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RMR GROUP INC. - Quarter Report: 2021 June (Form 10-Q)


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 June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-37616
 
THE RMR GROUP INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland47-4122583
(State of Organization)(IRS Employer Identification No.)
 
Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634
(Address of Principal Executive Offices)                            (Zip Code)
Registrant’s Telephone Number, Including Area Code 617-796-8230
Securities registered pursuant to Section 12(b) of the Act:
Title Of Each ClassTrading SymbolName Of Each Exchange On Which Registered
Class A common stock, $0.001 par value per shareRMRThe Nasdaq Stock Market LLC
 (Nasdaq Capital Market)
Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No
As of August 4, 2021, there were 15,407,933 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.



Table of Contents
THE RMR GROUP INC.

FORM 10-Q

June 30, 2021
 
Table of Contents

Page
 
 

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PART I. Financial Information
Item 1. Financial Statements
The RMR Group Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
(unaudited)
June 30,September 30,
20212020
Assets
Current assets:
Cash and cash equivalents$397,801 $369,663 
Due from related parties87,619 82,605 
Prepaid and other current assets5,467 3,877 
Total current assets490,887 456,145 
Property and equipment, net2,303 2,299 
Due from related parties, net of current portion11,902 7,764 
Equity method investment7,198 7,467 
Equity method investment accounted for under the fair value option18,184 12,152 
Goodwill and intangible assets, net of amortization2,104 2,136 
Operating lease right of use assets33,429 34,663 
Deferred tax asset21,917 23,900 
Other assets, net of amortization136,665 143,727 
Total assets$724,589 $690,253 
Liabilities and Equity
Current liabilities:
Other reimbursable expenses$61,730 $56,079 
Accounts payable and accrued expenses35,713 16,984 
Operating lease liabilities4,868 4,407 
Employer compensation liability1,440 4,298 
Total current liabilities103,751 81,768 
Operating lease liabilities, net of current portion30,395 32,030 
Amounts due pursuant to tax receivable agreement, net of current portion27,789 27,789 
Employer compensation liability, net of current portion11,902 7,764 
Total liabilities173,837 149,351 
Commitments and contingencies
Equity:
Class A common stock, $0.001 par value; 31,600,000 shares authorized; 15,407,933 and 15,395,641 shares issued and outstanding, respectively
15 15 
Class B-1 common stock, $0.001 par value; 1,000,000 shares authorized, issued and outstanding
Class B-2 common stock, $0.001 par value; 15,000,000 shares authorized, issued and outstanding
15 15 
Additional paid in capital109,281 106,622 
Retained earnings308,319 286,249 
Cumulative common distributions(115,680)(96,983)
Total shareholders’ equity301,951 295,919 
Noncontrolling interest248,801 244,983 
Total equity550,752 540,902 
Total liabilities and equity$724,589 $690,253 
See accompanying notes.
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The RMR Group Inc.
Condensed Consolidated Statements of Income
(amounts in thousands, except per share amounts)
(unaudited)
Three Months EndedNine Months Ended
June 30,June 30,
2021202020212020
Revenues:
Management services$44,376 $38,625 $125,365 $129,221 
Incentive business management fees— — 620 — 
Advisory services1,134 625 2,849 2,252 
Total management and advisory services revenues45,510 39,250 128,834 131,473 
Reimbursable compensation and benefits13,069 13,013 39,453 38,683 
Reimbursable equity based compensation1,402 736 5,611 1,394 
Other reimbursable expenses85,263 85,650 259,856 267,852 
Total reimbursable costs99,734 99,399 304,920 307,929 
Total revenues145,244 138,649 433,754 439,402 
Expenses:
Compensation and benefits30,530 29,569 90,610 89,888 
Equity based compensation1,954 1,299 7,267 3,183 
Separation costs— — 4,159 645 
Total compensation and benefits expense32,484 30,868 102,036 93,716 
General and administrative6,320 6,335 19,684 20,678 
Other reimbursable expenses85,263 85,650 259,856 267,852 
Transaction and acquisition related costs61 427 474 1,596 
Depreciation and amortization245 229 734 731 
Total expenses124,373 123,509 382,784 384,573 
Operating income20,871 15,140 50,970 54,829 
Interest and other income179 727 614 4,102 
Equity in earnings of investees28 458 755 1,037 
Unrealized gain on equity method investment accounted for under the fair value option1,312 1,678 6,032 916 
Income before income tax expense22,390 18,003 58,371 60,884 
Income tax expense(3,361)(2,608)(8,109)(8,944)
Net income19,029 15,395 50,262 51,940 
Net income attributable to noncontrolling interest(10,797)(8,678)(28,192)(29,306)
Net income attributable to The RMR Group Inc.$8,232 $6,717 $22,070 $22,634 
Weighted average common shares outstanding - basic16,269 16,198 16,259 16,187 
Weighted average common shares outstanding - diluted31,308 31,198 31,271 31,187 
Net income attributable to The RMR Group Inc. per common share - basic
$0.50 $0.41 $1.35 $1.39 
Net income attributable to The RMR Group Inc. per common share - diluted
$0.50 $0.41 $1.31 $1.37 
See accompanying notes.
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The RMR Group Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(dollars in thousands)
(unaudited)
Class A Common StockClass B-1 Common StockClass B-2 Common StockAdditional Paid In CapitalRetained EarningsCumulative Common DistributionsTotal Shareholders' EquityNoncontrolling InterestTotal Equity
Balance at September 30, 2020$15 $$15 $106,622 $286,249 $(96,983)$295,919 $244,983 $540,902 
Share grants, net— — — 1,012 — — 1,012 — 1,012 
Net income— — — — 8,897 — 8,897 10,856 19,753 
Tax distributions to Member— — — — — — — (2,820)(2,820)
Common share distributions— — — — — (6,230)(6,230)(4,500)(10,730)
Balance at December 31, 202015 15 107,634 295,146 (103,213)299,598 248,519 548,117 
Share grants, net— — — 1,298 — — 1,298 — 1,298 
Net income— — — — 4,941 — 4,941 6,539 11,480 
Tax distributions to Member— — — — — — — (4,459)(4,459)
Common share distributions— — — — — (6,230)(6,230)(4,500)(10,730)
Balance at March 31, 202115 15 108,932 300,087 (109,443)299,607 246,099 545,706 
Share grants, net— — — 349 — — 349 — 349 
Net income— — — — 8,232 — 8,232 10,797 19,029 
Tax distributions to Member— — — — — — — (3,595)(3,595)
Common share distributions— — — — — (6,237)(6,237)(4,500)(10,737)
Balance at June 30, 2021$15 $$15 $109,281 $308,319 $(115,680)$301,951 $248,801 $550,752 
See accompanying notes.

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The RMR Group Inc.
Condensed Consolidated Statements of Shareholders’ Equity (Continued)
(dollars in thousands)
(unaudited)
Class A Common StockClass B-1 Common StockClass B-2 Common StockAdditional Paid In CapitalRetained EarningsCumulative Common DistributionsTotal Shareholders' EquityNoncontrolling InterestTotal Equity
Balance at September 30, 2019$15 $$15 $103,360 $257,457 $(72,194)$288,654 $240,381 $529,035 
Share grants, net— — — 634 — — 634 — 634 
Net income— — — — 9,449 — 9,449 12,175 21,624 
Tax distributions to Member— — — — — — — (3,830)(3,830)
Common share distributions— — — — — (6,195)(6,195)(4,500)(10,695)
Balance at December 31, 201915 15 103,994 266,906 (78,389)292,542 244,226 536,768 
Share grants, net— — — 1,271 — — 1,271 — 1,271 
Net income— — — — 6,468 — 6,468 8,453 14,921 
Tax distributions to Member— — — — — — — (4,156)(4,156)
Common share distributions— — — — — (6,194)(6,194)(4,500)(10,694)
Balance at March 31, 202015 15 105,265 273,374 (84,583)294,087 244,023 538,110 
Share grants, net— — — 598 — — 598 — 598 
Net income— — — — 6,717 — 6,717 8,678 15,395 
Tax distributions to Member— — — — — — — (2,949)(2,949)
Common share distributions— — — — — (6,200)(6,200)(4,500)(10,700)
Balance at June 30, 2020$15 $$15 $105,863 $280,091 $(90,783)$295,202 $245,252 $540,454 
See accompanying notes.
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The RMR Group Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Nine Months Ended June 30,
20212020
Cash Flows from Operating Activities:
Net income$50,262 $51,940 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization734 731 
Straight line office rent60 124 
Amortization expense related to other assets7,062 7,062 
Deferred income taxes1,983 1,108 
Operating expenses paid in The RMR Group Inc. common shares2,881 2,658 
Equity in earnings of investees(755)(1,037)
Distributions from equity method investment1,024 721 
Unrealized gain on equity method investment accounted for under the fair value option(6,032)(916)
Changes in assets and liabilities:
Due from related parties(7,872)10,393 
Prepaid and other current assets(1,590)2,253 
Other reimbursable expenses5,651 (6,782)
Accounts payable and accrued expenses18,963 10,535 
Net cash from operating activities72,371 78,790 
Cash Flows from Investing Activities:
Purchase of property and equipment(940)(404)
Net cash used in investing activities(940)(404)
Cash Flows from Financing Activities:
Distributions to noncontrolling interest(24,374)(24,435)
Distributions to common shareholders(18,697)(18,589)
Repurchase of common shares(222)(155)
Net cash used in financing activities(43,293)(43,179)
Increase in cash and cash equivalents28,138 35,207 
Cash and cash equivalents at beginning of period369,663 358,448 
Cash and cash equivalents at end of period$397,801 $393,655 
Supplemental Cash Flow Information and Non-Cash Activities:
Income taxes paid$8,931 $6,385 
Fair value of share based payments recorded$5,611 $1,394 
Recognition of right of use assets and related lease liabilities$2,249 $39,746 
See accompanying notes.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in thousands, except per share amounts)


Note 1. Basis of Presentation
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 financial statements, unless otherwise indicated, “we”, “us” and “our” refer to RMR Inc. and its direct and indirect subsidiaries, including RMR LLC.
As of June 30, 2021, RMR Inc. owned 15,407,933 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 52.2% of the economic interest of RMR LLC as of June 30, 2021. 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 47.8% of the economic interest of RMR LLC as of June 30, 2021, which is presented as a noncontrolling interest within the condensed consolidated financial statements. Adam D. Portnoy, one of our Managing Directors, is the sole trustee of ABP Trust, and owns all of ABP Trust’s voting securities.
