RMR GROUP INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

The following information should be read in conjunction with our consolidated
financial statements and accompanying notes included in Part IV, Item 15 of this
Annual Report on Form 10-K.

OVERVIEW (dollars in thousands)


RMR Inc. is a holding company and substantially all of its business is conducted
by RMR LLC. RMR Inc. has no employees, and the personnel and various services it
requires to operate are provided by RMR LLC. RMR LLC manages a diverse portfolio
of real estate and real estate related businesses. As of September 30, 2022, RMR
LLC managed 2,100 properties in 46 states, Washington, D.C., Puerto Rico and
Canada that are principally owned by the Managed Equity REITs.

Business Environment and Outlook


The continuation and growth of our business depends upon our ability to operate
the Managed REITs so as to maintain, grow and increase the value of their
businesses, to assist our Managed Operating Companies to grow their businesses
and operate profitably and to successfully expand our Managed Private Real
Estate Capital business through the execution of new business ventures and
additional investments. Our business and the businesses of our clients generally
follow the business cycle of the U.S. real estate industry, but with certain
property type and regional geographic variations. Typically, as the general U.S.
economy expands, commercial real estate occupancies increase and new real estate
development occurs; new development frequently leads to increased real estate
supply and reduced occupancies; and then the cycle repeats. These general trends
can be impacted by property type characteristics or regional factors; for
example, demographic factors such as the aging U.S. population, the growth of
e-commerce retail sales or net population migration across different geographic
regions can slow, accelerate, overwhelm or otherwise impact general cyclical
trends. Because of such multiple factors, we believe it is often possible to
grow real estate based businesses in selected property types or geographic areas
despite general national trends.

Beyond general real estate industry trends, we also take into account general
economic factors impacting our clients. More specifically, in the U.S., the
Federal Reserve has increased the federal funds rate six times since the
beginning of calendar 2022 and has announced an expectation that it will
continue to raise rates, in an attempt to slow inflation, which has in turn lead
to increased borrowing costs and disruptions in the financial markets. In a
period of increased borrowing costs, real estate transaction volumes often slow
along with real estate valuation growth, which the commercial real estate
industry has been experiencing. Rising interest rates also adversely impact our
clients with floating rate debt, which they, in some instances, attempt to
address with interest rate caps and other strategic actions to reduce leverage.
Further, while the Federal Reserve is looking to slow inflation, its efforts may
not be successful. The impact of rising costs, both for goods and human capital,
are impacting us and our clients and we and our clients are implementing
mitigation strategies to minimize the impact of increased costs on our and our
clients' earnings, where possible.

We consider industry and general economic factors when providing services to our
clients and attempt to take advantage of opportunities when they arise. For
example: (i) since March 2020, ILPT and DHC have completed several joint venture
transactions with institutional investors and subsequently grown some of those
ventures by acquiring additional properties; (ii) SVC transitioned over 200
hotels from other hotel operators to Sonesta, which on March 17, 2021, completed
its acquisition of RLH Corporation, establishing it as one of the largest hotel
companies in the U.S. and expanding its franchising capabilities; (iii) on
September 30, 2021, SEVN and TRMT merged, resulting in a larger, more
diversified mortgage REIT with an expanded capital base; and (iv) on February
25, 2022, ILPT completed its acquisition of 126 new, Class A, single tenant, net
leased, e-commerce focused industrial properties as a result of its acquisition
of Monmouth Real Estate Investment Corporation, or MNR, in an all-cash
transaction valued at approximately $4.0 billion. In addition, we balance our
pursuit of growth of our and our clients' businesses by executing, on behalf of
our clients, prudent capital recycling or business arrangement restructurings in
an attempt to help our clients prudently manage leverage and increased operating
costs. We also look to reposition their portfolios and businesses when
circumstances warrant such changes or when other more desirable opportunities
are identified.

Please see elsewhere in this Annual Report on Form 10-K, including "Warning
Concerning Forward Looking Statements", Part 1, Item 1 "Business" and Part I,
Item 1A "Risk Factors" for a discussion of some of the circumstances that may
adversely affect us and our business.

