SEC Form 10-Q filed by The RMR Group Inc.

2/5/25 4:18:50 PM ET

Professional Services

Consumer Discretionary

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rmr-20241231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2024

☐ 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)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 3, 2025, there were 15,844,688 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.


		Page
PART I.	Financial Information

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets — December 31, 2024 and September 30, 2024	3

	Condensed Consolidated Statements of Income — Three Months Ended December 3 1 , 2024 and 2023	4

	Condensed Consolidated Statements of Shareholders’ Equity — Three Months Ended December 3 1 , 2024 and 2023	5

	Condensed Consolidated Statements of Cash Flows — Three Months Ended December 3 1 , 2024 and 2023	6

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	31

	Warning Concerning Forward-Looking Statements	31

PART II.	Other Information

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 5.	Other Information	33

Item 6.	Exhibits	33

	Signatures	35


	December 31,		September 30,
	2024		2024
Assets
Cash and cash equivalents held by The RMR Group Inc.	$	24,398	$	23,189
Cash and cash equivalents held by The RMR Group LLC	123,182		118,410
Due from related parties	121,440		134,030
Prepaid and other current assets	13,369		9,789
Assets held for sale	8,656		8,700
Total current assets	291,045		294,118
Loans held for investment, net of allowance for credit losses of $194 and $343, respectively	57,887		56,221
Property and equipment, net of accumulated depreciation of $4,318 and $3,447, respectively	76,757		76,433
Due from related parties, net of current portion	6,155		9,350
Investments	26,454		23,733

Goodwill	71,761		71,761
Intangible assets, net of accumulated amortization of $4,506 and $3,719, respectively	19,168		20,299

Operating lease right of use assets	25,450		27,353
Deferred tax asset	14,346		15,163
Other assets, net of accumulated amortization of $90,094 and $87,740, respectively	103,709		106,063
Total assets	$	692,732	$	700,494

Liabilities and Equity

Reimbursable accounts payable and accrued expenses	$	79,383	$	90,444



Accounts payable and accrued expenses	41,324		31,599
Current portion of Earnout liability	1,501		517
Operating lease liabilities	5,658		5,906
Liabilities held for sale	4,880		4,973
Total current liabilities	132,746		133,439


Operating lease liabilities, net of current portion	20,352		22,147
Amounts due pursuant to tax receivable agreement, net of current portion	18,442		18,442
Employer compensation liability, net of current portion	6,155		9,350
Earnout liability, net of current portion	7,047		11,441
Secured financing facility, net	41,027		41,109
Mortgage note payable	45,219		45,149
Total liabilities	270,988		281,077

Commitments and contingencies

Equity:
Class A common stock, $0.001 par value; 31,950,000 shares authorized; 15,844,688 and 15,846,025 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	119,361		118,811
Retained earnings	442,606		436,226

Cumulative common distributions	(325,076)		(317,495)
Total shareholders’ equity	236,923		237,574
Noncontrolling interest in The RMR Group LLC	181,475		181,439
Noncontrolling interest in consolidated entities	3,346		404
Total noncontrolling interests	184,821		181,843
Total equity	421,744		419,417
Total liabilities and equity	$	692,732	$	700,494


	Three Months Ended
	December 31,
	2024		2023
Revenues:
Management services	$	46,183	$	45,094
Incentive fees	68		299
Advisory services	1,141		1,125
Total management, incentive and advisory services revenues	47,392		46,518


Income from loan investments, net	546		—
Rental property revenues	1,622		26
Reimbursable compensation and benefits	21,790		16,828
Reimbursable equity based compensation	(430)		2,327
Other reimbursable expenses	148,556		195,998
Total reimbursable costs	169,916		215,153
Total revenues	219,476		261,697
Expenses:
Compensation and benefits	42,562		34,772
Equity based compensation	126		2,829
Separation costs	—		3,544
Total compensation and benefits expense	42,688		41,145
General and administrative	11,284		9,514
Other reimbursable expenses	148,556		195,998
Rental property expenses	426		12
Transaction and acquisition related costs	787		3,987
Depreciation and amortization	2,347		423
Total expenses	206,088		251,079
Operating income	13,388		10,618
Change in fair value of Earnout liability	3,410		—
Interest income	1,556		3,508
Interest expense	(699)		(11)
(Loss) gain on investments	(1,071)		4,049
Income before income tax expense	16,584		18,164
Income tax expense	(2,476)		(2,638)
Net income	14,108		15,526

