RMR - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to The RMR Group's Second Quarter Fiscal 2020 Conference Call. [Operator Instructions]

I would now like to turn the conference over to Michael Kodesch, Director of Investor Relations. Please go ahead, sir.

Michael Kodesch

Good afternoon, and thank you for joining RMR's second quarter fiscal 2020 conference call. call Officer, and Matt today's and Adam on Financial Chief Jordan. me are CEO, President Portnoy; With In just session. a our business moment, they will performance, by provide followed a question-and-answer and details about recording I to call prohibited Company. the would without the of written of note the is consent like prior today's and that conference retransmission

beliefs Act of XXXX statements statements other and differ and securities May These forward-looking contains Today's meaning today's the the XXXX conference in the may or obligation results we forward-looking to project. call as materially made release Private of that of actual to conference based and from call. on The results publicly XX, RMR's no revision statements are the those today, within of any Company undertakes Securities forward-looking expectations revise Litigation Reform laws.

Investors those found factors Additional our which with statements. the information concerning or upon any our and could on can place website cautioned filings forward-looking that SEC, is in Commission, www.rmrgroup.com. not Exchange to are Securities undue be reliance contained differences cause at

this per addition, principles net determined to issued numbers US A call, of income, income adjusted of net generally accepted EBITDA with accordance share, accounting during EBITDA earnings and income, share, reconciliation adjusted and EBITDA can morning. adjusted news may non-GAAP be we the release per earnings margin adjusted adjusted In including adjusted margin. calculations adjusted the net this EBITDA discuss found in in we adjusted

should any locations Due bear us the ask difficulties on team conducting arise. that call to is today's call the current and from several circumstances, unique management the with technical listeners

to Adam. like would the turn I to call now, over And

Adam Portnoy

time XXXX an joining afternoon. fiscal Thanks, The Michael, large. the the second unprecedented quarter business, this truly of us our at and economy thank world for and marked for you

most invested client employees. over including significant employees rapidly all have health including we pandemic, COVID-XX our efforts wellness of the impact continuity end, importantly of the our their remotely. stakeholders, on to our have To the we weeks adjusting of safety, with we last organization the as ensuring gravity and the business time well this companies, workforce ensuring and preserve been These monitoring several working our pandemic's families. Given the as

more property report that being management XXX% our response provide has proud staff, our available of are our assets and this the steps utilized. but numerous are pandemic, most tenants, will the I safety to being our protect and Matt and organization office insights managed operational taken detailed of cases the on to in am While protocols utilized to in health including industrial to lightly

also would buildings did in not has I deemed be tenants of throughout RMR's and property team supporting our and remiss one from essential service the of to an if Facilities day use efforts people the pandemic functioning been our management I flawlessly. this our pandemic. opportunity executed this management acknowledge keeping have

work goods taken in truck seeing business critical of RMR's pride drivers country. of transport kept TravelCenters professional nation's also response our this on has around stops America pandemic. I've the client support to front they great of companies their as the for lines open to truck two vital the of

risk addition, and COVID-XX. health nation's be has the our to seniors, Star Living of of most who the dedicated In Five been well-being protecting at may the Senior from effects

at work our process slowed activity in construction Non-essential several for or or that in real and managed stopped markets of we completely the to negotiated decline continue we In in late-March. market, has in activity in where before planned crisis the significant several the we building beginning estate redevelopment while commercial many operate, of improvement which activity the also of a leasing unfolded. terms strong impacts saw state the tenant quarter, of close was remained deals assets. Though,

late-March, of sales as several of and property offerings slowed terms have transaction considerably withdrawn. have activity, seen we In

REITs, seen transactions concerns in pulled As had or financing. Managed because many the disposition around we it buyers seeking and transactions the we underway, have of we due of reduction to reductions we have Equity the buyer a some for number price to relates have our of buyers viability

For our Managed Equity looking possible REITs, acquisition opportunities. we're at

We the cautiously. be and are office currently in properties, opportunities active to and limited are but regards with market, continue proceeding industrial to especially evaluate to there we

the that sale transaction aggregate, the considerably, have have closed noting While the companies properties million is worth proceeds of beginning client of since for in $XXX of slowed it markets eight March. our in

of with with well security approximately continue the Considering debt. have operating positioned Managed remains cash generate our $XXX ended contracts we challenges to REITs our business the evergreen We quarter Equity healthy in we to crisis, million continue no cash given the and posed underlying the XX-year flows. this by and

