The RMR Group (RMR) Risk Factors

We are subject to substantial regulation and numerous contractual obligations and internal policies. We are subject to regulation by the SEC, Nasdaq, and other federal, state and local or international governmental bodies and agencies or self-regulatory organizations. Our subsidiary, Tremont Realty Capital, is registered with the SEC as an investment adviser under the Investment Advisers Act. The Investment Advisers Act requires registered investment advisers to comply with numerous obligations, including compliance, record keeping, operating and marketing requirements, disclosure obligations and limitations on certain activities. Investment advisers also may owe fiduciary duties to certain of their clients. We are also responsible for managing or assisting with the regulatory aspects of certain of our clients, including the Managed REITs' compliance with applicable REIT rules and SEVN's maintenance of its exemption from registration under the 1940 Act. The level of regulation and supervision to which we and our clients are subject varies from jurisdiction to jurisdiction and is based on the type of business activity involved. For example, we and SEVN may also be subject to state licensing requirements to conduct lending activities. The regulations to which we and our clients are subject are extensive, complex and require substantial management time and attention. Regulatory oversight and enforcement may become more rigorous for regulated industries as a result of the impact of the COVID-19 pandemic, especially in the wake of the array of state and federal government financial assistance programs. Laws and regulations passed in connection with the ongoing COVID-19 pandemic may result in a more complex regulatory, tax and political environment, which could subject us to increased compliance costs and administrative burdens. COVID-19 related laws and regulations can be subject to rapid change depending on public health developments, which can lead to confusion and make compliance with laws uncertain. Further, in connection with the Biden administration, uncertainty has arisen regarding prospective changes in laws and regulations affecting the financial industry, including the possibility of significant revision to U.S. financial and tax laws, rules and regulations that could have an adverse impact on us and our clients. These regulatory and fiduciary obligations may result in increased costs or otherwise adversely impact our business. Our or our clients' failure to comply with any of the regulations, contractual obligations or policies applicable to it may subject us to litigation, extensive investigations, enforcement actions, as well as substantial fines, penalties and reputational risk, and our business and operations could be materially adversely affected. Our lack of compliance with applicable law could result in, among other things, our inability to enforce contracts, our default under contracts (including our management agreements or advisory agreements with our clients) and our ineligibility to contract with, and receive revenue from, governmental authorities and agencies, our clients or other third parties. We have numerous contractual obligations with which we must comply on a continuous basis to operate our business, the default of which could have a material adverse effect on our business and financial condition. We have established internal policies designed to ensure that we manage our business in accordance with applicable law and regulation and in accordance with our contractual obligations. These internal policies may not be effective in all regards; and, if we fail to comply with our internal policies, we could be subjected to additional risk and liability.

ABP Trust may redeem Class A Units it owns for Class A Common Shares or cash. See "Business-Our Organizational Structure-The RMR LLC Operating Agreement-Redemption rights of holders of Class A Units" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. Both ABP Trust's initial purchase of Class A Units and any future redemptions that ABP Trust may affect may result in increases in our tax basis of our assets that otherwise would not have been available. Such increases in tax basis are likely to increase (for tax purposes) depreciation and amortization deductions and therefore reduce the amount of income tax we otherwise would be required to pay in the future. These increases in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent the increased tax basis is allocated to those assets. The Internal Revenue Service, or IRS, may challenge all or part of these tax basis increases, and a court might sustain such a challenge. We have entered into a tax receivable agreement, dated June 5, 2015, by and among RMR Inc., RMR LLC and ABP Trust, or the Tax Receivable Agreement, that provides for the payment by RMR Inc. to ABP Trust of 85.0% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that RMR Inc. actually realizes as a result of (a) the increases in tax basis attributable to its dealings with ABP Trust and (b) tax benefits related to imputed interest deemed to be paid by us as a result of the Tax Receivable Agreement. See "Business-Our Organizational Structure-Tax Receivable Agreement" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 for further information regarding the Tax Receivable Agreement. While the actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions, the price of our Class A Common Shares at the time of the redemption, the extent to which such redemptions are taxable, and the amount and timing of our income, we expect that, as a result of the size of the increases in the tax basis of the tangible and intangible assets of RMR LLC attributable to RMR Inc.'s interests in RMR LLC, during the expected term of the Tax Receivable Agreement, the payments that RMR Inc. makes to ABP Trust may be substantial. ABP Trust generally will not reimburse RMR Inc. for any payments that may have been made under the Tax Receivable Agreement. As a result, in certain circumstances RMR Inc. could make payments to ABP Trust under the Tax Receivable Agreement in excess of cash tax savings. Our ability to achieve benefits from any tax basis increase, and the payments to be made under the Tax Receivable Agreement, will depend upon a number of factors, including the timing and amount of our future income. In addition, the Tax Receivable Agreement provides that, upon certain changes of control and certain breaches of the agreement that we fail to cure in accordance with the terms of the agreement, our obligations with respect to Class A Units will be accelerated. In those circumstances, our obligations under the Tax Receivable Agreement would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits described in the Tax Receivable Agreement, and that any Class A Units that have not been redeemed will be deemed redeemed for the market value of the Class A Common Shares at the time of the change of control or breach, as applicable. Consequently, it is possible, in these circumstances, that the actual cash tax savings realized by RMR Inc. may be significantly less than the corresponding Tax Receivable Agreement payments.

