(State of Organization) | (IRS Employer Identification No.) |
Title Of Each Class | Trading Symbol | Name Of Each Exchange On Which Registered | ||
(Nasdaq Capital Market) |
Large accelerated filer | ☐ | ☒ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company |
Page | ||
June 30, | September 30, | |||||||
2020 | 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Due from related parties | ||||||||
Prepaid and other current assets | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Due from related parties, net of current portion | ||||||||
Equity method investment | ||||||||
Equity method investment accounted for under the fair value option | ||||||||
Goodwill | ||||||||
Intangible assets, net of amortization | ||||||||
Operating lease right of use assets | — | |||||||
Deferred tax asset | ||||||||
Other assets, net of amortization | ||||||||
Total assets | $ | $ | ||||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Other client company reimbursable expenses | $ | $ | ||||||
Accounts payable and accrued expenses | ||||||||
Operating lease liabilities | — | |||||||
Employer compensation liability | ||||||||
Total current liabilities | ||||||||
Deferred rent payable, net of current portion | — | |||||||
Operating lease liabilities, net of current portion | — | |||||||
Amounts due pursuant to tax receivable agreement, net of current portion | ||||||||
Employer compensation liability, net of current portion | ||||||||
Total liabilities | ||||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Class A common stock, $0.001 par value; 31,600,000 shares authorized; 15,315,445 and 15,302,710 shares issued and outstanding, respectively | ||||||||
Class B-1 common stock, $0.001 par value; 1,000,000 shares authorized, issued and outstanding | ||||||||
Class B-2 common stock, $0.001 par value; 15,000,000 shares authorized, issued and outstanding | ||||||||
Additional paid in capital | ||||||||
Retained earnings | ||||||||
Cumulative common distributions | ( | ) | ( | ) | ||||
Total shareholders’ equity | ||||||||
Noncontrolling interest | ||||||||
Total equity | ||||||||
Total liabilities and equity | $ | $ |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | ||||||||||||||||
Management services | $ | $ | $ | $ | ||||||||||||
Incentive business management fees | ||||||||||||||||
Advisory services | ||||||||||||||||
Total management and advisory services revenues | ||||||||||||||||
Reimbursable compensation and benefits | ||||||||||||||||
Other client company reimbursable expenses | ||||||||||||||||
Total reimbursable costs | ||||||||||||||||
Total revenues | ||||||||||||||||
Expenses: | ||||||||||||||||
Compensation and benefits | ||||||||||||||||
Equity based compensation | ||||||||||||||||
Separation costs | ||||||||||||||||
Total compensation and benefits expense | ||||||||||||||||
General and administrative | ||||||||||||||||
Other client company reimbursable expenses | ||||||||||||||||
Transaction and acquisition related costs | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Total expenses | ||||||||||||||||
Operating income | ||||||||||||||||
Interest and other income | ||||||||||||||||
Impairment loss on Tremont Mortgage Trust investment | ( | ) | ( | ) | ||||||||||||
Equity in earnings of investees | ||||||||||||||||
Unrealized gain (loss) on equity method investment accounted for under the fair value option | ( | ) | ( | ) | ||||||||||||
Income before income tax expense | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net income | ||||||||||||||||
Net income attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net income attributable to The RMR Group Inc. | $ | $ | $ | $ | ||||||||||||
Weighted average common shares outstanding - basic | ||||||||||||||||
Weighted average common shares outstanding - diluted | ||||||||||||||||
Net income attributable to The RMR Group Inc. per common share - basic | $ | $ | $ | $ | ||||||||||||
Net income attributable to The RMR Group Inc. per common share - diluted | $ | $ | $ | $ |
Class A Common Stock | Class B-1 Common Stock | Class B-2 Common Stock | Additional Paid In Capital | Retained Earnings | Cumulative Common Distributions | Total Shareholders' Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||
Share grants, net | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||
Tax distributions to Member | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||
Common share distributions | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Balance at December 31, 2019 | ( | ) | ||||||||||||||||||||||||||||||||||
Share grants, net | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||
Tax distributions to Member | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||
Common share distributions | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Balance at March 31, 2020 | ( | ) | ||||||||||||||||||||||||||||||||||
Share grants, net | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||
Tax distributions to Member | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||
Common share distributions | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ |
Class A Common Stock | Class B-1 Common Stock | Class B-2 Common Stock | Additional Paid In Capital | Retained Earnings | Cumulative Other Comprehensive Income | Cumulative Common Distributions | Total Shareholders' Equity | Noncontrolling Interest | Total Equity | |||||||||||||||||||||||||||||||
Balance at September 30, 2018 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
Share grants, net | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Tax distributions to Member | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Common share distributions | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | ( | ) | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Balance at December 31, 2018 | ( | ) | ||||||||||||||||||||||||||||||||||||||
Share grants, net | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Tax distributions to Member | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Common share distributions | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | ( | ) | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Reclassification due to disposition of our Australian operations | — | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||||
Balance at March 31, 2019 | ( | ) | ||||||||||||||||||||||||||||||||||||||
Share grants, net | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Tax distributions to Member | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Common share distributions | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ |
Nine Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | ||||||||
Straight line office rent | ||||||||
Amortization expense related to other assets | ||||||||
Deferred income taxes | ( | ) | ||||||
Operating expenses paid in The RMR Group Inc. common shares | ||||||||
Impairment loss on Tremont Mortgage Trust investment | ||||||||
Equity in earnings of investees | ( | ) | ( | ) | ||||
Distributions from equity method investments | ||||||||
Unrealized (gain) loss on equity method investment accounted for under the fair value option | ( | ) | ||||||
Changes in assets and liabilities: | ||||||||
Due from related parties | ( | ) | ||||||
Prepaid and other current assets | ||||||||
Other client company reimbursable expenses | ( | ) | ||||||
Accounts payable and accrued expenses | ||||||||
Net cash from operating activities | ||||||||
Cash Flows from Investing Activities: | ||||||||
Purchase of property and equipment | ( | ) | ( | ) | ||||
Equity method investment in TravelCenters of America Inc. | ( | ) | ||||||
Equity method investment in Tremont Mortgage Trust | ( | ) | ||||||
Advances to Tremont Mortgage Trust under the credit agreement | ( | ) | ||||||
Repayments from Tremont Mortgage Trust under the credit agreement | ||||||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Distributions to noncontrolling interest | ( | ) | ( | ) | ||||
Distributions to common shareholders | ( | ) | ( | ) | ||||
Repurchase of common shares | ( | ) | ( | ) | ||||
Net cash used in financing activities | ( | ) | ( | ) | ||||
Effect of exchange rate fluctuations on cash and cash equivalents | ( | ) | ||||||
Increase in cash and cash equivalents | ||||||||
Cash and cash equivalents at beginning of period | ||||||||
Cash and cash equivalents at end of period | $ | $ | ||||||
Supplemental Cash Flow Information and Non-Cash Activities: | ||||||||
Income taxes paid | $ | $ | ||||||
Fair value of share based payments recorded | $ | $ | ||||||
Recognition of right of use assets and related lease liabilities | $ | $ | — |
• | the sum of (a) |
• | the sum of (a) |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Income taxes computed at the federal statutory rate | % | % | % | % | ||||||||
State taxes, net of federal benefit | % | % | % | % | ||||||||
Permanent items | % | % | % | % | ||||||||
Net income attributable to noncontrolling interest | ( | )% | ( | )% | ( | )% | ( | )% | ||||
Total | % | % | % | % |
June 30, | September 30, | |||||||
2020 | 2019 | |||||||
Money market funds included in cash and cash equivalents | $ | $ | ||||||
Current portion of due from related parties related to share based payment awards | ||||||||
Long term portion of due from related parties related to share based payment awards | ||||||||
Current portion of employer compensation liability related to share based payment awards | ||||||||
Long term portion of employer compensation liability related to share based payment awards |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||
Managed Equity REITs: | ||||||||||||||||||||||||||||
DHC (1) | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||
ILPT | ||||||||||||||||||||||||||||
OPI (2) | ||||||||||||||||||||||||||||
SIR (1) (2) | ||||||||||||||||||||||||||||
SVC (1) | ||||||||||||||||||||||||||||
Managed Operators: | ||||||||||||||||||||||||||||
Five Star | ||||||||||||||||||||||||||||
Sonesta | ||||||||||||||||||||||||||||
TA | ||||||||||||||||||||||||||||
Other Client Companies: | ||||||||||||||||||||||||||||
ABP Trust | ||||||||||||||||||||||||||||
AIC | ||||||||||||||||||||||||||||
Open End Fund | ||||||||||||||||||||||||||||
RMRM | ||||||||||||||||||||||||||||
TRMT | ||||||||||||||||||||||||||||
Centre Street | ||||||||||||||||||||||||||||
Total revenues from related parties | ||||||||||||||||||||||||||||
Revenues from unrelated parties | ||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % |
(1) | The amounts for the nine months ended June 30, 2019 include incentive business management fees of $ |
(2) | OPI acquired SIR by merger on December 31, 2018. This table presents revenues for the nine months ended June 30, 2019 from SIR separately as they relate to a period prior to this merger. |