As be organization very a result, well is our for what prepared recovery. may long a

the results our quarter. for to Moving

reported arranging adjusted quarter $X.XX, of and feet organization second a of client this perspective, of income the March average up in X.X%. $XX.X term lease years weighted very XX.X%. adjusted on and For behalf operations square we we up with share of remained busy, X.X companies almost of -- a XXXX, quarter, roll EBITDA rent margin on per fiscal million average XX, ended our which leases weighted our adjusted six of million EBITDA net ended an of year From of

supervised in approximately companies. at improvements $XX capital client directly We our also million

have previously The spending of to rents I'm XXXX. To-date April April X% to or than reopening report economy. REITs. highlighted, granted collected expect the April have outstanding almost XXX I tenants result the rents Equity as the contractual slow across through and As to of expected that the the less we quarter shelter-in-place XX% volumes Managed with our we for a our orders rent majority July been tenants pleased of of leasing discussions rents. slow of relief relief of I capital months rent platform addressed to next almost of and

tenants portfolio with important partner experiencing organization, an financial thus relationships, and I tenant As our to hardships, stabilities. is preserving believe retention it

EBITDA ILPT XX% highlights noteworthy companies. XX% million, a and of a $XX.X this year-over-year. client some reported of increase with million, to quarter strong year-over-year results our a adjusted across FFO on normalized $XX.X basis increase Moving

importantly, several has will overall coming e-commerce. highly with XX% include or qualities important of Further, demand secured rent investment-grade of which logistics mitigate tenants are ILPT's annual Hawaii and we increased of land leases. More occupancy experiencing, annualized and used rated from warehouse in currently reliance has that nearly from approximately disruptions portfolio XX% comes help the remained purposes, rent for which XX% strong properties on the ILPT's distribution

ILPT support relationship wealth with a leverage to ILPT this proceeds be should we investor logistics able fully historical a net transaction Additionally, venture expect and previously able joint during of RMR's and industrial closed quarter, sovereign relationship the raising future announced on acquisitions. $XXX ILPT grow million. to approximately that to was

property the that sector percentages consensus its OPI per XX.X% at the same estimates to annualized $X.XX investment-grade by approximately is rent well and only sheet of unsecured increasing well-diversified its by share, The ratings further OPI of of basis recently annualized EBITDA of earnings deemed of availability revolving announced almost balance X.X% under OPI highest rated rents its reaffirmed given million tenants strength portfolio paid of and rent and for ratio of with by X.X outlooks. is stable reinforce operating FFO OPI's essential. debt one tenants positioned paid future XX% industries year-over-year. the portfolio is facility. the had of credit strength office of exceeding net balance NOI, normalized and in with cash highlighted investment-grade $XXX properties sheet, of with also its in times,

conditions, economic headwinds. While the ILPT and each have are more seen and limited OPI current facing impacts DHC initial SVC from significant

a non-essential per capital and and plans reduce their liquidity. investments result, previously planned these has REITs As to to of conserve each to deferred dividends $X.XX share announced cash

senior As early which to its With Senior declines. to adverse cash with challenges restructuring this strength to with the the science completed DHC year of part office in has generating also Despite COVID-XX disposition growing in continue communities, in advent new XXXX, these it turn coupled expenses. regards medical operating in to its DHC, led increase its relates financial make portfolio, in challenges and X.X% program. Living progress calendar a its on maintained occupancy Star its the occupancy pandemic, of significant and year-over-year attracting transaction on basis The the life Five to is tenants DHC of NOI impact communities, basis. has living a had earlier

these Additionally, the to headwinds, has have DHC I'm and has non-essential seen with current that office at doors capital their to weather medical the patients volume it some tenants confident of DHC's its Even appropriate closed spending, the entirely. liquidity disruptions dividend business. in reductions their and reduced businesses

country Wyndham number ES sectors. hotels as our have momentum negatively hotels. hotel significant of its operations. announced was SVC pandemic-related retail marketing previously buyers is of of and disposition challenges of impacts before And SVC Sonesta and businesses managed the process a the was began the in been most of shelter-in-place the as service COVID-XX launching the impacted materially Suites orders facing affect Marriott have selected building all across the to among disproportionately program SVC's for branded hospitality

ceased XXXX or transactions delay lending As now hotel later planned expect a will may and SVC's initiatives. in pandemic, result all, transactions we reductions has XXXX, leverage at the delayed for these effectively of be the until which if

portfolio April April the were rent for rent highlighted across month service I retail While collections platform, was only XX%. the of SVC's collections for almost RMR XX%

most of the to to to to the I'm time. liquidity service business. through As Similar hard dividend numerous of granted economy its its we closed, appropriate its this rent the and especially in and have retail sector reduction assist them SVC capital relief hit spending, been remains the withstand downturn with confident has has DHC, difficult tenants

