RMR - Earnings call transcript Q1 2022

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Operator

Good day, and welcome to The RMR Group's Fiscal First Quarter 2022 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Michael Kodesch, Director of Investor Relations. ahead. go Please

Michael Kodesch

about from and the prohibited as contains actual of company. statements today, Today's Officer, thank fiscal forward-looking retransmission the we and provide consent call conference made joining and first revise Chief session. RMR's conference meaning President call statements moment, or followed just January Good is question-and-answer they call the call. of XX, conference securities you quarterly Litigation results other call. forward-looking that of Financial and are company Portnoy; no Securities XXXX CEO, of based today's materially results today's by the Reform forward-looking to the Jordan. prior With quarter XXXX differ may In of of and any details Act and obligation a will morning of expectations those Private on undertakes Adam for Matt and These me are 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

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

now, and of per to would can adjusted adjusted accordance Principles I Adam. over Generally Reconciliation share, net EBITDA addition, Accounting including EBITDA, earnings this earnings And share, adjusted margin. call like may our net in of adjusted numbers and adjusted adjusted margin non-GAAP in per to Accepted with during earnings turn to call the release. determined income, In income, the adjusted calculation EBITDA, be income found U.S. we discuss EBITDA adjusted net

Adam Portnoy

you for morning. all thank Michael, you, joining this and Thank us

first of the year quarter $XX.X cash, assets no which under of million of with We EBITDA ended $XXX debt. net XX, XXXX XXXX, per income on and $X.XX million. fiscal adjusted of and December well-capitalized adjusted over and remain calendar billion $XX.X For share, ended with we reported management, of

be over leasing over leases excess in increase for volumes. rent [Ph] levels XX% estate its represented of leasing As manages. that fundamentals of year our growth Despite certain increase was X%. the square leasing average increased trended spending United volumes least generally strong RMR amenity-rich These was real we partially higher. organization healthy, an are GDP fourth increasingly as estate and XXXX fundamentals as levels operational million are trends the an consumer of optimistic are majority commercial facing we year-over-year. that the delivering an and pre-pandemic our States. begin four XX% with Recent to Real comparable This approximately estate continue From an related the approximately volumes portfolio of evidenced the [gap] term and a sequentially, wellness-focused And last were fourth of and strong the is years, focus population transaction business. arranged roll-up our to on the the X%. buildings tenants. decade, over RMR XX% calendar quarter the variants, clients headwinds by a quarter quarter in XXXX, about real COVID-XX to of are and adult high-quality feet continued this XX% highest vaccinated, has our at supported market across These X.X average perspective, influencing by of continued period

sectors we quarter's across all the the this spread was activity While robust, estate leasing industrial remains real broadly sector manage.

and office the also fuel We of coming remain hospitality increased the leisure prospect the business in months. travel increased spending to of in and confident future

moving some companies to private for first I capital success. notable steps highlight the client wanted announcements some best quarter, of of taken the to our to position Before significant strategic

a regarding our quarter reporting of we reminder, to can are limited are what as discuss in we we As them. as public this clients results advance

quarter First, year its return three-year ahead in resulting OPI's incentive market of tracking fee a in return peers basis the total most year, peer volatility its group, of to for relative XXXX. calendar despite on throughout total the impacted no fourth adversely

to Similarly, we with over peer phase its XX.X%. XX.X%, and years. While the business, reflects to three-year And balance its encouraged by total operator is a three stronger Sonesta, and the return total initiatives last hotel highly OPI's Operationally, completed which over over liquidity. to remain of first XXXX, disappointed, past deleveraging living return management capital we the OPI's recycling as improve enhance we of order successful par was ILPT's DHC three repositioning on were excited and and company utilizing need continues this the metrics for in continue continues continues produced dilutive set. as XX in rate, hit XXXX without Sonesta hotels, its company XXX to capital Earlier which transitions, the to economy the over of room remain hotels similar to portfolio create expected sheet. take strategic occupancy, quarter the sale RevPAR SVC raises. of proactive grow repositioning meaningfully, private this XXX overall equity to SVC-owned milestones are overall year, to in announced senior a partners in SVC improve. measures of assumed years has

in company both DHC will significantly invest and a DHC's joint leverage well-capitalized the reinstatement future its currently dividends I increase of announcement, in the to shareholder will reduce to in portfolio. Following total recent At the meaningfully more and which believe SVC, we venture future. help returns is in discuss moment, detail

mortgage pleased business activity to are Trust, has Hills prospects. recent that Seven Finally, believe our at continue commercial with Realty long-term and we managed REIT, the attractive

made on summer. believe we they this for fully will of XX% to this its industrial to best-in-class by quarter. the businesses portfolio remaining expected industrial like the significant will we originations private Hills properties are platform, the A comprised quarter. track this Corporation by of this meaningful dividend Class driven occupied is the now more XXX deploy This RMR forward. to raised Estate pending tenants business heels our Real another record, within currently to capital capital dry leverages e-commerce. originations. Hills at are record ILPT, the turn I'd Seven of logistics which fourth with of expect During acquisition moving pace, powder line REIT, our [Ph] quarter that has quarter, And developments a] largely enable strong free platform RMR's [which default Seven raise by close Investment $X this billion Starting is Monmouth whose

