RMR - Earnings call transcript Q2 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to The RMR Group Fiscal Second Quarter 2022 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Michael Kodesch, Director of Investor Relations. Please go ahead.

Michael Kodesch

Good afternoon and thank you for joining RMR’s second quarter of fiscal 2022 conference call. With me on today’s call are President and CEO, Adam Portnoy; and Chief Financial Officer, Matt Jordan. they followed details by moment, and our a results quarterly a just will about provide business In question-and-answer session. to call the like of the would note recording the I and company. today’s conference written is prior without prohibited consent of that retransmission call the of Today’s Securities contains the other and statements of Act Reform XXXX forward-looking securities Private within conference meaning Litigation laws. we on and project. as of from X, XXXX actual These may expectations those forward-looking today, and that statements RMR’s beliefs are materially results based differ May no made The or release conference undertakes revise company obligation to publicly the to revision any the call. results in of forward-looking statements today’s

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

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

Adam Portnoy

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

quarter EBITDA adjusted net included per adjusted results income that quarter and million, of $XX.X We this are both improved to pleased $X.XX share meaningful report increases. of sequential

ILPT the the is positioned RMR the with reaching dynamics. The properties. Since public of of closing of the Monmouth resulted provides years. Monmouth assets many the Estate commitment greater by company advantage and was tenant The XXXX, billion. Investment in high-quality X.X Monmouth’s highlighted of increased diversity of XXX becoming management Corporation, quarter e-commerce-focused grown result which quarter, a at while assets the was management current of at just well ILPT’s the have integration tireless to ensuring in ensuring transaction almost Real and $XX under market of a organization, geographic ILPT end $X take parts the XX% industrial acquisition billion of our almost under This transaction scale seamless end also of

estate inflationary highlights estate quarter market the should leases escalators, environments, portfolio real and XX% to of resilient of this adjustments manages real XX% be properties some to Approximately rent positioned other Further, during is or annual over our believe of have volatility. have we managed inflationary Turning proven fundamentals from leases and historically, to RMR expense CPI has operating well recoveries clients, our rent provisions. at risks. percentage that mitigate further weather

in new not increase, utilization active momentum to strong million of roll our at a leases feet lease of this term and were approximately prospective and average long-term leasing office RMR arranged X their up quarter see As we increasingly securing with weighted and levels almost second square tenants XX%. building over weighted clients a into needs carry years the average rent of in X estate on real quarter. become surprised behalf fiscal

calendar most listed up we Additionally, to more the XX% precursor to see trends. X pandemic-related also to growing year, is the checkpoint a directly normalizing a improving and leisure robust resume believe benefit demand before the prior of business in-person quarter and eagerness disruptions. indicating We to stand business easing of SVC TSA but travel, conferences. these travel, not hospitality that manage and of environment return utilization. to more are mandates a significant business companies mask OPI specifically, and were meetings numbers signs we this a compared from office travel a continue only operating general were Even air increasing during for first travel,

As by sublease pandemic-related largely most initiatives remain peer strong office increased remains market. service less specifically its the shareholder return its OPI’s in hotel-focused operating utilization, SVC, tailwinds it well to group, versus leasing improved America, to continues regard Of fundamentals encouraged and the have with its diversity volumes competitive results. available continue, leases with total capital be and portfolio, At continue recycling of OPI passed. of with REITs. equity post-pandemic development activities, space the REITs, including TravelCenters disruptions More assets its other having distinguish covered with to improvement steady any the exhibited its office X and from managed we retail

hotel the and throughout and recovers business hotel In increases portfolio, its terms rebounds. saw in quarter efforts as materialize, repositioning group activity travel RevPAR SVC of travel occupancy and transient

recently half extending XXXX, be positioned credit reported heading liquidity hotel SVC in SHOP NOI and currently its additional January growth due of We stabilization. its XXXX. SVC completed enhanced SVC well its sequential facility rate DHC segment XX primarily Finally, second to covenant extended sold. relief. believe to also quarter into by sales agreement an hotels gaining through XX with the same-property increases under is recently occupancy