RMR LLC was founded in 1986 to manage public investments in real estate and, as of June 30, 2021, managed a diverse portfolio of real estate and real estate related businesses. 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 wellness centers; Industrial Logistics Properties Trust, or ILPT, which owns and leases industrial and logistics properties; Office Properties Income Trust, or OPI, which owns office properties primarily leased to single tenants and those with high quality credit characteristics, including the government; and Service Properties Trust, or SVC, which owns a diverse portfolio of hotels and net lease service and necessity-based retail properties. DHC, ILPT, OPI and SVC are collectively referred to as the Managed Equity REITs.
RMR LLC also provides management services to three real estate operating companies: Five Star Senior Living Inc., or Five Star, a publicly traded operator of senior living communities, many of which are owned by DHC; 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 whose U.S. hotels are owned by SVC; and TravelCenters of America Inc., or TA, an operator and franchisor of travel centers primarily along the U.S. interstate highway system, many of which are owned by SVC, and standalone truck service facilities. Hereinafter, Five Star, Sonesta and TA are collectively referred to as the Managed Operating Companies.
In addition, RMR LLC provides management services to private capital vehicles, including ABP Trust and its subsidiaries, or collectively ABP Trust, and other private entities that own commercial real estate, of which certain of our Managed Equity REITs own minority equity interests. In these financial statements we refer to these clients as the Managed Private Real Estate Capital clients.
RMR LLC’s wholly owned subsidiary, Tremont Realty Advisors LLC, or Tremont Advisors, an investment adviser registered with the Securities and Exchange Commission, or SEC, provides advisory services for two publicly traded mortgage REITs: RMR Mortgage Trust, or RMRM, and Tremont Mortgage Trust, or TRMT. RMRM, TRMT and the Managed Equity REITs are collectively referred to as the Managed REITs or the Managed Public Real Estate Capital clients. RMRM and TRMT focus primarily on originating and investing in first mortgage whole loans secured by middle market and transitional commercial real estate. Tremont Advisors has in the past and may in the future manage additional accounts that invest in commercial real estate debt, including secured mortgage debt. Employees of Tremont Advisors also act as a transaction broker for non-investment advisory clients for negotiated fees, which we refer to as the Tremont business.
On April 26, 2021, RMRM and TRMT announced that they have entered into a definitive merger agreement pursuant to which TRMT will merge with and into RMRM, with RMRM continuing as the surviving company. Tremont Advisors will continue to manage the combined company and has waived any termination fee that would otherwise be payable by TRMT as a result of the merger. The merger is expected to close during the third calendar quarter of 2021, subject to the requisite approvals by RMRM and TRMT shareholders and other customary closing conditions.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
The accompanying condensed consolidated financial statements are unaudited. Certain information and disclosures required by U.S. Generally Accepted Accounting Principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, or our 2020 Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.
Preparation of these financial statements in conformity with GAAP requires our management to make certain estimates and assumptions that may affect the amounts reported in these financial statements and related notes. The actual results could differ from these estimates.
Note 2. Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU No. 2016-13, which requires that entities use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. On October 1, 2020, we adopted ASU No. 2016-13. We have not historically experienced credit losses from our clients and as a result, the adoption of ASU No. 2016-13 did not have a material impact on our condensed consolidated financial statements.
Note 3. Revenue Recognition
Base Business Management Fees—Managed Equity REITs
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 monthly in arrears. 
We earned aggregate base business management fees from the Managed Equity REITs of $24,471 and $21,010 for the three months ended June 30, 2021 and 2020, respectively, and $68,599 and $72,928 for the nine months ended June 30, 2021 and 2020, respectively.
Incentive Business Management Fees—Managed Equity REITs
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
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
agreement, of a specified REIT index identified in the applicable business management agreement for the measurement period, as adjusted for net share issuances during the period and subject to caps on the values of the incentive fees. The measurement period for the annual incentive business management fees is defined as the three year period ending on December 31 of the year for which such fee is being calculated.
We did not earn incentive business management fees from the Managed Equity REITs for the calendar years 2019 or 2020 and, as a result, we did not recognize any incentive business management fees from the Managed Equity REITs for the nine months ended June 30, 2021 or 2020.
Other Management Agreements
Managed Operating Companies
We earn management fees by providing continuous services pursuant to the management agreements from the Managed Operating Companies equal to 0.6% of: (i) in the case of Five Star, Five Star’s revenues from all sources reportable under GAAP, less any revenues reportable by Five Star 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 revenues from all sources reportable under GAAP, less any revenues reportable by Sonesta with respect to hotels for which it provides management services, plus the 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, as defined in the applicable agreement, plus TA’s total nonfuel revenues. These fees are estimated and payable monthly in advance.
We earned aggregate fees from the Managed Operating Companies of $6,976 and $5,277 for the three months ended June 30, 2021 and 2020, respectively, and $17,988 and $17,700 for the nine months ended June 30, 2021 and 2020, respectively.
Managed Private Real Estate Capital
We earn management fees from the Managed Private Real Estate Capital clients based on a percentage of average invested capital, as defined in the applicable management agreements. These management fees are paid monthly in arrears.
We earned aggregate fees from the Managed Private Real Estate Capital clients of $1,276 and $686 for the three months ended June 30, 2021 and 2020, respectively, and $3,463 and $1,926 for the nine months ended June 30, 2021 and 2020, respectively.
Property Management Fees
We earn property management fees by providing continuous services pursuant to property management agreements with our clients. We generally earn fees under these agreements equal to 3.0% of gross collected rents. Also, under the terms of the property management agreements, we receive additional fees for construction supervision services in connection with certain construction activities undertaken at the managed properties up to 5.0% of the cost of such construction.
In June 2021, we and DHC and SVC amended our respective property management agreements to, among other things, provide for our oversight of any major capital projects and repositionings at DHC’s senior living communities, including DHC’s senior living communities managed by Five Star, and SVC’s hotels, including SVC’s hotels managed by Sonesta, as DHC or SVC, as applicable, may request from time to time. We will receive the same fee previously paid to Five Star and Sonesta, respectively, for these services, which is equal to 3.0% of the cost of any such major capital project or repositioning.
We earned aggregate property management fees of $11,653 and $11,618 for the three months ended June 30, 2021 and 2020, respectively, and $35,056 and $35,851 for the nine months ended June 30, 2021 and 2020, respectively.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Advisory Services and Other
Tremont Advisors is primarily compensated pursuant to its management agreements with RMRM (beginning January 6, 2021) and TRMT at an annual rate of 1.5% of RMRM’s and TRMT’s equity, as defined in the applicable agreements. Tremont Advisors waived any business management fees otherwise due and payable by TRMT pursuant to the management agreement for the period beginning July 1, 2018 until December 31, 2020. Tremont Advisors earned aggregate advisory services revenue from TRMT of $377 and $40 for the three months ended June 30, 2021 and 2020, respectively, and $792 and $113 for the nine months ended June 30, 2021 and 2020, respectively.
Tremont Advisors may also earn an incentive fee under its management agreements with RMRM (beginning the second calendar quarter of 2021) and TRMT equal to the difference between: (a) the product of (i) 20% and (ii) the difference between (A) RMRM’s and TRMT’s 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) RMRM’s and TRMT’s 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 Advisors 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 (or such lesser number of completed calendar quarters from January 5, 2021 for RMRM and September 18, 2017 for TRMT) in the aggregate is greater than zero. The incentive fee may not be less than zero. Tremont Advisors waived any incentive fees otherwise due and payable by TRMT pursuant to the management agreement prior to December 31, 2020. Tremont Advisors earned incentive fees of zero and $620 from TRMT for the three and nine months ended June 30, 2021, respectively.
RMR Advisors LLC, or RMR Advisors, which previously provided advisory services for RMRM until it merged into Tremont Advisors on January 6, 2021, was compensated through January 5, 2021 pursuant to its agreement with RMRM at an annual rate of 0.85% of RMRM’s average daily managed assets. Average daily managed assets included the net asset value attributable to RMRM’s outstanding common shares and cash on hand, plus the liquidation preference of RMRM’s outstanding preferred shares and the principal amount of any borrowings, including from banks or evidenced by notes, commercial paper or other similar instruments issued by RMRM. RMR Advisors or Tremont Advisors, as applicable, earned advisory services revenue of $757 and $585 for the three months ended June 30, 2021 and 2020, respectively, and $2,057 and $2,139 for the nine months ended June 30, 2021 and 2020, respectively.
The Tremont business earns between 0.5% and 1.0% of the aggregate principal amounts of any loans it brokers. The Tremont business earned fees for such brokerage services of zero and $34 for the three months ended June 30, 2021 and 2020, respectively, and $259 and $816 for the nine months ended June 30, 2021 and 2020, respectively, which amounts are included in management services revenue in our condensed consolidated statements of income.
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 were paid by tenants of our clients. We recognize the revenue for reimbursements when we incur the related reimbursable compensation and benefits on behalf of our clients. We realized reimbursable compensation and benefits of $13,069 and $13,013 for the three months ended June 30, 2021 and 2020, respectively, and $39,453 and $38,683 for the nine months ended June 30, 2021 and 2020, respectively.
Reimbursable Equity Based Compensation
Reimbursable equity based compensation includes grants of common shares from our clients directly to certain of our officers and employees in connection with the provision of management services to those companies. The revenue in respect of each grant is based on the fair value as of the grant date for those shares that have vested, with subsequent changes in the fair value of the unvested grants being recognized in our condensed consolidated statements of income over the requisite service periods. We record an equal offsetting amount as equity based compensation expense for the value of the grants of common shares from our clients to certain of our officers and employees. We realized equity based compensation expense and related reimbursements from our clients of $1,402 and $736 for the three months ended June 30, 2021 and 2020, respectively, and $5,611 and $1,394 for the nine months ended June 30, 2021 and 2020, respectively.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
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, security and cleaning services, a significant portion of which are charged or passed through to and were paid by tenants of our clients. We have determined that we control the services provided by third parties for certain of our clients and therefore we account for the cost of these services and the related reimbursement revenue on a gross basis.
We realized other reimbursable expenses reflecting corresponding amounts in revenue and expense of $85,263 and $85,650 for the three months ended June 30, 2021 and 2020, respectively, and $259,856 and $267,852 for the nine months ended June 30, 2021 and 2020, respectively.
