The RMR Group’s Q3 Earnings Call Contradictions: Prolonged EGV Fundraising, Shifting Balance-Sheet Focus, and Incentive Fee Timing Discrepancies

Date of Call: Aug 6, 2026

Financials Results

• EPS: 48 cents per share (distributable earnings), in line with expectations
• Operating Margin: EBITDA margin in the low 40% range, historically trending at or above 50%

Guidance:

• Recurring service revenues expected to remain consistent at approximately $45 million next quarter.
• Adjusted EBITDA for next quarter expected to be approximately $19 to $21 million.
• Distributable earnings for next quarter expected between $0.48 and $0.50 per share.
• Full-year adjusted EBITDA expected to be approximately $76.5 to $78.5 million.
• Incentive fees for calendar year 2026 expected to be over $40 million.

Business Commentary:

Financial Performance and Strategic Objectives:

• The RMR Group reported distributable earnings of 48 cents per share and adjusted EBITDA of $19.7 million for Q3 2026, meeting their guidance.
• The results reflect the company's strategic focus on improving share prices of managed REITs and growing their private capital business.

Managed REITs Performance:

• DHC generated normalized FFO of 16 cents per share and adjusted EBITDA of $82 million, with same property shop NOI growing 37% year-on-year.
• ILPT achieved a record 5.4 million square feet of leasing and a rent roll-up of over 35%, marking its seventh consecutive quarter of double-digit rent growth.
• SVC's normalized FFO per share was $0.43 with adjusted EBITDA of $146 million, and REVPAR increased by 6.6%.
• The performance improvements in these REITs are attributed to strategic asset sales, refinancing efforts, and operational improvements.

Private Capital Business Challenges:

• The ongoing conflict in the Middle East has caused global real estate fundraising to reach a nine-year low, impacting the private capital business.
• Despite these challenges, RMR has built a global sales and marketing team to increase brand awareness and pursue growth opportunities.

Incentive Fees and Future Outlook:

• RMR is on pace to generate over $40 million in incentive fees for the calendar year, primarily from DHC and ILPT.
• The company expects a similar trend for 2027, driven by the strong performance of these REITs.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed being 'pleased with the significant progress' and 'particularly encouraged by the total shareholder returns' of DHC and ILPT. They noted results 'in line with our expectations despite broad economic and geopolitical uncertainty' and highlighted 'record' leasing and 'multiyear acceleration in cash flow growth'.

Q&A:

• Question from Tyler Batori (Oppenheimer): First one is just on the private capital side of things, in particular the enhanced growth venture. It sounds like it's just a macro that's impacting some of the fundraising, but just wanted to double-click on that... any updates on kind of how you think fundraising might progress over the next couple of quarters.
  Response: Fundraising is still underway, impacted by the Middle East conflict causing market volatility and a lack of available capital from investors who haven't recouped prior investments. The process is for the long game, with marketing efforts expected to pay dividends when conditions stabilize.

• Question from Tyler Batori (Oppenheimer): Another big picture question. I'm just trying to think about offering leverage, potential margin improvement in the business... any guideposts you could provide in terms of flow through or even on margin, what that might look like in the medium term?
  Response: Goal is to improve EBITDA margin back towards the historical 50% level by continuing to grow revenues, with the margin expected to flow through to the bottom line.

• Question from Tyler Batori (Oppenheimer): The $40 million potential incentive fees... which REITs are driving that... any help in terms of potential sensitivity?
  Response: The $40 million+ is primarily driven by DHC (about 75%) and ILPT, both of which are outperforming and hitting the incentive fee cap, providing fee stability into 2027.

• Question from Tyler Batori (Oppenheimer): The SPC investment that you've made, do you have an ideal holding period for that? Is that capital down the line that could be freed up and maybe an opportunity to monetize that at a gain level?
  Response: The investment in SVC is viewed as a long-term holding, with expected improvements measured in years, not quarters or months.

• Question from Christopher Nolan (Ladenburg-Fallman): Adam, was the $40 million incentive fee for calendar year or fiscal year?
  Response: It is a calendar year calculation, paid typically in January after year-end.

• Question from Christopher Nolan (Ladenburg-Fallman): What was the driver for the $21 million investment gain?
  Response: The gain was due to the change in share price of investments in SVC and Seven Hills from March 31 to June 30.

• Question from Christopher Nolan (Ladenburg-Fallman): Following up on the comments on the slowdown in commercial real estate... has this impacted valuations for commercial real estate, equity valuations for properties and so forth?
  Response: Transaction volumes are down significantly, but pricing has not moved much; cap rates are compressing in some sectors like senior living and retail, but overall valuations have not deteriorated substantially.

• Question from John Masaka (B. Riley): How are you thinking about additional investments today? Does that need to see kind of a ramp up in that private capital fundraising before you would feel comfortable putting more investments on balance sheet?
  Response: Wholly-owned multifamily investments will likely wait until private capital fundraising (like EGV) ramps up; retail is an area where additional on-balance-sheet investments could be considered, as they are bullish on the sector.