plan joint not RMR's with equity Not and transaction to common and grow this under also As fund to a RMR's partners. raised raise expects to via a portion of assets. high-quality large this only but result, capital transaction, does private does fund with access institutional the venture highlights to our ILPT growth by with capital assets alignment management, opportunities shareholders expanding acquisition client

at at growth. equity addition to existing be level fund discount properties $XXX contributed the This that effectively for reduce leverage versus future capital it also raises net at joint to industrial the value, announced In acquisition, used ILPT, ILPT for corporate a million. asset and pending venture due which six transaction industrial to Monmouth will

before period the a $X.X property in in relatively equity million current just end DHC in DHC billion property district Seaport of is short the Life acquired a valuation venture joint $XXX of investment of sale on building announced a year, Finally, Boston. the its return the this interest two and property XX% billion, achieved of time. of Science XXXX for the attractive $X.X underscoring in the

our of its private from capital commercial demonstrates excellence our I'll real financial service. We current the capabilities and RMR's estate had can the our further Officer to quarter organic in capital over expertise, to Financial $X.X class quarter. the have where turn infrastructure. The comes RMR Chief scale billion out results fourth quickly review $X.X highlights for management now its transactions collectively Jordan, repeatedly the from building our to success our XXX%. increase this our believe with quarter relationships business Matt capital fundraising billion We an and how private call stated that under world firmly to ability assets this announced client expand private raises our operational

Matt Jordan

Thanks, Adam and morning, good everyone.

reported of quarter, than expectations. for of an highlighted revenues net higher in the quarter this below to to primarily of fees would service guidance, adversely price throughout quarterly and quarter million, and $X.X sequential XX% approximately construction was of growth which a our Management sequential at quarter. business management cash quarter sequential per increase. enterprise and our of and on as from includes we SBC share respective earlier coming due guidance management adjusted fees line this in increase advisory measures represent million, The these quarter declines EBITDA with attributable adjusted a year-over-year reduction values. both revenue continue decline Revenues to this quarter in share primarily Adam income was were the $X.X slightly highlight impacted with a as basis of As $X.XX $XX.X million, $XXX,XXX. our our decline being of quarter a their million compensation I fees DHC $XX expectations

portfolios. clients redevelopment construction many we volumes activities and increase on to last throughout their further respective fiscal repositioning as are year, quarter, within As expected highlighted our the of embark

next factors. Looking revenues ahead million by we $XX and following quarter, expect $XX to driven between be to the million

in fees values mortgage at DHC. recent share debt factoring and and base $XXX joint OPI we're the price in projected venture from management business million levels deconsolidation of First, using enterprise SBC deriving DHC, at

and fees Over on activity the generate raised property expected change are Secondly, incremental capital is management much to per venture to joint in based subject $X amounts and disposition business these Monmouth time, month. occurred. is how million approximately transaction property

construction million approximately fees, capital venture continued to the And next fees private in next lastly, expected Third, is previously highlighted $X $X.X generate revenues increases in million quarter. will incremental approximately joint I management generate incremental quarter. in activity

compensation of represented an inflation, slowdown in the well cash million usage variant to an likely recent which increases, approximately by surge. unexpected $X.X was increase as tied most sequentially, COVID Turning million driven vacation merit expenses, annual to bonus as $XX.X of

to of in levels share, cash million primarily per and Operator, of in the organization. would and $X.X expect please rate contributions to Aggregating growth years, issued EBITDA debt. which from be leaves rate XXX(k) January to these will Looking next per tax We run meaningful Directors share for $XXX,XXX adjusted as variety approximately on beyond both including collective in million, sheet which insights was capital in million G&A closed organization. the million to continue investments to next D&A concludes the by grants, resetting continued believe the of support incremental we March, formal in We our range range private of no adjusted with $XX.X share driven our ahead, expect balance costs to will remarks. annual quarter $X.XX we of increases. earnings next $X.XX for from million $XXX with quarter, Board said, quarter, run over With levels. our previous pursue and quarter this our have we our That in to approximately strategies us payroll a line that along $XX.X represent result X, represent sequential business. expect questions. cash, the well-positioned you open and expand to quarter, to be $XX.X roles compensation

Operator

Please from the Bill session. Our question comes ahead. We go will begin now Citigroup. [Operator question-and-answer Katz with Instructions] first

Bill Katz

And very get your for started. Morning. picture a the taking to big thank question Maybe and guidance. questions, you much

from actually REIT sort there point private arbitrage sort do contribution what here? to at firm in a you economics; curious, from as becomes And any the you the think public do of the dollars space? as migrate into the private move net capital REIT Just managed the to the it is markets, economics of that the from the

