Maryland (State of Organization) | 47-4122583 (IRS Employer Identification No.) |
Large accelerated filer ☐ | Accelerated filer ☒ | |
Non-accelerated filer ☐ | Smaller reporting company ☐ | |
(Do not check if a smaller reporting company) | ||
Emerging growth company ☒ |
Page | ||
June 30, | September 30, | |||||||
2018 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 280,518 | $ | 108,640 | ||||
Due from related parties | 24,262 | 25,161 | ||||||
Prepaid and other current assets | 10,067 | 7,092 | ||||||
Total current assets | 314,847 | 140,893 | ||||||
Total property and equipment, net | 2,713 | 3,276 | ||||||
Due from related parties, net of current portion | 6,672 | 7,551 | ||||||
Equity method investments | 11,420 | 12,162 | ||||||
Goodwill | 1,859 | 1,859 | ||||||
Intangible assets, net of amortization | 396 | 462 | ||||||
Deferred tax asset | 24,788 | 45,541 | ||||||
Other assets, net of amortization | 164,914 | 171,975 | ||||||
Total assets | $ | 527,609 | $ | 383,719 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 51,015 | $ | 26,414 | ||||
Total current liabilities | 51,015 | 26,414 | ||||||
Long term portion of deferred rent payable, net of current portion | 1,184 | 1,028 | ||||||
Amounts due pursuant to tax receivable agreement, net of current portion | 34,354 | 59,063 | ||||||
Employer compensation liability, net of current portion | 6,672 | 7,551 | ||||||
Total liabilities | 93,225 | 94,056 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Class A common stock, $0.001 par value; 31,600,000 shares authorized; 15,174,463 shares issued and outstanding | 15 | 15 | ||||||
Class B-1 common stock, $0.001 par value; 1,000,000 shares authorized, issued and outstanding | 1 | 1 | ||||||
Class B-2 common stock, $0.001 par value; 15,000,000 shares authorized, issued and outstanding | 15 | 15 | ||||||
Additional paid in capital | 98,531 | 95,878 | ||||||
Retained earnings | 174,693 | 86,836 | ||||||
Cumulative other comprehensive income | 81 | 84 | ||||||
Cumulative common distributions | (45,423 | ) | (33,298 | ) | ||||
Total shareholders’ equity | 227,913 | 149,531 | ||||||
Noncontrolling interest | 206,471 | 140,132 | ||||||
Total equity | 434,384 | 289,663 | ||||||
Total liabilities and equity | $ | 527,609 | $ | 383,719 |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Management services | $ | 47,328 | $ | 44,644 | $ | 142,457 | $ | 130,629 | ||||||||
Incentive business management fees | — | — | 155,881 | 52,407 | ||||||||||||
Reimbursable payroll related and other costs | 13,711 | 9,839 | 38,076 | 29,023 | ||||||||||||
Advisory services | 1,045 | 1,019 | 3,492 | 3,033 | ||||||||||||
Total revenues | 62,084 | 55,502 | 339,906 | 215,092 | ||||||||||||
Expenses: | ||||||||||||||||
Compensation and benefits | 28,606 | 23,731 | 82,876 | 68,746 | ||||||||||||
Equity based compensation | 2,347 | 1,038 | 6,285 | 3,804 | ||||||||||||
Separation costs | 1,739 | — | 1,875 | — | ||||||||||||
Total compensation and benefits expense | 32,692 | 24,769 | 91,036 | 72,550 | ||||||||||||
General and administrative | 6,551 | 6,779 | 20,281 | 19,073 | ||||||||||||
Transaction and acquisition related costs | 775 | 1,760 | 917 | 2,453 | ||||||||||||
Depreciation and amortization | 244 | 467 | 996 | 1,550 | ||||||||||||
Total expenses | 40,262 | 33,775 | 113,230 | 95,626 | ||||||||||||
Operating income | 21,822 | 21,727 | 226,676 | 119,466 | ||||||||||||
Interest and other income | 1,223 | 402 | 3,083 | 1,059 | ||||||||||||
Tax receivable agreement remeasurement | — | — | 24,710 | — | ||||||||||||
Income before income tax expense and equity in losses of investees | 23,045 | 22,129 | 254,469 | 120,525 | ||||||||||||
Income tax expense | (3,462 | ) | (4,528 | ) | (55,486 | ) | (24,811 | ) | ||||||||
Equity in income (losses) of investees | (134 | ) | 4 | (568 | ) | (161 | ) | |||||||||
Net income | 19,449 | 17,605 | 198,415 | 95,553 | ||||||||||||
Net income attributable to noncontrolling interest | (11,068 | ) | (10,748 | ) | (110,558 | ) | (58,303 | ) | ||||||||
Net income attributable to RMR Inc. | $ | 8,381 | $ | 6,857 | $ | 87,857 | $ | 37,250 | ||||||||
Other comprehensive (loss) income: | ||||||||||||||||
Foreign currency translation adjustments | $ | (3 | ) | $ | 1 | (5 | ) | — | ||||||||
Other comprehensive (loss) income | (3 | ) | 1 | (5 | ) | — | ||||||||||
Comprehensive income | 19,446 | 17,606 | 198,410 | 95,553 | ||||||||||||
Comprehensive income attributable to noncontrolling interest | (11,067 | ) | (10,748 | ) | (110,556 | ) | (58,303 | ) | ||||||||
Comprehensive income attributable to RMR Inc. | $ | 8,379 | $ | 6,858 | $ | 87,854 | $ | 37,250 | ||||||||
Weighted average common shares outstanding - basic | 16,087 | 16,037 | 16,072 | 16,029 | ||||||||||||
Weighted average common shares outstanding - diluted | 16,135 | 16,058 | 16,111 | 16,044 | ||||||||||||
Net income attributable to RMR Inc. per common share - basic | $ | 0.52 | $ | 0.43 | $ | 5.43 | $ | 2.32 | ||||||||
Net income attributable to RMR Inc. per common share - diluted | $ | 0.52 | $ | 0.43 | $ | 5.42 | $ | 2.31 |
Cumulative | ||||||||||||||||||||||||||||||||||||||||
Class A | Class B-1 | Class B-2 | Additional | Other | Cumulative | Total | ||||||||||||||||||||||||||||||||||
Common | Common | Common | Paid In | Retained | Comprehensive | Common | Shareholders' | Noncontrolling | Total | |||||||||||||||||||||||||||||||
Stock | Stock | Stock | Capital | Earnings | Income | Distributions | Equity | Interest | Equity | |||||||||||||||||||||||||||||||
Balance at September 30, 2017 | $ | 15 | $ | 1 | $ | 15 | $ | 95,878 | $ | 86,836 | $ | 84 | $ | (33,298 | ) | $ | 149,531 | $ | 140,132 | $ | 289,663 | |||||||||||||||||||
Share grants, net | — | — | — | 2,653 | — | — | — | 2,653 | — | 2,653 | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | 87,857 | — | — | 87,857 | 110,558 | 198,415 | ||||||||||||||||||||||||||||||
Fees from services provided prior to the Up-C Transaction | — | — | — | — | — | — | — | — | (127 | ) | (127 | ) | ||||||||||||||||||||||||||||
Tax distributions to Member | — | — | — | — | — | — | — | — | (32,840 | ) | (32,840 | ) | ||||||||||||||||||||||||||||
Common share distributions | — | — | — | — | — | — | (12,125 | ) | (12,125 | ) | (11,250 | ) | (23,375 | ) | ||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (3 | ) | — | (3 | ) | (2 | ) | (5 | ) | ||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | 15 | $ | 1 | $ | 15 | $ | 98,531 | $ | 174,693 | $ | 81 | $ | (45,423 | ) | $ | 227,913 | $ | 206,471 | $ | 434,384 |
Nine Months Ended June 30, | ||||||||
2018 | 2017 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 198,415 | $ | 95,553 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 996 | 1,550 | ||||||
Straight line office rent | 156 | 197 | ||||||
Amortization expense related to other asset | 7,062 | 7,062 | ||||||
Deferred income taxes | 20,753 | 2,487 | ||||||
Operating expenses paid in RMR Inc. common shares | 2,781 | 1,021 | ||||||
Contingent consideration liability | (491 | ) | (456 | ) | ||||
Tax receivable agreement remeasurement | (24,710 | ) | — | |||||
Distribution from equity method investments | 174 | 70 | ||||||
Equity in losses of investees | 568 | 161 | ||||||
Changes in assets and liabilities: | ||||||||
Due from related parties | (2,857 | ) | (5,779 | ) | ||||
Prepaid and other current assets | (2,975 | ) | (3,617 | ) | ||||
Accounts payable and accrued expenses | 28,824 | 24,682 | ||||||
Net cash from operating activities | 228,696 | 122,931 | ||||||
Cash Flows from Investing Activities: | ||||||||
Purchase of property and equipment | (470 | ) | (604 | ) | ||||
Net cash used in investing activities | (470 | ) | (604 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Distributions to noncontrolling interest | (44,090 | ) | (38,383 | ) | ||||
Distributions to common shareholders | (12,125 | ) | (12,065 | ) | ||||
Repurchase of common shares | (128 | ) | — | |||||
Net cash used in financing activities | (56,343 | ) | (50,448 | ) | ||||
Effect of exchange rate fluctuations on cash and cash equivalents | (5 | ) | (1 | ) | ||||
Increase in cash and cash equivalents | 171,878 | 71,878 | ||||||
Cash and cash equivalents at beginning of period | 108,640 | 65,833 | ||||||
Cash and cash equivalents at end of period | $ | 280,518 | $ | 137,711 | ||||
Supplemental cash flow information: | ||||||||
Income taxes paid | $ | 30,174 | $ | 23,336 |
• | 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. |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Income taxes computed at the federal statutory rate | 24.5 | % | 35.0 | % | 24.5 | % | 35.0 | % | ||||
State taxes, net of federal benefit | 2.3 | % | 2.5 | % | 2.5 | % | 2.5 | % | ||||
Tax Cuts and Jobs Act transitional impact (1) | — | % | — | % | 7.8 | % | — | % | ||||
Permanent items (2) | — | % | — | % | (2.3 | )% | — | % | ||||
Net income attributable to noncontrolling interest | (11.8 | )% | (17.0 | )% | (10.7 | )% | (16.9 | )% | ||||
Total | 15.0 | % | 20.5 | % | 21.8 | % | 20.6 | % |
(1) | Transitional impact is the $19,817 adjustment to our deferred tax asset due to the reduction in our corporate income tax rate under the Tax Act. |
(2) | Permanent items include the $24,710 reduction in our liability related to the tax receivable agreement with ABP Trust discussed in Note 7. |
June 30, | September 30, | |||||||
2018 | 2017 | |||||||
Money market funds included in cash and cash equivalents | $ | 278,433 | $ | 104,700 | ||||
Current portion of due from related parties related to share based payment awards | 1,281 | 4,910 | ||||||
Long term portion of due from related parties related to share based payment awards | 6,672 | 7,551 | ||||||
Current portion of employer compensation liability related to share based payment awards included in accounts payable and accrued expenses | 1,281 | 4,910 | ||||||
Long term portion of employer compensation liability related to share based payment awards | 6,672 | 7,551 |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||