Managed Equity REITs


The base business management fees we earn from the Managed Equity REITs are
calculated monthly in accordance with the applicable business management
agreement and are based on a percentage of the lower of (i) the average
historical cost of each REIT's properties and (ii) each REIT's average market
capitalization. The property management fees we earn from the Managed Equity
REITs are principally based on a percentage of the gross rents collected at
certain managed properties owned

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by the Managed Equity REITs, excluding rents or other revenues from hotels,
travel centers, senior living properties and wellness centers, which are
separately managed by our Managed Operating Companies or a third party. Also
under the terms of the property management agreements, we receive construction
supervision fees in connection with certain construction activities undertaken
at the properties owned by the Managed Equity REITs and certain of the Managed
Operating Companies based on a percentage of the cost of such construction. For
further information regarding the fees we earn, see Note 2, Summary of
Significant Accounting Policies, to our consolidated financial statements
included in Part IV, Item 15 of this Annual Report on Form 10-K.

The following table presents for each Managed Equity REIT a summary of its
primary strategy and the lesser of the historical cost of its assets under
management and its market capitalization as of September 30, 2022 and 2021, as
applicable:

                                                                              Lesser of Historical Cost of Assets
                                                                                      Under Management or
                                                                               Total Market Capitalization as of
                                                                                         September 30,
REIT           Primary Strategy                                                    2022                  2021
DHC            Medical office and life science properties, senior           

$ 3,328,069 $ 5,150,401

               living communities and wellness centers
ILPT           Industrial and logistics properties                               4,656,472             2,100,020
OPI            Office properties primarily leased to single tenants,             3,102,253             3,837,235
               including the government
SVC            Hotels and net lease service and necessity-based retail           6,651,976             9,050,693
               properties
                                                                            

$ 17,738,770 $ 20,138,349



A Managed Equity REIT's historical cost of assets under management includes the
real estate it owns and its consolidated assets invested directly or indirectly
in equity interests in or loans secured by real estate and personal property
owned in connection with such real estate (including acquisition related costs
which may be allocated to intangibles or are unallocated), all before reserves
for depreciation, amortization, impairment charges or bad debts or other similar
non-cash reserves. A Managed Equity REIT's average market capitalization
includes the average value of the Managed Equity REIT's outstanding common
equity value during the period, plus the daily weighted average of each of the
aggregate liquidation preference of preferred shares and the principal amount of
consolidated indebtedness during the period.

The table above presents for each Managed Equity REIT, the lesser of the
historical cost of its assets under management and its market capitalization as
of the end of each period. The basis on which our base business management fees
are calculated for the fiscal years ended September 30, 2022 and 2021 may differ
from the basis at the end of the periods presented in the table above. As of
September 30, 2022, the market capitalization was lower than the historical cost
of assets under management for each of the Managed Equity REITs; the historical
cost of assets under management for DHC, ILPT, OPI and SVC as of September 30,
2022, were $7,354,104, $5,693,562, $5,907,788 and $11,285,303, respectively.

The fee revenues we earned from the Managed Equity REITs for the fiscal years
ended September 30, 2022 and 2021 are set forth in the following tables:

                                                 Fiscal Year Ended September 30,
                                   2022                                                     2021
              Base                   Base                                               Base                   Base
            Business               Property        Construction                       Business               Property        Construction
           Management             Management        Supervision                      Management             Management        Supervision
REIT        Revenues               Revenues          Revenues           Total         Revenues               Revenues          Revenues           Total
DHC       $    19,408            $     6,365      $       4,570      $  30,343      $    23,247            $     9,851      $       3,274      $  36,372
ILPT           20,810                  9,738                806         31,354           11,110                  6,471                164         17,745
OPI            17,369                 15,936              8,899         42,204           17,025                 16,021              4,205         37,251
SVC            38,444                  3,998              1,751         44,193           41,771                  3,494                589         45,854
          $    96,031            $    36,037      $      16,026      $ 148,094      $    93,153            $    35,837      $       8,232      $ 137,222

Managed Operating Companies and Managed Private Real Estate Capital


We provide business management services to the Managed Operating Companies. ALR
operates senior living communities throughout the United States, many of which
are owned by and managed for DHC. Sonesta manages and franchises hotels,

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resorts and cruise ships in the United States, Latin America, the Caribbean and
the Middle East; many of the U.S. hotels that Sonesta operates are owned by SVC.
TA operates, leases and franchises travel centers along the U.S. interstate
highway system, many of which are owned by SVC, and standalone truck service
facilities. Generally, our fees earned from business management services to the
Managed Operating Companies are based on a percentage of certain revenues.