June 30, | September 30, | |||||||
2020 | 2019 | |||||||
Managed Equity REITs: | ||||||||
DHC | $ | $ | ||||||
ILPT | ||||||||
OPI | ||||||||
SVC | ||||||||
Managed Operators: | ||||||||
Five Star | ||||||||
Sonesta | ||||||||
TA | ||||||||
Other Client Companies: | ||||||||
ABP Trust | ||||||||
AIC | ||||||||
Open End Fund | ||||||||
RMRM | ||||||||
TRMT | ||||||||
Centre Street | ||||||||
$ | $ |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Former executive officers: | ||||||||||||||||
Cash separation costs | $ | $ | $ | $ | ||||||||||||
Equity based separation costs | ||||||||||||||||
Former nonexecutive officers: | ||||||||||||||||
Cash separation costs | ||||||||||||||||
Equity based separation costs | ||||||||||||||||
Total separation costs | $ | $ | $ | $ |
Declaration | Record | Paid | Distributions | Total | ||||||||
Date | Date | Date | Per Common Share | Distributions | ||||||||
Nine Months Ended June 30, 2020 | ||||||||||||
10/17/2019 | 10/28/2019 | 11/14/2019 | $ | $ | ||||||||
1/16/2020 | 1/27/2020 | 2/20/2020 | ||||||||||
4/16/2020 | 4/27/2020 | 5/21/2020 | ||||||||||
$ | $ | |||||||||||
Nine Months Ended June 30, 2019 | ||||||||||||
10/18/2018 | 10/29/2018 | 11/15/2018 | $ | $ | ||||||||
1/18/2019 | 1/28/2019 | 2/21/2019 | ||||||||||
4/18/2019 | 4/29/2019 | 5/16/2019 | ||||||||||
$ | $ |
Distributions Per | Total | RMR LLC | RMR LLC | |||||||||||||||||
Declaration | Record | Paid | RMR LLC | RMR LLC | Distributions | Distributions | ||||||||||||||
Date | Date | Date | Membership Unit | Distributions | to RMR Inc. | to ABP Trust | ||||||||||||||
Nine Months Ended June 30, 2020 | ||||||||||||||||||||
10/17/2019 | 10/28/2019 | 11/14/2019 | $ | $ | $ | $ | ||||||||||||||
1/16/2020 | 1/27/2020 | 2/20/2020 | ||||||||||||||||||
4/16/2020 | 4/27/2020 | 5/21/2020 | ||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
Nine Months Ended June 30, 2019 | ||||||||||||||||||||
10/18/2018 | 10/29/2018 | 11/15/2018 | $ | $ | $ | $ | ||||||||||||||
1/18/2019 | 1/28/2019 | 2/21/2019 | ||||||||||||||||||
4/18/2019 | 4/29/2019 | 5/16/2019 | ||||||||||||||||||
$ | $ | $ | $ |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Numerators: | ||||||||||||||||
Net income attributable to The RMR Group Inc. | $ | $ | $ | $ | ||||||||||||
Income attributable to unvested participating securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net income attributable to The RMR Group Inc. used in calculating basic EPS | ||||||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Add back: net income attributable to noncontrolling interest | — | — | ||||||||||||||
Add back: income tax expense | — | — | ||||||||||||||
Income tax expense at enacted tax rates assuming redemption of noncontrolling interest’s Class A Units for Class A Common Shares | ( | ) | — | ( | ) | — | ||||||||||
Net income attributable to The RMR Group Inc. used in calculating diluted EPS | $ | $ | $ | $ | ||||||||||||
Denominators: | ||||||||||||||||
Weighted average common shares outstanding - basic | ||||||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Assumed redemption of noncontrolling interest’s Class A Units for Class A Common Shares | ||||||||||||||||
Incremental unvested shares | ||||||||||||||||
Weighted average common shares outstanding - diluted | ||||||||||||||||
Net income attributable to The RMR Group Inc. per common share - basic | $ | $ | $ | $ | ||||||||||||
Net income attributable to The RMR Group Inc. per common share - diluted | $ | $ | $ | $ |
2020 | $ | |||
2021 | ||||
2022 | ||||
2023 | ||||
2024 | ||||
Thereafter | ||||
Total lease payments (1) | ||||
Less: imputed interest | ( | ) | ||
Present value of operating lease liabilities | ||||
Less: current portion of operating lease liabilities | ( | ) | ||
Operating lease liabilities, net of current portion | $ |
(1) | Excludes $ |
Three Months Ended June 30, 2020 | ||||||||||||
All Other | ||||||||||||
RMR LLC (1) | Operations | Total | ||||||||||
Revenues: | ||||||||||||
Management services | $ | $ | $ | |||||||||
Advisory services | ||||||||||||
Total management and advisory services revenues | ||||||||||||
Reimbursable compensation and benefits | ||||||||||||
Other client company reimbursable expenses | ||||||||||||
Total reimbursable costs | ||||||||||||
Total revenues | ||||||||||||
Expenses: | ||||||||||||
Compensation and benefits | ||||||||||||
Equity based compensation | ||||||||||||
Total compensation and benefits expense | ||||||||||||
General and administrative | ||||||||||||
Other client company reimbursable expenses | ||||||||||||
Transaction and acquisition related costs | ||||||||||||
Depreciation and amortization | ||||||||||||
Total expenses | ||||||||||||
Operating income (loss) | ( | ) | ||||||||||
Interest and other income | ||||||||||||
Equity in earnings of investees | ||||||||||||
Unrealized gain on equity method investment accounted for under the fair value option | ||||||||||||
Income (loss) before income tax expense | ( | ) | ||||||||||
Income tax expense | ( | ) | ( | ) | ||||||||
Net income (loss) | $ | $ | ( | ) | $ | |||||||
Total assets | $ | $ | $ |
(1) | Intersegment revenues of $ |
Nine Months Ended June 30, 2020 | ||||||||||||
All Other | ||||||||||||
RMR LLC (1) | Operations | Total | ||||||||||
Revenues: | ||||||||||||
Management services | $ | $ | $ | |||||||||
Advisory services | ||||||||||||
Total management and advisory services revenues | ||||||||||||
Reimbursable compensation and benefits | ||||||||||||
Other client company reimbursable expenses | ||||||||||||
Total reimbursable costs | ||||||||||||
Total revenues | ||||||||||||
Expenses: | ||||||||||||
Compensation and benefits | ||||||||||||
Equity based compensation | ||||||||||||
Separation costs | ||||||||||||
Total compensation and benefits expense | ||||||||||||
General and administrative | ||||||||||||
Other client company reimbursable expenses | ||||||||||||
Transaction and acquisition related costs | ||||||||||||
Depreciation and amortization | ||||||||||||
Total expenses | ||||||||||||
Operating income (loss) | ( | ) | ||||||||||
Interest and other income | ||||||||||||
Equity in earnings of investees | ||||||||||||
Unrealized gain on equity method investment accounted for under the fair value option | ||||||||||||
Income (loss) before income tax expense | ( | ) | ||||||||||
Income tax expense | ( | ) | ( | ) | ||||||||
Net income (loss) | $ | $ | ( | ) | $ | |||||||
Total assets | $ | $ | $ |
(1) | Intersegment revenues of $ |
Three Months Ended June 30, 2019 | ||||||||||||
All Other | ||||||||||||
RMR LLC (1) | Operations | Total | ||||||||||
Revenues: | ||||||||||||
Management services | $ | $ | $ | |||||||||
Advisory services | ||||||||||||
Total management and advisory services revenues | ||||||||||||
Reimbursable compensation and benefits | ||||||||||||
Other client company reimbursable expenses | ||||||||||||
Total reimbursable costs | ||||||||||||
Total revenues | ||||||||||||
Expenses: | ||||||||||||
Compensation and benefits | ||||||||||||
Equity based compensation | ||||||||||||
Separation costs | ||||||||||||
Total compensation and benefits expense | ||||||||||||
General and administrative | ||||||||||||
Other client company reimbursable expenses | ||||||||||||
Transaction and acquisition related costs | ||||||||||||
Depreciation and amortization | ||||||||||||
Total expenses | ||||||||||||
Operating income (loss) | ( | ) | ||||||||||
Interest and other income | ||||||||||||
Impairment loss on Tremont Mortgage Trust investment | ( | ) | ( | ) | ||||||||
Equity in earnings of investees | ||||||||||||
Unrealized loss on equity method investment accounted for under the fair value option | ( | ) | ( | ) | ||||||||
Income (loss) before income tax expense | ( | ) | ||||||||||
Income tax expense | ( | ) | ( | ) | ||||||||
Net income (loss) | $ | $ | ( | ) | $ | |||||||
Total assets | $ | $ | $ |
(1) | Intersegment revenues of $ |
Nine Months Ended June 30, 2019 | ||||||||||||
All Other | ||||||||||||
RMR LLC (1) | Operations | Total | ||||||||||
Revenues: | ||||||||||||
Management services | $ | $ | $ | |||||||||
Incentive business management fees | ||||||||||||
Advisory services | ||||||||||||
Total management and advisory services revenues | ||||||||||||
Reimbursable compensation and benefits | ||||||||||||
Other client company reimbursable expenses | ||||||||||||
Total reimbursable costs | ||||||||||||
Total revenues | ||||||||||||
Expenses: | ||||||||||||
Compensation and benefits | ||||||||||||
Equity based compensation | ||||||||||||
Separation costs | ||||||||||||
Total compensation and benefits expense | ||||||||||||
General and administrative | ||||||||||||
Other client company reimbursable expenses | ||||||||||||
Transaction and acquisition related costs | ||||||||||||
Depreciation and amortization | ||||||||||||
Total expenses | ||||||||||||
Operating income (loss) | ( | ) | ||||||||||
Interest and other income | ||||||||||||
Impairment loss on Tremont Mortgage Trust investment | ( | ) | ( | ) | ||||||||
Equity in earnings of investees | ||||||||||||
Unrealized loss on equity method investment accounted for under the fair value option | ( | ) | ( | ) | ||||||||
Income (loss) before income tax expense | ( | ) | ||||||||||
Income tax expense | ( | ) | ( | ) | ||||||||
Net income (loss) | $ | $ | ( | ) | $ | |||||||
Total assets | $ | $ | $ |
(1) |
• | the adverse impact of volatility in our Managed Equity REITs’ share prices and the adverse impacts to our business management fee revenues, as the majority of our Managed Equity REITs are currently paying business management fees on a total market capitalization basis, |
• | tenants of our Client Companies’ ability to withstand the current economic conditions and continue as going concerns, including possible adverse impacts to our future property management fee revenues due to declines in our Client Companies’ tenant rental receipts, |
• | our Client Companies’ operations, liquidity and capital needs and resources, including reductions in our construction management fees as a result of the Managed Equity REITs reducing or delaying their capital spending in order to conserve capital or because of construction moratoriums issued by governments in response to the COVID-19 pandemic, |
• | our Client Companies’ ability to comply with financial covenants under their debt agreements, |
• | our Client Companies’ ability to access debt and equity capital, and |
• | possible government relief funding sources and other programs that may be available to us and our Client Companies. |
• | installing signage throughout our managed properties with social distancing reminders; |
