RMR - Earnings call transcript Q1 2021

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Operator

Good day and welcome to the RMR Group Fiscal First Quarter of 2021 Earnings Call. All participants will be in a listen-only mode. [Operator Instruction] After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Michael Kodesch, Director of Investor Relations. sir. ahead, go Please

Michael Kodesch

about from and the prohibited as contains actual of company. statements today, Today’s Officer, thank conference forward-looking retransmission the we joining provide consent today’s conference made call. and CEO, revise Chief session. President conference meaning and call statements moment, or followed just February of is question-and-answer they call the call. of X, call securities first quarterly Litigation results other fiscal forward-looking that and Financial and are company Portnoy; no Securities XXXX With of based Adam materially results today’s by the Reform forward-looking to the Jordan. prior you morning, XXXX differ may In of of and any details Act RMR’s obligation a will for of expectations those Private on undertakes quarter are Matt and These Good me would revision the like statements recording results, a the publicly RMR’s to without laws. written I to our business The within project. note that today’s and conference XXXX, in release beliefs on

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

EBITDA now and Adam. of reconciliation would net accordance generally adjusted call, like turn per adjusted adjusted income, accepted earnings in we And adjusted call may share, EBITDA will share, the A the to with release. including our during net discuss margins to per earnings of adjusted found in be over principles I adjusted to and calculation earnings accounting addition, non-GAAP adjusted income, EBITDA net determined U.S. this In numbers income EBITDA adjusted margin.

Adam Portnoy

for us joining you and Michael, this thank Thanks, morning.

$X.X quarter $X.XX am reported For share, on debt. we no last we capitalized $XXX quarter $XX million, adjusted which under ended with RMR of are Similar XXst, and first having million million, sequential remain XXXX December calendar or begin XXst September fiscal of XXXX, $XX.X client ended our December we well to as of having and XXXX. assets of most to management per year-end, with gross are Overall, a of both of in and results We and limited increases. we the of due income net cash optimistic year, reporting adjusted advance billion what I discuss client reasonably as companies as we can year-ends, to XX our companies. EBITDA

broader resilience the it Throughout the remain the allowed pandemic, operate the operating has and our of also presented business and sectors dividend many While of many business has pandemic economy estate in, real strong. to sustainability flow excess and margins we in our to generate the cash demonstrate to RMR our of challenges continues model.

to continue our call. our XX% REITS, companies to arrangements REIT client that I occurred like In with shareholders. revenues addition, of would managed coming some our our us have more align over our equity of from contractual last at events the well earnings since noteworthy with our highlight

for asset ILPT Class to ILPT property should acquired on a fund to In which into debt, continues A Kansas, During leased the is years, eventual XX known $XX industrial this this to a past the Kansas the the initial is vehicle, million capital as a early January, quarter, in assets, from the to our building level. now XXX% acquisitions ILPT’s but candidate in has leverage sales which industrial and interest industrial option used we City, proceeds high-quality moderate for fund. this sale these ILPT focus investment sell into acquiring closing fund. fund. could remains of announced private ensure industrial at the be repay

our and the typically who appreciate efficiently have to vehicle large capital, to sizable Given RMR’s deploy acquisitions, require small- in access medium-sized expertise sourcing this property they to this unique transactions we investment partners to appetite grow believe product, a future. in

Class to million The property million. opportunistic for It South the capital building purchase Carolina and continued Turning an announced for A Virginia the OPI. its office in company recycling in a $XXX Richmond, an of of recently in quarter. program newly-constructed $XX office sale

known and focus negatively long-term pandemic improve its pandemic. outs, gears the for the OPI portfolio. equity expenses backfilling its managing affected by recycling on upcoming move property-level managed more impacts to Shifting capital sector to on looking office has reach the kept While the remain uncertain, opportunities

with made of progress pleased distribution COVID-XX a being vaccine. are in We the the

senior Star the administer vaccines staff Five momentum, the participating communities. With XXXX. XX% to gaining well Five with both living least approximately primary to DHC’s than Five rollout positioned living in of communities residents. Star of received residents dose believe are the of accepting Currently, have at vaccine the to senior industries has its and CVS the vaccine their new and residents second are we operator, half Star’s at all first portfolio, XX% and more of of materially hospitality partnered Within improve the

recover may the the measured in we occupancy believe the we be While recoveries to senior long living expect future. in business run,

hotels waivers IHG DHC and of covenant with issued terminating and related million on its its notes its approximately Similarly, credit XXXX Marriott. recovery, relationships economic uncertain XXXX. its June recently liquidity. the July of facility enhanced to part credit improve an waivers transfer facility management its SVC with recently $XXX through liquidity to of by Given on revolving through senior schedule as obtained securing XXX Sonesta to covenant remains SVC