Note 4. Investments
Equity Method Investment
As of June 30, 2021, Tremont Advisors owned 1,600,100, or approximately 19.2%, of TRMT’s outstanding common shares. We account for our investment in TRMT using the equity method of accounting because we are deemed to exert significant influence, but not control, over TRMT’s most significant activities. Our share of earnings from our investment in TRMT included in equity in earnings of investees in our condensed consolidated statements of income was $28 and $458 for the three months ended June 30, 2021 and 2020, respectively, and $755 and $1,037 for the nine months ended June 30, 2021 and 2020, respectively. We received aggregate distributions from TRMT of $160 and $16 during the three months ended June 30, 2021 and 2020, respectively, and $1,024 and $721 during the nine months ended June 30, 2021 and 2020, respectively.
Equity Method Investment Accounted for Under the Fair Value Option
As of June 30, 2021, we owned 621,853, or approximately 4.3%, of TA’s outstanding common shares. We account for our investment in TA using the equity method of accounting because we are deemed to exert significant influence, but not control, over TA’s most significant activities. We elected the fair value option to account for our equity method investment in TA and determine fair value using the closing price of TA’s common shares as of the end of the period, which is a Level 1 fair value input. The market value of our investment in TA at June 30, 2021 and September 30, 2020, based on quoted market prices, was $18,184 and $12,152, respectively. The unrealized gain in our condensed consolidated statements of income related to our investment in TA was $1,312 and $1,678 for the three months ended June 30, 2021 and 2020, respectively, and $6,032 and $916 for the nine months ended June 30, 2021 and 2020, respectively.
Note 5. Income Taxes
We are the sole managing member of RMR LLC. We are a corporation subject to U.S. federal and state income tax with respect to our allocable share of any taxable income of RMR LLC and its tax consolidated subsidiaries. RMR LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, RMR LLC is generally not subject to U.S. federal and most state income taxes. Any taxable income or loss generated by RMR LLC is passed through to and included in the taxable income or loss of its members, including RMR Inc. and ABP Trust, based on each member’s respective ownership percentage.
For the three months ended June 30, 2021 and 2020, we recognized estimated income tax expense of $3,361 and $2,608, respectively, which includes $2,467 and $1,900, respectively, of U.S. federal income tax and $894 and $708, respectively, of state income taxes. For the nine months ended June 30, 2021 and 2020, we recognized estimated income tax expense of $8,109 and $8,944, respectively, which includes $5,953 and $6,578, respectively, of U.S. federal income tax and $2,156 and $2,366, respectively, of state income taxes.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
A reconciliation of the statutory income tax rate to the effective tax rate is as follows:
Three Months Ended June 30,Nine Months Ended June 30,
2021202020212020
Income taxes computed at the federal statutory rate21.0 %21.0 %21.0 %21.0 %
State taxes, net of federal benefit3.2 %3.6 %3.2 %3.7 %
Permanent items0.9 %0.1 %0.7 %0.1 %
Net income attributable to noncontrolling interest(10.1)%(10.2)%(10.1)%(10.1)%
Other (1)
— %— %(0.9)%— %
Total15.0 %14.5 %13.9 %14.7 %
(1)     In December 2020, the Internal Revenue Service and Department of Treasury released final regulations which, among other clarifications, established the effective date as it relates to limitations on the deductibility of certain executive compensation. The final regulations provide that the application of the limit applies to deductions after December 18, 2020. As such, during the three months ended December 31, 2020, we reduced our provision for income taxes for limitations applied prior to the effective date by $520, or $0.02 per diluted share, which reduced the effective income tax rate by 0.9% for the nine months ended June 30, 2021.
ASC 740, Income Taxes, provides a model for how a company should recognize, measure and present in its financial statements uncertain tax positions that have been taken or are expected to be taken with respect to all open years and in all significant jurisdictions. Pursuant to this topic, we recognize a tax benefit only if it is “more likely than not” that a particular tax position will be sustained upon examination or audit. To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50.0% likely to be realized upon settlement. As of June 30, 2021, we had no uncertain tax positions.
Note 6. Fair Value of Financial Instruments
As of June 30, 2021 and September 30, 2020, the fair values of our financial instruments, which include cash and cash equivalents, amounts due from related parties and accounts payable and accrued expenses, which include liabilities related to other reimbursable expenses, were not materially different from their carrying values due to the short term nature of these financial instruments.
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 (Level 1), and the lowest priority to unobservable inputs (Level 3). 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. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The following are our assets and liabilities that have been measured at fair value using Level 1 inputs in the fair value hierarchy as of June 30, 2021 and September 30, 2020:
June 30,September 30,
20212020
Money market funds included in cash and cash equivalents$357,187 $341,612 
Current portion of due from related parties related to share based payment awards1,440 4,298 
Long term portion of due from related parties related to share based payment awards11,902 7,764 
Current portion of employer compensation liability related to share based payment awards1,440 4,298 
Long term portion of employer compensation liability related to share based payment awards11,902 7,764 
Note 7. Related Person Transactions
Adam D. Portnoy, one of our Managing Directors, is the sole trustee of our controlling shareholder, ABP Trust, and owns all of ABP Trust’s voting securities and a majority of the economic interests of ABP Trust. As of June 30, 2021, Adam D. Portnoy beneficially owned, in aggregate, (i) 160,502 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; (iii) all the
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
outstanding shares of Class B-2 common stock of RMR Inc., or Class B-2 Common Shares; and (iv) 15,000,000 Class A Units of RMR LLC. Adam D. Portnoy and Jennifer B. Clark, our other Managing Director, are also officers of ABP Trust and RMR Inc. and officers and employees of RMR LLC. Matthew P. Jordan, our Executive Vice President, Chief Financial Officer and Treasurer, is also an officer of ABP Trust and an officer and employee of RMR LLC.
Adam D. Portnoy is the chair of the board of trustees of each of the Managed Equity REITs, the chair of the board of directors of each of Five Star and TA, a managing trustee or managing director of each of the Managed REITs, Five Star and TA, a director of Sonesta (and its parent) and the controlling shareholder of Sonesta (and its parent). Jennifer B. Clark, our other Managing Director, is a managing director of Five Star, a managing trustee of OPI and a director of Sonesta (and its parent), and she previously served as a managing trustee of each of DHC and RMRM until June 3, 2021 and January 5, 2021, respectively. Ms. Clark also serves as the secretary of all our publicly traded clients and Sonesta.
As of June 30, 2021, Adam D. Portnoy beneficially owned, in aggregate, 6.4% of Five Star’s outstanding common shares, 1.1% of SVC’s outstanding common shares, 1.2% of ILPT’s outstanding common shares, 1.5% of OPI’s outstanding common shares, 1.1% of DHC’s outstanding common shares, 4.5% of TA’s outstanding common shares (including through RMR LLC), 2.4% of RMRM’s outstanding common shares, and 19.4% of TRMT’s outstanding common shares (including through Tremont Advisors).
The Managed REITs 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. All the officers of the Managed Equity REITs and ABP Trust are officers or employees of RMR LLC. All the officers, overhead and required office space of TRMT and RMRM are provided or arranged by Tremont Advisors. All of TRMT’s and RMRM’s officers are officers or employees of Tremont Advisors or RMR LLC. Many of the executive officers of the Managed Operating Companies are officers or employees of RMR LLC. Some of our executive officers are also managing directors or managing trustees of certain of the Managed REITs and the Managed Operating Companies.
Additional information about our related person transactions appears in Note 8, Shareholders’ Equity, below and in our 2020 Annual Report.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Revenues from Related Parties
For the three months ended June 30, 2021 and 2020, we recognized revenues from related parties as set forth in the following table:
Three Months Ended June 30, 2021Three Months Ended June 30, 2020
TotalTotal
ManagementManagement
and AdvisoryTotaland AdvisoryTotal
ServicesReimbursableTotalServicesReimbursableTotal
RevenuesCostsRevenuesRevenuesCostsRevenues
Managed Public Real Estate Capital:
DHC$9,699 $32,722 $42,421 $8,435 $35,037 $43,472 
ILPT4,243 4,719 8,962 5,212 4,822 10,034 
OPI9,320 50,527 59,847 9,157 49,286 58,443 
SVC12,000 2,800 14,800 9,313 2,843 12,156 
Total Managed Equity REITs35,262 90,768 126,030 32,117 91,988 124,105 
RMRM757 533 1,290 585 — 585 
TRMT377 1,218 1,595 40 539 579 
36,396 92,519 128,915 32,742 92,527 125,269 
Managed Private Real Estate Capital:
ABP Trust1,073 5,457 6,530 346 2,678 3,024 
Other private entities1,065 1,429 2,494 851 3,905 4,756 
2,138 6,886 9,024 1,197 6,583 7,780 
Managed Operating Companies:
Five Star1,794 104 1,898 2,123 104 2,227 
Sonesta1,522 91 1,613 113 96 209 
TA3,660 134 3,794 3,041 89 3,130 
6,976 329 7,305 5,277 289 5,566 
Total revenues from related parties45,510 99,734 145,244 39,216 99,399 138,615 
Revenues from unrelated parties— — — 34 — 34 
$45,510 $99,734 $145,244 $39,250 $99,399 $138,649 
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
For the nine months ended June 30, 2021 and 2020, we recognized revenues from related parties as set forth in the following table:
Nine Months Ended June 30, 2021Nine Months Ended June 30, 2020
TotalTotal
ManagementManagement
and AdvisoryTotaland AdvisoryTotal
ServicesReimbursableTotalServicesReimbursableTotal
RevenuesCostsRevenuesRevenuesCostsRevenues
Managed Public Real Estate Capital:
DHC$27,273 $105,907 $133,180 $27,535 $100,541 $128,076 
ILPT13,290 14,386 27,676 16,091 20,558 36,649 
OPI27,215 147,984 175,199 28,800 151,095 179,895 
SVC33,498 11,166 44,664 34,763 13,578 48,341 
Total Managed Equity REITs101,276 279,443 380,719 107,189 285,772 392,961 
RMRM2,057 1,474 3,531 2,139 — 2,139 
TRMT1,412 2,856 4,268 113 1,821 1,934 
104,745 283,773 388,518 109,441 287,593 397,034 
Managed Private Real Estate Capital:
ABP Trust3,171 16,022 19,193 918 8,277 9,195 
Other private entities2,671 4,090 6,761 2,557 11,300 13,857 
5,842 20,112 25,954 3,475 19,577 23,052 
Managed Operating Companies:
Five Star5,573 289 5,862 6,726 227 6,953 
Sonesta2,511 170 2,681 1,259 218 1,477 
TA9,904 576 10,480 9,715 306 10,021 
17,988 1,035 19,023 17,700 751 18,451 
Total revenues from related parties128,575 304,920 433,495 130,616 307,921 438,537 
Revenues from unrelated parties259 — 259 857 865 
$128,834 $304,920 $433,754 $131,473 $307,929 $439,402 
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Amounts Due From Related Parties
The following table represents amounts due from related parties as of the dates indicated:
June 30, 2021September 30, 2020
AccountsReimbursableAccountsReimbursable
ReceivableCostsTotalReceivableCostsTotal
Managed Public Real Estate Capital:
DHC$6,619 $23,043 $29,662 $5,548 $22,035 $27,583 
ILPT4,359 1,845 6,204 3,089 5,791 8,880 
OPI9,711 29,413 39,124 7,883 30,529 38,412 
SVC7,425 3,273 10,698 4,258 6,326 10,584 
Total Managed Equity REITs28,114 57,574 85,688 20,778 64,681 85,459 
RMRM1,007 1,438 2,445 — — — 
TRMT865 693 1,558 19 614 633 
29,986 59,705 89,691 20,797 65,295 86,092 
Managed Private Real Estate Capital:
ABP Trust987 2,282 3,269 1,106 2,364 3,470 
Other private entities2,013 828 2,841 — — — 
3,000 3,110 6,110 1,106 2,364 3,470 
Managed Operating Companies:
Five Star487 47 534 149 102 251 
Sonesta95 — 95 — — — 
TA2,781 310 3,091 176 380 556 
3,363 357 3,720 325 482 807 
$36,349 $63,172 $99,521 $22,228 $68,141 $90,369 
Leases
As of June 30, 2021, RMR LLC leased from ABP Trust and certain Managed Equity REITs office space for use as our headquarters and local offices. We incurred rental expense under related party leases of $1,420 and $1,367 for the three months ended June 30, 2021 and 2020, respectively, and $4,246 and $4,230 for the nine months ended June 30, 2021 and 2020, respectively.