In addition, we also provide management services to the Managed Private Real
Estate Capital clients and earn fees based on a percentage of average invested
capital, as defined in the applicable agreements, property management fees based
on a percentage of rents collected from managed properties and construction
management fees based on a percentage of the cost of construction activities.

Our fee revenues from services to the Managed Operating Companies and the
Managed Private Real Estate Capital clients for the fiscal years ended September
30, 2022
and 2021, are set forth in the following tables:


                                                                                           Fiscal Year Ended September 30,
                                                               2022                                                                               2021
                                Base                 Base                                                          Base                 Base
                              Business             Property            Construction                              Business             Property            Construction
                             Management           Management           Supervision                              Management           Management           Supervision
                              Revenues             Revenues              Revenues              Total             Revenues             Revenues              Revenues              Total
ABP Trust                  $     2,046          $     1,498          $         556          $  4,100          $     2,335          $     1,776          $         184          $  4,295
Other private
entities                         8,056                5,389                    152            13,597                2,423                1,288                     60             3,771
ALR                              4,908                    -                      -             4,908                7,123                    -                      -             7,123
Sonesta                          8,717                    -                      9             8,726                4,497                    -                      -             4,497
TA                              15,926                    -                      -            15,926               13,727                    -                      -            13,727
                           $    39,653          $     6,887          $         717          $ 47,257          $    30,105          $     3,064          $         244          $ 33,413


Advisory Business

Tremont provides advisory services to SEVN, a publicly traded mortgage REIT that
focuses on originating and investing in first mortgage whole loans secured by
middle market and transitional commercial real estate. Tremont also provided
advisory services to TRMT until September 30, 2021, when it merged with and into
SEVN. Tremont is primarily compensated pursuant to its management agreements
with SEVN (beginning January 6, 2021) and TRMT (until September 30, 2021) based
on a percentage of equity, as defined in the applicable agreements.

For the fiscal years ended September 30, 2022 and 2021, we earned advisory
services revenue of $4,530 and $3,956, respectively, and incentive fees of $0
and $620, respectively.


The Tremont business acts as a transaction broker for non-investment advisory
clients for negotiated fees. The Tremont business earned fees for such brokerage
services of $99 and $467 for the fiscal years ended September 30, 2022 and 2021,
respectively, which amounts are included in management services revenue in our
consolidated statements of income.

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RESULTS OF OPERATIONS (dollars in thousands)

The following table presents the changes in our operating results for the fiscal
year ended September 30, 2022 compared to the fiscal year ended September 30,
2021:

                                                                        

Fiscal Year Ended September 30,

                                                       2022                   2021             $ Change            % Change

Revenues:

Management services                             $    195,450              $ 171,102          $  24,348               14.2%
Incentive business management fees                         -                    620               (620)               n/m
Advisory services                                      4,530                  3,956                574               14.5%
Total management and advisory services
revenues                                             199,980                175,678             24,302               13.8%
Reimbursable compensation and benefits                56,684                 52,369              4,315               8.2%
Reimbursable equity based compensation                 7,072                  9,154             (2,082)             (22.7)%
Other reimbursable expenses                          568,767                370,037            198,730               53.7%
Total reimbursable costs                             632,523                431,560            200,963               46.6%
Total revenues                                       832,503                607,238            225,265               37.1%
Expenses:
Compensation and benefits                            129,872                119,644             10,228               8.5%
Equity based compensation                             10,136                 12,022             (1,886)             (15.7)%
Separation costs                                       1,315                  4,525             (3,210)             (70.9)%
Total compensation and benefits expense              141,323                136,191              5,132               3.8%
General and administrative                            32,919                 26,961              5,958               22.1%
Other reimbursable expenses                          568,767                370,037            198,730               53.7%
Transaction and acquisition related costs                132                    984               (852)             (86.6)%
Depreciation and amortization                            993                    973                 20               2.1%
Total expenses                                       744,134                535,146            208,988               39.1%
Operating income                                      88,369                 72,092             16,277               22.6%
Interest and other income                              1,322                    760                562               73.9%

