RMR GROUP INC.RMR
RMR GROUP INC. Fair Value Disclosure
Fair Value of Financial Instruments
We determine the estimated fair value of financial assets and liabilities using the three-tier fair value hierarchy established by GAAP, which prioritizes observable inputs in active markets when measuring fair value. The three levels of inputs that may be used to measure fair value in order of priority are as follows:
Level 1 — Inputs include quoted prices in active markets for identical assets or liabilities that we have the ability to access.
Level 2 — Inputs include quoted prices in markets that are less active or inactive or for which all significant inputs are observable, either directly or indirectly.
Level 3 — Inputs include unobservable prices and are supported by little or no market activity and are significant to the overall fair value measurement.
As of September 30, 2025 and 2024, the fair values of our financial instruments, which include cash and cash equivalents, amounts due from related parties, accounts payable and accrued expenses and reimbursable accounts payable and accrued expenses, were not materially different from their carrying values due to the short term nature of these financial instruments.
We estimate the fair value of our mortgage notes payable, loans held for investment and outstanding principal balances under our secured financing facility using significant unobservable inputs (Level 3), including discounted cash flow analyses and prevailing market interest rates.
The table below provides information regarding these financial instruments not carried at fair value in our consolidated balance sheet as of September 30, 2025:
| As of September 30, 2025 | As of September 30, 2024 | |||||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||
Loans held for investment | $ | 60,984 | $ | 61,989 | $ | 56,221 | $ | 57,365 | ||||||||||||||||||
Secured financing facility | 44,586 | 45,471 | 41,109 | 41,793 | ||||||||||||||||||||||
Mortgage notes payable (1) | 136,168 | 137,076 | 45,149 | 46,520 | ||||||||||||||||||||||
(1)Includes two mortgage notes payable with an aggregate carrying value of $90,739 that carry interest at a rate of SOFR plus a premium. The carrying values of these mortgage notes approximate fair value.
On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices. ASC 820, Fair Value Measurements, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities, or Level 1, the lowest priority to unobservable inputs, or Level 3, and significant other observable inputs, or Level 2. A financial asset’s or financial liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The following tables present our financial assets and liabilities that have been measured at fair value on a recurring basis:
| As of September 30, 2025 | ||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| Due from related parties related to share based payment awards | $ | 15,797 | $ | 15,797 | $ | — | $ | — | ||||||||||||||||||
| Investment in SEVN | 17,610 | 17,610 | — | — | ||||||||||||||||||||||
| Investment in Fund VII | 3,156 | — | — | 3,156 | ||||||||||||||||||||||
Investment in joint ventures | 11,134 | — | — | 11,134 | ||||||||||||||||||||||
| Employer compensation liability related to share based payment awards | 15,797 | 15,797 | — | — | ||||||||||||||||||||||
| Interest rate caps | 1,758 | — | 1,758 | — | ||||||||||||||||||||||
| Earnout liability | 3,639 | — | — | 3,639 | ||||||||||||||||||||||
| As of September 30, 2024 | ||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| Due from related parties related to share based payment awards | $ | 14,339 | $ | 14,339 | $ | — | $ | — | ||||||||||||||||||
| Investment in SEVN | 23,520 | 23,520 | — | — | ||||||||||||||||||||||
| Employer compensation liability related to share based payment awards | 14,339 | 14,339 | — | — | ||||||||||||||||||||||
| Earnout liability | 11,958 | — | — | 11,958 | ||||||||||||||||||||||
The fair values of our interest rate caps are based on prevailing market prices in secondary markets for similar derivative contracts as of the measurement date.
The following tables present additional information about the valuation techniques and significant unobservable inputs for financial assets and liabilities that are measured at fair value and categorized within Level 3 as of September 30, 2025:
| As of September 30, 2025 | |||||||||||||||||||||||
Fair Value | Valuation Technique | Unobservable Input | Range | ||||||||||||||||||||
| Investment in Fund VII | $ | 3,156 | Discounted cash flow | Discount rates | 6.50% - 7.00% | ||||||||||||||||||
Exit capitalization rates | 5.00% - 5.50% | ||||||||||||||||||||||
Holding period | 10 years | ||||||||||||||||||||||
Investment in joint ventures | $ | 11,134 | Discounted cash flow | Unlevered IRR | 12.02% - 12.37% | ||||||||||||||||||
| Exit capitalization rates | 4.97% - 5.15% | ||||||||||||||||||||||
| Holding period | 3 years | ||||||||||||||||||||||
Earnout liability | $ | 3,639 | Monte Carlo | Capital deployment volatility | 15.00% | ||||||||||||||||||
Discount rate | 5.84% | ||||||||||||||||||||||
| As of September 30, 2024 | |||||||||||||||||||||||
Fair Value | Valuation Technique | Unobservable Input | Range | ||||||||||||||||||||
Earnout liability | $ | 11,958 | Monte Carlo | Capital deployment volatility | 15.00% | ||||||||||||||||||
Discount rate | 5.53% | ||||||||||||||||||||||
The tables below present a summary of the changes in fair value for our investment in Fund VII and Earnout liability measured on a recurring basis:
| Fiscal Year Ended | Fiscal Year Ended | |||||||||||||
| Investment in Fund VII | September 30, 2025 | September 30, 2024 | ||||||||||||
Beginning balance | $ | — | $ | — | ||||||||||
Changes in fair value for our investment in Fund VII | 3,156 | — | ||||||||||||
Ending balance | $ | 3,156 | $ | — | ||||||||||
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.