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 our 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 agreement. As of June 30, 2021, our condensed consolidated balance sheet reflects a liability related to the tax receivable agreement of $29,950, including $2,161 classified as a current liability that we expect to pay to ABP Trust during the fourth quarter of fiscal year 2021.
Under the RMR LLC operating agreement, RMR LLC is also required to make certain pro rata distributions to each member of RMR LLC quarterly on the basis of the estimated tax liabilities of its members, subject to future adjustment based on actual results. For the nine months ended June 30, 2021 and 2020, pursuant to the RMR LLC operating agreement, RMR LLC made required quarterly tax distributions to holders of its membership units totaling $23,201 and $23,062, respectively, of which $12,327 and $12,127, respectively, was distributed to us and $10,874 and $10,935, respectively, was distributed to ABP Trust, based on each membership unit holder’s respective ownership percentage. The amounts distributed to us were eliminated in our condensed consolidated financial statements, and the amounts distributed to ABP Trust were recorded as a reduction of
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
its noncontrolling interest. We used 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.
RMR Mortgage Trust
In connection with its deregistration as an investment company under the Investment Company Act of 1940, as amended, the investment advisory agreement and administration agreement between RMRM and RMR Advisors or Tremont Advisors, as applicable, were terminated effective January 5, 2021 and March 16, 2021, respectively, and Tremont Advisors entered into a new management agreement with RMRM effective January 5, 2021.
On April 26, 2021, RMRM and TRMT announced that they have entered into a definitive merger agreement pursuant to which TRMT will merge with and into RMRM, with RMRM continuing as the surviving company. Tremont Advisors will continue to manage the combined company and has waived any termination fee that would otherwise be payable by TRMT as a result of the merger. The merger is expected to close during the third calendar quarter of 2021, subject to the requisite approvals by RMRM and TRMT shareholders and other customary closing conditions. See Note 1, Basis of Presentation, for further information.
Separation Arrangements
We entered into retirement agreements with certain of our former executive officers. Pursuant to these agreements, we made various cash payments and accelerated the vesting of unvested shares RMR Inc. previously awarded to these retiring officers. We also enter into separation arrangements from time to time with other nonexecutive officers and employees of ours. All costs associated with separation arrangements, for which there remain no substantive performance obligations, are recorded in our condensed consolidated statements of income as separation costs.
In October 2020, we entered into a retirement agreement with David M. Blackman, a former Executive Vice President of RMR LLC. Mr. Blackman, at the time, also served as president, chief executive officer and a director of Tremont Advisors, president, chief executive officer and managing trustee of TRMT, president, chief executive officer and managing trustee of OPI, and executive vice president of RMR Advisors. Pursuant to his retirement agreement, Mr. Blackman remained in his officer, director and trustee roles with RMR LLC, Tremont Advisors, TRMT, OPI and RMR Advisors through December 31, 2020 and he continued to serve as a managing trustee of OPI until June 17, 2021. In addition, Mr. Blackman continued to serve as an employee of RMR LLC through June 30, 2021. Under Mr. Blackman’s retirement agreement, RMR LLC paid Mr. Blackman combined cash payments in the amount of $2,850. In addition, our Compensation Committee approved the acceleration of all 9,400 unvested shares owned by Mr. Blackman of us as of his retirement date, June 30, 2021, subject to applicable conditions.
For the nine months ended June 30, 2021 and 2020, we recognized cash and equity based separation costs as set forth in the following table:
Nine Months Ended June 30,
20212020
Former executive officers:
Cash separation costs$2,900 $260 
Equity based separation costs295 281 
3,195 541 
Former nonexecutive officers:
Cash separation costs (1)
805 80 
Equity based separation costs159 24 
964 104 
Total separation costs$4,159 $645 
(1)During the nine months ended June 30, 2021, we were indemnified for a withdrawal liability of $515 that we had recorded during the three months ended September 30, 2020 related to a prior client’s shared pension plan accounted for as a multiemployer benefit plan.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Note 8. Shareholders’ Equity
We grant our Class A Common Shares to our Directors, officers and employees under the 2016 Omnibus Equity Plan adopted in 2016, or the 2016 Plan. Shares issued to Directors in that capacity vest immediately. Shares issued to employees in that capacity vest in five equal, consecutive, annual installments, with the first installment vesting on the date of grant. We recognize share forfeitures as they occur. Compensation expense related to share grants is determined based on the market value of our shares on the date of grant, with the aggregate value of the granted shares amortized to expense over the related vesting period. Expense recognized for shares granted to Directors in that capacity are included in general and administrative expenses and for shares granted to employees in that capacity are included in equity based compensation in our condensed consolidated statements of income.
On March 11, 2021, we granted 3,000 of our Class A Common Shares, valued at $42.85 per share, the closing price of our Class A Common Shares on The Nasdaq Stock Market LLC, or Nasdaq, on that day, to each of our Directors as part of his or her annual compensation for serving as a Director. For the nine months ended June 30, 2021, we recorded general and administrative expense of $771 for these grants.
Equity based compensation expense related to shares granted to certain officers and employees was $552 and $563 for the three months ended June 30, 2021 and 2020, respectively, and $1,656 and $1,789 for the nine months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, we had 129,570 unvested shares outstanding which are scheduled to vest as follows: 45,020 shares in 2021, 37,550 shares in 2022, 29,660 shares in 2023 and 17,340 in 2024.
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. The repurchase price is based on the closing price of our Class A Common Shares on the Nasdaq on the repurchase date. During the nine months ended June 30, 2021, we withheld and repurchased 5,708 of our Class A Common Shares for an aggregate value of $222, which is reflected as a decrease to shareholders’ equity in our condensed 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.
Distributions
During the nine months ended June 30, 2021 and 2020, we declared and paid dividends on our Class A Common Shares and Class B-1 Common Shares as follows:
DeclarationRecordPaidDistributionsTotal
DateDateDatePer Common ShareDistributions
Nine Months Ended June 30, 2021
10/15/202010/26/202011/19/2020$0.38 $6,230 
1/14/20211/25/20212/18/20210.38 6,230 
4/15/20214/26/20215/20/20210.38 6,237 
$1.14 $18,697 
Nine Months Ended June 30, 2020
10/17/201910/28/201911/14/2019$0.38 $6,195 
1/16/20201/27/20202/20/20200.38 6,194 
4/16/20204/27/20205/21/20200.38 6,200 
$1.14 $18,589 
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The RMR Group Inc.
Notes to Unaudited Condensed 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 PerTotalRMR LLCRMR LLC
DeclarationRecordPaidRMR LLCRMR LLCDistributionsDistributions
DateDateDateMembership UnitDistributionsto RMR Inc.to ABP Trust
Nine Months Ended June 30, 2021
10/15/202010/26/202011/19/2020$0.30 $9,419 $4,919 $4,500 
1/14/20211/25/20212/18/20210.30 9,419 4,919 4,500 
4/15/20214/26/20215/20/20210.30 9,424 4,924 4,500 
$0.90 $28,262 $14,762 $13,500 
Nine Months Ended June 30, 2020
10/17/201910/28/201911/14/2019$0.30 $9,391 $4,891 $4,500 
1/16/20201/27/20202/20/20200.30 9,390 4,890 4,500 
4/16/20204/27/20205/21/20200.30 9,394 4,894 4,500 
$0.90 $28,175 $14,675 $13,500 
The remainder of the dividends noted above were funded with cash accumulated at RMR Inc.
On July 15, 2021, we declared a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares to our shareholders of record as of July 26, 2021, in the amount of $0.38 per Class A Common Share and Class B-1 Common Share, or $6,235. This dividend will be partially funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.30 per unit, or $9,422, of which $4,922 will be distributed to us based on our aggregate ownership of 16,407,933 membership units of RMR LLC and $4,500 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 August 19, 2021.
Note 9. Per Common Share Amounts
Basic earnings per common share reflects net income attributable to RMR Inc. divided by our weighted average Class A Common Shares and our Class B-1 Common Shares outstanding during the applicable periods. 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 common share reflects net income divided by our weighted average Class A Common Shares and our Class B-1 Common Shares plus the effect of dilutive common share equivalents during the applicable periods. Diluted common share equivalents reflect the assumed issuance of Class A Common Shares pursuant to our 2016 Plan and the assumed issuance of Class A Common Shares related to the assumed redemption of the 15,000,000 Class A Units using the if-converted method.
Unvested Class A Common Shares granted to our employees are deemed participating securities for purposes of calculating earnings per common share because they have dividend rights. We calculate earnings per share using the two-class method. 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. Earnings attributable to unvested Class A Common Shares are excluded from earnings per share under the two-class method as reflected in our condensed consolidated statements of income.