Gain on Tremont Mortgage Trust investment                  -                  2,059             (2,059)               n/m
Equity in earnings of investees                            -                    443               (443)               n/m
Unrealized gain on equity method
investments accounted for under the fair
value option                                           1,010                 18,811            (17,801)             (94.6)%
Income before income tax expense                      90,701                 94,165             (3,464)             (3.7)%
Income tax expense                                   (13,233)               (13,152)               (81)             (0.6)%
Net income                                            77,468                 81,013             (3,545)             (4.4)%
Net income attributable to noncontrolling
interest                                             (43,464)               (45,317)             1,853               4.1%
Net income attributable to The RMR Group
Inc.                                            $     34,004              $  35,696          $  (1,692)             (4.7)%


n/m – not meaningful


References to changes in the income and expense categories below relate to the
comparison of consolidated results for the fiscal year ended September 30, 2022,
compared to the fiscal year ended September 30, 2021. For a comparison of
consolidated results for the fiscal year ended September 30, 2021 compared to
the fiscal year ended September 30, 2020, see Part II, Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

Management services revenue. Management services revenue increased $24,348
primarily due to (i) growth in base business management fees of $9,700 and
property and construction management fees of $3,909 earned from ILPT, primarily
due to its acquisition of MNR, (ii) increases in construction supervision fees
earned from OPI, SVC and DHC aggregating $7,152 due to increased development
activity, and (iii) an increase in management fees earned from Sonesta of $4,229
primarily resulting from an increase in travel as pandemic restrictions have
eased and an increase in the number of hotels that it manages and franchises
during the current fiscal year. These increases were partially offset by a
decline in base business

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management fees earned from DHC and SVC of $7,166 driven by declines in the
enterprise values of these respective clients during the current fiscal year.


Incentive business management fees. Incentive business management fees of $620
in the prior fiscal year represent fees earned from TRMT. For further
information about these incentive fees, see Note 2, Summary of Significant
Accounting Policies, to our consolidated financial statements included in Part
IV, Item 15 of this Annual Report on Form 10-K.

Advisory services revenue. Advisory services revenue increased $574 primarily
due to the expiration of the fee waiver that was previously provided to TRMT in
effect until December 31, 2020. For further information about this waiver, see
Note 2, Summary of Significant Accounting Policies, to our consolidated
financial statements included in Part IV, Item 15 of this Annual Report on Form
10-K.

Reimbursable compensation and benefits. Reimbursable compensation and benefits
include reimbursements, at cost, that arise primarily from services our
employees provide pursuant to our property management agreements at the
properties of our clients. A significant portion of these compensation and
benefits are charged or passed through to and paid by tenants of our clients.
Reimbursable compensation and benefits increased $4,315 primarily due to
increases in employee compensation and benefits for which we receive
reimbursement.

Reimbursable equity based compensation. Reimbursable equity based compensation
includes awards of common shares by our clients directly to certain of our
officers and employees in connection with the provision of management services
to those clients. We record an equal offsetting amount as equity based
compensation expense for the value of these awards. Reimbursable equity based
compensation revenue decreased $2,082 primarily as a result of decreases in our
clients' respective share prices.

Other reimbursable expenses. For further information about these reimbursements,
see Note 2, Summary of Significant Accounting Policies, to our consolidated
financial statements included in Part IV, Item 15 of this Annual Report on Form
10-K.

Compensation and benefits. Compensation and benefits consist of employee
salaries and other employment related costs, including health insurance expenses
and contributions related to our employee retirement plan. Compensation and
benefits expense increased $10,228 primarily due to annual employee merit and
bonus increases in the current fiscal year and increased headcount.