I origination of briefly our managed than believe to origination they our operators. -- untapped significant to of our and mortgage relating had items XX% our to while platform platform our revenues, certain Finally, note less want mortgage continue of I of potential. represent highlight certain some did of

invested With impairments or loan believed liquidity. asset by prudent per fully that dividend its $X.XX its Tremont the its preserve and cash that on cash investments, was management Tremont to board and focused underwriting its have in taken said, loan our share the capital, fact loss to of has reflected reserves any conserve reducing While and is it asset quality not we remains managing today. maximize to

from RMR. convert Income to from the real expand commercial will capabilities the further within We also estate mortgage to in recently mutual shareholder investing help change origination received securities in Estate This mortgage fund REIT. Real our RMR strategy Fund a approval

Lastly, at a organization. team the TravelCenters management America, to new of renewed TA energy the has brought

will steps pandemic in renewed momentum, its and team reorganization this announced both efforts. leadership the reductions While staff TA its hamper a COVID-XX of important recently repositioning

basis. increased sales pandemic, fuel during gross on first ongoing the fuel saw both volume year-over-year TA margin total the despite X.X%, Additionally, and quarter a increased X.X%

to platform. efforts our expand and to RMR grow Turning the

We large demonstrate to continue before. these a to Managed that RMR types funds ILPT the spend I of of grown the in believe including our joint time capital such as account have management sovereign capital involving with private ventures sources such business, asset stronger REITs relationships private on transactions mentioned our focused separately Equity opportunities venture future. for wealth managed and may lead only as We

In settings. M&A exploring possible through accelerate current grow opportunities happen and been cannot capabilities has private addition, AUM to negotiations efforts in we our as in to live any environment activities. our continue diligence efforts The disruptive capital fundraising

transactions overall accretive process prior specific that be cannot we that at earnings an calls, this executed. remain can confident With to in said, the speak as time. slowed, any While we has transaction

Matt, to over present may it market to the I to about crisis, current that for ongoing RMR's growth turn ability disruptions that weather I optimistic want pursue in opportunities the new themselves both despite I remain reiterate future. Before the and

to over Jordan, Officer. Financial Chief Matt call the turn now our I'll

Matt Jordan

and Adam everyone. Thanks, afternoon, good

and of wanted taken As employees, talk we've prepared our to tenants, providers remarks, about Adam an actions safety in organization suggested the and his ensure health visitors. as the service some detailed I of to first

personal filtration, last have address industrial our outside as social organization, the months, and assist equipment. and to Over protective the such two air products separation janitorial and designed of to experts advice use items -- of procedures, the standard hygiene, leveraging procedures operating

implementing and procedures, costs mitigating assets also reduction of unnecessary these protocols In many building includes temporary reductions of implementation at on services. usage, the which managed addition non-essential of given in we reduction the to focused have our energy

same suspended, plans business location In have operational addition to time property is to work have enhanced same teams the operating to required allowed property our been ensure management has not travel Non-critical continuity protective implementing established personal employees. leadership been the stability. equipment and regional protocols, for all management at in

across re-occupy to for At attention various team time, the turned assets this states operations as tenants our country ease their our orders. to has managed preparing shelter-in-place

will in and providing and platform update future continue experts to on to efforts outside an look from calls. forward We these practices national leverage best our

financial Turning our led to which and caused disruptions results. fee-paying to business has in share have management, to management the pandemic prices of under quarter's our material this base by market in The the assets led in companies turn declines in client fees. reductions

cash rent As have our deferrals be to certain some deferrals adverse Adam construction lead REITs capital in as and REITs agreed fee is with any fees management discussed, will Managed our as on future Equity management fees Equity will their a of reduced and either construction basis, altogether have look These canceled activities or to our spending on a Managed rent impact temporary tenants property to conserve the will calculated lower quarters. capital. delayed

to issued current guidance withdrew our uncertainties, issue expect stabilizes. these Considering situation new not guidance and the do until we previously