• Question from John Masaka (B. Riley): In terms of the public vehicles, OPI now back in the public markets, can you maybe provide a little more disclosure on how you get to some of the potential fees there...
  Response: The 2% ownership stake in OPI is likely a long-term hold; management is focused on increasing free cash flow, deleveraging, and portfolio optimization for OPI.

• Question from John Masaka (B. Riley): In the potential 8% additional ownership stake, I mean, is that kind of contingent on more kind of going concern type of targets, or would that be kind of more of a liquidation type scenario?
  Response: Discussions are ongoing regarding the management incentive plan for OPI; details will be disclosed once finalized, with various structures on the table.

• Question from Mitch Germain (Citizens Bank): How are they [legacy investments] performing relative to your original underwriting?
  Response: Wholly-owned multifamily assets are nearly 92% occupied, showing 3-4% rent growth on renewals and high teen ROI on renovations, trending on track with their 4-5 year business plans.

• Question from Mitch Germain (Citizens Bank): Adam, you've got shares in now three of your five public vehicles... Is there any consideration to maybe grow a stake in the other two remaining?
  Response: It is an open question and scenario under the right circumstances, but there is no imminent plan to invest in the other REITs.

• Question from Mitch Germain (Citizens Bank): Is there a recurring nature to that [higher compensation impacting earnings], or is this one-time expenses?
  Response: The majority of the compensation adjustment is one-time, related to performance-based bonuses tied to the year-end EBITDA target increase, with a slight factor from headcount mix changes.

Contradiction Point 1

Outlook for Private Capital Fundraising (EGV)

Contradictory statements on the timing and progress of the Enhanced Growth Venture (EGV) fundraising.

Tyler Batori (Oppenheimer) - Tyler Batori (Oppenheimer)

2026Q3: The fundraising cycle has extended (18–24 months), and it's been about nine months... Interest levels are there, but the ongoing conflict in the Middle East and market volatility are causing a pause. - Matt Jordan(COO)

Could you provide updates on fundraising for the enhanced growth venture on the private capital side, as well as guideposts on leverage, margin improvement, and revenue flow-through in the medium term? - Christopher Nolan (Ladenburg Thalmann)

2026Q2: Building brand awareness as a new platform takes time, and the Enhanced Growth Venture's fundraising is expected to take longer until market conditions stabilize. - Matt Jordan(COO)

Contradiction Point 2

Ideal Holding Period for Balance Sheet Investments

Contradiction on the strategic focus for the SPC (Seven Hills) investment versus other potential balance sheet investments.

Tyler Batori (Oppenheimer) - Tyler Batori (Oppenheimer)

2026Q3: The investment in SVC (Seven Hills) is viewed as a long-term investment, measured in years, not quarters or months. RMR is bullish on SVC's prospects and expects to be long-term holders. - Adam Portnoy(CEO)

What is the ideal holding period for the SPC (Seven Hills) investment, and could the capital be reallocated to other opportunities once that period is reached? - John Massocca (B. Riley)

2026Q2: The company will likely not add multifamily assets until successful syndication of the Enhanced Growth Venture. Retail could see a couple more balance sheet acquisitions of the right type of asset to help advance its strategy. - Adam Portnoy(CEO)

Contradiction Point 3

Timeline for Removing Multifamily Assets from Balance Sheet

Contradiction on urgency to remove assets from balance sheet.

What are John Masaka's key points from B. Riley's earnings call? - John Masaka (B. Riley)

2026Q3: RMR is unlikely to add more wholly-owned multifamily assets on the balance sheet until private capital fundraising... picks up. - Adam Portnoy(CEO)

How are you thinking about additional on-balance-sheet real estate investments, and does that require a ramp in private capital fundraising first? - John Massocca (B. Riley Securities, Inc.)

2026Q1: The goal is to raise capital and move the multifamily assets off RMR's balance sheet as soon as possible in fiscal year 2026... - Adam Portnoy(CEO)

Contradiction Point 4

Focus for Additional On-Balance-Sheet Investments

Shift in focus from multifamily to retail for balance sheet investments.

John Masaka (B. Riley) - John Masaka (B. Riley)

2026Q3: The focus for balance sheet investments is currently in the retail sector... - Adam Portnoy(CEO)

Are you considering additional on-balance-sheet real estate investments and would that require a ramp in private capital fundraising first? - Mitch Germain (Citizens JMP Securities, LLC)

2026Q1: The primary focus is on launching a multifamily fund, with significant balance sheet capital already deployed. - Adam Portnoy(CEO)

Contradiction Point 5

Incentive Fee Calculation and Timing

Contradiction on whether the incentive fee is calculated annually or for the fiscal year.

Is there a question from Christopher Nolan (Ladenburg-Fallman)? - Christopher Nolan (Ladenburg-Fallman)

2026Q3: The $40 million incentive fee is a calendar year calculation, paid typically in January after year-end. - Adam Portnoy(CEO)

Is the $40 million incentive fee for a calendar year or fiscal year, and what drove the $21 million investment gain? - Mitch Germain (Citizens JMP Securities, LLC)

2025Q4: The fee is effectively flat. RMR will earn a fixed $14 million per year for the first 2 years post-emergence from bankruptcy. - Adam Portnoy(CEO)