and first to IHG XXXX. in fourth the are the transitions in All of XXXX, the of Marriott have occurred conversions the expected quarter occur quarter of successfully

hotels acquisition IT more SVC a this Sonesta later result we year. accelerate at beneficial Finally, note, X,XXX than Hyatt related expect of the in a closed country will franchising million pandemic. Sonesta’s for of recently January, will from proceeds level Red of of a Unless and company received its term other to hotel transformation That development centers Hyatt of the these this Lion is said, and agreement, by to notice Sonesta continues the in hotels. be site the SVC mutually On the which would hotels. acquisition a during business. executing Hotels, TA the discussions critical the a which transition also Travel transportation of simultaneously goods also fund to franchising to initiatives. year-end, termination XX America help subject closing with will the of loan, to the strategic covering supporting significantly This increase Lion. infrastructure transaction shareholder on vote its growth size around to announced Red updates improvements, used $XXX while

month, to Turning to a Earlier conversion announce closed RMR of loans the were its underwriting teams mortgage to seven convert origination our million. commercial to excited and $XXX RMR’s totaling RMR the completion mortgage REIT. efforts this we platform. intention mortgage, have in growing trusts announcing Since over

to coming mortgage invested this pipeline We new of also the months. have a deals, and have in REIT fully we strong hope

coming to management in our into assets we make is a to credit part platform future. the momentum meaningful this resources dedicated and the an there we Given under have believe continue calendar opportunity to of have XXXX, we the our

management which fund organically in transactions the as I to significant We building business, time capital invest our out continue includes private discussed such that also earlier. asset industrial

RMR opportunities While progress may for capital, private share lead there companies substantial this relationships cannot additional which additional specifics, been large to I has later year. client and with developing in sources of its

accelerate criteria our limited. through of attractive We capabilities continue possible be we increasingly and sourcing a recently private acquisition our AUM found opportunities fit capital grow activities. to opportunities Nevertheless, M&A that to fundraising number

After past impact in which to has estate management real several is note of from potential many that the a to slowed XXXX, the these of have over have number the a over transactions market, flurry the of pandemic, years, in Beyond last activity the has and transaction asset of caused of sale important years itself the controlling materially. limited stake few themselves businesses. space it involved occurred remove that targets in the one a activity XXXX

targets, are in coming available that experience any an portion us the believe of potential potential in suggest and We would handful require transaction would we our far engaged cash a M&A our thus still leave may sometime discussions occur of capital. Nevertheless, a year. excess acquisition with balance significant and only with

results for to our for our deploying I who new continue Chief have possible our our quarter. capital will which vehicles this into organically Officer, we to may cash, addition, strategies, combination business. it involve excess returning Financial Matt over our In accretively of Board uses now some of capital a review our financial to will private continues Accordingly, to including or Jordan, shareholders. turn alternative success the assess call the building investment

Matt Jordan

Thanks, Adam, and good morning, everyone.

million adjusted $X.XX low this representing per increase XXX EBITDA of EBITDA was income Adam a our basis margin $XX.X a quarter. XX% As Adjusted this share point. basis and we reported point in over at due This price to development a service increase basis. sequential increases due to advisory management and Management was quarter share primarily million this activity. revenues SVC the were quarter, of appreciation a highlighted XX net increase quarter, of the and quarter, earlier, course sequentially point from $XX.X fees $X.X construction on increase million XXXX adjusted and

base XXXX, The business our revenue measure basis. REITs, fees in equity million. all XX, As loss a of paying management of of results on a on managed approximately $XX impact capitalization are except being ILPT, this lower market December opportunity

pleased While we a reduce there million loss revenue have past is ahead, are high opportunity helped recent price significant this still share $XX of that summer. opportunity our improvements from

exceeded incentive relates unfortunately, total peer calendar of it REITs returns averages. equity none our to their XXXX, As fees managed for

prepared and that position at measurement this their periods. future over of pandemic are outperform period, the strategic peer REITs several REITs groups actions our outlined could While in we measurement remarks past hopeful Adam’s to in efforts presented our repositioning the headwinds

