RMR Group (RMR) Stock Valuation: An 11% Yield That Leans on Incentive Fees, Hold at $16.61

RMR calls its dividend "well covered", and on its own measure, distributable earnings of 48 cents a unit in the June quarter, it is. That measure is calculated before interest. RMR now owns four properties with $141 million of mortgages and has $25 million drawn on its credit line, and the June quarter's interest bill was $3.2 million. After it, the quarter earned 38 cents a unit, against a 45-cent dividend.

At $16.61 on the November 3, 2026 close, RMR trades 21.0% below my Base value of $21.02. The Bear value is $13.00, 21.7% below the price, and the Bull value is $28.33, 70.6% above it. I assign no probabilities to the cases. The verdict is Hold, with new money waiting for $12.08 or less.

Valuation route: an external manager of four listed REITs, a mortgage REIT and private real estate funds, valued as a sum of the parts: recurring fee earnings after tax, incentive fees, and listed stakes, owned real estate and cash at market or cost less a discount. The cross-check capitalizes distributable earnings after interest. Values are present fair-value estimates, not 12-month price targets.

What RMR is

RMR runs real estate companies it does not own. Its staff are the management of Service Properties Trust (hotels and net lease retail), Industrial Logistics Properties Trust, Diversified Healthcare Trust, Office Properties Income Trust and the mortgage lender Seven Hills Realty Trust, plus private funds, the Sonesta hotel company and a residential business. Fees come from contracts: a base fee on the lower of each REIT's historical cost or its enterprise value, property management fees, construction supervision and, in good years, incentive fees for beating a REIT index.

In the June quarter the four listed equity REITs and Seven Hills paid $33.4 million of the $45.4 million of fee revenue, 73%. Adam Portnoy is chief executive of RMR and, through ABP Trust and the voting Class B shares, controls it. The managed REITs have trustees in common with RMR, which is the source of both the business and the main criticism of it.

The structure matters for the per-share math. Public shareholders own The RMR Group Inc., which owns 17.09 million of the 32.09 million units of the operating company. ABP Trust owns the other 15.0 million units, which can be exchanged for shares. I value the operating company per unit and add the small amount that sits only at the listed company.

The latest results

Fiscal third quarter ($ million)	June 2026	June 2025	Comment
Fee revenue	45.5	44.1	includes a one-off $0.6 million acquisition fee
Adjusted EBITDA	19.7	20.1	margin 41.3%, before interest
Distributable earnings	15.4	13.9	$0.48 a unit, up from $0.43
Interest expense	3.2	1.1	not deducted in the two lines above
Net income to shareholders	3.2	4.2	after a $19.1 million write-off of the old OPI contract and a $21.3 million gain on stakes

Management guided to adjusted EBITDA of $19 to $21 million and distributable earnings of $0.48 to $0.50 a unit for the September quarter, and $76.5 to $78.5 million of adjusted EBITDA for the fiscal year, excluding incentive fees. The wind-down of AlerisLife, a former client that paid $5.7 million of fees in fiscal 2025, is one reason the fee line is flat.

Office Properties Income Trust left bankruptcy in June 2026 with a new contract: a fixed $14 million a year business management fee for two years, a 3% property management fee, and the right to terminate without penalty after two years. RMR received 2% of the new OPI shares. The old twenty-year contract, with its large termination fee, did not survive the bankruptcy.

Which earnings figure to trust

Adjusted EBITDA mixes three businesses. It contains fee earnings, the operating profit of real estate RMR owns ($3.5 million in the June quarter), and dividends from its stakes in Service Properties and Seven Hills ($1.7 million). I separate them, because the stakes and buildings are valued on the balance sheet.
Fee earnings are about $55 million a year before tax. That is adjusted EBITDA less the real estate profit, the stake dividends and the part of pay settled in RMR shares, averaged over the last two quarters and checked against the September quarter guidance (my arithmetic).
Distributable earnings ignore interest. They are adjusted EBITDA less tax distributions to the owners. Interest was $3.2 million in the June quarter and $2.6 million in March, so after interest the last two quarters average $1.48 a unit a year, not the $1.84 the company's measure gives.
Incentive fees sit outside all of these. They were $23.6 million for calendar 2025, from Diversified Healthcare and Industrial Logistics, and nothing in several years before that. In August management said the REITs were on pace for more than $40 million for 2026. Since then Diversified Healthcare has fallen 15% and Industrial Logistics 25% in three months, and the fee is measured at December 31.