Equity based compensation. Equity based compensation consists of the value of
vested shares awarded to certain of our employees under our and our clients'
equity compensation plans. Equity based compensation decreased $1,886 primarily
as a result of decreases in our clients' respective share prices.

Separation costs. Separation costs consist of employment termination costs. For
further information about these costs, see Note 5, Related Person Transactions,
to our consolidated financial statements included in Part IV, Item 15 of this
Annual Report on Form 10-K.

General and administrative. General and administrative expenses consist of
office related expenses, information technology related expenses, employee
training, travel, professional services expenses, director compensation and
other administrative expenses. General and administrative costs increased $5,958
primarily due to increases in technology infrastructure costs, third-party costs
related to our expanded role in construction oversight and increases in
recruiting and other professional fees.

Transaction and acquisition related costs. The decrease in transaction and
acquisition related costs primarily relates to costs incurred in the prior
fiscal year in connection with RMR Mortgage Trust’s conversion from a registered
investment company to a commercial mortgage REIT and other strategic
initiatives.

Interest and other income. Interest and other income increased $562 primarily
due to higher interest earned during the current fiscal year as a result of
higher interest rates.


Gain on Tremont Mortgage Trust investment. The gain on Tremont Mortgage Trust
investment in the prior fiscal year represents the difference between the cost
basis of our former investment in TRMT and the fair value of our investment in
SEVN on the date of the Merger. For further information see Note 2, Summary of
Significant Accounting Policies, to our consolidated financial statements
included in Part IV, Item 15 of this Annual Report on Form 10-K.

Equity in earnings of investees. Equity in earnings of investees represents our
proportionate share of earnings from our former equity interest in TRMT. For
further information, see Note 2, Summary of Significant Accounting Policies, to
our consolidated financial statements included in Part IV, Item 15 of this
Annual Report on Form 10-K.

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Unrealized gain on equity method investments accounted for under the fair value
option. Unrealized gain on equity method investments accounted for under the
fair value option represents the unrealized gain or loss on our investments in
SEVN and TA common shares. For further information, see Note 2, Summary of
Significant Accounting Policies, to our consolidated financial statements
included in Part IV, Item 15 of this Annual Report on Form 10-K.

Income tax expense. The increase in income tax expense of $81 is primarily
attributable to higher taxable income during the current fiscal year and an
increase in the annual effective tax rate compared to the prior fiscal year. For
further information see Note 3, Income Taxes, to our consolidated financial
statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands, except per share amounts)


Our current assets have historically been comprised predominantly of cash, cash
equivalents and receivables for business management, property management and
advisory services fees. As of September 30, 2022 and 2021, we had cash and cash
equivalents of $189,088 and $159,835, respectively, of which $21,492 and
$23,338, respectively, was held by RMR Inc., with the remainder being held at
RMR LLC. Cash and cash equivalents include all short term, highly liquid
investments that are readily convertible to known amounts of cash and have
original maturities of three months or less from the date of purchase. As of
September 30, 2022 and 2021, $181,219 and $131,065, respectively, of our cash
and cash equivalents were invested in money market funds. We believe that our
cash and cash equivalents leave us well positioned to pursue a range of capital
allocation strategies, with a focus on the growth of our private capital
business, and to fund our operations and obligations, in the next twelve months.

Our liquidity is highly dependent upon our receipt of fees from the businesses
that we manage. Historically, we have funded our working capital needs with cash
generated from our operating activities and we currently do not maintain any
credit facilities. We expect that our future working capital needs will relate
largely to our operating expenses, primarily consisting of employee compensation
and benefits costs, our obligation to make quarterly tax distributions to the
members of RMR LLC, our plan to make quarterly distributions on our Class A
Common Shares and Class B-1 Common Shares and our plan to pay quarterly
distributions to the members of RMR LLC in connection with the quarterly
dividends to RMR Inc. shareholders. Our management fees are typically payable to
us within 30 days of the end of each month or, in the case of annual incentive
business management fees earned from the Managed Equity REITs, if any, within 30
days following each calendar year end. Quarterly incentive fees earned from
SEVN, if any, are payable generally within 30 days following the end of the
applicable quarter. Historically, we have not experienced losses on collection
of our fees and have not recorded any allowances for bad debts.