As an asset manager, our business, and our ability to retain and attract new clients, is dependent upon our maintaining a positive reputation in the marketplace. There is a risk that our employees could engage in misconduct that adversely affects our reputation and, hence, our business. We are subject to a number of obligations and standards arising from our business and our authority over the companies and assets we manage. The violation of these obligations and standards by any of our employees may adversely affect our clients and us. Our business often requires that we deal with confidential matters of great significance to our clients. If our employees improperly use or disclose confidential information, we and the concerned client could suffer serious harm to our and its reputation, financial position and current and future business relationships and face potentially significant litigation. It is not always possible to detect or deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in all cases. If any of our employees were to engage in or be accused of misconduct, our business and our reputation could be adversely affected. Misconduct by an employee might rise to the level of a default that would permit a client to terminate its management agreements or advisory agreements with us for cause and without paying a termination fee, which could materially adversely affect our business, results of operations and financial condition.

Our business and operations are significantly dependent on conditions in the commercial real estate industry, which in turn is impacted by general economic conditions in the United States. Significant portions of the commercial real estate markets in the United States were significantly negatively impacted during the recession that occurred during the early stages of the COVID-19 pandemic, and certain aspects of that market continue to be challenged by the pandemic and the changes to market and workplace practices in response to the pandemic, such as remote work for many office based workers, reduced hotel occupancy and declines in senior living communities' operations. Adverse conditions in the commercial real estate industry and declining real estate values would harm our business and financial condition by limiting our and our clients' access to debt and equity capital and our and their ability to grow our and their businesses. Adverse conditions may also give rise to an increase in tenant defaults under our clients' leases, defaults of SEVN's loans, and decreased market capitalizations, shareholder returns, rent receipts and capital projects for the Managed Equity REITs.

The strain of coronavirus that causes the viral disease known as COVID-19 has been declared a pandemic by the World Health Organization, and the U.S. Health and Human Services Secretary declared a public health emergency in the United States in response to the outbreak. The COVID-19 pandemic has had a substantial adverse impact on the global economy, including the U.S. economy, during various stages of the pandemic. Government requirements to stay in place and temporarily close businesses had a substantial negative impact on the economy. Government spending during the pandemic, and subsequent easing of the government restrictions, has since helped avert extended negative economic impact to the economy and is believed to have helped foster a return to economic growth. However, the progression of the pandemic has been unpredictable with periods of high rates of infection, followed by periods of reduced infection rates later followed again by periods of high infection rates. Recently, the Delta variant of COVID-19 spread in the United States during the 2021 summer months and has begun to wane. This spike is attributed with causing a reduction in the level of economic growth that had been expected. Any future variants of COVID-19 could have similar or worse impacts on the economy and public health. The COVID-19 pandemic has had particularly negative impacts on certain industries in the commercial real estate market, including hotels, senior living communities, rehabilitation services and certain retail businesses, such as movie theaters and fitness centers. Certain of our clients operate in those industries and they and their businesses and operating results have been substantially negatively impacted. These clients experienced decreases in their market capitalizations during the pandemic, which decreased our management fee revenues. Although their market capitalizations have generally improved or stabilized from their low points during the pandemic, they are below the levels experienced prior to the pandemic, and they may remain so for an indefinite period and they could decline. Although we have experienced increases in the fees we earn from our clients since the low points during the pandemic, there can be no assurance that the COVID-19 pandemic will not continue to negatively impact our clients and reduce the fees that we earn from our clients in future periods. Potential consequences of the unprecedented measures taken in response to the spread of the virus that causes COVID-19 and the potential reintroduction of such measures in light of the spread of the Delta variant and other COVID-19 related variants and market disruptions and volatility affecting us include, but are not limited to: - sudden and/or severe declines in the market price of our and our clients' common shares;- the inability of our clients to comply with certain financial covenants or pay interest and principal on their outstanding debt that could result in their defaulting under their debt agreements;- the inability of our clients to access debt and equity capital on attractive terms, or at all;- downgrades of our clients' credit ratings by nationally recognized credit rating agencies;- the inability of our clients to reduce leverage through the sale of identified properties in accordance with targets;- the inability of borrowers under SEVN's loans to timely pay interest and principal under their respective loans;- continued or new state, local and federal industry-initiated tenant relief efforts that may adversely affect some clients' ability to collect rent and/or enforce remedies for the failure to pay rent;- the inability of our clients to maintain or increase their current distribution rate, or make any distributions to their shareholders;- uncertain economic and financial market conditions that could significantly reduce the value of the real estate, loans and other investments of our clients and reduce the amounts earned on those investments;- increased risk of our clients' and their tenants' and managers' default or bankruptcy;- increased risk of our clients' and their tenants' and managers' inability to weather an extended cessation of normal economic activity and thereby impairing their ability to continue functioning as going concerns and our clients' tenants' and managers' ability to pay rent and returns to our clients;- reduction in our property management fees if our clients reduce or delay capital expenditures in order to conserve capital or because of a reintroduction of construction moratoriums issued by governments;- our and our clients' and their tenants' and managers' inability to operate our, our clients' and our and their tenants' businesses if the health, well-being or morale of our and their management personnel and other employees is adversely affected by the ongoing COVID-19 pandemic or otherwise, particularly if a significant number of individuals are impacted; and - reduced economic demand resulting from any mass employee layoffs or furloughs in response to future governmental action that may be taken to slow the spread of COVID-19 and its variants, and reductions in spending and other business operations and initiatives in response to the COVID-19 pandemic and other economic conditions, which could impact our and our clients' and their tenants' and managers' continued viability. There remains uncertainty as to the ultimate duration and severity of the COVID-19 pandemic, including risks that may arise from the Delta variant and other COVID-19 related variants, the ability to successfully administer vaccinations to a sufficient number of persons or attain immunity to the virus by natural or other means to achieve herd immunity, the ability of vaccinations to prevent infection and the spread of COVID-19, and the impact on the U.S. economy that may result from the inability of other countries to administer vaccinations to their citizens or their citizens' ability to otherwise achieve immunity to the virus. A continued, long-duration and severe COVID-19 pandemic would likely materially and adversely affect us and our clients.