April 6, 2022
VIA EDGAR
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Trade & Services
100 F Street, N.E.
Washington, D.C. 20549
Attention: Abe Friedman and Lyn Shenk
Re: | The RMR Group Inc. |
Form 10-K for the Fiscal Year Ended September 30, 2021
Filed November 15, 2021
File No. 001-37616
Ladies and Gentlemen:
This letter is submitted in response to the comment from the Staff of the Division of Corporation Finance (the “Staff”), received by letter dated March 24, 2022, relating to the above-mentioned Annual Report on Form 10-K (the “Form 10-K”).
The Staff’s comment with respect to our Form 10-K has been reproduced below in italicized text. Our response thereto is set forth immediately following the reproduced comment.
Form 10-K for the Fiscal Year Ended September 30, 2021
Item 15. Exhibits and Financial Statement Schedules
Consolidated Statements of Income, page F-6
1. | We have reviewed your response to comment 2, and reissue. We continue to believe that your revenues should be captioned as related party transactions on the face of your ‘Consolidated Statements of Income’ or parenthetically stated, pursuant to Rule 4-08(k)(1) of Regulation S-X which is prescriptive in stating “Amounts of related party transactions should be stated on the face of the balance sheet, statement of comprehensive income, or statement of cash flows.” Please revise or advise accordingly. |
Response: We respectfully acknowledge the Staff’s comment and will revise future filings.
Upon review of the most recent public filings of 13 alternative asset managers with similar business operations and significant revenues from related parties, we noted only one company that identified revenues from related parties on the face of the income statement. This company included the following disclosure in the footer of their income statement, “Substantially all revenues are earned from affiliates of the Company. See accompanying notes.”
April 6, 2022
Page 2
As substantially all (i.e., 99.9% for the fiscal years ended September 30, 2021, 2020 and 2019) of the revenues of The RMR Group Inc. are earned from related parties, we intend to provide a footnote to our income statement in future filings that indicates substantially all revenues are earned from related parties. We believe this approach complies with Rule 4-08(k)(1) and is consistent with investor expectations. We have included an example of our proposed disclosure in Exhibit A. We will also continue to disclose the amounts of unrelated party revenues, to the extent they remain insignificant, within the notes to the financial statements.
We appreciate the Staff’s review of our Form 10-K. If you have any questions or concerns, or require additional information, please call me at (617) 796-7684.
Sincerely, | |
/s/ Matthew P. Jordan | |
Matthew P. Jordan | |
Executive Vice President, | |
Chief Financial Officer and Treasurer | |
The RMR Group Inc. |
cc: | Faiz Ahmad |
Skadden, Arps, Slate, Meagher & Flom LLP
April 6, 2022
Page 3
Exhibit A
The RMR Group Inc.
Condensed Consolidated Statements of Income
(amounts in thousands, except per share amounts)
(unaudited)
Three Months Ended December 31, | ||||||||
2021 | 2020 | |||||||
Revenues: | ||||||||
Management services | $ | 44,897 | $ | 40,747 | ||||
Advisory services | 1,118 | 586 | ||||||
Total management and advisory services revenues | 46,015 | 41,333 | ||||||
Reimbursable compensation and benefits | 14,397 | 13,225 | ||||||
Reimbursable equity based compensation | 1,598 | 3,003 | ||||||
Other reimbursable expenses | 119,558 | 99,385 | ||||||
Total reimbursable costs | 135,553 | 115,613 | ||||||
Total revenues | 181,568 | 156,946 | ||||||
Expenses: | ||||||||
Compensation and benefits | 31,791 | 29,494 | ||||||
Equity based compensation | 2,219 | 3,561 | ||||||
Separation costs | — | 4,159 | ||||||
Total compensation and benefits expense | 34,010 | 37,214 | ||||||
General and administrative | 7,671 | 6,260 | ||||||
Other reimbursable expenses | 119,558 | 99,385 | ||||||
Transaction and acquisition related costs | — | 117 | ||||||
Depreciation and amortization | 236 | 238 | ||||||
Total expenses | 161,475 | 143,214 | ||||||
Operating income | 20,093 | 13,732 | ||||||
Interest and other income | 57 | 231 | ||||||
Equity in earnings of investees | — | 424 | ||||||
Unrealized gain on equity method investments accounted for under the fair value option | 1,196 | 8,122 | ||||||
Income before income tax expense | 21,346 | 22,509 | ||||||
Income tax expense | (3,054 | ) | (2,756 | ) | ||||
Net income | 18,292 | 19,753 | ||||||
Net income attributable to noncontrolling interest | (10,250 | ) | (10,856 | ) | ||||
Net income attributable to The RMR Group Inc. | $ | 8,042 | $ | 8,897 | ||||
Weighted average common shares outstanding - basic | 16,325 | 16,252 | ||||||
Weighted average common shares outstanding - diluted | 31,325 | 31,252 | ||||||
Net income attributable to The RMR Group Inc. per common share - basic | $ | 0.49 | $ | 0.54 | ||||
Net income attributable to The RMR Group Inc. per common share - diluted | $ | 0.49 | $ | 0.51 |
Substantially all revenues are earned from related parties. See accompanying notes.