Adam $XXX,XXX. discussed An less of which X, average which Marriott-branded in the quarter’s management will service activity said, represent to of a other quarterly share line managed $XXX,XXX with Sonesta decline the construction hold ahead include and $XXX,XXX revenues; December approximately earlier; revenues of fees the resulting steady, finally, management a quarter, equity TRMT variables, revenues advisory in in the to quarterly that $XXX,XXX. incremental be REITS this prices and X that include to in quarter, IHG- of management by January Looking decreased projected conversion impact REITs expect in on effective of impact days reinstituting number quarter. in assuming for our adversely and approximately from we fiscal revenues advisory management construction second next hotels managed next approximately revenues which fees With will

true-up in the flat Turning quarter’s Cash sequentially which is projected effective offset $XX.X excluding merit quarter. annual that $X.X bonus cash expenses inflation, bonus compensation. million last reflects of recent quarter both to increases executive and for retirements. Cash million this by of after Xst the compensation were were October compensation

be to inflation. G&A compensation our due sequentially cash an remainder approximately COVID-XX $XX offices to increase expect expenses insurance as $X.X at associated implementing quarter million XXXX. $XXX,XXX We and was this safety quarter costs well fiscal with IT standards cyber for per cost of million, of as the security

next of we in incremental approximately quarter, quarter, to our will result costs share expect grants, annual ahead issued of Looking will Board in years, Directors previous next which $XXX,XXX. be as including

on in tax limitations corporate executive December structures tax expanding were of As our that regulations new to released, it rate, types compensation. needed apply to the relates deduction XXXX,

to benefit, RMR’s regulations this Accordingly, these of announced apply regulations to next accounting adjusted Recently, XX.X% our new date required, December the rate remove XXXX. prior the XX, As applied to IRS limitations these deduction quarter. XXXX. the apply incorporated return release. to rate tax structure, EPS onetime X.X% this regulations and results onetime be effective a would tax we XX, quarter’s that This into to we quarter, corporate upon the rules was $XXX,XXX, December new or include benefit new expect approximately

us assess as to believe initiatives. sheet questions? Finally, strategic well million line would concludes in debt. have leave positioned the continues invest our ended you and continue cash, to We business Adam mentioned in Operator, new and no $XXX balance to we quarter with approximately our formal please open remarks. earlier, That we opportunities to the

Operator

Instructions] will from Our Maher question ahead. with first FBR. go Riley Bryan come [Operator Please B.

Bryan Maher

years? there Red I down thought to game for and plan. thanks on comments. a is And Matt, over two like where that to and the three the little Sonesta what resource would five allocation and more Adam drill integrate bit Lion the to and the do envision next you of the kind process going those

Adam Portnoy

Sure.

to one it subject the we vote, That while increase companies shareholder over the So at will optimistic can’t United Lion close, it the it close. Sonesta it largest make but it to size the we States. does will of will really Red close, of If Sonesta, acquisition is hotels. in significantly we assure will hotel X,XXX are

number of United be which It reference. bigger Hyatt accelerates internationally have have of a and company of a States. frame you one terms To franchise increases hotels, In would operating or to a franchising in than Sonesta’s some franchising to We Sonesta. business. it also you give today, hotel capability, at be major the America have hotels significantly outside we significant do

back in thing when may some It hotels is top-tier of to it the Sonesta is in in Marriott. to to from don’t for is years it with one of RMR, platform SVC for It here all good virtually domestically. is a it good SVC. relatively of thing And it going Sonesta. many of hotels Sonesta anything is hotel and that also have for Sonesta we is is some or larger again, almost back for are It see next will hotels industry. platform a And America much becoming sort business. XX% is hotels help its of Sonesta. operating ask from it when business Wyndham. Where the really Sonesta shareholders comes Lion, that think very operating the good of businesses really few operating perspective, Hyatt, giving hotels manage. really from manage it it had taking those You still and lion’s those taking And is And SVC’s franchised. the different SVC to the hotel a take IHG or hotels with is Red It owns small accelerate we its for share one growth. back a SVC. that

your So years. becoming really it hotel franchisor benefit States gets operating also question, Sonesta the we manager and To coming top-tier business from answer large United the the see that. in a in

resource are go lot folks of growing good allocations, - a talented hiring the terms very This industry, to space. is time hotel of In be let have good in very is it and the in very fast. a been

maybe new only is hotel operating Sonesta businesses of hiring one actively folks. the

addition hired and it announced. was new a Chief people period, a we little coming pipeline of transition We So this That there to of good its do have resources Operating gets availing that, that. management had itself the is upon, It RMR. on. of a Officer very of the new bit ability per that recently in drawing And is is that agreement with RMR. it to in

a long-term augmenting call, of don’t is in think staff We Sonesta. I RMR over in is of that sort But thing. what RMR at to would period. some So transition this, augmenting be a Sonesta going short is term, short-term the

very complex. for about benefit are entire we and So is where and going the bullish the Sonesta it