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, that the aforementioned redemption would have on earnings per share, we considered that 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 three and nine months ended June 30, 2021 and 2020, the assumed redemption is dilutive to earnings per share as presented in the table below. The calculation of basic and diluted earnings per share for the three and nine months ended June 30, 2021 and 2020, is as follows:
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Three Months Ended June 30,Nine Months Ended June 30,
2021202020212020
Numerators:
Net income attributable to The RMR Group Inc.$8,232 $6,717 $22,070 $22,634 
Income attributable to unvested participating securities
(72)(48)(194)(166)
Net income attributable to The RMR Group Inc. used in calculating basic EPS
8,160 6,669 21,876 22,468 
Effect of dilutive securities:
Add back: income attributable to unvested participating securities72 48 194 166 
Add back: net income attributable to noncontrolling interest
10,797 8,678 28,192 29,306 
Add back: income tax expense
3,361 2,608 8,109 8,944 
Income tax expense assuming redemption of noncontrolling interest’s Class A Units for Class A Common Shares (1)
(6,686)(5,313)(17,346)(18,114)
Net income used in calculating diluted EPS$15,704 $12,690 $41,025 $42,770 
Denominators:
Common shares outstanding16,408 16,315 16,408 16,315 
Unvested participating securities(139)(117)(149)(128)
Weighted average common shares outstanding - basic
16,269 16,198 16,259 16,187 
Effect of dilutive securities:
Assumed redemption of noncontrolling interest’s Class A Units for Class A Common Shares
15,000 15,000 15,000 15,000 
Incremental unvested shares39 — 12 — 
Weighted average common shares outstanding - diluted
31,308 31,198 31,271 31,187 
Net income attributable to The RMR Group Inc. per common share - basic
$0.50 $0.41 $1.35 $1.39 
Net income attributable to The RMR Group Inc. per common share - diluted
$0.50 $0.41 $1.31 $1.37 
(1)Income tax expense assumes the hypothetical conversion of the noncontrolling interest, which results in estimated tax rates of 29.9% and 29.5% for the three months ended June 30, 2021 and 2020, respectively, and 29.7% and 29.8% for the nine months ended June 30, 2021 and 2020, respectively.
Note 10. Net Income Attributable to RMR Inc.
Net income attributable to RMR Inc. for the three and nine months ended June 30, 2021 and 2020, is calculated as follows:
Three Months EndedNine Months Ended
June 30,June 30,
2021202020212020
Income before income tax expense$22,390 $18,003 $58,371 $60,884 
RMR Inc. franchise tax expense and interest income217 115 646 278 
Net income before noncontrolling interest22,607 18,118 59,017 61,162 
Net income attributable to noncontrolling interest(10,797)(8,678)(28,192)(29,306)
Net income attributable to RMR Inc. before income tax expense11,810 9,440 30,825 31,856 
Income tax expense attributable to RMR Inc.(3,361)(2,608)(8,109)(8,944)
RMR Inc. franchise tax expense and interest income(217)(115)(646)(278)
Net income attributable to RMR Inc.$8,232 $6,717 $22,070 $22,634 
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Note 11. Segment Reporting
We have one reportable business segment, which is RMR LLC. In the tables below, our All Other Operations includes the operations of RMR Inc., Tremont Advisors and until January 5, 2021, RMR Advisors.
Three Months Ended June 30, 2021
All Other
RMR LLC (1)
OperationsTotal
Revenues:
Management services$44,376 $— $44,376 
Advisory services— 1,134 1,134 
Total management and advisory services revenues44,376 1,134 45,510 
Reimbursable compensation and benefits12,561 508 13,069 
Reimbursable equity based compensation1,402 — 1,402 
Other reimbursable expenses85,263 — 85,263 
Total reimbursable costs99,226 508 99,734 
Total revenues143,602 1,642 145,244 
Expenses:
Compensation and benefits29,541 989 30,530 
Equity based compensation1,922 32 1,954 
Total compensation and benefits expense31,463 1,021 32,484 
General and administrative5,335 985 6,320 
Other reimbursable expenses85,263 — 85,263 
Transaction and acquisition related costs45 16 61 
Depreciation and amortization234 11 245 
Total expenses122,340 2,033 124,373 
Operating income (loss)21,262 (391)20,871 
Interest and other income171 179 
Equity in earnings of investees— 28 28 
Unrealized gain on equity method investment accounted for under the fair value option1,312 — 1,312 
Income (loss) before income tax expense22,745 (355)22,390 
Income tax expense— (3,361)(3,361)
Net income (loss)$22,745 $(3,716)$19,029 
Total assets$674,378 $50,211 $724,589 
(1)    Intersegment revenues of $801 recognized by RMR LLC for services provided to our All Other Operations segment have been eliminated in the condensed consolidated financial statements.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Three Months Ended June 30, 2020
All Other
RMR LLC (1)
OperationsTotal
Revenues:
Management services$38,590 $35 $38,625 
Advisory services— 625 625 
Total management and advisory services revenues38,590 660 39,250 
Reimbursable compensation and benefits12,743 270 13,013 
Reimbursable equity based compensation736 — 736 
Other reimbursable expenses85,650 — 85,650 
Total reimbursable costs99,129 270 99,399 
Total revenues137,719 930 138,649 
Expenses:
Compensation and benefits28,203 1,366 29,569 
Equity based compensation1,255 44 1,299 
Total compensation and benefits expense29,458 1,410 30,868 
General and administrative5,292 1,043 6,335 
Other reimbursable expenses85,650 — 85,650 
Transaction and acquisition related costs317 110 427 
Depreciation and amortization217 12 229 
Total expenses120,934 2,575 123,509 
Operating income (loss)16,785 (1,645)15,140 
Interest and other income667 60 727 
Equity in earnings of investees— 458 458 
Unrealized gain on equity method investment accounted for under the fair value option1,678 — 1,678 
Income (loss) before income tax expense19,130 (1,127)18,003 
Income tax expense— (2,608)(2,608)
Net income (loss)$19,130 $(3,735)$15,395 
Total assets$655,413 $49,310 $704,723 
(1)    Intersegment revenues of $988 recognized by RMR LLC for services provided to our All Other Operations segment have been eliminated in the condensed consolidated financial statements.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Nine Months Ended June 30, 2021
All Other
RMR LLC (1)
OperationsTotal
Revenues:
Management services$125,106 $259 $125,365 
Incentive business management fees— 620 620 
Advisory services— 2,849 2,849 
Total management and advisory services revenues125,106 3,728 128,834 
Reimbursable compensation and benefits38,018 1,435 39,453 
Reimbursable equity based compensation5,611 — 5,611 
Other reimbursable expenses259,856 — 259,856 
Total reimbursable costs303,485 1,435 304,920 
Total revenues428,591 5,163 433,754 
Expenses:
Compensation and benefits86,517 4,093 90,610 
Equity based compensation7,160 107 7,267 
Separation costs4,159 — 4,159 
Total compensation and benefits expense97,836 4,200 102,036 
General and administrative16,690 2,994 19,684 
Other reimbursable expenses259,856 — 259,856 
Transaction and acquisition related costs409 65 474 
Depreciation and amortization702 32 734 
Total expenses375,493 7,291 382,784 
Operating income (loss)53,098 (2,128)50,970 
Interest and other income585 29 614 
Equity in earnings of investees— 755 755 
Unrealized gain on equity method investment accounted for under the fair value option6,032 — 6,032 
Income (loss) before income tax expense59,715 (1,344)58,371 
Income tax expense— (8,109)(8,109)
Net income (loss)$59,715 $(9,453)$50,262 
Total assets$674,378 $50,211 $724,589 
(1)    Intersegment revenues of $3,003 recognized by RMR LLC for services provided to our All Other Operations segment have been eliminated in the condensed consolidated financial statements.
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The RMR Group Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(dollars in thousands, except per share amounts)
Nine Months Ended June 30, 2020
All Other
RMR LLC (1)
OperationsTotal
Revenues:
Management services$128,404 $817 $129,221 
Advisory services— 2,252 2,252 
Total management and advisory services revenues128,404 3,069 131,473 
Reimbursable compensation and benefits37,290 1,393 38,683 
Reimbursable equity based compensation1,394 — 1,394 
Other reimbursable expenses267,852 — 267,852 
Total reimbursable costs306,536 1,393 307,929 
Total revenues434,940 4,462 439,402 
Expenses:
Compensation and benefits84,401 5,487 89,888 
Equity based compensation3,079 104 3,183 
Separation costs645 — 645 
Total compensation and benefits expense88,125 5,591 93,716 
General and administrative17,731 2,947 20,678 
Other reimbursable expenses267,852 — 267,852 
Transaction and acquisition related costs366 1,230 1,596 
Depreciation and amortization696 35 731 
Total expenses374,770 9,803 384,573 
Operating income (loss)60,170 (5,341)54,829 
Interest and other income3,753 349 4,102 
Equity in earnings of investees— 1,037 1,037 
Unrealized gain on equity method investment accounted for under the fair value option916 — 916 
Income (loss) before income tax expense64,839 (3,955)60,884 
Income tax expense— (8,944)(8,944)
Net income (loss)$64,839 $(12,899)$51,940 
Total assets$655,413 $49,310 $704,723 
(1)    Intersegment revenues of $4,153 recognized by RMR LLC for services provided to our All Other Operations segment have been eliminated in the condensed consolidated financial statements. 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2020 Annual Report.
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. As of June 30, 2021, RMR LLC managed approximately 2,100 properties in 47 states, Washington, D.C., Puerto Rico and Canada that are principally owned by the Managed Equity REITs.
Business Environment and Outlook
The continuation and growth of our business depends upon our ability to operate the Managed REITs so as to maintain, grow and increase the value of their businesses, to assist our Managed Operating Companies to grow their businesses and operate profitably and to successfully execute on new business ventures and investments we may pursue. 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 in migration or out migration in 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. We also believe that these regional or special factors can be reinforced or sometimes overwhelmed by general economic factors; for example, increases or decreases in U.S. interest rates may cause a general decrease, or increase, in the value of securities of real estate businesses or in their value relative to other types of securities and investments, including those real estate businesses that use large amounts of debt and that attract equity investors by paying dividends such as REITs. We try to take account of industry and general economic factors as well as specific property and regional geographic considerations when providing services to our clients.