Adam Portnoy

been and some whether to private happened structured, on REITs instances under more Sure. fees bib get picture Bill. will largely, or happened of a especially and those some difference concerted COVID, the last our in for as Good expected in not And try embarking, way that given, deals AUM in more generate, in in they're the the years, for morning, We've with what's management. couple delever to coincided, last years generally From the vehicle. few the to we the businesses. speaking, to need REIT effort private there's a what's perspective, are a capital meaningful with

put to the at we've So, where with them value, And of into did to perfect an we AUM some really the $X.X able that doesn't And that years, were sort to billion. you're in and increase been base. situation effectively at do few short-term, can vehicle delever, of of have right, what it the some our that take a already instances last what build some to and but a REITs we years in needed assets really that's for the manage. that continue trying couple the a in the is increase that we last over deals do occurred, private

transaction in sort the of different of going the company ever -- public Monmouth the organization, done a us. in net is Monmouth $X equity pretty is the It's or That's it fund the start that indicates it's we going remarkable organization. XX to transaction also years sort transaction I a the taken transaction think grow I when sort say it. a really perspective, any beginning put not we've AUM of pretty of it's size to forward. To That's its of demarcation to are only a for the of has raising that remarkable. that change around it lot history, billion. ever largest on,

We last the few the do could we that there from is in built sort up all only the partners. And are relationships the the years raising private we of way over equity institutional from building current AUM. largely

I the occur not that have AUM relationships. look out hopefully transaction all -- incremental Monmouth to assets So, able would if been built as hadn't we those under at

where from I you from we're to going to side than I going point AUM. and AUM start do think of to don't grow I putting say, in AUM on business vehicles, And it that of being keep this the you more going why Matt, just able moment, it's and existing to the grow watershed be to this the beginning sort And side. the as And forward, on of sort net at see I do into generally transaction. I private to short-term, meaningfully, rather assets, that let's forward, actually and going it's us other and to taking the within pocket think of so, is really the try one we're now accelerate, that think, going growing private want able do do what's more not on? largely, But we talk? fee that said, talk, to line. the a

Matt Jordan

Yes.

[Vertex] on [Ph] And basis in of -- on value a us XX the phenomenon they're also largely that fees on is million. quarter, step to $X my to in intended now, see the we basis, prepared is neutral, we're -- that they're arrangements you saw fee DHC, which highlighted, remarks, next though where even at applied lower the fee we So, based be about largely paying the enterprise are building. case at going about then And up an the right measure. value basis, have paying highlighted, there as incremental of Adam That points. is basis significant, a in that fair an

there So, currently DHC's step-up an the sits. in where is enterprise under the inherent value joint short-term venture given agreement

to normalize million increase going we're should over sequential a $X time. that So, quarter-over-quarter see

Bill Katz

out And follow-up on terms of multiples maybe your picture for in helpful. the but your side. how mix sequentially, that through? hand your you. you will updated any also sounds a bit that's And net like then, balance maybe play higher be one just think Okay, there Adam, net sheet clean, Monmouth, a the one last question is cash big your on built On cash, might funding guidance

here? Thank capital questions. for us give thanks think deployment about of how you. all taking sense So, to a And from the

Adam Portnoy

Sure.

And, more following, scheduled we is obviously, dollars the [Ph] it its two the around [remaining] can't vote much been is again off shortly yet I we're transaction of closing of going -- ranges. occur what's tell February big currently the thereafter. to raise can or hasn't and you the XX, publicly on for we of When between $XXX told transaction. the the shareholder sell announced ILPT the disclosures earnings zero $X.X say Bill, marketplace What announced already market. unfortunately, public billion of the would ILPT It Monmouth not sort to than is transaction, this further we're at is be million the sort worst scenarios case Monmouth we'd announced. and told billion Monmouth expected -- I we and that tell definitively So, be at those were the there of equity, to can said $X.X ranges you and between going sales.

We $XXX than will than equity, will sell more $X.X million and of raise billion. we less

things outlined. going of net really picture can the I funding about in and big share. are as obviously, retained sort much we With scenarios $XXX yes, that. no the we So, we worst-case That quarter, I million third go than thinking tell outlier be to think, down regards large today. how debt dividend to know, a can't you than we're better, paid further about roughly And you of directionally have cash outstanding. But and announced the to cash, cash a special $XXX one-time million by we got our that $X.XX

not fact the to and been we we use side, billion as things, grow on balance way On For not co-investment to that's look few sure of gotten, that invest of for dollars. business one been AUM to the about last capital think continue we've neither cash. as which One, side, deploy continue the I'm at new do the we've we've that to in That's a how to had had co-investments very $X.X a for under two, to to dollar years, actually today, new cash want two that we've vehicles. retain RMR, M&A, fortunate vehicles, and one two to so management that launch very do. about of things been different but strategic of we could talking private lot and going fortunate we've

we this a about proactively in the are last side, quarter for acquisitions. looking we M&A the On not strategic lot I talked think especially;

of many were For of sort a -- conversations years We've many we couple had for folks. looking very acquisitions. proactively we had with