Bryan Maher

on And you foresee is all or your broad have into are to expansion, U.S., you that Do you across is, moving you say, real light where see seeing expanse you of of done industrial. space, private or kind question the let’s real office? biggest that follow-up in my whether And estate can in the opportunities see of you hospitality day-to-day pursue? capital another like Great. estate would the

Adam Portnoy

Everything talking are to care we to side. you health folks office are hospitality sectors involved we short that The is people answer side, that side, various Sure. are retail in we talking the with. side, the about mentioned,

about with, capital of we sort sector having involved and investors that. are So to pretty being able much with dialogue expand we every touch private are some

as today. view office the be of but long us it then additional long eventually, believe that as opportunities grow really in office lease will use XXXX. for to shift, some there by take in in maybe big be a I They that has around malls, because Office, around opportunities an term, We office up use office And of during be mind And could could is sector, there. perhaps a basis, But interesting interesting medium- in that and the organically And to users. office single-tenant sunbelt, tier lot term, changes, opportunities better be in cities there largely to and presents, office, to I pandemic. could time. is retail. strategy where to interesting out office your net maybe outside least one on most the very one the that interesting up folks will of the the the sourness will around my extremely are, gateway there think net answer financially, office some to that of hotels. not spaces view, mean, some risk-adjusted To held personally view, performance-wise, a back supply/demand out interesting specifically backdrop the in interesting invest Tier of most a think you - around of return my end a And business of are lease office. the There really in back also most but most about. could in capital, have is is will think thinking lease argue be in well in X at in be about retail, opportunity going the you a seeking top the obviously there a office be balance think terms there the going is today, RMR, Within in wholesale my net question, because I sector of there folks - I’m is opportunities this retail, is opportunities to a used. we necessarily that that there way themselves lot some so being present not sure or shift believe office

of you are sense gives about thinking a we how stuff. that So

Operator

go from come Stanley. Morgan Kamdem Please question next of will ahead. The Ronald

Ronald Kamdem

Great.

of to industrial sort fund. the back going Just

a I trying quickly Just to of you guys grow. about are initially. portfolio know can there get sense thinking how XX is that

of dropping on of It like should is forth. down. potentially Curious that But about how what middle the and sort looking property that maybe small assets think in of in and strategy ILPT-buying I can markets about clarify it sounds well. think as you you terms you the also touched for potential industrial? growth or sort we in are so

Adam Portnoy

Sure.

dollars hundreds will industrial it we the as firm, might whole, on as think millions there. a of we of deploy where So the is that end year about side I assets could a up. talk per

actually industrial where tree ILPT to from bit The we is the perspective, really the ability at and basically do NAV. through specifically there. decision fund, cost the tree ILPT is below little ILPT are of so by It in might down capital. end RMR’s a and today interest option NAV the cost next, has you ILPT And sell that. fund ILPT, capital of up level end decision for up at far drop driven level equity decide of the Now they corporate the selling it it agnostic. the into is the versus there equity because the remember, property interest staying could what to, to ask could equity

it it down at and the and going capital it at obviously, NAV equity into to to makes you down do So property the if today, are drop level sense more fund. lot a raise ILPT

it whether up. front, is is again, of where sit ILPT down likely way, whole we it board, where stays improved largely a ILPT has equity so it that or in terms staying cost it end fact, thing from be sit, the the and of is ends And if agnostic, our level from would shareholders, more at we growing. a in that And a significantly, where perhaps that industrial up little But maybe just today, maybe outcome of for for reasons. in host capital assets very either RMR, the because good across the in ILPT, goes we is it are corporate

I sector at, assets. There favorite. focused the you investing of our in. is are amount earmarked most medium-sized the tremendous sector. probably assets There favored in in is the amount terms are It most of of It invest estate. small- sweet capital the invest today’s industrial to real right. on In that of is to real think is market That strategy, we spot is more in looking tremendous a is a type capital that estate industrial to

a can Our there out advantage players competitive single-asset or bid is larger and money of transactions. lot there up they of to lot large a have is that work really put portfolios to

much I There would Our sweet little less. acquire that. buildings a one-offs. the spot around then transactions at And either sort size, little able one-off less I there, partners we very industrial ability is but can efficiently drop call, to what them, which ILPT is, be is into or sub-$XX million still there ILPT our think that aggregate a to down within of fund, competition is that and do competition in it in, appreciate

In type we on essentially what buildings terms leased. the of of newer properties, as single-tenant core industrial. And top United XX net buildings. focused itself, mean typically markets the States industrial most as by our well ILPT industrial in that, Typically, for of are do we are the fund

