost of internal audit services is reimbursed by each Managed Equity REIT to RMR LLC.
Property Management Agreement Fees and Expense Reimbursement
Each property management agreement between RMR LLC and a Managed Equity REIT provides for the following:
(i) a management fee equal to 3.0% of the gross rents collected from tenants, which is not applicable to any hotels, senior living communities or travel centers which are leased to, or managed by, AlerisLife, Sonesta or another operating business such as a hotel management company or a senior living or healthcare services provider; and
(ii) a construction supervision fee equal to 5.0% of the cost of any construction, renovation or repair activities at the Managed Equity REIT’s properties, other than ordinary maintenance and repairs, and 3% of the cost of any major capital project or repositionings at DHC’s senior living communities and SVC’s hotels.
Also, under each property management agreement, the Managed Equity REIT pays certain allocable expenses of RMR LLC in the performance of its duties, including wages for onsite property management personnel and allocated costs of centralized property and construction management services.
Other Provisions
Under both the business and property management agreements, each Managed Equity REIT has agreed to indemnify RMR LLC, its members, officers, employees and affiliates against liabilities relating to acts or omissions of RMR LLC with respect to the provision of services by RMR LLC, except to the extent such provision of services was in bad faith or fraudulent, constituted willful misconduct or was grossly negligent. In addition, each management agreement provides that any disputes, as defined in those agreements, arising out of or relating to the agreement or the provision of services pursuant thereto, upon the demand of a party to the dispute, will be subject to mandatory arbitration in accordance with procedures provided in the agreement.
Other Management Agreements
RMR LLC provides services and earns fees pursuant to management agreements with ABP Trust regarding AlerisLife; with Sonesta; and until May 15, 2023, with TA. Under these agreements, RMR LLC provides services to these clients relating to, or assists them with, among other things, their compliance with various laws and rules applicable to them, capital markets and financing activities, maintenance of their properties, selection of new business sites and evaluation of other business opportunities, internal audit and general oversight of the company’s daily business activities, including legal and tax matters, insurance programs and management information systems.
Each of these clients pay RMR LLC a fee under its management agreement in an amount equal to 0.6% of: (i) in the case of AlerisLife, AlerisLife’s revenues from all sources reportable under U.S. Generally Accepted Accounting Principles, or 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; (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; and (iii) in the case of TA, the sum of TA’s gross fuel margin, determined as TA’s fuel sales revenues less its cost of fuel sales, plus TA’s total nonfuel revenues.
The terms of the management agreements with ABP Trust regarding AlerisLife and with Sonesta end on December 31st of each year, and automatically extend for successive one year terms, unless RMR LLC, or ABP Trust or Sonesta, as applicable, gives notice of non-renewal before the expiration of the applicable term. Any party may terminate the applicable management agreement at any time on 30 days notice. In connection with BP’s acquisition of TA on May 15, 2023, TA terminated its management agreement with us and paid us a termination fee of $45,282.
ABP Trust and Sonesta have each agreed to indemnify RMR LLC, its members, officers, employees and affiliates against liabilities relating to acts or omissions of RMR LLC with respect to the provision of services by RMR LLC, except to the extent such provision of services was in bad faith or was grossly negligent. In addition, each of ABP Trust’s and Sonesta’s agreement provides that any disputes, as defined in those agreements, arising out of or relating to the agreement or the provision of services pursuant thereto, upon the demand of a party to the dispute, shall be subject to mandatory arbitration in accordance with procedures provided in the agreement.
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RMR Residential provides management services to properties owned by third parties and to four funds through its property management and 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 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.
RMR LLC provides management services to other Private Capital clients for which we receive, depending upon the services provided, a management fee based on a percentage of average invested capital, as defined in the applicable management agreements, a property management fee in an amount equal to 3.0% of rents collected from managed properties and a construction supervision fee in an amount up to 5.0% of the cost of any construction, renovation or repair activities at the managed properties, other than ordinary maintenance and repairs.
Our Management Agreements with Advisory Clients
Tremont is party to a management agreement with SEVN. Pursuant to this agreement, Tremont provides SEVN with a continuous investment program, makes day to day investment decisions and generally manages the business affairs of SEVN in accordance with SEVN’s investment objectives and policies.
Tremont is compensated pursuant to its management agreement with SEVN at an annual rate of 1.5% of equity, as defined in the agreement. Tremont may also earn an incentive fee under this management agreement 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.
The management agreement with SEVN automatically renews for successive one year terms beginning on each January 1, unless it is sooner terminated upon written notice delivered no later than 180 days prior to a renewal date by the affirmative vote of at least two-thirds (2/3) of the independent trustees of SEVN based upon a determination that (a) Tremont’s performance is unsatisfactory and materially detrimental to SEVN or (b) the base management fee and incentive fee, taken as a whole, payable to Tremont under the management agreement is not fair to SEVN (provided that in the instance of (b), Tremont will be afforded the opportunity to renegotiate the base management fee and incentive fee prior to termination). The management agreement may be terminated by Tremont before each annual renewal upon written notice delivered to the board of trustees of SEVN no later than 180 days prior to an annual renewal date.
In the event the management agreement is terminated by SEVN without a cause event or by Tremont for a material breach, SEVN will be required to pay Tremont a termination fee equal to (a) three times the sum of (i) the average annual base management fee and (ii) the average annual incentive fee, in each case paid or payable to Tremont during the 24 month period immediately preceding the most recently completed calendar quarter prior to the date of termination, plus (b) $1.6 million. In addition, SEVN merged with Tremont Mortgage Trust, or TRMT, in 2021. The initial organizational costs related to TRMT’s formation and the costs of its initial public offering and the concurrent private placement that Tremont had paid pursuant to its management agreement with TRMT will be included in the “Termination Fee” under, and as defined in, SEVN’s management agreement with Tremont. No termination fee will be payable if the management agreement is terminated by SEVN for a cause event or by Tremont without SEVN’s material breach.
Our Organizational Structure
Our organizational structure has not materially changed since September 30, 2019. For a discussion of our organizational structure, see Part I, Item 1 “Business – Our Organizational Structure” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019.
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Regulation
We and our clients are subject to supervision and regulation by state, federal and non-U.S. governmental authorities and are subject to various laws and judicial and administrative decisions imposing various requirements and restrictions upon the ways in which we and our clients do business including various requirements for public disclosure of our and their activities.
The Managed Equity REITs and SEVN, or the Managed REITs, have qualified and expect to continue to qualify to be taxed as REITs under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or the Code. In addition, the Managed REITs generally distribute 100.0% of their taxable income to avoid paying corporate federal income taxes; and as REITs, such companies generally must currently distribute, at a minimum, an amount equal to 90.0% of their taxable income. REITs are also subject to a number of organizational and operational requirements in order to elect and maintain REIT status, including share ownership tests and assets and gross income composition tests. If a Managed REIT fails to continue to qualify as a REIT under Sections 856 through 860 of the Code in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. Even if a Managed REIT qualifies for taxation as a REIT, it may be subject to state and local income taxes and to federal income tax and excise tax on its undistributed income.
Certain of our clients own or operate healthcare and senior living properties. These companies are subject to numerous federal, state and local laws and regulations that are subject to frequent and material changes (sometimes applied retroactively) resulting from legislation, adoption of rules and regulations and administrative and judicial interpretations of existing laws. Some of the revenues received by these companies are paid by governmental programs which are also subject to periodic and material changes.
Certain of our clients own and operate hotels and some provide dining, food and beverage services, including the sale of alcoholic beverages. The operation of such properties is subject to numerous regulations by various governmental entities.
Tremont is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Investment Advisers Act. Tremont provides investment advisory and administrative services to SEVN, and may, in the future, provide such services to private funds that invest in commercial real estate debt. Employees of Tremont may also act as transaction originators for its non-investment advisory clients, which we refer to as the Tremont business. These activities result in certain aspects of our asset management business being supervised by the SEC and requires our compliance with numerous obligations, including record keeping requirements, operational procedures and disclosure obligations. SEVN intends to conduct its business in a manner that does not require its registration under the Investment Company Act of 1940, or the 1940 Act, and to do so, may rely on any available exemption from registration, or exclusion from the definition of “investment company,” under the 1940 Act. To maintain this exemption from registration, SEVN will be required to ensure the composition of its portfolio complies with certain tests.
The ownership and operation of real estate properties are subject to various federal, state and local laws and regulations concerning the protection of the environment, including air and water quality, hazardous or toxic substances and health and safety. Certain of our clients own real estate, and we may be responsible for compliance with some of these environmental protection laws.
While we incur significant expense to comply with the various regulations to which we and our clients are subject, we do not believe that existing statutes and regulations have had a material adverse effect on our business. However, it is not possible to forecast the nature of future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial condition, results of operations or prospects.
Competition
The asset management industry is intensely competitive, and we expect it to remain so. Our continued growth will depend upon our ability to manage or assist our clients in an effective manner and identify and execute on opportunities to expand our services to new clients and new sources of capital.
Our existing clients face significant competition in their respective sectors or industries. The Managed Equity REITs compete on a national and regional basis with many third parties engaged in real estate investment activities including other publicly traded REITs, non-traded REITs, commercial and investment banking firms, private institutional funds, private equity funds and other investors. AlerisLife competes with numerous other companies that provide senior living services, including home healthcare companies and other real estate based service providers. Sonesta competes with other hotel operators and franchisors. RMR Residential competes with numerous other companies that provide management services to multifamily residential communities in the Sunbelt region of the United States. SEVN competes on a national and regional
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basis with a variety of institutional investors, including other REITs, specialty finance companies, public and private funds (including funds or investors that we or our affiliates may sponsor, advise or manage), banks, credit unions, insurance companies and other financial institutions.
We compete with other businesses in the real estate management and asset management businesses. Many of these competitors may have greater financial, technical, marketing and other resources than we or our clients have. Such competitors may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital, greater business scale and enhanced operating efficiencies. Certain competitors may also be subject to different regulatory regimes or rules that may allow them more flexibility or better access to pursue potential investments and raise capital for themselves or their managed companies. In addition, certain competitors may have higher risk tolerance, different risk assessments or lower return thresholds, which could allow them to consider a broader range of investments and to bid more aggressively for investment opportunities. Our ability and the ability of our clients to continue to compete effectively will depend in large part upon the ability to attract, retain and motivate employees.
Corporate Sustainability
Over our more than three decades in business, we and our clients have been guided by Environmental, Social and Governance, or ESG, principles. Given the magnitude of our platform, we believe corporate sustainability must be a strategic focus alongside our focus on economic performance. Our sustainability practices — minimizing our impact on the environment, embracing the communities where we operate and attracting top professionals — are critical elements supporting our long-term success.
Environmental Focus
We recognize our responsibility to minimize the impact of our business on the environment. We seek to preserve natural resources and maximize efficiencies in order to reduce the impact the properties we manage have on the planet. Our environmental sustainability strategies and best practices help to mitigate our managed properties’ environmental footprint, optimize operational efficiency and enhance our competitiveness in the marketplace.
We remain committed to our “Zero Emissions Promise” announced in 2022, which is our organization’s goal of net zero by 2050 and a 50% reduction by 2029 from a 2019 baseline as it relates to scope 1 and 2 emissions, for all properties where we directly manage energy. We anticipate emissions reductions will occur through a combination of strategic capital investments in energy efficiency by the Managed Equity REITs, stakeholder engagement to promote sustainable behavior, the deployment of on site solar and the purchase of energy from renewable sources. We believe our efforts toward these goals will add value to our clients’ properties, benefit tenants by lowering their operating costs, drive sustainable economic returns and address investor demands that our clients have viable strategies to mitigate climate risk. We have made significant progress to date, achieving an overall reduction in emissions of 33%.
We have an active pipeline of commercial real estate development projects and maintain a green and energy-efficient equipment purchasing guideline which mandates the use of high energy efficiency equipment and environmentally friendly materials for new developments and major asset refurbishments. Our risk mitigation practices, such as energy management programs, green purchasing and high-efficiency equipment guidelines, performance benchmarking, and policy tracking and climate-related emergency preparedness, are well-established, while the data we obtain to assess future climate change exposure continues to evolve.
We drive value, manage risk and benchmark the performance of our managed properties by effectively capturing and managing data through real-time energy monitoring, or RTM. Our cloud-based system connects building automation systems to a central supervisor. RTM facilitates advanced data analytics and access to detect faults and inefficiencies in equipment operations faster, meanwhile enhancing building system control in a cost-effective and scalable way. In 2024, we expanded this program to include fault detection and diagnostics, with the aim of accelerating our identification of energy and emissions reduction opportunities. We launched this program in 2017 and it is now deployed in 82 managed properties, totaling approximately 63% of our managed annual electricity spend as of the end of 2023. We continue to expand our RTM program and remain committed to a goal of monitoring 90% of our managed energy spend through RTM by the end of 2025, resulting in operational savings and reduced equipment wear and tear, while maintaining high tenant comfort.
Our energy performance programs drive down energy consumption and reduce carbon emissions of our managed properties. Lower energy use and emissions reduce our managed properties' potential exposure to policies that call for a carbon tax or other emissions-based penalties.
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Our existing business practices align with the Task Force on Climate-related Financial Disclosures, or TCFD, framework across both physical and transition risks and opportunities. We have strengthened our alignment with the TCFD by advancing the depth of our alignment with all four pillars of the TCFD framework and we developed a tool to help assess building energy and emissions performance standards across the U.S. This tool overlays property locations, size and use profiles with laws requiring energy, water and emissions reporting or energy and emissions performance standards, and forecasts future compliance risks. We continue to refine our long-standing engineering, operating and management practices that incorporate environmental resilience and risk mitigation with activities and technology related to management oversight, enhanced data gathering, assessing risks and opportunities, and adopting science-based emissions targets.
As a result of our sustainability initiatives, we and our managed properties have received honors from The Building Owners and Managers Association, or BOMA, The Environmental Protection Agency, or EPA, and the U.S. Green Building Council, or USGBC, amongst others. In 2023, the honors achieved by our clients included 70 BOMA 360 Certified Properties, 88 ENERGY STAR Certified Properties, 87 LEED Certified Properties and 22 National Wildlife Sanctuary Sites Certified Properties. Finally, for the sixth year in a row, we received the 2024 ENERGY STAR Partner of the Year Award, and for the seventh year in a row, OPI received the 2024 ENERGY STAR Partner of the Year Award.
Human Capital Resources and Governance
We are led by an experienced management team with proven ability to manage and grow a resilient business. Moreover, significant insider ownership and the structure of the contracts with our clients provide a strong alignment of interests with our clients and with public shareholders. Our organization is focused on the assets of our clients and we blend long-term strategic vision with careful execution of day-to-day operations to optimize efficiency and foster the sustainable growth of our clients.
Employees and Equal Opportunity
As of September 30, 2024, RMR LLC employed over 1,000 real estate professionals, including 31% in our corporate offices and 69% across more than 35 offices throughout the United States. The average tenure of our employees was 5 years. Our employees are the foundation of our success and in many ways our most critical asset. Our strength lies in the collective experience of a diverse and inclusive workplace. We ensure employees receive competitive salaries and benefits and we aim to attract professionals who will uphold our values of social and environmental stewardship.
We are an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or protected veteran status. Throughout our organization, including our Board, we are committed to racial equality and fostering a culture of diversity and inclusion. We have made diversity and inclusion an important part of our hiring, retention and development programs. As of September 30, 2024, 39% of our employees were women and 44% were members of minority communities underrepresented in commercial real estate.
Board Diversity
As of September 30, 2024, our Board of Directors composition included 50% of members from underrepresented communities, including 33% female and 17% African American.
Employee Engagement, Education and Training
Our employee engagement initiatives align with our goal of being an employer of choice with a thriving workforce that encourages career enrichment and positions us for growth. Our programs are carefully designed for hiring, developing and retaining the best talent in the real estate industry. In connection with the acquisition of MPC, we added approximately 500 employees and integrated these employees into our organization. Our compensation is designed to motivate and retain employees and align their interests with those of our clients. We believe our compensation and benefits are best in class and are consistent with companies in the alternative asset management industry. We periodically review the effectiveness and competitiveness of our compensation program.
Our recruiting programs, on-boarding and retention programs and our development and on-going training programs currently include the following:
•Managing with Impact: Since 2016, we hosted Managing with Impact workshops for managers throughout the company to expand their perspectives and increase their confidence as a new manager. Within their first year, managers complete the workshop and learn how to effectively delegate, solve problems and give meaningful performance feedback.
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•Tuition Reimbursement Program: We offer tuition assistance up to $20,000 annually for work-related education from accredited colleges and universities in order to deepen employees’ skill sets and support personal enrichment.
•Analyst Accelerator Internship Program: We established an Analyst Accelerator Internship Program which is designed to attract early career talent to our industry from backgrounds underrepresented in real estate. The 10-week program is built upon the premise that hands on exposure as an analyst is an ideal way to provide rising juniors or seniors with a solid first step toward a successful and lasting career in real estate. We actively recruit talent from college campuses and student communities interested in real estate who are traditionally underrepresented in the sector, including women and people of color. Relationships with programs like the University of Massachusetts Amherst Real Estate Program, involvement with Historically Black Colleges and Universities, and engagement with women’s career forums all amplify our outreach efforts to develop a robust and diverse talent pipeline.
•Engineering Apprenticeship Program: Given the increasing challenges within the real estate industry of attracting qualified engineers throughout the country, we made it a strategic focus to develop the next generation of qualified building engineers. Our Engineering Apprenticeship Program standardizes the recruitment and development of engineering candidates to prepare them for open positions and to plan for future engineering needs. We recruit from various trade schools and job fairs to identify candidates for the two-year program with a curriculum that includes specific onboarding plans for training in electrical, HVAC, or plumbing trades and covers a range of essential engineering staff development topics.
•Industry Associations & Credentials: In order to further their professional development, many of our employees seek out credentials and association memberships, with any membership costs reimbursed by us. Examples of credentials and association memberships include: BOMA membership, Certified Property Manager, Certified Public Accountant, Certified Apartment Manager, Certified Apartment Portfolio Supervisor and National Association of Industrial and Office Properties.
Internet Website
Our internet website address is www.rmrgroup.com. We make available, free of charge, through the “Investors & Media” section of our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after these forms are filed with, or furnished to, the SEC. Any material we file with or furnish to the SEC is also maintained on the SEC website (sec.gov).
The information on or accessible through our website is not incorporated by reference into this Annual Report on Form 10-K or other documents we file with, or furnish to, the SEC. We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website in the “Investors & Media” section. Accordingly, investors should monitor such portions of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
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Item 1A. Risk Factors
Summary of Risk Factors
Our business is subject to a number of risks and uncertainties. The following is a summary of the principal risk factors described in this section:
•unfavorable market and industry conditions may have a material adverse effect on our and our clients’ results of operations, financial condition and ability to pay dividends;
•most of our revenues are derived from services to a limited number of clients;
•our management fees from our clients are based, in general, on cost of assets, enterprise values, shareholder returns, rent income, construction projects or certain revenues, as applicable, and, accordingly our future revenues, income and cash flows will decline if the business activities, assets, enterprise values, shareholder returns, rent income, construction projects or certain revenues of our clients decline;
•our revenues may be highly variable;
•potential terminations of our management agreements with our clients;
•our ability to successfully grow the RMR Residential business and realize our expected returns on our investment within the anticipated timeframe;
•the ability of Tremont Realty Capital to identify and close suitable investments for our Real Estate Lending Venture and to monitor, service and administer existing investments;
•our ability to obtain capital from third party investors in our Real Estate Lending Venture to make additional investments and to increase potential returns;
•uncertainty surrounding interest rates and sustained high interest rates may significantly impact our clients and in turn adversely impact our revenues or impede our growth;
•our ability to expand our business depends upon the growth and performance of our clients and our ability to obtain or create new clients for our business, including through our acquisition of new businesses, and is often dependent upon circumstances beyond our control;
•our ability to continue to pay a regular quarterly dividend is dependent on many factors, including current and expected earnings and alternative uses for available cash and our Board of Directors may decide to lower our dividends;
•our and our operating company clients’ ability to attract, retain and motivate sufficient qualified personnel in a challenging labor market and to effectively manage our and our operating company clients’ labor costs;
•our ability to retain the services of our controlling shareholder and other key and talented personnel;
•our and our clients’ risks associated with our and their costs of compliance with laws and regulations, including securities regulations, exchange listing standards and other laws and regulations affecting public companies;
•our ESG initiatives, federal and state regulations, other requirements and investor expectations may impose additional costs and expose us and our clients to new risks;
•risks related to the security of our network and information technology;
•risks related to inflation, including inflation impacting wages and employee benefits;
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•risks related to acquisitions, dispositions and other activities by or among our clients;
•allegations, even if untrue, of any conflicts of interest arising from our management activities; and
•risks to holders of our Class A Common Shares as a result of our dual class capital structure.
Prospective investors should carefully consider the risks described in this section, together with all of the other information in this Annual Report on Form 10-K. These risks may not be the only risks we face but are risks we believe may be material at this time. Additional risks and uncertainties that we do not yet know of, or that we currently think are immaterial, may also impair our business operations or financial results. If any of the events or circumstances described in this section occur, our business, financial condition or results of operations and the trading price of our securities could decline. Investors and prospective investors should consider these risks, the information contained under the heading “Warning Concerning Forward-Looking Statements” and the risks described elsewhere in this Annual Report on Form 10-K before deciding whether to invest in our securities. We may update these risk factors in our future periodic reports.
Risks Related to Our Business
Unfavorable market and industry conditions may have a material adverse effect on our and our clients’ results of operations, financial condition and ability to pay dividends.
Our business and operations may be adversely affected by market and economic volatility experienced by the U.S. and global economies, the commercial real estate industry and/or the local economies in the markets in which our clients’ properties are located. Unfavorable economic and industry conditions may be due to, among other things, uncertainty surrounding interest rates, prolonged inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions (such as the ongoing wars in Ukraine and the Middle East), possible economic recession, changes in real estate utilization and other conditions beyond our control. These current conditions, or similar conditions existing in the future, have adversely affected, and may continue to adversely affect, our and our clients’ and their tenants and managers’ results of operations, financial condition and ability to pay dividends. Unfavorable market conditions have particularly impacted the office sector as sustained low occupancy in office properties, reduced values of these properties and limited acquisition and disposition volume continue to negatively affect our clients that own office properties. Unfavorable market conditions and the impact on the commercial real estate industry have negatively impacted, and may continue to negatively impact, our clients’ market capitalizations, revenues, construction projects and acquisition and disposition activity, which may reduce the fees we earn from them. These conditions may also give rise to an increase in defaults under our clients’ leases and loans, negatively impact market capitalizations, shareholder returns, rent income and construction projects for the Managed Equity REITs and acquisition and disposition activity of, financial performance of and returns for our Private Capital clients. Sustained high interest rates may increase the cost of our clients’ capital, reduce their ability to make acquisitions and to make dispositions at favorable prices, and have increased their debt service costs. Sustained high interest rates also may reduce dispositions by the Managed Equity REITs due to their forgoing property sales because of depressed asset valuations and reduced buyer demand or more costly acquisition financing for buyers, which could limit our clients’ ability to reduce leverage and recycle capital. Further, unfavorable market conditions have negatively impacted the stock price of some of the Managed Equity REITs, which in turn has negatively impacted the fees we earn from them. In addition, some of our clients may be negatively impacted by an economic downturn that reduces business and leisure travel, commerce, hotel occupancy and demand for office, retail and industrial space, and may also limit the ability of residents and potential residents to pay for senior living community services.
Most of our revenues are derived from our provision of management services to a limited number of companies. The loss or decline in business or assets of any of the Managed Equity REITs or clients comprising a significant part of our Private Capital business could substantially reduce our revenues.
The fees we earn from providing management services to, and the reimbursable fees we receive from, the Managed Equity REITs comprise most of our revenues. However, our Private Capital clients have comprised an increasing portion of our assets under management and revenues, and our current business plans contemplate that trend continuing. A decline in the business or assets of our Private Capital clients could reduce our revenue. Our operating results and our ability to maintain and grow our revenues depend upon the ability of our Managed Equity REITs to maintain and grow their investments and market capitalizations and to achieve positive shareholder returns in excess of applicable REIT total shareholder return indexes. Additionally, our operating results and ability to maintain or grow revenue also increasingly depend on the ability of our Private Capital clients to raise or contribute capital to invest in real estate assets. Reduced business activities of the Managed Equity REITs or our Private Capital clients may materially reduce our revenues and our profitability.
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Our revenues may be highly variable.
RMR LLC’s business management agreement with each Managed Equity REIT provides for a base business management fee that is based on the lower of the average historical costs of the Managed Equity REIT’s assets under management and its average market capitalization, as calculated in accordance with the applicable business management agreement, and an incentive business management fee that is based on the Managed Equity REIT’s relative outperformance of a specified REIT total shareholder return index. The management fees we earn under these agreements are highly variable.
The base business management fee payable by a Managed Equity REIT may increase or decrease materially as the Managed Equity REIT acquires or disposes of real estate assets or its market capitalization increases or decreases. In addition, we generally only earn an incentive business management fee under our business management agreement with a Managed Equity REIT if it outperforms an identified REIT total shareholder return index during the measurement period and certain other conditions are satisfied, as measured at the end of the applicable measurement period. The shareholder returns realized by a Managed Equity REIT, its market capitalization and its ability to raise capital or make investments may be impacted by trends in the Managed Equity REIT’s portfolio, the U.S. commercial real estate industry generally, the Managed Equity REIT’s industry specifically or other factors that are outside of our or its control, including prolonged inflation, sustained high interest rates, supply chain challenges and economic downturns or recessions. Whether we earn an incentive fee, and the amount of any incentive fee we may earn, may have a significant impact on the amount of revenues we earn. For example, in the fiscal year ended September 30, 2019, our incentive business management fees earned from the Managed Equity REITs was 39.9% of our total management and advisory services revenues, and we have not subsequently earned any incentive business management fees from the Managed Equity REITs. Further, the fees we earn under our property management agreements with the Managed Equity REITs and certain of our Private Capital clients are based on a percentage of the rents they receive and a percentage of the costs of construction, in each case, at properties we manage for them. To the extent the Managed Equity REITs or certain Private Capital clients receive less rent or incur less construction costs, our property management fee revenues are negatively impacted. Also, the fees under our management agreements with respect to AlerisLife and Sonesta are based on a percentage of revenues earned by them or generated at the properties they operate. AlerisLife and Sonesta experienced high revenue volatility in the past, and, given the nature of AlerisLife and Sonesta’s businesses (i.e., senior living communities and hotels), may continue to experience revenue volatility for the reasonably foreseeable future.
The fees we earn and expect to earn from RMR Residential include promote fees on new co-investments and such fees may be highly variable. The number and timing of new co-investments may vary depending on market opportunities, changes in interest rates, demand for multifamily and commercial real estate in general and other factors that may be out of our control.
Our management agreements with our clients are subject to termination.
Our management agreements with our clients may be terminated by a client or by us in certain circumstances. For example, if we do not satisfy the applicable performance measures for three consecutive calendar years under our management agreements with the Managed Equity REITs, such Managed Equity REIT will have the right to terminate its management agreement by prior written notice to us within 60 days following the end of the third consecutive calendar year, and in which case, it would be required to pay us the applicable termination fee. If any of our management agreements with a client is terminated, we may be unable to replace the lost revenue. Even if we receive a termination fee upon the termination of a management agreement with a client, we may be unable to invest the after tax proceeds from the termination fee we receive in opportunities that earn returns equal to or greater than the revenues lost as a result of the terminated management agreement. The termination of our management agreement with any of our clients could have a material adverse impact on our business, results of operations and financial condition.
We may be unable to successfully grow the RMR Residential business and achieve the anticipated benefits of the transaction.
We may not be able to successfully grow the RMR Residential business or the growth may be more costly or more time-consuming and complex than anticipated, and cost savings, synergies and anticipated future financial performance may not be realized or may take longer to realize than expected. In addition, the growth of the RMR Residential business and the time and resources necessary to resume the pace of its acquisition activity may divert our management’s attention from our other business opportunities. Our ability to generate revenue from RMR Residential depends on our execution of acquisition opportunities on behalf of the investment funds it manages in the multifamily real estate sector. We do not have significant experience in this commercial real estate sector, and there can be no assurance that we will be successful in this business, that we will achieve our expected objectives, execute acquisition opportunities, operate successfully or that we will earn fees from RMR Residential that provide returns on our investment that meet our underwriting expectations. In addition, because RMR Residential involves certain joint venture arrangements, investment funds and limited partnerships, we have limited flexibility and discretionary authority with respect to certain assets acquired, or management of assets assumed. Further, in order to grow
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the RMR Residential business we may need to raise additional capital from third party investors and our ability to raise additional capital depends on many factors, some of which are outside of our control. The failure to raise capital in sufficient amounts and on satisfactory terms could result in a decrease in our assets under management and our management fees or could result in our being unable to grow the RMR Residential business. Any of the foregoing risks could have a material adverse effect on our ability to successfully grow the RMR Residential business and to achieve the anticipated benefits of the transaction.
We may not be able to successfully grow our new private capital Real Estate Lending Venture, we have made a limited number of target investments to date and we may not be successful in attracting outside investors.
In 2024, we and Tremont Realty Capital, launched our Real Estate Lending Venture which will provide senior secured transitional first mortgage loans for middle market real estate. We are seeking outside investment partners for this venture and have guaranteed Tremont Realty Capital’s $200 million repurchase facility with UBS AG (the “UBS Master Repurchase Facility”), pursuant to which Tremont Realty Capital may sell to UBS, and later repurchase, commercial mortgage loans. In July 2024, RMR LLC funded two first mortgage loans with an aggregate loan value of $67 million that will be included in our Real Estate Lending Venture’s portfolio. We may be unable to compete with other companies in the middle market mortgage loan business, many of which have significantly more experience and resources than we do. Our ability to achieve our investment objectives depends on our Real Estate Lending Venture’s ability to attract outside investors and to make investments that generate attractive, risk adjusted returns. In general, the availability of favorable investment opportunities will be affected by the level and volatility of interest rates in the market generally, the availability of adequate short and long term real estate financing and the competition for investment opportunities. Tremont Realty Capital also provides management services to SEVN and has a policy of allocating investment and loan opportunities among its clients on a rotating basis if an opportunity is appropriate for more than one client. The allocation of loan opportunities pursuant to this policy frequently involves significant and subjective judgments, and Tremont Realty Capital’s allocation of loan opportunities may be perceived to favor one client at the expense of another. Further, we may not be successful in attracting outside investors to invest in our Real Estate Lending Venture. If we are successful in attracting third party investors to our Real Estate Lending Venture, the joint venture structure may limit our flexibility with jointly owned investments and subject us to certain risks relating to joint venture relationships. There can be no assurance that our Real Estate Lending Venture will obtain sufficient capital from outside investors within a reasonable time and on acceptable terms, that Tremont Realty Capital will make suitable investments and successfully monitor, service and administer existing investments or that our Real Estate Lending Venture will successfully compete in the mortgage lending business and provide a return on our investment that meets our expectations.
Uncertainty surrounding interest rates and sustained high interest rates may significantly reduce our revenues or impede our growth.
Uncertainty surrounding interest rates and sustained high interest rates or interest rate reductions may significantly reduce our revenues or impede our growth. In response to significant and prolonged increases in inflation, the Federal Reserve raised interest rates eleven times during 2022 and 2023 and then paused rate increases in the fourth quarter of 2023 following the deceleration of inflationary growth. The Federal Reserve cut interest rates in September 2024, and it may seek to further reduce interest rates, increase interest rates or maintain current interest rates. The timing, number and amount of any future interest rate changes are uncertain.
Increases in interest rates and sustained high interest rates may materially and negatively affect us. One of the factors that investors typically consider important in deciding whether to buy or sell the common shares of our Managed REITs is the distribution rate with respect to such shares relative to prevailing interest rates. If interest rates go up, investors may expect a higher distribution rate before investing in a Managed REIT or they may sell the Managed REITs’ common shares and seek alternate investments with a higher distribution rate. Several of the Managed Equity REITs have reduced their quarterly dividend to $0.01 per share in recent years. Sales of common shares of the Managed Equity REITs may cause a decline in the market prices of such shares, which reduces the market capitalizations and total shareholder returns of the Managed Equity REITs, which, in turn, may materially reduce the fees we earn under our business management agreements with them. Moreover, the increases in interest rates has led to increased borrowing costs for our clients and may negatively impact their access to capital to fund future growth or refinance debt, reduce their earnings and total shareholder returns and cause the Managed REITs’ and our real estate business Private Capital vehicles’ tenants, operators and borrowers and SEVN’s borrowers to default on their rent and debt obligations, which may materially reduce the fees we earn under our management agreements with our clients. Further, during periods of increased borrowing costs, real estate transaction volumes often slow along with real estate valuation growth which may impact the results of operation of our clients and the fees we earn from those clients.
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If we cannot retain and motivate our key and talented personnel and recruit, retain and motivate new talented personnel, our business, operating results and financial condition could be adversely affected.
Our people are the foundation of our success and in many ways our most critical asset. Our continued success depends to a great extent on our ability to retain and motivate our key and talented personnel and strategically recruit, retain and motivate new talented personnel. However, we may not be successful in these efforts as the market for qualified employees in the asset management industry is highly competitive. We do not have employment agreements with our key employees. Our ability to recruit, retain and motivate our personnel is dependent on our ability to offer attractive compensation, opportunities for professional growth and a desirable work environment. In addition, the Managed REITs have historically granted equity awards to our officers and certain other employees of ours. If our clients reduce the amount of, or stop making, similar grants in the future, or if the value of any equity awards they may grant are lower than anticipated, we may need to increase other compensation or incentives for our employees. Likewise, if competition for employees increases, in order to recruit and retain existing and future personnel, we may need to increase the level of compensation that we pay.
We depend on our controlling shareholder and other key and talented personnel.
We depend on the efforts, skills, reputations and business contacts of our controlling shareholder, Adam D. Portnoy, and other key and talented personnel. The extent and nature of the experience of our executive officers and of the relationships they have with real estate professionals and financial institutions, although not a guarantee of positive results, are critical to the success of our business. The loss of the services of any of them or the loss of investor confidence in such personnel could have a material adverse effect on our revenues, operating income and cash flows and could impair our ability to maintain or grow assets under management in our clients or otherwise maintain or grow our business.
We are subject to substantial regulation and numerous contractual obligations and internal policies, and failure to comply with these provisions could have a material adverse effect on our business, financial condition and results of operations.
We are subject to substantial regulation and numerous contractual obligations and internal policies. We are subject to regulation by the SEC, Nasdaq, and other federal, state and local or international governmental bodies and agencies or self-regulatory organizations. Our subsidiary, Tremont Realty Capital, is registered with the SEC as an investment adviser under the Investment Advisers Act. The Investment Advisers Act requires registered investment advisers to comply with numerous obligations, including compliance, record keeping, operating and marketing requirements, disclosure obligations and limitations on certain activities. Investment advisers also may owe fiduciary duties to certain of their clients.
We are also responsible for managing or assisting with the regulatory aspects of certain of our clients, including the Managed REITs’ compliance with applicable REIT rules and SEVN’s maintenance of its exemption from registration under the 1940 Act. The level of regulation and supervision to which we and our clients are subject varies from jurisdiction to jurisdiction and is based on the type of business activity involved. For example, our Real Estate Lending Venture and SEVN may also be subject to state licensing requirements to conduct lending activities. The regulations to which we and our clients are subject are extensive, complex and require substantial management time and attention. In addition, regulatory oversight and enforcement may increase and become more rigorous. Our or our clients’ failure to comply with any of the regulations, contractual obligations or policies applicable to it may subject us to litigation, extensive investigations, enforcement actions, as well as substantial fines, penalties and reputational risk, and our business and operations could be materially adversely affected.
Our lack of compliance with applicable law could result in, among other things, our inability to enforce contracts, our default under contracts (including our management agreements with our clients) and our ineligibility to contract with, and receive revenue from, governmental authorities and agencies, our clients or other third parties.
We have numerous contractual obligations with which we must comply on a continuous basis to operate our business, the default of which could have a material adverse effect on our business and financial condition. We have established internal policies designed to ensure that we manage our business in accordance with applicable law and regulation and in accordance with our contractual obligations. These internal policies may not be effective in all regards; and, if we fail to comply with our internal policies, we could be subjected to additional risk and liability.
ESG initiatives, requirements and market expectations may impose additional costs and expose us and our clients to new risks.
There remains a continued focus from regulators, investors, certain of our clients’ tenants, managers, borrowers, customers, employees, and other stakeholders concerning corporate sustainability. For example, California has enacted a climate focused disclosure law and the SEC has adopted climate change related regulations, both of which will require us to focus significant time and resources on behalf of ourselves and our clients to comply with these new requirements if and when such regulations
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become effective, and we and these clients may incur significant costs in compliance with such rules. Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us or our clients, or otherwise do business with us or our clients, if they believe our or their policies relating to corporate responsibility are inadequate. Third party providers of corporate responsibility ratings and reports on companies have increased in number, resulting in varied and in some cases inconsistent standards. In addition, the criteria by which companies’ corporate responsibility practices are assessed are evolving, which could result in greater expectations of us and our clients and cause us and our clients to undertake costly initiatives to satisfy such new criteria. Alternatively, if we or our clients elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third party provider, some investors may conclude that our or their policies with respect to corporate responsibility are inadequate. Pursuant to our zero emissions goal, we have pledged to reduce our scope 1 and 2 emissions to net zero by 2050 with a 50% reduction commitment by 2029 from a 2019 baseline. We and our clients may face reputational damage in the event that our or their corporate responsibility procedures or standards do not meet the goals we or they have set or the standards set by various constituencies. If we and our clients fail to comply with ESG related regulations and to satisfy the expectations of investors and our clients’ tenants, managers, borrowers, customers, employees and other stakeholders or our or our clients’ announced goals and other initiatives are not executed as planned, our and our clients’ reputation and financial results could be adversely affected, the management fees we may earn from our clients may decline, and our revenues, results of operations and ability to grow our business may be negatively impacted. In addition, we or our clients may incur significant costs in attempting to comply with regulatory requirements, ESG policies or third party expectations or demands.
We and our clients are subject to risks from adverse weather, natural disasters and adverse impact from global climate change.
We and our clients are subject to risks and could be exposed to additional costs from adverse weather, natural disasters and adverse impact from global climate change. For example, the properties owned or operated by us or our clients could be severely damaged or destroyed by physical climate risks that could materialize as either singular extreme weather events (for example floods, storms and wildfires) or through long-term impacts of climatic conditions (such as precipitation frequency, weather instability and rise of sea levels). Some of our clients and the investment funds and joint ventures we manage own a significant number of properties in the Southeastern United States which has been increasingly impacted by severe weather and rising sea levels in recent years. Severe weather events and climatic conditions could also adversely impact us and our clients and cause significant losses if we or our clients, or our or their tenants, managers or borrowers are unable to operate their businesses due to damage resulting from such events. Insurance may not sufficiently cover all losses sustained by us or our clients and our or their tenants, managers or borrowers. If we or our clients fail to adequately prepare for such events, our and our clients’ revenues, results of operations and financial condition may be impacted.
We rely on information technology and systems in our operations, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially harm our business.
We rely on information technology and systems, including the Internet and cloud-based infrastructures and services, commercially available software and our internally developed applications, to process, transmit, store and safeguard information and to manage or support a variety of our business processes, including financial transactions and maintenance of records, which may include personal identifying information of employees, tenants, borrowers and guarantors and lease data. If we experience material failures, inadequacies or interruptions or security breaches of our information technology, we could incur material costs and losses. Further, third party vendors have experienced and could experience similar events with respect to their information technology and systems that impact the products and services they provide to us or our clients. We rely on commercially available systems, software, tools and monitoring, as well as our internally developed applications and internal procedures and personnel, to provide security for processing, transmitting, storing and safeguarding confidential tenant, customer, borrower, guarantor and vendor information, such as personally identifiable information related to our employees and others and information regarding our and our clients’ financial accounts. We take various actions, and we incur significant costs, to maintain and protect the operation and security of our information technology and systems, including the data maintained in those systems. However, it is possible that these measures will not prevent the systems’ improper functioning or a compromise in security, such as in the event of a cyberattack or the improper disclosure of personally identifiable information. Security breaches, computer viruses, attacks by hackers, online fraud schemes and similar breaches have created and can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information. The risk of a security breach or disruption, particularly through cyberattack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
The cybersecurity risks to us, our clients and third party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and
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increasingly sophisticated methods used to perpetrate illegal or fraudulent activities against us, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in our or other third parties’ information technology networks and systems or operations. Although most of our staff works from our offices for the majority of the work week, flexible working arrangements have resulted in increased remote working. This and other possible changing work practices have adversely impacted, and may in the future adversely impact, our ability to maintain the security, proper function and availability of our information technology and systems since remote working by our employees could strain our technology resources and introduce operational risk, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that have sought, and may seek, to exploit remote working environments. In addition, our data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform in a remote work environment or by the failure of, or attack on, their information systems and technology.
In July 2023, the SEC adopted rules requiring public companies to disclose material cybersecurity incidents on Form 8-K and periodic disclosure of a registrant’s cybersecurity risk management, strategy, and governance in annual reports. The rules became effective beginning with annual reports for fiscal years ending on or after December 15, 2023 and beginning with Form 8-Ks on December 18, 2023. With the SEC particularly focused on cybersecurity, we expect increased scrutiny of our policies and systems designed to manage our cybersecurity risks and our related disclosures. We also expect to face increased costs to comply with the new SEC rules, including increased costs for cybersecurity training and management. Many jurisdictions in which we operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information, including, the California Consumer Privacy Act and the New York SHIELD Act. In addition, the SEC has indicated that one of its examination priorities for the Office of Compliance Inspections and Examinations is to continue to examine cybersecurity procedures and controls, including testing the implementation of these procedures and controls.
Any failure to maintain the security, proper function and availability of our information technology and systems, or certain third party vendors’ failure to similarly protect their information technology and systems that are relevant to our or our clients’ operations, or to safeguard our or our clients’ business processes, assets and information, or any failure to provide the appropriate regulatory and other notifications in a timely manner could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect us.
We are incorporating artificial intelligence into some of our business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and adversely affect our results of operations.
We have begun using AI and machine learning technologies to enhance certain workflows and processes used in our business, and our research into and continued deployment of such capabilities remain ongoing. AI is still in its early stages, and the introduction and incorporation of AI technologies may result in unintended consequences or other new or expanded risks and liabilities. If the content, analyses or recommendations that AI applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected. Additionally, AI technology is continuously evolving, and we may incur costs to adopt and deploy AI technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI. Also, our competitors or other third parties may incorporate AI into their products and services more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
The use of AI applications to support business processes carries inherent risks related to data privacy and security, such as unintended or inadvertent transmission of proprietary or sensitive information, including personal data. AI presents emerging ethical issues, and we may be unsuccessful in identifying and resolving these issues before they arise. If our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability. There is uncertainty in the legal and regulatory landscape for AI, which is not fully developed, and any laws, regulations or industry standards adopted in response to the emergence of AI may be burdensome, could entail significant costs, and may restrict or impede our ability to successfully develop, adopt and deploy AI technologies efficiently and effectively.
Inflation may continue to negatively impact us and our clients and our and their businesses, results of operations and ability to grow.
Inflation remains above historic levels, and the global economy continues to experience commodity pricing and other inflation, including inflation impacting wages and employee benefits. It is uncertain whether inflation will decline further, remain relatively steady or increase; however, some market forecasts indicate that inflation rates may remain elevated for a prolonged period. These conditions have increased the costs for materials, other goods and labor, and these rising costs are
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impacting us and our clients. For example, various construction supplies and materials have experienced significant price increases as have other commodities, such as food and fuel. These pricing increases as well as increases in labor costs have increased the operating costs for us and certain of our clients and tenants, operators and borrowers of our clients. If these inflationary pressures continue, we and our clients may reduce or delay construction projects that we oversee, and may realize decreased earnings, negative impacts on their ability to increase or maintain dividends that they pay to their shareholders and reduced market capitalizations. In that case, the management fees we earn may decline and our revenues, results of operations and ability to grow our business may be negatively impacted.
Employee misconduct could harm us by subjecting us to significant legal liability, reputational harm and loss of business.
As an asset manager, our business, and our ability to retain and attract new clients, is dependent upon our maintaining a positive reputation in the marketplace. There is a risk that our employees could engage in misconduct that adversely affects our reputation and, hence, our business. We are subject to a number of obligations and standards arising from our business and our authority over the companies and assets we manage. The violation of these obligations and standards by any of our employees may adversely affect our clients and us. Our business often requires that we deal with confidential matters of great significance to our clients. If our employees improperly use or disclose confidential information, we and the concerned client could suffer serious harm to our and its reputation, financial position and current and future business relationships and face potentially significant litigation. It is not always possible to detect or deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in all cases. In connection with the acquisition of RMR Residential in 2023, we added approximately 500 employees and fully integrating these employees in our organization, compliance systems and culture may take longer than we anticipate. If any of our employees were to engage in or be accused of misconduct, our business and our reputation could be adversely affected. Misconduct by an employee might rise to the level of a default that would permit a client to terminate its management agreements with us for cause and without paying a termination fee, which could materially adversely affect our business, results of operations and financial condition. Additionally, alleged misconduct by employees providing services to properties managed by the RMR Residential business has and may in the future contribute to the termination of property management agreements with respect to affected properties.
RMR LLC’s required quarterly tax distributions may limit our ability to implement our business or pursue growth opportunities.
Under the RMR LLC operating agreement, RMR LLC is required to make certain pro rata distributions to each member of RMR LLC, including RMR Inc., quarterly on the basis of the assumed tax liabilities of the members. If and when federal, state or local governments impose higher income tax rates or increase the taxable base, RMR LLC’s quarterly tax distributions would generally increase accordingly. From time to time, RMR LLC’s cash flows from operations may be insufficient to enable it to make required minimum tax distributions to its members. RMR LLC may have to borrow funds or sell assets to fund its distribution requirements, and thereby materially adversely affect our liquidity and financial condition. Further, by making cash distributions rather than investing that cash in our businesses, we might risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise. In such event, we may not be able to implement our business and growth strategy to the extent intended.
Risks Related to the Businesses of Our Clients
Risks associated with our clients’ businesses could adversely affect their respective abilities to grow, generate revenue, increase their market capitalizations and pay management fees.
We have presented in this Annual Report on Form 10-K historical fees that we have earned from our clients. The historical fees earned from our clients, including those presented in this Annual Report on Form 10-K, should not be considered as indicative of the future results of our clients or of our future results. The risks associated with each client’s business could adversely affect its ability to carry out its business plans and objectives, and, as a result, could adversely impact its ability to pay us management fees or cause the amounts of those fees to decline. For more information see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview.” Risks to our clients, in addition to the risks noted elsewhere in this Annual Report on Form 10-K, include, but are not limited to, the following:
•adverse economic and market conditions;
•the inability of our clients’ tenants, managers and borrowers to weather the ongoing adverse economic conditions, including uncertainty surrounding interest rates and sustained high interest rates, prolonged inflation, economic downturn and possible recession and thereby impair their ability to pay rent and returns and make loan payments;
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•the inability of our clients to access debt and equity capital on attractive terms, or at all which could reduce our clients’ ability to pursue acquisition and development opportunities and refinance existing debt, and reduce our clients’ returns from acquisition and development activities and increase their future interest expense;
•some of our clients have a substantial amount of debt and are subject to additional risks, including the inability to refinance maturing debt and the cost of any such refinanced debt, the inability to reduce debt leverage which may remain at or above current levels for an indefinite period, covenants and conditions contained in debt agreements which may restrict such clients’ operations by increasing interest expense and limiting such clients’ ability to make investments in their properties, sell properties securing the debt and pay distributions to their shareholders, potential downgrades to credit ratings and other limitations on their ability to access capital at reasonable costs or at all, including the limited availability of debt capital to office and healthcare REITs in general;
•our clients face competition for tenants and customers at substantially all of their properties and competing properties may be more attractive to tenants and customers;
•changing market, consumer and workplace practices and trends that have and could continue to result in decreased demand for office space, business travel, hotel stays and conference facilities;
•our clients face significant competition for investment opportunities from other investors, some of which have greater financial resources, including publicly traded REITs, non-traded REITs, insurance companies, banking firms, private institutional funds, private equity funds and other investors;
•a sustained period of high interest rates and inflation may increase operating costs, reduce the value of properties, increase cost of capital and make raising capital difficult for our clients whereas low interest rates may increase the amount of debt capital available, which may result in declining capitalization rates for property acquisitions and impede the growth of our clients’ businesses;
•RMR Residential’s inability to grow its business and realize expected returns within the anticipated timeframe;
•Tremont Realty Capital’s ability to identify and close suitable investments for our Real Estate Lending Venture and SEVN and to monitor, service and administer existing investments;
•our Real Estate Lending Venture’s ability to obtain third party investors in order to attain its target leverage levels, to make additional investments and to increase potential returns;
•changing general economic and financial market conditions could significantly reduce the value of the real estate, loans and other investments of our clients and reduce the amounts earned on those investments;
•the real estate and real estate related investments of our clients may be less liquid than other investments and the ability of our clients to adjust their portfolios in response to changes in economic or other conditions may be limited;
•our operating company clients’ ability to attract, retain and motivate sufficient qualified personnel in a challenging labor market and to effectively manage their labor costs;
•changes in investor preferences or market conditions could limit our clients’ ability to raise capital to competitively maintain their properties and operations or make new investments;
•geopolitical instability and tensions (such as the ongoing wars in Ukraine and the Middle East);
•shareholder activism, complaints about management strategies and structures, corporate governance and other matters may divert management attention and be disruptive to our clients’ operations;
•ESG initiatives, requirements and market expectations may impose additional costs and expose our clients to new risks;
•changes in tax laws, regulation or accounting rules may make certain types of investments in or by our clients less valuable;
•our clients are exposed to environmental, building and other laws, natural disasters, adverse impacts from global climate change and other factors beyond their control as a result of their investment in real estate;
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•public health safety events, such as pandemics, may adversely impact our clients’ business, operating results, financial condition and value;
•our clients have significant investments in certain types of assets, such as hotels, senior living communities and office, industrial and healthcare properties, and market changes which impact these specific types of assets (e.g., a reduction in levels of business travel and occupancy at hotels and senior living communities as a result of adverse economic and market conditions, tenant and customer trends, new competition for short term accommodations, changes in Medicare and Medicaid rates and other regulatory matters, an insufficient recovery or a further reduction in the demand for office space as a result of remote, hybrid and other flexible working arrangements, and declining economic activity, oversupply of industrial buildings or technological or market practice changes, such as offshoring, reducing the demand for industrial properties) may adversely impact certain of the clients’ ability to maintain or grow their businesses;
•our clients with significant investments in office space have and may continue to experience declines in demand for office space consistent with declines in the office space industry generally, as a result of remote, hybrid and other flexible working arrangements which have adversely impacted such clients operating results and financial condition;
•the failure of a Managed REIT to continue to qualify as a REIT would subject it to U.S. federal income tax and reduce cash available for distributions to its shareholders, adversely impacting its ability to raise capital and operate its business;
•the failure of our clients to comply with applicable laws and regulations could result in legal liability, regulatory fines and the loss of, or an inability to obtain, licenses required to operate their businesses; and
•complying with REIT requirements may cause a Managed REIT to forgo otherwise attractive opportunities or liquidate otherwise attractive investments.
Many of our clients are SEC registrants and file reports with the SEC as required by the Exchange Act. A discussion of the businesses and the risks associated with the businesses of our clients that are SEC registrants is contained in the reports filed by our clients, including in the section captioned “Risk Factors” in each Managed REIT’s Annual Report on Form 10-K for the year ended December 31, 2023, as those Risk Factors may have been updated or supplemented in those companies’ Quarterly Reports on Form 10-Q filed subsequently. Copies of these reports are available at the SEC’s website, www.sec.gov.
Risks Related to Our Securities
A trading market that provides adequate liquidity may not be sustained for our Class A Common Shares and the market price of our Class A Common Shares may fluctuate widely.
Our public float represents about 48.3% of the economic interest in RMR LLC. As a result, a significant amount of the economic interest in RMR LLC is not represented in our public float, which may adversely impact trading in our Class A Common Shares. There can be no assurance that an active trading market for our Class A Common Shares will be sustained in the future.
The market price of our Class A Common Shares may fluctuate widely, depending upon many factors, some of which are beyond our control, including, but not limited to, the following:
•market and economic volatility due to adverse economic, geopolitical and public health conditions and the resulting market disruption on us and our clients;
•declines in the market prices of our clients’ common shares;
•a relatively thin trading market for our Class A Common Shares could cause trades of small blocks of shares to have a significant impact on the price of our Class A Common Shares;
•our quarterly or annual earnings, or those of other comparable companies;
•actual or anticipated fluctuations in our operating results;
•changes in accounting standards, policies, guidance, interpretations or principles;
•announcements by us, our clients or our competitors of significant investments, acquisitions or dispositions;
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•the inclusion, exclusion, or deletion of our Class A Common Shares from any trading indices;
•the failure of securities analysts to cover our Class A Common Shares;
•changes in earnings estimates by securities analysts or in our ability to meet those estimates;
•the operating and stock price performance of other comparable companies;
•overall market fluctuations; and
•general economic conditions.
Stock markets in general often experience volatility that is unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our Class A Common Shares. Our shareholders may not be able to resell their Class A Common Shares following periods of volatility because of the market’s adverse reaction to volatility.
Some investors may not invest in our Class A Common Shares as a result of our dual class capital structure, which may adversely affect the trading price of our Class A Common Shares.
Although S&P Dow Jones, a provider of widely followed stock indices, reversed its prior decision to exclude companies with multiple share classes, such as ours, in certain of their indices, there is no guarantee that our Class A Common Shares will be included in an S&P index, despite their eligibility. The Council on Institutional Investors remains strongly opposed to dual class structures, and some investors may continue to avoid investing in companies with dual class shares, particularly companies that do not include time limits with respect to such dual class structures. In addition, several stockholder advisory firms oppose the use of multiple class structures. As a result, our Class A Common Shares may not be included in certain stock indices and may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Many investment funds are precluded from investing in companies that are not included in stock indices, and these funds would be unable to purchase our Class A Common Shares. Exclusion from indices could make our Class A Common Shares less attractive to investors and, as a result, the market price of our Class A Common Shares could be adversely affected. Additionally, any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Common Shares.
Our dividend policy is subject to change.
RMR Inc. currently plans to pay a regular quarterly cash dividend equal to $0.45 per share ($1.80 per share per year) to holders of its Class A Common Shares. However, the amount of distributions RMR LLC may make in the future is not certain, and there is no assurance that future distributions will be made. The declaration and payment of any dividends to our shareholders will be at the discretion of our Board of Directors which considers many factors when setting dividend rates including RMR Inc.’s current and expected earnings and the availability of cash to fund dividends as compared to alternative uses of such cash. Our Board of Directors may change the distribution policy or discontinue the payment of dividends at any time. Accordingly, any future dividends may be increased or decreased and there is no assurance as to the rate at which any future dividends will be paid, and they could decline in amount or be suspended or discontinued. Any change in our dividend policy could have a material adverse effect on the market price of our Class A Common Shares.
Risks Related to Our Relationships with Our Controlling Shareholder and Our Clients
Our controlling shareholder has voting control over our outstanding capital stock, and our other shareholders will have less influence over our business than shareholders of most other publicly traded companies.
Substantially all of the voting power in RMR Inc. and a majority of the economic interest in RMR LLC is held by ABP Trust, an entity controlled by its sole trustee, Adam D. Portnoy. Mr. Portnoy is Chair of our Board of Directors and one of our Managing Directors and is our President and Chief Executive Officer. RMR Inc. is the managing member of RMR LLC. As of September 30, 2024, Adam D. Portnoy beneficially owned in aggregate, directly and indirectly through ABP Trust, a combined direct and indirect 50.9% economic interest in RMR LLC and controlled 91.1% of the aggregate voting power of our outstanding capital stock. As a result of this voting control, Adam D. Portnoy is effectively able to determine the outcome of all matters requiring shareholder approval, including, but not limited to, election of our directors. Adam D. Portnoy is able to cause or prevent a change of control of RMR Inc., and this voting control could preclude any unsolicited acquisition of RMR Inc. The voting control of Adam D. Portnoy could deprive our shareholders of an opportunity to receive a premium for their Class A Common Shares as part of a sale of us and may affect the market price of our Class A Common Shares.
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Our management agreements with the Managed Equity REITs may discourage our change of control.
Each Managed Equity REIT may terminate its management agreements with us if we experience a change of control, as defined in those agreements, without payment of any termination fee. We may be unable to duplicate the long term management arrangements we have with each of the Managed Equity REITs if the management agreements were terminated following our change of control. As a result, the management agreements may discourage a change of control of us, including a change of control which might result in payment of a premium for our Class A Common Shares.
The registration of Tremont Realty Capital under the Investment Advisers Act may discourage our change of control.
Our subsidiary, Tremont Realty Capital, is registered as an investment adviser under the Investment Advisers Act. Any change in control of Tremont Realty Capital, as defined in and interpreted pursuant to the Investment Advisers Act, would trigger a shareholder approval right by SEVN shareholders or other advisory clients of Tremont Realty Capital as applicable, under that Act. The need for such approval may discourage a change of control of us, including a change of control which might result in payment of a premium for our Class A Common Shares.
The ability of ABP Trust to sell its ownership stake in us and speculation about any such sale may adversely affect the market price of our Class A Common Shares.
ABP Trust controls 100.0% of our Class B-1 Common Shares (which are exchangeable for Class A Common Shares) and Class B-2 Common Shares, some of our currently outstanding Class A Common Shares and approximately 48.6% of our Class A Units of RMR LLC (which ABP Trust may cause RMR LLC to redeem for, at our election, Class A Common Shares on a one for one basis or cash). Thus, a significant portion of our ownership is not trading in the public markets. ABP Trust may sell any or all of its Class A Common Shares at any time without approval by our other shareholders. Speculation by the press, stock analysts, our shareholders or others regarding the intention of ABP Trust to dispose of Class A Common Shares could adversely affect the market price of our Class A Common Shares. Moreover, the market price of our Class A Common Shares may be adversely impacted by the fact that a significant amount of our outstanding shares is not included in the public float of our Class A Common Shares and by our dual-stock structure. Accordingly, our Class A Common Shares may be worth less than they would be if the Class A Common Shares that ABP Trust controls or has a right to acquire were trading in the public markets.
We and our clients are party to transactions with related parties that may increase the risk of allegations of conflicts of interest.
We and our clients are party to transactions with related parties, including with entities controlled by Adam D. Portnoy and entities that we manage. For example, because of the relationships among us, Adam D. Portnoy, and our clients, the agreements we are party to with them, including our management agreements, are among related parties. Our and our clients’ agreements with related parties or in respect of transactions among related parties may not be on terms as favorable to us as they would have been if they had been negotiated among unrelated parties. Our shareholders or the shareholders of one or more of our clients may challenge such related party transactions. Although all past challenges have been unsuccessful, if any future challenges to related party transactions were to be successful, we or our clients might not realize the benefits expected from the transactions being challenged. Moreover, any such challenge could result in substantial costs and a diversion of our management’s attention, could have a material adverse effect on our or our clients’ reputation, business and growth and could adversely affect our or our clients’ ability to realize the benefits expected from the transactions, whether or not the allegations have merit or are substantiated.
Declines in revenue, business or assets of a client may result in a corresponding decline or reduced market capitalizations for another client due to their business relationships with each other.
Some of our clients have or have had significant interests in other clients of ours, including ownership interests and business arrangements, and some of our clients may in the future have such interests in other clients. For example: Sonesta manages most of SVC’s hotels, and SVC owns approximately 34% of Sonesta’s outstanding common stock; and AlerisLife manages many of the senior living communities owned by DHC, and DHC owns approximately 34% of AlerisLife’s outstanding common stock. Accordingly, a decline in the performance or prospects of AlerisLife would be expected to adversely impact DHC, and any similar decline of Sonesta would be expected to adversely impact SVC.
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Our management responsibilities to each of our clients and any future companies we may manage may give rise to actual, potential or perceived conflicts of interest.
Some of our clients have overlapping investment objectives, and if and as we expand our management services to include additional private real estate capital clients, additional overlapping investment objectives may result. Allocating investment and loan opportunities appropriately frequently involves significant and subjective judgments. In addition, the perception of non-compliance with such requirements or policies could harm our reputation with private capital investors and our public stockholders. Additionally, some of our clients have material business relationships with, and in some instances have engaged in material transactions with, other of our clients that could give rise to conflicting interests. For example, our Real Estate Lending Venture and SEVN both provide first mortgage loans for middle market real estate and both are managed by our wholly owned subsidiary Tremont Realty Capital. Our controlling shareholder’s investment in some of our clients also could give rise to conflicting interests. Our clients rely on information and management services we provide to them. While we believe we and our clients have appropriate policies and procedures in place that are intended to manage and mitigate the risks of conflicts of interest, our allocation of investment opportunities and cost reimbursements, advice, recommendations and commitments of our management team across our clients might be perceived to favor one client at the expense of another. If we fail or appear to fail to deal appropriately with one or more potential or actual conflict of interest our reputation could be damaged and could have a materially adverse effect on our business, financial condition or results of operations in a number of ways, including an inability to raise additional funds and a reluctance of counterparties to do business with us.
In addition to serving as the Chair and a member of our Board of Directors and on our executive team, Adam D. Portnoy serves as the chair of the board and as a managing trustee of each Managed REIT, as a director of Sonesta (and its parent) and as the sole director of AlerisLife; certain of our other officers serve as managing trustees or directors of our clients; and all of the executive officers of the Managed REITs, one of the executive officers of AlerisLife and one of the executive officers of Sonesta is an officer and employee of ours. In addition, some of the independent trustees of the Managed REITs also serve as independent trustees of other Managed REITs. Mr. Portnoy is also the controlling shareholder of AlerisLife and Sonesta. These multiple responsibilities and varying interests could create competition for the time and efforts of Adam D. Portnoy and RMR LLC and its subsidiaries and their officers and employees, and actual, potential or perceived conflicts of interest may arise.
Shareholder litigation, dissident shareholder director nominations and dissident shareholder proposals have often been instituted against companies alleging conflicts of interest in business dealings with affiliated and related persons and entities. The various relationships noted above may precipitate such activities. In addition, certain proxy advisory firms which have significant influence over the voting by shareholders of public companies, have, in the past, recommended that shareholders vote against, or withhold votes for, the election of board members at annual meetings of shareholders of our clients and vote against certain proposals at special meetings of shareholders, and they may advocate for similar voting actions for future meetings. These actions may affect the outcome of those shareholder votes and impact the governance of those clients, which may increase the risk of shareholder activism and litigation at those clients. These activities could result in substantial costs and diversion of our management’s attention and could have a material adverse effect on our and our clients’ reputations and businesses.
Risks Related to Our Organization and Structure
We are a “controlled company” within the meaning of the Nasdaq listing rules and, as a result, qualify for, and may rely on, exemptions from certain corporate governance requirements. Our shareholders will not have the same protections afforded to shareholders of companies that are subject to such requirements.
Adam D. Portnoy, as sole trustee of ABP Trust, holds more than 50.0% of the voting power of our shares eligible to vote. As a result, we are a “controlled company” under the Nasdaq listing rules. Under these rules, a company of which more than 50.0% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain listed company governance requirements, including the requirements that the board of directors be comprised of a majority of independent directors and that we have a compensation committee and a nominating and corporate governance committee composed entirely of independent directors. Although we are not currently availing ourselves of these exceptions, the fact that we could in the future may cause our Class A Common Shares to trade at a lower price than if we were required to afford these protections.
Our rights and the rights of our shareholders to take action against our directors and officers are limited.
Our charter limits the liability of our directors and officers to us and our shareholders for money damages to the maximum extent permitted under Maryland law. Under current Maryland law, our directors and officers will not have any liability to us and our shareholders for money damages other than liability resulting from:
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•actual receipt of an improper benefit or profit in money, property or services; or
•active and deliberate dishonesty by the director or officer that was established by a final judgment as being material to the cause of action adjudicated.
Additionally, our governing documents require us to indemnify, to the maximum extent permitted by Maryland law, any of our present or former directors or executive officers who is made or threatened to be made a party or otherwise involved in a proceeding by reason of his, her or their service in that capacity and to pay his, her or their expenses in advance of final disposition of a proceeding upon our receipt of an undertaking by or on behalf of such person to repay such amount if it is ultimately determined that such person is not entitled to be indemnified by us. We also entered into separate agreements with our directors and executive officers providing for indemnification and advancement of expenses in addition to any rights such person may have under our governing documents.
As a result of these limitations on liability and indemnification obligations, we and our shareholders may have more limited rights against our present and former directors and officers than might exist with other companies, which could limit shareholder recourse in the event of actions which some shareholders may believe are not in our best interest.
Our bylaws designate the Circuit Court for Baltimore City, Maryland or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, manager, agents or employees.
Our bylaws currently provide that other than any action arising under the Securities Act of 1933, as amended, (the “Securities Act”) the Circuit Court for Baltimore City, Maryland or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for: (1) any Internal Corporate Claim, as such term is defined under the Maryland General Corporation Law; (2) any derivative action or proceeding brought on our behalf; (3) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, agent or employee of ours to us or our shareholders; (4) any action asserting a claim against us or any director, officer, agent or employee of ours arising pursuant to Maryland law or our charter or bylaws, including any disputes, claims or controversies brought by or on behalf of a shareholder either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of our stock or our shareholders against us or any of our directors, officers, agents or employees, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our charter or bylaws; or (5) any action asserting a claim against us or any director, officer, agent or employee of ours that is governed by the internal affairs doctrine of the State of Maryland. Unless we otherwise consent in writing, the sole and exclusive forum for claims that arise under the Securities Act, is the federal district courts of the United States of America, to the fullest extent of the law. Any person or entity purchasing or otherwise acquiring or holding any interest in our shares of stock shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. The exclusive forum provisions of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our directors, officers, employees or agents, which may discourage lawsuits against us and our directors, officers, employees or agents.
RMR Inc. is required to pay ABP Trust for certain tax benefits it claims as a result of the tax basis step up we received as part of the RMR LLC reorganization on June 5, 2015 and will receive upon future redemptions by ABP Trust for Class A Common Shares or for cash. In certain circumstances, payments under the tax receivable agreement may be accelerated and/or significantly exceed the actual tax benefits RMR Inc. realizes.
ABP Trust may redeem Class A Units it owns for Class A Common Shares or cash. See “Business-Our Organizational Structure-The RMR LLC Operating Agreement-Redemption rights of holders of Class A Units” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. Both ABP Trust’s initial purchase of Class A Units and any future redemptions that ABP Trust may effect may result in increases in our tax basis of our assets that otherwise would not have been available. Such increases in tax basis are likely to increase (for tax purposes) depreciation and amortization deductions and therefore reduce the amount of income tax we otherwise would be required to pay in the future. These increases in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent the increased tax basis is allocated to those assets. The Internal Revenue Service, or the IRS, may challenge all or part of these tax basis increases, and a court might sustain such a challenge.
We have entered into a tax receivable agreement, dated June 5, 2015, by and among RMR Inc., RMR LLC and ABP Trust that provides for the payment by RMR Inc. to ABP Trust of 85.0% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that RMR Inc. actually realizes as a result of (a) the increases in tax basis attributable to its dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be paid by us as a result of the tax receivable
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agreement. See “Business-Our Organizational Structure-Tax Receivable Agreement” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 for further information regarding the tax receivable agreement. While the actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of redemptions, the price of our Class A Common Shares at the time of the redemption, the extent to which such redemptions are taxable, and the amount and timing of our income, we expect that, as a result of the size of the increases in the tax basis of the tangible and intangible assets of RMR LLC attributable to RMR Inc.’s interests in RMR LLC, during the expected term of the tax receivable agreement, the payments that RMR Inc. makes to ABP Trust may be substantial. ABP Trust generally will not reimburse RMR Inc. for any payments that may have been made under the tax receivable agreement. As a result, in certain circumstances RMR Inc. could make payments to ABP Trust under the tax receivable agreement in excess of cash tax savings. Our ability to achieve benefits from any tax basis increase, and the payments to be made under the tax receivable agreement, will depend upon a number of factors, including the timing and amount of our future income.
In addition, the tax receivable agreement provides that, upon certain changes of control and certain breaches of the agreement that we fail to cure in accordance with the terms of the agreement, our obligations with respect to Class A Units will be accelerated. In those circumstances, our obligations under the tax receivable agreement would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits described in the tax receivable agreement, and that any Class A Units that have not been redeemed will be deemed redeemed for the market value of the Class A Common Shares at the time of the change of control or breach, as applicable. Consequently, it is possible, in these circumstances, that the actual cash tax savings realized by RMR Inc. may be significantly less than the corresponding tax receivable agreement payments.
Our governing documents permit our directors and officers, our clients and ABP Trust to retain corporate opportunities for their own benefit.
Under RMR Inc.’s charter and RMR LLC’s operating agreement, no director or officer of ours who is also serving as an officer, employee or agent of a client or ABP Trust or any of its affiliates is required to present, communicate or offer any business opportunity to us, and such person shall have the right to hold any business opportunity for themselves or transfer it to any other person to the maximum extent permitted by Maryland law. If any of these persons fails to present an opportunity to us or takes the opportunity for themselves, to the maximum extent permitted under Maryland law they will not be liable to us. We have renounced all potential interest or expectation in certain business opportunities which may fit our growth objectives in the future or otherwise have value to us. These opportunities may be directed to the clients or other persons or entities to which RMR LLC may have a relationship. Additionally, under our governing documents, our directors, officers, employees and agents are permitted to engage in other business activities that are similar to, or even competitive with, our own. If such persons engage in competitive business activities, we may have no remedy under our governing documents in these circumstances.
Our governing documents do not limit our ability to enter into new lines of businesses and doing so may result in additional risks and uncertainties in our businesses.
Our governing documents do not limit our business to the management of commercial real estate assets or businesses related thereto. Accordingly, we may pursue other business initiatives. To the extent we enter into a new line of business, we will face numerous risks and uncertainties, including risks associated with: (i) the required investment of capital and other resources; (ii) the possibility that we have insufficient expertise to engage in such activities competently or profitably; (iii) combining or integrating operational and management systems and controls; and (iv) the broadening of our geographic footprint, including the risks associated with conducting operations in non-U.S. jurisdictions. Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. During the past three years, we expanded our Private Capital through the execution of new business ventures; our Private Capital assets under management increased from approximately $1.7 billion as of September 30, 2021 to approximately $12.8 billion as of September 30, 2024. We entered the multifamily residential real estate sector in December 2023 through our acquisition of RMR Residential and in July 2024 we launched our Real Estate Lending Venture. In addition, our strategic initiatives include joint ventures or partnerships, in which case we may be subject to additional risks and uncertainties because we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control. There can be no assurance that our increased focus on private real estate capital or any other business initiative we decide to pursue will be successful in the future or that we will achieve our performance objectives.
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Our only material asset is our interest in RMR LLC, and we are accordingly dependent upon distributions from RMR LLC to pay our taxes and expenses.
RMR Inc. is organized as a holding company of RMR LLC and its only material asset is its limited liability company membership units of RMR LLC. RMR Inc. has no independent means of generating revenue. Pursuant to RMR Inc.’s agreements with RMR LLC, RMR Inc., as the managing member of RMR LLC, intends to cause RMR LLC to make distributions in an amount that is at least sufficient to cover applicable taxes payable by its members, other expenses and some or all of the dividends, if any, declared by us.
Deterioration in the financial condition, earnings or cash flow of RMR LLC for any reason could limit or impair its ability to pay such distributions to us. Additionally, to the extent that RMR Inc. requires funds and RMR LLC is restricted from making such distributions under applicable law or regulation or under the terms of financing or other arrangements, or is otherwise unable to provide such funds, our liquidity and financial condition could be materially adversely affected.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk management and strategy
We maintain a cybersecurity risk management program to identify, assess and manage material risks from cybersecurity threats, including by regularly assessing risks from cybersecurity threats and monitoring our information systems for potential vulnerabilities. Our cybersecurity program is designed to align with the National Institute of Standards and Technology Cybersecurity Framework.
We take various actions designed to maintain and protect the operation and security of our information technology and systems, including the data maintained in those systems. We conduct data security education and testing for our employees, in addition to penetration testing and unannounced email phishing exercises. Additionally, we have implemented a third-party risk management process for third party service providers and vendors. Extensive security questionnaires are issued to third party providers and vendors, the responses to which are weighted and reviewed by our security and compliance team. High risk vendors are reviewed at least biennially and new vendors that interact with our data are assessed as part of our vendor procurement process. In the event of a cybersecurity incident, we have a detailed incident response plan in place for contacting authorities and informing key stakeholders. In addition, we have engaged a qualified third party who conducted an external assessment of our cybersecurity controls.
To date, we are not aware of risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition. For additional information on cybersecurity risks and potential related impacts on us, see Part I, Item 1A. Risk Factors, “We rely on information technology and systems in our operations, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially harm our business.”
Governance
Our Board of Directors holds oversight responsibility over our strategy and risk management, including material risks related to cybersecurity threats. Our Audit Committee takes a leading role in oversight of risk management, including risks related to cybersecurity, and receives reports from our management regarding cybersecurity risks and countermeasures being undertaken or considered by us, including updates on the internal and external cybersecurity landscape and relevant technical developments and more frequent reports as it may direct or as warranted. Our cybersecurity program is led by our Chief Information Officer, or CIO, who has over two decades of relevant experience in information technology and cybersecurity and has primary responsibility for assessing and managing material risks from cybersecurity threats and overseeing our cybersecurity team. Our CIO has previously held senior information technology and security roles, including as CIO of a global real estate firm and of a real estate investment trust. Our Director of Information Security and our cybersecurity team are responsible for, among other things, information technology failure mitigation and business continuity, cybersecurity threat detection and incident response and continuous network monitoring. Our cybersecurity team members have a broad array of relevant skills and expertise and have obtained, or are working to obtain, relevant information security certifications, including Certified Information Systems Security Professional, Certified Information Systems Auditor and Certified Risk and Information Systems Control certifications. Our Director of Information Security assembles our incident response and investigative teams and informs our CIO if an incident occurs. Investigative findings are reported to our executive leadership and to the relevant
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authorities if warranted. Our CIO works closely with our senior management, including cross-functional leaders in our human resources, legal and corporate communications departments, to develop and advance our cybersecurity strategy and reports to our Audit Committee on cybersecurity matters.
Item 2. Properties
Our principal executive offices are located at Two Newton Place, 255 Washington Street, Newton, MA 02458-1634. These offices are leased from an affiliate of ABP Trust through 2030. A copy of the lease is incorporated by reference as an exhibit to this Annual Report on Form 10-K.
We also lease other ancillary and local office space from ABP Trust, from certain Managed Equity REITs and from third parties. We consider these leased premises suitable and adequate for our business. For more information about our leased facilities, see Note 13, Leases, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
In December 2023, as part of the MPC Acquisition, 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. A mortgage loan with an acquisition date fair value of $4,726 and an aggregate principal amount outstanding of $5,429 is secured by the Woodstock Property and bears interest at a fixed rate of 3.71%. The mortgage loan requires monthly payments of interest only until September 2025, at which time payments of principal and interest are due monthly until the loan matures in August 2029.
In July 2024, we acquired a 240 unit, garden style apartment community located in Denver, CO, or the Denver Property, 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.
Item 3. Legal Proceedings
From time to time, we may become involved in litigation matters incidental to the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, we are currently not a party to any litigation which we expect to have a material adverse effect on our business.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Class A Common Shares are traded on Nasdaq (symbol: RMR). There is no publicly traded market for our Class B-1 Common Shares or our Class B-2 Common Shares, all of which are held by ABP Trust.
As of November 5, 2024, there were 2,087 shareholders of record of our Class A Common Shares.
Issuer purchases of equity securities.
The following table provides information about our purchases of our equity securities during the fiscal year ended September 30, 2024:

|  |  |  |  |  |  |  | Maximum
|  |  |  |  |  | Total Number of |  | Approximate Dollar
|  |  |  |  |  | Shares Purchased |  | Value of Shares that
|  | Number of |  | Average |  | as Part of Publicly |  | May Yet Be Purchased
|  | Shares |  | Price Paid |  | Announced Plans |  | Under the Plans or
Calendar Month |  | Purchased (1) |  | per Share |  | or Programs |  | Programs
November 1, 2023 - November 30, 2023 |  | 492 |  |  | $ | 23.82 |  |  | N/A |  | N/A
January 1, 2024 - January 31, 2024 |  | 1,832 |  |  | 27.53 |  |  | N/A |  | N/A
March 1, 2024 - March 31, 2024 |  | 2,568 |  |  | 24.21 |  |  | N/A |  | N/A
May 1, 2024 - May 31, 2024 |  | 1,156 |  |  | 23.99 |  |  | N/A |  | N/A
July 1, 2024 - July 31, 2024 |  | 4,250 |  |  | 22.48 |  |  | N/A |  | N/A
August 1, 2024 - August 31, 2024 |  | 1,720 |  |  | 25.30 |  |  | N/A |  | N/A
September 1, 2024 - September 30, 2024 |  | 33,471 |  |  | 25.25 |  |  | N/A |  | N/A
Total |  | 45,489 |  |  | $ | 24.98 |  |  | N/A |  | N/A