Balance sheet, stakes and units

Item, June 30, 2026 unless noted	Value
Cash	$58.2 million, of which $15.4 million at the listed company
Service Properties shares, 8.33 million	$51.7 million at $6.21 (bought at $6.00 in April for $50 million)
Seven Hills shares, 4.58 million (20%)	$30.4 million at $6.64
Office Properties shares, 0.44 million	$7.5 million at the June mark
Joint venture stakes in apartments	$17.9 million, mostly at cost
Owned real estate, 781 apartments and a retail center	$241.4 million at cost, $141.5 million of mortgages
Credit line	$25 million drawn, $75 million available
Tax receivable agreement with ABP Trust	$15.9 million, owed by the listed company
Units	32.09 million: 17.09 million listed company, 15.0 million ABP Trust

The listed stakes are at November 3 closing prices, which knocked about $27 million off their June value. Service Properties did a one-for-five reverse split in July, so the 41.7 million shares RMR bought in April are now 8.33 million. I keep $20 million of cash for operations and count the rest. Retail occupancy at the owned shopping center is 76.5%, down from 95.4% a year earlier, and the apartments are 91.9% occupied.

The money that went into the Service Properties offering, paid partly with the credit line, supported a client that needed equity. It has earned a 3.5% gain so far. That is the kind of decision that makes me discount the balance sheet rather than take it at face value.

Primary valuation: sum of the parts

I value fee earnings after a 21% tax at 10 times, the multiple for flat earnings at a 10% cost of equity, add incentive fees and the balance sheet, and divide by 32.09 million units. Listed stakes, joint ventures and the owned real estate get a 15% discount for the reasons above. The Base value is $21.02.

Base case, per unit	Value	How
Fee business	$13.54	$55 million a year, 21% tax, 10 times
Incentive fees for 2026	$0.61	$25 million, paid early 2027
Later incentive fees	$1.48	$6 million a year on average, 10 times after tax
Stakes, real estate and cash	$5.43	market or cost less 15%, less credit line
Listed company items	-$0.03	its own cash less the tax receivable agreement
Total	$21.02	rows are rounded

Why 10 times: the fees are contractual and renew each year, but the client base is a fixed group of related REITs that are mostly selling assets or paying down debt, and private fund-raising is, in management's word, challenging. I assume no growth. A 10% cost of equity comes from a beta near 1.0 and a market return of about 9.4%, rounded up for the size and the client concentration.
Why $25 million for 2026: management's mid-year pace was above $40 million, and two of the REITs that drive it have fallen since. On September 30 last year management said the fee would be about $22 million if the year had ended then; the same disclosure with the fiscal year results is the best update before December 31.
Why $6 million a year later: the fees came in only two of the last several years. An average of $6 million is my estimate; at zero the value falls by $1.48.
Terminal share: this is a perpetuity on today's earnings, so the whole fee value is terminal by construction. The balance sheet, $5.43, is the part that does not depend on it.

Rules of thumb from the model: each $5 million of annual fee earnings is worth about $1.23 a unit, losing OPI's roughly $10 million of earnings after 2028 (my estimate) would cost about $2.46, and taking the balance sheet at full marks instead of a 15% discount adds $0.97.