with if As down three feel contract, not start would not partner issues, road really think with more it's deals calls, because for be in that LOI, marketplace and us we we're reverse much I now come pretty in we think universe over I inbound negotiating apart three of or we're came of know advisors to the waiting social two I waiting, different last said about the that out going parties those things started pretty see I'm the us, we opportunity very our went sort know partners that and were inquiry, into the on proactive but entered and But we we quarter, receive there. much presents all economics, we to over have But flow to were buy. for ruling years out M&A. the we deal the out like They good potential to or more far, sitting phone brokers an that and so back itself. of appetite. because companies

am source out. our can't way. it. to it capital so, I going That be less proactively of a And we -- not I doing rule use are we because optimistic that's that

day. proactively up it and we're that looking might us, not Something very not, something attractive we're be every that's for would show at accretive but

Bill Katz

Thank you.

Operator

Riley comes B. Bryan with question from next Our go Please Securities. Maher ahead.

Bryan Maher

have with two so at at to specifics the related to kind know become Two that that occupancy COVID. to as trend SVC. Good more of or the back-half expect all recently? picture maybe to little you as has SVC, more I usual, down questions information for on us would challenged seeing it REITs it give and you're managed you component been the of And trends, And comes bigger those XXXX, of and which past been two thanks by going the with of for the years of maybe can't hotel's bit what But a transitions business that DHC Matt. as opposed starts far. for DHC Adam me, morning,

Adam Portnoy

two to more vehicles, optimistic trailed and back back were that's than QX. fact faster get good my how severely XXXX at there was the thumb overall come have been prognosticators before about decide rebounded by Senior at data, and if January. more senior settled in all And things of parts the most we a DHC XXXX optimistic back Living that now now points Omicron which sort it may we with December when the by even better and waning Sure, data DHC that especially specifically can COVID. better faster, back. have better up variant and example, faster things going look picked Yes, than come Obviously, to from Sonesta occupancy the now, optimistic in data living out than that since which and up and hotel come Hotels, had QX, to I for of COVID absolutely couple pretty, you suffered quarters we're fast we that now third of observe up the second-half their into people going we're hotels we get able talking put and you're to much summer, faster, better business into And two last may have way big hotel I'm this going picture communities. most look was And we're as generally really get thought SVC within now originally and the the at a hotel the and pick was data sectors, get daily the you fairly actually but both frequently, it the air and SVC Bryan. Hotels, of portfolios much the think perspective, can right, and company getting informed they've we in when Those for going obviously, it hotel the hit versus hotels the been affiliated one back that in to little to over well with people back those years. was are think as the by we're we of year, second-half enter rebound travel as sort especially second within that's

The events, seeing gives 'XX, some first-half not were corporate canceled. We're of the large a point events second is cancellations. gives thing optimism largely where being data that that us us unlike group just

are fact, the the in Conference, off, this last [LS] this ASIA they're went with [Ph] off the going this hotel industry some In week -- healthcare industry, and early Conference the week.

are in but there So, also hotel gives of space not pushing the happening, sense us quarter, seeing just a optimism. we're canceled, folks That out conferences push two it quarters. by out one, a events,

this So, data second-half we're optimism the the of specific fair longer seen that it the accelerated. during affiliate those for of trends many that and get much hotels, and address accelerated is companies a trying one they some us months XX that before things to that little that used points like seeing, on sort COVID have now we Star might trend accelerated longer a amount taken of can, what seeing in staying AlerisLife that people one COVID of in recognizing a gives or and Living to Five faster be in been think we've there you're or and just fed focus better I called over our much in Senior where they've used hotels within are this, things There, out realizing that. deliver have COVID, think being their I prognosticators to more services really got were home to was about. the And last difficult. talking the trends trends they occurring are to of able at got than in home they get

occupancy? Now, more a and as snap take little it the in look Senior I to time to going to a does for to going what it's take -- get gradual grow. mean in be it's going occupancy it's back bit to not think DHC fast Living,

'XX, has gradual April seeing it much the point are a and March It's at let's of and is Living really Living, Senior the occupancy, steadily in say We of depths since low certainly improvement. and was which more just above it is in then. it growth occupancy Senior improved where

it's do Senior I get to And think but take into 'XX 'XX, so, think meaningful space. start to really I but going improvement things in us better, the you'll beyond Living see will

Bryan Maher

my activity about keep we been investors that and as importantly, question lot Yes, real can relates related office seeing keep you we a -- your you from that, cover to the reporting. other medical hearing thanks most results to hearing well building, and for out that. building in relative office, office returning companies, including to every regular from you second there And and little leasing about office talked actually to others talk a skepticism we've that we're what some people in terms leasing quarter that bit

