RMR GROUP (RMR)·Q1 2026 Earnings Summary

RMR Group Q1 2026: Incentive Fees Drive GAAP Beat, Stock Jumps 6%

February 5, 2026 · by Fintool AI Agent

The RMR Group Inc. (NASDAQ: RMR) reported fiscal Q1 2026 results that "exceeded or are at the high end of our expectations," with GAAP net income boosted by $23.6 million in incentive fees earned from Diversified Healthcare Trust (DHC) and Industrial Logistics Properties Trust (ILPT). The stock rose 5.9% to $16.66 following the earnings call, with CEO Adam Portnoy highlighting that DHC and ILPT were the #1 and #3 best-performing REITs in the United States in 2025 as measured by total shareholder return.

While headline GAAP results were strong, underlying metrics showed some softness: Adjusted EPS of $0.20 declined 9% sequentially and 43% year-over-year, reflecting the wind-down of AlerisLife and lower base business management fees. However, Distributable Earnings—the key metric for dividend coverage—rose 7% quarter-over-quarter to $0.47 per share.

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Did RMR Beat Earnings?

RMR's results present a tale of two metrics:

The GAAP result was exceptional due to $23.6 million in incentive fees—$17.9 million from DHC and $5.7 million from ILPT—earned for calendar year 2025 as both REITs materially outperformed their industry benchmarks. These fees were paid in January 2026.

CEO Adam Portnoy commented: "We largely exceeded our expectations for RMR's first quarter results as share price gains at DHC and ILPT, along with a full quarter contribution from two recently acquired residential communities, helped offset the adverse impact of the wind down of AlerisLife."

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What Did Management Guide?

Management provided Q2 FY2026 guidance calling for a sequential decline in adjusted metrics as several one-time tailwinds roll off:

Key drivers of sequential decline:

• AlerisLife wind-down complete: Earned ~$400K in Q1 that won't recur
• Loan portfolio sale: Loans sold mid-November contributed $411K in Q1
• Lower construction management fees: Calendar Q1 spend typically lower for clients
• Managed REIT deleveraging: Lower enterprise values from asset sales to repay debt
• Trustee share grants: March equity grants create ~$0.02/share headwind

Offset: Beginning next quarter, SEVN dividends will contribute ~$800K in quarterly Adjusted EBITDA from the increased 20.3% ownership stake.

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What Changed From Last Quarter?

The quarter featured several significant developments:

Operating Highlights

For the full year 2025, RMR arranged nearly 10 million sq ft of leasing at rental rates approximately 13% higher than previous rents for the same space.

Portfolio Restructuring

1. SEVN Loan Sale & Rights Offering: RMR sold its loan portfolio (2 loans totaling $61.7M) to Seven Hills, generating $16.6 million net proceeds after repaying the secured financing facility. During RMR's approximate 1.5-year holding period, these loans generated returns of just over 14%.

RMR then participated in and fully backstopped SEVN's common shares rights offering, investing approximately $24.8 million (including $17.4 million from the backstop agreement), increasing its equity interest in SEVN to 20.3%.

2. Managed REIT Asset Sales: RMR assisted its Managed Equity REITs with nearly $800 million in asset sales during the quarter, with proceeds primarily used to delever their respective balance sheets.

3. AlerisLife Wind-Down: The wind-down of AlerisLife's business continued to impact results, with AlerisLife contributing only $0.4 million in fees versus $1.4 million in the prior quarter.

Revenue Bridge

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How Did the Stock React?

RMR shares rose 5.9% to $16.66 on the day of the earnings call (Feb 5), building on the 3.0% gain the day prior when the 8-K was filed. The two-day post-earnings move totals +10.3% from the $15.11 close on Feb 3.

The positive reaction likely reflects:

1. Better-than-expected incentive fees ($23.6M) paid in January
2. DHC and ILPT ranking as #1 and #3 best-performing REITs in 2025
3. Well-covered dividend (67.5% payout ratio)
4. Nearly $150M liquidity position
5. Successful SEVN rights offering execution increasing RMR ownership to 20.3%

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Assets Under Management Trends

AUM declined 8% year-over-year, primarily due to asset sales at managed REITs designed to reduce leverage:

Fee-Earning AUM by Client

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Dividend and Capital Allocation

RMR declared a quarterly dividend of $0.45 per share, payable February 19, 2026 to shareholders of record as of January 26, 2026.

The dividend is funded through a combination of Distributable Earnings from The RMR Group LLC ($0.32/share) and cash held at The RMR Group Inc. ($0.13/share).