We buildings. have some also multi-tenant

leased, tenant, is so core is And well what building, would industrial quality, typically, single leased, good you see a larger us. credit that well-term

Ronald Kamdem

That helpful. is Great.

go view, comes as sort guys. those you getting of for upside here, of guess, and reopen, fee-paying the it fee-paying are feedback company quarter. the the would Because so and that one, forth, talking incentive feels of higher companies, a what the you number fees. of one, of gone terms another sort economy be cover right? so to and of work back, you forth. to had on investors market stimulus we AUM about lot of AUM the I side, as of both sort the could which in comes the has Just Clearly, the saw what something sort in, are thinking the like When performance this you sort

curious, company. of what So just investor REIT sort feedback the the is on

based is incentive that earning work the getting closer sort to performance one. second long of that a shows the Sorry, on OPI the closer fee staff. is an it of our But of is and part

thinking is you guys what and how there, curious that Just are about evolving. strategy

Adam Portnoy

Sure.

The four are ones which big is and we is retail REITS. our and two DHC care hospitality then So SVC. biggest REIT, REIT, have which equity our health

think, the confident the more RMR. terms within from I getting poised are a in widespread. better pretty companies is vaccinations fourth third feel of industries. we economic We things yes, those get two benefit pretty that are going the well view generally becoming to those reopening, summer There into to as house start quarters and and much

a admissions of to and new first maybe see and start to of attention fully are really there, the that. recovery, as in inoculated, industry, be Within rebound if largely to see industry, a can it could That growing sort senior well living start may communities fully largely, see they the turn Those positions senior sort even be they an because a inoculated than may by they living turnaround QX. the to sector second a little the earlier will occupancy, their end that them you quarter. in

the So we retail vaccinations side economy going as well. the about feel in hospitality, and care, health on our the where opens good in is of very with even are we - what as house of terms

industrial through them to will expect the sectors pandemic, to office talk I and well very incentive Our to and continue we fees. let perform perform and about well. Matt continue REITs

Matt Jordan

organic highlight that is just AUM, talk to revenue, on I comment. lost When If just that our nothing, I gone flow-through just do guess on is XX REIT, would to focus growth. think organic low we XXs Adam’s to investors, something pay we but just I to is the from and one that all forward add the straight now. fee And thing EBITDA Yes.

some Adam XXXX opportunity in see it out I see should So that investors think about. that the and of reasons play for talked in

we incentive with you, of terms agree fees, Ron. In

I to put opportunities we is still their was REITs away, as think OPI, that performance the of are tend cautiously and right is you managed long to way fee equity troughs it away. specifically, January incentive that structure of outperform we are in term point. to a while year, at present our what seen recover low they peer this since XXXX far it groups tend and optimistic. through as ways have this in relates And is a because place long

position not for really you XXXX in are we a I agree OPI. would So on comment, to with but

Ronald Kamdem

fees. just it. as the the is potentially seems think how the nice economy reopens, Got I way upside about Yes, the think Helpful. a it is like company positioned, there for

answer that all my helpful. questions. Very So

Operator

The Sum with next Oppenheimer. from ahead. Lau will Please Kwun go come question

Kwun Sum Lau

an Adam, months. the on please happen you in any heard there I progress be it you you coming mentioned of bit would And strategic us in coming change give correctly, happening mentioned update elaborate could is little you I here? your previously, And if the that years. may it the remember acquisition. thinking if the in Could please a

Adam Portnoy

business. in my I About remarks There a Kwun. little of has think, public that bit prepared question. a bit into, Thanks, we you our it. ago, were private also talking in jump-start about that. a out basically around M&A simultaneously to little detail try an Thank been to with and seek really for said strategic going go were we to are take this build to of And investment we organically two shift sort that, very in thinking. years help capital to acquisition to a we going make of did how investors our time I or partner try

building good I momentum, have in ourselves We think, been pretty organically. getting good some pretty it success having,

been have, the On M&A years, at front, two for this. we

We have conversations. had numerous

the transaction, real asset for But us again, manager to is space muted to folks. on right control in which, think, reasons. would deal what with We around specifically, in what has I on estate for I is, we various and - conversations activity sector, of characterize focused handful are very continuing a especially are been thing have, focus for in that

that becoming So be sheet. we even more up on balance unlikely have still majority us to it a cash would activity. lot and the built is it of more is there that those we that we And hasn’t conversations our then the are been that having, evident using of