Adam Portnoy

of example. you quarter in into Yes, activity. think you're right. -- may tenants the There's can There's fourth market good terms I lock of of lot that record was the a leasing state the things us time for and I that. the to industry a had office read long-term into looking this given and lease, were at pretty thought many imagine a market,

your we to I and really in said, our what's that just our home of think obviously as a own [Ph], look, That's lot the a schedule employers But through tight lot for been It's fourth get look think many think leasing including we were about beginning work I've flexible XX% -- just we number full preferences, happen metrics it's as say of around resistant. in this to what of we many the into especially science XX% and are time XX% think. in the saw. December, large spring. able to [MOBs] almost such to The an the you return I'll to now. we to being see be with be is own are employers, September and around more there, of that larger to eager of very buildings. in labor think tight what think we have buildings, I this true going I our that themselves a that are as we office on life been in I buildings what view got think of generally, commercial could office office portfolio. a our obviously a The delay I safety the I quarter. are employee what larger playout return people points in from portfolio, by all Labor buildings, them, X employees is those and the working in and from seeing home was we January. Thanksgiving, XX% that focused occupied, that seeing so to in that That labor portfolio, you're and fall, is large that's had in But less occupancy them number own of Day. on creeping many up -- less like? and own work a many different and hybrid terms were more spring in is led to to and activity And We was case around have workplace quick And and is to -- large going the well. going there's give do health data becoming was our their into is a going we're is say We issue, out number, environment gotten employer, not a market, That capacity, we've would time are firmly slowly I come a about work years the a trying back market of companies in more

the folks they What doing the our -- OPI at over do office years trying basically last been the there. portfolio couple really that in work we've has to been occupied have to be think tenants we offices better be You think going about, going more are But be don't to want. environment, are amenities buildings away. what the do in think we going it's with accentuated; the this newer to just specifically located,

older that suburbs than aren't buildings the pretty we've And that well well well OPI saw last are of you newer, in modern, when amenitized, what important as so, year been as I active that divesting office amenitized, is time. way. located buying at for maybe a buildings, doing and it's that we've to OPI environment, portfolio the office current I ever I that continue do have think in imagine been ever at because if to some

Bryan Maher

Adam. Thanks, Great.

Operator

Sullivan next comes question James with Please ahead. from go BTIG. Our

James Sullivan

I I you. quarter think just guide here wanted Matt That terms to talk with guide. to is in guide the about Thank of the for line top XX. next XX

as I you Now with your provided back comments, was would the in that because that declining. rates, quarter had management a that prepared of quarter below with came guy that. be of two obviously rates quarter understand assume and fourth little two a that And first fourth flat other fees

year-to-date. the assuming and What second the of source had, the So, comp these quarterly price was REITs quarter. guide the share that were significant question guides, that how factor the the you you obviously negative changes, for are been -- the do which pretty providing regarding that two and have into

Matt Jordan

is do our is share back the quarter will looked and we've both significant question, and in we've average come an this for over Jim, last seven land in SVC so DHC. the weeks, up with try REITs given and forecast we guide and $X our we've what around share what for on prices around and in those guide per try number, just just if our best prognosticate A to volatility based that and or great $X our directions done especially so to two where

James Sullivan

Okay.

and average trading provide range average the average for the and think you the of build that an kind So, or into the month? just close that

Matt Jordan

stability, to coming use last Typically, that is the a since we're say the quarter, end first reporting this quarter. of at conservative quite in the proxy quarter. month the quarter, That's as of but back first greater the if seeing, the Correct. we'll current periods look volatility up, we of more I took first. a month little frankly, And results a of given we're approach

James Sullivan

the like probably about several I hotel the prior Okay, about portfolio over And has do lease course, an here the the question been lease the portfolio hotel for the outlook in inflation weeks, office exposure triple talked as answering How as I'm overall? for Adam, when well fair year. net then the over portfolios, [indiscernible] portfolio rate very obviously, I'm And enough. appreciate positioned opposed is And as portfolio, think that. topic, clearly your well last of curious, of portfolio question The environment. course more at about to inflationary the really looking net to rising your more feel the healthcare? active of the And the and currently. inflation. you you you the

Adam Portnoy

Sure.

building, speaking, where other at daily, that are the we the Yes, out, you gamut, usually for between obviously, the the rates we net have all Jim. an to the leases, way quarterly. pointed have between, think let's on I if extreme, a diverse in rates where senior are generally all not have portfolio way hotels set thanks, monthly, XX-year reset lease, and runs in as office you to they're assets, very one extreme, So, and housing example, say in everything but annually long-term

retail rates in you often there. categorize fairly can broadly as -- have portfolio. I what within reset the you you So, industrial will office you tell