• | changes to certain building HVAC systems and equipment, including adjusting outdoor air control programs to increase the amount of outside air delivered to interior spaces and to adjust control sequences to maintain space relative humidity in order to help minimize the concentration of the virus; |
• | flushing domestic water systems to prepare for re-occupancy; |
• | performing service calls and preventative maintenance after business hours to limit social interactions; |
• | requiring vendors to follow best practices under COVID-19 pandemic conditions, including providing us with documented preventative measures for their employees and requiring staff to wear appropriate personal protective equipment when working at our managed properties; and |
• | altering cleaning schedules to perform vacuuming at times intended to reduce the potential airborne spread of the virus. |
• | the duration and severity of the negative economic impact, especially on the hospitality, senior living and service retail sectors, |
• | the strength and sustainability of any economic recovery, |
• | the timing and process for how federal, state and local governments and other market participants may oversee and conduct the return of economic activity when the COVID-19 pandemic abates, such as what continuing restrictions and protective measures may remain in place or be added and what restrictions and protective measures may be lifted or reduced in order to foster a return of increased economic activity in the United States, and |
• | whether, following a recommencing of more normal levels of economic activities, the United States or other countries experience increased numbers of COVID-19 infections and, if so, the responses of governments, businesses and the general public to those events. |
Lesser of Historical Cost of Assets | ||||||||||
Under Management or | ||||||||||
Total Market Capitalization as of | ||||||||||
June 30, | ||||||||||
REIT | Primary Strategy | 2020 | 2019 | |||||||
DHC | Medical office and life science properties, senior living communities and wellness centers | $ | 4,596,718 | $ | 5,756,149 | |||||
ILPT | Industrial and logistics properties | 2,612,328 | 2,492,044 | |||||||
OPI | Office properties primarily leased to single tenants, including the government | 3,474,277 | 4,237,239 | |||||||
SVC | Hotels and net lease service and necessity-based retail properties | 7,400,127 | 8,251,377 | |||||||
$ | 18,083,450 | $ | 20,736,809 |
Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
DHC | $ | 4,995 | $ | — | $ | 3,440 | $ | 8,435 | $ | 6,732 | $ | — | $ | 3,522 | $ | 10,254 | ||||||||||||||||
ILPT | 3,353 | — | 1,859 | 5,212 | 3,163 | — | 1,921 | 5,084 | ||||||||||||||||||||||||
OPI | 4,080 | — | 5,077 | 9,157 | 5,099 | — | 5,483 | 10,582 | ||||||||||||||||||||||||
SVC | 8,582 | — | 731 | 9,313 | 9,839 | — | 26 | 9,865 | ||||||||||||||||||||||||
$ | 21,010 | $ | — | $ | 11,107 | $ | 32,117 | $ | 24,833 | $ | — | $ | 10,952 | $ | 35,785 |
Nine Months Ended June 30, 2020 | Nine Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
DHC | $ | 17,550 | $ | — | $ | 9,985 | $ | 27,535 | $ | 23,206 | $ | 40,642 | $ | 10,087 | $ | 73,935 | ||||||||||||||||
ILPT | 10,127 | — | 5,964 | 16,091 | 7,531 | — | 4,622 | 12,153 | ||||||||||||||||||||||||
OPI (1) | 13,447 | — | 15,353 | 28,800 | 13,971 | — | 14,877 | 28,848 | ||||||||||||||||||||||||
SIR (1) | — | — | — | — | 4,124 | 25,817 | 2,335 | 32,276 | ||||||||||||||||||||||||
SVC | 31,804 | — | 2,959 | 34,763 | 29,808 | 53,635 | 56 | 83,499 | ||||||||||||||||||||||||
$ | 72,928 | $ | — | $ | 34,261 | $ | 107,189 | $ | 78,640 | $ | 120,094 | $ | 31,977 | $ | 230,711 |
(1) | SIR merged with and into OPI on December 31, 2018 with OPI continuing as the surviving entity. |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
Company | 2020 | 2019 | 2020 | 2019 | ||||||||||||
ABP Trust | $ | 346 | $ | 216 | $ | 918 | $ | 691 | ||||||||
AIC | — | 60 | — | 180 | ||||||||||||
Five Star | 2,123 | 2,409 | 6,726 | 7,124 | ||||||||||||
Open End Fund | 851 | 891 | 2,557 | 2,444 | ||||||||||||
Sonesta | 113 | 810 | 1,259 | 2,206 | ||||||||||||
TA | 3,041 | 3,315 | 9,715 | 10,133 | ||||||||||||
$ | 6,474 | $ | 7,701 | $ | 21,175 | $ | 22,778 |
Three Months Ended June 30, | ||||||||||||||
2020 | 2019 | $ Change | % Change | |||||||||||
Revenues: | ||||||||||||||
Management services | $ | 38,625 | $ | 43,641 | $ | (5,016 | ) | (11.5)% | ||||||
Advisory services | 625 | 802 | (177 | ) | (22.1)% | |||||||||
Total management and advisory services revenues | 39,250 | 44,443 | (5,193 | ) | (11.7)% | |||||||||
Reimbursable compensation and benefits | 13,749 | 13,583 | 166 | 1.2% | ||||||||||
Other client company reimbursable expenses | 85,650 | 85,689 | (39 | ) | —% | |||||||||
Total reimbursable costs | 99,399 | 99,272 | 127 | 0.1% | ||||||||||
Total revenues | 138,649 | 143,715 | (5,066 | ) | (3.5)% | |||||||||
Expenses: | ||||||||||||||
Compensation and benefits | 29,569 | 28,530 | 1,039 | 3.6% | ||||||||||
Equity based compensation | 1,299 | 1,334 | (35 | ) | (2.6)% | |||||||||
Separation costs | — | 239 | (239 | ) | n/m | |||||||||
Total compensation and benefits expense | 30,868 | 30,103 | 765 | 2.5% | ||||||||||
General and administrative | 6,335 | 7,670 | (1,335 | ) | (17.4)% | |||||||||
Other client company reimbursable expenses | 85,650 | 85,689 | (39 | ) | —% | |||||||||
Transaction and acquisition related costs | 427 | 42 | 385 | n/m | ||||||||||
Depreciation and amortization | 229 | 250 | (21 | ) | (8.4)% | |||||||||
Total expenses | 123,509 | 123,754 | (245 | ) | (0.2)% | |||||||||
Operating income | 15,140 | 19,961 | (4,821 | ) | (24.2)% | |||||||||
Interest and other income | 727 | 2,408 | (1,681 | ) | (69.8)% | |||||||||
Impairment loss on Tremont Mortgage Trust investment | — | (6,213 | ) | 6,213 | n/m | |||||||||
Equity in earnings of investees | 458 | 174 | 284 | 163.2% | ||||||||||
Unrealized gain (loss) on equity method investment accounted for under the fair value option | 1,678 | (731 | ) | 2,409 | n/m | |||||||||
Income before income tax expense | 18,003 | 15,599 | 2,404 | 15.4% | ||||||||||
Income tax expense | (2,608 | ) | (2,226 | ) | (382 | ) | (17.2)% | |||||||
Net income | 15,395 | 13,373 | 2,022 | 15.1% | ||||||||||
Net income attributable to noncontrolling interest | (8,678 | ) | (7,524 | ) | (1,154 | ) | (15.3)% | |||||||
Net income attributable to The RMR Group Inc. | $ | 6,717 | $ | 5,849 | $ | 868 | 14.8% |
Three Months Ended June 30, | ||||||||||||
2020 | 2019 | Change | ||||||||||
Managed Equity REITs | $ | 32,117 | $ | 35,785 | $ | (3,668 | ) | |||||
Managed Operators | 5,277 | 6,534 | (1,257 | ) | ||||||||
Other | 1,231 | 1,322 | (91 | ) | ||||||||
Total | $ | 38,625 | $ | 43,641 | $ | (5,016 | ) |
Nine Months Ended June 30, | ||||||||||||||
2020 | 2019 | $ Change | % Change | |||||||||||
Revenues: | ||||||||||||||
Management services | $ | 129,221 | $ | 133,729 | $ | (4,508 | ) | (3.4)% | ||||||
Incentive business management fees | — | 120,094 | (120,094 | ) | n/m | |||||||||
Advisory services | 2,252 | 2,345 | (93 | ) | (4.0)% | |||||||||
Total management and advisory services revenues | 131,473 | 256,168 | (124,695 | ) | (48.7)% | |||||||||
Reimbursable compensation and benefits | 40,077 | 40,868 | (791 | ) | (1.9)% | |||||||||
Other client company reimbursable expenses | 267,852 | 257,088 | 10,764 | 4.2% | ||||||||||
Total reimbursable costs | 307,929 | 297,956 | 9,973 | 3.3% | ||||||||||
Total revenues | 439,402 | 554,124 | (114,722 | ) | (20.7)% | |||||||||
Expenses: | ||||||||||||||
Compensation and benefits | 89,888 | 85,523 | 4,365 | 5.1% | ||||||||||
Equity based compensation | 3,183 | 4,349 | (1,166 | ) | (26.8)% | |||||||||
Separation costs | 645 | 7,050 | (6,405 | ) | (90.9)% | |||||||||
Total compensation and benefits expense | 93,716 | 96,922 | (3,206 | ) | (3.3)% | |||||||||
General and administrative | 20,678 | 22,112 | (1,434 | ) | (6.5)% | |||||||||
Other client company reimbursable expenses | 267,852 | 257,088 | 10,764 | 4.2% | ||||||||||
Transaction and acquisition related costs | 1,596 | 273 | 1,323 | n/m | ||||||||||
Depreciation and amortization | 731 | 762 | (31 | ) | (4.1)% | |||||||||
Total expenses | 384,573 | 377,157 | 7,416 | 2.0% | ||||||||||
Operating income | 54,829 | 176,967 | (122,138 | ) | (69.0)% | |||||||||
Interest and other income | 4,102 | 6,402 | (2,300 | ) | (35.9)% | |||||||||
Impairment loss on Tremont Mortgage Trust investment | — | (6,213 | ) | 6,213 | n/m | |||||||||
Equity in earnings of investees | 1,037 | 318 | 719 | n/m | ||||||||||
Unrealized gain (loss) on equity method investment accounted for under the fair value option | 916 | (2,978 | ) | 3,894 | 130.8% | |||||||||
Income before income tax expense | 60,884 | 174,496 | (113,612 | ) | (65.1)% | |||||||||
Income tax expense | (8,944 | ) | (24,335 | ) | 15,391 | 63.2% | ||||||||
Net income | 51,940 | 150,161 | (98,221 | ) | (65.4)% | |||||||||
Net income attributable to noncontrolling interest | (29,306 | ) | (83,935 | ) | 54,629 | 65.1% | ||||||||
Net income attributable to The RMR Group Inc. | $ | 22,634 | $ | 66,226 | $ | (43,592 | ) | (65.8)% |
Nine Months Ended June 30, | ||||||||||||
2020 | 2019 | Change | ||||||||||
Managed Equity REITs | $ | 107,189 | $ | 110,617 | $ | (3,428 | ) | |||||
Managed Operators | 17,700 | 19,463 | (1,763 | ) | ||||||||
Other | 4,332 | 3,649 | 683 | |||||||||
Total | $ | 129,221 | $ | 133,729 | $ | (4,508 | ) |
• | the impact of the COVID-19 pandemic and the resulting market disruptions on us and our Client Companies; |
• | substantially all of our revenues are derived from services to a limited number of Client Companies; |
• | our revenues are highly variable; |
• | changing market conditions that 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 is often dependent upon circumstances beyond our control; |
• | the ability of our Client Companies to operate their businesses profitably and to grow and increase their market capitalizations and total shareholder returns; |
• | litigation risks; |
• | risks related to acquisitions, dispositions and other activities by or among our Client Companies; |
• | risks related to potential impairment of our equity investments; |
• | 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; |
• | Our base business management fees earned from our Managed Equity REITs are calculated monthly based upon the lower of each REIT’s cost of its applicable assets and such REIT’s market capitalization. Our business management fees earned from our Managed Operators are calculated based upon certain revenues from each operator’s business. Accordingly, our future revenues, income and cash flows will decline if the business activities, assets or market capitalizations of our Client Companies decline; |