Managed Equity REITs: | ||||||||||||||||||||||||||||
GOV | $ | 13,508 | 21.8 | % | $ | 9,139 | 16.4 | % | $ | 40,248 | 11.8 | % | $ | 26,302 | 12.3 | % | ||||||||||||
HPT | 10,803 | 17.5 | 10,636 | 19.2 | 106,926 | 31.5 | 84,156 | 39.1 | ||||||||||||||||||||
ILPT | 3,744 | 6.0 | — | — | 6,735 | 2.0 | — | — | ||||||||||||||||||||
SIR | 8,448 | 13.6 | 11,089 | 20.0 | 53,987 | 15.9 | 33,108 | 15.4 | ||||||||||||||||||||
SNH | 15,364 | 24.7 | 15,653 | 28.2 | 101,806 | 30.0 | 45,433 | 21.1 | ||||||||||||||||||||
51,867 | 83.6 | 46,517 | 83.8 | 309,702 | 91.2 | 188,999 | 87.9 | |||||||||||||||||||||
Managed Operators: | ||||||||||||||||||||||||||||
Five Star | 2,383 | 3.8 | 2,439 | 4.4 | 7,462 | 2.2 | 7,206 | 3.4 | ||||||||||||||||||||
Sonesta | 836 | 1.3 | 671 | 1.2 | 2,099 | 0.6 | 1,745 | 0.8 | ||||||||||||||||||||
TA | 4,052 | 6.6 | 3,659 | 6.6 | 11,307 | 3.3 | 10,822 | 5.0 | ||||||||||||||||||||
7,271 | 11.7 | 6,769 | 12.2 | 20,868 | 6.1 | 19,773 | 9.2 | |||||||||||||||||||||
Other: | ||||||||||||||||||||||||||||
ABP Trust | 1,258 | 2.0 | 1,024 | 1.9 | 3,868 | 1.1 | 2,755 | 1.3 | ||||||||||||||||||||
AIC | 60 | 0.1 | 60 | 0.1 | 180 | 0.1 | 180 | 0.1 | ||||||||||||||||||||
RIF | 706 | 1.1 | 613 | 1.1 | 2,134 | 0.6 | 1,826 | 0.8 | ||||||||||||||||||||
TRMT | 639 | 1.0 | — | — | 1,986 | 0.6 | — | — | ||||||||||||||||||||
2,663 | 4.2 | 1,697 | 3.1 | 8,168 | 2.4 | 4,761 | 2.2 | |||||||||||||||||||||
Total revenues from related parties | 61,801 | 99.5 | 54,983 | 99.1 | 338,738 | 99.7 | 213,533 | 99.3 | ||||||||||||||||||||
Other unrelated parties | 283 | 0.5 | 519 | 0.9 | 1,168 | 0.3 | 1,559 | 0.7 | ||||||||||||||||||||
$ | 62,084 | 100.0 | % | $ | 55,502 | 100.0 | % | $ | 339,906 | 100.0 | % | $ | 215,092 | 100.0 | % |
June 30, | September 30, | |||||||
2018 | 2017 | |||||||
Managed Equity REITs: | ||||||||
GOV | $ | 7,707 | $ | 6,369 | ||||
HPT | 6,557 | 7,968 | ||||||
ILPT | 1,449 | — | ||||||
SIR | 5,107 | 7,351 | ||||||
SNH | 8,111 | 9,550 | ||||||
28,931 | 31,238 | |||||||
Managed Operators: | ||||||||
Five Star | 292 | 305 | ||||||
Sonesta | 41 | 1 | ||||||
TA | 668 | 444 | ||||||
1,001 | 750 | |||||||
Other Client Companies: | ||||||||
ABP Trust | 680 | 551 | ||||||
AIC | 20 | 22 | ||||||
RIF | 63 | 36 | ||||||
TRMT | 239 | 115 | ||||||
1,002 | 724 | |||||||
$ | 30,934 | $ | 32,712 |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Basic EPS | ||||||||||||||||
Numerator: | ||||||||||||||||
Net income attributable to RMR Inc. | $ | 8,381 | $ | 6,857 | $ | 87,857 | $ | 37,250 | ||||||||
Income attributable to unvested participating securities | (45 | ) | (25 | ) | (518 | ) | (135 | ) | ||||||||
Net income attributable to RMR Inc. used in calculating basic EPS | $ | 8,336 | $ | 6,832 | $ | 87,339 | $ | 37,115 | ||||||||
Denominator: | ||||||||||||||||
Weighted average common shares outstanding - basic | 16,087 | 16,037 | 16,072 | 16,029 | ||||||||||||
Net income attributable to RMR Inc. per common share - basic | $ | 0.52 | $ | 0.43 | $ | 5.43 | $ | 2.32 | ||||||||
Diluted EPS | ||||||||||||||||
Numerator: | ||||||||||||||||
Net income attributable to RMR Inc. | $ | 8,381 | $ | 6,857 | $ | 87,857 | $ | 37,250 | ||||||||
Income attributable to unvested participating securities | (45 | ) | (25 | ) | (518 | ) | (135 | ) | ||||||||
Net income attributable to RMR Inc. used in calculating diluted EPS | $ | 8,336 | $ | 6,832 | $ | 87,339 | $ | 37,115 | ||||||||
Denominator: | ||||||||||||||||
Weighted average common shares outstanding - basic | 16,087 | 16,037 | 16,072 | 16,029 | ||||||||||||
Dilutive effect of incremental unvested shares | 48 | 21 | 39 | 15 | ||||||||||||
Weighted average common shares outstanding - diluted | 16,135 | 16,058 | 16,111 | 16,044 | ||||||||||||
Net income attributable to RMR Inc. per common share - diluted | $ | 0.52 | $ | 0.43 | $ | 5.42 | $ | 2.31 |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Income before income tax expense and equity in losses of investees | $ | 23,045 | $ | 22,129 | $ | 254,469 | $ | 120,525 | ||||||||
Add: RMR Inc. franchise tax expense and interest income | 91 | 147 | 375 | 456 | ||||||||||||
Less: tax receivable agreement remeasurement | — | — | (24,710 | ) | — | |||||||||||
Less: equity in losses of investees | (134 | ) | 4 | (568 | ) | (161 | ) | |||||||||
Less: fees from services provided prior to the UP-C Transaction | — | — | (127 | ) | — | |||||||||||
Net income before noncontrolling interest | 23,002 | 22,280 | 229,439 | 120,820 | ||||||||||||
Less: noncontrolling interest | (11,068 | ) | (10,748 | ) | (110,431 | ) | (58,303 | ) | ||||||||
Net income attributable to RMR Inc. before income tax expense | 11,934 | 11,532 | 119,008 | 62,517 | ||||||||||||
Add: tax receivable agreement remeasurement | — | — | 24,710 | — | ||||||||||||
Less: income tax expense attributable to RMR Inc. | (3,462 | ) | (4,528 | ) | (55,486 | ) | (24,811 | ) | ||||||||
Less: RMR Inc. franchise tax expense and interest income | (91 | ) | (147 | ) | (375 | ) | (456 | ) | ||||||||
Net income attributable to RMR Inc. | $ | 8,381 | $ | 6,857 | $ | 87,857 | $ | 37,250 |
Three Months Ended June 30, 2018 | ||||||||||||
All Other | ||||||||||||
RMR LLC (1) | Operations | Total | ||||||||||
Revenues: | ||||||||||||
Management services | $ | 47,328 | $ | — | $ | 47,328 | ||||||
Reimbursable payroll related and other costs | 13,078 | 633 | 13,711 | |||||||||
Advisory services | — | 1,045 | 1,045 | |||||||||
Total revenues | 60,406 | 1,678 | 62,084 | |||||||||
Expenses: | ||||||||||||
Compensation and benefits | 27,047 | 1,559 | 28,606 | |||||||||
Equity based compensation | 2,333 | 14 | 2,347 | |||||||||
Separation costs | 1,739 | — | 1,739 | |||||||||
Total compensation and benefits expense | 31,119 | 1,573 | 32,692 | |||||||||
General and administrative | 5,665 | 886 | 6,551 | |||||||||
Transaction and acquisition related costs | 775 | — | 775 | |||||||||
Depreciation and amortization | 222 | 22 | 244 | |||||||||
Total expenses | 37,781 | 2,481 | 40,262 | |||||||||
Operating income (loss) | 22,625 | (803 | ) | 21,822 | ||||||||
Interest and other income | 1,085 | 138 | 1,223 | |||||||||
Income (loss) before income tax expense and equity in losses of investees | 23,710 | (665 | ) | 23,045 | ||||||||
Income tax expense | — | (3,462 | ) | (3,462 | ) | |||||||
Equity in losses of investees | (2 | ) | (132 | ) | (134 | ) | ||||||
Net income (loss) | $ | 23,708 | $ | (4,259 | ) | $ | 19,449 | |||||
Total Assets: | $ | 460,596 | $ | 67,013 | $ | 527,609 |
Nine Months Ended June 30, 2018 | ||||||||||||
All Other | ||||||||||||
RMR LLC (1) | Operations | Total | ||||||||||
Revenues: | ||||||||||||
Management services | $ | 142,457 | $ | — | $ | 142,457 | ||||||
Incentive business management fees | 155,881 | — | 155,881 | |||||||||
Reimbursable payroll related and other costs | 36,193 | 1,883 | 38,076 | |||||||||
Advisory services | — | 3,492 | 3,492 | |||||||||
Total revenues | 334,531 | 5,375 | 339,906 | |||||||||
Expenses: | ||||||||||||
Compensation and benefits | 78,415 | 4,461 | 82,876 | |||||||||
Equity based compensation | 6,244 | 41 | 6,285 | |||||||||
Separation costs | 1,875 | — | 1,875 | |||||||||
Total compensation and benefits expense | 86,534 | 4,502 | 91,036 | |||||||||
General and administrative | 17,343 | 2,938 | 20,281 | |||||||||
Transaction and acquisition related costs | 775 | 142 | 917 | |||||||||
Depreciation and amortization | 931 | 65 | 996 | |||||||||
Total expenses | 105,583 | 7,647 | 113,230 | |||||||||
Operating income (loss) | 228,948 | (2,272 | ) | 226,676 | ||||||||
Interest and other income | 2,810 | 273 | 3,083 | |||||||||
Tax receivable agreement remeasurement | — | 24,710 | 24,710 | |||||||||
Income before income tax expense and equity in losses of investees | 231,758 | 22,711 | 254,469 | |||||||||
Income tax expense | — | (55,486 | ) | (55,486 | ) | |||||||
Equity in losses of investees | $ | 33 | $ | (601 | ) | $ | (568 | ) | ||||
Net income (loss) | $ | 231,791 | $ | (33,376 | ) | $ | 198,415 | |||||
Total Assets: | $ | 460,596 | $ | 67,013 | $ | 527,609 |
Three Months Ended June 30, 2017 | ||||||||||||
All Other | ||||||||||||
RMR LLC (1) | Operations | Total | ||||||||||
Revenues: | ||||||||||||
Management services | $ | 44,644 | $ | — | $ | 44,644 | ||||||
Reimbursable payroll related and other costs | 9,839 | — | 9,839 | |||||||||
Advisory services | — | 1,019 | 1,019 | |||||||||
Total revenues | 54,483 | 1,019 | 55,502 | |||||||||
Expenses: | ||||||||||||
Compensation and benefits | 23,050 | 681 | 23,731 | |||||||||
Equity based compensation | 1,038 | — | 1,038 | |||||||||
Total compensation and benefits expense | 24,088 | 681 | 24,769 | |||||||||
General and administrative | 6,297 | 482 | 6,779 | |||||||||
Transaction and acquisition related costs | 1,760 | — | 1,760 | |||||||||
Depreciation and amortization | 321 | 146 | 467 | |||||||||
Total expenses | 32,466 | 1,309 | 33,775 | |||||||||
Operating income (loss) | 22,017 | (290 | ) | 21,727 | ||||||||
Interest and other income | 377 | 25 | 402 | |||||||||
Income (loss) before income tax expense and equity in losses of investees | 22,394 | (265 | ) | 22,129 | ||||||||
Income tax expense | — | (4,528 | ) | (4,528 | ) | |||||||
Equity in losses of investees | $ | — | $ | 4 | $ | 4 | ||||||
Net income (loss) | $ | 22,394 | $ | (4,789 | ) | $ | 17,605 | |||||
Total Assets: | $ | 344,738 | $ | 59,250 | $ | 403,988 |
Nine Months Ended June 30, 2017 | ||||||||||||
All Other | ||||||||||||
RMR LLC (1) | Operations | Total | ||||||||||
Revenues: | ||||||||||||
Management services | $ | 130,629 | $ | — | $ | 130,629 | ||||||
Incentive business management fees | 52,407 | — | 52,407 | |||||||||
Reimbursable payroll related and other costs | 29,023 | — | 29,023 | |||||||||
Advisory services | — | 3,033 | 3,033 | |||||||||
Total revenues | 212,059 | 3,033 | 215,092 | |||||||||
Expenses: | ||||||||||||
Compensation and benefits | 67,038 | 1,708 | 68,746 | |||||||||
Equity based compensation | 3,804 | — | 3,804 | |||||||||
Total compensation and benefits expense | 70,842 | 1,708 | 72,550 | |||||||||