So, be if costs what economic operating to look continue. on provide revenue could and will I insights current conditions and future

second million For REITs. our unrealized losses net ILPT revenues we per and on year-over-year growth $XXX,XXX million. a primarily share by in acquisition-related to in at costs. earnings TA and Management and in sequential a EBITDA advisory due result quarter, partially of this adds $X.X $XX.X $X represents our were investment business their declines for or the back this services on income fiscal transaction aggregate of decreased adjusted a of million from On OPI and as quarter of separation basis, declines management Equity and Adjusted quarter, at per share primarily basis DHC reported fee which fees $X.XX $X.XX share capitalization. and revenues Managed a quarter price adjusted million increase market SVC, offset lower $XX.X from

fees For share on Equity measure March using business business of prices. basis. being the XXXX base a average paying quarter capitalization market The management of determination results fees of on REITs our this opportunity million are management lost revenue a ended XX, currently our for Managed the $XX impact base in of lower approximately March all

of our As the the declines a prices REITs calculated Managed was base share to Equity the month reminder, March. resulting limited pandemic monthly, business our fees management are thus from in

average and $XX between Assuming $XX are to remainder levels, our and the share REIT prices April quarter service deferrals that of impacts year. revenues the highlighted, we in projecting per remain coupled fiscal declines the total previously with rent the at construction million management advisory of and adverse be for we million

on to compensation XX%. client Turning cash of expenses Cash quarter a quarter. our for at compensation companies sequential the and from our $XX.X million was remained reimbursements flat basis,

While we reductions against short-term would built. we've have making otherwise staffing have we rash looked scalable at disrupt infrastructure decided levels, our the that

year. our this reflect of level expect compensation the We run rate to fiscal the of for remainder cash

which in G&A of share includes expenses Directors this annual $X.X Board share quarter million, $X.XX almost or were $XXX,XXX to March. per our from grants

the cash ended We limit in costs discretionary as continue approximately no expenditures with sheet operating believe ongoing have and minimize For liquidity, as expect and We and fiscal in the strategic positioning advantage be of the to G&A business debt. looking to million leave as we take balance $XXX pandemic our quarter travel. us we remainder such to to with opportunities of continues us to invest will well the year, new initiatives. unnecessary ample naturally

organization Energy. acknowledge the Year to recognized in to the of have Department year questions, Partner a row US having across in hard Before number I for want STAR we who with of of Award people ENERGY the go of by RMR the the the a second work helped

you the line That remarks. would formal questions? open to concludes please our Operator,

Operator

Please go ahead. from Instructions] comes Today's Bill first Katz with [Operator Citigroup. question

Bill Katz

much commentary. very all okay. you the I I everyone Thank the for hope update. doing appreciate is Okay.

REITs, Just of appreciate through thinking feel short-term how different view if of I China, sort and you the of sort of will. sort you the

fee-paying about restructure, wondering, dispose we I understand management for see for to you also on across here? the outlook your I of very think the things guidance we sort how I fee-paying you of just the ahead How trying revenues, here, sort looking I you. from next think them, potentially and but couple sort leverage Just think were of about at when Thank where but to of look quarters should some some should high them. appreciate have AUM? AUM just

Adam Portnoy

Bill. Sure. Hi,

is declines. share complete as AUM, REITs where with of contracts to REITs. given fee-paying taking share of declines think we fee the the at demonstrating all, RMR reduction, So interests and Managed result prices of alignment regards the first I which REITs, significant Managed in their RMR with a the is a are do is our are the in our resulting of what G&A between significant

both leverage, both Specifically programs those think least not were dividend question a disposition levels given at to you're of substantially share with fact more leverage. beyond. to make capital I with and given companies. the or those around liquidity that them $X.XX being we at if are regards we reduce of elevated through And have that run those are DHC, we've leverage it yes, companies to in than today midway the expenditures, said, are typically higher reduced would your SVC where they curtailed position more That than a and ample right, XXXX or sort through enough per quarter companies, that to

further. relates several are move, much have fee-paying we the hard last share how so and continue And me imagine given for where prices about companies AUM, those RMR specifically. that in declined where to pretty And nobody good it's feel prices two to two it weeks, exactly those as to companies knows decline but share they

knee-jerk a midway of through that of the those a companies to fact reaction disposition reductions sort both and sort effort. were they think, dividend were I the

point reflected 'XX. of think both this to able and certainly in they're I financial the enough in withstand and positions think forward, that's I and very, through been have very stock, from a liquid flexibility lot downturn

Bill Katz

wondering Okay, reading quick in just of that that's the too kind might of follow-up relationships guidance just some the these today, is some of that boilerplate maybe much and is a of mentioned your I'm sort long-term you compromise pulled of contracts. sort risk there again and both the press risk release I'm helpful. any of potential the And it. much of otherwise with how you REITs where In of shifting sort sort some of versus contracts? longer-term into that

Adam Portnoy

think, far I think are believe that There Bill, and and between organization. the also our benefiting REITs think, in expertise great experienced announcements. just significant and the always I in releases depth shift today of REITs had the And G&A, at in it's are those than and Yes, breadth no the that's they RMR of Those RMR the many reductions alignment boilerplate relationship the REITs of often is and anything, the their language have peers have Managed from I the from more I again, all. If press marketplace. handsomely and interest between fact of the benefiting REITs RMR. in

is relationship. don't there deterioration I so, any think And in

would I probably it the characterize today past. if anyway, in been fact, In than I'd ever it's say it's stronger

Bill Katz

you much. Thank very great. Okay,

Adam Portnoy

Yes.