Base value	9% cost	10% cost	11% cost
Fee earnings $50 million	$21.32	$19.78	$18.53
Fee earnings $55 million	$22.69	$21.02	$19.65
Fee earnings $60 million	$24.05	$22.25	$20.77

Cross-check: distributable earnings after interest

The second view ignores the balance sheet marks and counts only cash earnings. The last two quarters averaged $1.48 a unit a year after interest, and $6 million a year of incentive fees adds $0.15. At 10 times, the same multiple as above, that gives $16.27, almost exactly the price.

The two values differ by 25%, more than the 20% level where I stop and explain. The reason is the balance sheet. The earnings view counts Service Properties only through its $0.20 dividend, a 3.2% yield, and gives nothing for $38 million of spare cash, the OPI shares or the joint ventures, which pay little or nothing. The sum of the parts counts them at market less 15%. Which one is right depends on whether RMR ever turns those stakes into cash for its owners, and its record so far is to put cash into them.

Valuation triangulation

Primary (sum of the parts, Base): $21.02. This is the central value.
Cross-check (earnings after interest at 10 times): $16.27, 25% below, explained by the balance sheet.
Nearby assumptions (cost 9% to 11%, fee earnings $50 to $60 million): $18.53 to $24.05.
Balance sheet at full marks, no discount: $21.98.

I keep the sum of the parts as the central value, because the stakes and buildings are real and marked to market, but the cross-check is the reason the buy price is low. It shows what the stock is worth if the balance sheet never pays out.

What is the market already pricing in?

Reverse valuation	Result
Market value of all 32.09 million units	$533 million
Less my Base balance sheet and the 2026 incentive fee	about $340 million left for the fee business
Multiple of after-tax fee and expected incentive earnings	about 7.1 times (my Base 10 times)
Fee business and incentive fees together, per $1 of pre-tax fee earnings	about 6.5 times
Growth that fits the price at a 10% cost	about -4% a year, forever
Return if the Base is right	+26.5% from the price

The market pays for a fee business that shrinks about 4% a year forever. That is not absurd for a manager whose largest client is selling hotels and whose office client just rewrote its contract in bankruptcy. It is also a low price if the REITs simply stop shrinking.

Bear, base and bull scenarios

Case	Fee business	Incentive fees	Balance sheet	Value	Versus price
Bear	$9.03	$0.12	$3.89	$13.00	-21.7%
Base	$13.54	$2.08	$5.43	$21.02	+26.5%
Bull	$17.52	$4.44	$6.39	$28.33	+70.6%

Each row also includes -$0.03 for the listed company items.

Bear: OPI ends its contract after 2028 and the other REITs keep selling assets, so fee earnings fall 20% to $44 million and shrink 2% a year after that (8.3 times). Incentive fees are $5 million for 2026 and nothing later. The stakes are worth 30% less than today and the owned real estate 20% less than cost.
Base: as described above.
Bull: fee earnings rise 10% to $60.5 million as the REITs' values recover, growing 1.5% a year (11.8 times). Incentive fees are $40 million for 2026 and $12 million a year after that. The balance sheet counts at full marks and cost.

The cost of equity is 10% in all cases, so the client risk sits in the earnings and not again in the discount rate.

How the buy price is set

Confidence is C, which carries a default margin of safety of 42.5%. I add nothing to it, because the client, incentive fee and balance sheet risks already sit in the scenarios and the discount. That gives a maximum buy price of $12.08.

With a cost of equity between 9% and 11% and fee earnings between $50 and $60 million, the same margin gives buy prices from $10.66 to $13.83. The price of $16.61 is above all of them, so the decision does not depend on which is right. The 52-week low is $14.73.

With no change in valuation and flat fee earnings, the return over the next few years is roughly the dividend, 10.8% a year if it is kept, or about 8.9% if it is cut to what recurring earnings after interest cover. Anything above that needs the market to change its mind about the fee business.

Dividend

RMR pays $0.45 a quarter, $1.80 a year, a 10.8% yield at $16.61, unchanged for at least the last two years. The operating company pays $0.32 a unit to all owners, and the listed company adds $0.13 from cash that built up because tax distributions it receives exceed the tax it pays. Management says that cash, $15.4 million in June, can fund the top-up for more than two years.