M&A the going that some said so going to that market we process of capital M&A were the And were private use always investment sort to time business. to to try jump-start evaluate spend really we to the we

up. given haven’t We

a gotten do is about to not to most having deal, a to make point on team comment I on have shareholders. really start sense that. does some a a start do And asked up the sort Board that, There in are taking many that bit really that think it forms is starting in shareholders? where a have about of to we where little is I we the of in capital terms we for say to we of of capital start we form might long there up where obvious of organically. shift shift and Have remarks to couple We are what the still trying But I time. we probably that trying are meetings deal, should to - that, terms were of about. going about I And are few point is asked the we am about, the our to very quarters some becoming Board end to to capital. it this is it returning that thinking thinking just may quite do even more okay, But debate into to I’m shift a in But slight we time do closer don’t may we than if we step thinking how of going result on terms on. we it around are feel little now in about thinking where is, more we prepared is that. if And at I investors a We been for start that discussions we indicate think expect been by to mean returning evident thinking And probably at that. a a years. the are for I case, comfortable I been even at. asked how start a has say, to sort a is be. think is discussion not coming doing get to If I my have last of think pretty it of what to robust time our now it growing some thinking trying And to it what do I a that can been in bit pretty are have we of that deal, level this. we use I think going is

is is and We what pretty available have good might is there, do. feel it what what of we out a

have And I so think, our needs. cash a visibility, better into we

Kwun Sum Lau

Got it.

thinking. Just follow-up quickly on a that

- your also about about a that also you also you dividend? mean it think, that think it an talked bit. should Does Is investors that are I does to the it that? way little mean onetime So buyback open

Adam Portnoy

Yes.

is exactly think I we that the it. way thinking about were

obvious to return those either buybacks. I of shareholders, time when one or terms In or capital things. are say increase, the Dividend stock recurring

Kwun Sum Lau

it. Got

housekeeping I question, may. Just one final if

How change should the for in road? mortgage with there to from fee commercial is the about RMR contribution structure? any revenue the So we RMRM the expect you could talk down if RMRM, please

Matt Jordan

contractual as Yes. mortgage REIT REITS. now TRMT, Owen, that our going same RMRM, follow other arrangement is to the mortgage their

will be is about it their XXX million. and So points equity basis of equity $XXX

about annual is it in fees. $X.X So million

Operator

BTIG. Jim go Sullivan question with The from will next come ahead. Please

Jim Sullivan

Thank I you here ask of Red on Sonesta Lion. of a acquisition couple wanted questions just the to Adam.

at earlier. And terminated. a to of were years. of able do properties Lion the what You talked franchises in has But been two about terms last have They number looking they where Red operate. over the lost considerable franchising this the

about is the five economy, brands the intended, and lion’s brands the share the five mid-scale of being economy, no pun portfolio. it think - in obviously, I in with

would if reversal will one? trend So brands I will Sonesta number number number two, of not under expand be. just look that a higher to or the of Will And comes you company. ownership? of franchising us the to for talk into it kind to the I points a you amount And about you price reduce what the wonder here, look you when franchising, the when guess, strategy expanding help can understand

Adam Portnoy

With number regards Sure. you in few franchising over the quarters, of are there, have a questions to business on reduction is Jim, and had it The the last franchisees. public, great great correct. you to Red the call. has, Lion,

it are franchises start existing acquire business, vote, if to Red to shareholder the subject goal, the reduction will, around in Lion, able I’m the is to is, optimistic and in stabilize of we and is business, even again, but the as really stop focus think I a it that we number turn the coming the to quarters. the

of would There is Pearce] a if obvious keep. won’t that a an that on Sonesta do, that to brands that development. of Vice decision couple you large with that there and a don’t (Ph) economy, have wonder very There on hired but made in has as in I doesn’t brands to to to which Franchising point had also hasn’t them. make that about XX-years obviously terms is terms the to has have of continue brands, been we - joining probably and the in going industry we [Keith over be want Sonesta until decisions sense think are to similar President of run. announced some in is closed to it somebody going acquisition, be it ones mid-scale number President who final a acquisition. we out, may be did we economy continue part think veteran those of and I as is our I are franchises the we yet this close made franchising, what have Executive segment. an

business, to is are that We has expertise he that. and very that us the confident focused experience do us on he turn and help around helping pretty

thing think could - we would can some it, say the terms take is after about again, In the acquisition. where doing I and we obvious quarters this of

to Sonesta thinking the Sonesta at what you mid-scale. called Sonesta franchises. where expanding is it, we to want Sonesta. to of would the is I that too franchising we the expand then even franchising the logical reverse Sonesta right, do, they under stabilize places think and brands holy okay, franchising which, step, ES expand where to the of or start have can the first that trend, where around So is about, you you grow obvious start place are Well, and economy And maybe existing logical type Suites Royal Select. ultimately or The start. the is mean about would ultimate place, think get into business Sonesta the Simply we grail be that Sonesta and I would you Suites

fact course, the hotels we Of business than of cognizant different a very franchising full-service luxury are franchising hotels. economy is

are but of our the way as work start roll Lion up sort to And we think plan segments get Red into we business. to there, to so the we do Sonesta planning the I franchising