• | The fact that we earned significant incentive business management fees from certain Managed Equity REITs in previous years may imply that we will earn incentive business management fees in future years. The incentive business management fees which we may earn from our Managed Equity REITs are based upon total returns realized by the REITs’ shareholders compared to the total shareholders return of certain identified indices. We have only limited control over the total returns realized by shareholders of our Managed Equity REITs and effectively no control over indexed total returns. There can be no assurance that we will earn any incentive business management fees in the future; |
• | We currently intend to pay a regular quarterly dividend of $0.38 per Class A Common Share and Class B-1 Common Share. Our dividends are declared and paid at the discretion of our board of directors. Our board may consider many factors when deciding whether to declare and pay dividends, including our current and projected 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; |
• | Our liquidity will be temporarily impacted by rent deferrals our Client Companies have granted to their tenants because our property management fee revenues are based on gross rents collected and we will not begin to earn fees related to these deferred amounts until September 2020 and then assuming the tenants begin to then pay the deferred amounts to the Client Companies. However, these tenants may be unable to repay those amounts when due. Further, these and other tenants of our Client Companies may be unable to pay other rent amounts and they may default on those payments or our Client Companies may grant them relief, any of which may reduce or delay the fees we earn and negatively impact our liquidity; |
• | We balance our pursuit of growth of our and our Client Companies’ businesses by executing, on behalf of our Client Companies, prudent capital recycling or business arrangement restructurings in an attempt to help our Client Companies prudently manage leverage and to reposition their portfolios and businesses when circumstances warrant such changes or when other more desirable opportunities are identified. However, these efforts may not be successful and, even if they are successful, they may not be sufficient to prevent our Client Companies from experiencing increases in leverage, to adequately reposition our Client Companies’ portfolios and businesses, or to enable our Client Companies to execute successfully on desirable opportunities; |
• | We have undertaken new initiatives and are considering other initiatives to grow our business and any actions we may take to grow our business may not be successful or we may elect to abandon pursuing some or all of those initiatives in order to pursue other initiatives or for other reasons. In addition, any investments or repositioning of the properties we or our Client Companies may make or pursue may not increase the value of the applicable properties, offset the decline in value those properties may otherwise experience, or increase the market capitalization or total shareholder returns of our Client Companies; and |
• | The market turmoil created by COVID-19 may have lasting effects on our business and the businesses of our Client Companies. Our business is dependent on revenue generated from sectors that have been and may continue to be adversely impacted by COVID-19 to a greater degree than other sectors. Further, our revenues from other sectors may become increasingly adversely impacted by COVID-19. Accordingly, there can be no assurances that we will be able to successfully manage through the COVID-19 pandemic, resulting market disruptions and their aftermath, or that we will be able to take advantage of any resulting opportunities. |
▪ | continued sudden and/or severe declines in the market price of our and our Client Companies’ common shares; |
▪ | the inability of our Client Companies to comply with certain financial covenants or pay interest and principal on their outstanding debt that could result in their defaulting under their debt agreements; |
▪ | the inability of our Client Companies to access debt and equity capital on attractive terms, or at all; |
▪ | downgrades of our Client Companies’ credit ratings by nationally recognized credit rating agencies; |
▪ | the inability of our Client Companies to pay distributions to their shareholders; |
▪ | worsening economic and financial market conditions that could significantly reduce the value of the real estate, loans and other investments of our Client Companies and reduce the amounts earned on those investments; |
▪ | increased risk of our Client Companies’ and their tenants’ and managers’ default or bankruptcy; |
▪ | increased risk of our Client Companies’ and their tenants’ and managers’ inability to weather an extended cessation of normal economic activity and thereby impairing their ability to continue functioning as going concerns and our Client Companies’ tenants’ and managers’ ability to pay rent and returns to our Client Companies; |
▪ | our and our Client Companies’ and their tenants’ and managers’ inability to operate our and their businesses if the health of our and their management personnel and other employees is affected, particularly if a significant number of individuals are impacted; and |
▪ | reduced economic demand resulting from mass employee layoffs or furloughs in response to governmental action taken to slow the spread of COVID-19, which could impact our and our Client Companies’ continued viability. |
• | some of our Client Companies have reduced their quarterly distribution rates payable to their shareholders; |
• | some of our Client Companies have deferred capital spending to conserve cash and liquidity; |
• | some of our Client Companies have raised additional debt and equity capital; |
• | some of our Client Companies have obtained a waiver from the lenders under their credit facilities; |
• | we and our Client Companies have been in regular, frequent contact with our and their key managers, tenants, lenders, customers, suppliers and other vendors to implement cost savings measures to minimize losses and preserve liquidity, including agreeing to the closures of certain properties, the reduction of staffing and certain other measures; and |
• | our Client Companies have provided rent and debt funding relief to certain of their tenants and borrowers. |
Maximum | |||||||||||
Total Number of | Approximate Dollar | ||||||||||
Shares Purchased | Value of Shares that | ||||||||||
Number of | Average | as Part of Publicly | May Yet Be Purchased | ||||||||
Shares | Price Paid | Announced Plans | Under the Plans or | ||||||||
Calendar Month | Purchased (1) | per Share | or Programs | Programs | |||||||
June 2020 | 2,034 | $ | 29.47 | N/A | N/A | ||||||
Total | 2,034 | $ | 29.47 | N/A | N/A |
(1) | These Class A Common Share withholdings and purchases were made to satisfy tax withholding and payment obligations in connection with the vesting of awards of our Class A Common Shares. We withheld and purchased these shares at their fair market values based upon the trading prices of our Class A Common Shares at the close of trading on Nasdaq on the purchase dates. |
Exhibit Number | Description | |
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. (Filed herewith.) | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.) | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.) | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.) | |
104 | Cover Page Interactive Data File. (formatted as Inline XBRL and contained in Exhibit 101.) | |
(1) | Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-207423) filed with the U.S. Securities and Exchange Commission on October 14, 2015. | |
(2) | Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the U.S. Securities and Exchange Commission on March 11, 2016. | |
(3) | Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-37616) filed with the U.S. Securities and Exchange Commission on September 15, 2017. | |
(4) | Incorporated by reference to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-207423) filed with the U.S. Securities and Exchange Commission on November 2, 2015. |
By: | /s/ Matthew P. Jordan | |
Matthew P. Jordan | ||
Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer) | ||
Dated: August 7, 2020 | ||
THE RMR GROUP INC. | |||
By: | |||
Name: | Matthew P. Jordan | ||
Title: | Executive Vice President, Chief Financial Officer and Treasurer | ||
JONATHAN VEITCH | |||
Indemnitee's Address: | |||
Jonathan Veitch | |||
Two Newton Place | |||
255 Washington Street, Suite 300 | |||
Newton, Massachusetts 02458 |
WITNESS: | ||
Print name of witness | Print name of Indemnitee | |
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 7, 2020 | /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 7, 2020 | /s/ Matthew P. Jordan |
Matthew P. Jordan Executive Vice President, Chief Financial Officer and Treasurer (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 Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer) |
TRAVELCENTERS OF AMERICA INC. | ||
By: | /s/ Mark R. Young | |
Name: | Mark R. Young | |
Title: | Executive Vice President and General Counsel | |
THE RMR GROUP LLC | ||
By: | /s/ Adam D. Portnoy | |
Name: | Adam D. Portnoy | |
Title: | President and Chief Executive Officer |
Sincerely, | |||
TREMONT REALTY ADVISORS LLC | |||
By: | /s/ Matthew P. Jordan | ||
Matthew P. Jordan | |||
Executive Vice President, Treasurer and Chief Financial Officer | |||
TREMONT MORTGAGE TRUST | |||
By: | /s/ David M. Blackman | ||
President and Chief Executive Officer |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 31,600,000 | 31,600,000 |
Common stock, shares issued (in shares) | 15,315,445 | 15,302,710 |
Common stock shares outstanding (in shares) | 15,315,445 | 15,302,710 |
Class B-1 Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Common stock, shares issued (in shares) | 1,000,000 | 1,000,000 |
Common stock shares outstanding (in shares) | 1,000,000 | 1,000,000 |
Class B-2 Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 15,000,000 | 15,000,000 |
Common stock, shares issued (in shares) | 15,000,000 | 15,000,000 |
Common stock shares outstanding (in shares) | 15,000,000 | 15,000,000 |
Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands |
Total |
Common shares
Class A Common Stock
|
Common shares
Class B-1 Common Stock
|
Common shares
Class B-2 Common Stock
|
Additional Paid In Capital |
Retained Earnings |
Cumulative Other Comprehensive Income |
Cumulative Common Distributions |
Total Shareholders' Equity |