Coverage, per unit a year	Amount
Dividend to public shareholders	$1.80
Distributable earnings, company measure	$1.84 (98% paid out)
Distributable earnings after interest	$1.48 (122% paid out)
Plus incentive fees of $25 million, after tax, one year	about $0.62 more

The dividend is safe for as long as incentive fees keep arriving or the listed company's spare cash lasts. Without either, recurring earnings after interest do not cover it. I would not count on a cut, because the family receives the same distribution on its units, but I would not call it covered either.

Reasons to own RMR

The fees are contractual, recurring and earn a margin above 40% before interest, and $37.5 billion of assets sit under management.
Listed stakes, owned real estate and spare cash are worth about $5.43 a unit after my discount, a third of the price, so the fee business costs about 7 times after-tax earnings.
Diversified Healthcare and Industrial Logistics have been strong performers over three years, and if that holds through December, 2026 incentive fees could be well above my $25 million.
A 10.8% yield, paid at the same rate for at least two years.
The family owns 15 million units and receives the same distribution, so its interest in the cash payout matches the public shareholders'.

What could go wrong?

Client concentration. Five related REITs paid 73% of fee revenue in the June quarter, and the base fee shrinks when they sell assets, as Service Properties is doing.
Contract strength. The OPI bankruptcy replaced a twenty-year contract with one that can end without penalty in 2028. Another client in trouble could test the same path.
Incentive fees. They depend on the REITs' share prices against an index on December 31, and two of them have fallen 15% to 25% since the summer.
Capital allocation. RMR used cash and its credit line to buy into a client's share offering and owns buildings with $141 million of mortgages, which adds debt to an asset-light business.
Governance. The Portnoy family controls the voting shares, the managed REITs and RMR share trustees, and the tax receivable agreement pays ABP Trust from the listed company's tax savings.

Management execution

The managed REITs have mixed records: Diversified Healthcare and Industrial Logistics rebounded strongly, while Office Properties went bankrupt and Service Properties needed new equity and a reverse split.
RMR kept OPI as a client through the restructuring, but on weaker terms, and wrote off $19.1 million of the old contract's value.
Guidance is specific and was met in the June quarter: adjusted EBITDA and distributable earnings were inside the ranges given in May.
Private capital raising, the planned source of growth, has been slow, and the company is now buying real estate with its own balance sheet.
The dividend has been held at $0.45 for at least two years and is described in full, including the part paid from the listed company's cash.

On my ten-point management check (two points each), RMR scores 8 of 20: credit for disclosure and keeping guidance, little for capital allocation, per-share growth and governance.

Stock Analyza scorecard

Business quality	Score
Franchise and pricing power	10/20
Return on capital over its cost	10/20
Balance sheet and resilience	11.25/15
Earnings quality	3.75/15
Growth and reinvestment runway	3.75/15
Management and capital allocation	2.5/10
Dilution and governance	1.25/5
Total	42.5/100

The valuation score is 60 of 100.

Valuation score	Score
Discount to the Base (price 21.0% below it)	37.5/50
Price against the Bear (-21.7%)	7.5/30
What the price assumes (fees shrinking about 4% a year, between Bear and Base)	15/20
Total	60/100

On the general scorecard RMR scores 4 to 6 of 12, depending on the return on capital that I cannot separate cleanly from the owned real estate. Either way it is a standard company, not a compounder: revenue and earnings per unit have not grown, and the runway depends on fund-raising that has not happened yet. Business quality and valuation are shown separately and are not averaged.

Confidence score

Confidence	Score
Historical data and sources (quarterly filing and presentation; current stake prices)	3.75/5
Accounting and ownership (two-tier structure, consolidated real estate, adjusted measures before interest)	2.5/5
Evidence for forward assumptions (incentive fees, client REITs' health)	2.5/5
Model construction (two independent recomputations agree)	3.75/5
Independent challenge (earnings cross-check, reverse valuation)	2.5/5
Total	15/25, grade C

The grade measures how well the model is identified, not the chance of a loss.