Jim Sullivan

Okay. one of the on possibility to And then cash quick follow-up returning question shareholders.

there fish a you are it consider end You as to you of Do as alternatives. timing? the a make the going think the end have talked informal Is cut a by date is any when you bait here you possibility decision about this timing, that next have a or year? of year, to

Adam Portnoy

or year will a one of other end we make the September. decision before the way our fiscal

And the of the we decision sort on of sometime the I so question fiscal year. is are a shareholders. is before think of focused end of making share we line around do I think capital that If returning of time it, the van the is to sort

Operator

from Kenneth Please next will The RBC Lee with capital markets. ahead. come go question

Kenneth Lee

capital take shareholders. capital of return that share of just either the considerations whether could on in piggyback the to repurchases. could question or terms with return some could form that to wonder key dividends Just influence of share that you previous us if I potentially

Adam Portnoy

obvious shareholders, money the down path we have. questions Both so go returning we put If in tangible. to is hands, of shareholders’ very speak. to those are Sure. X One capital this

And "Oh, put or is that But to a a float, order also very price stock with. a buyback we in us to a something a that is mean share deal stock The sort has to you what in we told impact we think It are we other we Cash shares. do course, of love buyback. an and obviously, don’t The that issue whether issue have We out." would efficiently It consideration of so buyback view or have dealt in return have price a share And with that wrestle when flow. business have a way with. particularly have in And is is we not to push what That be trading sort is are is way. is A less really the not, wrestled And into tangible, to cash. get And consider in do of great, more price a is is were is the if to wrestle in the as large we that early discussions your to of these we flow. that. can’t it have to big that meaning depends, model around such I stock And capital on shareholders one around. shareholders. it if by and the again, I And easy where get around tangible. we obviously other. is would I as can is small - we shareholders and us, and with buy don’t but your many love would have company - sort we of we think our well. we also quantify.

as - we again, just thinking other. considerations is I’m is sort the the you are the those it. that tip trying I’m of so to the of And the And one through issues how not scale way telling that those are about. - some go we are or

Kenneth Lee

And just Very may. Great. if one I helpful. follow-up,

involved. mentioned either that as potential the number hotels impact You the frame if this us out of just or year. revenue at some give the prepared remarks, Hyatt from you expect transition in well could is hotels potentially potentially later least I wonder of

Adam Portnoy

little Yes. termination sent sent notice. a this, a If again, backwards, a is they it clear but a pretty Hyatt. Hyatt some has happens, been SVC likely it and notice. to sounds around going SVC that discussions It us with have termination

to are and SVC We RMR. engaged, be going

to discussions going have Hyatt. are with We some

hotels they is none of where fruitful, XX up the those really taking I what they would see were where not to for view they hotels, all Select’s do one some they where view if scenario XX what it suspect we at is a But a will become. you scenario, those other, places they numbers? way they become we point. or have If end could end end we I a them. is were become example, only is on up Hyatt have to or a Sonesta’s, they take back But are hotels, don’t suspect and branded. back of back as be are are We would I this Matt, take again, going to all Sonesta up. the

Matt Jordan

Ken. ballpark, be would This

is You talking potential $X.X are in number. round very probably million a that revenue and a quarter opportunity,

will give think out and how quarter. I play color next see more you negotiations we the

Operator

from come Please will of ahead. question Bank Mike Carrier America. with next go The

Dean Stephan

is answered, of Stephan just This my for good morning. on Hey, Mike Most so Carrier. questions from Dean have quick me. a been one

in M&A your the multifamily estate attractiveness you your we of exposure of area the or guys to wondering potential line. portfolio, across would organic Given down views could if JV growth some real regards consider potential I opportunities no sector. was get lack And Thanks. the in of if that that