General and administrative | 18,086 | 987 | 19,073 | |||||||||
Transaction and acquisition related costs | 2,453 | — | 2,453 | |||||||||
Depreciation and amortization | 1,072 | 478 | 1,550 | |||||||||
Total expenses | 92,453 | 3,173 | 95,626 | |||||||||
Operating income (loss) | 119,606 | (140 | ) | 119,466 | ||||||||
Interest and other income | 657 | 402 | 1,059 | |||||||||
Income before income tax expense and equity in losses of investees | 120,263 | 262 | 120,525 | |||||||||
Income tax expense | — | (24,811 | ) | (24,811 | ) | |||||||
Equity in losses of investees | $ | — | $ | (161 | ) | $ | (161 | ) | ||||
Net income (loss) | $ | 120,263 | $ | (24,710 | ) | $ | 95,553 | |||||
Total Assets: | $ | 344,738 | $ | 59,250 | $ | 403,988 |
Lesser of Historical Cost of Assets Under | ||||||||||
Total Market Capitalization | ||||||||||
As of June 30, | ||||||||||
REIT | Primary Strategy | 2018 | 2017 | |||||||
GOV | Office properties leased to government and private sector tenants | $ | 3,457,505 | $ | 2,235,767 | |||||
HPT | Hotels and travel centers | 8,874,447 | 8,666,849 | |||||||
ILPT | Industrial and logistics properties | 1,496,199 | — | |||||||
SIR | Land and properties primarily leased to single tenants | 3,446,029 | 4,611,115 | |||||||
SNH | Senior living, medical office and life science properties | 8,006,840 | 8,272,965 | |||||||
$ | 25,281,020 | $ | 23,786,696 |
Three Months Ended June 30, 2018 (1) | Three Months Ended June 30, 2017 (1) | |||||||||||||||||||||||||||||||
Incentive | Incentive | |||||||||||||||||||||||||||||||
Base Business | Business | Property | Base Business | Business | Property | |||||||||||||||||||||||||||
Management | Management | Management | Management | Management | Management | |||||||||||||||||||||||||||
REIT | Revenues | Revenues | Revenues | Total | Revenues | Revenues | Revenues | Total | ||||||||||||||||||||||||
GOV | $ | 4,396 | $ | — | $ | 3,574 | $ | 7,970 | $ | 2,837 | $ | — | $ | 2,584 | $ | 5,421 | ||||||||||||||||
HPT | 10,055 | — | 11 | 10,066 | 10,315 | — | 10 | 10,325 | ||||||||||||||||||||||||
ILPT | 1,945 | — | 1,155 | 3,100 | — | — | — | — | ||||||||||||||||||||||||
SIR | 4,147 | — | 2,395 | 6,542 | 5,674 | — | 3,302 | 8,976 | ||||||||||||||||||||||||
SNH | 9,012 | — | 3,016 | 12,028 | 9,817 | — | 2,966 | 12,783 | ||||||||||||||||||||||||
$ | 29,555 | $ | — | $ | 10,151 | $ | 39,706 | $ | 28,643 | $ | — | $ | 8,862 | $ | 37,505 | |||||||||||||||||
Nine Months Ended June 30, 2018 (1) | Nine Months Ended June 30, 2017 (1) | |||||||||||||||||||||||||||||||
Incentive | Incentive | |||||||||||||||||||||||||||||||
Base Business | Business | Property | Base Business | Business | Property | |||||||||||||||||||||||||||
Management | Management | Management | Management | Management | Management | |||||||||||||||||||||||||||
REIT | Revenues | Revenues | Revenues | Total | Revenues | Revenues | Revenues | Total | ||||||||||||||||||||||||
GOV | $ | 13,213 | $ | — | $ | 11,510 | $ | 24,723 | $ | 8,317 | $ | — | $ | 7,403 | $ | 15,720 | ||||||||||||||||
HPT | 30,544 | 74,572 | 36 | 105,152 | 30,341 | 52,407 | 40 | 82,788 | ||||||||||||||||||||||||
ILPT | 3,427 | — | 2,122 | 5,549 | — | — | — | — | ||||||||||||||||||||||||
SIR | 14,391 | 25,569 | 8,088 | 48,048 | 16,970 | — | 9,691 | 26,661 | ||||||||||||||||||||||||
SNH | 28,015 | 55,740 | 8,785 | 92,540 | 29,188 | — | 8,029 | 37,217 | ||||||||||||||||||||||||
$ | 89,590 | $ | 155,881 | $ | 30,541 | $ | 276,012 | $ | 84,816 | $ | 52,407 | $ | 25,163 | $ | 162,386 |
(1) | Excludes reimbursable payroll related and other costs. While we record incentive business management fee revenue only when earned, we estimate that we would have earned aggregate incentive business management fees from the Managed REITs of $95,019 as of June 30, 2018 if that date had been the end of a measurement period. This estimated amount of incentive business management fees which would have been earned if the measurement period ended on June 30, 2018 is not included in the fees listed in the tables above or in our condensed consolidated financial statements as it may not reflect the incentive business management fees which will be earned as of the end of the measurement period, if any. |
Three Months Ended June 30, (1) | Nine Months Ended June 30, (1) | |||||||||||||||
Company | 2018 | 2017 | 2018 | 2017 | ||||||||||||
ABP Trust | $ | 402 | $ | 410 | $ | 1,518 | $ | 1,019 | ||||||||
AIC | 60 | 60 | 180 | 180 | ||||||||||||
Five Star | 2,312 | 2,354 | 7,206 | 6,972 | ||||||||||||
Sonesta | 740 | 625 | 1,941 | 1,668 | ||||||||||||
TA | 3,914 | 3,577 | 10,899 | 10,459 | ||||||||||||
$ | 7,428 | $ | 7,026 | $ | 21,744 | $ | 20,298 |
(1) | Includes business management fees and property management fees, including construction supervision fees, if any, earned during the applicable period and excludes reimbursable payroll related and other costs. |
Three Months Ended June 30, | |||||||||||||||
2018 | 2017 | $ Change | % Change | ||||||||||||
Revenues: | |||||||||||||||
Management services | $ | 47,328 | $ | 44,644 | $ | 2,684 | 6.0 | % | |||||||
Reimbursable payroll related and other costs | 13,711 | 9,839 | 3,872 | 39.4 | |||||||||||
Advisory services | 1,045 | 1,019 | 26 | 2.6 | |||||||||||
Total revenues | 62,084 | 55,502 | 6,582 | 11.9 | |||||||||||
Expenses: | |||||||||||||||
Compensation and benefits | 28,606 | 23,731 | 4,875 | 20.5 | |||||||||||
Equity based compensation | 2,347 | 1,038 | 1,309 | 126.1 | |||||||||||
Separation costs | 1,739 | — | 1,739 | 100.0 | |||||||||||
Total compensation and benefits expense | 32,692 | 24,769 | 7,923 | 32.0 | |||||||||||
General and administrative | 6,551 | 6,779 | (228 | ) | (3.4 | ) | |||||||||
Transaction and acquisition related costs | 775 | 1,760 | (985 | ) | (56.0 | ) | |||||||||
Depreciation and amortization | 244 | 467 | (223 | ) | (47.8 | ) | |||||||||
Total expenses | 40,262 | 33,775 | 6,487 | 19.2 | |||||||||||
Operating income | 21,822 | 21,727 | 95 | 0.4 | |||||||||||
Interest and other income | 1,223 | 402 | 821 | 204.2 | |||||||||||
Income before income tax expense and equity in losses of investees | 23,045 | 22,129 | 916 | 4.1 | |||||||||||
Income tax expense | (3,462 | ) | (4,528 | ) | 1,066 | 23.5 | |||||||||
Equity in losses of investees | (134 | ) | 4 | (138 | ) | nm | |||||||||
Net income | 19,449 | 17,605 | 1,844 | 10.5 | |||||||||||
Net income attributable to noncontrolling interest | (11,068 | ) | (10,748 | ) | (320 | ) | (3.0 | ) | |||||||
Net income attributable to RMR Inc. | $ | 8,381 | $ | 6,857 | $ | 1,524 | 22.2 | % |
Three Months Ended June 30, | ||||||||||||
Source | 2018 | 2017 | Change | |||||||||
Managed Equity REITs | $ | 39,706 | $ | 37,505 | $ | 2,201 | ||||||
Managed Operators | 6,966 | 6,556 | 410 | |||||||||
Other Client Companies | 656 | 583 | 73 | |||||||||
Total | $ | 47,328 | $ | 44,644 | $ | 2,684 |
Nine Months Ended June 30, | |||||||||||||||
2018 | 2017 | $ Change | % Change | ||||||||||||
Revenues: | |||||||||||||||
Management services | $ | 142,457 | $ | 130,629 | $ | 11,828 | 9.1 | % | |||||||
Incentive business management fees | 155,881 | 52,407 | 103,474 | 197.4 | |||||||||||
Reimbursable payroll related and other costs | 38,076 | 29,023 | 9,053 | 31.2 | |||||||||||
Advisory services | 3,492 | 3,033 | 459 | 15.1 | |||||||||||
Total revenues | 339,906 | 215,092 | 124,814 | 58.0 | |||||||||||
Expenses: | |||||||||||||||
Compensation and benefits | 82,876 | 68,746 | 14,130 | 20.6 | |||||||||||
Equity based compensation | 6,285 | 3,804 | 2,481 | 65.2 | |||||||||||
Separation costs | 1,875 | — | 1,875 | 100.0 | |||||||||||
Total compensation and benefits expense | 91,036 | 72,550 | 18,486 | 25.5 | |||||||||||
General and administrative | 20,281 | 19,073 | 1,208 | 6.3 | |||||||||||
Transaction and acquisition related costs | 917 | 2,453 | (1,536 | ) | (62.6 | ) | |||||||||
Depreciation and amortization | 996 | 1,550 | (554 | ) | (35.7 | ) | |||||||||
Total expenses | 113,230 | 95,626 | 17,604 | 18.4 | |||||||||||
Operating income | 226,676 | 119,466 | 107,210 | 89.7 | |||||||||||
Interest and other income | 3,083 | 1,059 | 2,024 | 191.1 | |||||||||||
Tax receivable agreement remeasurement | 24,710 | — | 24,710 | 100.0 | |||||||||||
Income before income tax expense and equity in earnings of investees | 254,469 | 120,525 | 133,944 | 111.1 | |||||||||||
Income tax expense | (55,486 | ) | (24,811 | ) | (30,675 | ) | (123.6 | ) | |||||||
Equity in earnings of investees | (568 | ) | (161 | ) | (407 | ) | (252.8 | ) | |||||||
Net income | 198,415 | 95,553 | 102,862 | 107.6 | |||||||||||
Net income attributable to noncontrolling interest | (110,558 | ) | (58,303 | ) | (52,255 | ) | (89.6 | ) | |||||||
Net income attributable to RMR Inc. | $ | 87,857 | $ | 37,250 | $ | 50,607 | 135.9 | % |
Nine Months Ended June 30, | ||||||||||||
Source | 2018 | 2017 | Change | |||||||||
Managed Equity REITs | $ | 120,131 | $ | 109,979 | $ | 10,152 | ||||||
Managed Operators | 20,046 | 19,099 | 947 | |||||||||
Other Client Companies | 2,280 | 1,551 | 729 | |||||||||
Total | $ | 142,457 | $ | 130,629 | $ | 11,828 |
• | SUBSTANTIALLY ALL OF OUR REVENUES ARE DERIVED FROM SERVICES TO A LIMITED NUMBER OF CLIENT COMPANIES; |
• | OUR REVENUES ARE HIGHLY VARIABLE; |
• | CHANGING MARKET CONDITIONS, INCLUDING RISING INTEREST RATES MAY ADVERSELY IMPACT OUR CLIENT COMPANIES AND OUR BUSINESS WITH THEM; |
• | POTENTIAL TERMINATIONS OF OUR MANAGEMENT AGREEMENTS WITH OUR CLIENT COMPANIES; |
• | OUR ABILITY TO EXPAND OUR BUSINESS DEPENDS UPON THE GROWTH AND PERFORMANCE OF OUR CLIENT COMPANIES AND OUR ABILITY TO OBTAIN OR CREATE NEW CLIENTS FOR OUR BUSINESS AND TO SUCCESSFULLY EXECUTE ON NEW BUSINESS VENTURES AND INVESTMENTS WE MAY PURSUE AND IS OFTEN DEPENDENT UPON CIRCUMSTANCES BEYOND OUR CONTROL; |
• | LITIGATION RISKS; |
• | 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. |
• | WE HAVE A LIMITED NUMBER OF CLIENT COMPANIES. 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; |