(1)These Class A Common Share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain of our Directors, officers and employees in connection with the vesting of awards of our Class A Common Shares. We withheld and purchased these shares at their fair market values based upon the trading prices of our Class A Common Shares at the close of trading on Nasdaq on the purchase dates.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with our consolidated financial statements and accompanying notes included in Part IV, Item 15 of this Annual Report on Form 10-K.
OVERVIEW (dollars in thousands)
RMR Inc. is a holding company and substantially all of its business is conducted by RMR LLC. RMR Inc. has no employees, and the personnel and various services it requires to operate are provided by RMR LLC. RMR LLC manages a diverse portfolio of real estate and real estate related businesses.
Acquisition of MPC Partnership Holdings LLC
On December 19, 2023, we completed our acquisition, or the Acquisition, of MPC (now doing business as RMR Residential), a vertically integrated residential platform. This acquisition further advances our strategic focus on continuing to grow our private capital business, comprising approximately $5.1 billion in assets under management as of September 30, 2024 and a number of new institutional relationships. This acquisition also allows us to further diversify our revenue sources, to enter the only major commercial real estate, or CRE, sector in which we did not have a significant presence, and brings infrastructure and digital marketing capabilities that may be leveraged across our platform.
Business Environment and Outlook
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. 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.
Beyond general real estate industry 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 third quarter of calendar 2024. In September 2024, citing progress toward its 2% inflation target, the FOMC lowered the targeted federal funds rate by 50 basis points, to a range of 4.75% to 5.00%, the first reduction since March 2020. This rate cut provided CRE owners relief from the recent high borrowing costs and uncertainty regarding the timing and magnitude of future rate cuts. With this additional clarity on the intentions of the FOMC and the direction of future interest rates, CRE owners are now better positioned to make sale or refinance decisions and opt between floating or fixed rate financing options.
Although certain CRE investors feel that the risk of a prolonged period of elevated interest rates is largely over, 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 the pandemic shift 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.
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
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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.
For a discussion of some of the circumstances that may adversely affect us and our business, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements”, Part I, Item 1 “Business” and Part I, Item 1A “Risk Factors”.
Managed Equity REITs
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 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
The following table presents for each Managed Equity REIT a summary of its primary strategy and the lesser of the historical cost of its assets under management and its market capitalization as of September 30, 2024 and 2023, as applicable:

|  |  |  | Lesser of Historical Cost of Assets
|  |  |  | Under Management or
|  |  |  | Total Market Capitalization as of
|  |  |  | September 30,
REIT |  | Primary Strategy |  | 2024 |  | 2023 |  |
DHC |  | Medical office and life science properties, senior living communities and other healthcare related properties |  | $ | 4,122,133 |  |  | $ | 3,280,149 |  |  |
ILPT |  | Industrial and logistics properties |  | 4,627,266 |  |  | 4,520,662 |  |  |
OPI |  | Office properties primarily leased to single tenants and those with high credit quality characteristics |  | 2,450,756 |  |  | 2,789,224 |  |  |
SVC |  | Hotels and service-focused retail net lease properties |  | 6,442,016 |  |  | 7,083,845 |  |  |
|  |  |  | $ | 17,642,171 |  |  | $ | 17,673,880 |  |  |

A Managed Equity REIT’s historical cost of assets under management includes the real estate it owns and its consolidated assets invested directly or indirectly in equity interests in or loans secured by real estate and personal property owned in connection with such real estate (including acquisition related costs which may be allocated to intangibles or are unallocated), all before reserves for depreciation, amortization, impairment charges or bad debts or other similar non-cash reserves. A Managed Equity REIT’s average market capitalization includes the average value of the Managed Equity REIT’s outstanding common equity value during the period, plus the daily weighted average of each of the aggregate liquidation preference of preferred shares and the principal amount of consolidated indebtedness during the period.
The table above presents for each Managed Equity REIT, the lesser of the historical cost of its assets under management and its market capitalization as of the end of each period. The basis on which our base business management fees are calculated for the fiscal years ended September 30, 2024 and 2023 may differ from the basis at the end of the periods presented in the table above. As of September 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 September 30, 2024, were $7,651,487, $5,699,132, $5,806,052 and $11,425,389, respectively.
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The fee revenues we earned from the Managed Equity REITs for the fiscal years ended September 30, 2024 and 2023 are set forth in the following table:

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023
|  | Base |  |  |  | Base |  |  |  |  |  | Base |  |  |  | Base |  |  |  |
|  | Business |  |  |  | Property |  | Construction |  |  |  | Business |  |  |  | Property |  | Construction |  |
|  | Management |  |  |  | Management |  | Supervision |  |  |  | Management |  |  |  | Management |  | Supervision |  |
REIT |  | Revenues |  |  |  | Revenues |  | Revenues |  | Total |  | Revenues |  |  |  | Revenues |  | Revenues |  | Total
DHC |  | $ | 16,498 |  |  |  |  | $ | 5,659 |  |  | $ | 2,359 |  |  | $ | 24,516 |  |  | $ | 14,388 |  |  |  |  | $ | 5,921 |  |  | $ | 3,366 |  |  | $ | 23,675 |
ILPT |  | 23,590 |  |  |  |  | 12,683 |  |  | 431 |  |  | 36,704 |  |  | 23,428 |  |  |  |  | 12,690 |  |  | 716 |  |  | 36,834 |
OPI |  | 12,484 |  |  |  |  | 13,339 |  |  | 4,080 |  |  | 29,903 |  |  | 14,133 |  |  |  |  | 13,909 |  |  | 10,121 |  |  | 38,163 |
SVC |  | 31,610 |  |  |  |  | 5,397 |  |  | 6,752 |  |  | 43,759 |  |  | 33,654 |  |  |  |  | 3,794 |  |  | 3,095 |  |  | 40,543 |
|  | $ | 84,182 |  |  |  |  | $ | 37,078 |  |  | $ | 13,622 |  |  | $ | 134,882 |  |  | $ | 85,603 |  |  |  |  | $ | 36,314 |  |  | $ | 17,298 |  |  | $ | 139,215 |

Other Clients
We provide business management services to AlerisLife, Sonesta and until May 15, 2023, TA. AlerisLife operates senior living communities throughout the United States, 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.
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. RMR Residential also provides us the potential to generate promote fees on any new co-investments in the future.
Our management fee revenues from services to these clients for the fiscal years ended September 30, 2024 and 2023, are set forth in the following table and exclude termination fee revenue earned from TA of $45,282 for the fiscal year ended September 30, 2023:

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023
|  | Base |  | Base |  |  |  |  |  | Base |  | Base |  |  |  |
|  | Business |  | Property |  | Construction |  |  |  | Business |  | Property |  | Construction |  |
|  | Management |  | Management |  | Supervision |  |  |  | Management |  | Management |  | Supervision |  |
|  | Revenues |  | Revenues |  | Revenues |  | Total |  | Revenues |  | Revenues |  | Revenues |  | Total
AlerisLife |  | $ | 5,632 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,632 |  |  | $ | 5,414 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,414 |
Sonesta |  | 9,362 |  |  | — |  |  | — |  |  | 9,362 |  |  | 9,456 |  |  | — |  |  | 15 |  |  | 9,471 |
RMR Residential |  | 482 |  |  | 15,014 |  |  | 1,440 |  |  | 16,936 |  |  | — |  |  | — |  |  | — |  |  | — |
Other private entities |  | 12,099 |  |  | 8,664 |  |  | 579 |  |  | 21,342 |  |  | 12,013 |  |  | 8,388 |  |  | 1,130 |  |  | 21,531 |
SEVN |  | — |  |  | 47 |  |  | — |  |  | 47 |  |  | — |  |  | 8 |  |  | — |  |  | 8 |
TA |  | — |  |  | — |  |  | — |  |  | — |  |  | 9,932 |  |  | — |  |  | — |  |  | 9,932 |
|  | $ | 27,575 |  |  | $ | 23,725 |  |  | $ | 2,019 |  |  | $ | 53,319 |  |  | $ | 36,815 |  |  | $ | 8,396 |  |  | $ | 1,145 |  |  | $ | 46,356 |

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Advisory Business
Tremont provides advisory services to SEVN, 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 is primarily compensated pursuant to its management agreement with SEVN based on a percentage of equity, as defined in the applicable agreement.
For the fiscal years ended September 30, 2024 and 2023, Tremont earned advisory services revenue of $4,506 and $4,520, respectively, and incentive fees of $1,213 and $660, respectively.
Real Estate Lending Venture
As part of our strategic initiative to expand our private capital business, 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.
In July 2024, we originated a floating rate first mortgage loan that is secured by a hotel property in Revere, MA for a total commitment of $40,000, which has been fully funded as of September 30, 2024. This loan requires the borrower to pay interest at a rate of the Secured Overnight Financing Rate, or 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 originated a floating rate first mortgage loan that is secured by an industrial property in Wayne, PA for a total commitment of $27,000, of which $17,180 has been funded as of September 30, 2024. This loan requires the borrower to pay interest at a 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.
In September 2024, we entered into a master repurchase agreement with UBS AG, or UBS, or our UBS Master Repurchase Agreement, for a facility with an aggregate maximum capacity of $200,000, or our UBS Master Repurchase Facility, pursuant to which we may sell to UBS, and later repurchase, commercial mortgage loans, which are referred to as purchased assets. Pursuant to the UBS Master Repurchase Agreement, we will pay UBS a non-refundable upfront fee that is equal to 0.60% of the applicable tranche amount on each purchase date.
RMR Residential Acquisition
In July 2024, we acquired a 240 unit, garden style apartment community located in Denver, CO, or the Denver Property, 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.
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.
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RESULTS OF OPERATIONS (dollars in thousands)
The following table presents the changes in our operating results for the fiscal year ended September 30, 2024 compared to the fiscal year ended September 30, 2023:

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023 |  | $ Change |  | % Change
Revenues: |  |  |  |  |  |  |  |
Management services |  | $ | 188,201 |  |  | $ | 185,702 |  |  | $ | 2,499 |  |  | 1.3%
Termination and incentive fees |  | 1,213 |  |  | 45,942 |  |  | (44,729) |  |  | (97.4)%
Advisory services |  | 4,506 |  |  | 4,520 |  |  | (14) |  |  | (0.3)%
Total management, termination, incentive and advisory services revenues |  | 193,920 |  |  | 236,164 |  |  | (42,244) |  |  | (17.9)%
Loan investment interest income |  | 1,400 |  |  | — |  |  | 1,400 |  |  | n/m
Loan investment interest expense |  | (87) |  |  | — |  |  | (87) |  |  | n/m
Income from loan investments, net |  | 1,313 |  |  | — |  |  | 1,313 |  |  | n/m
Rental property revenues |  | 1,604 |  |  | — |  |  | 1,604 |  |  | n/m
Reimbursable compensation and benefits |  | 84,169 |  |  | 59,925 |  |  | 24,244 |  |  | 40.5%
Reimbursable equity based compensation |  | 7,919 |  |  | 9,826 |  |  | (1,907) |  |  | (19.4)%
Other reimbursable expenses |  | 608,688 |  |  | 656,401 |  |  | (47,713) |  |  | (7.3)%
Total reimbursable costs |  | 700,776 |  |  | 726,152 |  |  | (25,376) |  |  | (3.5)%
Total revenues |  | 897,613 |  |  | 962,316 |  |  | (64,703) |  |  | (6.7)%
Expenses: |  |  |  |  |  |  |  |
Compensation and benefits |  | 170,357 |  |  | 136,355 |  |  | 34,002 |  |  | 24.9%
Equity based compensation |  | 10,624 |  |  | 12,488 |  |  | (1,864) |  |  | (14.9)%
Separation costs |  | 6,297 |  |  | 2,002 |  |  | 4,295 |  |  | n/m
Total compensation and benefits expense |  | 187,278 |  |  | 150,845 |  |  | 36,433 |  |  | 24.2%
General and administrative |  | 43,743 |  |  | 36,019 |  |  | 7,724 |  |  | 21.4%
Other reimbursable expenses |  | 608,688 |  |  | 656,401 |  |  | (47,713) |  |  | (7.3)%
Rental property expenses |  | 462 |  |  | — |  |  | 462 |  |  | n/m
Transaction and acquisition related costs |  | 7,750 |  |  | 4,221 |  |  | 3,529 |  |  | 83.6%
Depreciation and amortization |  | 4,713 |  |  | 1,102 |  |  | 3,611 |  |  | n/m
Total expenses |  | 852,634 |  |  | 848,588 |  |  | 4,046 |  |  | 0.5%
Operating income |  | 44,979 |  |  | 113,728 |  |  | (68,749) |  |  | (60.5)%
Change in fair value of Earnout liability |  | 2,589 |  |  | — |  |  | 2,589 |  |  | n/m
Interest income |  | 10,403 |  |  | 10,574 |  |  | (171) |  |  | (1.6)%
Interest expense |  | (783) |  |  | — |  |  | (783) |  |  | n/m
Gain on equity method investments |  | 7,260 |  |  | 25,237 |  |  | (17,977) |  |  | (71.2)%
Income before income tax expense |  | 64,448 |  |  | 149,539 |  |  | (85,091) |  |  | (56.9)%
Income tax expense |  | (11,319) |  |  | (21,768) |  |  | 10,449 |  |  | 48.0%
Net income |  | 53,129 |  |  | 127,771 |  |  | (74,642) |  |  | (58.4)%
Net income attributable to noncontrolling interest in The RMR Group LLC |  | (30,039) |  |  | (70,624) |  |  | 40,585 |  |  | 57.5%
Net loss attributable to noncontrolling interest in consolidated entity |  | 40 |  |  | — |  |  | 40 |  |  | n/m
Net income attributable to The RMR Group Inc. |  | $ | 23,130 |  |  | $ | 57,147 |  |  | $ | (34,017) |  |  | (59.5)%

n/m - not meaningful
References to changes in the income and expense categories below relate to the comparison of consolidated results for the fiscal year ended September 30, 2024, compared to the fiscal year ended September 30, 2023. For a comparison of consolidated results for the fiscal year ended September 30, 2023 compared to the fiscal year ended September 30, 2022, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
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Management services revenue. Management services revenue increased $2,499 primarily due to growth in management services revenue of $16,936 related to our acquisition of MPC, partially offset by decreases 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 fees earned, primarily from the Managed Equity REITs, of $4,242.
Termination and incentive fees. Termination and incentive fees decreased $44,729 primarily due to the $45,282 termination fee received from TA during the 2023 period. For further information about these fees, see Note 2, Summary of Significant Accounting Policies, and Note 8, Related Person Transactions, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Income from loan investments, net. Income from loan investments, net includes loan investment interest income of $1,400 for loans originated as part of the Real Estate Lending Venture that was launched this fiscal year.
Rental property revenues. Rental property revenues includes base rental income and non-cash straight line rent adjustments for our two owned properties, each of which was acquired in the current fiscal year.
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 $24,244 primarily due to the impact of our acquisition of MPC and annual merit increases effective October 1, 2023.
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 $1,907 primarily as a result of decreases in certain of our clients’ respective share prices.
Other reimbursable expenses. For further information about these reimbursements, see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
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 $34,002 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.
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 $1,864 primarily as a result of decreases in certain of our clients’ respective share prices.
Separation costs. Separation costs consist of employment termination costs. For further information about these costs, see Note 8, Related Person Transactions, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
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 $7,724 primarily due to the impact of our acquisition of MPC and increases in third party costs related to our expanded role in construction oversight.
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.
Transaction and acquisition related costs. Transaction and acquisition related costs in the 2024 period primarily represent costs associated with our acquisition of MPC and related integration expenses.
Depreciation and amortization. Depreciation and amortization increased $3,611 primarily due to the amortization of MPC acquisition related intangible assets and the acquisition of our two owned properties in the 2024 period.
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Change in fair value of Earnout liability. For further information about the Earnout liability, see Note 4, Acquisitions and Note 7, Fair Value of Financial Instruments to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Interest income. Interest income decreased $171 due to a lower amount of investable cash during the 2024 period, partially offset by higher average interest rates as compared to the 2023 period.
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 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Income tax expense. The decrease in income tax expense of $10,449 is primarily attributable to lower taxable income during the 2024 period as compared to the 2023 period.
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LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands, except per share amounts)
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 September 30, 2024 and 2023, we had cash and cash equivalents of $141,599 and $267,989, respectively, of which $23,189 and $26,802, 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 September 30, 2024 and 2023, $92,326 and $265,800, respectively, of our cash and cash equivalents were invested in money market bank accounts.
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 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.
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 $11,958 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.
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.
During the fiscal year ended September 30, 2024, we paid cash distributions to the holders of our Class A Common Shares, Class B-1 Common Shares and to the other owner of RMR LLC membership units in the aggregate amount of $47,623. On October 16, 2024, we declared a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares to our shareholders of record as of October 28, 2024 in the amount of $0.45 per Class A Common Share and Class B-1 Common Share, or $7,581. This dividend will be partially funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.32 per unit, or $10,191, of which $5,391 will be distributed to us based on our aggregate ownership of 16,846,025 membership units of RMR LLC and $4,800 will be distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC. The remainder of this dividend will be funded with cash accumulated at RMR Inc. We expect the total dividend will amount to approximately $12,381 and we expect to pay this dividend on or about November 14, 2024. See Note 9, Shareholders’ Equity, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for more information regarding these distributions.
For the fiscal year ended September 30, 2024, pursuant to the RMR LLC operating agreement, RMR LLC made required quarterly tax distributions to its holders of its membership units totaling $27,796, of which $14,799 was distributed to us and $12,997 was distributed to ABP Trust, based on each membership unit holder’s then respective ownership percentage in RMR LLC. The $14,799 distributed to us was eliminated in our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, and the $12,997 distributed to ABP Trust was recorded as a reduction of their noncontrolling interest. We used a portion of these funds distributed to us to pay our tax liabilities and amounts due under the tax receivable agreement.
Cash Flows
The $47,840 decrease in net cash flows from operating activities for the fiscal year ended September 30, 2024 compared to the prior fiscal year reflects a decrease in net income due to termination fee revenue from TA in the prior period. The $259,334 decrease in net cash flows from investing activities for the fiscal year ended September 30, 2024 compared to the prior fiscal year was due to our acquisition of MPC and the Denver Property, as well as the origination of loans held for investment in the current fiscal year compared to the proceeds received from the sale of TA’s common shares in the prior period. The $101,883 increase in net cash flows from financing activities for the fiscal year ended September 30, 2024 compared to the prior fiscal
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year was primarily due to proceeds from our UBS Master Repurchase Facility and mortgage note payable in the current fiscal year, as well as higher tax distributions in the prior period.
As of September 30, 2024, we had no off-balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Tax Receivable Agreement
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 consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. As of September 30, 2024, our 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.
Market Risk and Credit Risk
We have not invested in derivative instruments, borrowed through issuing debt securities or transacted in foreign currencies. Our floating rate debt consists of our purchased assets, which are governed by our UBS Master Repurchase Facility 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. 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 this Annual Report on Form 10-K for the risks to us and our clients.
Risks Related to Cash and Short Term Investments
Our cash and cash equivalents include short term, highly liquid investments readily convertible to known amounts of cash that have original maturities of three months or less from the date of purchase. We invest a substantial amount of our cash in money market bank accounts. The majority of our cash is maintained in U.S. bank accounts. Some U.S. bank account balances exceed the Federal Deposit Insurance Corporation insurance limit. We believe our cash and short term investments are not subject to any material interest rate risk, equity price risk, credit risk or other market risk.
Related Person Transactions
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, see Note 2, Summary of Significant Accounting Policies and Note 8, Related Person Transactions, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which is incorporated herein by reference, the section captioned “Business” above in Part I, Item 1 of this Annual Report on Form 10-K, our other filings with the SEC and our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders, or the 2025 Proxy Statement, to be filed within 120 days after the close of the fiscal year ended September 30, 2024. In addition, for more information about these transactions and relationships and about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements” and Part I, Item 1A “Risk Factors.” We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.
Critical Accounting Estimates
An understanding of our accounting policies is necessary for a complete analysis of our results, financial position, liquidity and trends. The preparation of our consolidated financial statements requires our management to make certain critical accounting estimates and judgments that impact (i) the revenue recognized during the reporting periods (ii) the estimation of
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fair values and (iii) our principles of consolidation. These accounting estimates are based on our management’s judgment. We consider them to be critical because of their significance to our consolidated financial statements and the possibility that future events may cause differences from current judgments or because the use of different assumptions could result in materially different estimates. We review these estimates on a periodic basis to test their reasonableness. Although actual amounts likely differ from such estimated amounts, we believe such differences are not likely to be material.
Revenue Recognition. Our principal sources of revenue are:
•business management fees, including base and incentive business management fees; and
•property management fees, including construction supervision fees and reimbursement for certain compensation and benefits related expenses.
We recognize revenue from business management and property management fees as earned in accordance with our management agreements. We consider the incentive business management fees earned from the REITs that we manage to be contingent performance based fees, which we recognize as revenue when earned at the end of each measurement period. We also recognize as revenue certain compensation and benefits reimbursements in our capacity as property manager, at cost, when we incur the related reimbursable compensation and benefits and other costs on behalf of our clients. See the “Revenue Recognition” section of Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for a detailed discussion of our revenue recognition policies and our contractual arrangements.
Fair Value. 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. 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.
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 transaction, 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.
Consolidation. Our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K include only the accounts of the entities we control. We continually assess whether our existing contractual rights give us the ability to direct the activities of the entities we manage that most significantly affect the results of that entity. The activities and factors we consider include, but are not limited to:
•our representation on the entity’s governing body;
•the size of our investment in each entity compared to the size of the entity and the size of other investors’ interests; and
•the ability and rights to participate in significant policy making decisions and to replace our manager of those entities.
Based on our historical assessments, we have not consolidated the entities we manage. We will reassess these conclusions if and when facts and circumstances indicate that there are changes to the elements evidencing control.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative disclosures about market risk are set forth above in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operation—Market Risk and Credit Risk.”
Item 8. Financial Statements and Supplementary Data
The information required by this item is included in Item 15 of this Annual Report on Form 10-K.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Exchange Act. Based upon that evaluation, our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management Report on Assessment of Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2024. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) in Internal Control—Integrated Framework. Based on this assessment, we believe that, as of September 30, 2024, our internal control over financial reporting is effective.
Our assessment of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls of MPC acquired on December 19, 2023, which is included in our consolidated financial statements since the date of acquisition and represented less than 4% of our total assets as of September 30, 2024 after excluding goodwill and intangible assets acquired, and less than 5% of our total revenues for the year ended September 30, 2024. We will include MPC in our assessment of internal controls for the fiscal year ending September 30, 2025.
Deloitte & Touche LLP, the independent registered public accounting firm that audited our 2024 Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, has issued an attestation report on our internal control over financial reporting. Its report appears elsewhere herein.
Item 9B. Other Information
We have adopted comprehensive insider trading policies and procedures that apply to all directors, officers and employees. These policies are designed to prevent trading on the basis of material nonpublic information and to ensure compliance with applicable securities laws. The policies include provisions for pre-clearance of trades, blackout periods and the establishment of Rule 10b5-1 trading plans. A copy of our insider trading policy is filed as an exhibit to this Annual Report on Form 10-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item 10 of Form 10-K will be included in the 2025 Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item 11 of Form 10-K will be included in the 2025 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information. We may award our Class A Common Shares to our officers and employees under the Amended and Restated 2016 Omnibus Equity Plan, or the 2016 Plan. In addition, each of our Directors receives Class A Common Shares under the 2016 Plan as part of his or her annual compensation for serving as a Director. The terms of awards made under the 2016 Plan are determined by the Compensation Committee of our Board of Directors, at the time of the award. The following table is as of September 30, 2024.

|  |  |  |  |  | Number of securities
|  | Number of securities |  |  |  | remaining available for
|  | to be issued upon |  | Weighted-average |  | future issuance under equity
|  | exercise of |  | exercise price of |  | compensation plans (excluding
|  | outstanding options, |  | outstanding options, |  | securities
Plan category |  | warrants and rights |  | warrants and rights |  | reflected in column (a))
|  | (a) |  | (b) |  | (c)
Equity compensation plans approved by security holders - 2016 Plan |  | None. |  | None. |  | 103,975 (1)
Equity compensation plans not approved by security holders |  | None. |  | None. |  | None.
Total |  | None. |  | None. |  | 103,975 (1)

(1) Consists of shares available for issuance pursuant to the terms of the 2016 Plan. Share awards that are repurchased or forfeited will be added to the shares available for issuance under the 2016 Plan.
Other information required by this Item 12 of Form 10-K will be included in the 2025 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Person Transactions, and Director Independence
The information required by this Item 13 of Form 10-K will be included in the 2025 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 of Form 10-K will be included in the 2025 Proxy Statement and is incorporated herein by reference.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Index to Financial Statements and Financial Statement Schedules
The following consolidated financial statements of The RMR Group Inc. are included on the pages indicated:

Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34) | F-1
Consolidated Balance Sheets as of September 30, 2024 and 2023 | F-5
Consolidated Statements of Income for the fiscal years ended September 30, 2024, 2023 and 2022 | F-6
Consolidated Statements of Shareholders’ Equity for the fiscal years ended September 30, 2024, 2023 and 2022 | F-7
Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2024, 2023 and 2022 | F-8
Notes to Consolidated Financial Statements | F-10

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, or are inapplicable, and therefore have been omitted.
(b) Exhibits

Exhibit Number |  | Description
2.1 |  | Equity Purchase Agreement, dated as of July 29, 2023, by and among The RMR Group LLC, MPC Partnership Holdings LLC, the Sellers set forth on the signature pages thereto, the Seller Owners set forth on the signature pages thereto, and James A. Rubright, solely in his capacity as the Seller Representative (Schedules to the Equity Purchase Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of all omitted schedules to the SEC upon its request). (Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the SEC on July 31, 2023.)
3.1 |  | Articles of Amendment and Restatement of the Registrant. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
3.2 |  | Articles of Amendment, filed July 30, 2015. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
3.3 |  | Articles of Amendment, filed September 11, 2015. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
3.4 |  | Articles of Amendment, filed March 9, 2016. (Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the SEC on March 11, 2016.)
3.5 |  | Articles of Amendment, filed November 14, 2022. (Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on November 14, 2022.)
3.6 |  | Fifth Amended and Restated Bylaws of the Registrant adopted June 11, 2024. (Incorporated by reference to the Registrant's Current Report on Form 8-K (File No. 001-37616) filed with the SEC on June 11, 2024.)
4.1 |  | Form of The RMR Group Inc. Share Certificate for Class A Common Stock. (Incorporated by reference to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on November 2, 2015.)
4.2 |  | Registration Rights Agreement, dated as of June 5, 2015, by and between the Registrant and ABP Trust (formerly known as Reit Management & Research Trust). (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
4.3 |  | Description of Capital Stock. (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on November 22, 2019.)
10.1 |  | The RMR Group LLC Amended and Restated Operating Agreement, dated as of October 14, 2015, as updated December 22, 2017, by and among The RMR Group LLC and its Members. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on February 8, 2018.)