Adam Portnoy

great Great, out. correct Yes. are point and correct the question. is to one It you

that really taken multifamily, in. that Yes, space. we importantly, turning It the business specifically them think side we DHC is we - into it vertically is We of an advantage to something grow to in area SVC We sector have about area That partner offices conversations of around could project possibly the the do converting the that can M&A is REITs renovating, and as where assets a as in real the - country. engage gives the the take on we platform think have a have about ourselves. a nationwide could is on over or that take focused - a housing. So don’t side, presence we and we back that I of real that of hotel way many a need RMR that more that could we is organically the hotel don’t company. specifically a something housing. consider we robust is on senior And the something all that, sort to integrated acquire. the we are new conversion more in sort it estate like converting of an multifamily, been repositioning the commercial significant with are now have have expertise maybe of obviously that than into about of prudential a to line the well that them workforce as handful in strategic we folks are thinking of estate business. significant one some a it. as had a living It handful, could perhaps, have a could properties, be And especially also it presence doing catalyst That them think workforce be of and maybe

Of is make we did exploring, about are any how that thinking also we through to But if strategic sense make are conversion. could it that building we M&A, has course, It it some it. and/or to extent. living but ourselves to SVC it DHC, with to senior come assets

Operator

from Please ahead. question William will next Katz Citi. go with come The

Millie Wu

and Millie the on for dispositions. Katz. of timing have the on Hi, update is on Wu you such this please Can disposition? just one I give William level question an

Adam Portnoy

Sure.

think, XXXX. but a the that see and specifically two amount some companies would dispositions I those activity a year hold. don’t companies to around large-scale be, disposition that was disposition of poised hotels, So calendar I think one-offs. expect be limited don’t portfolios, have be or as specifically to you two went largely it it most on dispositions were Both could will put there could platform, be across consider large companies. There activity around in smattering in DHC Both pandemic, the I SVC, and material we the into those

disposition living But I one-offs. You of again, be some I it a in be would around think smattering think assets. could activity it see don’t large senior portfolio, and would

did sell go building At was did OPI, great It very in leased. good could you was think a sale That We very to we not building a I pricing. was an It We sales. that market. it building. see building. felt $XXX opportunistic to million. some plan We is Richmond, opportunistic Virginia. a fully for not sold It had off-market transaction.

We see don’t could will it. But like forward we the So transactions in appear. a I for material dispositions of platform. moved couple story think that XXXX entire that, be with a

Matt Jordan

have disposition very activity remarks. we numbers Millie, limited the my prepared forward-looking in outlined I in

Millie Wu

that Thank Got you it. helpful. Okay. very is

Operator

from Sullivan The Jim go with BTIG. next question come Please ahead. will

Jim Sullivan

level for And curious, of question time headline all one on. Yes, we taking integration, the probably have creative that Adam. a seeing And vertical you recently market, follow-up hi. of SPAC that for the is, in the this your saw given us be The wonder considered of Thanks a or with I owners distressed on peers formed obviously, lot I your the distress is to obviously thinking. are real a the possibility some if going in but back as attractiveness or to a estate I’m or might are you you of of grow the just way sitting business the just forming cash, Operators forward. companies that feasibility at look the

Adam Portnoy

Sure. Jim, it is a great question.

several We have lot A idea pitch pretty have studying investment been business obviously the months. banks SPAC of for us this aggressively. closely

we it. the to on line. It along doing not is couldn’t about say held So off have far, we something think

closed have been have You or we have is on focused anything to we off we we partly, lot have our so how been anything. a off. holding we own mentioned, And But And held announced M&A have about because haven’t far, activity. talked date, Jim.

that our we of the opportunity whether honest going to M&A seen organization said, just that are it of today. will and private Simon make you. worried the large do we with core so organization, a one business peers get be then and getting it peers, being for on just think worried capital been an announced to -. terms there really - sort little have But some our money several of I through a business going a I’m until as ourselves. and I up distraction be And an of be in is distraction, have to I a we could there, just agree. That the

Matt Jordan

[TRE] (Ph) Tishman.

Adam Portnoy

been has folks a that done There have Tishman. lot of it.

why don’t been is sort a we we little explaining I’m is they been on we just have I what been It have we it have rule have been reluctant out. of do just consider. M&A. But it where to to-date studying been something it. could And so doing. focused

James Sullivan

answer, Okay, good. thank Good very you.

Operator

for answer and closing sir. would remarks. like any I question Portnoy our Please concludes turn This back over go to ahead, Adam conference the to session.

Adam Portnoy

you next concludes RBC XXXX forward Operator, Institutions Conference quarterly Markets March look you for of Thank our and to call, us. call. joining the we Virtual earnings that our on at Financial many Prior conference seeing Capital XXth. to Xth

Operator

conference The now has today’s attending concluded. Thank for you presentation.

You may now disconnect.

The RMR Group Inc. (RMR) 2 Feb 212021 Q1 Earnings call transcript