Operator

And our Owen comes Please with ahead. next Oppenheimer. from Lau go question today

Owen Lau

you questions. for Adam afternoon, taking Matt. and Good Thank my

then on need capital REITs like pursue any is situation, RMR to COVID do you could of your about meantime? purpose? other please there initiatives for So update thoughts given your for strategic or preserve acquisition? your some potentially JV in the And the And timing meantime, lending the the Managed in could that then you the us

Adam Portnoy

the of a activities, changed regards a strategic to Owen. not strategy of Thanks, Great. has as M&A RMR result With picture, big our pandemic.

on had for those strategy. our XXXX. business short-term. pandemic both of to strategy through been business struck, the were right M&A will to diversify and need sort largely the go at our hand optimistic with their before I'm to specific that that try when moving we opportunities opportunities, -- opportunities reasonably of forward regards struck. because the say, pandemic to to to Those With -- balance the of our opportunities, Going would sides road be was not focus couple had and we continues down grow the continue I a paused

still something So accomplished chance, is I XXXX. will think there get decent a they in

With of no for financial RMR. our been with think benefited it's of as sort putting cash priorities. flexibility regards one lot last the I we're flexibility, a couple at to -- us our because years pandemic and going the we've And debt of financial into of

deep than think before could now flexibility especially recession. a I pretty more so is important, in financial even what very be a

And focused we -- so, maintaining I on we flexibility financial had think, were before.

we're focused even now. think more on I it

we're for there from often through go That ourselves through as on like now with and the companies opportunities event often the advantage the of. of and being the emerge that like an back-end and are many going as then what are recession, you could said, take you recession flush liquidity companies

think, I thinking be for this we we went about -- was do thought so, into even And could us opportunities an than even more there downturn. as to I do could

sure opportunities I'm advantage that optimistic years. how, we months may otherwise we I'm be that been hope financial there not will the not in when there that flexibility coming can really so have us that if our not take pretty And to of but I'm exactly presented using or optimistic

one REIT, opportunities, a sovereign or with on of historical our on REIT a alluded our industrial with to venture joint investor relationship of wealth with has that a Managed with with. JV what closed a regards we've ILPT, done to joint And we that it closed REITS, sort RMR we venture there

more type JV asset those the current we only that in, months. And environment with that coming I types, able will in think capital relationships which this of opportunities many of to our of currently think, I be take stronger. in invest is that through getting certain think we advantage I even for

a not commercial when more established estate favor to people a that or much real recession. be in might but of in than or call tends what primarily RMR real primarily, pretty on recession would mature as you're focuses define not what people type exclusively, in estate itself real core estate, investing

our environment. in also And current very to hand that play the so well could

Owen Lau

very That's helpful. Okay.

living but of change I the future? What doing for behavior? it's you. senior hotel your Thank in are to convince potentially you potential think tough about you consumer a know do So things to your do come and could how in the the environment or businesses, are customers back some

Adam Portnoy

toughest to you're among Sure. -- of two effects that living and pandemic downturn With the or right, or the current of the sectors facing toughest senior the regards are are space. our hotels the hospitality

I two stories with think it's different each.

-- the largely -- if hotels, hotels, are we With of operated by are more our most partner hotels by of operated very our owners. all not all our hotels brand large

For not example, Radisson the Hotel owner, and we're And Group, Hyatt, we dealing operator InterContinental with again, are the with among operate. deal franchisees. majority and hotels brand of Marriott the we hotel

think, I we behind so, draft them. And largely

I from you normal company or this as is the pandemic. are be Marriot like new to focused a And they they're going extremely InterContinental, on hospitality what also ahead emerged emerge China let's companies you that can tell Asia United they the pandemic the in States. their or had specifically little seeing up, have bit the hotels as have benefit opened somehow say, from of a global of

they draw be -- knows forward. going space lessons is perhaps the everyone on can hotel So to it's how different space operate, United here knows States. assure them the and how apply will probably be going to to in try those hotel going for the but Nobody

different a it's space, living senior the to there. regards story With

the you're sector after up, think other assisted that lot start And open place going may than a of the in lockdown. the be the to for independent with take to think longer I come to services. as effects sort maybe I have and in think, Long any it just going while still states population space been They're whole. to going space a a nursing much living a of very back. that of that because much dealing living longer COVID-XX and have still of homes in is of probably probably to rest going I see than probably to protocols for lot it's economy

the nature more is and around around think of more tied less the I to the economy virus that itself. space much