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10.2 |  | Second Amended and Restated Business Management Agreement, dated as of March 20, 2023, by and between The RMR Group LLC and ABP Trust. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on May 3, 2023.)
10.3 |  | Amended and Restated Business Management and Shared Services Agreement, dated as of June 5, 2015, by and between Sonesta International Hotels Corporation and The RMR Group LLC. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
10.4 |  | First Amendment to Amended and Restated Business Management and Shared Services Agreement, dated as of May 31, 2022, by and between Sonesta International Hotels Corporation and The RMR Group LLC. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on August 4, 2022.)
10.5 |  | Second Amended and Restated Business Management Agreement, dated as of June 5, 2015, by and between Office Properties Income Trust (formerly known as Government Properties Income Trust) and The RMR Group LLC. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
10.6 |  | Amendment to Second Amended and Restated Business Management Agreement, dated December 31, 2018, between Office Properties Income Trust (formerly known as Government Properties Income Trust) and The RMR Group LLC. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on February 7, 2019.)
10.7 |  | Second Amendment to Second Amended and Restated Business Management Agreement, dated August 1, 2021, between Office Properties Income Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on November 15, 2021.)
10.8 |  | Second Amended and Restated Business Management Agreement, dated as of June 5, 2015, by and between Service Properties Trust (formerly known as Hospitality Properties Trust) and The RMR Group LLC. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
10.9 |  | First Amendment to Second Amended and Restated Business Management Agreement, dated as of August 1, 2021, by and between Service Properties Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on November 15, 2021.)
10.10 |  | Second Amended and Restated Business Management Agreement, dated as of June 5, 2015, by and between Diversified Healthcare Trust (formerly known as Senior Housing Properties Trust) and The RMR Group LLC. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
10.11 |  | First Amendment to Second Amended and Restated Business Management Agreement, dated as of August 1, 2021, by and between Diversified Healthcare Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on November 15, 2021.)
10.12 |  | Business Management Agreement, dated as of January 17, 2018, by and between Industrial Logistics Properties Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the SEC on January 18, 2018.)
10.13 |  | Amendment to Business Management Agreement, dated December 31, 2018, between Industrial Logistics Properties Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on February 7, 2019.)
10.14 |  | Second Amendment to Business Management Agreement, dated August 1, 2021, between Industrial Logistics Properties Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on November 15, 2021.)
10.15 |  | Amended and Restated Property Management Agreement, by and between The RMR Group LLC and ABP Trust (formerly known as Reit Management & Research Trust). (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
10.16 |  | Second Amended and Restated Property Management Agreement, dated as of June 5, 2015, by and between The RMR Group LLC and Office Properties Income Trust (formerly known as Government Properties Income Trust). (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)

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10.17 |  | Third Amended and Restated Property Management Agreement, dated as of June 22, 2021, by and between The RMR Group LLC and Service Properties Trust. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on August 5, 2021.)
10.18 |  | Third Amended and Restated Property Management Agreement, dated as of June 9, 2021, by and between The RMR Group LLC and Diversified Healthcare Trust. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on August 5, 2021.)
10.19 |  | Property Management Agreement, dated as of January 17, 2018, by and between The RMR Group LLC and Industrial Logistics Properties Trust. (Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the SEC on January 18, 2018.)
10.20 |  | Tax Receivable Agreement, dated as of June 5, 2015, by and among the Registrant, The RMR Group LLC and ABP Trust (formerly known as Reit Management & Research Trust). (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
10.21 |  | Lease, dated as of June 1, 2015, by and between RMR West LLC and The RMR Group LLC. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
10.22 |  | Amendment No. 1 to the Lease, dated as of June 1, 2015, by and between RMR West LLC and The RMR Group LLC, effective as of January 1, 2016. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on August 8, 2018.)
10.23 |  | Amendment No. 2 to the Lease, dated as of June 1, 2015, by and between ABP Trust and The RMR Group LLC, effective as of July 19, 2018. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on August 8, 2018.)
10.24 |  | Amendment No. 3 to the Lease, dated as of June 1, 2015, by and between ABP Trust and The RMR Group LLC, effective as of June 13, 2019. (Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the SEC on June 14, 2019.)
10.25 |  | Form of Indemnification Agreement for the Registrant and its directors and executive officers. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the SEC on October 14, 2015.)
10.26 |  | The RMR Group Inc. Amended and Restated 2016 Omnibus Equity Plan (+). (Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the SEC on March 11, 2022.)
10.27 |  | Form of The RMR Group Inc. Share Award Agreement (+). (Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on November 14, 2022.)
10.28 |  | Letter Agreement, dated as of November 15, 2023, by and among The RMR Group LLC and Jennifer Francis (+). (Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on February 7, 2024.)
19.1 |  | T he RMR Group Inc. Insider Trading Policies and Procedures (Filed herewith.)
21.1 |  | Subsidiaries of the Registrant (Filed herewith.)
23.1 |  | Consent of Deloitte & Touche LLP (Filed herewith.)
31.1 |  | Rule 13a-14(a) Certification (Filed herewith.)
31.2 |  | Rule 13a-14(a) Certification (Filed herewith.)
32.1 |  | Section 1350 Certification (Furnished herewith.)
97.1 |  | The RMR Group Inc. Clawback Policy (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on November 15, 2023.)
99.1 |  | Letter, dated March 24, 2017, between The RMR Group LLC and Diversified Healthcare Trust (formerly known as Senior Housing Properties Trust), regarding Second Amended and Restated Business Management Agreement. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on May 10, 2017.)

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99.2 |  | Letter, dated October 2, 2017, between The RMR Group LLC and Office Properties Income Trust (formerly known as Government Properties Income Trust), regarding Second Amended and Restated Property Management Agreement. (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-37616) filed with the SEC on December 12, 2017.)
99.3 |  | Letter, dated January 17, 2018, between Office Properties Income Trust (as successor to Select Income REIT) and The RMR Group LLC, regarding Business Management Agreement and Property Management Agreement, between Industrial Logistics Properties Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the SEC on January 18, 2018.)
99.4 |  | Letter, dated January 29, 2019, between The RMR Group LLC and Industrial Logistics Properties Trust, regarding Property Management Agreement, between Industrial Logistics Properties Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on May 10, 2019.)
99.5 |  | Letter Agreement, dated as of February 21, 2020, between Industrial Logistics Properties Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on May 11, 2020.)
99.6 |  | Letter, dated February 25, 2022, between Industrial Logistics Properties Trust and The RMR Group LLC regarding Business Management Agreement between Industrial Logistics Properties Trust and The RMR Group LLC. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on May 4, 2022.)
99.7 |  | Letter Agreement, dated as of May 1, 2023, between The RMR Group LLC and Service Properties Trust. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on August 9, 2023.)
99.8 |  | Letter Agreement, dated as of May 25, 2023, between The RMR Group LLC and Office Properties Income Trust. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on August 9, 2023.)
99.9 |  | Property Management Agreement, dated as of July 8, 2023, between The RMR Group LLC and Floral Vale LLC, a subsidiary of Seven Hills Realty Trust. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37616) filed with the SEC on August 9, 2023.)
101.INS |  | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH |  | XBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(+) Contract with management or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of The RMR Group Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The RMR Group Inc. (the “Company”) as of September 30, 2024 and 2023, the related consolidated statements of income, shareholders’ equity, and cash flows, for each of the three years in the period ended September 30, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 12, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Identification of related parties and related party transactions - Refer to Notes 1, 2 and 8 to the financial statements
Critical Audit Matter Description
As discussed in Notes 1 and 2 to the financial statements, the Company generates its revenue by providing management services to four publicly traded equity real estate investment trusts, two real estate operating companies, and private capital vehicles, as well as providing advisory services to a publicly traded mortgage real estate investment trust, all of which are related parties. These entities are considered to be related parties for the reasons discussed in Note 8 to the financial statements. In addition, the Company has also entered into a number of other arrangements with its related persons and related parties (collectively, “related parties”), as further discussed in Note 8.
Given the number of related parties and related party transactions, we determined the evaluation of the identification and disclosure of related parties and related party transactions to be a critical audit matter. Auditor judgment and effort was involved in assessing the sufficiency of the procedures the Company performed to identify and disclose related parties and related party transactions.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the identification and disclosure of related parties and related party transactions included the following, among others:
•We tested the effectiveness of controls over the Company’s identification of related party relationships and transactions.
•We evaluated the process used by management to identify related parties and related party transactions by:
◦Inspecting the Company’s minutes from meetings of the Board of Directors and related committees to determine whether there were any related parties or transactions not previously identified.
◦Inspecting questionnaires completed by the Company’s directors and officers to identify potential related party transactions.
◦Inquiring with executive officers, key members of management, and the Audit Committee of the Board of Directors regarding their knowledge of the Company’s related party transactions.
◦Reading public filings made by the Company, in addition to external news sources for information related to transactions between the Company and related parties to compare to the Company’s detail of related party transactions.
◦Listening to the Company’s quarterly earnings investor calls to identify any undisclosed related parties, transactions, or agreements.
◦Inspecting new and amended agreements between the Company and related parties to ensure they were properly disclosed, along with existing related party relationships.
◦Inspecting the Company’s check register and accounts payable sub-ledger to determine whether there were any payments made or to be made to related parties for transactions not previously identified.
Acquisition of MPC Partnership Holdings LLC - Refer to Note 4 to the financial statements
Critical Audit Matter Description
As discussed in Note 4 to the financial statements, the Company completed the acquisition of MPC Partnership Holdings LLC (or “MPC”) on December 19, 2023 with a purchase price of $99 million. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including intangible assets of property management and investment management agreements of $13.5 million, trade name of $5.2 million, and investor relationships of $1.8 million. The method for determining relative fair value requires management to make estimates and assumptions related to the long-term growth rate and the selection of the discount rate.
Given the fair value determination of the intangible assets for MPC requires management to make significant estimates and assumptions related to the long-term growth rate and the selection of the discount rate, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the long-term growth rate and the selection of the discount rate for the intangible assets valuation included the following:
•We tested the effectiveness of controls over the valuation of the intangible assets, including management’s controls over the long-term growth rate and selection of the discount rate.
•We assessed the reasonableness of management’s estimated long-term growth rate by comparing the projections to historical results and in place contracts.
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•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:
◦Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.
◦Developing a range of independent estimates and comparing those to the discount rate selected by management.
/s/ Deloitte & Touche LLP

Boston, Massachusetts |
November 12, 2024 |

We have served as the Company’s auditor since 2020.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of The RMR Group Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The RMR Group Inc. (the “Company”) as of September 30, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2024, of the Company and our report dated November 12, 2024 expressed an unqualified opinion on those financial statements.
As described in Management Report on Assessment of Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at MPC Partnership Holdings LLC, which was acquired on December 19, 2023, and whose financial statements constitute less than 4% of total assets after excluding goodwill and intangible assets acquired, and less than 5% of total revenues of the consolidated financial statement amounts as of and for the year ended September 30, 2024. Accordingly, our audit did not include the internal control over financial reporting at MPC Partnership Holdings LLC.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP

Boston, Massachusetts |
November 12, 2024 |

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The RMR Group Inc.
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)

|  | September 30,
|  | 2024 |  | 2023
Assets |  |  |  |
Cash and cash equivalents held by The RMR Group Inc. |  | $ | 23,189 |  |  | $ | 26,802 |
Cash and cash equivalents held by The RMR Group LLC |  | 118,410 |  |  | 241,187 |
Due from related parties |  | 134,030 |  |  | 111,323 |
Prepaid and other current assets |  | 9,789 |  |  | 6,997 |
Assets held for sale |  | 8,700 |  |  | — |
Total current assets |  | 294,118 |  |  | 386,309 |
Loans held for investment, net of allowance for credit losses of $343 and $0, respectively |  | 56,221 |  |  | — |
Property and equipment, net of accumulated depreciation of $3,447 and $3,212, respectively |  | 76,433 |  |  | 5,446 |
Due from related parties, net of current portion |  | 9,350 |  |  | 7,261 |
Equity method investments |  | 23,733 |  |  | 18,651 |
Goodwill |  | 71,761 |  |  | 1,859 |
Intangible assets, net of accumulated amortization of $3,719 and $983, respectively |  | 20,299 |  |  | 167 |
Operating lease right of use assets |  | 27,353 |  |  | 29,032 |
Deferred tax asset |  | 15,163 |  |  | 18,220 |
Other assets, net of accumulated amortization of $87,740 and $78,324, respectively |  | 106,063 |  |  | 115,479 |
Total assets |  | $ | 700,494 |  |  | $ | 582,424 |
Liabilities and Equity |  |  |  |
Reimbursable accounts payable and accrued expenses |  | $ | 90,444 |  |  | $ | 77,924 |
Accounts payable and accrued expenses |  | 31,599 |  |  | 22,578 |
Current portion of Earnout liability |  | 517 |  |  | — |
Operating lease liabilities |  | 5,906 |  |  | 5,068 |
Liabilities held for sale |  | 4,973 |  |  | — |
Total current liabilities |  | 133,439 |  |  | 105,570 |
Operating lease liabilities, net of current portion |  | 22,147 |  |  | 25,044 |
Amounts due pursuant to tax receivable agreement, net of current portion |  | 18,442 |  |  | 20,886 |
Employer compensation liability, net of current portion |  | 9,350 |  |  | 7,261 |
Earnout liability, net of current portion |  | 11,441 |  |  | — |
Secured financing facility, net |  | 41,109 |  |  | — |
Mortgage note payable |  | 45,149 |  |  | — |
Total liabilities |  | 281,077 |  |  | 158,761 |
Commitments and contingencies |  |  |  |
Equity: |  |  |  |
Class A common stock, $0.001 par value; 31,950,000 shares authorized; 15,846,025 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 capital |  | 118,811 |  |  | 116,010 |
Retained earnings |  | 436,226 |  |  | 413,096 |
Cumulative common distributions |  | (317,495) |  |  | (289,072) |
Total shareholders’ equity |  | 237,574 |  |  | 240,066 |
Noncontrolling interest in The RMR Group LLC |  | 181,439 |  |  | 183,597 |
Noncontrolling interest in consolidated entity |  | 404 |  |  | — |
Total noncontrolling interests |  | 181,843 |  |  | 183,597 |
Total equity |  | 419,417 |  |  | 423,663 |
Total liabilities and equity |  | $ | 700,494 |  |  | $ | 582,424 |

See accompanying notes.
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The RMR Group Inc.
Consolidated Statements of Income
(amounts in thousands, except per share amounts)

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023 |  | 2022
Revenues: |  |  |  |  |  |
Management services |  | $ | 188,201 |  |  | $ | 185,702 |  |  | $ | 195,450 |
Termination and incentive fees |  | 1,213 |  |  | 45,942 |  |  | — |
Advisory services |  | 4,506 |  |  | 4,520 |  |  | 4,530 |
Total management, termination, incentive and advisory services revenues |  | 193,920 |  |  | 236,164 |  |  | 199,980 |
Loan investment interest income |  | 1,400 |  |  | — |  |  | — |
Loan investment interest expense |  | (87) |  |  | — |  |  | — |
Income from loan investments, net |  | 1,313 |  |  | — |  |  | — |
Rental property revenues |  | 1,604 |  |  | — |  |  | — |
Reimbursable compensation and benefits |  | 84,169 |  |  | 59,925 |  |  | 56,684 |
Reimbursable equity based compensation |  | 7,919 |  |  | 9,826 |  |  | 7,072 |
Other reimbursable expenses |  | 608,688 |  |  | 656,401 |  |  | 568,767 |
Total reimbursable costs |  | 700,776 |  |  | 726,152 |  |  | 632,523 |
Total revenues |  | 897,613 |  |  | 962,316 |  |  | 832,503 |
Expenses: |  |  |  |  |  |
Compensation and benefits |  | 170,357 |  |  | 136,355 |  |  | 129,872 |
Equity based compensation |  | 10,624 |  |  | 12,488 |  |  | 10,136 |
Separation costs |  | 6,297 |  |  | 2,002 |  |  | 1,315 |
Total compensation and benefits expense |  | 187,278 |  |  | 150,845 |  |  | 141,323 |
General and administrative |  | 43,743 |  |  | 36,019 |  |  | 32,919 |
Other reimbursable expenses |  | 608,688 |  |  | 656,401 |  |  | 568,767 |
Rental property expenses |  | 462 |  |  | — |  |  | — |
Transaction and acquisition related costs |  | 7,750 |  |  | 4,221 |  |  | 132 |
Depreciation and amortization |  | 4,713 |  |  | 1,102 |  |  | 993 |
Total expenses |  | 852,634 |  |  | 848,588 |  |  | 744,134 |
Operating income |  | 44,979 |  |  | 113,728 |  |  | 88,369 |
Change in fair value of Earnout liability |  | 2,589 |  |  | — |  |  | — |
Interest income |  | 10,403 |  |  | 10,574 |  |  | 1,322 |
Interest expense |  | (783) |  |  | — |  |  | — |
Gain on equity method investments |  | 7,260 |  |  | 25,237 |  |  | 1,010 |
Income before income tax expense |  | 64,448 |  |  | 149,539 |  |  | 90,701 |
Income tax expense |  | (11,319) |  |  | (21,768) |  |  | (13,233) |
Net income |  | 53,129 |  |  | 127,771 |  |  | 77,468 |
Net income attributable to noncontrolling interest in The RMR Group LLC |  | (30,039) |  |  | (70,624) |  |  | (43,464) |
Net loss attributable to noncontrolling interest in consolidated entity |  | 40 |  |  | — |  |  | — |
Net income attributable to The RMR Group Inc. |  | $ | 23,130 |  |  | $ | 57,147 |  |  | $ | 34,004 |
Weighted average common shares outstanding - basic |  | 16,532 |  |  | 16,426 |  |  | 16,338 |
Weighted average common shares outstanding - diluted |  | 16,532 |  |  | 16,426 |  |  | 31,348 |
Net income attributable to The RMR Group Inc. per common share - basic |  | $ | 1.38 |  |  | $ | 3.44 |  |  | $ | 2.06 |
Net income attributable to The RMR Group Inc. per common share - diluted |  | $ | 1.38 |  |  | $ | 3.44 |  |  | $ | 2.04 |

Substantially all revenues are earned from related parties. See accompanying notes.
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The RMR Group Inc.
Consolidated Statements of Shareholders’ Equity
(dollars in thousands)

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Noncontrolling Interests in: |  |
|  | Class A Common Stock |  | Class B-1 Common Stock |  | Class B-2 Common Stock |  | Additional Paid In Capital |  | Retained Earnings |  |  |  | Cumulative Common Distributions |  | Total Shareholders' Equity |  | The RMR Group LLC |  | Consolidated Entity |  | Total Equity
Balance at September 30, 2021 |  | $ | 15 |  |  | $ | 1 |  |  | $ | 15 |  |  | $ | 109,910 |  |  | $ | 321,945 |  |  |  |  | $ | (236,766) |  |  | $ | 195,120 |  |  | $ | 152,595 |  |  | $ | — |  |  | $ | 347,715 |
Share awards, net |  | 1 |  |  | — |  |  | — |  |  | 3,226 |  |  | — |  |  |  |  | — |  |  | 3,227 |  |  | — |  |  | — |  |  | 3,227 |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | 34,004 |  |  |  |  | — |  |  | 34,004 |  |  | 43,464 |  |  | — |  |  | 77,468 |
Tax distributions to member |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | (14,341) |  |  | — |  |  | (14,341) |
Common share distributions |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | (25,730) |  |  | (25,730) |  |  | (18,600) |  |  | — |  |  | (44,330) |
Balance at September 30, 2022 |  | 16 |  |  | 1 |  |  | 15 |  |  | 113,136 |  |  | 355,949 |  |  |  |  | (262,496) |  |  | 206,621 |  |  | 163,118 |  |  | — |  |  | 369,739 |
Share awards, net |  | — |  |  | — |  |  | — |  |  | 2,874 |  |  | — |  |  |  |  | — |  |  | 2,874 |  |  | — |  |  | — |  |  | 2,874 |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | 57,147 |  |  |  |  | — |  |  | 57,147 |  |  | 70,624 |  |  | — |  |  | 127,771 |
Tax distributions to member |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | (30,945) |  |  | — |  |  | (30,945) |
Common share distributions |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | (26,576) |  |  | (26,576) |  |  | (19,200) |  |  | — |  |  | (45,776) |
Balance at September 30, 2023 |  | 16 |  |  | 1 |  |  | 15 |  |  | 116,010 |  |  | 413,096 |  |  |  |  | (289,072) |  |  | 240,066 |  |  | 183,597 |  |  | — |  |  | 423,663 |
Share awards, net |  | — |  |  | — |  |  | — |  |  | 2,801 |  |  | — |  |  |  |  | — |  |  | 2,801 |  |  | — |  |  | — |  |  | 2,801 |
Net income (loss) |  | — |  |  | — |  |  | — |  |  | — |  |  | 23,130 |  |  |  |  | — |  |  | 23,130 |  |  | 30,039 |  |  | (40) |  |  | 53,129 |
Tax distributions to member |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | (12,997) |  |  | — |  |  | (12,997) |
Common share distributions |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | (28,423) |  |  | (28,423) |  |  | (19,200) |  |  | — |  |  | (47,623) |
Acquisition of MPC Partnership Holdings LLC |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | 444 |  |  | 444 |
Balance at September 30, 2024 |  | $ | 16 |  |  | $ | 1 |  |  | $ | 15 |  |  | $ | 118,811 |  |  | $ | 436,226 |  |  |  |  | $ | (317,495) |  |  | $ | 237,574 |  |  | $ | 181,439 |  |  | $ | 404 |  |  | $ | 419,417 |

