The RMR Group's Q4 2025 Earnings Call: Contradictions Emerge on Fundraising, Residential Strategy, Retail Investments, and EBITDA Margins

Date of Call: November 13, 2025

Financials Results

• Revenue: Recurring service revenues of approximately $45.5M this quarter, up ~$1.5M sequentially; expected to decline to approximately $42.5M next quarter due to AlerisLife sale and enterprise value changes.
• EPS: Adjusted net income $0.22 per share and distributable earnings $0.44 per share for the quarter; guidance for next quarter: adjusted net income $0.16-$0.18 and distributable earnings $0.42-$0.44.

Guidance:

• Recurring service revenues expected to be ~ $42.5M next quarter (down from $45.5M).
• Adjusted EBITDA guidance $18M–$20M for Q1.
• Distributable earnings guidance $0.42–$0.44 per share for Q1.
• Adjusted net income guidance $0.16–$0.18 per share for Q1.
• Cash compensation expected to decline to ~$37M; reimbursement rate ~46%–47%.
• Interest expense expected to rise to ~$2.6M next quarter.
• Tax rate expected ~15% in Q1 and ~18% for Q2–Q4.

Business Commentary:

* Revenue Performance and Strategic Initiatives: - The RMR Group reported distributable earnings of $0.44 per share and adjusted net income of $0.22 per share for Q4 2025. - The company executed nearly $2 billion in accretive debt financings and over $300 million in asset sales during the quarter. - The strategic initiatives, particularly in managed equity REITS, were aimed at improving share prices and aligning interests with managed equity REITs.

• Portfolio Performance and Asset Sales:
• DHC, a managed equity REIT, saw a 210-basis point increase in occupancy to 81.5% and a 5.3% increase in average monthly rates for its senior housing segment.
• DHC completed the transition of 116 SHOP communities to new operators and announced the sale of non-core assets, contributing to a decline in its enterprise value.

• These actions were part of a strategic transformation to focus on core operations and deleverage the balance sheet.

• Private Capital Expansion and Fundraising Efforts:

• RMR launched fundraising for the RMR Residential Enhanced Growth Venture, aiming to raise up to $250 million from up to three large investors.
• The company is expanding its retail portfolio, targeting the acquisition of multiple multi-tenant retail properties, with a focus on value-add opportunities.

• These efforts are part of a strategic initiative to diversify and grow the private capital segment of RMR's business.

• Shareholder Incentives and Incentive Fees:

• RMR accrued potential incentive fees of approximately $22 million in 2025 based on share price improvements at DHC and ILPT.
• These fees are structured to align the interests of RMR with the managed equity REITs, incentivizing RMR to create shareholder value.

Sentiment Analysis:

Overall Tone: Positive

• Management said results were "in line with our expectations," highlighted completion of "nearly $2 billion of accretive debt financings" and >$300M of asset sales, and noted potential incentive fees from DHC and ILPT of approximately $22 million, reflecting constructive operational and capital actions.

Q&A:

• Question from Mitch Germain (Citizens JMP Securities, LLC, Research Division): I'm curious about OPI's fee. Does it in effect go up quarter-over-quarter?
  Response: OPI fees are effectively flat: RMR will earn a fixed business management fee of $14M per year for the first two years after emergence; during bankruptcy we may earn slightly less and expect emergence roughly H1 2026.

• Question from Mitch Germain (Citizens JMP Securities, LLC, Research Division): Can you discuss shopping centers as part of your private capital strategy and competency?
  Response: RMR has retail competency, owns a $21M community shopping center outside Chicago, will add at least a couple more similar deals to build a track record and pursue fundraising around neighborhood/grocery-anchored centers.

• Question from Mitch Germain (Citizens JMP Securities, LLC, Research Division): Did I hear you have a couple of additional loan investments under agreement?
  Response: RMR has no new loan investments on its own balance sheet; two loans on RMR are being sold, and Seven Hills' rights offering should enable ~ $200M of new loan investments at Seven Hills.

• Question from Mitch Germain (Citizens JMP Securities, LLC, Research Division): Please walk through the puts and takes to get to your Q1 adjusted EBITDA forecast (bridge from Q4 to Q1).
  Response: Adjusted EBITDA guided down to $18M–$20M mainly due to the AlerisLife business sale/wind-down, which reduces fee revenue by roughly $1M next quarter.

• Question from John Massocca (B. Riley Securities, Inc., Research Division): Any additional negative flow-through from losing AlerisLife beyond next quarter?
  Response: Full wind-down by year-end; Q1 impact ~ $1M decline in fees and an additional ~$400K reduction rolling into fiscal Q2 (Q4 earned $1.4M total).

• Question from John Massocca (B. Riley Securities, Inc., Research Division): What does the advisory agreement look like after 2 years if you are still managing OPI?
  Response: Post-emergence term is five years with $14M/year fixed for the first two years and property management economics unchanged; fees are renegotiated after two years and the deal contemplates RMR receiving 2% equity plus up to ~8% additional promote tied to performance.

• Question from John Massocca (B. Riley Securities, Inc., Research Division): How flexible is G&A if you stop managing OPI or the portfolio changes?
  Response: RMR could materially reduce G&A if it no longer managed a large office portfolio because office is the most management‑intensive asset class, although exact margin impacts are uncertain.

• Question from John Massocca (B. Riley Securities, Inc., Research Division): Why were loans on RMR's balance sheet sold to Seven Hills?
  Response: Loans were initial seed assets for fundraising; selling them at par to Seven Hills enables timely deployment, secures Seven Hills' dividend and supports its rights offering—beneficial strategically for fundraising.