As than, subsides, what's that the in itself say, generally direct the will so that more have virus industry I on impact economy. a think, let's happening

Owen Lau

very it for much. Thank that's Okay, me. you

Operator

go comes from Riley question And Please our next FBR. today ahead. with B. Maher Bryan

Bryan Maher

Adam and afternoon, Good Matt.

that On when think concerned come and decision in deferrals guys the REITs the could been you do deferrals be level with tenants And that struck And the you're kind struck months look tenants, for all the think where forward up go to that lies have been getting with their Managed XX beginning to within your granted deferrals three did you one with how and that to, September and you of months? there you actually you what have about non-repayments to-date? repayments? to paybacks

Adam Portnoy

Sure.

So every handled case individually. was

have we going the -- month view of with, have a we've most within group with tenants asset RMR and they deferrals. that the as pretty to way. we those we out management all started were that and took in We robust requests also to Basically, large we as reached come handles that many tenants worked one the well along

how of we on depending limited the gone have it sense long long months basically people to going four out require, need cases even deferrals, made to And the as we We we fourth to to people how until decided quarter thought probably pick. timeline know this just early but didn't start was as push a they on to in nature maybe far that three seems reasonable repaying the like had us, business.

next April but you to say, give equal rent the most XX positive on year. start don't a has reacted if to installments back paying you October you'll pay, said April that for we deferral till, starting clearly that rent let's in didn't And in October pay you have that timeline, we'll people in April, and meaning X,

worry far. SVC of XX% prepared the Board, so most service that May, the As collected we look trend we are days April, tenants about it's that rents within somewhat retail, We retail my portfolio. about similar net XX only talked tenants into remarks, trending out to the in the today, in the XX, we very the obviously as across are

in here were same we are May. We we at the basically in point stand April as

concerned permanent perhaps I suspect that are be that impairment or probably we so, most rents we there And the would worry that's of some a the area about there.

In not we largely a disproportionately This industrial the very very don't don't material we in other other it's manage, revenues our but the portfolio, obviously tenants they medical buildings, so office those are pandemic has in in there downturn we lot portfolios sense, tending our small them, requests portfolio, generate that meaningful portfolios. number. have of buildings, where life a in a it's science tenants smaller and have where office a to we exist, we And just that's the get are not the some. piece do general of affected

Bryan, I probably say had is the So, area that's most to we're in worried retailer. about if the outright

Bryan Maher

Right. do as fully market given that paying is rents? relates it fact overreacted is lease the net minimum something the get excluding that to may like that have the only of sense XX% TA But though component SVC annual of portfolio the which you

Adam Portnoy

hospitality deposits answer, yes. have I on large guarantees has that brand our over export Bryan, on you're based we TA the fully Short is paying owners. and believe, and side market with fact right, security reacted the negatively SVC portfolios

the to I at the has both DHC. Yes. downside and do overshot yes, SVC So believe market

Bryan Maher

results at the in are shifting better Is where guys the you the you to Where hotel bit, spending it and four like this it's longer up doing really in and because more, industrial or the of pop performers at be want in well, your are starting of opportunity more Adam most C-Suite it and office kind dire where kind term grab where a the in there you And the of Okay. like estate is time? real could markets kind net morass are gears opportunities? Managed spending at of REITs? time seeing RMR meaningful you moment, maximize little where lease to to might

Adam Portnoy

say, Transaction opportunities for would the it fraction what are I us in Yes. today, of with the are industrial and time office spend volume a on that is to was. available side.

market We be opportunities they opportunities of some With a out were there's at what act the but as do the around to well. hotels, well-leased are multifamily, on could are there, the office. the moment. is multifamily opportunities there be Our none tend but opportunities to but that there regards before industrial, there don't much to in in fraction and retail pandemic,

for if pullback to sell And a sellers there not point they're distressed typically, we're like don't that point be, at to, where yet. they yet. while the to takes have we're know and have it but at a to when not get pricing, the it will willing this, when I you

seeing not so, try is like in and of they limited future And many themselves really the mean office. today, we're advantage doesn't what we to won't industrial take well-leased present to But them. seeing and we're that. That basically opportunities won't

Bryan Maher

Adam. That's Thanks, me. for all

Operator

question next RBC today our from go Markets. comes And ahead. Kenneth with Capital Lee Please

Kenneth Lee

Hi, for taking thanks question. my

in terms rent and that you're month the in the follow-up the SVC Just in of collections XX% last a of April. what one on of terms seeing

being Thanks. a wondering deferrals for if or now? Just sort you see rent this you of the currently any meaningful right good that's potential kind percentage near-term of level in of in like the increase hit the is do think

Adam Portnoy

Sure.