Net income attributable to noncontrolling interest in The RMR Group LLC	(7,722)		(8,531)
Net (income) loss attributable to noncontrolling interest in consolidated entities	(6)		2
Net income attributable to The RMR Group Inc.	$	6,380	$	6,997

Weighted average common shares outstanding - basic	16,613		16,508
Weighted average common shares outstanding - diluted	16,613		31,512

Net income attributable to The RMR Group Inc. per common share - basic	$	0.38	$	0.42
Net income attributable to The RMR Group Inc. per common share - diluted	$	0.38	$	0.41


															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 Entities		Total Equity
Balance at September 30, 2024	$	16	$	1	$	15	$	118,811	$	436,226	$	(317,495)	$	237,574	$	181,439	$	404	$	419,417

Share awards, net	—		—		—		550		—		—		550		—		—		550
Net income	—		—		—		—		6,380		—		6,380		7,722		6		14,108

Tax distributions to member	—		—		—		—		—		—		—		(2,886)		—		(2,886)
Common share distributions	—		—		—		—		—		(7,581)		(7,581)		(4,800)		—		(12,381)
Consolidation of investments	—		—		—		—		—		—		—		—		2,936		2,936
Balance at December 31, 2024	$	16	$	1	$	15	$	119,361	$	442,606	$	(325,076)	$	236,923	$	181,475	$	3,346	$	421,744




Balance at September 30, 2023	$	16	$	1	$	15	$	116,010	$	413,096	$	(289,072)	$	240,066	$	183,597	$	—	$	423,663
Share awards, net	—		—		—		588		—		—		588		—		—		588
Net income	—		—		—		—		6,997		—		6,997		8,531		(2)		15,526

Tax distributions to member	—		—		—		—		—		—		—		(4,102)		—		(4,102)
Common share distributions	—		—		—		—		—		(6,684)		(6,684)		(4,800)		—		(11,484)
Acquisition of MPC Partnership Holdings LLC	—		—		—		—		—		—		—		—		444		444
Balance at December 31, 2023	$	16	$	1	$	15	$	116,598	$	420,093	$	(295,756)	$	240,967	$	183,226	$	442	$	424,635


	Three Months Ended December 31,
	2024		2023
Cash Flows from Operating Activities:
Net income	$	14,108	$	15,526
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,347		423
Straight line rent, net	(140)		(89)
Amortization expense related to other assets	2,354		2,354
Reversal of credit losses	(72)		—
Provision for deferred income taxes	817		864
Change in fair value of Earnout liability	(3,410)		—
Operating expenses paid in The RMR Group Inc. common shares	556		600


Distributions from investments	598		598
Loss (gain) on investments	1,071		(4,049)

Changes in assets and liabilities:
Due from related parties	10,420		4,491

Prepaid and other current assets	(3,525)		(901)
Reimbursable accounts payable and accrued expenses	(11,061)		(215)
Accounts payable and accrued expenses	10,966		10,329
Net cash provided by operating activities	25,029		29,931

Cash Flows from Investing Activities:
Acquisition of MPC Partnership Holdings LLC, net of cash acquired	—		(78,771)
Funding of loans held for investment	(1,400)		—
Purchase of property and equipment	(1,469)		(1,123)
Investment in Fund VII	(768)		—
Net cash used in investing activities	(3,637)		(79,894)

Cash Flows from Financing Activities:
Payment of deferred financing fees	(138)		—
Distributions to noncontrolling interests	(7,686)		(8,902)
Distributions to common shareholders	(7,581)		(6,684)
Repurchase of common shares	(6)		(12)




Net cash used in financing activities	(15,411)		(15,598)


Increase (decrease) in cash and cash equivalents	5,981		(65,561)
Cash and cash equivalents at beginning of period	141,599		267,989
Cash and cash equivalents at end of period	$	147,580	$	202,428

Supplemental Disclosures:
Income taxes paid	$	8	$	220
Interest paid	$	1,428	$	—

Non-cash investing and financing activities:
Recognition of right of use assets and related lease liabilities	$	70	$	2,652
Recognition of Earnout liability	$	—	$	14,547
Write-off of fully depreciated property and equipment	$	350	$	393
Write-off of fully amortized intangible assets	$	339	$	—
Assumption of mortgage note payable	$	—	$	5,429
Property and equipment accrued, not paid	$	87	$	—