What I would watch from here

The fiscal year report around November 12 should show four things for the Base to hold: September quarter distributable earnings of at least $0.48 a unit, an incentive fee estimate for 2026 of at least $20 million if the year ended on September 30, guidance for the December quarter near today's level, and no further drop in the owned retail center's occupancy.

Green

Incentive fees for 2026 of $25 million or more, paid in early 2027.
Fee revenue above $47 million a quarter, from higher REIT values or new private capital.
Cash from the stakes or real estate returned to owners or used to repay the credit line.

Yellow

Distributable earnings after interest below $0.40 a unit a quarter, where they sit today ($0.38 in June).
More balance sheet money put into managed REITs or new owned buildings.
The listed company's spare cash falling below $8 million.

Red

Another managed REIT restructuring its contract or announcing a strategic review.
No incentive fees for 2026.
A dividend cut below the $0.32 the operating company pays per unit.

The three most important thesis breakers

OPI ends its contract in 2028 or another client follows its route, taking fee earnings toward the Bear's $44 million.
Incentive fees stay near zero, leaving the dividend paid from cash that runs out.
More of the balance sheet goes into supporting managed REITs at prices that do not recover.

Stress test and independent check

I recomputed every scenario with a separate script that builds the value per unit in a different order, and the results match to the cent. That checks the arithmetic, not the forecasts.

Input	Status
Revenue by client, adjusted EBITDA, distributable earnings, balance sheet, units, dividend funding	Fiscal third quarter presentation and quarterly filing
Guidance, incentive fee pace	Earnings call of August 6, 2026
OPI contract terms, stake details	Quarterly filing and presentation
Prices of RMR, Service Properties and Seven Hills	November 3, 2026 closes from market data
OPI share value	June 30 mark; current price not found
Fee earnings of $55 million, 10% cost of equity, incentive fees, 15% discount, $20 million operating cash	My assumptions
The REIT index behind the incentive fees, interest rates on each mortgage	Not disclosed in what I read

The weakest point is the incentive fee, because the 2026 figure alone moves the value by about $0.60 and the later average by about $1.48, and both depend on share prices of other companies on one date. The strongest bull argument is that a third of the price is assets at market and the fee business costs 7 times earnings. The strongest bear argument is that RMR keeps putting its cash into the same family of companies, so the balance sheet should be valued like the cross-check, at about today's price.

Final verdict: hold at $16.61

RMR is cheap if you count the balance sheet and fairly priced if you count only the cash it earns. The 11% yield sits between the two: covered by the company's own measure, not covered after interest, and topped up by incentive fees that are decided by the stock market on December 31.

Verdict: HOLD at $16.61, watchlist for new money. Base $21.02, 26.5% above the price, Bear $13.00, Bull $28.33, cross-check $16.27, Confidence C (15/25). Required margin of safety 42.5%, maximum buy price $12.08, range $10.66 to $13.83 under nearby assumptions.

New money buys only at or below $12.08. For an existing holder the original cost is irrelevant, and a Base value above the price supports holding while the dividend is paid; I would review a holding above the Base of about $21. The next tests are the fiscal year report around November 12 and the 2026 incentive fee in early 2027.

Sources

Primary sources are RMR's fiscal third quarter 2026 results presentation and quarterly report on Form 10-Q (filed August 5, 2026), the earnings call of August 6, 2026, the fiscal fourth quarter 2025 earnings call (November 13, 2025), and Service Properties Trust's quarterly report and reverse split announcement (July 2026). All were accessed through Bigdata.com and are available on SEC EDGAR.

The reference market price is $16.61, the November 3, 2026 Nasdaq close. Prices of Service Properties and the managed REITs come from market data via Bigdata.com, and the Seven Hills close from FinancialContent.