Noncontrolling Interest |
---|---|---|---|---|---|---|---|---|---|---|
Balance beginning at Sep. 30, 2018 | $ 434,661 | $ 15 | $ 1 | $ 15 | $ 99,239 | $ 182,877 | $ 82 | $ (49,467) | $ 232,762 | $ 201,899 |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Share grants, net | 1,569 | 1,569 | 1,569 | |||||||
Net income | 118,080 | 52,209 | 52,209 | 65,871 | ||||||
Tax distributions to Member | (8,037) | (8,037) | ||||||||
Common share distributions | (10,180) | (5,680) | (5,680) | (4,500) | ||||||
Other comprehensive loss | (4) | (2) | (2) | (2) | ||||||
Balance ending at Dec. 31, 2018 | 536,089 | 15 | 1 | 15 | 100,808 | 235,086 | 80 | (55,147) | 280,858 | 255,231 |
Balance beginning at Sep. 30, 2018 | 434,661 | 15 | 1 | 15 | 99,239 | 182,877 | 82 | (49,467) | 232,762 | 201,899 |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 150,161 | |||||||||
Balance ending at Jun. 30, 2019 | 529,325 | 15 | 1 | 15 | 102,847 | 249,103 | 0 | (66,511) | 285,470 | 243,855 |
Balance beginning at Dec. 31, 2018 | 536,089 | 15 | 1 | 15 | 100,808 | 235,086 | 80 | (55,147) | 280,858 | 255,231 |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Share grants, net | 862 | 862 | 862 | |||||||
Net income | 18,708 | 8,168 | 8,168 | 10,540 | ||||||
Tax distributions to Member | (11,616) | (11,616) | ||||||||
Common share distributions | (10,180) | (5,680) | (5,680) | (4,500) | ||||||
Other comprehensive loss | (10) | (5) | (5) | (5) | ||||||
Reclassification due to disposition of our Australian operations | (75) | (75) | (75) | |||||||
Balance ending at Mar. 31, 2019 | 533,778 | 15 | 1 | 15 | 101,670 | 243,254 | 0 | (60,827) | 284,128 | 249,650 |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Share grants, net | 1,177 | 1,177 | 1,177 | |||||||
Net income | 13,373 | 5,849 | 5,849 | 7,524 | ||||||
Tax distributions to Member | (8,819) | (8,819) | ||||||||
Common share distributions | (10,184) | (5,684) | (5,684) | (4,500) | ||||||
Balance ending at Jun. 30, 2019 | 529,325 | 15 | 1 | 15 | 102,847 | 249,103 | $ 0 | (66,511) | 285,470 | 243,855 |
Balance beginning at Sep. 30, 2019 | 529,035 | 15 | 1 | 15 | 103,360 | 257,457 | (72,194) | 288,654 | 240,381 | |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Share grants, net | 634 | 634 | 634 | |||||||
Net income | 21,624 | 9,449 | 9,449 | 12,175 | ||||||
Tax distributions to Member | (3,830) | (3,830) | ||||||||
Common share distributions | (10,695) | (6,195) | (6,195) | (4,500) | ||||||
Balance ending at Dec. 31, 2019 | 536,768 | 15 | 1 | 15 | 103,994 | 266,906 | (78,389) | 292,542 | 244,226 | |
Balance beginning at Sep. 30, 2019 | 529,035 | 15 | 1 | 15 | 103,360 | 257,457 | (72,194) | 288,654 | 240,381 | |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 51,940 | |||||||||
Balance ending at Jun. 30, 2020 | 540,454 | 15 | 1 | 15 | 105,863 | 280,091 | (90,783) | 295,202 | 245,252 | |
Balance beginning at Dec. 31, 2019 | 536,768 | 15 | 1 | 15 | 103,994 | 266,906 | (78,389) | 292,542 | 244,226 | |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Share grants, net | 1,271 | 1,271 | 1,271 | |||||||
Net income | 14,921 | 6,468 | 6,468 | 8,453 | ||||||
Tax distributions to Member | (4,156) | (4,156) | ||||||||
Common share distributions | (10,694) | (6,194) | (6,194) | (4,500) | ||||||
Balance ending at Mar. 31, 2020 | 538,110 | 15 | 1 | 15 | 105,265 | 273,374 | (84,583) | 294,087 | 244,023 | |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Share grants, net | 598 | 598 | 598 | |||||||
Net income | 15,395 | 6,717 | 6,717 | 8,678 | ||||||
Tax distributions to Member | (2,949) | (2,949) | ||||||||
Common share distributions | (10,700) | (6,200) | (6,200) | (4,500) | ||||||
Balance ending at Jun. 30, 2020 | $ 540,454 | $ 15 | $ 1 | $ 15 | $ 105,863 | $ 280,091 | $ (90,783) | $ 295,202 | $ 245,252 |
Basis of Presentation |
9 Months Ended |
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Jun. 30, 2020 | |
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, 2020, RMR Inc. owned 15,315,445 class A membership units of RMR LLC, or Class A Units, and 1,000,000 class B membership units of RMR LLC, or Class B Units. The aggregate RMR LLC membership units RMR Inc. owns represented 52.1% of the economic interest of RMR LLC as of June 30, 2020. We refer to economic interest as the right of a holder of a Class A Unit or Class B Unit to share in distributions made by RMR LLC and, upon liquidation, dissolution or winding up of RMR LLC, to share in the assets of RMR LLC after payments to creditors. A wholly owned subsidiary of ABP Trust, a Maryland statutory trust, owns 15,000,000 redeemable Class A Units, representing 47.9% of the economic interest of RMR LLC as of June 30, 2020, which is presented as a noncontrolling interest within the condensed consolidated financial statements. Adam D. Portnoy, one of our Managing Directors, is the sole trustee of ABP Trust, and owns all of ABP Trust’s voting securities. RMR LLC was founded in 1986 to manage public investments in real estate and, as of June 30, 2020, managed a diverse portfolio of publicly owned real estate and real estate related businesses. RMR LLC provides management services to four publicly traded real estate investment trusts, or REITs: Diversified Healthcare Trust, or DHC, which owns medical office and life science properties, senior living communities and wellness centers; Industrial Logistics Properties Trust, or ILPT, which owns and leases industrial and logistics properties; Office Properties Income Trust, or OPI, which owns office properties primarily leased to single tenants and those with high quality credit characteristics, including the government; and Service Properties Trust, or SVC, which owns a diverse portfolio of hotels and net lease service and necessity-based retail properties. Until December 31, 2018, RMR LLC provided management services to Select Income REIT, or SIR. On December 31, 2018, SIR merged with and into a subsidiary of OPI (then named Government Properties Income Trust, or GOV), or the GOV/SIR Merger, which then merged with and into OPI, with OPI as the surviving entity. The combined company continues to be managed by RMR LLC pursuant to OPI’s business and property management agreements with RMR LLC. DHC, ILPT, OPI, SVC and, until December 31, 2018, SIR, 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 DHC; Sonesta International Hotels Corporation, or Sonesta, a privately owned franchisor and operator of hotels, resorts and cruise ships in the United States, Latin America, the Caribbean and the Middle East, many of whose U.S. hotels are owned by SVC; and TravelCenters of America Inc., or TA, an operator and franchisor of travel centers along the U.S. Interstate Highway System, many of which are owned by SVC, standalone truck service facilities 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 ABP Trust and its subsidiaries, or collectively ABP Trust, and provided management services to Affiliates Insurance Company, or AIC, an Indiana insurance company, until its dissolution on February 13, 2020, and RMR Office Property Fund LP, or the Open End Fund, until its dissolution on July 28, 2020. RMR Advisors LLC, or RMR Advisors, is an investment adviser registered with the Securities and Exchange Commission, or SEC. RMR Advisors is a wholly-owned subsidiary of RMR LLC and is the adviser to RMR Mortgage Trust (formerly known as RMR Real Estate Income Fund), or RMRM. RMRM is currently a closed-end investment company. On April 16, 2020, shareholders of RMRM approved its conversion from a registered investment company to a commercial mortgage REIT and amended RMRM’s fundamental investment policies and restrictions to permit RMRM to pursue its new business. RMRM is focused on realigning its portfolio so that it is no longer an “investment company” under the Investment Company Act of 1940, or the 1940 Act, and has applied to the SEC to deregister as an investment company under the 1940 Act. Tremont Realty Advisors LLC, or Tremont Advisors, an investment adviser registered with the SEC, was formed 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 Tremont Mortgage Trust, or TRMT, a publicly traded mortgage real estate investment trust, and, as of December 18, 2019, Centre Street Finance LLC, or Centre Street, a private fund. Both TRMT and Centre Street focus primarily on originating and investing in first mortgage whole loans secured by middle market and transitional commercial real estate. Centre Street is a direct wholly owned subsidiary of ABP Trust. TRMT, together with Centre Street, are referred to as the Tremont Advisory Clients. The Tremont business also acts as a transaction originator for non-investment advisory clients for negotiated fees. In these financial statements, we refer to the Managed Equity REITs, the Managed Operators, RMRM, TRMT, AIC, ABP Trust, the Open End Fund, Centre Street 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, 2019, or our 2019 Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Preparation of these financial statements in conformity with GAAP requires our management to make certain estimates and assumptions that may affect the amounts reported in these financial statements and related notes. The actual results could differ from these estimates.
|
Recent Accounting Pronouncements |
9 Months Ended |
---|---|
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases, as amended, or ASU No. 2016-02, 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 determines 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 twelve months regardless of their classification. On October 1, 2019, we adopted ASU No. 2016-02 along with certain allowable practical expedients using the modified retrospective transition approach. We elected to apply the guidance to each lease that had commenced as of the adoption date. We also elected a package of practical expedients that allowed us not to reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) the recognition requirements for initial direct costs for any expired or existing leases. Additionally, we elected to account for the lease and non-lease components as a single lease component. The adoption of ASU No. 2016-02 did not affect our condensed consolidated statements of income and cash flows. See Note 10, Leases, for further information regarding the adoption of ASU No. 2016-02. Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU No. 2016-13, which requires that entities use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 will become effective for fiscal years beginning after December 15, 2019. The effective date for us is the first day of fiscal year 2021 (October 1, 2020). 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.