XX best give is exactly generally be May the into April that for We we're answer XX, May into net portfolio. will portfolio. thought you low on So can probably XX, watermark trending days currently the that it we that were where lease days retail XX I

so, tenants to most or be by activity tenants are June. have starting economic up we and some fashion our operating retail be just starting thought be It's the more that be up. view of opened states up probably general there'll or worse April. given will than in That's and these could these able And in form some retail fact of and likely most most back be it open will just states that June, that to

far bracing worse So than ourselves be April, that line. could tracking right in it's but so May we are

Kenneth Lee

helpful. very may. just And you, I Got then one if follow-up,

like growth maybe Just just given versus REITS earlier. months wondering six terms if the Thanks. current mentioned of Tremont within economic remarks, prepared mortgage saw and the this change the you what but as in see specifically as you within opportunity you any conditions the the commercial well

Adam Portnoy

where mortgage in lenders calls REIT excess their capital, capital. still from the dealing deploying origination really new deploying very they've in today and Yes, a platforms platform. I us response alternative of capital our situation to Ken, a and number loans. the with having that's deploy mortgage capital terms ability There origination. of opportunities, question. the space capital, is in few the of great stopped mortgage to repo lenders We're most think, they're in are a firms in to have United small so investments, whole one of are They're has that, There provide in lot that for those capital banks shut basically down States

Estate approved Fund, unique I of mutual business, a I a the where commercial we're that as in remarks, REIT. prepared pretty So, mortgage is one managed shareholders our mortgage, companies, into Real RMR a the Income business in fund which mentioned think converting circumstance,

We equity same have We $XXX opportunity we commercial permanent have to on CMBS don't And few sort there's returns can that to before to ability the have that against lower very properties environment, activity lack today, pandemic. refinance maybe there's folks because the for so of the have loans starting to in before that let's financing. say, of outsized bridge to the caught have few the given lend of current to the into very opportunity up get while of way banks, markets so leverage now competitors the value-add just of think, the been The in stable And chase market, about more I opportunity taking those in mortgages. with open, example, put redeploy the million a level basically sort might is in transitional we risk. we were, small. marketplace, they're

platform real hope advantage take do for months. coming opportunity I the there's of the our RMR so, current a to to, environment. and We think in And

Kenneth Lee

you Thank everyone helpful. and safe. very hope Very Great. stays much

Operator

Mike question Please ahead. today Bank of comes Our next America. go from Carrier,

Dean Stephan

for guys. is Mike Carrier. on Stephan This Dean Hey,

Just a quick question from me.

Given needed excess thoughts your at the in capital environment have and moving change of RMR forward? in shareholders cash balance, the minimum any forward just regards purposes liquidity cash Thanks. acquisitions what's the the maybe medium-term or wondering moving tougher for healthy and balance and for to some partnerships strategic near to returning

Adam Portnoy

of I'm sheet -- balance I not business minimum minimum cash Well, less on operate the is. I'm the million the sure could comfortably. $XXX mean, with what Sure. than we sure

we to scale cash it's And a of been the well by has say maintaining balance positioned financial little We outweighed any were positioned to sure has the into tipped I to take again, to advantage would returning And two well bit quickly the present trying present flexibility. that financial of no being capital, -- can that very Companies this And opportunity flexibility might balance themselves. itself. a access its a lots type of before. maybe don't where opportunities have We environment seen in is advantage able in towards financial trying we're shareholders went take we make flexibility. think, to cash move to if would XXX-year financial around that flexibility, opportunities to on I maybe desire have maybe to have environment, the be thinking leverage, sort take the maintain as sheet. generation, once pandemic. of once never our might we of

in so, that that. can -- position it a is to make trying the Company trying I'm we're And sure do that

light, that touch our intention though the quarters, stable rest through will flow is for stock to third in our we note Managed in hopefully did go our depending said, and being stable numbers, for the gone our on prices likely where consistent. even all That move consistent and diminish the year. dividend down cash Matt or or We That's our in is to of as the current not REITs. kept fourth Equity quarter, has keep and dividend the dividend we that

mentality, cash have ways to that -- paying could as flow to So are free the maybe willingness more be in a proportion you past. than of our interpret prior in actually out we capital a we greater some than going the because prior turn than

cash be but That going of be going still than will XXX% be to a to free not flow. it more our than is less we We're more. paying said, XXX%, paying

hope sort And the of focused still so, keep than same a coin. more not it look XXX% over quarter. that financial of dividend but to and at percentage flexibility, We're decided payout could -- on you before our a the is to the but we probably do fourth And that our stable it is and now third to flow time, higher. sides of cash is free two higher at we're