• Question from John Massocca (B. Riley Securities, Inc., Research Division): Any update on the rights offering and how much RMR expects to participate?
  Response: It's early; base case is RMR will exercise up to its 11% ownership and may backstop additional rights if needed, but likely less than 50% of the offering; final participation unknown until exercise deadline.

• Question from Mitch Germain (Citizens JMP Securities, LLC, Research Division): What's the true-up for rental income from the two residential assets acquired mid-quarter?
  Response: Those owned assets contributed ~$650K of EBITDA in Q4 and are expected to generate roughly $3.2M of NOI on a quarterly run‑rate while held.

• Question from Mitch Germain (Citizens JMP Securities, LLC, Research Division): How should we think about the cash/balance sheet given the rights offering and acquisitions—will you draw on the revolver?
  Response: Management does not expect to draw on the revolver based on current actions; proceeds from loan sales and potential incentive fees should provide liquidity and the company does not feel cash‑constrained.

Contradiction Point 1

Fundraising Environment and Capital Allocation

It involves differing perspectives on the fundraising environment and capital allocation strategies, which are crucial for understanding the company's financial outlook and growth potential.

Did OPI's fee increase quarter-over-quarter? - Mitch Germain(Citizens JMP Securities)

2025Q4: The fundraising environment continues to be challenging, but there is improvement. More meetings with potential capital providers indicate a ramp-up compared to last year. There's optimism that lower interest rates may encourage some groups to allocate money. The transaction market is showing signs of thawing, which could also help. It will still take time to raise capital, but conditions are improving. - Adam Portnoy(CEO)

Can you update us on the fundraising environment for private capital? Are there signs of improvement, and could lower interest rates help improve it? - Tyler Anton Batory(Oppenheimer)

2025Q3: The fundraising environment continues to be challenging, but there is improvement. More meetings with potential capital providers indicate a ramp-up compared to last year. There's optimism that lower interest rates may encourage some groups to allocate money. The transaction market is showing signs of thawing, which could also help. It will still take time to raise capital, but conditions are improving. - Adam Portnoy(CEO)

Contradiction Point 2

RMR Residential Strategy and Performance

It involves differing statements on the performance and strategy of the RMR Residential segment, which impacts investor understanding of the company's growth strategy and financial expectations.

Have you identified expertise in shopping centers within your private capital strategy? - Mitch Germain(Citizens JMP Securities)

2025Q4: The performance of RMR Residential is influenced by the cycle of value-add acquisitions, typically 3-5 years. Current reductions in AUM are due to some assets reaching their business plans and sales transactions. This is normal, but fundraising challenges limit the replenishment of AUM. - Matthew Jordan(CFO)

How does RMR Residential's performance impact service revenue, and is the current level sustainable? - Mitchell Bradley Germain(Citizens JMP Securities)

2025Q3: The performance of RMR Residential is influenced by the cycle of value-add acquisitions, typically 3-5 years. Current reductions in AUM are due to some assets reaching their business plans and sales transactions. This is normal, but fundraising challenges limit the replenishment of AUM. - Matthew Jordan(CFO)

Contradiction Point 3

Private Capital Strategy and Retail Investments

It involves changes in the strategic direction and focus of RMR's private capital investments, impacting potential revenue streams and capital allocation.

Have you found competency in shopping centers as part of your private capital strategy? - Mitch Germain (Citizens JMP Securities, LLC, Research Division)

2025Q4: RMR has experience in managing shopping centers and sees potential in investing in neighborhood and grocery-anchored shopping centers due to favorable supply-demand dynamics and opportunities for outsized returns through capital improvements or re-tenanting. The strategy is to initially invest from their balance sheet and then use that track record to raise capital around it in the future. - Adam Portnoy(CEO)

Can you explain the strategic rationale for the value-add retail acquisition? - Tyler Batory (Oppenheimer)

2025Q2: The value-add retail acquisition is different for us due to our historical focus on residential. We have a deep expertise in retail with $5B in AUM and 500 properties. Retail vacancies are low and demand is high, creating a gap in supply. We aim to leverage our expertise to generate high returns. We'll initially use our balance sheet for investments, but ultimately plan to raise third-party capital. - Adam Portnoy(CEO)

Contradiction Point 4

Outlook for EBITDA Margins

It involves differing expectations for EBITDA margins, which are crucial for assessing the company's financial health and performance.

How should we assess the true-up adjustment for rental income from mid-quarter residential asset acquisitions? - Mitch Germain(Citizens JMP Securities, LLC)

2025Q4: We expect to exit 2025 with a similar margin profile to 2024, as we expect the inclusion of the residential joint venture will offset any softness in underlying margins from the managed REITs. - Adam Portnoy(CEO)

What is the outlook for EBITDA margins following the recent decline? - Mitch Germain(Citizens JMP)

2025Q1: The target is to return to 50% margins, but challenges persist due to the residential platform's breakeven status. Improvements are expected over the next few quarters. - Matthew Jordan(CFO)

Contradiction Point 5

Flexibility in G&A Spend

It involves statements about the flexibility of general and administrative expense (G&A) spending, which directly impacts the company's operational efficiency and cost management.

How flexible is G&A spending to manage OPI? - John Massocca(B. Riley Securities, Inc.)

2025Q4: If RMR were to stop managing a large office portfolio like OPI, significant cost cuts would be possible due to the management-intensiveness of the office asset class. - Adam Portnoy(CEO)

Are earnings declines due to seasonality, and what factors are contributing to this trend? - Mitch Germain(Citizens JMP)

2025Q1: Our G&A costs are expected to be approximately $30 million in the first quarter of fiscal year 2025, which is consistent with fiscal year 2024 levels, and we expect G&A costs to continue to be relatively stable throughout the fiscal year. - Matthew Jordan(CFO)