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Revenue Recognition |
9 Months Ended | ||||||||
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Jun. 30, 2020 | |||||||||
Revenue Recognition [Abstract] | |||||||||
Revenue Recognition | Revenue Recognition Base Business Management Fees—Managed Equity REITs We earn annual base business management fees from the Managed Equity REITs by providing continuous services pursuant to business management agreements equal to the lesser of:
The foregoing base business management fees are paid monthly in arrears. 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, 2020 and 2019, we earned aggregate base business management fees from the Managed Equity REITs of $21,010 and $24,833, respectively. For the nine months ended June 30, 2020 and 2019, we earned aggregate base business management fees from the Managed Equity REITs of $72,928 and $78,640, respectively. Incentive Business Management Fees—Managed Equity REITs We also may earn annual incentive business management fees from the Managed Equity REITs under the business management agreements. The incentive business management fees, which are payable in cash, are contingent performance based fees recognized only when earned at the end of each respective measurement period. Incentive business management fees are excluded from the transaction price until it becomes probable that there will not be a significant reversal of cumulative revenue recognized. The incentive business management fees are calculated for each Managed Equity REIT as 12.0% of the product of (a) the equity market capitalization of the Managed Equity REIT, as defined in the applicable business management agreement, on the last trading day of the year immediately prior to the relevant measurement period and (b) the amount, expressed as a percentage, by which the Managed Equity REIT’s total return per share, as defined in the applicable business management agreement, exceeded the applicable benchmark total return per share, as defined in the applicable business management agreement, of a specified REIT index identified in the applicable business management agreement for the measurement period, as adjusted for net share issuances during the period and subject to caps on the values of the incentive fees. The measurement period for the annual incentive business management fees is defined as the three year period ending on December 31 of the year for which such fee is being calculated, except for ILPT, whose annual incentive business management fee is based on a shorter period from its initial public offering on January 12, 2018 through the applicable calendar year end. On December 31, 2018, RMR LLC’s business management agreements with ILPT and OPI were amended to provide that, for periods beginning on and after January 1, 2019, the SNL U.S. Industrial REIT Index and the SNL U.S. Office REIT Index will be used by ILPT and OPI, respectively, rather than the SNL U.S. REIT Equity Index, to calculate the benchmark return per share, as defined, for purposes of determining the incentive business management fee, if any, payable thereunder. For the nine months ended June 30, 2020 and 2019, we recognized aggregate incentive business management fees earned from the Managed Equity REITs of zero and $120,094, respectively. Management Agreements—Managed Operators, ABP Trust, AIC and the Open End Fund We earn management fees by providing continuous services pursuant to the management agreements from the Managed Operators and until December 31, 2019, ABP Trust, 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. Effective January 1, 2020, management fees earned from ABP Trust are equal to 0.5% of ABP Trust’s average invested capital, as defined in the management agreement. These fees are estimated and payable monthly in advance. Until June 30, 2019, we earned 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. AIC’s property insurance program expired on June 30, 2019 and was not continued. As a result, we have not earned any management fees from AIC since that date through AIC’s dissolution on February 13, 2020. We earn fees from the Open End Fund by providing a continuing and suitable real estate investment program consistent with the Open End Fund’s real estate investment policies and objectives pursuant to an administration services agreement. We earn fees equal to 1.0% of the Open End Fund’s net asset value, as defined, annually. These fees are payable quarterly in arrears. The Open End Fund was dissolved on July 28, 2020. As a result, we will not earn any fees subsequent to that date. We earned aggregate fees from the Managed Operators, ABP Trust, AIC and the Open End Fund of $5,963 and $7,145 for the three months ended June 30, 2020 and 2019, respectively, and $19,626 and $21,292 for the nine months ended June 30, 2020 and 2019, respectively. Property Management Fees We earn property management fees by providing continuous services pursuant to property management agreements with certain Client Companies. We generally earn fees under these agreements equal to 3.0% of gross collected rents. Also, under the terms of the property management agreements, we receive additional fees for construction supervision 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 $11,618 and $11,626 for the three months ended June 30, 2020 and 2019, respectively, and $35,851 and $33,603 for the nine months ended June 30, 2020 and 2019, respectively. Advisory Services and Other Agreements RMR Advisors is compensated pursuant to its agreement with RMRM at an annual rate of 0.85% of RMRM’s average daily managed assets. Average daily managed assets includes the net asset value attributable to RMRM’s outstanding common shares, plus the liquidation preference of RMRM’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 RMRM. RMR Advisors earned advisory services revenue of $585 and $767 for the three months ended June 30, 2020 and 2019, respectively, and $2,139 and $2,225 for the nine months ended June 30, 2020 and 2019, respectively. Tremont Advisors is primarily compensated pursuant to its management agreements with TRMT and Centre Street at an annual rate of 1.5% of TRMT’s and Centre Street’s equity, respectively, as defined in the applicable agreements. Tremont Advisors may also earn an incentive fee under these management agreements for TRMT and (beginning the first full calendar quarter of 2021) Centre Street. Tremont Advisors has waived any business management and incentive fees otherwise due and payable by TRMT pursuant to the management agreement for the period beginning July 1, 2018 until December 31, 2020. Tremont Advisors earned advisory services revenue from the Tremont Advisory Clients of $40 and $35 for the three months ended June 30, 2020 and 2019, respectively, and $113 and $120 for the nine months ended June 30, 2020 and 2019, respectively, in each case net of the fee waiver referenced above, as applicable. The Tremont business earns between 0.5% and 1.0% of the aggregate principal amounts of any loans it originates for non-investment advisory clients. The Tremont business earned fees for such origination services of $34 and $37 for the three months ended June 30, 2020 and 2019, respectively, and $816 and $194 for the nine months ended June 30, 2020 and 2019, respectively, which amounts are included in management services revenue in our condensed consolidated statements of income. Reimbursable Compensation and Benefits Reimbursable compensation and benefits include reimbursements, at cost, that arise primarily from services we provide pursuant to our property management agreements, a significant portion of which are charged or passed through to and were paid by tenants of our Client Companies. We recognize the revenue for reimbursements when we incur the related reimbursable compensation and benefits and other costs on behalf of our Client Companies. We realized reimbursable compensation and benefits of $13,749 and $13,583 for the three months ended June 30, 2020 and 2019, respectively, and $40,077 and $40,868 for the nine months ended June 30, 2020 and 2019, respectively. Included in reimbursable compensation and benefits are shared services fees we earn from the Tremont Advisory Clients for compensation and other costs related to the operation of the Tremont business. We earned shared services fees from the Tremont Advisory Clients of $250 and $370 for the three months ended June 30, 2020 and 2019, respectively, and $964 and $1,076 for the nine months ended June 30, 2020 and 2019, respectively. Reimbursable compensation and benefits also includes 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 income over the requisite service periods. We record an equal offsetting amount as equity based compensation expense for the value of the grants of common shares from our Client Companies to certain of our officers and employees. We realized equity based compensation expense and related reimbursements of $736 and $882 for the three months ended June 30, 2020 and 2019, respectively, and $1,394 and $2,954 for the nine months ended June 30, 2020 and 2019, respectively. Other Client Company Reimbursable Expenses Other client company reimbursable expenses include reimbursements that arise from services we provide pursuant to our property management agreements, a significant portion of which are charged or passed through to and were paid by tenants of our Client Companies. We have determined that we control the services provided by third parties for certain of our Client Companies and therefore we account for the cost of these services and the related reimbursement revenue on a gross basis. We realized other client company reimbursable expenses reflecting corresponding amounts in revenue and expense of $85,650 and $85,689 for the three months ended June 30, 2020 and 2019, respectively, and $267,852 and $257,088 for the nine months ended June 30, 2020 and 2019, respectively.
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Investments |
9 Months Ended |
---|---|
Jun. 30, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investments | Investments Equity Method Investments As of June 30, 2020, Tremont Advisors owned 1,600,100, or approximately 19.4%, of TRMT’s outstanding common shares. We account for our investment in TRMT using the equity method of accounting because we are deemed to exert significant influence, but not control, over TRMT’s most significant activities. Our share of earnings from our investment in TRMT included in equity in earnings of investees in our condensed consolidated statements of income was $458 and $174 for the three months ended June 30, 2020 and 2019, respectively, and $1,037 and $318 for the nine months ended June 30, 2020 and 2019, respectively. We received aggregate distributions from TRMT of $16 and $132 during the three months ended June 30, 2020 and 2019, respectively, and $721 and $198 during the nine months ended June 30, 2020 and 2019, respectively. Equity Method Investment Accounted for Under the Fair Value Option As of June 30, 2020, we owned 298,538, or approximately 3.6%, of TA’s outstanding common shares. We purchased these shares on October 10, 2018 for $8,382. On July 6, 2020, in conjunction with a public offering of TA’s common shares, we purchased an additional 218,577 shares for $3,060, maintaining our approximately 3.6% ownership of TA’s outstanding common shares. We account for our investment in TA using the equity method of accounting because we are deemed to exert significant influence, but not control, over TA’s most significant activities. We elected the fair value option to account for our equity method investment in TA and determine fair value using the closing price of TA’s common shares, which is a Level 1 fair value input. The market value of our investment in TA as of June 30, 2020 and September 30, 2019, based on quoted market prices, was $4,598 and $3,682, respectively. The unrealized gain (loss) in our condensed consolidated statements of income related to our investment in TA was $1,678 and ($731) for the three months ended June 30, 2020 and 2019, respectively, and $916 and ($2,978) for the nine months ended June 30, 2020 and 2019, respectively.
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Income Taxes |
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes We are the sole managing member of RMR LLC. We are a corporation subject to U.S. federal and state income tax with respect to our allocable share of any taxable income of RMR LLC and its tax consolidated subsidiaries. RMR LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, RMR LLC is generally not subject to U.S. federal and most state income taxes. Any taxable income or loss generated by RMR LLC is passed through to and included in the taxable income or loss of its members, including RMR Inc. and ABP Trust, based on each member’s respective ownership percentage. For the three months ended June 30, 2020 and 2019, we recognized estimated income tax expense of $2,608 and $2,226, respectively, which includes $1,900 and $1,624, respectively, of U.S. federal income tax and $708 and $602, respectively, of state income taxes. For the nine months ended June 30, 2020 and 2019, we recognized estimated income tax expense of $8,944 and $24,335, respectively, which includes $6,578 and $17,756, respectively, of U.S. federal income tax and $2,366 and $6,579, respectively, of state income taxes. 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 50.0% likely to be realized upon settlement. As of June 30, 2020, we had no uncertain tax positions.