The COVID-19 pandemic and the various governmental and market responses intended to contain and mitigate the spread of the virus and its detrimental public health impact have had a significant impact on the global economy, including the U.S. economy. In addition, the COVID-19 pandemic and related public health restrictions have had a particularly severe impact on certain industries in which our clients operate, including, hospitality, travel, service retail, senior housing and rehabilitation services. Many of the restrictions that had been imposed in the United States during the COVID-19 pandemic have since been lifted and commercial activity in the United States has increasingly returned to pre-pandemic practices and operations. There remains uncertainty as to the ultimate duration and severity of the COVID-19 pandemic, including risks that may arise from mutations or related strains of the virus, the ability to successfully administer vaccinations to a sufficient number of persons or attain immunity to the virus by natural or other means to achieve herd immunity, and the impact on the U.S. economy that may result from the inability of other countries to administer vaccinations to their citizens or their citizens’ ability to otherwise achieve immunity to the virus.
While our clients continue to face challenges related to the COVID-19 pandemic, we continue to believe that our current financial resources enable us to withstand the COVID-19 pandemic. As of June 30, 2021, we had $397,801 in cash and cash equivalents, no debt and for the nine months ended June 30, 2021, we generated cash from operations of $72,371.
Further, we believe that, because of the diversity of properties that our clients own and operate, there may be opportunities for growth in select property types and locations as this pandemic ebbs. We, on behalf of our clients and ourselves, attempt to take advantage of opportunities in the real estate market when they arise. For example: (i) on January 17, 2018, Select Income REIT, or SIR, launched an equity REIT, ILPT, that it formed to focus on the ownership and leasing of industrial and logistics properties throughout the U.S.; (ii) on December 31, 2018, Government Properties Income Trust and SIR merged to form OPI, a REIT with a broader investment strategy than its predecessor companies and ultimately a stronger combined entity positioned for future growth; (iii) on September 20, 2019, SVC acquired a net leased portfolio of 767 service oriented retail properties, providing SVC with a greater diversity in tenant base, property type and geography; and (iv) on March 31, 2020, ILPT completed a $680 million joint venture with an Asian institutional investor, which was expanded to include a large, top tier global sovereign wealth fund, as a second outside investor to this joint venture on November 18, 2020. 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 to reposition their portfolios and businesses when circumstances warrant such changes or when other more desirable opportunities are identified.
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There are extensive uncertainties surrounding the COVID-19 pandemic, and as a result, we are unable to determine what the ultimate impact will be on our clients and our financial position. For further information and risks related to the COVID-19 pandemic on us and our business, see “COVID-19 Pandemic” in Item 1 and “Risk Factors” in Item 1A of our 2020 Annual Report.
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 REITs, excluding rents or other revenues from hotels, travel centers, senior living properties and wellness centers, which are separately managed by our Managed Operating Companies 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 managed properties, including senior living communities owned by DHC and managed by Five Star and hotels owned by SVC and managed by Sonesta, based on a percentage of the cost of such construction. For further information regarding the fees that we earn, see Note 3, Revenue Recognition, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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 June 30, 2021 and 2020, as applicable:
Lesser of Historical Cost of Assets
Under Management or
Total Market Capitalization as of
June 30,
REITPrimary Strategy20212020
DHCMedical office and life science properties, senior living communities and wellness centers$5,337,144 $4,596,718 
ILPTIndustrial and logistics properties1,997,990 2,612,328 
OPIOffice properties primarily leased to single tenants, including the government3,962,573 3,474,277 
SVCHotels and net lease service and necessity-based retail properties9,277,211 7,400,127 
$20,574,918 $18,083,450 
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 three and nine months ended June 30, 2021 and 2020 may differ from the basis at the end of the periods presented in the table above. As of June 30, 2021, the market capitalization was lower than the historical cost of assets under management for DHC, OPI and SVC; the historical cost of assets under management for DHC, OPI and SVC as of June 30, 2021, were $8,414,221, $6,151,466 and $12,287,857, respectively. For ILPT, the historical cost of assets under management were lower than its market capitalization of $2,601,308 as of June 30, 2021.
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The fee revenues we earned from the Managed Equity REITs for the three and nine months ended June 30, 2021 and 2020 are set forth in the following tables:
Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Base BusinessPropertyBase BusinessProperty
Management Management Management Management
REIT RevenuesRevenuesTotalRevenuesRevenuesTotal
DHC$6,478 $3,221 $9,699 $4,995 $3,440 $8,435 
ILPT2,652 1,591 4,243 3,353 1,859 5,212 
OPI
4,417 4,903 9,320 4,080 5,077 9,157 
SVC10,924 1,076 12,000 8,582 731 9,313 
$24,471 $10,791 $35,262 $21,010 $11,107 $32,117 
Nine Months Ended June 30, 2021Nine Months Ended June 30, 2020
Base BusinessPropertyBase BusinessProperty
Management Management Management Management
REIT RevenuesRevenuesTotalRevenuesRevenuesTotal
DHC$17,110 $10,163 $27,273 $17,550 $9,985 $27,535 
ILPT8,330 4,960 13,290 10,127 5,964 16,091 
OPI
12,361 14,854 27,215 13,447 15,353 28,800 
SVC30,798 2,700 33,498 31,804 2,959 34,763 
$68,599 $32,677 $101,276 $72,928 $34,261 $107,189 
As of June 30, 2021, we estimate that we would have earned an incentive business management fee from OPI of $22,222 for calendar 2021 if June 30, 2021 had been the end of the next measurement period. However, incentive business management fees from the Managed Equity REITs are contingent performance based fees which are only recognized when earned at the end of the respective measurement period. There can be no assurance that we will in fact earn the estimated amount of, or any, incentive business management fees for calendar 2021, from OPI, or any Managed Equity REIT. Accordingly, this estimated amount of incentive business management fees for calendar 2021 which would have been earned if the measurement period ended on June 30, 2021, is not included in the fees listed in the tables above or in our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Managed Operating Companies and Managed Private Real Estate Capital
We provide business management services to the Managed Operating Companies. Five Star 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 Sonesta’s U.S. hotels 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 the Managed Operating Companies are based on a percentage of certain revenues.
In addition, we also provide management services to the Managed Private Real Estate Capital clients 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 management fees based on a percentage of the cost of construction activities.
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Our fee revenues from services to the Managed Operating Companies and the Managed Private Real Estate Capital clients for the three and nine months ended June 30, 2021 and 2020, are set forth in the following tables:
Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Base BusinessPropertyBase BusinessProperty
Management Management Management Management
RevenuesRevenuesTotalRevenuesRevenuesTotal
ABP Trust$580 $493 $1,073 $173 $173 $346 
Other private entities696 369 1,065 513 338 851 
Five Star1,794 — 1,794 2,123 — 2,123 
Sonesta1,522 — 1,522 113 — 113 
TA3,660 — 3,660 3,041 — 3,041 
$8,252 $862 $9,114 $5,963 $511 $6,474 
Nine Months Ended June 30, 2021Nine Months Ended June 30, 2020
Base BusinessPropertyBase BusinessProperty
Management Management Management Management
RevenuesRevenuesTotalRevenuesRevenuesTotal
ABP Trust$1,737 $1,434 $3,171 $375 $543 $918 
Other private entities1,726 945 2,671 1,551 1,006 2,557 
Five Star5,573 — 5,573 6,726 — 6,726 
Sonesta2,511 — 2,511 1,259 — 1,259 
TA9,904 — 9,904 9,715 — 9,715 
$21,451 $2,379 $23,830 $19,626 $1,549 $21,175 
Advisory Services and Other
Tremont Advisors manages two publicly traded mortgage REITs: RMRM and TRMT. RMRM and TRMT focus primarily on originating and investing in first mortgage whole loans secured by middle market and transitional commercial real estate. Tremont Advisors is primarily compensated pursuant to its management agreements with RMRM (beginning January 6, 2021) and TRMT based on a percentage of RMRM’s and TRMT’s equity, as defined in the applicable agreements.
Tremont Advisors earned aggregate advisory services revenue from TRMT of $377 and $40 for the three months ended June 30, 2021 and 2020, respectively, and $792 and $113 for the nine months ended June 30, 2021 and 2020, respectively. Incentive business management fees earned from TRMT were zero and $620 for the three and nine months ended June 30, 2021, respectively. Tremont Advisors did not earn incentive fees from TRMT during the three and nine months ended June 30, 2020.
RMR Advisors, which previously provided advisory services for RMRM until RMRM deregistered as an investment company with the SEC on January 5, 2021, was compensated pursuant to its agreement with RMRM based on a percentage of RMRM’s average daily managed assets, as defined in the agreement. The advisory fees earned by RMR Advisors or Tremont Advisors, as applicable, included in our revenue were $757 and $585 for the three months ended June 30, 2021 and 2020, respectively, and $2,057 and $2,139 for the nine months ended June 30, 2021 and 2020, respectively.
The Tremont business acts as a transaction broker for non-investment advisory clients for negotiated fees. The Tremont business earned fees for such brokerage services of zero and $34 for the three months ended June 30, 2021 and 2020, respectively, and $259 and $816 for the nine months ended June 30, 2021 and 2020, respectively, which amounts are included in management services revenue in our condensed consolidated statements of income.
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RESULTS OF OPERATIONS (dollars in thousands) 
Three Months Ended June 30, 2021, Compared to the Three Months Ended June 30, 2020
The following table presents the changes in our operating results for the three months ended June 30, 2021 compared to the three months ended June 30, 2020:
Three Months Ended June 30,
20212020$ Change% Change
Revenues:
Management services$44,376 $38,625 $5,751 14.9%
Advisory services1,134 625 509 81.4%
Total management and advisory services revenues45,510 39,250 6,260 15.9%
Reimbursable compensation and benefits13,069 13,013 56 0.4%
Reimbursable equity based compensation1,402 736 666 90.5%
Other reimbursable expenses85,263 85,650 (387)(0.5)%
Total reimbursable costs99,734 99,399 335 0.3%
Total revenues145,244 138,649 6,595 4.8%
Expenses:
Compensation and benefits30,530 29,569 961 3.3%
Equity based compensation1,954 1,299 655 50.4%
Total compensation and benefits expense32,484 30,868 1,616 5.2%
General and administrative6,320 6,335 (15)(0.2)%
Other reimbursable expenses85,263 85,650 (387)(0.5)%
Transaction and acquisition related costs61 427 (366)(85.7)%
Depreciation and amortization245 229 16 7.0%
Total expenses124,373 123,509 864 0.7%
Operating income20,871 15,140 5,731 37.9%
Interest and other income179 727 (548)(75.4)%
Equity in earnings of investees28 458 (430)(93.9)%
Unrealized gain on equity method investment accounted for under the fair value option1,312 1,678 (366)(21.8)%
Income before income tax expense22,390 18,003 4,387 24.4%
Income tax expense(3,361)(2,608)(753)(28.9)%
Net income19,029 15,395 3,634 23.6%
Net income attributable to noncontrolling interest(10,797)(8,678)(2,119)(24.4)%
Net income attributable to The RMR Group Inc.$8,232 $6,717 $1,515 22.6%
n/m - not meaningful
Management services revenue. For the three months ended June 30, 2021 and 2020, we earned base business and property management services revenue from the following sources:
Three Months Ended June 30,
20212020Change
Managed Equity REITs$35,262 $32,117 $3,145 
Managed Private Real Estate Capital2,138 1,231 907 
Managed Operating Companies6,976 5,277 1,699 
Total$44,376 $38,625 $5,751 
Management services revenue increased $5,751 primarily due to the economic recovery following the easing of pandemic related restrictions across the country, which were most impactful on our managed assets within the senior living, service retail and hospitality sectors. The increase in management services revenue was due to (i) increases in the average enterprise value of DHC and SVC resulting in increases to base business management fees of $1,483 and $2,342, respectively, and (ii) increases in
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management fees earned from the Managed Operating Companies of $1,699, primarily driven by continued improvements in operating performance at Sonesta and TA.