• | THE BASE BUSINESS MANAGEMENT FEES WE EARN FROM OUR MANAGED EQUITY REITS ARE CALCULATED BASED UPON THE LOWER OF EACH REIT’S COST OF ITS APPLICABLE ASSETS AND SUCH REIT’S MARKET CAPITALIZATION. THE MANAGEMENT FEES WE EARN FROM OUR MANAGED OPERATORS ARE CALCULATED BASED UPON CERTAIN REVENUES FROM EACH OPERATOR'S BUSINESS. ACCORDINGLY, OUR FUTURE REVENUES, INCOME AND CASH FLOWS WILL DECLINE IF THE BUSINESSES, ASSETS OR MARKET CAPITALIZATION OF THESE CLIENT COMPANIES DECLINE; |
• | WE EARNED AGGREGATE INCENTIVE BUSINESS MANAGEMENT FEES OF $155.9 MILLION FROM CERTAIN MANAGED EQUITY REITS FOR THE 2017 CALENDAR YEAR. THERE CAN BE NO ASSURANCE THAT WE WILL EARN ANY INCENTIVE BUSINESS MANAGEMENT FEES IN THE FUTURE. THE INCENTIVE BUSINESS MANAGEMENT FEES WHICH WE MAY EARN FROM OUR MANAGED EQUITY REITS ARE BASED UPON TOTAL RETURNS REALIZED BY THE REITS' SHAREHOLDERS, AS DEFINED, COMPARED TO THE SHAREHOLDERS TOTAL RETURN OF CERTAIN IDENTIFIED INDICES. WE HAVE LIMITED CONTROL OVER THE TOTAL RETURNS REALIZED BY SHAREHOLDERS OF OUR MANAGED EQUITY REITS AND NO CONTROL OVER INDEXED TOTAL RETURNS; AND |
• | WE CURRENTLY INTEND TO PAY A REGULAR QUARTERLY DIVIDEND OF $0.25 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 EARNINGS, OUR 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 STATE THAT RMR LLC’S $100.0 MILLION COMMITMENT TO THE FUND IS EXPECTED TO BE DRAWN AND INVESTED BY THE FUND WITHIN THE NEXT YEAR. THE ACQUISITION ENVIRONMENT FOR OFFICE PROPERTIES IN THE UNITED STATES IS COMPETITIVE AND THE FUND MAY NOT BE SUCCESSFUL IN DRAWING AND INVESTING ALL, OR ANY, OF THIS CAPITAL WITHIN ONE YEAR OR OTHERWISE. |
Exhibit Number | Description | |
3.1 | Articles of Amendment and Restatement of the Registrant* | |
3.2 | Articles of Amendment, filed July 30, 2015* | |
3.3 | Articles of Amendment, filed September 11, 2015* | |
3.4 | Articles of Amendment, filed March 9, 2016** | |
3.5 | Fourth Amended and Restated Bylaws of the Registrant adopted September 13, 2017*** | |
4.1 | Form of The RMR Group Inc. Share Certificate for Class A Common Stock**** | |
4.2 | Registration Rights Agreement, dated as of June 5, 2015, by and between the Registrant and Government Properties Income Trust* | |
4.3 | Registration Rights Agreement, dated as of June 5, 2015, by and between the Registrant and Hospitality Properties Trust* | |
4.4 | Registration Rights Agreement, dated as of June 5, 2015, by and between the Registrant and Select Income REIT* | |
4.5 | Registration Rights Agreement, dated as of June 5, 2015, by and between the Registrant and Senior Housing Properties Trust* | |
4.6 | Registration Rights Agreement, dated as of June 5, 2015, by and between the Registrant and ABP Trust* | |
10.1 | ||
10.2 | ||
31.1 | ||
31.2 | ||
32.1 | ||
101.1 | The following materials from RMR Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statement of Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) related notes to these financial statements, tagged as blocks of text and in detail. (Filed herewith.) | |
* | 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. | |
** | 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. | |
*** | 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. | |
**** | 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. |
By: | /s/ Matthew P. Jordan | |
Matthew P. Jordan | ||
Treasurer and Chief Financial Officer (principal financial officer and principal accounting officer) | ||
Dated: August 8, 2018 |
LANDLORD: |
RMR West LLC By: /s/ Ethan S. Bornstein |
Ethan S. Bornstein President |
TENANT: |
The RMR Group LLC By: /s/ Jennifer F. Francis |
Jennifer F. Francis Senior Vice President |
Period | Annual Fixed Rent | Monthly Rent |
5/1/18 – 5/31/18 | $2,973,641.40 | $247,803.45 |
6/1/18 – 5/31/19 | $3,018,964.92 | $251,580.41 |
6/1/19 – 5/31/20 | $3,064,288.44 | $255,357.37 |
6/1/20 – 5/31/21 | $3,109,611.96 | $259,134.33 |
6/1/21 – 5/31/22 | $3,472,908.30 | $289,409.03 |
6/1/22 – 5/31/23 | $3,535,228.14 | $294,602.35 |
6/1/23 – 5/31/24 | $3,596,839.80 | $299,736.65 |
6/1/24 – 5/31/25 | $3,659,159.64 | $304,929.97 |
LANDLORD: |
ABP Borrower, Inc. By: /s/ Ethan S. Bornstein |
Ethan S. Bornstein President |
TENANT: |
The RMR Group LLC By: /s/ Jennifer F. Francis |
Jennifer F. Francis Senior Vice President |
1. | I have reviewed this Quarterly Report on Form 10-Q of The RMR Group Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 8, 2018 | /s/ Adam D. Portnoy |
Adam D. Portnoy Managing Director, President and Chief Executive Officer (principal executive officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of The RMR Group Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 8, 2018 | /s/ Matthew P. Jordan |
Matthew P. Jordan Treasurer and Chief Financial Officer (principal financial officer and principal accounting officer) |
1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Adam D. Portnoy | /s/ Matthew P. Jordan | |
Adam D. Portnoy Managing Director, President and Chief Executive Officer (principal executive officer) | Matthew P. Jordan Treasurer and Chief Financial Officer (principal financial officer and principal accounting officer) | |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Aug. 07, 2018 |
|
Entity Registrant Name | RMR Group Inc. | |
Entity Central Index Key | 0001644378 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Class A common shares | ||
Entity Common Stock, Shares Outstanding | 15,174,463 | |
Class B-1 common shares | ||
Entity Common Stock, Shares Outstanding | 1,000,000 | |
Class B-2 common shares | ||
Entity Common Stock, Shares Outstanding | 15,000,000 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
Common stock, shares authorized | 15,000,000,000 | |
Class A common shares | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 31,600,000 | 31,600,000 |
Common stock, shares issued | 15,174,463 | 15,174,463 |
Common stock, shares outstanding | 15,174,463 | 15,174,463 |
Class B-1 common shares | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 1,000,000 | 1,000,000 |
Common stock, shares issued | 1,000,000 | 1,000,000 |
Common stock, shares outstanding | 1,000,000 | 1,000,000 |
Class B-2 common shares | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, shares issued | 15,000,000 | 15,000,000 |
Common stock, shares outstanding | 15,000,000 | 15,000,000 |
Condensed Consolidated Statements of Shareholders' Equity - 9 months ended Jun. 30, 2018 - USD ($) $ in Thousands |
Total |
Common shares
Class A common shares
|
Common shares
Class B-1 common shares
|
Common shares
Class B-2 common shares
|
Additional Paid In Capital |
Retained Earnings |
Cumulative Other Comprehensive Income (Loss) |
Cumulative Common Distributions |
Total Shareholders' Equity |
Noncontrolling Interest |
---|---|---|---|---|---|---|---|---|---|---|
Balance beginning at Sep. 30, 2017 | $ 289,663 | $ 15 | $ 1 | $ 15 | $ 95,878 | $ 86,836 | $ 84 | $ (33,298) | $ 149,531 | $ 140,132 |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Share grants, net | 2,653 | 2,653 | 2,653 | |||||||
Net income | 198,415 | 87,857 | 87,857 | 110,558 | ||||||
Fees from services provided prior to the Up-C Transaction | (127) | (127) | ||||||||
Tax distributions to Member | (32,840) | (32,840) | ||||||||
Common share distributions | (23,375) | (12,125) | (12,125) | (11,250) | ||||||
Other comprehensive loss | (5) | (3) | (3) | (2) | ||||||
Balance ending at Jun. 30, 2018 | $ 434,384 | $ 15 | $ 1 | $ 15 | $ 98,531 | $ 174,693 | $ 81 | $ (45,423) | $ 227,913 | $ 206,471 |
Basis of Presentation |
9 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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, 2018, RMR Inc. owned 15,174,463 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 51.9% of the economic interest of RMR LLC as of June 30, 2018. 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 48.1% of the economic interest of RMR LLC as of June 30, 2018, 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 of our controlling shareholder, ABP Trust, and owns a majority of ABP Trust's voting securities. RMR LLC was founded in 1986 to manage public investments in real estate and, as of June 30, 2018, managed a diverse portfolio of publicly owned real estate and real estate related businesses. RMR LLC provides management services to: Government Properties Income Trust, or GOV, a publicly traded real estate investment trust, or REIT, that primarily owns properties located throughout the United States that are majority leased to government tenants and office properties in the metropolitan Washington, D.C. market area that are leased to government and private sector tenants; Hospitality Properties Trust, or HPT, a publicly traded REIT that primarily owns hotel and travel center properties; Industrial Logistics Properties Trust, or ILPT, a publicly traded REIT that primarily owns and leases industrial and logistics properties; Select Income REIT, or SIR, a publicly traded REIT that primarily owns properties that are leased to single tenants; and Senior Housing Properties Trust, or SNH, a publicly traded REIT that primarily owns senior living, medical office and life science properties. GOV, HPT, ILPT, SIR and SNH are collectively referred to as the Managed Equity REITs. RMR LLC also provides management services to other publicly traded and private businesses, including: Five Star Senior Living Inc., or Five Star, a publicly traded operator of senior living communities, many of which are owned by SNH; 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, some of whose U.S. hotels are owned by HPT; and TravelCenters of America LLC, or TA, an operator and franchisor of travel centers along the U.S. Interstate Highway System, many of which are owned by HPT, convenience stores with retail gas stations and restaurants. Hereinafter, Five Star, Sonesta and TA are collectively referred to as the Managed Operators. In addition, RMR LLC also provides management services to certain related private companies, including Affiliates Insurance Company, or AIC, an Indiana insurance company, and ABP Trust and its subsidiaries (ABP