Dividend Sustainability: Management noted that accumulated cash of $18.8 million from tax distributions in excess of obligations provides "ample capacity, when combined with expected Distributable Earnings, to continue dividends at current levels for more than three years."

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Liquidity Position

RMR ended the quarter with a strong liquidity position:

CEO Portnoy emphasized the strategic positioning: "With $149.3 million in liquidity and a scalable operating platform, we believe we are well positioned to execute on our strategic goals as we enter 2026."

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Key Risks and Concerns

1. OPI Restructuring: Office Properties Income Trust (OPI) filed Chapter 11 bankruptcy on October 30, 2025. Management stated the process is expected to conclude by summer 2026 and RMR remains "committed to supporting the assets, vendors, and tenants of OPI."

2. AUM Pressure: Continued asset sales at managed REITs to delever balance sheets will pressure fee-earning AUM and base management fees. Q2 guidance already reflects lower enterprise values from debt paydowns at DHC and SVC.

3. AlerisLife Wind-Down Complete: The business was substantially sold by December 31, 2025. Q1 FY2026 included ~$400K in fees that won't recur.

4. Private Capital Fundraising Environment: "The fundraising environment remains challenging," though RMR is investing in dedicated capital formation staff.

5. Client Concentration: RMR's revenues depend on a limited number of clients, creating concentration risk.

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Forward Catalysts

1. Multifamily Fund Launch: Target to launch vehicle and move balance sheet assets by fiscal year-end (September 30, 2026). This is the "number one focus" for private capital raising.
2. SEVN Loan Deployment: With $200M+ in new lending capacity and a ~$1B pipeline, Seven Hills will be active in 2026. RMR now owns 20.3% and will receive ~$800K/quarter in additional dividends.
3. Enhanced Growth Venture: Goal to raise ~$250M from select investors with ability to share in property-level and GP economics.
4. DHC SHOP Improvements: Transition of 116 communities to new operators expected to drive "material SHOP NOI improvements."
5. OPI Resolution: Bankruptcy expected to conclude by summer 2026, providing clarity on ongoing management relationship.
6. AI and Efficiency Initiatives: Company highlighted "significant strides in headcount rationalization through process improvement, the implementation of AI initiatives."

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Q&A Highlights

Private Capital Fundraising Strategy

Mitch Germain (Citizens Bank) asked about Peter Welch's recent hire and international capital raising:

"If I had to very simply describe Mary and Peter in sort of very senior roles, Mary's very focused U.S.-focused capital raising, and Peter is very focused ex-U.S. with a real focus on Asia and Middle East... We went from no dedicated folks focused on private capital fundraising six months ago to now having four dedicated people."

Adam Portnoy on product focus: "For 2026, we're very focused on getting our multifamily fund off the ground. As Matt highlighted, we have close to $100 million on our balance sheet deployed to seed that effort... In conversations in the marketplace, there's a little less interest in industrial, a little less interest in lending, a little more interest in office, and continued interest in multifamily which has been strong throughout the cycle."

Multifamily Performance

John Massocca (B. Riley) asked about performance of the balance sheet residential assets:

"Most of the 5 assets are still early in their life cycle... 3- to 5-year business plan, all targeted mid- to high-teen returns. We're seeing really strong operational results. We're seeing the capital improvements resulting in premiums on the rent as we underwrote. A 70% tenant retention rate is incredibly important in this market right now... If you're holding on to tenants, you're seeing rent growth approaching 5%, versus new tenancy being roll downs in rent of 4%-5%."

Multifamily Fund Timeline

On launching the multifamily vehicle: "Not to sound flippant, but ASAP. It's really the number one focus in terms of our private capital raising discussions in the marketplace... The management team would expect it to happen in fiscal year 2026 [by September 30, 2026]. I don't know if that's early or late, but there's a lot of effort going in towards it."

Credit Strategy Shift

On loan investments: "We don't think we're planning to put additional loans on the RMR balance sheet. We originally did that because we were trying to seed a vehicle... As we were out in the marketplace talking to private capital, it became evident that we didn't really need to seed the portfolio on our balance sheet. Most if not all [new lending] is gonna be going through the Seven Hills mortgage REIT."

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Strategic Updates from Managed REITs

The call provided updates on RMR's managed companies:

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Data sourced from RMR Group 8-K (Feb 4, 2026) and Q1 FY2026 earnings call transcript (Feb 5, 2026). Market data from S&P Global.