Advisory services revenue. Advisory services revenue represents fees earned for managing RMRM and TRMT. Advisory services revenues increased by $509 primarily due to an increase of $337 in fees earned from TRMT as a result of the fee waiver Tremont Advisors previously provided to TRMT expiring on December 31, 2020.
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 were paid by tenants of our clients. Reimbursable compensation and benefits increased $56 primarily due to annual increases in employee compensation and benefits for which we receive reimbursement.
Reimbursable equity based compensation. Reimbursable equity based compensation includes grants of common shares from 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 the grants of common shares from our clients to certain of our officers and employees. Reimbursable equity based compensation increased $666 as a result of increases in our clients’ respective share prices.
Other reimbursable expenses. For further information about these reimbursements, see Note 3, Revenue Recognition, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
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 $961 primarily due to merit increases and higher estimated bonus costs for the current fiscal year, partially offset by higher vacation deferrals and business continuity payments resulting from the COVID-19 pandemic during the prior period.
Equity based compensation. Equity based compensation consists of the value of vested shares granted to certain of our employees under our equity compensation plan and by our clients. Equity based compensation increased $655 primarily due to increases in our clients’ respective share prices for the share awards granted to our employees by our clients.
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 was relatively unchanged from the prior period.
Transaction and acquisition related costs. Transaction and acquisition related costs decreased $366 primarily due to costs incurred in the prior period in connection with RMRM’s conversion from a registered investment company to a commercial mortgage REIT.
Depreciation and amortization. Depreciation and amortization expense was relatively unchanged from the prior period.
Interest and other income. Interest and other income decreased $548 primarily due to lower interest earned during the current period as a result of lower interest rates compared to the prior period.
Equity in earnings of investees. Equity in earnings of investees represents our proportionate share of earnings from our equity interest in TRMT.
Unrealized gain on equity method investment accounted for under the fair value option. Unrealized gain on equity method investment accounted for under the fair value option represents the gain on our investment in TA common shares. For further information, see Note 4, Investments, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Income tax expense. The increase in income tax expense of $753 is primarily attributable to higher taxable income for the current period compared to the prior period.
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Nine Months Ended June 30, 2021, Compared to the Nine Months Ended June 30, 2020
The following table presents the changes in our operating results for the nine months ended June 30, 2021 compared to the nine months ended June 30, 2020:
Nine Months Ended June 30,
20212020$ Change% Change
Revenues:
Management services$125,365 $129,221 $(3,856)(3.0)%
Incentive business management fees620 — 620 n/m
Advisory services2,849 2,252 597 26.5%
Total management and advisory services revenues128,834 131,473 (2,639)(2.0)%
Reimbursable compensation and benefits39,453 38,683 770 2.0%
Reimbursable equity based compensation5,611 1,394 4,217 n/m
Other reimbursable expenses259,856 267,852 (7,996)(3.0)%
Total reimbursable costs304,920 307,929 (3,009)(1.0)%
Total revenues433,754 439,402 (5,648)(1.3)%
Expenses:
Compensation and benefits90,610 89,888 722 0.8%
Equity based compensation7,267 3,183 4,084 128.3%
Separation costs4,159 645 3,514 n/m
Total compensation and benefits expense102,036 93,716 8,320 8.9%
General and administrative19,684 20,678 (994)(4.8)%
Other reimbursable expenses259,856 267,852 (7,996)(3.0)%
Transaction and acquisition related costs474 1,596 (1,122)(70.3)%
Depreciation and amortization734 731 0.4%
Total expenses382,784 384,573 (1,789)(0.5)%
Operating income50,970 54,829 (3,859)(7.0)%
Interest and other income614 4,102 (3,488)(85.0)%
Equity in earnings of investees755 1,037 (282)(27.2)%
Unrealized gain on equity method investment accounted for under the fair value option6,032 916 5,116 n/m
Income before income tax expense58,371 60,884 (2,513)(4.1)%
Income tax expense(8,109)(8,944)835 9.3%
Net income50,262 51,940 (1,678)(3.2)%
Net income attributable to noncontrolling interest(28,192)(29,306)1,114 3.8%
Net income attributable to The RMR Group Inc.$22,070 $22,634 $(564)(2.5)%
n/m - not meaningful
Management services revenue. For the nine months ended June 30, 2021 and 2020, we earned base business and property management services revenue from the following sources:
Nine Months Ended June 30,
20212020Change
Managed Equity REITs$101,276 $107,189 $(5,913)
Managed Private Real Estate Capital6,101 4,332 1,769 
Managed Operating Companies17,988 17,700 288 
Total$125,365 $129,221 $(3,856)
Management services revenue decreased $3,856 primarily due to (i) declines in the average enterprise value of OPI and SVC resulting in decreases to base business management fees of $1,086 and $1,006, respectively, (ii) decreases in property management fees earned from OPI and SVC of $499 and $259, respectively, primarily due to strategic property dispositions
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and (iii) a decline in management fees earned from Five Star of $1,153 driven by COVID-19 pandemic related adverse impacts to its business, partially offset by an increase in management fees earned from Sonesta of $1,252 primarily resulting from an increase in the number of hotels that it manages and franchises during the current period.
Incentive business management fees. Incentive business management fees for the current period include fees earned by Tremont Advisors from TRMT of $620. Tremont Advisors could not earn any incentive fees from TRMT in the prior period due to the fee waiver in effect for the period beginning July 1, 2018 until December 31, 2020. For further information about TRMT’s incentive fees and the fee waiver, see Note 3, Revenue Recognition, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Advisory services revenue. Advisory services revenue increased $597 primarily due to an increase of $679 in fees earned from TRMT as a result of the fee waiver Tremont Advisors previously provided to TRMT expiring on December 31, 2020.
Reimbursable compensation and benefits. Reimbursable compensation and benefits increased $770 primarily due to annual increases in employee compensation and benefits for which we receive reimbursement.
Reimbursable equity based compensation. Reimbursable equity based compensation increased $4,217 as a result of increases in our clients’ respective share prices.
Other reimbursable expenses. For further information about these reimbursements, see Note 3, Revenue Recognition, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Compensation and benefits. Compensation and benefits expense increased $722 primarily due to higher estimated bonus costs for the current fiscal year and annual employee merit increases effective on October 1, 2020, largely offset by higher mortgage broker commissions, vacation deferrals and business continuity payments during the prior period.
Equity based compensation. Equity based compensation increased $4,084 primarily due to increases in our clients’ respective share prices for the share awards granted to our employees by our clients.
Separation costs. For further information about these costs, see Note 7, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.
General and administrative. General and administrative costs decreased $994 primarily due to decreases in travel, temporary staffing and recruiting fees largely as a result of the pandemic, partially offset by an increase in the value of annual share grants awarded to our Directors.
Transaction and acquisition related costs. Transaction and acquisition related costs decreased $1,122 primarily due to costs incurred in the prior period in connection with RMRM’s conversion from a registered investment company to a commercial mortgage REIT.
Depreciation and amortization. Depreciation and amortization expense was relatively unchanged from the prior period.
Interest and other income. Interest and other income decreased $3,488 primarily due to lower interest earned during the current period as a result of lower interest rates compared to the prior period.
Equity in earnings of investees. Equity in earnings of investees represents our proportionate share of earnings from our equity interest in TRMT.
Unrealized gain on equity method investment accounted for under the fair value option. Unrealized gain on equity method investment accounted for under the fair value option represents the gain on our investment in TA common shares. For further information, see Note 4, Investments, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Income tax expense. The decrease in income tax expense of $835 is primarily attributable to lower taxable income during the current period compared to the prior period, and a reduction in our income tax provision recorded during the three months ended December 31, 2020 of $520 related to final tax regulations released in December 2020. For further information, see Note 5, Income Taxes, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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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 June 30, 2021 and September 30, 2020, we had cash and cash equivalents of $397,801 and $369,663, respectively, of which $24,487 and $25,498, respectively, was held by RMR Inc., with the remainder being held at RMR LLC. Cash and cash equivalents include all short term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. As of June 30, 2021 and September 30, 2020, $357,187 and $341,612, respectively, of our cash and cash equivalents were invested in money market funds. Our cash and cash equivalents leave us well positioned to pursue numerous capital allocation strategies, including the potential return of shareholder capital in the form of a special dividend, in the next twelve months.
Our liquidity is highly dependent upon our receipt of fees from the businesses that we manage. Historically, we have funded our working capital needs with cash generated from our operating activities and we currently do not maintain any credit facilities. We expect that our future working capital needs will relate largely to our operating expenses, primarily consisting of employee compensation and benefits costs, our obligation to make quarterly tax distributions to the members of RMR LLC, our plan to make quarterly distributions on our Class A Common Shares and Class B-1 Common Shares and our plan to pay quarterly distributions to the members of RMR LLC in connection with the quarterly dividends to RMR Inc. shareholders. Our management fees are typically payable to us within 30 days of the end of each month or, in the case of annual incentive business management fees earned from the Managed Equity REITs, within 30 days following each calendar year end. Quarterly incentive fees earned from RMRM or TRMT, if any, are payable generally within 30 days following the end of the applicable quarter. Historically, we have not experienced losses on collection of our fees and have not recorded any allowances for bad debts.
During the nine months ended June 30, 2021, 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 $32,197. On July 15, 2021, we declared a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares to our shareholders of record as of July 26, 2021 in the amount of $0.38 per Class A Common Share and Class B-1 Common Share, or $6,235. This dividend will be partially funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.30 per unit, or $9,422, of which $4,922 will be distributed to us based on our aggregate ownership of 16,407,933 membership units of RMR LLC and $4,500 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 $10,735 and we expect to pay this dividend on or about August 19, 2021. See Note 8, Shareholders’ Equity, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding these distributions.