Trust and its subsidiaries are collectively referred to as ABP Trust). RMR Advisors LLC, or RMR Advisors, an investment adviser registered with the Securities and Exchange Commission, or SEC, was founded in 2002. RMR Advisors is a wholly owned subsidiary of RMR LLC and is the adviser to RMR Real Estate Income Fund, or RIF. RIF is a closed end investment company focused on investing in real estate securities, including REITs and other dividend paying securities, but excluding our Client Companies, as defined below. Tremont Realty Advisors LLC, or Tremont Advisors, an investment adviser registered with the SEC, was founded in 2016 in connection with the acquisition of certain assets of Tremont Realty Capital LLC, or the Tremont business. Tremont Advisors is a wholly owned subsidiary of RMR LLC that manages a private fund created for an institutional investor and other separately managed accounts that invest in commercial real estate debt, including secured mortgage debt, mezzanine financings and commercial real estate that may become owned by its clients. Tremont Advisors also manages Tremont Mortgage Trust, or TRMT, a publicly traded mortgage real estate investment trust that completed its initial public offering on September 18, 2017, or the TRMT IPO. TRMT focuses primarily on originating and investing in first mortgage loans secured by middle market and transitional commercial real estate. In these financial statements, we refer to the Managed Equity REITs, the Managed Operators, RIF, TRMT, AIC, ABP Trust and the clients of the Tremont business as our Client Companies. We refer to the Managed Equity REITs and TRMT collectively as the Managed REITs. The accompanying condensed consolidated financial statements of RMR Inc. 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, 2017, or our 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. Reclassifications have been made to the prior year's condensed consolidated financial statements to conform to the current year's presentation. 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. |
Recent Accounting Pronouncements |
9 Months Ended |
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Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers. The main provision of ASU No. 2014-09 is to recognize revenue when control of the goods or services transfers to the customer, as opposed to the existing guidance of recognizing revenue when the risk and rewards transfer to the customer. The effective date for this ASU is for interim and annual reporting periods beginning after December 15, 2017. We plan to adopt ASU No. 2014-09 using the modified retrospective approach on October 1, 2018. We do not expect the adoption of this ASU to have a material impact on net income, though we are continuing our evaluation, most notably regarding the updated principal versus agent guidance within ASU 2014-09. In February 2016, the FASB issued ASU No. 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU No. 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The effective date for RMR will be the first day of fiscal year 2020 and we are continuing to assess the potential impact the adoption of ASU No. 2016-02 will have on our condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, 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. ASU No. 2016-13 will become effective for fiscal years beginning after December 15, 2019. We are continuing to assess this guidance, but we have not historically experienced credit losses from our Client Companies and do not expect the adoption of ASU No. 2016-13 to have a material impact on our condensed consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-7, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. ASU No. 2018-7 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We are currently assessing the potential impact the adoption of ASU No. 2018-7 will have in our condensed consolidated financial statements. |
Revenue Recognition |
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Revenue Recognition [Abstract] | |||||||||
Revenue Recognition | Revenue Recognition Revenues from services that we provide are recognized as earned in accordance with contractual agreements. Business Management Fees—Managed Equity REITs We earn annual base business management fees from the Managed Equity REITs pursuant to business management agreements equal to the lesser of:
The foregoing base business management fees are paid monthly in arrears, based on the lower of the Managed Equity REIT’s monthly average historical costs of assets under management and average market capitalization during the month. For purposes of these fees, a Managed Equity REIT’s assets under management do not include shares it owns of another Client Company. For the three months ended June 30, 2018 and 2017, we earned aggregate base business management fees from the Managed Equity REITs of $29,555 and $28,643, respectively. For the nine months ended June 30, 2018 and 2017, we earned aggregate base business management fees from the Managed Equity REITs of $89,590 and $84,816, 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 are contingent performance based fees which are only recognized when earned at the end of each respective measurement period. The incentive fees are calculated for each Managed Equity REIT as 12.0% of the product of (a) the equity market capitalization of the Managed Equity REIT, as defined in the applicable business management agreement, on the last trading day of the year immediately prior to the relevant measurement period and (b) the amount, expressed as a percentage, by which the Managed Equity REIT’s total return per share, as defined in the applicable business management agreement, exceeded the applicable benchmark total return per share, as defined in the applicable business management agreement, of a specified REIT index identified in the applicable business management agreement for the measurement period, as adjusted for net share issuances during the period and subject to caps on the values of the incentive fees. The measurement periods for the annual incentive business management fees in respect of calendar years 2017 and 2016 were the three calendar year periods that ended on December 31, 2017 and 2016, respectively. The annual incentive business management fees for calendar 2018 will be based on the three calendar year periods ended December 31, 2018, except for ILPT, whose annual incentive business management fee will be based on a shorter period subsequent to its initial public offering (January 12, 2018 through the calendar year ended December 31, 2018). For the nine months ended June 30, 2018 and 2017, we recognized aggregate incentive business management fees earned from the Managed Equity REITs of $155,881 and $52,407, respectively. Incentive business management fees were recognized as earned in the three months ended December 31, 2017 and 2016 as they relate to the calendar years 2017 and 2016, respectively. Business Management Fees—Managed Operators, ABP Trust and AIC We earn business management fees from the Managed Operators and ABP Trust pursuant to business management agreements 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, (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 and (iv) in the case of ABP Trust, revenues from all sources reportable under GAAP. These fees are estimated and payable monthly in advance. We earn business management fees from AIC pursuant to a management agreement equal to 3.0% of its total premiums paid under active insurance underwritten or arranged by AIC. We earned aggregate business management fees from the Managed Operators, ABP Trust and AIC of $7,094 and $6,650 for the three months ended June 30, 2018 and 2017, respectively, and $20,432 and $19,372 for the nine months ended June 30, 2018 and 2017, respectively. Property Management Fees We earned property management fees pursuant to property management agreements with certain Client Companies. We generally earn fees under these agreements for property management services equal to 3.0% of gross collected rents. Also, under the terms of the property management agreements, we receive additional property management fees for construction supervision in connection with certain construction activities undertaken at the managed properties equal to 5.0% of the cost of such construction. We earned aggregate property management fees of $10,485 and $9,238 for the three months ended June 30, 2018 and 2017, respectively, and $31,853 and $26,089 for the nine months ended June 30, 2018 and 2017, respectively. Reimbursable Payroll Related and Other Costs Pursuant to certain of our management agreements, the companies to which we provide management services pay or reimburse us for expenses incurred on their behalf. We present certain payroll related and other cost reimbursements we receive as revenue. A significant portion of these reimbursable payroll related and other costs arise from services we provide pursuant to our property management agreements that are charged or passed through to, and paid by, tenants of our Client Companies. We realized reimbursable payroll related and other costs of $13,711 and $9,839 for the three months ended June 30, 2018 and 2017, respectively, and $38,076 and $29,023 for the nine months ended June 30, 2018 and 2017, respectively. Our reimbursable payroll related and other costs include grants of common shares from Client Companies 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 comprehensive income over the requisite service periods. We record an equal offsetting amount as equity based compensation expense for all of our payroll related and other cost revenues. We realized equity based compensation expense and related reimbursements of $2,033 and $892 for the three months ended June 30, 2018 and 2017, respectively, and $4,368 and $3,386 for the nine months ended June 30, 2018 and 2017, respectively. Advisory Services and Other Agreements RMR Advisors is