Dean Stephan

That's sense. me. for it Makes

Operator

And our next comes Ronald ahead. with go Please question today Kamdem Morgan Stanley. from

Ronald Kamdem

for thanks taking my Hey, questions.

classes. of on back to going Just some asset -- the the question back going to

in asking way. a Just different

different and be or that sort first-hand perform. how still add to in potentially there classes want seen pandemic, here. about currently, property you're which of of types benefit get Just have early, of this Has asset had maybe easy in you'd involved of terms and they obviously may in in during you in just any involved lessons being sort asset classes just more been to the very longer thinking on learned involved medium guys sort of thought to maybe that curious term less not have

Michael Kodesch

think, Sure. I there Which Entering gives with joint wealth continue and significantly. investor, to like before, to at that grow that on. into think to grow place add that sovereign is -- we I as that a said the industrial venture us I ILPT capacity some

carefully, and that have sense. don't pick of we the long that multifamily. -- On significant can office our lot we be a significant presence we an area well-leased opportunity office a only think, area the An buildings as that spots itself I present makes could side, could for

As part to more going present this that to as an were focused get of foothold we themselves. what's and as might that's on, foothold get on whole a area a -- even in, of of now opportunities part trying greater have we things

play in to for want that about, of been well, years, what paramount, the from pandemic. terms environments the write emerge density be in about Us, like everybody one to other. the in right, that There's are this I, market close to we figure people new or marketplace out of Every each urban a I so something much that is real lot spend continue is has thinking to density going XX time things normal of when the people last all like, change. is been commercial work, think of to going in for has sort estate think live, sort trying in --

in more an favor build going dense a before, office is was to it want can't suddenly be -- it to won't than people you because to going Our because area. in be much

that. So we're like about things thinking

office a We large have suburban portfolio.

invest more forward. So are thinking right the even area it an this, But we're going be we now. maybe should from might might benefit it those where things about

Ronald Kamdem

sort just capital second then, piggybacking my conversations. question And Right. the on of was private

what's sort there the in is curious investors sense Just back given but you there sense the and trying extent, there of get the now of some to some the unknown opportunistic headlights on now also this? themselves To to out work of deer position the pandemic, the the those of give right? of to be out that be can do maybe a to may looking investors, pulse right more

trying started conversations get Just to a sense even is it too has of soon? or still

Adam Portnoy

take put very the that's good we've of say opportunities. very of environment. wealth pools question. really the wanting much say say, money and had In They open to Yes, very to capital, been I try to try to investors that is much try large conversations would keen of come current very keen the for majority of capital. that's private with, with take advantage to the would business conversations the talk theme work, let's overwhelming of in a to that are I across to everyone in pools sovereign we advantage large we've to

asset Now, have certain they their different -- have classes changed. They view. might views on might might a have

work a very, For to and I very is but I at the and retail money to work. and is put there industrial people I segments, think, to put think in niche think to money are example, I select want other trying and open of office think, hotels lot folks, there not much money in or multifamily and segments, moment,

the this they have all very this what thinking really happens. in be wait I a the and much see if they'd see once-in-a-lifetime talking that opportunities, much and folks, was investors case want advantage headlights of would very a they situation. little been once-in-XXX-year want to to want you deer very bit going to reaction opportunity not again They to the business. be like not maybe in could these our And recognize to for are That's be So, not with to experience. take are much open --

Ronald Kamdem

from all That's Thanks. Helpful. me.

Operator

our I'd back ladies any for turn Portnoy And closing concludes conference remarks. gentlemen, Mr. the to Instructions] to and over question-and-answer [Operator this like session.

Adam Portnoy

Operator, Thank that call. today our joining earnings you, call. our concludes for everyone, for us

Operator

This today's concludes sir. conference thank attending you for We you, presentation. today's call. Thank all

now your disconnect a and day. may have You lines wonderful

The RMR Group Inc. (RMR) 11 May 202020 Q2 Earnings call transcript