You're in say we longer XX it so the term quite occupied term, peers years, might retail Obviously a pushing about it's on long. lease the exception, just with to -- a OPI, a MOB's, being is buildings. and to at portfolio. as right, the I to X well that science on pushing it's it's to maybe in of over lease ILPT At it's the XX% longer is office, up one general five our said, years little think they net broadly not point life XX It I industrial, not, the up That is science retail, it's tend I DHC many office, average where lease not at you of life maybe years, believe XX-year years. industrial, all what's also MOB out including broadly what portfolio, office and so overwhelmingly want portfolio. have an XX, that

those have We either step-ups. leases, adjustments fixed of CPI and/or XX% an

willing what obviously core good to and medium this ventures. hedge as X inflation is to So, us you're that, for period cover us real-estate, will real-estate in typical high has our XX in especially hold short good commercial inflationary very as for pretty to it feel largely if been a that traditionally period I commercial environment, well think we hopes especially of to which our a years, high in joint be REITs term our in a

held So, we is we've have I diverse think overall, we in perspective feel what try pretty and RMR's been good. a do been Look diverse from make a of portfolio our sure part pretty to we portfolio. -- we've

all a think of Granted have if served type of well that And sort environment more cycles, our in in it sort has deal years operate eggs doing of sector obviously a reasonably in we've diversity we and higher type. lease not one last we're coming well we're operations. think of being many So, and us probably or seen XX the that I pretty positioned one long But one the not we've with through than well. And inflationary are us years. to served time. in I over

James Sullivan

or adjustments adjustments. rate -- capped I adjustments, just to was CPI fact, CPI adjustments? specific in healthcare percentage to of at annual guess, full Just specific typical, follow-up true, a though, CPI are oftentimes, either Is mentioned in it not or is CPI are you typically it which that that, on it

Adam Portnoy

Sometimes The fixed follow honestly, markets have convention. sometimes they're they're capped, conventions. doesn't rates. it's different necessarily industry one different Jim,

specifically As generally office you well. as within know, and within MOB,

and when market the That's real-estate talk an the in looking have down in the it effect the we look always sort effective Denver nuances the at, by structured, of market a and what old rents, we net about are we're you all terms rents. nationwide time negotiated when a real-estate versus you market variable different is these looking everything leasing at we market, different might -- have of leases convention, say you we Dallas get all to cut through to have local, have saying gets are convention market. through adjust will might in That's let's portfolio, because different You and in it all all. Boston at net how as RMR hyperlocal to effective

the over in one not say market. the And it It's MOB's way, necessarily versus it's generally so, place. all really depends on let's

James Sullivan

going? obviously involved terms inflation and me, start Adam, have from debt interest sheet then the been the of that on along of what enviable final question Can that interest variables us share and has the the a of been finally and your you plenty company kind in with given rates have balance is with in moving prepared about cash involved comments portfolio and in inflation not? macro or rates cap Okay. position of in, where Do company you mentioned are many how higher And an transactions moving been you here the to and has as sense to no the in a rates rates are higher up. sense cap significant pivot with going companies

Adam Portnoy

like feels them any It it's go hard see to lower.

Let put way. that me it

is up modestly. little to bit. My think were have got go more a view I they they

a one-for-one having I tempered meaningful pretty correlation be of the is trying think the real-estate. put in in debt cap in I a costs think inflation in and say I they're a And reason to to race. impact don't increases for -- capital, active There to see market. we're rates. work you got amount to to on increased going their increase be that, let's tremendous costs

about got talked That be to to of quick home in lot sort is demand a BREIT. for Just in unfortunately, needs a BREIT. their That a a make more money what They're Blackstone money $X month, fraction that and rates. Yesterday, looking billion deployed has on of for the to so other sectors market and sectors just anecdote. wise. and announced are certain cap over raising of And us folks growth they is the temper deployed. earnings, be a to real-estate just that going focused more supply including their

moderate. to going We move, before are we the come going and to play costs a an look So, projects. to the They're I lend are you rates but I'll going little because multifamily anecdote. debt probably against give multifamily think cap in space, but up don't a lot bit current

sorry announcement going the at into cap prior rates This to in was certain multifamily expected rate hotel, money. in of run-up higher ago. the deal lending rates were the certain the at. six in or We out inflation. increasing owners We to to money they rates to lend months I'm prior than were have that This run-up is

Now, in plays in time. And planning going would of amount rate period you work is and X%. turn over cap we're at around it just I'm of trying course, to multifamily the And sense that some that for make put making that. of and that lot first-lien be feel space. looking gives our these the to going gives money value X.X% to we against it a a But time a rates a the up spend you of to were add project, we're mortgages

those is they're there more to much Now years, gives how have a cap money's they in of course, rate. the and expansions. debt to cap was of two business plan planning going to to cost over it do there, than but there NOI three That you rate out increase the the a temper that going sense

James Sullivan

Sure.

great. listen, Thanks. Adam. Well, Thanks, Okay. that's

Operator

comes next at Our question from go Ronald Stanley. ahead. Kamdem Please Morgan

Ronald Kamdem

a Great, we the and could much OPI that there sort road. make see other ILPT the these sense just of other and transactions, capital is Are types transactions for trying both how more during where come the down sense REITs, happen of the Thanks. that the of DHC and of of assets quarter, sort to happened SVC? to to something office there would going two at sort private get in this and back