During the fiscal year ended September 30, 2022, we paid cash distributions to
the holders of our Class A Common Shares, Class B-1 Common Shares and to the
other owner of RMR LLC membership units in the aggregate amount of $44,330. On
October 13, 2022, we declared a quarterly dividend on our Class A Common Shares
and Class B-1 Common Shares to our shareholders of record as of October 24, 2022
in the amount of $0.40 per Class A Common Share and Class B-1 Common Share,
or $6,642. This dividend will be partially funded by a distribution from RMR LLC
to holders of its membership units in the amount of $0.32 per unit, or $10,114,
of which $5,314 will be distributed to us based on our aggregate ownership of
16,605,741 membership units of RMR LLC and $4,800 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 the total dividend will amount to approximately $11,442 and we expect to
pay this dividend on or about November 17, 2022. See Note 6, Shareholders'
Equity, to our consolidated financial statements included in Part IV, Item 15 of
this Annual Report on Form 10-K for more information regarding these
distributions.

For the fiscal year ended September 30, 2022, pursuant to the RMR LLC operating
agreement, RMR LLC made required quarterly tax distributions to its holders of
its membership units totaling $30,281, of which $15,940 was distributed to us
and $14,341 was distributed to ABP Trust, based on each membership unit holder's
then respective ownership percentage in RMR LLC. The $15,940 distributed to us
was eliminated in our consolidated financial statements included in Part IV,
Item 15 of this Annual Report on Form 10-K, and the $14,341 distributed to ABP
Trust was recorded as a reduction of their noncontrolling interest. We used a
portion of these funds distributed to us to pay our tax liabilities and amounts
due under the tax receivable agreement.

Tax Receivable Agreement


We are party to a tax receivable agreement which provides for the payment by RMR
Inc. to ABP Trust of 85.0% of the amount of 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 RMR Inc.'s dealings with ABP
Trust and (b) tax benefits related to imputed interest deemed to be paid by it
as a result of the tax receivable agreement. See Note 5, Related Person
Transactions, to our consolidated financial statements included in Part IV, Item
15 of this Annual Report on Form 10-K. As of September 30, 2022, our
consolidated balance sheet reflects a liability related to the tax receivable
agreement of $25,583, of which we expect to pay $2,275 to ABP Trust during the
fourth quarter of fiscal year 2023.

Cash Flows


Our changes in cash flows for the fiscal year ended September 30, 2022 compared
to the prior fiscal year were as follows: (i) net cash from operating activities
increased from $71,794 in the prior fiscal year to $101,270 in the current
fiscal year; (ii)

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net cash used in investing activities increased from $1,142 in the prior fiscal
year to $10,590 in the current fiscal year; and (iii) net cash used in financing
activities decreased from $280,480 in the prior fiscal year to $61,427 in the
current fiscal year.

The increase in net cash from operating activities for the fiscal year ended
September 30, 2022 compared to the prior fiscal year primarily reflects
increases in net income, after the exclusion of non-cash gains and losses, as
well as favorable changes in working capital. The increase in net cash used in
investing activities for the fiscal year ended September 30, 2022 compared to
the prior fiscal year was primarily due to the purchase of 882,407 SEVN common
shares in the current fiscal year. The decrease in net cash used in financing
activities for the fiscal year ended September 30, 2022 compared to the prior
fiscal year was primarily due to a one-time, special cash dividend of $7.00 per
Class A Common Share and Class B-1 Common Share, or $219,851, paid in the prior
fiscal year.

As of September 30, 2022, we had no off-balance sheet arrangements that have had
or that we expect would be reasonably likely to have a material effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.

Market Risk and Credit Risk


We have not invested in derivative instruments, borrowed through issuing debt
securities or transacted in foreign currencies. As a result, we are not now
subject to significant direct market risk related to interest rate changes,
changes to the market standard for determining interest rates, commodity price
changes or credit risks; however, if any of these risks were to negatively
impact our clients' businesses or market capitalization, our revenues would
likely decline. To the extent we change our approach on the foregoing
activities, or engage in other activities, our market and credit risks could
change. Please see Part I, Item 1A "Risk Factors" of this Annual Report on Form
10-K for the risks to us and our clients.