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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, 2020 and September 30, 2019, the fair values of our financial instruments, which include cash and cash equivalents, amounts due from related parties and accounts payable and accrued expenses, which include liabilities related to other Client Company reimbursable 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 to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), and the lowest priority to unobservable inputs (Level 3). A financial asset’s or financial liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. 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, 2020 and September 30, 2019:
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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 all of ABP Trust’s voting securities and a majority of the economic interests of ABP Trust. As of June 30, 2020, Adam D. Portnoy beneficially owned, in aggregate, (i) 147,502 shares of Class A common stock of RMR Inc., or Class A Common Shares; (ii) all the outstanding shares of Class B-1 common stock of RMR Inc., or Class B-1 Common Shares; (iii) all the outstanding shares of Class B-2 common stock of RMR Inc., or Class B-2 Common Shares; and (iv) 15,000,000 Class A Units of RMR LLC. Adam D. Portnoy and Jennifer B. Clark, our other Managing Director, are also officers of ABP Trust and RMR Inc. and officers and employees of RMR LLC. Matthew P. Jordan, our Executive Vice President, Chief Financial Officer and Treasurer is also an officer of ABP Trust and an officer and employee of RMR LLC. Adam D. Portnoy is also the chair of the board of trustees of each of the Managed Equity REITs, the chair of the board of directors of each of Five Star and TA, a managing trustee or managing director of each of the Managed REITs, Five Star, RMRM and TA, a director of Sonesta (and its parent) and is a controlling shareholder of Sonesta. Jennifer B. Clark, our other Managing Director, is a managing trustee of DHC and RMRM, a managing director of FVE and a director of Sonesta, and she serves as the secretary of all the publicly traded Client Companies and Sonesta and as an officer of ABP Trust. Prior to its dissolution on February 13, 2020, Mr. Portnoy was a director of AIC and Ms. Clark was the president and chief executive officer of AIC. As of June 30, 2020, Adam D. Portnoy beneficially owned, in aggregate, 6.4% of Five Star’s outstanding common shares, 1.1% of SVC’s outstanding common shares, 1.2% of ILPT’s outstanding common shares, 1.5% of OPI’s outstanding common shares, 1.1% of DHC’s outstanding common shares, 4.0% of TA’s outstanding common shares (including through RMR LLC), 2.3% of RMRM’s outstanding common shares, and 19.5% of TRMT’s outstanding common shares (including through Tremont Advisors). Until its dissolution on February 13, 2020, ABP Trust owned 14.3% of AIC. The Managed Equity REITs, the Open End Fund, TRMT and RMRM all have no employees. RMR LLC provides or arranges for all the personnel, overhead and services required for the operation of the Managed Equity REITs, the Open End Fund (until its dissolution on July 28, 2020) and AIC (until its dissolution on February 13, 2020), pursuant to management agreements with them. All the officers of the Managed Equity REITs and the Open End Fund are officers or employees of RMR LLC. All the officers, overhead and required office space of TRMT are provided or arranged by Tremont Advisors. All of TRMT’s officers are officers or employees of Tremont Advisors or RMR LLC. All officers, overhead and required office space of RMRM are provided or arranged by RMR Advisors. All of RMRM’s officers are officers or employees of RMR Advisors or RMR LLC. Many of the executive officers of the Managed Operators are officers or employees of RMR LLC. Some of our executive officers are also managing directors or managing trustees of certain of the Managed REITs, the Managed Operators and RMRM. As of June 30, 2020, ABP Trust owned 100% of Centre Street and 206,300 limited partnership units, or 100%, of the Open End Fund. RMR LLC owned no limited partnership units of the Open End Fund, but as of June 30, 2020, had committed to contributing $100,000 to, the Open End Fund. The general partner of the Open End Fund is a subsidiary of ABP Trust and is not entitled to any compensation for services rendered to the Open End Fund in its capacity as general partner. On July 28, 2020, the Open End Fund was dissolved and RMR LLC’s $100,000 commitment was terminated as a result. In connection with the dissolution of the Open End Fund, the Transaction Agreement, dated as of July 31, 2018, between ABP Trust and RMR LLC was terminated. Additional information about our related person transactions appears in Note 8, Shareholders’ Equity, below and in our 2019 Annual Report. Revenues from Related Parties For the three and nine months ended June 30, 2020 and 2019, we recognized revenues from related parties as set forth in the following table:
Amounts Due From Related Parties The following table represents amounts due from related parties as of the dates indicated:
Leases As of June 30, 2020, RMR LLC leased from ABP Trust and certain Managed Equity REITs office space for use as our headquarters and local offices. We incurred rental expense under related party leases of $1,367 and $1,366 for the three months ended June 30, 2020 and 2019, respectively, and $4,230 and $4,224 for the nine months ended June 30, 2020 and 2019, respectively. Tax-Related Payments Pursuant to our tax receivable agreement with ABP Trust, RMR Inc. pays to ABP Trust 85.0% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that RMR Inc. realizes as a result of (a) the increases in tax basis attributable to our dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be paid by us as a result of the tax receivable agreement. As of June 30, 2020, our condensed consolidated balance sheet reflects a liability related to the tax receivable agreement of $32,061, including $2,111 classified as a current liability that we expect to pay to ABP Trust during the fourth quarter of fiscal year 2020. Under the RMR LLC operating agreement, RMR LLC is also required to make certain pro rata distributions to each member of RMR LLC quarterly on the basis of the estimated tax liabilities of its members, subject to future adjustment based on actual results. For the nine months ended June 30, 2020 and 2019, pursuant to the RMR LLC operating agreement, RMR LLC made required quarterly tax distributions to holders of its membership units totaling $23,062 and $59,279, respectively, of which $12,127 and $30,807, respectively, was distributed to us and $10,935 and $28,472, 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. Separation Arrangements We entered into retirement agreements with each of Mark L. Kleifges, Bruce J. Mackey Jr. and John C. Popeo, each a former Executive Vice President of RMR LLC, between October 25, 2018 and December 11, 2018 in connection with their retirements. Pursuant to these agreements, we made various cash payments and accelerated the vesting of unvested shares RMR Inc. previously awarded to these retiring officers. We also enter into separation arrangements from time to time with other nonexecutive officers and employees of ours. There remains no further substantive performance obligations with respect to any such arrangements, and we in turn recognized all applicable provisions in our condensed consolidated statements of income as separation costs. In December 2019, we entered into a retirement agreement with TA and a former executive officer of RMR LLC, Andrew J. Rebholz. Mr. Rebholz was also a managing director and chief executive officer of TA. Pursuant to his retirement agreement, Mr. Rebholz served as an employee of RMR LLC through June 30, 2020. Under Mr. Rebholz’s retirement agreement, RMR LLC paid Mr. Rebholz an annual base salary of $75 until June 30, 2020 and RMR LLC paid him a cash bonus in respect of 2019 of $250 in December 2019. RMR LLC also paid Mr. Rebholz an additional cash payment of $250 in 2020. In addition, in January 2020, we accelerated the vesting of all 7,300 unvested shares of RMR Inc. owned by Mr. Rebholz as of his retirement date, June 30, 2020. We recorded approximately $281 of equity based separation costs related to the acceleration of these shares for the nine months ended June 30, 2020. For the three and nine months ended June 30, 2020 and 2019, we recognized cash and equity based separation costs as set forth in the following table:
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Shareholders’ Equity | Shareholders’ Equity Issuances and Repurchases We grant our Class A Common Shares to our Directors, officers and employees under the 2016 Omnibus Equity Plan adopted in 2016, or the 2016 Plan. Shares issued to Directors vest immediately. Shares issued to employees vest in five equal, consecutive, annual installments, with the first installment vesting on the date of grant. We recognize share forfeitures as they occur. Compensation expense related to share grants is determined based on the market value of our shares on the date of grant, with the aggregate value of the granted shares amortized to expense over the related vesting period. Expense recognized for shares granted to Directors are included in general and administrative expenses and for shares granted to employees are included in equity based compensation in our condensed consolidated statements of income. On March 11, 2020, we granted 3,000 of our Class A Common Shares, valued at $31.28 per share, the closing price of our Class A Common Shares on The Nasdaq Stock Market LLC, or Nasdaq, on that day, to each of our Managing Directors and Independent Directors as part of his or her annual compensation for serving as a Director. On June 23, 2020, in connection with the election of one of our Independent Directors, we awarded to such Director 3,000 of our common shares, valued at $31.66 per share, the closing price of our common shares on the Nasdaq on that day. For the three and nine months ended June 30, 2020, we recorded general and administrative expense of $95 and $564, respectively, for Director grants. Equity based compensation expense related to shares granted to certain officers and employees was $563 and $452 for the three months ended June 30, 2020 and 2019, respectively, and $1,789 and $1,395 for the nine months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, we had 109,210 unvested shares outstanding which are scheduled to vest as follows: 39,910 shares in 2020, 31,940 shares in 2021, 23,280 shares in 2022 and 14,080 in 2023. In connection with the vesting and issuance of awards of our Class A Common Shares to our Directors, officers and employees, we provide for the ability to repurchase our Class A Common Shares to satisfy tax withholding and payment obligations. The repurchase price is based on the closing price of our Class A Common Shares on the Nasdaq on the repurchase date. During the nine months ended June 30, 2020, we withheld and repurchased 4,455 of our Class A Common Shares for an aggregate value of $155, which is reflected as a decrease to shareholders’ equity in our condensed consolidated balance sheets. In connection with the issuances and repurchases of our Class A Common Shares, and as required by the RMR LLC operating agreement, RMR LLC concurrently issues or acquires an identical number of Class A Units from RMR Inc. Distributions During the nine months ended June 30, 2020 and 2019, we declared and paid dividends on our Class A Common Shares and Class B-1 Common Shares as follows:
These dividends were funded in part by distributions from RMR LLC to holders of its membership units as follows:
The remainder of the above noted dividends that were paid were funded with cash accumulated at RMR Inc. On July 16, 2020, we declared a quarterly dividend on our Class A Common Shares and Class B-1 Common Shares to our shareholders of record as of July 27, 2020, in the amount of $0.38 per Class A Common Share and Class B-1 Common Share, or $6,200. This dividend will be partially funded by a distribution from RMR LLC to holders of its membership units in the amount of $0.30 per unit, or $9,395, of which $4,895 will be distributed to us based on our aggregate ownership of 16,315,445 membership units of RMR LLC and $4,500 will be distributed to ABP Trust based on its ownership of 15,000,000 membership units of RMR LLC. The remainder of this dividend will be funded with cash accumulated at RMR Inc. We expect to pay this dividend on or about August 20, 2020.
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per Common Share Amounts | Per Common Share Amounts Basic earnings per common share reflects net income attributable to RMR Inc. divided by our weighted average Class A Common Shares and our Class B-1 Common Shares outstanding during the applicable periods. Our Class B-2 Common Shares, which are paired with ABP Trust’s Class A Units, have no independent economic interest in RMR Inc. and thus are not included as common shares outstanding for purposes of calculating basic earnings per common share. Diluted earnings per common share reflects net income divided by our weighted average Class A Common Shares and our Class B-1 Common Shares plus the effect of dilutive common share equivalents during the applicable periods. Diluted common share equivalents reflect the assumed issuance of Class A Common Shares pursuant to our 2016 Plan and the assumed issuance of Class A Common Shares related to the assumed redemption of the 15,000,000 Class A Units using the if-converted method. Unvested Class A Common Shares granted to our employees are deemed participating securities for purposes of calculating earnings per common share because they have dividend rights. We calculate earnings per share using the two-class method. Under the two-class method, we allocate earnings proportionately to vested Class A Common Shares and Class B-1 Common Shares outstanding and unvested Class A Common Shares outstanding for the period. Earnings attributable to unvested Class A Common Shares are excluded from earnings per share under the two-class method as reflected in our condensed consolidated statements of income. The 15,000,000 Class A Units that we do not own may be redeemed for our Class A Common Shares on a one-for-one basis, or upon such redemption, we may elect to pay cash instead of issuing Class A Common Shares. Upon redemption of a Class A Unit, the Class B-2 Common Share “paired” with such unit is canceled for no additional consideration. In computing the dilutive effect, if any, that the aforementioned redemption would have on earnings per share, we considered that net income available to holders of our Class A Common Shares would increase due to elimination of the noncontrolling interest offset by any tax effect, which may be dilutive. For the three and nine months ended June 30, 2019, such redemption is not reflected in diluted earnings per share as the assumed redemption would be anti-dilutive. For the three and nine months ended June 30, 2020, the assumed redemption is dilutive to earnings per share as presented in the table below. The calculation of basic and diluted earnings per share for the three and nine months ended June 30, 2020 and 2019, is as follows:
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Leases |
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases We enter into operating leases, as the lessee, for office space and determine if an arrangement is a lease at inception of the arrangement. Operating lease liabilities and right of use assets are recognized based on the present value of the future minimum lease payments over the lease term using our estimated incremental borrowing rate. Operating lease costs totaled $1,568 and $4,794 for the three and nine months ended June 30, 2020, respectively, including variable lease payments of $143 and $504, respectively, and straight-line rent amounts of $52 and $124, respectively. Minimum lease payments for leases with an initial term of twelve months or less are not recorded on our condensed consolidated balance sheet. Lease expense for leases with an initial term of twelve months or less was $11 and $44 for the three and nine months ended June 30, 2020, respectively. As of June 30, 2020, our operating leases expire on various dates through 2030, the weighted average remaining lease term was 9.1 years and the determination of the present value of the remaining lease payments utilized a weighted average discount rate of 3.1%. The following table presents the undiscounted cash flows on an annual basis for our operating lease liabilities as of June 30, 2020:
(1) Excludes $771 of lease payments for signed leases that have not yet commenced.