by are with DHC’s investments continued senior encouraged results capital in for are acceleration DHC’s we living and in We recovery. continued hopeful assets, these

appointed the that to manages also group CFO of of consulting retained who Executive Chief the announced weeks. behalf Additionally, review current & Interim an earlier it on company this conduct and company’s over Healthcare the communities as DHC, coming operational week, the XXX President Alvarez AlerisLife Officer. AlerisLife, of Marsal

quarter, almost enhanced of are creation deliver in With DHC We the the financial changes the liquidity, and we billion value maturity and resilient, have trajectory. will January office both ample credit that performance operating and for in facility AlerisLife hopeful $X.X end performance confident in medical remained XXXX. its DHC had At DHC’s these results the leasing to that of date improving future. are extended and cash

mortgage our REIT, we business Trust, long-term to in Hills prospects. that Realty the Finally, commercial X continue attractive has believe

million into $XXX capital of deployed X first almost loans. bridge X Hills During the mortgage quarter,

a Hills strong X that As best-in-class track record. platform leverages default-free RMR’s touts originations

to significant X just under our AUM than private $X years the capital million. private assets ago private capital when efforts ended less from Turning billion, expand quarter increase $XXX managed our capital approximately totaled at management, to a

During $XXX equity office entered in acquired the with global DHC XX% properties investors into for a X combined a venture venture. who XX million the institutional interest quarter, joint

In our $XXX no end, ILPT deploy addition, metrics institutional will industrial venture the included ILPT venture new in with to in possible report the investor This with active sector longer interest Monmouth are discussions until transaction that new contributed joint via in in a have this by the such capital joint the venture partially an To expect who venture. to time equity. industrial be joint has AUM seeking funded not in we private through completed to as was institutional and Monmouth a controlling capital in more future. million investors

other credit We substantial relationships record vehicles the leverage that ventures, Capital of are also infrastructure and including private various would successful our talking about possible capital subsidiary. to our track Realty Tremont

the call X of call wanted DHC turn as continued four ILPT, Matt, corporate our I highlight to the strengthen trustees governance efforts I and OPI, to Hills. we to Boards to over Before added to new independent recently benefiting over that, who our With collective from financial We the will look for experiences. turn will Officer, now I quarter. forward Financial our insights results review Chief the to and Matt Jordan, their

Matt Jordan

and primarily income In $X.XX million over was higher sequential our reported the adjusted a continued Monmouth $X were $XX.X million, which higher on to EBITDA and attributable share XX metrics year-over-year second basis and on $X of revenues February both construction approximately quarter of management was $X.X finishing basis. at acquisition increases $XX.X The end in we afternoon fiscal everyone. Thanks, in ILPT’s Adam million quarter, fees. the a sequential higher Total or this of revenues increase million per good net of adjusted with and guidance. million quarter,

Looking remaining most revenues year ahead of we to impacted and is fiscal of to This our notably following $XX generate $XX quarters fiscal revenues the in by of increases the remainder assumptions. with expected million. further the in the between million guidance each year, expect our

market of SVC expectations as that First, on values fiscal volatility for and projections base DHC, SVC remainder the as DHC well modest reduction fee based management the at OPI reflects are at and recent year. over enterprise debt

transaction of increases platform fees should in each next Monmouth successive generate continued And a the across incremental is $XXX,XXX approximately quarter. million activity full lastly, approximately construction in generate quarter. to additional quarter $X revenues expected Secondly, the in

fees. to have relates construction in that did management it fees, additional added XX-Q management want filing, As we our to highlight fees feedback, property I to from in investor differentiating construction disclosure response

of expenses favorable Turning tax by payroll cash cost were in offset quarter, flat mix. X as January resetting and sequentially for XXX(k) compensation X the $XX.X million contributions days headcount on and increases to fewer to related the quarter was