	December 31, 2024			September 30, 2024
Number of loans	2			2
Total loan commitments	$	67,000		$	67,000
Unfunded loan commitments (1)	$	8,420		$	9,820
Principal balance	$	58,580		$	57,180
Weighted average coupon rate	8.52		%	9.15		%
Weighted average all in yield (2)	9.47		%	10.13		%
Weighted average floor	4.34		%	4.34		%
Weighted average maximum maturity (years) (3)	4.52			4.80


	Principal Balance		Carrying Value(1)		Coupon Rate (2)		Remaining Maturity (years)	Maturity Date	Collateral Principal Balance
December 31, 2024:
Revere, MA (Hotel)	$	28,770	$	28,336	7.51	%	1.50	7/1/2026	$	40,000
Wayne, PA (Industrial)	12,885		12,691		7.46	%	2.55	7/18/2027	18,580
Total/weighted average	$	41,655	$	41,027	7.49	%	1.80		$	58,580

September 30, 2024:
Revere, MA (Hotel)	$	28,770	$	28,393	7.82	%	1.75	7/1/2026	$	40,000
Wayne, PA (Industrial)	12,885		12,716		7.77	%	2.80	7/18/2027	17,180
Total/weighted average	$	41,655	$	41,109	7.80	%	2.10		$	57,180


	As of December 31, 2024				As of September 30, 2024
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans held for investment	$	57,887	$	58,821	$	56,221	$	57,365
Secured financing facility	41,027		41,730		41,109		41,793
Mortgage note payable	45,219		45,107		45,149		46,520




	December 31, 2024
	Total		Level 1		Level 2		Level 3



Due from related parties related to share based payment awards	$	8,947	$	8,947	$	—	$	—
Investment in SEVN	22,341		22,341		—		—
Investment in Fund VII	4,113		—		—		4,113


Employer compensation liability related to share based payment awards	8,947		8,947		—		—

Earnout liability	8,548		—		—		8,548


	Three Months Ended December 31,
	2024		2023
Income taxes computed at the federal statutory rate	21.0	%	21.0	%
State taxes, net of federal benefit	2.9	%	2.8	%

Permanent items	0.6	%	0.6	%
Uncertain tax position reserve, net of federal benefit	0.2	%	—	%
Net income attributable to noncontrolling interest	(9.8)	%	(9.9)	%

Total	14.9	%	14.5	%


	Three Months Ended December 31, 2024						Three Months Ended December 31, 2023
	Total						Total
	Management						Management
	and Advisory		Total				and Advisory		Total
	Services		Reimbursable		Total		Services		Reimbursable		Total
	Revenues		Costs		Revenues		Revenues		Costs		Revenues
Perpetual Capital:
DHC	$	6,594	$	42,497	$	49,091	$	6,321	$	45,216	$	51,537
ILPT	9,310		10,193		19,503		9,041		10,676		19,717
OPI	6,546		43,106		49,652		8,479		68,377		76,856
SVC	10,106		49,470		59,576		11,623		73,799		85,422
Total Managed Equity REITs	32,556		145,266		177,822		35,464		198,068		233,532
SEVN	1,230		1,479		2,709		1,433		1,534		2,967
	33,786		146,745		180,531		36,897		199,602		236,499

Private Capital:
AlerisLife	1,400		—		1,400		1,382		—		1,382
Sonesta	2,224		—		2,224		2,223		—		2,223
RMR Residential	5,165		7,337		12,502		714		912		1,626


Other private entities	4,817		15,834		20,651		5,302		14,639		19,941
	13,606		23,171		36,777		9,621		15,551		25,172

Total revenues from related parties	47,392		169,916		217,308		46,518		215,153		261,671
Income from loan investments, net	—		—		546		—		—		—
Rental property revenues	—		—		1,622		—		—		26
Total revenues from unrelated parties	—		—		2,168		—		—		26
Total revenues	$	47,392	$	169,916	$	219,476	$	46,518	$	215,153	$	261,697


	December 31, 2024						September 30, 2024
	Accounts		Reimbursable				Accounts		Reimbursable
	Receivable		Costs		Total		Receivable		Costs		Total
Perpetual Capital:
DHC	$	5,083	$	11,664	$	16,747	$	6,307	$	11,358	$	17,665
ILPT	4,704		11,786		16,490		4,244		7,968		12,212
OPI	5,590		22,499		28,089		5,877		20,132		26,009
SVC	6,262		8,871		15,133		5,470		8,591		14,061
Total Managed Equity REITs	21,639		54,820		76,459		21,898		48,049		69,947
SEVN	1,759		2,748		4,507		2,551		2,601		5,152