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Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting We have one reportable business segment, which is RMR LLC. In the tables below, our All Other Operations includes the operations of RMR Inc., RMR Advisors and Tremont Advisors.
(1) Intersegment revenues of $2,696 recognized by RMR LLC for services provided to our All Other Operations segment have been eliminated in the condensed consolidated financial statements.
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Recent Accounting Pronouncements (Policies) |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases, as amended, or ASU No. 2016-02, 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 determines 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 twelve months regardless of their classification. On October 1, 2019, we adopted ASU No. 2016-02 along with certain allowable practical expedients using the modified retrospective transition approach. We elected to apply the guidance to each lease that had commenced as of the adoption date. We also elected a package of practical expedients that allowed us not to reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) the recognition requirements for initial direct costs for any expired or existing leases. Additionally, we elected to account for the lease and non-lease components as a single lease component. The adoption of ASU No. 2016-02 did not affect our condensed consolidated statements of income and cash flows. See Note 10, Leases, for further information regarding the adoption of ASU No. 2016-02. Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU No. 2016-13, which requires that entities use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 will become effective for fiscal years beginning after December 15, 2019. The effective date for us is the first day of fiscal year 2021 (October 1, 2020). 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.
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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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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, 2020 and September 30, 2019:
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Related Person Transactions - (Tables) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | For the three and nine months ended June 30, 2020 and 2019, we recognized cash and equity based separation costs as set forth in the following table:
The following table represents amounts due from related parties as of the dates indicated:
For the three and nine months ended June 30, 2020 and 2019, we recognized revenues from related parties as set forth in the following table:
|
Shareholders’ Equity (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends Declared | During the nine months ended June 30, 2020 and 2019, we declared and paid dividends on our Class A Common Shares and Class B-1 Common Shares as follows:
These dividends were funded in part by distributions from RMR LLC to holders of its membership units as follows:
|
Per Common Share Amounts (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share | The calculation of basic and diluted earnings per share for the three and nine months ended June 30, 2020 and 2019, is as follows:
|
Leases (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of undiscounted cash flows of operating lease liability and reconciliation of operating lease liabilities | The following table presents the undiscounted cash flows on an annual basis for our operating lease liabilities as of June 30, 2020:
(1) Excludes $771 of lease payments for signed leases that have not yet commenced.
|
Segment Reporting (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment reporting information |
(1) Intersegment revenues of $2,696 recognized by RMR LLC for services provided to our All Other Operations segment have been eliminated in the condensed consolidated financial statements.
|
Basis of Presentation (Details) |
9 Months Ended |
---|---|
Jun. 30, 2020
shares
| |
RMR LLC | |
Related Party Transaction [Line Items] | |
Ownership percentage | 52.10% |
Class B membership units | |
Related Party Transaction [Line Items] | |
Membership units (in units) | 1,000,000 |
Class A Common Stock | Class A membership units | |
Related Party Transaction [Line Items] | |
Membership units (in units) | 15,315,445 |
Capital Unit Redeemable Class A Units | ABP Trust | |
Related Party Transaction [Line Items] | |
Membership units (in units) | 15,000,000 |
Capital Unit Redeemable Class A Units | ABP Trust | RMR LLC | |
Related Party Transaction [Line Items] | |
Ownership percentage | 47.90% |
Revenue Recognition - Business Management Fees (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|---|
Jan. 31, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Managed Operators, ABP Trust and AIC | ||||||
Related Party Transaction [Line Items] | ||||||
Business management fee percent based on management agreements | 0.50% | 0.60% | ||||
Aggregate business management fees | $ 5,963 | $ 7,145 | $ 19,626 | $ 21,292 | ||
AIC | ||||||
Related Party Transaction [Line Items] | ||||||
Business management fee percent based on total premiums paid | 3.00% | |||||
Open End Fund | ||||||
Related Party Transaction [Line Items] | ||||||
Management fee as a percent of NAV | 1.00% |
Revenue Recognition - Property Management Fees (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
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 | $ 11,618 | $ 11,626 | $ 35,851 | $ 33,603 |
Revenue Recognition - Reimbursable Payroll Related and Other Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 138,649 | $ 143,715 | $ 439,402 | $ 554,124 |
Shared service fees | 250 | 370 | 964 | 1,076 |
Equity based compensation expense and related reimbursements | 736 | 882 | 1,394 | 2,954 |
Reimbursable compensation and benefits | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 13,749 | 13,583 | 40,077 | 40,868 |
Other client company reimbursable expenses | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 85,650 | $ 85,689 | $ 267,852 | $ 257,088 |
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 2,608 | $ 2,226 | $ 8,944 | $ 24,335 |
Federal income tax expense | 1,900 | 1,624 | 6,578 | 17,756 |
State income tax expense | $ 708 | $ 602 | $ 2,366 | $ 6,579 |
Income Taxes - Reconciliation of Income Tax Rate (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Income taxes computed at the federal statutory rate | 21.00% | 21.00% | 21.00% | 21.00% |
State taxes, net of federal benefit | 3.60% | 2.80% | 3.70% | 3.00% |
Permanent items | 0.10% | 0.60% | 0.10% | 0.10% |
Net income attributable to noncontrolling interest | (10.20%) | (10.10%) | (10.10%) | (10.10%) |
Total | 14.50% | 14.30% | 14.70% | 14.00% |
Fair Value of Financial Instruments (Details) - Recurring basis - Level 1 - USD ($) $ in Thousands |
Jun. 30, 2020 |
Sep. 30, 2019 |
---|---|---|
Schedule of assets and liabilities measured at fair value | ||
Money market funds included in cash and cash equivalents | $ 344,063 | $ 357,526 |
Current portion of due from related parties related to share based payment awards | 998 | 4,814 |
Long term portion of due from related parties related to share based payment awards | 5,837 | 9,238 |
Current portion of employer compensation liability related to share based payment awards | 998 | 4,814 |
Long term portion of employer compensation liability related to share based payment awards | $ 5,837 | $ 9,238 |
Related Person Transactions - Footnotes to Revenue from Related Parties (Details) $ in Thousands |
9 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
DHC | |
Related Party Transaction [Line Items] | |
Aggregate incentive business management fees | $ 40,642 |
SIR | |
Related Party Transaction [Line Items] | |
Aggregate incentive business management fees | 25,817 |
SVC | |
Related Party Transaction [Line Items] | |
Aggregate incentive business management fees | $ 53,635 |
Related Person Transactions - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Related Party Transaction [Line Items] | ||||
Lease expense, rental expense | $ 11 | $ 44 | ||
ABP Trust and Managed REIT | ||||
Related Party Transaction [Line Items] | ||||
Lease expense, rental expense | $ 1,367 | $ 1,366 | $ 4,230 | $ 4,224 |
Related Person Transactions - Tax Related Payments (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
RMR LLC | ||
Related Party Transaction [Line Items] | ||
Tax distributions | $ 12,127 | $ 30,807 |
ABP Trust | RMR LLC | ||
Related Party Transaction [Line Items] | ||
Tax distributions | $ 10,935 | 28,472 |
ABP Trust | Up C Transaction | ||
Related Party Transaction [Line Items] | ||
Tax receivable agreement, percent of payment | 85.00% | |
Liability related to tax receivable agreement | $ 32,061 | |
Current portion of liability related to tax receivable agreement | 2,111 | |
ABP Trust and Managed REIT | RMR LLC | ||
Related Party Transaction [Line Items] | ||
Tax distributions | $ 23,062 | $ 59,279 |
Shareholders’ Equity - Distributions (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Class A and B-1 common shares | ||||||||
Class of Stock [Line Items] | ||||||||
Dividends paid (in dollars per share) | $ 0.38 | $ 0.38 | $ 0.38 | $ 0.35 | $ 0.35 | $ 0.35 | $ 1.14 | $ 1.05 |
Value of dividends | $ 6,200 | $ 6,194 | $ 6,195 | $ 5,684 | $ 5,680 | $ 5,680 | $ 18,589 | $ 17,044 |
ABP Trust | Class A Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Value of dividends | 4,500 | 4,500 | 4,500 | 4,500 | 4,500 | 4,500 | 13,500 | 13,500 |
RMR LLC | Class A and B-1 common shares | ||||||||
Class of Stock [Line Items] | ||||||||
Value of dividends | $ 4,894 | $ 4,890 | $ 4,891 | $ 4,872 | $ 4,869 | $ 4,869 | $ 14,675 | $ 14,610 |
RMR LLC | RMR LLC | ||||||||
Class of Stock [Line Items] | ||||||||
Dividends paid (in dollars per share) | $ 0.30 | $ 0.30 | $ 0.30 | $ 0.30 | $ 0.30 | $ 0.30 | $ 0.90 | $ 0.90 |
Value of dividends | $ 9,394 | $ 9,390 | $ 9,391 | $ 9,372 | $ 9,369 | $ 9,369 | $ 28,175 | $ 28,110 |
Per Common Share Amounts - Additional Information (Details) |
9 Months Ended |
---|---|
Jun. 30, 2020
shares
| |
Class A membership units | |
Class of Stock [Line Items] | |
Antidilutive securities (in shares) | 15,000,000 |
Leases (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Leases [Abstract] | |||
Operating lease expense associated with minimum lease payments | $ 1,568 | $ 4,794 | |
Variable lease payments | 143 | 504 | |
Straight line rent | 52 | 124 | $ 166 |
Lease expense for leases with an initial term of twelve months or less | $ 11 | $ 44 | |
Weighted average remaining lease term | 9 years 1 month 6 days | 9 years 1 month 6 days | |
Weighted average discount rate | 3.10% | 3.10% | |
Leases not yet commenced | $ 771 | $ 771 |
Leases - Cash Flows of Operating Lease Liability and Reconciliation of Operating Lease Liabilities (Details) $ in Thousands |
Jun. 30, 2020
USD ($)
|
---|---|
Leases [Abstract] | |
2020 | $ 1,349 |
2021 | 5,480 |
2022 | 5,555 |
2024 | 4,926 |
2025 | 4,428 |
Thereafter | 21,400 |
Total lease payments | 43,138 |
Less: imputed interest | (5,639) |
Present value of operating lease liabilities | 37,499 |
Less: current portion of operating lease liabilities | (4,343) |
Operating lease liabilities, net of current portion | $ 33,156 |
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