See accompanying notes.
F-7

Table of Contents
The RMR Group Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023 |  | 2022
Cash Flows from Operating Activities: |  |  |  |  |  |
Net income |  | $ | 53,129 |  |  | $ | 127,771 |  |  | $ | 77,468 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  | 4,713 |  |  | 1,102 |  |  | 993 |
Straight line rent, net |  | (380) |  |  | (345) |  |  | (352) |
Amortization expense related to other assets |  | 9,416 |  |  | 9,416 |  |  | 9,416 |
Provision for credit losses |  | 602 |  |  | — |  |  | — |
Provision (benefit) for deferred income taxes |  | 3,057 |  |  | (1,108) |  |  | 1,559 |
Change in fair value of Earnout liability |  | (2,589) |  |  | — |  |  | — |
Operating expenses paid in The RMR Group Inc. common shares |  | 3,937 |  |  | 3,608 |  |  | 3,774 |
Distributions from equity method investments |  | 2,391 |  |  | 2,221 |  |  | 841 |
Gain on equity method investments |  | (7,260) |  |  | (25,237) |  |  | (1,010) |
Changes in assets and liabilities: |  |  |  |  |  |
Due from related parties |  | (14,364) |  |  | (6,584) |  |  | (18,720) |
Prepaid and other current assets |  | (1,475) |  |  | (1,625) |  |  | 649 |
Reimbursable accounts payable and accrued expenses |  | 12,520 |  |  | (2,297) |  |  | 25,106 |
Accounts payable and accrued expenses |  | (2,322) |  |  | 2,293 |  |  | 1,546 |
Net cash provided by operating activities |  | 61,375 |  |  | 109,215 |  |  | 101,270 |
Cash Flows from Investing Activities: |  |  |  |  |  |
Acquisition of MPC Partnership Holdings LLC, net of cash acquired |  | (78,771) |  |  | — |  |  | — |
Rental property acquisition |  | (70,509) |  |  | — |  |  | — |
Origination of loans held for investment |  | (57,180) |  |  | — |  |  | — |
Purchase of property and equipment |  | (3,865) |  |  | (3,983) |  |  | (1,121) |
Proceeds from deferred origination fees |  | 700 |  |  | — |  |  | — |
Equity method investment in MF Fund VII |  | (213) |  |  | — |  |  | — |
Equity method investment in Seven Hills Realty Trust |  | — |  |  | — |  |  | (9,469) |
Proceeds from sale of TravelCenters of America Inc. common shares |  | — |  |  | 53,479 |  |  | — |
Net cash (used in) provided by investing activities |  | (209,838) |  |  | 49,496 |  |  | (10,590) |
Cash Flows from Financing Activities: |  |  |  |  |  |
Proceeds from secured financing facility |  | 41,655 |  |  | — |  |  | — |
Proceeds from mortgage note payable |  | 46,500 |  |  | — |  |  | — |
Payment of deferred financing fees |  | (1,960) |  |  | — |  |  | — |
Distributions to noncontrolling interests |  | (32,197) |  |  | (50,145) |  |  | (32,941) |
Distributions to common shareholders |  | (28,423) |  |  | (26,576) |  |  | (25,730) |
Repurchase of common shares |  | (1,136) |  |  | (734) |  |  | (547) |
Payments under the tax receivable agreement |  | (2,366) |  |  | (2,355) |  |  | (2,209) |
Net cash provided by (used in) financing activities |  | 22,073 |  |  | (79,810) |  |  | (61,427) |
(Decrease) increase in cash and cash equivalents |  | (126,390) |  |  | 78,901 |  |  | 29,253 |
Cash and cash equivalents at beginning of period |  | 267,989 |  |  | 189,088 |  |  | 159,835 |
Cash and cash equivalents at end of period |  | $ | 141,599 |  |  | $ | 267,989 |  |  | $ | 189,088 |
Supplemental disclosures: |  |  |  |  |  |
Income taxes paid |  | $ | 9,138 |  |  | $ | 21,233 |  |  | $ | 9,555 |
Interest paid |  | $ | 371 |  |  | $ | — |  |  | $ | — |
Non-cash investing and financing activities: |  |  |  |  |  |
Recognition of right of use assets and related lease liabilities |  | $ | 3,646 |  |  | $ | 5,057 |  |  | $ | 1,295 |
Recognition of Earnout liability |  | $ | 14,547 |  |  | $ | — |  |  | $ | — |
Write-off of fully depreciated property and equipment |  | $ | 1,209 |  |  | $ | 479 |  |  | $ | 1,272 |
Assumption of mortgage note payable |  | $ | 5,429 |  |  | $ | — |  |  | $ | — |
Property and equipment accrued, not paid |  | $ | 465 |  |  | $ | 39 |  |  | $ | 114 |

F-8

Table of Contents
RMR Group Inc.
Consolidated Statements of Cash Flows (Continued)
(dollars in thousands)
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:

|  | September 30,
|  | 2024 |  | 2023 |  | 2022
Cash and cash equivalents held by The RMR Group Inc. |  | $ | 23,189 |  |  | $ | 26,802 |  |  | $ | 21,492 |
Cash and cash equivalents held by The RMR Group LLC |  | 118,410 |  |  | 241,187 |  |  | 167,596 |
Total cash and cash equivalents shown in the consolidated statements of cash flows |  | $ | 141,599 |  |  | $ | 267,989 |  |  | $ | 189,088 |

See accompanying notes.
F-9

Table of Contents
The RMR Group Inc.
Notes to 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 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 September 30, 2024, RMR Inc. owned 15,846,025 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 52.9% of the economic interest of RMR LLC as of September 30, 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 47.1% of the economic interest of RMR LLC as of September 30, 2024, which is presented as a noncontrolling interest in the RMR Group LLC within the 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 U.S. interstate highway system, many of which are owned by SVC, and standalone truck service facilities. The Managed Equity REITs, SEVN, and TA until May 15, 2023, 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 consolidated financial statements. For additional information regarding the Acquisition, see Note 4, Acquisitions.
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.
F-10

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
All intercompany transactions and balances with or among our consolidated entities have been eliminated.
Use of Estimates
Preparation of these financial statements in conformity with U.S. Generally Accepted Accounting Principles, or GAAP, requires our management to make certain estimates and assumptions that may affect the amounts reported in these consolidated financial statements and related notes. The actual results could differ from these estimates.
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. Interest income related to our CRE mortgage loans is generally accrued based on the coupon rates applied to the outstanding principal balance of such loans. Fees, premiums and discounts, if any, will be amortized or accreted into interest income over the remaining lives of the loans using the effective interest method, as adjusted for any prepayments. Revenues from our rental of residential property is recognized on a straight line basis over the underlying lease term.
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
•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.
For the fiscal years ended September 30, 2024, 2023 and 2022, we earned aggregate base business management fees from the Managed Equity REITs of $84,182, $85,603 and $96,031, 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
F-11

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
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, 2022 or 2021.
Term and Termination — Our management agreements with the Managed Equity REITs automatically extend on December 31st of each year and have terms thereafter that end on the 20th anniversary of the date of each extension. Each of the Managed Equity REITs has the right to terminate each management agreement: (i) at any time upon 60 days’ written notice for convenience, (ii) immediately upon written notice for cause, as defined in the agreements, (iii) upon written notice given within 60 days after the end of an applicable calendar year for a performance reason, as defined in the agreements, and (iv) by written notice during the 12 months following a change of control of RMR LLC, as defined in the agreements. We have the right to terminate the management agreements for good reason, as defined therein.
Under our management agreements with the Managed Equity REITs, if a Managed Equity REIT terminates our management agreements for convenience, or if we terminate one or both of our management agreements with a Managed Equity REIT for good reason, the Managed Equity REIT is obligated to pay us a termination fee in an amount equal to the sum of the present values of the Managed Equity REIT’s monthly future fees, as defined therein, for the terminated management agreement(s) for the remaining term, assuming it had not been terminated. If a Managed Equity REIT terminates one or both of our management agreements for a performance reason, as defined therein, the Managed Equity REIT has agreed to pay to us the termination fee calculated as described above, but assuming a remaining term of 10 years. No termination fee is payable by a Managed Equity REIT if it terminates one or both of our management agreements for cause or as a result of a change of control of us, as defined in the applicable management agreement.
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.
For the fiscal years ended September 30, 2024, 2023 and 2022, we earned aggregate base business management fees from TA and the Private Capital clients of $27,575, $36,815 and $39,653, respectively. Additionally, in connection with BP’s acquisition of TA on May 15, 2023, TA terminated its business management agreement with us and paid us the applicable termination fee of $45,282 which was recognized in the fiscal year end September 30, 2023.
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 consolidated financial statements. These management fees are payable in cash monthly in arrears.
For the fiscal years ended September 30, 2024, 2023 and 2022, we earned aggregate property management fees of $76,444, $63,153 and $59,667, respectively, including construction supervision fees of $15,641, $18,443 and $16,743, respectively.
F-12

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
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 applicable agreements, 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. For the fiscal years ended September 30, 2024, 2023 and 2022, Tremont earned incentive fees of $1,213, $660 and $0, respectively.
For the fiscal years ended September 30, 2024, 2023 and 2022, we earned advisory services revenue of $4,506, $4,520 and $4,530, 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 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.
Equity Method Investments
Seven Hills Realty Trust
As of September 30, 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 September 30, 2024 and 2023, based on quoted market prices, was $23,520 and $18,651, respectively. The unrealized gain (loss) in our consolidated statements of income related to our investment in SEVN was $7,260, $5,295 and ($1,564) for the fiscal years ended September 30, 2024, 2023 and 2022, respectively. During the fiscal years ended September 30, 2024, 2023, and 2022, we received distributions from SEVN of $2,391, $2,221 and $841, respectively.
F-13

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Carroll Multifamily Venture VII, LP
In July 2024, we funded a $213 capital call to CARROLL Multifamily Venture VII, LP, or Fund VII, a co-investment vehicle managed by RMR Residential. We account for our investment in Fund VII using the equity method of accounting because we are deemed to exert significant influence, but not control, over Fund VII’s most significant activities. This investment is recorded in equity method investments in our consolidated balance sheets.
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 consolidated statements of income. We recorded net gains in our consolidated statements of income related to our investment in TA of $19,942 and $2,574 for the fiscal years ended September 30, 2023 and 2022, respectively.
Variable Interest Entities
We regularly evaluate our relationships and investments to determine if they constitute variable interests. A variable interest is an investment or interest that will absorb portions of an entity’s expected losses or receive portions of an entity’s expected returns. If we determine we have a variable interest in an entity, we evaluate whether such interest is in a variable interest entity, or VIE. Under the VIE model, we would be required to consolidate a VIE we manage if we are determined to be the primary beneficiary of the entity. We continuously assess whether we must consolidate any of the entities we manage. Consideration of factors included, but was not limited to, our representation on the entity’s governing body, the size of our investment in each entity compared to the size of the entity and the size of other investors’ interests, the ability and rights to participate in significant policy making decisions and to replace the manager of those entities. Based on this assessment, we concluded that we are not required to consolidate any of our clients.
Cash and Cash Equivalents
We consider highly liquid investments with original maturities of three months or less on the date of purchase to be cash equivalents, the majority of which is held at major commercial banks. Certain cash account balances exceed Federal Deposit Insurance Corporation insurance limits of $250,000 per account and, as a result, there is a concentration of credit risk related to amounts in excess of the insurance limits. We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk in cash and cash equivalents.
As of September 30, 2024, $553 in cash and cash equivalents consists of amounts escrowed for performance incentives, future real estate taxes, insurance and capital expenditures, as required by certain of our debt agreements. These funds are held by our mortgage lenders and are segregated from our cash accounts.
Loans Held for Investment, Net
Generally, our loans are classified as held for investment based upon our intent and ability to hold them until maturity. Loans that are held for investment are carried at cost, net of allowance for credit losses, unamortized loan origination fees, accreted exit fees, unamortized premiums and unaccreted discounts, as applicable, that are required to be recognized in the carrying value of the loans in accordance with GAAP, unless the loans are determined to be collateral dependent. Loans that we have a plan to sell or liquidate are held at the lower of cost or fair value less cost to sell.
Loan Deferred Fees — Loan origination and exit fees are fees charged to our borrowers and unamortized or unaccreted balances are reflected as a reduction in loans held for investment, net, in our consolidated balance sheets. These fees are recorded as a component of loan investment interest income in our consolidated statements of income over the life of the related loans held for investment.
Allowance for Credit Losses
The measurement of current expected credit losses, or CECL, is based upon historical experience, current conditions, and reasonable and supportable forecasts incorporating forward-looking information that affect the collectability of the reported
F-14

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
amount. Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments prescribes a forward-looking “expected loss” model that generally will result in the earlier recognition of credit losses and is applicable to financial assets measured at amortized cost and off-balance sheet credit exposures, such as unfunded loan commitments.
The allowance for credit losses required under ASU No. 2016-13 is a valuation account that is deducted from the related loans’ amortized cost basis in our consolidated balance sheets. Our loans typically include commitments to fund incremental proceeds to borrowers over the life of the loan; these future funding commitments are also subject to the CECL model. The allowance for credit losses related to unfunded loan commitments is included in accounts payable and accrued expenses in our consolidated balance sheets.
Given the lack of historical loss data related to our loan portfolio, we estimate our expected losses using an analytical model that considers the likelihood of default and loss given default for each individual loan. This analytical model incorporates data from a third party database with historical loan loss information for commercial mortgage-backed securities, or CMBS, and commercial real estate, or CRE, loans since 1998. We estimate the allowance for credit losses for our loan portfolio, including unfunded loan commitments, at the individual loan level. Significant inputs to the model include certain loan specific data, such as loan to value, or LTV, property type, geographic location, occupancy, vintage year, remaining loan term, net operating income, expected timing and amounts of future loan fundings, and macroeconomic forecast assumptions, including the performance of CRE assets, unemployment rates, interest rates and other factors. We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period, followed by a straight-line reversion period to average historical losses. Average historical losses are established using a population of third party historical loss data that approximates our portfolio as of the measurement date. We evaluate the estimated allowance for each of our loans individually and we consider our internal loan risk rating as the primary credit quality indicator underlying our assessment.
As of September 30, 2024, based on our loan portfolio, the then current economic environment and expectations for future conditions, we recorded an allowance for credit losses of $343 with respect to our then outstanding loans held for investment and increasing accounts payable and accrued expenses by $259 with respect to our then unfunded loan commitments.
We evaluate the credit quality of each of our loans at least quarterly by assessing a variety of risk factors in relation to each loan and assigning a risk rating to each loan based on those factors. Factors considered in these evaluations include, but are not limited to, property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, risk of loss, current LTV, debt yield, collateral performance, structure, exit plan and sponsorship. Loans are rated “1” (less risk) through “5” (greater risk) as defined below:
“1” lower risk—Criteria reflects a sponsor having a strong financial condition and low credit risk and our evaluation of management's experience; collateral performance exceeding performance metrics included in the business plan or credit underwriting; and the property demonstrating stabilized occupancy and/or market rates, resulting in strong current cash flow and net operating income and/or having a very low LTV.
“2” average risk—Criteria reflects a sponsor having a stable financial condition and our evaluation of management's experience; collateral performance meeting or exceeding substantially all performance metrics included in the business plan or credit underwriting; and the property demonstrating improved occupancy at market rents, resulting in sufficient current cash flow and/or having a low LTV.
“3” acceptable risk—Criteria reflects a sponsor having a history of repaying loans at maturity and meeting its credit obligations and our evaluation of management's experience; collateral performance expected to meet performance metrics included in the business plan or credit underwriting; and the property having a moderate LTV. New loans and loans with a limited history will typically be assigned this rating and will be adjusted to other levels from time to time as appropriate.
“4” higher risk—Criteria reflects a sponsor having a history of unresolved missed or late payments, maturity extensions and difficulty timely fulfilling its credit obligations and our evaluation of management's experience; collateral performance failing to meet the business plan or credit underwriting; the existence of a risk of default possibly leading to a loss and/or potential weaknesses that deserve management’s attention; and/or the property having a high LTV.
“5” loss likely—Criteria reflects a very high risk of realizing a principal loss or having incurred a principal loss; a sponsor having a history of default payments, trouble fulfilling its credit obligations, deeds in lieu of foreclosures, and/or bankruptcies; collateral performance is significantly worse than performance metrics included in the business plan; loan covenants or
F-15

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
performance milestones having been breached or not attained; timely exit via sale or refinancing being uncertain; and/or the property having a very high LTV.
Deferred Financing Costs
Costs incurred in connection with financings are capitalized and recorded as a reduction to the related liability in our consolidated balance sheets. Deferred financing costs are amortized over the term of the financing agreement and are recorded as a component of loan investment interest expense in our consolidated statements of income.
Property and Equipment
Property and equipment are stated at cost. Depreciation of building and furniture and equipment is computed using the straight line method over estimated useful lives ranging from three to 30 years. Depreciation for leasehold improvements is computed using the straight line method over the term of the lesser of their useful lives or related lease agreements. Capitalized software costs, information technology labor and other personnel costs, are depreciated using the straight line method over useful lives ranging between three and five years. We do not depreciate the allocated cost of land. We may engage independent real estate appraisal firms to provide market information and evaluations which are relevant to our purchase price allocations and determinations of useful lives; however, we are ultimately responsible for the purchase price allocations and determinations of useful lives.
The following is a summary of property and equipment presented in our consolidated balance sheets, excluding assets held for sale:

|  | September 30,
|  | 2024 |  | 2023
Land |  | $ | 10,084 |  |  | $ | — |
Building |  | 57,407 |  |  | — |
Furniture and equipment |  | 5,996 |  |  | 7,681 |
Leasehold improvements |  | 781 |  |  | 581 |
Capitalized software costs |  | 5,612 |  |  | 396 |
Total property and equipment |  | 79,880 |  |  | 8,658 |
Accumulated depreciation |  | (3,447) |  |  | (3,212) |
Property and equipment, net |  | $ | 76,433 |  |  | $ | 5,446 |

Depreciation expense related to property and equipment and capitalized software costs for the fiscal years ended September 30, 2024, 2023 and 2022, was $1,665, $1,071 and $956, respectively.
We allocate the purchase prices of our properties to land, buildings and improvements based on determinations of the relative fair values of these assets assuming the properties are vacant. We determine the fair value of each property using methods similar to those used by independent appraisers, which may involve estimated cash flows that are based on a number of factors, including capitalization rates and discount rates, among others. We allocate a portion of the purchase price of our properties to above market and below market leases based on the present value (using an interest rate which reflects the risks associated with acquired in place leases at the time each property was acquired by us) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases. We allocate a portion of the purchase price to acquired in place leases and tenant relationships based upon market estimates to lease up the property based on the leases in place at the time of purchase. We allocate this aggregate value between acquired in place lease values and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease. However, we have not separated the value of tenant relationships from the value of acquired in place leases because such value and related amortization expense is immaterial to the accompanying consolidated financial statements. In making these allocations, we consider factors such as estimated carrying costs during the expected lease up periods, including real estate taxes, insurance and other operating income and expenses and costs, such as leasing commissions, legal and other related expenses, to execute similar leases in current market conditions at the time a property was acquired by us. If the value of tenant relationships becomes material in the future, we may separately allocate those amounts and amortize the allocated amounts over the estimated life of the relationships. For
F-16

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
transactions that qualify as business combinations, we allocate the excess, if any, of the consideration over the fair value of the assets acquired to goodwill.
We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. Impairment indicators may include declining tenant occupancy, lack of progress releasing vacant space, low long term prospects for improvement in property performance, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining useful lives of our long lived assets. If we change our estimate of the remaining useful lives, we allocate the carrying value of the affected assets over their revised remaining useful lives.
Goodwill and Intangible Assets
Goodwill represents the costs of business acquisitions in excess of the fair value of identifiable net assets acquired. We evaluate the recoverability of goodwill annually, or more frequently, if events or changes in circumstances indicate that goodwill might be impaired. If our review indicates that the carrying amount of goodwill exceeds its fair value, we would reduce the carrying amount of goodwill to fair value. During the fiscal year ended September 30, 2024, we recognized a $69,902 change in the carrying value of goodwill presented in our consolidated balance sheets as a result of the MPC acquisition.
Intangible assets represent the fair value at acquisition of acquired leases, trade names, investor relationships, management agreements and other intangible assets. Amortization expense related to intangible assets for the fiscal years ended September 30, 2024, 2023 and 2022, was $3,048, $31, $37, respectively. Aggregate future amortization to be recognized over the remaining useful lives of these intangible assets is estimated to be $4,675 in 2025, $3,607 in 2026, $3,076 in 2027, $3,075 in 2028 and $691 in 2029 and thereafter.
The following is a summary of intangible assets, net presented in our consolidated balance sheets, excluding assets held for sale:

|  | As of September 30, 2024 |  | As of September 30, 2023
|  | Gross Carrying Value |  | Accumulated Amortization |  | Gross Carrying Value |  | Accumulated Amortization
Amortized intangible assets |  |  |  |  |  |  |  |
Management agreements |  | $ | 13,456 |  |  | $ | (2,145) |  |  | $ | — |  |  | $ | — |
Acquired leases |  | 2,394 |  |  | (270) |  |  | — |  |  | — |
Investor relationships |  | 1,843 |  |  | (294) |  |  | — |  |  | — |
Customer relationships and non-solicitation agreements |  | 1,150 |  |  | (1,010) |  |  | 1,150 |  |  | (983) |
Total |  | $ | 18,843 |  |  | $ | (3,719) |  |  | $ | 1,150 |  |  | $ | (983) |
Unamortized intangible assets |  |  |  |  |  |  |  |
Trade name |  | $ | 5,175 |  |  | $ | — |  |  | $ | — |  |  | $ | — |

F-17

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Other Assets
On June 5, 2015, in connection with the formation of RMR Inc., each of DHC, OPI (then Government Properties Income Trust, or GOV, and Select Income REIT, or SIR) and SVC contributed cash and shares with a combined value of $167,764. The consideration received from such Managed Equity REITs for our Class A Common Shares represented a discount to the fair value of RMR Inc.’s Class A Common Shares in the amount of $193,806, which we recorded in other assets. The other assets are being amortized against revenue recognized related to the management agreements using the straight line method through the period ended December 31, 2035. For the fiscal years ended September 30, 2024, 2023 and 2022, we reduced revenue by $9,416 each year, related to the amortization of these other assets. As of September 30, 2024 and 2023, the remaining amount of these other assets to be amortized was $106,063 and 115,479, respectively.
Assets and Liabilities Held for Sale
As of September 30, 2024, we had one property classified as held for sale in our consolidated balance sheets that is under agreement to sell for a sales price of $9,800, excluding closing costs. The following is a summary of assets held for sale and liabilities held for sale in our consolidated balance sheets:

|  | September 30,
|  | 2024 |  | 2023
Property and equipment, net |  | $ | 8,254 |  |  | $ | — |
Intangible assets, net |  | 392 |  |  | — |
Other current assets |  | 54 |  |  | — |
Assets held for sale |  | $ | 8,700 |  |  | $ | — |
Mortgage note payable |  | $ | 4,817 |  |  | $ | — |
Other current liabilities |  | 156 |  |  | — |
Liabilities held for sale |  | $ | 4,973 |  |  | $ | — |

Equity-Based Compensation
The awards made under our share award plan to our Directors, officers and employees to date, have been shares of Class A common stock of RMR Inc., or Class A Common Shares. Shares issued to Directors vest immediately. Shares issued to our officers and employees vest in five equal, consecutive, annual installments, with the first installment vesting on the date of award. We recognize share forfeitures as they occur. Compensation expense related to share awards is determined based on the market value of our shares on the date of award, with the aggregate value of the awarded shares amortized to expense over the related vesting period. Expense recognized for shares awarded to Directors are included in general and administrative expenses and for shares awarded to employees are included in equity based compensation expenses in our consolidated statements of income.
Transaction and Acquisition Related Costs
Transaction and acquisition related costs include costs related to acquisitions and other strategic transactions. Such costs include legal, accounting, valuation, other professional or consulting fees. Transaction and acquisition related costs are expensed as incurred.
Segment Reporting
We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and evaluates our financial results. Because we have a single reportable segment, all required financial segment information can be found directly in our consolidated financial statements.
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
F-18

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
they are regularly provided to the chief operating decision maker, or 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. 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. During the fiscal years ended September 30, 2024, 2023 and 2022, all of our income before taxes was derived solely from domestic operations.
We had a provision (benefit) for income taxes which consists of the following:

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |  |
Federal |  | $ | 4,912 |  |  | $ | 16,922 |  |  | $ | 8,553 |
State |  | 3,350 |  |  | 5,954 |  |  | 3,121 |
Deferred: |  |  |  |  |  |
Federal |  | 2,248 |  |  | (940) |  |  | 1,176 |
State |  | 809 |  |  | (168) |  |  | 383 |
Total |  | $ | 11,319 |  |  | $ | 21,768 |  |  | $ | 13,233 |

A reconciliation of the statutory income tax rate to the effective tax rate is as follows:

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023 |  | 2022
Income taxes computed at the federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit |  | 3.4 | % |  | 3.0 | % |  | 3.0 | %
Permanent items |  | 1.1 | % |  | 0.5 | % |  | 0.7 | %
Uncertain tax position reserve, net of federal benefit |  | 1.9 | % |  | — | % |  | — | %
Net income attributable to noncontrolling interest |  | (9.8) | % |  | (9.9) | % |  | (10.1) | %
Total |  | 17.6 | % |  | 14.6 | % |  | 14.6 | %

The components of the deferred tax assets as of September 30, 2024 and 2023 are entirely comprised of the outside basis difference in our partnership interest in RMR LLC.
F-19

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
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.
We continue to be subject to federal, state, and local income tax audit examinations for open periods, which can lead to adjustments to our provision for income taxes, the resolution of which may be highly uncertain. We received a proposed adjustment from a state jurisdiction with respect to the tax years ended September 30, 2019 and 2020. As a result, we have accrued an uncertain tax position reserve for the fiscal year ended September 30, 2024 related to the adjustment for the fiscal years ending September 30, 2019 and thereafter. Our policy is to include interest expense related to unrecognized tax benefits within the provision for income taxes in our consolidated statements of income.
As of September 30, 2024, our gross unrecognized tax benefit from uncertain tax positions, exclusive of interest expense, was $1,449, of which $107 is based on positions related to the fiscal year ended September 30, 2024. As of September 30, 2024, we recognized $252 for interest expense related to unrecognized tax benefits and had $1,701 of gross unrecognized tax benefits. As of September 30, 2023 and 2022, we had no uncertain tax positions. We do not reasonably expect any significant changes relating to our unrecognized tax benefits within the next twelve months.
Note 4. Acquisitions
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.
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.
Goodwill of $69,902 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.
F-20