	23,398		57,568		80,966		24,449		50,650		75,099

Private Capital:
AlerisLife	512		—		512		570		—		570
Sonesta	63		—		63		82		—		82

RMR Residential	11,907		—		11,907		9,587		—		9,587
Other private entities	3,385		30,762		34,147		3,909		54,133		58,042
	15,867		30,762		46,629		14,148		54,133		68,281

	$	39,265	$	88,330	$	127,595	$	38,597	$	104,783	$	143,380


		Lesser of Historical Cost of Assets
		Under Management or
		Total Market Capitalization as of
		December 31,
REIT	Primary Strategy	2024		2023
DHC	Medical office and life science properties, senior living communities and other healthcare related properties	$	3,605,263	$	3,952,740
ILPT	Industrial and logistics properties	4,549,255		4,635,406
OPI	Office properties primarily leased to single tenants and those with high credit quality characteristics	2,696,349		2,951,207
SVC	Hotels and service-focused retail net lease properties	6,254,869		7,049,245
		$	17,105,736	$	18,588,598


	Three Months Ended
	December 31, 2024
Beginning balance	$	11,958

Changes in fair value for our Earnout liability measured on a recurring basis	(3,410)
Ending balance	$	8,548


Declaration	Record	Paid	Distributions		Total
Date	Date	Date	Per Common Share		Distributions
Three Months Ended December 31, 2024
10/16/2024	10/28/2024	11/14/2024	$	0.45	$	7,581


			$	0.45	$	7,581
Three Months Ended December 31, 2023
10/12/2023	10/23/2023	11/16/2023	$	0.40	$	6,684


			$	0.40	$	6,684


			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
Three Months Ended December 31, 2024
10/16/2024	10/28/2024	11/14/2024	$	0.32	$	10,191	$	5,391	$	4,800


			$	0.32	$	10,191	$	5,391	$	4,800
Three Months Ended December 31, 2023
10/12/2023	10/23/2023	11/16/2023	$	0.32	$	10,148	$	5,348	$	4,800


			$	0.32	$	10,148	$	5,348	$	4,800


	Three Months Ended December 31, 2024						Three Months Ended December 31, 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	$	4,285	$	1,345	$	964	$	6,594	$	3,807	$	1,458	$	1,056	$	6,321
ILPT	5,918		3,222		170		9,310		5,878		3,039		124		9,041
OPI	2,987		2,907		652		6,546		3,320		3,447		1,712		8,479
SVC	7,209		1,508		1,389		10,106		8,545		896		2,182		11,623
	$	20,399	$	8,982	$	3,175	$	32,556	$	21,550	$	8,840	$	5,074	$	35,464


Exhibit Number						Description


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 Registrant'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.)
3.7						A rticles of Amendment, filed December 19, 2024. (Incorporated by reference to the Registra nt ’s Current Report on Form 8-K (File No. 001-37616) filed with the SEC on December 19, 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 and 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.)
10.1						Credit Agreement, dated as of January 22, 2025, among The RMR Group LLC, The RMR Group Inc., RMR Residential Management Group LLC, the lenders party thereto and Citibank, N.A., as administrative agent and as collateral agent (Inc orporated by reference to the R egistra nt ’s Current Report on Form 8-K (File No. 001-37616 ) filed with the SEC on January 23, 2025.)
10.2						Letter Agreement, dated as of February 5, 2025, by and among The RMR Group LLC and Jennifer B. Clark (+) (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.)
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.)


			By:			/s/ Matthew P. Jordan
						Matthew P. Jordan
						Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)
						Dated: February 5, 2025

Date	Price Target	Rating	Analyst
4/19/2024		Mkt Perform	JMP Securities
8/9/2022		Perform	Oppenheimer
1/5/2022	$43.00 → $39.00	Equal-Weight	Morgan Stanley
10/22/2021	$38.00	Neutral	Citigroup
8/31/2021	$41.00 → $43.00	Equal-Weight	Morgan Stanley

SEC Form 10-Q filed by The RMR Group Inc.

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The RMR Group Inc. filed SEC Form 8-K: Regulation FD Disclosure, Financial Statements and Exhibits