compensated pursuant to its agreement with RIF at an annual rate of 0.85% of RIF’s average daily managed assets, as defined in the agreement. Average daily managed assets includes the net asset value attributable to RIF’s outstanding common shares, plus the liquidation preference of RIF’s outstanding preferred shares, plus the principal amount of any borrowings, including from banks or evidenced by notes, commercial paper or other similar instruments issued by RIF. RMR Advisors earned advisory services revenue of $706 and $613 for the three months ended June 30, 2018 and 2017, respectively, and $2,134 and $1,826 for the nine months ended June 30, 2018 and 2017, respectively. Tremont Advisors is primarily compensated pursuant to its management agreement with TRMT at an annual rate of 1.5% of TRMT's equity, as defined in the agreement. Tremont Advisors may also earn an incentive fee under this management agreement beginning in the fourth quarter of calendar year 2018 equal to the difference between: (a) the product of (i) 20% and (ii) the difference between (A) TRMT’s core earnings, as defined in the agreement, for the most recent 12 month period (or such lesser number of completed calendar quarters, if applicable), including the calendar quarter (or part thereof) for which the calculation of the incentive fee is being made, and (B) the product of (1) 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 TRMT’s core earnings for the 12 most recently completed calendar quarters (or such lesser number of completed calendar quarters from the date of the completion of the TRMT IPO) in the aggregate is greater than zero. The incentive fee may not be less than zero. In June 2018, Tremont Advisors agreed to waive any business management fees otherwise due and payable by TRMT pursuant to the management agreement for the period beginning July 1, 2018 until June 30, 2020. In addition, no incentive fee will be paid or payable by TRMT to Tremont Advisors for the 2018 or 2019 calendar years. Tremont Advisors earned advisory services revenue of $339 and $406 for the three months ended June 30, 2018 and 2017, respectively, and $1,358 and $1,207 for the nine months ended June 30, 2018 and 2017, respectively. The Tremont business also acts as a transaction originator for non-investment advisory clients for negotiated fees. The Tremont business earned between 0.50% and 1.0% of the aggregate principal amounts of any loans so originated. The Tremont business earned fees for such origination services of $194 and $113 for the three months ended June 30, 2018 and 2017, respectively, and $582 and $352 for the nine months ended June 30, 2018 and 2017, respectively, which amounts are included in management services revenue in our condensed consolidated statements of comprehensive income. |
Equity Investments |
9 Months Ended |
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Jun. 30, 2018 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity Investments | Equity Investments As of June 30, 2018, Tremont Advisors owned 600,100, or approximately 19.1%, of TRMT's common shares, with a carrying value of $11,420 and a market value, based on quoted market prices, of $7,891 ($13.15 per share). We account for our investment in TRMT using the equity method of accounting because we are deemed to exert significant influence over, but not control, TRMT's most significant activities. Our share of net losses from our investment in TRMT included in equity in losses of investees in our condensed consolidated statements of comprehensive income for the three and nine months ended June 30, 2018 was $136 and $535, respectively. We also have a 0.5% general partnership interest in a private fund created for an institutional investor that is managed by Tremont Advisors. This private fund is winding down and our carrying value is zero at June 30, 2018. We account for this investment under the equity method of accounting and record our share of the investment's earnings or losses each period. Our share of net gains from the private fund for the three months ended June 30, 2018 was $2 and our share of net losses from the private fund for the nine months ended June 30, 2018 was $33, both of which are included in equity in losses of investees in our condensed consolidated statements of comprehensive income. In addition, the private fund made distributions to its partners for which our share for the three and nine months ended June 30, 2018 was $31 and $174, respectively. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes We are the sole managing member of RMR LLC. 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. 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. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. The Tax Act significantly revised the U.S. corporate income tax system, by among other things, lowering corporate income tax rates. Since we have a September 30 fiscal year end, the lower corporate income tax rate of 21.0% will be phased in, resulting in a federal statutory tax rate of approximately 24.5% for our fiscal year ending September 30, 2018, and the new corporate income tax rate of 21.0% for subsequent fiscal years thereafter. The Tax Act reduction in the corporate income tax rate also caused us to adjust our deferred tax asset to the lower federal base rates, resulting in an increase in income tax expense of $19,817, or $1.23 per share, for the nine months ended June 30, 2018. For the three months ended June 30, 2018 and 2017, we recognized estimated income tax expense of $3,462 and $4,528, respectively, which includes $2,688 and $3,978, respectively, of U.S. federal income tax and $774 and $550, respectively, of state income taxes. For the nine months ended June 30, 2018 and 2017, we recognized estimated income tax expense of $55,486 and $24,811, respectively, which includes $43,225 and $21,797, respectively, of U.S. federal income tax and $12,261 and $3,014, respectively, of state income taxes. We will monitor future interpretations of the Tax Act as they develop and accordingly, our estimates may change. A reconciliation of the statutory income tax rate to the effective tax rate is as follows:
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% likely of being realized upon settlement. As of June 30, 2018 and September 30, 2017, we had no uncertain tax positions. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments As of June 30, 2018 and September 30, 2017, the fair values of our financial instruments, which include cash and cash equivalents, amounts due from related parties and accounts payable and accrued expenses, were not materially different from their carrying values due to the short term nature of these financial instruments. Recurring Fair Value Measures 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 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. Level 1 Estimates The following are our assets and liabilities that all have been measured at fair value using Level 1 inputs in the fair value hierarchy as of June 30, 2018 and September 30, 2017:
Level 3 Estimates Contingent consideration liabilities are re-measured to fair value each reporting period using updated probabilities of payment. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Increases or decreases in probabilities of payment may result in significant changes in the fair value measurements. In August 2016, we acquired the Tremont business for total cash consideration of $2,466, plus contingent consideration of up to an additional $1,270 payable over a two year period following the acquisition date. The contingent consideration is measured at fair value using an income approach valuation technique, specifically with probability weighted and discounted cash flows. The fair value of the contingent consideration as of June 30, 2018 and September 30, 2017 was $5 and $591, respectively, and is included in accounts payable and accrued expenses on our condensed consolidated balance sheets. We recognized a gain of $491 as part of remeasuring the contingent consideration for the nine months ended June 30, 2018 that are included in interest and other income on our condensed consolidated statements of comprehensive income. |
Related Person Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Person Transactions | Related Person Transactions Adam D. Portnoy, one of our Managing Directors, is the sole trustee of our controlling shareholder, ABP Trust, and owns a majority of ABP Trust's voting securities. As of June 30, 2018, Adam D. Portnoy beneficially owned, in aggregate, directly and indirectly through ABP Trust, (i) 165,365 shares of Class A common stock of RMR Inc., or Class A Common Shares; (ii) all of the outstanding shares of Class B-1 common stock of RMR Inc., or Class B-1 Common Shares; (iii) all of the 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. Adam D. Portnoy is a Managing Trustee or Managing Director of each of the Managed REITs, Five Star and TA, and he is an owner and Director of Sonesta. Jennifer B. Clark is a Managing Trustee of SNH and a Director of Sonesta. Other officers of ours serve as Managing Trustees or Managing Directors of certain of the Managed REITs and TA. As of June 30, 2018, GOV, HPT, SIR and SNH owned 1,214,225, 2,503,777, 1,586,836 and 2,637,408 of our Class A Common Shares, respectively, and Adam D. Portnoy beneficially owned, in aggregate, directly and indirectly through ABP Trust, 36.4% of Five Star’s outstanding common shares, 1.9% of GOV’s common shares, 1.5% of HPT’s outstanding common shares, less than 1% of ILPT’s outstanding common shares, 2.0% of SIR’s outstanding common shares, 1.3% of SNH’s outstanding common shares, 2.2% of RIF’s outstanding common shares and less than 1% of TA’s outstanding common shares and we owned (through Tremont Advisors) 19.1% of TRMT's outstanding common shares. All of the executive officers of the Managed REITs and AIC and many of the executive officers of the Managed Operators and RIF are also officers of RMR LLC. Additional information about our related person transactions appears in Note 8 below and in our 2017 Annual Report. Revenues from Related Parties For the three and nine months ended June 30, 2018 and 2017, we recognized revenues from related parties as set forth in the following table:
On December 31, 2017, RMR LLC earned incentive business management fees from HPT, SIR and SNH of $74,572, $25,569 and $55,740, respectively, pursuant to its business management agreements with HPT, SIR and SNH. HPT, SIR and SNH paid these incentive fees to us in January 2018. On December 31, 2016, RMR LLC earned a $52,407 incentive business management fee from HPT pursuant to its business management agreement with HPT. HPT paid this incentive fee to us in January 2017. All of these incentive fees are included in the table above. These incentive fees are calculated annually at the end of each calendar year. Amounts Due From Related Parties The following table represents amounts due from related parties as of the dates indicated:
Leases As of June 30, 2018, 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 aggregating $1,274 and $1,056 for the three months ended June 30, 2018 and 2017, respectively, and $3,558 and $3,165 for the nine months ended June 30, 2018 and 2017, 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. In connection with the Tax Act and the resulting lower corporate income tax rates applicable to RMR Inc., we remeasured the amounts due pursuant to our tax receivable agreement with ABP Trust and reduced our liability by $24,710, or $1.53 per share, which is presented on our condensed consolidated statements of comprehensive income for the nine months ended June 30, 2018 as tax receivable agreement remeasurement. As of June 30, 2018, our condensed consolidated balance sheet reflects a liability related to the tax receivable agreement of $37,289, including $2,935 classified as a current liability that we expect to pay to ABP Trust during the fourth quarter of fiscal year 2018. 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 assumed tax liabilities of its members. For the nine months ended June 30, 2018 and 2017, pursuant to the RMR LLC operating agreement, RMR LLC made required quarterly tax distributions to holders of its membership units totaling $68,232 and $56,230, respectively, of which $35,392 and $29,097, respectively, was distributed to us and $32,840 and $27,133, 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 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. Other On July 31, 2018, RMR LLC entered into a transaction agreement pursuant to which RMR LLC is committing to contribute up to $100,000 and ABP Trust is contributing $206,000 of owned office properties to a newly formed private open end real estate fund, the RMR Office Property Fund LP, or the Fund. The Fund will be focused on the acquisition, ownership and leasing of a diverse portfolio of commercial office properties throughout the United States. The Fund’s General Partner will be a wholly owned subsidiary of ABP Trust and RMR LLC and ABP Trust will be limited partners of the Fund. RMR LLC will manage the Fund and it will receive annual fund administration fees equal to 1.0% of the Fund's net asset value. In addition, RMR LLC will receive property management fees equal to 3.0% of all rents collected from commercial real estate investments and 5.0% of costs of construction or any improvement at commercial real estate investments held by the Fund. On March 29, 2018, David J. Hegarty announced his resignation from his position as an Executive Vice President of RMR LLC and as president and chief operating officer of SNH effective April 30, 2018. In connection with his retirement, RMR LLC entered into a retirement agreement with Mr. Hegarty on March 29, 2018. Pursuant to his retirement agreement, Mr. Hegarty will remain an employee of RMR LLC until September 30, 2018 or such earlier date as he may elect. Under Mr. Hegarty’s retirement agreement, RMR LLC paid him $1,250 following his resignation as an Executive Vice President of RMR LLC on April 30, 2018 and it will make another cash payment to him in the amount of $1,250 following his resignation as an employee of RMR LLC, subject to RMR LLC’s receipt of a waiver and release. We will recognize these cash payments, net of amounts previously accrued, over Mr. Hegarty's remaining service period as Executive Vice President of RMR LLC, with the costs presented as separation costs on our condensed consolidated statements of comprehensive income. In addition, all of our unvested Class A Common Shares previously awarded to Mr. Hegarty will fully accelerate upon the date of his retirement from RMR LLC, subject to conditions. For the three and nine months ended June 30, 2018, we recorded $55 and $371 in equity based compensation expense, respectively, related to Mr. Hegarty's retirement agreement. Effective December 31, 2017, Thomas M. O’Brien resigned from his position as an Executive Vice President and employee of RMR LLC and as president, chief executive officer and a managing director of TA. In connection with Mr. O’Brien’s resignation, RMR LLC and TA entered into a retirement agreement with Mr. O’Brien on November 29, 2017. Under Mr. O'Brien's retirement agreement, all 5,600 of our unvested Class A Common Shares previously awarded to Mr. O’Brien were fully accelerated on December 31, 2017, and we recorded $332, the aggregate value of those shares on such date, as equity based compensation expense for the three months ended December 31, 2017. |
Shareholders' Equity |
9 Months Ended |
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Jun. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Shareholders’ Equity Distributions On November 16, 2017, we paid a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares, in the amount of $0.25 per Class A Common Share and Class B-1 Common Share, or $4,041. This dividend was paid to our shareholders of record as of the close of business on October 23, 2017. This dividend was funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.25 per unit, or $7,791, of which $4,041 was distributed to us based on our then aggregate ownership of 16,164,066 membership units of RMR LLC and $3,750 was distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC. On February 22, 2018, we paid a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares, in the amount of $0.25 per Class A Common Share and Class B-1 Common Share, or $4,040. This dividend was paid to our shareholders of record as of the close of business on January 29, 2018. This dividend was funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.25 per unit, or $7,790, of which $4,040 was distributed to us based on our then aggregate ownership of 16,162,338 membership units of RMR LLC and $3,750 was distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC. On May 17, 2018, we paid a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares, in the amount of 0.25 per Class A Common Share and Class B-1 Common Share, or $4,044. This dividend was paid to our shareholders of record as of the close of business on April 30, 2018. This dividend was funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.25 per unit, or $7,794, of which $4,044 was distributed to us based on our then aggregate ownership of 16,174,463 membership units of RMR LLC and $3,750 was distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC. On July 19, 2018, we declared a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares payable to our shareholders of record as of July 30, 2018, in the amount of $0.25 per Class A Common Share and Class B-1 Common Share, or $4,044. This dividend will be funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.25 per unit, or $7,794, of which $4,044 will be distributed to us based on our expected then aggregate ownership of 16,174,463 membership units of RMR LLC and $3,750 will be distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC. We expect to pay this dividend on or about August 16, 2018. |
Per Common Share Amounts |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per Common Share Amounts | Per Common Share Amounts Earnings per common share reflects net income attributable to RMR Inc. divided by our weighted average common shares outstanding. Basic and diluted weighted average common shares outstanding represents our outstanding Class A Common Shares and our Class B-1 Common Shares 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 our net income attributable to RMR Inc. per share. Unvested Class A Common Shares granted to our employees are deemed participating securities for purposes of calculating earnings per common share, as 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 comprehensive income. The calculation of basic and diluted earnings per share is as follows:
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, our Class B-2 Common Shares “paired” with such unit is canceled for no additional consideration. If all outstanding Class A Units that we do not own had been redeemed for our Class A Common Shares in the periods presented, our Class A Common Shares outstanding as of June 30, 2018, would have been 30,174,463. 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 (including any tax impact). For the periods presented, such redemption is not reflected in diluted earnings per share as the assumed redemption would be anti-dilutive. |
Net Income Attributable to RMR Inc |
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Net Income Attributable to RMR Inc. | Net Income Attributable to RMR Inc. Net income attributable to RMR Inc. for the three and nine months ended June 30, 2018 and 2017, is calculated as follows:
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Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting We have one separately reportable business segment, which is RMR LLC. In the tables below, our All Other Operations includes the operations of RMR Inc., RMR Advisors and Tremont Advisors.