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
As of September 30, 2024, we finalized the purchase price allocation for the Acquisition from the preliminary amounts reported as of December 31, 2024. The adjustments made during the fiscal year ended September 30, 2024 to the fair value of acquired assets and liabilities did not have a significant impact on our consolidated balance sheets or our consolidated statements of income.
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 |  | 13,456 |
Trade name |  | 5,175 |
Investor relationships |  | 1,843 |
Acquired leases |  | 703 |
Total intangible assets |  | 21,177 |
Total assets acquired |  | 43,501 |
Liabilities assumed: |  |
Mortgage note payable |  | 4,726 |
Other liabilities |  | 9,212 |
Total liabilities |  | 13,938 |
Net identifiable assets acquired |  | 29,563 |
Noncontrolling interests in consolidated entity |  | (444) |
Goodwill |  | 69,902 |
Total consideration |  | $ | 99,021 |

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 improvements |  | 7,060 |
Acquired leases |  | 703 |
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: $8 in 2025, $98 in 2026, $102 in 2027, $105 in 2028 and $5,116 in 2029 and thereafter.
F-21

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
As of September 30, 2024, we have entered into an agreement to sell the Woodstock Property for a sales price of $9,800, excluding closing costs. This pending sale is subject to conditions; accordingly, we cannot be sure that we will complete this sale or that this sale will not be delayed or the terms will not change. The Woodstock Property is presented in assets held for sale and the mortgage note payable is presented in liabilities held for sale in our consolidated balance sheets. As such, accumulated depreciation and accumulated amortization excludes $221 and $331, respectively, related to the Woodstock Property. Property and equipment, net also excludes $15 in furniture and equipment related to the Woodstock Property that was purchased after the Acquisition Date. 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 interest in consolidated entity in our 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. As of the Acquisition Date, 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. As of the Acquisition Date, 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, 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 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 September 30, 2024, we have funded capital of $213 to Fund VII and we have not contributed any capital to any of the other funds we manage. The results of these funds are not reflected in our consolidated financial statements and we have accounted for the contribution to Fund VII as an equity method investment.
Pro Forma Financial Information
Unaudited pro forma financial information for the fiscal years ended September 30, 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.
F-22

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

|  |  |  |  |  | Fiscal Years Ended September 30, |  |
|  |  |  |  |  | 2024 |  | 2023 |  |  |  |
Total revenues |  |  |  |  |  | $ | 909,231 |  |  | $ | 1,029,963 |  |  |  |  |
Net income |  |  |  |  |  | 50,489 |  |  | 101,324 |  |  |  |  |
Net income attributable to The RMR Group Inc. |  |  |  |  |  | 22,003 |  |  | 45,383 |  |  |  |  |

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 $7,302 as if they had occurred as of October 1, 2022.
Rental Property Acquisition
In July 2024, we acquired a 240 unit, garden style apartment community located in Denver, CO, or the Denver Property, for a purchase price of $70,000, excluding $509 in capitalized acquisition costs. This transaction was accounted for as an asset acquisition. Our allocation of the purchase price of this acquisition is based on the relative fair value of the acquired assets and is presented in the following table:

Land |  | $ | 10,084 |
Building and improvements |  | 58,032 |
Acquired leases |  | 2,393 |
Total consideration |  | $ | 70,509 |

Note 5. Loans Held for Investment, Net
As part of our strategic initiative to expand our private capital business, 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.
Generally, these loans are classified as held for investment based upon our intent and ability to hold them until maturity. Loans that are held for investment are carried at cost, net of unamortized loan origination fees, accreted exit fees, unamortized premiums and unaccreted discounts, as applicable, that are required to be recognized in the carrying value of the loans in accordance with GAAP, unless the loans are determined to be collateral dependent.
In July 2024, we originated a floating rate first mortgage loan that is secured by a hotel property in Revere, MA for a total commitment of $40,000, which has been fully funded as of September 30, 2024. This loan requires the borrower to pay interest at a rate of the Secured Overnight Financing Rate, or SOFR, plus a premium of 395 basis points per annum and has an initial term of two years with three one year extensions.
In July 2024, we originated a floating rate first mortgage loan that is secured by an industrial property in Wayne, PA for a total commitment of $27,000, of which $17,180 has been funded as of September 30, 2024. This loan requires the borrower to pay interest at the 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.
We deferred origination fees totaling $700, of which $651 remains unamortized as of September 30, 2024. We have also accrued $35 in exit fee receivables which we include in loans held for investment in our consolidated balance sheets.
F-23

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
The table below provides overall statistics for our loan portfolio as of September 30, 2024:

Number of loans |  | 2 |
Total loan commitments |  | $ | 67,000 |
Unfunded loan commitments (1) |  | $ | 9,820 |
Principal balance |  | $ | 57,180 |
Weighted average coupon rate |  | 9.15 | %
Weighted average all in yield (2) |  | 10.13 | %
Weighted average floor |  | 4.34 | %
Weighted average maximum maturity (years) (3) |  | 4.80

(1)Unfunded loan commitments are primarily used to finance property improvements and leasing capital and are generally funded over the term of the loan.
(2)All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan.
(3)Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions.
Credit Quality Information
We evaluate the credit quality of each of our loans at least quarterly by assessing a variety of risk factors in relation to each loan and assigning a risk rating to each loan based on those factors. The higher the number, the greater the risk level. As of September 30, 2024, our two loans had an internal risk rating of 3.
We estimate credit losses over a reasonable and supportable forecast period of 12 months, followed by a straight-line reversion period of 12 months back to average historical losses. For the fiscal year ended September 30, 2024, we recorded an allowance for credit losses of $343 related to our then outstanding loans held for investment and increased accounts payable and accrued expenses by $259 related to then unfunded loan commitments.
We have elected to exclude accrued interest receivable from amortized cost and not to measure an allowance for credit losses on accrued interest receivable. Accrued interest receivables are generally written off when payments are 120 days past due. Such amounts, if any, are reversed against interest income and no further interest will be recorded until it is collected. As of September 30, 2024, we recognized $454 in prepaid and other current assets on our consolidated balance sheets related to accrued interest receivable on our loans and no amounts were written off for the fiscal year ended September 30, 2024.
As of September 30, 2024 and November 5, 2024, our borrowers with outstanding loans had paid their debt service obligations owed and due to us.
Note 6. Indebtedness
Secured Financing Facility, Net
In September 2024, we, through our Tremont managed vehicle, entered into a master repurchase agreement with UBS AG, or UBS, or our UBS Master Repurchase Agreement, for a facility with an aggregate maximum capacity of $200,000, or our UBS Master Repurchase Facility, pursuant to which we may sell to UBS, and later repurchase, commercial mortgage loans, which are referred to as purchased assets. Pursuant to the UBS Master Repurchase Agreement, we will pay UBS a non-refundable upfront fee that is equal to 0.60% of the applicable tranche amount on each purchase date.
Loans financed through our UBS Master Repurchase Facility are treated as collateralized financing transactions, unless they meet sales treatment under GAAP. Pursuant to GAAP treatment of collateralized financing transactions, loans financed through our UBS Master Repurchase Facility remain on our consolidated balance sheets as assets and cash received from UBS is recorded on our consolidated balance sheets as liabilities. Interest paid in accordance with our UBS Master Repurchase Facility is recorded as loan investment interest expense on our consolidated income statements.
Under our UBS Master Repurchase Facility, the initial purchase price paid by UBS for each purchased asset is up to 80% of the lesser of the market value of the purchased asset and the unpaid principal balance of such purchased asset, subject to UBS’s approval. Upon the repurchase of a purchased asset, we are required to pay UBS the outstanding purchase price of the
F-24

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
purchased asset, accrued interest and all accrued and unpaid expenses of UBS relating to such purchased assets. The pricing rate (or interest rate) relating to a purchased asset is equal to one month SOFR, plus a premium within a fixed range, determined by the debt yield and property type of the purchased asset’s real estate collateral.
In connection with our UBS Master Repurchase Agreement, we entered into a guaranty, or the UBS Guaranty, which requires us to guarantee 25% of the aggregate repurchase price, and 100% of losses in the event of certain bad acts as well as any costs and expenses of UBS related to our UBS Master Repurchase Agreement. The UBS Guaranty also contains financial covenants, which require us to maintain a minimum tangible net worth, a minimum liquidity and to satisfy a total indebtedness to stockholders' equity ratio. Upon our Tremont managed vehicle meeting certain requirements, including maintaining a minimum tangible net worth of $100,000, we will be released from our obligations under the UBS Guaranty and our Tremont managed vehicle shall be deemed the sole guarantor.
Our UBS Master Repurchase Facility also contains margin maintenance provisions that provide UBS with the right, in certain circumstances related to a credit event, as defined in the UBS Master Repurchase Agreement, to redetermine the value of purchased assets. Where a decline in the value of such purchased assets has resulted in a margin deficit, UBS may require us to eliminate any margin deficit through a combination of purchased asset repurchases and cash transfers to UBS subject to UBS’s approval.
In September 2024, we sold a purchased asset to UBS for $28,770 with an interest rate equal to SOFR plus a premium of 290 basis points secured by a hotel property in Revere, MA. The initial term of the purchased asset is two years with no stated extension option and monthly payments of interest only are due until maturity in July 2026. The carrying value of the underlying loan held for investment that is serving as collateral for this purchased asset is $39,373.
In September 2024, we sold a purchased asset to UBS for $12,885 with an interest rate equal to SOFR plus a premium of 285 basis points secured by an industrial property in Wayne, PA. The initial term of the purchased asset is three years with no stated extension option and monthly payments of interest only are due until maturity in July 2027. The carrying value of the underlying loan held for investment that is serving as collateral for this purchased asset is $16,848.
In connection with the UBS Master Repurchase Agreement, we recognized $561 of deferred financing fees, of which $546 remains unamortized as of September 30, 2024.
As of September 30, 2024, we were in compliance with the covenants and other terms of the agreements that govern our UBS Master Repurchase Facility.
Mortgage Note Payable, Net
In July 2024, we acquired the Denver Property 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. Deferred financing fees incurred in connection with this mortgage financing are amortized over the term of the mortgage agreement and are recorded as a component of interest expense in our consolidated statements of income. Unamortized deferred financing fees totaled $1,351 as of September 30, 2024.
Note 7. Fair Value of Financial Instruments
We determine the estimated fair value of financial assets and liabilities using the three-tier fair value hierarchy established by GAAP, which prioritizes observable inputs in active markets when measuring fair value. The three levels of inputs that may be used to measure fair value in order of priority are as follows:
Level 1 — Inputs include quoted prices in active markets for identical assets or liabilities that we have the ability to access.
Level 2 — Inputs include quoted prices in markets that are less active or inactive or for which all significant inputs are observable, either directly or indirectly.
Level 3 — Inputs include unobservable prices and are supported by little or no market activity and are significant to the overall fair value measurement.
F-25

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
As of September 30, 2024 and 2023, the fair values of our financial instruments, which include cash and cash equivalents, amounts due from related parties, accounts payable and accrued expenses and reimbursable accounts payable and accrued expenses, were not materially different from their carrying values due to the short term nature of these financial instruments.
We estimate the fair value of our fixed rate mortgage note payable, loans held for investment and outstanding principal balances under our UBS Master Repurchase Facility using significant observable inputs (Level 3), including discounted cash flow analyses and prevailing market interest rates.
The table below provides information regarding these financial instruments not carried at fair value in our consolidated balance sheet as of September 30, 2024:

|  | As of September 30, 2024 |  | As of September 30, 2023
|  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Loans held for investment |  | $ | 56,221 |  |  | $ | 57,365 |  |  | $ | — |  |  | $ | — |
Secured financing facility |  | 41,109 |  |  | 41,793 |  |  | — |  |  | — |
Mortgage note payable |  | 45,149 |  |  | 46,520 |  |  | — |  |  | — |

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 used to measure fair value. The hierarchy gives the highest priority to 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 following tables present our assets and liabilities that have been measured at fair value on a recurring basis:

|  | September 30, 2024
|  | Total |  | Level 1 |  | Level 2 |  | Level 3
Due from related parties related to share based payment awards |  | $ | 14,339 |  |  | $ | 14,339 |  |  | $ | — |  |  | $ | — |
Equity method investment in SEVN |  | 23,520 |  |  | 23,520 |  |  | — |  |  | — |
Employer compensation liability related to share based payment awards |  | 14,339 |  |  | 14,339 |  |  | — |  |  | — |
Earnout liability |  | 11,958 |  |  | — |  |  | — |  |  | 11,958 |

|  | 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 SEVN |  | 18,651 |  |  | 18,651 |  |  | — |  |  | — |
Employer compensation liability related to share based payment awards |  | 10,695 |  |  | 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 September 30, 2024:

| Fair Value |  | Valuation Technique |  | Unobservable Input |  | Range
Earnout liability | $ | 11,958 |  |  | Monte Carlo |  | Capital deployment volatility |  | 15.00%
|  |  |  |  | Discount rate |  | 5.53%

F-26

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
The table below presents a summary of the changes in fair value for our Earnout liability measured on a recurring basis:

|  |  |  | Fiscal Year Ended
|  |  |  | September 30, 2024
Beginning balance |  |  |  | $ | — |
Acquisition of MPC Partnership Holdings LLC |  |  |  | 14,547 |
Changes in fair value for our Earnout liability measured on a recurring basis |  |  |  | (2,589) |
Ending balance |  |  |  | $ | 11,958 |

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. RMR Inc.’s executive officers serve as trustees or directors of certain companies to which we provide management services. For more information regarding these relationships, please see our proxy statement for our 2024 annual meeting of shareholders.
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. One of the executive officers of AlerisLife and one of the executive officers of Sonesta are 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.
F-27

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Revenues from Related Parties
For the fiscal years ended September 30, 2024, 2023 and 2022, we recognized revenues from related parties as set forth in the following tables:

|  | Fiscal Year Ended September 30, 2024
|  | Total |  |  |  |  |  |  |  |  |  |
|  | Management and |  | % of |  | Total |  | % of |  |  |  | % of
|  | Advisory Services |  | Total |  | Reimbursable |  | Total |  | Total |  | Total
|  | Revenues |  | Revenues |  | Costs |  | Revenues |  | Revenues |  | Revenues
Perpetual Capital: |  |
DHC |  | $ | 24,516 |  |  | 12.6% |  | $ | 127,119 |  |  | 18.1% |  | $ | 151,635 |  |  | 16.9%
ILPT |  | 36,704 |  |  | 18.9% |  | 35,768 |  |  | 5.1% |  | 72,472 |  |  | 8.1%
OPI |  | 29,903 |  |  | 15.5% |  | 212,054 |  |  | 30.3% |  | 241,957 |  |  | 27.0%
SVC |  | 43,759 |  |  | 22.6% |  | 236,760 |  |  | 33.8% |  | 280,519 |  |  | 31.3%
Total Managed Equity REITs |  | 134,882 |  |  | 69.6% |  | 611,701 |  |  | 87.3% |  | 746,583 |  |  | 83.3%
SEVN |  | 5,766 |  |  | 3.0% |  | 6,064 |  |  | 0.9% |  | 11,830 |  |  | 1.3%
|  | 140,648 |  |  | 72.6% |  | 617,765 |  |  | 88.2% |  | 758,413 |  |  | 84.6%
Private Capital: |  |
AlerisLife |  | 5,632 |  |  | 2.9% |  | — |  |  | —% |  | 5,632 |  |  | 0.6%
Sonesta |  | 9,362 |  |  | 4.8% |  | — |  |  | —% |  | 9,362 |  |  | 1.0%
RMR Residential |  | 16,936 |  |  | 8.7% |  | 23,369 |  |  | 3.3% |  | 40,305 |  |  | 4.5%
Other private entities |  | 21,342 |  |  | 11.0% |  | 59,642 |  |  | 8.5% |  | 80,984 |  |  | 9.0%
|  | 53,272 |  |  | 27.4% |  | 83,011 |  |  | 11.8% |  | 136,283 |  |  | 15.1%
Total revenues from related parties |  | 193,920 |  |  | 100.0% |  | 700,776 |  |  | 100.0% |  | 894,696 |  |  | 99.7%
Income from loan investments, net |  | — |  |  | —% |  | — |  |  | —% |  | 1,313 |  |  | 0.1%
Rental property revenues |  | — |  |  | —% |  | — |  |  | —% |  | 1,604 |  |  | 0.2%
Total revenues from unrelated parties |  | — |  |  | —% |  | — |  |  | —% |  | 2,917 |  |  | 0.3%
Total revenues |  | $ | 193,920 |  |  | 100.0% |  | $ | 700,776 |  |  | 100.0% |  | $ | 897,613 |  |  | 100.0%

F-28

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

|  | Fiscal Year Ended September 30, 2023
|  | Total |  |  |  |  |  |  |  |  |  |
|  | Management and |  | % of |  | Total |  | % of |  |  |  | % of
|  | Advisory |  | Total |  | Reimbursable |  | Total |  | Total |  | Total
|  | Services Revenues |  | Revenues |  | Costs |  | Revenues |  | Revenues |  | Revenues
Perpetual Capital: |  |  |  |  |  |  |  |  |  |  |  |
DHC |  | $ | 23,675 |  |  | 10.0% |  | $ | 156,224 |  |  | 21.4% |  | $ | 179,899 |  |  | 18.7%
ILPT |  | 36,834 |  |  | 15.5% |  | 40,438 |  |  | 5.6% |  | 77,272 |  |  | 8.0%
OPI |  | 38,163 |  |  | 16.2% |  | 334,208 |  |  | 46.0% |  | 372,371 |  |  | 38.7%
SVC |  | 40,543 |  |  | 17.2% |  | 117,421 |  |  | 16.2% |  | 157,964 |  |  | 16.5%
Total Managed Equity REITs |  | 139,215 |  |  | 58.9% |  | 648,291 |  |  | 89.2% |  | 787,506 |  |  | 81.9%
SEVN |  | 5,188 |  |  | 2.2% |  | 4,865 |  |  | 0.7% |  | 10,053 |  |  | 1.0%
TA(1) |  | 55,214 |  |  | 23.4% |  | 3,476 |  |  | 0.5% |  | 58,690 |  |  | 6.1%
|  | 199,617 |  |  | 84.5% |  | 656,632 |  |  | 90.4% |  | 856,249 |  |  | 89.0%
Private Capital: |  |  |  |  |  |  |  |  |  |  |  |
AlerisLife (2) |  | 5,414 |  |  | 2.3% |  | 97 |  |  | —% |  | 5,511 |  |  | 0.6%
Sonesta |  | 9,471 |  |  | 4.0% |  | 544 |  |  | 0.1% |  | 10,015 |  |  | 1.0%
Other private entities |  | 21,531 |  |  | 9.1% |  | 68,879 |  |  | 9.5% |  | 90,410 |  |  | 9.4%
|  | 36,416 |  |  | 15.4% |  | 69,520 |  |  | 9.6% |  | 105,936 |  |  | 11.0%
Total revenues from related parties |  | 236,033 |  |  | 99.9% |  | 726,152 |  |  | 100.0% |  | 962,185 |  |  | 100.0%
Revenues from unrelated parties |  | 131 |  |  | 0.1% |  | — |  |  | —% |  | 131 |  |  | —%
Total revenues |  | $ | 236,164 |  |  | 100.0% |  | $ | 726,152 |  |  | 100.0% |  | $ | 962,316 |  |  | 100.0%

(1)On May 15, 2023, BP acquired TA and TA terminated its management agreement with us. In connection with the termination of TA’s management agreement, we received the applicable termination fee of $45,282 during the fiscal year ended September 30, 2023.
(2)On March 30, 2023, AlerisLife merged with and into a subsidiary of ABP Trust and ceased to be a public company. As a result, the amounts due with respect to AlerisLife are characterized as Private Capital for the period presented.
F-29

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

|  | Fiscal Year Ended September 30, 2022
|  | Total |  |  |  |  |  |  |  |  |  |
|  | Management and |  | % of |  | Total |  | % of |  |  |  | % of
|  | Advisory |  | Total |  | Reimbursable |  | Total |  | Total |  | Total
|  | Services Revenues |  | Revenues |  | Costs |  | Revenues |  | Revenues |  | Revenues
Perpetual Capital: (1) |  |  |  |  |  |  |  |  |  |  |  |
DHC |  | $ | 30,343 |  |  | 15.2% |  | $ | 157,770 |  |  | 24.9% |  | $ | 188,113 |  |  | 22.6%
ILPT |  | 31,354 |  |  | 15.6% |  | 33,593 |  |  | 5.4% |  | 64,947 |  |  | 7.8%
OPI |  | 42,204 |  |  | 21.1% |  | 308,139 |  |  | 48.7% |  | 350,343 |  |  | 42.1%
SVC |  | 44,193 |  |  | 22.1% |  | 67,844 |  |  | 10.7% |  | 112,037 |  |  | 13.5%
Total Managed Equity REITs |  | 148,094 |  |  | 74.0% |  | 567,346 |  |  | 89.7% |  | 715,440 |  |  | 86.0%
SEVN |  | 4,530 |  |  | 2.3% |  | 5,692 |  |  | 0.9% |  | 10,222 |  |  | 1.2%
TA |  | 15,926 |  |  | 8.0% |  | 2,060 |  |  | 0.3% |  | 17,986 |  |  | 2.2%
|  | 168,550 |  |  | 84.3% |  | 575,098 |  |  | 90.9% |  | 743,648 |  |  | 89.4%
Private Capital: (1) |  |  |  |  |  |  |  |  |  |  |  |
AlerisLife |  | 4,908 |  |  | 2.5% |  | 309 |  |  | —% |  | 5,217 |  |  | 0.6%
Sonesta |  | 8,726 |  |  | 4.4% |  | 396 |  |  | 0.1% |  | 9,122 |  |  | 1.1%
Other private entities |  | 17,697 |  |  | 8.8% |  | 56,720 |  |  | 9.0% |  | 74,417 |  |  | 8.9%
|  | 31,331 |  |  | 15.7% |  | 57,425 |  |  | 9.1% |  | 88,756 |  |  | 10.6%
Total revenues from related parties |  | 199,881 |  |  | 100.0% |  | 632,523 |  |  | 100.0% |  | 832,404 |  |  | 100.0%
Revenues from unrelated parties |  | 99 |  |  | —% |  | — |  |  | —% |  | 99 |  |  | —%
Total revenues |  | $ | 199,980 |  |  | 100.0% |  | $ | 632,523 |  |  | 100.0% |  | $ | 832,503 |  |  | 100.0%

(1)On December 23, 2021, DHC sold a 35% equity interest in its existing joint venture with an institutional investor. Following this sale, DHC owned a 20% equity interest in this joint venture. As a result, the revenues earned with respect to this joint venture are characterized as Private Capital for periods on and after December 23, 2021 and as Perpetual Capital for periods prior to December 23, 2021. On June 29, 2022, DHC sold an additional 10% equity interest in this joint venture. Following this additional sale, DHC owns a 10% equity interest in this joint venture.
For additional information regarding our management or advisory agreements with these related parties, see Note 2, Summary of Significant Accounting Policies.
F-30

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Amounts Due From Related Parties
The following table presents amounts due from related parties as of the dates indicated:

|  | September 30,
|  | 2024 |  | 2023
|  | Accounts |  | Reimbursable |  |  |  | Accounts |  | Reimbursable |  |
|  | Receivable |  | Costs |  | Total |  | Receivable |  | Costs |  | Total
Perpetual Capital: |  |  |  |  |  |
DHC |  | $ | 6,307 |  |  | $ | 11,358 |  |  | $ | 17,665 |  |  | $ | 5,953 |  |  | $ | 13,434 |  |  | $ | 19,387 |
ILPT |  | 4,244 |  |  | 7,968 |  |  | 12,212 |  |  | 4,597 |  |  | 5,869 |  |  | 10,466 |
OPI |  | 5,877 |  |  | 20,132 |  |  | 26,009 |  |  | 7,427 |  |  | 51,912 |  |  | 59,339 |
SVC |  | 5,470 |  |  | 8,591 |  |  | 14,061 |  |  | 5,528 |  |  | 8,423 |  |  | 13,951 |
Total Managed Equity REITs |  | 21,898 |  |  | 48,049 |  |  | 69,947 |  |  | 23,505 |  |  | 79,638 |  |  | 103,143 |
SEVN |  | 2,551 |  |  | 2,601 |  |  | 5,152 |  |  | 1,663 |  |  | 1,921 |  |  | 3,584 |
|  | 24,449 |  |  | 50,650 |  |  | 75,099 |  |  | 25,168 |  |  | 81,559 |  |  | 106,727 |
Private Capital: |  |  |  |  |  |
AlerisLife |  | 570 |  |  | — |  |  | 570 |  |  | 74 |  |  | — |  |  | 74 |
Sonesta |  | 82 |  |  | — |  |  | 82 |  |  | 89 |  |  | — |  |  | 89 |
RMR Residential |  | 9,587 |  |  | — |  |  | 9,587 |  |  | — |  |  | — |  |  | — |
Other private entities |  | 3,909 |  |  | 54,133 |  |  | 58,042 |  |  | 4,634 |  |  | 7,060 |  |  | 11,694 |
|  | 14,148 |  |  | 54,133 |  |  | 68,281 |  |  | 4,797 |  |  | 7,060 |  |  | 11,857 |
|  | $ | 38,597 |  |  | $ | 104,783 |  |  | $ | 143,380 |  |  | $ | 29,965 |  |  | $ | 88,619 |  |  | $ | 118,584 |