For the nine months ended June 30, 2021, pursuant to the RMR LLC operating agreement, RMR LLC made required quarterly tax distributions to its holders of its membership units totaling $23,201, of which $12,327 was distributed to us and $10,874 was distributed to ABP Trust, based on each membership unit holder’s then respective ownership percentage in RMR LLC. The $12,327 distributed to us was eliminated in our condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and the $10,874 distributed to ABP Trust was recorded as a reduction of their noncontrolling interest. We expect to use a portion of these funds distributed to us to pay our tax liabilities and amounts due under the tax receivable agreement described in Note 7, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We expect to use the remaining funds distributed to us to fund our long-term tax liabilities and pay dividends.
Cash Flows
Our changes in cash flows for the nine months ended June 30, 2021 compared to the nine months ended June 30, 2020 were as follows: (i) net cash from operating activities decreased $6,419 from $78,790 in the 2020 period to $72,371 in the 2021 period; (ii) net cash used in investing activities increased $536 from $404 in the 2020 period to $940 in the 2021 period; and (iii) net cash used in financing activities increased $114 from $43,179 in the 2020 period to $43,293 in the 2021 period.
The decrease in cash from operating activities for the nine months ended June 30, 2021, compared to the same period in 2020 primarily reflects the net effect of declines in net income, excluding the impacts of non-cash gains, and changes in working capital. The increase in cash used in investing activities for the nine months ended June 30, 2021 compared to the same period in 2020 was due to a modest increase in purchases of property and equipment to support our operations in the 2021 period. Cash used in financing activities for the nine months ended June 30, 2021 increased nominally compared to the same period in 2020.
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Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
Tax Receivable Agreement
We are party to a tax receivable agreement, or 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 7, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and “Business—Our Organizational Structure—Tax Receivable Agreement” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. As of June 30, 2021, our condensed consolidated balance sheet reflects a liability related to the tax receivable agreement of $29,950, of which we expect to pay $2,161 to ABP Trust during the fourth quarter of fiscal year 2021. 
Market Risk and Credit Risk
We have not invested in derivative instruments, borrowed through issuing debt securities or transacted a significant part of our businesses in foreign currencies. As a result, we are not now subject to significant direct market risk related to interest rate changes, changes to the market standard for determining interest rates, commodity price changes or credit risks; however, if any of these risks were to negatively impact our clients’ businesses or market capitalization, our revenues would likely decline. To the extent we change our approach on the foregoing activities, or engage in other activities, our market and credit risks could change. See Part I, Item 1A “Risk Factors” of our 2020 Annual Report for the risks to us and our clients related to the COVID-19 pandemic.
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 funds. 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, one of our Managing Directors, as well as our clients. For further information about these and other such relationships and related person transactions, please see Note 7, Related Person Transactions, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2020 Annual Report, our definitive Proxy Statement for our 2021 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” in our 2020 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative disclosures about market risk are set forth above in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operation—Market Risk and Credit Risk.”
Item 4. Controls and Procedures
As of the end of the period covered by this report, 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 Securities Exchange Act of 1934, as amended. 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 June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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WARNING CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Our forward-looking statements reflect our current views, intents and expectations with respect to, among other things, our operations and financial performance. Our forward-looking statements can be identified by the use of words such as “outlook,” “believe,” “expect,” “potential,” “will,” “may,” “estimate,” “anticipate” and derivatives or negatives of such words or similar words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be factors that could cause actual outcomes or results to differ materially from those stated or implied in these statements. We believe these factors include, but are not limited to the following:
the duration and severity of the COVID-19 pandemic and the resulting disruptions on us and our clients;
substantially all of our revenues are derived from services to a limited number of clients;
our revenues are highly variable;
changing market conditions that may adversely impact our clients and our business with them;
potential terminations of our management agreements with our clients;
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 and is often dependent upon circumstances beyond our control;
the ability of our clients to operate their businesses profitably and to grow and increase their market capitalizations and total shareholder returns;
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; and
risks associated with and costs of compliance with laws and regulations, including securities regulations, exchange listing standards and other laws and regulations affecting public companies.
For example:
We have a limited number of clients. We have long term contracts with our Managed Equity REITs; however, the other contracts under which we earn our revenues are for shorter terms, and the long term contracts with our Managed Equity REITs may be terminated in certain circumstances. The termination or loss of any of our management contracts may have a material adverse impact upon our revenues, profits, cash flows and business reputation;
Our base business management fees earned from our Managed Equity REITs are calculated monthly based upon the lower of each REIT’s cost of its applicable assets and such REIT’s market capitalization. Our business management fees earned from our Managed Operating Companies are calculated based upon certain revenues from each operator’s business. Accordingly, our future revenues, income and cash flows will decline if the business activities, assets or market capitalizations of our clients decline;
The fact that we have earned significant incentive business management fees from certain of our Managed Equity REITs in previous years and the fact that we estimate we would have earned an incentive business management fee for calendar 2021 from one of our Managed Equity REITs of $22.2 million as of June 30, 2021, if that date had been the end of the next measurement period, may imply that we will earn incentive business management fees for calendar 2021 or in future years. The incentive business management fees that we may earn from our Managed Equity REITs are based upon total returns realized by the REITs’ shareholders compared to the total shareholders return of certain identified indices. We have only limited control over the total returns realized by shareholders of the Managed Equity REITs and effectively no control over indexed total returns. There can be no assurance that we will earn any incentive business management fees from our Managed Equity REITs in the future;
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The fact that we have earned a $0.6 million incentive fee from TRMT during the nine months ended June 30, 2021 may imply that we will earn incentive business management fees from TRMT and RMRM in future periods. However, there can be no assurance that we will earn any incentive business management fees from TRMT or RMRM in the future;
We currently intend to pay a regular quarterly dividend of $0.38 per Class A Common Share and Class B-1 Common Share. Our dividends are declared and paid at the discretion of our board of directors. Our board may consider many factors when deciding whether to declare and pay dividends, including our current and projected cash flows and alternative uses for any available cash. Our board may decide to lower or even eliminate our dividends. There can be no assurance that we will continue to pay any regular dividends or with regard to the amount of dividends we may pay;
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 to reposition their portfolios and businesses when circumstances warrant such changes or when other more desirable opportunities are identified. However, these efforts may not be successful and, even if they are successful, they may not be sufficient to prevent our clients from experiencing increases in leverage, to adequately reposition our clients’ portfolios and businesses, or to enable our clients to execute successfully on desirable opportunities;
Our belief that, because of the diversity of properties that our clients own and operate, there should be opportunities for growth in select property types and locations as the COVID-19 pandemic ebbs may prove unfounded or we and our clients may not succeed in executing on those opportunities;
Our attempts to take into account industry and economic factors as well as specific property and regional geographic considerations when providing services to our clients may not be successful;
We have undertaken new initiatives and are considering other initiatives to grow our business and any actions we may take to grow our business may not be successful or we may elect to abandon pursuing some or all of those initiatives in order to pursue other initiatives or for other reasons. In addition, any investments or repositioning of the properties we or our clients may make or pursue may not increase the value of the applicable properties, offset the decline in value those properties may otherwise experience, or increase the market capitalization or total shareholder returns of our clients;
We state that our cash and cash equivalents balance leaves us well positioned to pursue numerous capital allocation strategies, including the potential return of shareholder capital in the form of a special dividend, in the next 12 months. This statement may imply that we will successfully identify and execute one or more capital allocation strategies, including that we will return capital to shareholders in the form of a special dividend, in the next 12 months and that any capital allocation strategy we may pursue will be successful and benefit us and our shareholders. However, identifying and executing on capital allocation strategies are subject to various uncertainties and risks and may take an extended period to realize any resulting benefit to our business. In addition, we may elect to not pursue a capital allocation strategy, including returning shareholder capital in the form of a special dividend, or abandon any such strategy we may pursue; and
The COVID-19 pandemic may have lasting affects on our business and the businesses of our clients. Our business is dependent on revenue generated from sectors that have been and may continue to be adversely impacted by COVID-19 to a greater degree than other sectors. Further, our revenues from other sectors may become increasingly adversely impacted by COVID-19. Accordingly, there can be no assurances that we will be able to successfully manage through the COVID-19 pandemic, resulting market disruptions and their aftermath, or that we will be able to take advantage of any resulting opportunities.
There are or will be additional important factors that could cause business outcomes or financial results to differ materially from those stated or implied in our forward-looking statements. For example, the COVID-19 pandemic and its aftermath may reduce or limit any growth in the market value of our Managed Equity REITs or cause their rent receipts or construction activities to decline or cause the revenues of our Managed Operating Companies to significantly decline and, as a result, our revenues and cash flows may continue to be adversely impacted.
We have based our forward-looking statements on our current expectations about future events that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, our forward-looking statements should not be relied on as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected or implied in our forward-looking statements. The matters
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discussed in this warning should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q and in our 2020 Annual Report, including the “Risk Factors” section of our 2020 Annual Report. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Part II. Other Information
Item 1A. Risk Factors
There have been no material changes to the risk factors from those we previously provided in our 2020 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer purchases of equity securities.
The following table provides information about our purchases of our equity securities during the quarter ended June 30, 2021:
Maximum
Total Number ofApproximate Dollar
Shares PurchasedValue of Shares that
Number ofAverageas Part of PubliclyMay Yet Be Purchased
SharesPrice PaidAnnounced PlansUnder the Plans or
Calendar Month
Purchased (1)
per Shareor ProgramsPrograms
June 20215,258 $38.64 N/AN/A
Total5,258 $38.64 N/AN/A
(1)These Class A Common Share withholdings and purchases were made to satisfy tax withholding and payment obligations 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.
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Item 6. Exhibits
Exhibit
Number
Description
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CALXBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
101.LABXBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104Cover Page Interactive Data File. (formatted as Inline XBRL and contained in Exhibit 101.)
(1)
Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the U.S. Securities and Exchange Commission on October 14, 2015.
(2)
Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the U.S. Securities and Exchange Commission on March 11, 2016.
(3)
Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the U.S. Securities and Exchange Commission on September 15, 2017.
(4)
Incorporated by reference to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-207423) filed with the U.S. Securities and Exchange Commission on November 2, 2015.

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SIGNATURES
Pursuant to the requirements 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.
 By:/s/ Matthew P. Jordan
Matthew P. Jordan
Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)
Dated: August 5, 2021
 

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