CRE Manager RMR Group Trades at Discount
The RMR Group (RMR), a commercial real estate manager with ~$37B in AUM, is trading at a deep discount, according to recent analysis. Trading at just 0.4x sales with a 10.8% dividend yield, the firm is being weighed down by its office exposure and incentive fee structure, offering a case study in valuing public CRE operating companies.
RMR's struggles with its office-heavy portfolio are magnified in a market where financing costs for commercial real estate remain high. Nationally, maturing debt of nearly $1.8 trillion through 2026 is forcing many property owners to refinance at significantly higher interest rates, impacting valuations and cash flow. This dynamic particularly affects externally managed REITs, where perceived conflicts of interest in fee structures can lead to valuation discounts compared to internally managed peers. While office assets face headwinds, the Chicago multifamily market shows strong fundamentals, with a vacancy rate of 4.7% in Q3 2025, significantly below the U.S. average. Rent growth is projected to be 3% in 2026, driven by a shortage of new construction, the lowest since the Great Financial Crisis. This supply constraint, coupled with a diversified economy, makes Chicago's multifamily sector a focus for investors. For those looking to invest, neighborhoods like Logan Square, West Town, and Bronzeville are attracting attention. Logan Square benefits from its proximity to trendier areas and offers rental prices that are higher than the city's average, with median resale prices slightly below. In Q3 2025, multifamily cap rates in Chicago averaged 6.7%, offering potentially attractive yields for investors. The strongest demand is currently in the entry-level and working-class neighborhoods on the South and West Sides. A transition from hospitality to real estate investment is a viable path, leveraging skills in operations and client management. To break into investment firms, proficiency in financial modeling using Excel and ARGUS, along with an understanding of valuation methods like Discounted Cash Flow (DCF), are critical. Networking and considering qualifications such as the CFA can also strengthen a candidate's profile for analyst and associate roles. Building a personal portfolio requires creative capital strategies. Options include partnering with other investors in a joint venture, utilizing private lenders, or refinancing existing properties to tap into equity. Tax strategies are also crucial for wealth building; investors can use depreciation to reduce taxable income and a 1031 exchange to defer capital gains taxes when selling a property to buy another. To stay ahead of market trends, professionals in the region follow publications like *Midwest Real Estate News* and Crain's *Chicago Real Estate Daily*. Commentary from brokerage firms like CBRE and Northmarq provides in-depth analysis of the Chicago and broader Midwest markets. Following discussions from organizations like the Chicago Association of Realtors and the Real Estate Investment Association can also provide valuable local insights.