Adam Portnoy

conversations Sure, capital we generally real all pretty much having types private estate that speaking, with manage, every sector. commercial partners, on we're of

having can of of conversation that. type It Living, in, level and hotels, retail, are we service So, gamut. with be some others every can around go you we industrial, office, are the sector Senior

our would conversations involve reach. those include vehicles of potentially could Some that

conversations those reach, of at include some our that are not vehicles would involving going what's on our overwhelming, REITs. And the

at very of at see could that very so out the incentive to is, we two RMR This REITs? fees. I on other all years and the is things focused fact so And an what point on are for that collected you we're question happen we other we the haven't haven't fee incentive focused tied together, want sort and collected

the faster especially SVC, guidance think is I is made you And because can't better rather sooner most one we I those running because later. tell that as we joint DHC so that because than because the also it if it all improved. reinstated, can dividends I de-leveraging think have de-lever, getting REITs it again to really increase to are do it's could give on everybody than At de company's the board. total it capital, relates dividend de-lever that returns that and into little that's think because leverage the with so things we higher SVC, dividend we a to of hope and typically we And need get, to will the to to are across the reinstate return run, those the especially shareholder happen sense, to the them behooves REITs returns reinstate the and going de-lever it bit and I two enter at we plays other yes, when to by to shareholder and private but additional are story that's going behooves into where DHC addition leveraging in things it we ventures, and happen, we do

be different the incentive de-lever get really saying really additional lead the joint start REITs. to I I'm could talking, to about. actions so I'm the can high of because returns time, and that's we At we those to the alignment vehicles, and want but improve think is doing yes, a same what other trying I'm we RMR fees. of between at shareholder interest talk earning what to it's shareholders ventures does And it

Ronald Kamdem

helpful. that's and Great, just back then on And ILPT.

any to just color involved that willing you amount I getting of curious, sort is what's or appreciate but I not the private debate, about involved, sort of talked on three, or either the two it's think involved one, the they're whether is of conversation capital commitments can get to money capital fluid, driving what's decision and debating? just there. still put driving what what

Adam Portnoy

we're that think the the I partners out question that. about is ILPT, capital really to talking

$X.X Monmouth ILPT well, we we than really I could capital at there's the the we than form, raise billion. will $XXX said is say are capital. before amount I million think private private think in million, overall that, the at the raising this of vote of a greatest going $XXX shareholder announced said earnings, saying what we before I definitively much sense comfortable announces be can't that the smallest I've more would feel when at that amount conversations Well, its and here we and more transaction, in before

going lines only that we think funded, And so we largely feel that but to. well, not generally close, optimistic the are and long we I conversations closed will what hope

Ronald Kamdem

a a of give expenses Thinking I sort wage are Great, workers what increases pressures, ground of sense there? That'd are and then about the bit. you to and you gears terms little wages wage increases, of of want of sort magnitude of seeing on to just be for in switch sort construction what great. the business and what if can us

Adam Portnoy

or if operating majority company, you XX,XXX X.X around seeing being seeing more our platform. Sure, commercial to said, fully job positions, operating openings We have the affiliate X,XXX if job asset is times we of look businesses were board, currently the about openings. roughly our specifically XX% those generally estate businesses, that have give so we're management an anecdotes you across alternative real employees. do contractors, I we open That don't company, normal have they insight and what have the they're affiliate what where we're revenues. principally, about I at across employed, can all Remember, large great that's RMR generate with

and the X% general about is on fourth statement, growth That's speaking let necessarily. just position the what talk at our in the you in seeing necessarily market, here operating in a Matt we're the I'll on that presents the of So, board, gives across not sense. generally the broader in very depends saw companies this quarter a economy, quarter, you in construction, what that a sense wages. RMR. gives we fourth But

Matt Jordan

real, cash to quarter to back in reinforce just second. come that Ron this due I'll had definitely is inflation wage while comp, in primarily I do where so which it and environment. the higher comp want normally a where than driver. non-COVID came was usage, would Yes, it vacation the we especially or And being of be sizable believe amount $X.X to million, in a not over a that variant COVID miss was just not, guided

we forecast, you into increases X, Now will year tell merit our effective know, September as October baked go I XX are so you real. they were inflation wage end, that is

So, plus incorporating normal we about merit adjustments, increases market X%. averaged

inflation just to labor continues would most me volatility our will probably forward, cash in say at keeps to forecasting create night of thing point, Adam's I what while comp, the and Going the piggyback up shortage. be I salary that is real, would off

and we're going be And organization. Monmouth creates, talent organization finding we're which this As new to when as predict with we it support our biggest an the variable the the growth forecasting probably we're do creating growing that what rates, that experience finding private our jobs capital we're a and to as as come other board and to transactions in will best on roles, talent when experiencing will at firm. the filled is

Ronald Kamdem

for me; Great, that's you. thank helpful, it

Operator

comes go Owen question with [Operator Instructions] from Our next Lau Oppenheimer. Please ahead.