Risks Related to Cash and Short Term Investments


Our cash and cash equivalents include short term, highly liquid investments
readily convertible to known amounts of cash that have original maturities of
three months or less from the date of purchase. We invest a substantial amount
of our cash in money market funds. The majority of our cash is maintained in
U.S. bank accounts. Some U.S. bank account balances exceed the Federal Deposit
Insurance Corporation insurance limit. We believe our cash and short term
investments are not subject to any material interest rate risk, equity price
risk, credit risk or other market risk.

Related Person Transactions


We have relationships and historical and continuing transactions with Adam D.
Portnoy, the Chair of our Board and one of our Managing Directors, as well as
our clients. For further information about these and other such relationships
and related person transactions, please see Note 2, Summary of Significant
Accounting Policies and Note 5, Related Person Transactions, to our consolidated
financial statements included in Part IV, Item 15 of this Annual Report on Form
10-K, which is incorporated herein by reference, the section captioned
"Business" above in Part I, Item 1 of this Annual Report on Form 10-K, our other
filings with the SEC and our definitive Proxy Statement for our 2023 Annual
Meeting of Shareholders, or the 2023 Proxy Statement, to be filed within 120
days after the close of the fiscal year ended September 30, 2022. In addition,
for more information about these transactions and relationships and about the
risks that may arise as a result of these and other related person transactions
and relationships, please see elsewhere in this Annual Report on Form 10-K,
including "Warning Concerning Forward Looking Statements" and Part I, Item 1A
"Risk Factors." We may engage in additional transactions with related persons,
including businesses to which RMR LLC or its subsidiaries provide management
services.

Critical Accounting Estimates


An understanding of our accounting policies is necessary for a complete analysis
of our results, financial position, liquidity and trends. The preparation of our
consolidated financial statements requires our management to make certain
critical accounting estimates and judgments that impact (i) the revenue
recognized during the reporting periods and (ii) our principles of
consolidation. These accounting estimates are based on our management's
judgment. We consider them to be critical because of their significance to our
consolidated financial statements and the possibility that future events may
cause differences from current judgments or because the use of different
assumptions could result in materially different estimates. We review these
estimates on a periodic basis to test their reasonableness. Although actual
amounts likely differ from such estimated amounts, we believe such differences
are not likely to be material.

Revenue Recognition. Our principal sources of revenue are:

•business management fees, including base and incentive business management
fees; and

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•property management fees, including construction supervision fees and
reimbursement for certain compensation and benefits related expenses.


We recognize revenue from business management and property management fees as
earned in accordance with our management agreements. We consider the incentive
business management fees earned from the REITs that we manage to be contingent
performance based fees, which we recognize as revenue when earned at the end of
each measurement period. We also recognize as revenue certain compensation and
benefits reimbursements in our capacity as property manager, at cost, when we
incur the related reimbursable compensation and benefits and other costs on
behalf of our clients. See the "Revenue Recognition" section of Note 2, Summary
of Significant Accounting Policies, to our consolidated financial statements
included in Part IV, Item 15 of this Annual Report on Form 10-K for a detailed
discussion of our revenue recognition policies and our contractual arrangements.

Consolidation. Our consolidated financial statements included in Part IV, Item
15 of this Annual Report on Form 10-K include only the accounts of the entities
we control. We continually assess whether our existing contractual rights give
us the ability to direct the activities of the entities we manage that most
significantly affect the results of that entity. The activities and factors we
consider include, but are not limited to:

•our representation on the entity’s governing body;

•the size of our investment in each entity compared to the size of the entity
and the size of other investors’ interests; and

•the ability and rights to participate in significant policy making decisions
and to replace our manager of those entities.


Based on our historical assessments, we have not consolidated the entities we
manage. We will reassess these conclusions if and when facts and circumstances
indicate that there are changes to the elements evidencing control.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative disclosures about market risk are set forth above
in “Item 7-Management’s Discussion and Analysis of Financial Condition and
Results of Operation-Market Risk and Credit Risk.”

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