(1) Intersegment revenues of $995 recognized by RMR LLC for services provided to the All Other Operations segment have been eliminated in the condensed consolidated financial statements.
(1) Intersegment revenues of $2,972 recognized by RMR LLC for services provided to the All Other Operations segment have been eliminated in the condensed consolidated financial statements.
(1) Intersegment revenues of $221 recognized by RMR LLC for services provided to the All Other Operations segment have been eliminated in the condensed consolidated financial statements.
(1) Intersegment revenues of $872 recognized by RMR LLC for services provided to the All Other Operations segment have been eliminated in the condensed consolidated financial statements. |
Recent Accounting Pronouncements (Policies) |
9 Months Ended |
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Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers. The main provision of ASU No. 2014-09 is to recognize revenue when control of the goods or services transfers to the customer, as opposed to the existing guidance of recognizing revenue when the risk and rewards transfer to the customer. The effective date for this ASU is for interim and annual reporting periods beginning after December 15, 2017. We plan to adopt ASU No. 2014-09 using the modified retrospective approach on October 1, 2018. We do not expect the adoption of this ASU to have a material impact on net income, though we are continuing our evaluation, most notably regarding the updated principal versus agent guidance within ASU 2014-09. In February 2016, the FASB issued ASU No. 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU No. 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The effective date for RMR will be the first day of fiscal year 2020 and we are continuing to assess the potential impact the adoption of ASU No. 2016-02 will have on our condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, 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. ASU No. 2016-13 will become effective for fiscal years beginning after December 15, 2019. We are continuing to assess this guidance, but we have not historically experienced credit losses from our Client Companies and do not expect the adoption of ASU No. 2016-13 to have a material impact on our condensed consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-7, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. ASU No. 2018-7 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We are currently assessing the potential impact the adoption of ASU No. 2018-7 will have in our condensed consolidated financial statements. |
Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of the statutory income tax rate to the effective tax rate | A reconciliation of the statutory income tax rate to the effective tax rate is as follows:
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Fair Value of Financial Instruments (Tables) |
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair value | The following are our assets and liabilities that all have been measured at fair value using Level 1 inputs in the fair value hierarchy as of June 30, 2018 and September 30, 2017:
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Related Person Transactions (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | The following table represents amounts due from related parties as of the dates indicated:
For the three and nine months ended June 30, 2018 and 2017, we recognized revenues from related parties as set forth in the following table:
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Per Common Share Amounts (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Diluted, by Common Class, Including Two Class Method | The calculation of basic and diluted earnings per share is as follows:
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Schedule of Earnings Per Share, Basic, by Common Class, Including Two Class Method | The calculation of basic and diluted earnings per share is as follows:
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Net Income Attributable to RMR Inc (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Attributable to RMR Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net income attributable to parent | Net income attributable to RMR Inc. for the three and nine months ended June 30, 2018 and 2017, is calculated as follows:
|
Segment Reporting (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment reporting information |
(1) Intersegment revenues of $221 recognized by RMR LLC for services provided to the All Other Operations segment have been eliminated in the condensed consolidated financial statements.
(1) Intersegment revenues of $872 recognized by RMR LLC for services provided to the All Other Operations segment have been eliminated in the condensed consolidated financial statements.
(1) Intersegment revenues of $995 recognized by RMR LLC for services provided to the All Other Operations segment have been eliminated in the condensed consolidated financial statements.
(1) Intersegment revenues of $2,972 recognized by RMR LLC for services provided to the All Other Operations segment have been eliminated in the condensed consolidated financial statements. |
Basis of Presentation (Details) |
9 Months Ended |
---|---|
Jun. 30, 2018
shares
| |
Class B membership units | |
Related Party Transaction [Line Items] | |
Membership units (in units) | 1,000,000 |
RMR LLC | |
Related Party Transaction [Line Items] | |
Ownership percentage | 51.90% |
Class A common shares | Class A membership units | |
Related Party Transaction [Line Items] | |
Membership units (in units) | 15,174,463,000 |
Capital Unit Redeemable Class A Units | ABP Trust | |
Related Party Transaction [Line Items] | |
Membership units (in units) | 15,000,000 |
Ownership percentage | 48.10% |
Revenue Recognition - Business Management Fees (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Managed Operators, ABP Trust and AIC | ||||
Related Party Transaction [Line Items] | ||||
Business management fee percent based on management agreements | 0.60% | |||
Aggregate business management fees | $ 7,094 | $ 6,650 | $ 20,432 | $ 19,372 |
AIC | ||||
Related Party Transaction [Line Items] | ||||
Business management fee percent based on total premiums paid | 3.00% |
Revenue Recognition - Property Management Fees (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Deferred Revenue Disclosure [Abstract] | ||||
Property management fee percent based on gross collected rents | 3.00% | |||
Property management fee percent based on the cost of construction | 5.00% | |||
Aggregate property management fees | $ 10,485 | $ 9,238 | $ 31,853 | $ 26,089 |
Revenue Recognition - Reimbursable Payroll Related and Other Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Equity based compensation expense and related reimbursements | $ 2,033 | $ 892 | $ 4,368 | $ 3,386 |
Reimbursable payroll related and other costs | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 13,711 | $ 9,839 | $ 38,076 | $ 29,023 |
Income Taxes - Reconciliation of Income Tax Rate (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Income taxes computed at the federal statutory rate | 24.50% | 35.00% | 24.50% | 35.00% |
State taxes, net of federal benefit | 2.30% | 2.50% | 2.50% | 2.50% |
Tax Cuts and Jobs Act transitional impact | 0.00% | 0.00% | 7.80% | 0.00% |
Permanent items | (0.00%) | (0.00%) | (2.30%) | (0.00%) |
Net income attributable to noncontrolling interest | (11.80%) | (17.00%) | (10.70%) | (16.90%) |
Total | 15.00% | 20.50% | 21.80% | 20.60% |
Fair Value of Financial Instruments (Details) - Recurring basis - Level 1 - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jun. 30, 2017 |
---|---|---|
Schedule of assets and liabilities measured at fair value | ||
Money market funds included in cash and cash equivalents | $ 278,433 | $ 104,700 |
Current portion of due from related parties related to share based payment awards | 1,281 | 4,910 |
Long term portion of due from related parties related to share based payment awards | 6,672 | 7,551 |
Current portion of employer compensation liability related to share based payment awards included in accounts payable and accrued expenses | 1,281 | 4,910 |
Long term portion of employer compensation liability related to share based payment awards | $ 6,672 | $ 7,551 |
Fair Value of Financial Instruments - Additional Information (Details) - Tremont Realty Capital LLC - USD ($) $ in Thousands |
1 Months Ended | 9 Months Ended | |
---|---|---|---|
Aug. 31, 2016 |
Jun. 30, 2018 |
Sep. 30, 2017 |
|
Business Acquisition [Line Items] | |||
Cash consideration | $ 2,466 | ||
Contingent consideration | $ 1,270 | $ 5 | $ 591 |
Duration of potential earn out | 2 years | ||
Gain on contingent consideration | $ 491 |
Related Person Transactions - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
HPT | ||||||
Related Party Transaction [Line Items] | ||||||
Aggregate incentive business management fees | $ 74,572 | $ 52,407 | ||||
SNH | ||||||
Related Party Transaction [Line Items] | ||||||
Aggregate incentive business management fees | 55,740 | |||||
SIR | ||||||
Related Party Transaction [Line Items] | ||||||
Aggregate incentive business management fees | $ 25,569 | |||||
ABP Trust and Managed REIT | ||||||
Related Party Transaction [Line Items] | ||||||
Rental expense | $ 1,274 | $ 1,056 | $ 3,558 | $ 3,165 |
Per Common Share Amounts - Additional Information (Details) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018
shares
|
Jun. 30, 2017
shares
|
Jun. 30, 2018
shares
|
Jun. 30, 2017
shares
|
Sep. 30, 2017
shares
|
|
Class of Stock [Line Items] | |||||
Common stock shares authorized (in shares) | 15,000,000,000 | 15,000,000,000 | |||
Weighted average common stock shares outstanding diluted (in shares) | 16,135,000 | 16,058,000 | 16,111,000 | 16,044,000 | |
Class A membership units | |||||
Class of Stock [Line Items] | |||||
Conversion ratio | 1 | ||||
Weighted average common stock shares outstanding diluted (in shares) | 30,174,463,000 | ||||
Class B-1 common shares | |||||
Class of Stock [Line Items] | |||||
Common stock shares authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 | ||
Conversion ratio | 1 |
Net Income Attributable to RMR Inc (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Net Income Attributable to RMR Inc. | ||||
Income before income tax expense and equity in losses of investees | $ 23,045 | $ 22,129 | $ 254,469 | $ 120,525 |
Add: RMR Inc. franchise tax expense and interest income | 91 | 147 | 375 | 456 |
Less: tax receivable agreement remeasurement | 0 | 0 | (24,710) | 0 |
Less: equity in losses of investees | (134) | 4 | (568) | (161) |
Less: fees from services provided prior to the UP-C Transaction | 0 | 0 | (127) | 0 |
Net income before noncontrolling interest | 23,002 | 22,280 | 229,439 | 120,820 |
Less: noncontrolling interest | (11,068) | (10,748) | (110,431) | (58,303) |
Net income attributable to RMR Inc. before income tax expense | 11,934 | 11,532 | 119,008 | 62,517 |
Less: income tax expense attributable to RMR Inc. | (3,462) | (4,528) | (55,486) | (24,811) |
Less: RMR Inc. franchise tax expense and interest income | $ (91) | $ (147) | $ (375) | $ (456) |
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