Leases
As of September 30, 2024, RMR LLC leased from ABP Trust and certain Managed Equity REITs office space for use as our headquarters and local offices. During the fiscal years ended September 30, 2024, 2023 and 2022, we incurred rental expense under related party leases aggregating $5,552, $5,329 and $5,859, respectively. Our related party leases have various termination dates and many have renewal options. Some of our related party leases are terminable on 30 days’ notice and many allow us to terminate early if our management agreements for the buildings in which we lease space are terminated. For additional information regarding these leases, see Note 13, Leases.
Tax-Related Payments
Pursuant to our tax receivable agreement with ABP Trust, RMR Inc. pays to ABP Trust 85.0% of the amount of cash 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 RMR Inc. as a result of the tax receivable agreement. Accordingly, we made payments of $2,366, $2,355 and $2,209 to ABP Trust during the fiscal years ended September 30, 2024, 2023 and 2022, respectively. As of September 30, 2024, our consolidated balance sheet reflects a liability related to the tax receivable agreement of $20,863, including $2,421 classified as a current liability in accounts payable and accrued expenses that we expect to pay to ABP Trust during the fourth quarter of fiscal year 2025.
Pursuant to the RMR LLC operating agreement, for the fiscal years ended September 30, 2024, 2023 and 2022, RMR LLC made required quarterly tax distributions to holders of its membership units totaling $27,796, $65,486 and $30,281, respectively, of which $14,799, $34,541 and $15,940, respectively, was distributed to us and $12,997, $30,945 and $14,341, respectively, was distributed to ABP Trust, based on each membership unit holder’s respective ownership percentage at the time of distribution. The amounts distributed to us were eliminated in our consolidated financial statements, and the amounts distributed to ABP Trust were recorded as a reduction of its noncontrolling interest. We use funds from these distributions to pay certain of our U.S. federal and state income tax liabilities and to pay part of our obligations under the tax receivable agreement.
F-31

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Registration and Lock-up Agreements
The following registration rights and lock-up agreements are in effect:
•ABP Trust Registration Rights Agreement. RMR Inc. is party to a registration rights agreement with ABP Trust pursuant to which RMR Inc. has granted ABP Trust demand and piggyback registration rights, subject to certain limitations, covering the Class A Common Shares ABP Trust owns, including the shares received on conversion of Class B-1 Common Shares or redemption of the paired Class B-2 Common Shares and Class A Units of RMR LLC.
•Founders Registration Rights and Lock-Up Agreements. Adam D. Portnoy and ABP Trust are parties to a registration rights and lock-up agreement with each of DHC, OPI and SVC with respect to each such Managed Equity REITs’ common shares. Pursuant to that agreement, ABP Trust and Adam D. Portnoy agreed not to transfer the Managed Equity REITs’ common shares they acquired in connection with RMR LLC’s reorganization in June 2015 for a period of ten years, subject to certain exceptions, and each of those Managed Equity REITs has granted ABP Trust and Adam D. Portnoy demand and piggyback registration rights, subject to certain limitations.
Separation Arrangements
We enter into retirement agreements with certain of our former executive officers. Pursuant to these agreements, we make various cash payments and accelerate the vesting of unvested shares of RMR Inc. previously awarded to these retiring officers. We also enter into separation arrangements from time to time with executive and non-executive officers and employees of ours. All costs associated with separation arrangements, for which there remain no substantive performance obligations, are recorded in our consolidated statements of income as separation costs.
For the fiscal year ended September 30, 2024, 2023 and 2022, we recognized separation costs of $6,297, $2,002, and $1,315 respectively, including equity based separation costs of $632, $482 and $163, respectively, and cash separation costs of $5,665, $1,520, and $1,152, respectively.
Note 9. Shareholders’ Equity
Common Shares
Class A Common Shares—Class A Common Shares entitle holders to one vote for each share held of record on all matters submitted to a vote of shareholders.
Class B-1 Common Shares—ABP Trust owns 1,000,000 Class B-1 Common Shares that entitle the holder to ten votes for each share on all matters submitted to a vote of shareholders. Each Class B-1 Common Share may, at the option of its holder, be converted into a Class A Common Share, on a one for one basis.
Class B-2 Common Shares—ABP Trust owns 15,000,000 Class B-2 Common Shares, which are paired with the 15,000,000 RMR LLC Class A Units and have no independent economic interest in RMR Inc. The Class A Units may, at the option of the holder, be redeemed for Class A Common Shares on a one to one basis and, upon such redemption, our Class B-2 Common Shares that are paired with the Class A Units are automatically canceled. RMR Inc. has the option to settle the redemption in cash. Each Class B-2 Common Share entitles the holder to ten votes per share, and, accordingly, the issuance of additional Class B-2 Common Shares would have a significant dilutive effect on the voting power of the then current holders of our Class A Common Shares.
Except as otherwise required in the charter or by applicable law, all holders of Class A Common Shares, Class B-1 Common Shares, and Class B-2 Common Shares shall vote together as a single class on all matters on which shareholders are generally entitled to vote. The holders of a class of common shares shall each be entitled to vote separately as a single class with respect to (and only with respect to) amendments to the charter that alter or change the powers or rights of the shares of such class of common shares so as to affect them materially and adversely; provided, however, if such amendments affect all holders of common shares materially and adversely in the same manner, the separate voting requirement shall not be applicable and all holders of common shares shall vote together as a single class.
F-32

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Issuances and Repurchases
We award our Class A Common Shares to our officers and employees under the Amended and Restated 2016 Omnibus Equity Plan, or the 2016 Plan. In addition, each of our Directors receives Class A Common Shares under the 2016 Plan as part of his or her annual compensation for serving as a Director. During the fiscal years ended September 30, 2024, 2023 and 2022, we awarded to our Managing Directors, in their capacities as our officers and employees, and to certain of our other officers and employees, an aggregate of 181,727, 121,200 and 125,700, respectively, of our Class A Common Shares. We also awarded to each of our Managing Directors and Independent Directors, 4,219 of our Class A Common Shares during the fiscal year ended September 30, 2024 and 3,000 of our Class A Common Shares during each of the fiscal years ended September 30, 2023 and 2022, as part of his or her annual compensation for serving as a Director.
The Class A Common Shares awarded to our Independent Directors and Managing Directors, in their capacities as Directors, vest immediately and are included in general and administrative expense in our consolidated statements of income. The Class A Common Shares awarded to our Managing Directors, in their capacities as our officers and employees, and to our other officers and employees vest in five equal, consecutive, annual installments beginning on the date of the award and are included in equity based compensation expense in our consolidated statements of income. During the fiscal years ended September 30, 2024, 2023 and 2022, we recorded general and administrative expenses of $600, $464 and $547, respectively, and equity based compensation expenses of $2,705, $2,662 and $3,064, respectively, related to awards we made under the 2016 Plan.
In connection with the vesting and issuance of awards of our Class A Common Shares to our Directors, officers and employees, we provide for the ability to repurchase our Class A Common Shares to satisfy tax withholding and payment obligations for those eligible to do so. The repurchase price is based on the closing price of our Class A Common Shares on The Nasdaq Stock Market LLC, or Nasdaq. The aggregate value of Class A Common Shares repurchased during the fiscal years ended September 30, 2024, 2023 and 2022, was $1,136, $734 and $547, respectively, which is recorded as a decrease to additional paid in capital included in shareholders’ equity in our consolidated balance sheets.
In connection with the issuances and repurchases of our Class A Common Shares, and as required by the RMR LLC operating agreement, RMR LLC concurrently issues or acquires an identical number of Class A Units from RMR Inc.
A summary of shares awarded and vested, including shares withheld, repurchased or forfeited, under the terms of the 2016 Plan for the fiscal years ended September 30, 2024, 2023 and 2022 is as follows:

|  | 2024 |  | 2023 |  | 2022
|  |  |  | Weighted |  |  |  | Weighted |  |  |  | Weighted
|  | Number |  | Average |  | Number |  | Average |  | Number |  | Average
|  | of |  | Award Date |  | of |  | Award Date |  | of |  | Award Date
|  | Shares |  | Fair Value |  | Shares |  | Fair Value |  | Shares |  | Fair Value
Unvested shares, beginning of year |  | 204,620 |  |  | $ | 26.90 |  |  | 202,740 |  |  | $ | 30.14 |  |  | 160,310 |  |  | $ | 37.36 |
Shares awarded |  | 181,727 |  |  | $ | 24.38 |  |  | 139,200 |  |  | $ | 24.92 |  |  | 143,700 |  |  | $ | 26.82 |
Vested shares withheld and repurchased |  | (45,489) |  |  | $ | 24.98 |  |  | (29,628) |  |  | $ | 24.76 |  |  | (20,911) |  |  | $ | 26.15 |
Shares vested |  | (105,292) |  |  | $ | 24.66 |  |  | (104,012) |  |  | $ | 24.82 |  |  | (78,449) |  |  | $ | 26.85 |
Shares forfeited |  | (2,220) |  |  | $ | 24.41 |  |  | (3,680) |  |  | $ | 25.40 |  |  | (1,910) |  |  | $ | 28.96 |
Unvested shares, end of year |  | 233,346 |  |  | $ | 25.31 |  |  | 204,620 |  |  | $ | 26.90 |  |  | 202,740 |  |  | $ | 30.14 |

The 233,346 unvested shares as of September 30, 2024 are scheduled to vest as follows: 80,932 shares in 2025, 69,291 shares in 2026, 51,892 shares in 2027 and 31,231 shares in 2028. As of September 30, 2024, the estimated future compensation expense for the unvested shares was $5,905 based on the award date fair value of these shares. The weighted average period over which this compensation expense will be recorded is approximately 26 months.
As of September 30, 2024, 103,975 of our Class A Common Shares remained available for award under the 2016 Plan.
F-33

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Distributions
During the fiscal years ended September 30, 2024, 2023 and 2022, we declared and paid dividends on our Class A Common Shares and Class B-1 Common Shares as follows:

Declaration |  | Record |  | Paid |  | Distributions |  | Total
Date |  | Date |  | Date |  | Per Common Share |  | Distributions
Fiscal Year Ended September 30, 2024
10/12/2023 |  | 10/23/2023 |  | 11/16/2023 |  | $ | 0.40 |  |  | $ | 6,684 |
1/11/2024 |  | 1/22/2024 |  | 2/15/2024 |  | 0.40 |  |  | 6,684 |
4/11/2024 |  | 4/22/2024 |  | 5/16/2024 |  | 0.45 |  |  | 7,529 |
7/11/2024 |  | 7/22/2024 |  | 8/15/2024 |  | 0.45 |  |  | 7,526 |
|  |  |  |  |  | $ | 1.70 |  |  | $ | 28,423 |
Fiscal Year Ended September 30, 2023
10/13/2022 |  | 10/24/2022 |  | 11/17/2022 |  | $ | 0.40 |  |  | $ | 6,642 |
1/12/2023 |  | 1/23/2023 |  | 2/16/2023 |  | 0.40 |  |  | 6,641 |
4/13/2023 |  | 4/24/2023 |  | 5/18/2023 |  | 0.40 |  |  | 6,648 |
7/13/2023 |  | 7/24/2023 |  | 8/17/2023 |  | 0.40 |  |  | 6,645 |
|  |  |  |  |  | $ | 1.60 |  |  | $ | 26,576 |
Fiscal Year Ended September 30, 2022
10/14/2021 |  | 10/25/2021 |  | 11/18/2021 |  | $ | 0.38 |  |  | $ | 6,264 |
1/13/2022 |  | 1/24/2022 |  | 2/17/2022 |  | 0.38 |  |  | 6,265 |
4/14/2022 |  | 4/25/2022 |  | 5/19/2022 |  | 0.40 |  |  | 6,601 |
7/14/2022 |  | 7/25/2022 |  | 8/18/2022 |  | 0.40 |  |  | 6,600 |
|  |  |  |  |  | $ | 1.56 |  |  | $ | 25,730 |

F-34

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
These dividends were funded in part by distributions from RMR LLC to holders of its membership units as follows:

|  |  |  |  | Distributions Per |  | Total |  | RMR LLC |  | RMR LLC
Declaration |  | Record |  | Paid | RMR LLC |  | RMR LLC |  | Distributions |  | Distributions
Date |  | Date |  | Date | Membership Unit |  | Distributions |  | to RMR Inc. |  | to ABP Trust
Fiscal Year Ended September 30, 2024
10/12/2023 |  | 10/23/2023 |  | 11/16/2023 | $ | 0.32 |  |  | $ | 10,148 |  |  | $ | 5,348 |  |  | $ | 4,800 |
1/11/2024 |  | 1/22/2024 |  | 2/15/2024 | 0.32 |  |  | 10,147 |  |  | 5,347 |  |  | 4,800 |
4/11/2024 |  | 4/22/2024 |  | 5/16/2024 | 0.32 |  |  | 10,154 |  |  | 5,354 |  |  | 4,800 |
7/11/2024 |  | 7/22/2024 |  | 8/15/2024 | 0.32 |  |  | 10,152 |  |  | 5,352 |  |  | 4,800 |
|  |  |  |  | $ | 1.28 |  |  | $ | 40,601 |  |  | $ | 21,401 |  |  | $ | 19,200 |
Fiscal Year Ended September 30, 2023
10/13/2022 |  | 10/24/2022 |  | 11/17/2022 | $ | 0.32 |  |  | $ | 10,114 |  |  | $ | 5,314 |  |  | $ | 4,800 |
1/12/2023 |  | 1/23/2023 |  | 2/16/2023 | 0.32 |  |  | 10,113 |  |  | 5,313 |  |  | 4,800 |
4/13/2023 |  | 4/24/2023 |  | 5/18/2023 | 0.32 |  |  | 10,118 |  |  | 5,318 |  |  | 4,800 |
7/13/2023 |  | 7/24/2023 |  | 8/17/2023 | 0.32 |  |  | 10,116 |  |  | 5,316 |  |  | 4,800 |
|  |  |  |  | $ | 1.28 |  |  | $ | 40,461 |  |  | $ | 21,261 |  |  | $ | 19,200 |
Fiscal Year Ended September 30, 2022
10/14/2021 |  | 10/25/2021 |  | 11/18/2021 | $ | 0.30 |  |  | $ | 9,446 |  |  | $ | 4,946 |  |  | $ | 4,500 |
1/13/2022 |  | 1/24/2022 |  | 2/17/2022 | 0.30 |  |  | 9,446 |  |  | 4,946 |  |  | 4,500 |
4/14/2022 |  | 4/25/2022 |  | 5/19/2022 | 0.32 |  |  | 10,080 |  |  | 5,280 |  |  | 4,800 |
7/14/2022 |  | 7/25/2022 |  | 8/18/2022 | 0.32 |  |  | 10,080 |  |  | 5,280 |  |  | 4,800 |
|  |  |  |  | $ | 1.24 |  |  | $ | 39,052 |  |  | $ | 20,452 |  |  | $ | 18,600 |

The remainder of the dividends noted above were funded with cash accumulated at RMR Inc.
On October 16, 2024, we declared a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares to our shareholders of record as of October 28, 2024, in the amount of $0.45 per Class A Common Share and Class B-1 Common Share, or $7,581. This dividend will be partially funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.32 per unit, or $10,191, of which $5,391 will be distributed to us based on our aggregate ownership of 16,846,025 membership units of RMR LLC and $4,800 will be distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC. The remainder of this dividend will be funded with cash accumulated at RMR Inc. We expect to pay this dividend on or about November 14, 2024.
Note 10. Per Common Share Amounts
We calculate basic earnings per share using the two-class method. Unvested Class A Common Shares awarded to our employees are deemed participating securities for purposes of calculating basic earnings per common share because they have dividend rights. Under the two-class method, we allocate earnings proportionately to vested Class A Common Shares and Class B-1 Common Shares outstanding and unvested Class A Common Shares outstanding for the period. Accordingly, earnings attributable to unvested Class A Common Shares are excluded from basic earnings per share under the two-class method. Our Class B-2 Common Shares, which are paired with ABP Trust’s Class A Units, have no independent economic interest in RMR Inc. and thus are not included as common shares outstanding for purposes of calculating basic earnings per common share.
Diluted earnings per share is calculated using the treasury stock method for unvested Class A Common Shares and the if-converted method for Class B-2 Common Shares. The 15,000,000 Class A Units that we do not own may be redeemed for our Class A Common Shares on a one-for-one basis or, upon such redemption, we may elect to pay cash instead of issuing Class A Common Shares. Upon redemption of a Class A Unit, the Class B-2 Common Share “paired” with such unit is canceled for no additional consideration. In computing the dilutive effect, if any, the assumed redemption would have on earnings per share, we considered net income available to holders of our Class A Common Shares would increase due to elimination of the noncontrolling interest offset by any tax effect, which may be dilutive. For the fiscal years ended September 30, 2024 and 2023, such redemption is not reflected in diluted earnings per share as the assumed redemption would be anti-dilutive. For the fiscal year ended September 30, 2022, the assumed redemption is dilutive to earnings per share.
F-35

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
The calculation of basic and diluted earnings per share for the fiscal years ended September 30, 2024, 2023 and 2022, is as follows (amounts in thousands, except per share amounts):

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023 |  | 2022
Numerators: |  |  |  |  |  |
Net income attributable to The RMR Group Inc. |  | $ | 23,130 |  |  | $ | 57,147 |  |  | $ | 34,004 |
Less: income attributable to unvested participating securities |  | (323) |  |  | (651) |  |  | (329) |
Net income attributable to The RMR Group Inc. used in calculating basic EPS |  | 22,807 |  |  | 56,496 |  |  | 33,675 |
Effect of dilutive securities: |  |  |  |  |  |
Add back: income attributable to unvested participating securities |  | — |  |  | — |  |  | 329 |
Add back: net income attributable to noncontrolling interest |  | — |  |  | — |  |  | 43,464 |
Add back: income tax expense |  | — |  |  | — |  |  | 13,233 |
Less: income tax expense assuming redemption of noncontrolling interest’s Class A Units for Class A Common Shares (1) |  | — |  |  | — |  |  | (26,732) |
Net income used in calculating diluted EPS |  | $ | 22,807 |  |  | $ | 56,496 |  |  | $ | 63,969 |
Denominators: |  |  |  |  |  |
Common shares outstanding |  | 16,846 |  |  | 16,712 |  |  | 16,606 |
Less: unvested participating securities and incremental impact of weighted average |  | (314) |  |  | (286) |  |  | (268) |
Weighted average common shares outstanding - basic |  | 16,532 |  |  | 16,426 |  |  | 16,338 |
Effect of dilutive securities: |  |  |  |  |  |
Add: assumed redemption of noncontrolling interest’s Class A Units for Class A Common Shares |  | — |  |  | — |  |  | 15,000 |
Add: incremental unvested shares |  | — |  |  | — |  |  | 10 |
Weighted average common shares outstanding - diluted |  | 16,532 |  |  | 16,426 |  |  | 31,348 |
Net income attributable to The RMR Group Inc. per common share - basic |  | $ | 1.38 |  |  | $ | 3.44 |  |  | $ | 2.06 |
Net income attributable to The RMR Group Inc. per common share - diluted |  | $ | 1.38 |  |  | $ | 3.44 |  |  | $ | 2.04 |

(1)Income tax expense assumes the hypothetical conversion of the noncontrolling interest, which results in an estimated tax rate of 29.5% for the fiscal year ended September 30, 2022.
Note 11. Net Income Attributable to RMR Inc.
Net income attributable to RMR Inc. for the fiscal years ended September 30, 2024, 2023 and 2022, is calculated as follows:

| Fiscal Year Ended September 30,
| 2024 |  | 2023 |  | 2022
Income before income tax expense | $ | 64,448 |  |  | $ | 149,539 |  |  | $ | 90,701 |
RMR Inc. franchise tax expense and interest income | (885) |  |  | (755) |  |  | 568 |
Net income before noncontrolling interest | 63,563 |  |  | 148,784 |  |  | 91,269 |
Net income attributable to noncontrolling interest in The RMR Group LLC | (30,039) |  |  | (70,624) |  |  | (43,464) |
Net loss attributable to noncontrolling interest in consolidated entity | 40 |  |  | — |  |  | — |
Net income attributable to RMR Inc. before income tax expense | 33,564 |  |  | 78,160 |  |  | 47,805 |
Income tax expense attributable to RMR Inc. | (11,319) |  |  | (21,768) |  |  | (13,233) |
RMR Inc. franchise tax expense and interest income | 885 |  |  | 755 |  |  | (568) |
Net income attributable to RMR Inc. | $ | 23,130 |  |  | $ | 57,147 |  |  | $ | 34,004 |

F-36

The RMR Group Inc.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Note 12. Employee Benefits
We have established a defined contribution savings plan for eligible employees under the provisions of U.S. Internal Revenue Code Section 401(k) whereby we contribute 100.0% of the first 3.0% and 50.0% of the next 2.0% of an employee’s cash compensation contributed to the plan up to stated maximums. All employees are eligible to participate in the plan and are entitled, upon termination or retirement, to receive their vested portion of the plan assets. Employees’ contributions and our related matching contributions are fully vested when made. Our plan contributions and expenses for the fiscal years ended September 30, 2024, 2023 and 2022, were $3,390, $2,992 and $2,726, respectively.
Note 13. Leases
We enter into operating leases, as the lessee, for office space and vehicles and determine if an arrangement is a lease at inception of the arrangement. Operating lease liabilities and right of use assets are recognized on our consolidated balance sheet for leases with an initial term greater than 12 months based on the present value of the future minimum lease payments over the lease term using our estimated incremental borrowing rate. Operating lease expense associated with minimum lease payments is recognized on a straight-line basis over the lease term. When additional payments are based on usage or vary based on other factors, they are expensed when incurred as variable lease expense. Certain leases include lease and non-lease components, which we account for as a single lease component. Minimum lease payments for leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. As of September 30, 2024, we had 60 leases that expire at various dates through 2031, with a weighted average remaining lease term of 5.0 years and a weighted average discount rate of 3.9%.
For the fiscal years ended September 30, 2024, 2023 and 2022, the components of operating lease costs were as follows:

|  | Fiscal Year Ended September 30,
|  | 2024 |  | 2023 |  | 2022
Fixed rent expense (1) |  | $ | 6,636 |  |  | $ | 6,272 |  |  | $ | 6,144 |
Variable lease payments |  | 1,158 |  |  | 907 |  |  | 1,001 |
Total cash portion of rent expense |  | 7,794 |  |  | 7,179 |  |  | 7,145 |
Non-cash straight line rent expense |  | (380) |  |  | (345) |  |  | (352) |
Total operating lease costs |  | $ | 7,414 |  |  | $ | 6,834 |  |  | $ | 6,793 |

(1)Includes expense for leases with an initial term of 12 months or less of $5, $76 and $83 for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.
The following table presents the undiscounted cash flows on an annual fiscal year basis for our operating lease liabilities as of September 30, 2024:

Fiscal Year |  | Amount |  |
2025 |  | $ | 6,907 |  |  |
2026 |  | 6,293 |  |  |
2027 |  | 5,866 |  |  |
2028 |  | 4,943 |  |  |
2029 |  | 4,111 |  |  |
Thereafter |  | 2,716 |  |  |
Total lease payments (1) |  | 30,836 |  |  |
Less: imputed interest (1) |  | (2,783) |  |  |
Present value of operating lease liabilities |  | 28,053 |  |  |
Less: current portion of operating lease liabilities |  | (5,906) |  |  |
Operating lease liabilities, net of current portion |  | $ | 22,147 |  |  |

(1) Excludes $291 of lease payments for signed leases that have not yet commenced.
As of September 30, 2024, $21,283 of total lease payments and $1,841 of imputed interest are for our principal executive offices, which are leased from an affiliate of ABP Trust pursuant to a lease agreement that expires in 2030.
F-37

Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

| THE RMR GROUP INC.
| By: | /s/ Adam D. Portnoy
|  | Adam D. Portnoy
|  | Managing Director, President and Chief Executive Officer
| Dated: | November 12, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature |  | Title |  | Date
/s/ Adam D. Portnoy |  | Managing Director, President and Chief Executive Officer |  | November 12, 2024
Adam D. Portnoy |  | (principal executive officer) |  |
/s/ Matthew P. Jordan |  | Executive Vice President, Chief Financial Officer and Treasurer |  | November 12, 2024
Matthew P. Jordan |  | (principal financial officer and principal accounting officer) |  |
/s/ Jennifer B. Clark |  | Managing Director, Executive Vice President, General Counsel |  | November 12, 2024
Jennifer B. Clark |  | and Secretary |  |
/s/ Ann Logan |  | Independent Director |  | November 12, 2024
Ann Logan |  |  |  |
/s/ Rosen Plevneliev |  | Independent Director |  | November 12, 2024
Rosen Plevneliev |  |  |  |
/s/ Jonathan Veitch |  | Independent Director |  | November 12, 2024
Jonathan Veitch |  |  |  |
/s/ Walter C. Watkins, Jr. |  | Independent Director |  | November 12, 2024
Walter C. Watkins, Jr. |  |  |  |