Owen Lau

taking for you thank and morning question. Good my

specific Going to to you. manage costs think would people? hire the lot competitive tackle about lot you how competition, at But how you time love RMR. rising of openings, get your competition. these a to back to do it's the mentioned comp I of don't same you a being just I labor and thoughts that? Thank

Matt Jordan

one, number is RMR incredibly to Greater bulk our competitive, that so you of and will if costs, level well, Yes, where corporate the reside. Boston their overhead employees that's

So, make which in we've programs, to amenities Greater Market. profitable, us allows having as and It's it'd place organization it as office comes corporate the of the Boston in market here at stay whether back a all come growth country. just to frankly, provide, especially our think opportunities, compete work inflation as the whether to it at it specialized our to I employed through want and with the obviously, position strong fortunate and the and as But the we're seeing disciplines operating benefits across be more career an this battle. we a and technology being programs, across or seeing margins, employee the we're commensurate in the roles, be the well different a collective we're people wellness

think HR I we're an choice. to leadership of of our to day heart make every all in organization sure takes employer

Adam Portnoy

-- we the Yes, I is do challenge add roles. open our only Owen, would and the thing that filling have

statistics, but we have is have anecdotally much pretty happens I our high rate haven't retention talking in specific attrition. nothing higher market. than peers corporate think it's about, year, but just I in normal many attrition Our What office. Matt's that of outside we the seen normal of our every this

Our of -- in stronger the years, some probably were year 'XX. metrics we in retention in this are 'XX than in not terms of and were they fact,

I that roles filling in we've It's as retention. really that this been to is and of new new think growing fill, in created but good, handful have portfolio very and a our that important environment, become the feel we're roles, to diversifying pretty retention trying So, it's also. we we've about point actually had good and they challenging we've out

Owen Lau

guide very of it, Matt, talked in helpful. And that's about the Got incremental you revenue. terms

you raising there and with and strategically fund? I then, some the understanding is you you RMR funds prevent charge much leverage the this [indiscernible] Thank subtraction how broadly, any very will talk private us Is of from helpful, you STC? from speaking, additional the compensation on think from real points contributed asset more their generate on and major how front? estate limitation And contributed basis other of please to is revenue but XXX the My could capital? maybe but the about Adam, capital, much base and owners, on you. investors remind that's how roadblock

Matt Jordan

Sure.

in the REITs. the me of Let question terms take growing first

REITs the we assets, high-quality stock for where And they high-quality very unfortunately, know, low is growing at that's You principal on, cap assets. especially to are price. compete for issue assets, hard the focused It's rates. us with the and trade

effectively REITs given to equity our are. grow are them stock where can't so, cost given And where prices those their of trading, capital we

of And of just equity them REITs I I Some to think point biggest we equity can't feel that that's buy today. are on competitively the to are none about but to basis. where raising an we things, prohibitor. things point we necessarily -- could of raises a That's not perhaps versus a where others, the at fund It's be the would it successfully one which and equity think REIT I done doing can joint think, closer these leverage long we're look we've we it's that have of you think able from for Lower not equity in it to companies, by we've has very these important, We've is raise long by at ventures, deleveraged a REIT at NAV, the lots stats only been showing effectively which able tend important higher REITs. assets leverage a the business to been perspective. REITs time. is outperform term, comfortable, very

because trading. it's NAV, are So, where that's at the much equity below stocks corporate versus their level, selling

avenues business. That term other the overhang have helps, with that, reason incentive going it's REIT we this, is the But without price to to the to taking dilute That's can important, another to to I I shareholders believe, get behooves have get we equity for about do capital important are Eventually, optimistic grow And -- it's equity, don't -- of do stock earning an investors to we performance better. actually if to RMR those and an that's way this understand raises And is maybe we it's once deleverage. those also at equity deals raising And because AUM. and do our that so, long vehicles only understand stock equity we're and that REITs. and important. that that this better, we'll discount, without start understand. delight prices their shareholders are and It's grow because not capital fees, important can they then shareholders the actually to think deal, the grow, equity because going think to growing look, raise And hopefully I to REITs the it own. element. grow raising think, for on there's a effectively private and do and the grow

sorts principle not out a at all private price it's structural, so, is at growth. to reasons think I us just capital, really to And fund of prohibitor we're the build there's the REITs why it's important but willing equity not the for issue very diluted to

Adam Portnoy

range fee-paying And the about then, perspective, Owen, think that over billion private just from way basis is some arrangements, AUM, the in gross we a includes numbers legacy points. weighted with basis on a And that have and points billion XX XX of capital, half. arrangements this which guess based XXX I fee-paying then it a disclosed a arrangements, I modeling about quarter would basis our from capital we've to average the and anywhere today X.X a on on

And gets somewhere to from most will XX% think that be X our as fee-paying around -- at of fall So, are you you will range forward, over to just XX that million fee-paying jayvees of XXX base levered and levered then run and annual current points. in fees rate model basis that capital. in

Owen Lau

much. very you Got it. helpful. very That's Thank

Operator

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

Adam Portnoy

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

Operator

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

disconnect. may You now

The RMR Group Inc. (RMR) 28 Jan 222022 Q1 Earnings call transcript