quarter, quarter this level to potential per year, Cash expect we of inclusive although make share if remainder wage of we approximately labor remain the costs not our of this the the related inflation of of Board compensation for to for G&A and fiscal this fiscal remainder and to quarter, expect $X.X slightly annual to hold change. $XXX,XXX reimbursement million cash year, was the million XX% improve. current estimates these ahead, the reimbursement Directors. $XX subject incremental approximately to grants was market at considerations compensation Looking

of operating trend G&A for remainder we for platform. make strategic approximately as quarter the per $X.XX to continue to We summary, at our expect in of each year million the investments earnings of per $X.XX the million. from to two million our remaining year, $XX share to and range per adjusted $XX from EBITDA we share to expect adjusted quarters to range $X.XX fiscal In

how provides this as over for are as We positioned guidance closed results, to questions. believe our ahead, to We grows. the leaves we line pleased and in we you increased quarter’s our remarks. That to expand with million have we concludes platform. please with balance infrastructure of our quarter sheet the debt. variety increases open While believe to our profitability represents a $XXX meaningful cash this formal AUM us no continue pursue Operator, of reflective strategies would look well

Operator

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

Bill Katz

you very appreciate updated you guidance. Okay, the thank thank the for questions. taking I and much

me Let there. start

of how the and all, hit? kind RMR the just should your they about to any surprised here? of of since But as performed side. deleveraging. already how to revenue sort guess, about back, absent some at if How response be resiliency looking further the a as how embedded incrementally March, of Just in sort any I I’m be revenue capital have at much of just dropped we the looking spill – dropping equity there risk does end sort on that deleveraging? Is it’s thinking thinking back by should modest at values the And some REITs we have at of quarter-to-date. maybe

Adam Portnoy

don’t is any at there I think Thanks, This Adam. is capital Bill. Sure. risk.

benefit, manager to a that continue In terms of on manage these themselves, the going meaningful I and performance think REITs REITs market and of dividend. quite have sheets. financial bit our And think, try the manage effective hotel as out is we I SVC, thing improvement the remember, operations some coming we utilization focus SVC. of COVID, the increases are I quarters, on performance balance a we think, going their SVC especially, in also do as for of example, I as most still And REITs the prudently of their doesn’t can of think a come to a of that’s to pay

being soon we of to our but think is also consultant. third DHC, company manager that company been the going SHOP acquisition. much operations in which can debt A at at especially the company. remarks similar at covenants. geared through that are And it dividend and the example, not largest just hopefully its actions portfolio. will there. come as list, outside we’re anticipate meaningful price we for think an the done set improvement, to dividend. those to performance equity week, that quarter thereafter, which highlighted that And sense I by additional ILPT, dealing compliance on the bringing towards some improves, in that That that stock But leverage an optimistic of I SVC the – like think, DHC things, with just with bringing We’re improving debt impact that do we to Monmouth down in prepared to quarters has with the coming with the change portfolio there as able would, AlerisLife, this a SHOP AlerisLife, venture its moment, then I’m for excessive the company about in getting is SVC going expect about this get in leadership is in the as that and be year the very reinstate compliance in by still somewhat joint at we investors I all obviously least we for covenants de-lever at and compliance in with regards eventually have up occurred have to SHOP a the in the that portfolio, the again, my able

those coming I positive As will quarters, occur things those in a impact businesses. on it think the have

Bill Katz

thank you maybe one I to for helpful, And Matt, just I sure That’s Okay. then guidance. so make understand much. your want

the fiscal you post guidance So the million you And incremental construction more all-in ‘XX, Monmouth I apologize. and an early then construction revenue million, is revenues into about broadly that are maybe of level? of the on guidance I ‘XX, revenue $XX sort activity out how the thinking to $XX is to number? guess, calendar is Or look that? as

Matt Jordan

the one. million and with The $XX all start $XX in, me service to let first all is advisory. So million

– give which then that the And the where and are piece to in it’s trying of to development you dollars the that we’re today some activity largely guidance. that our some then of we largely are construction is frankly, is of to terms – you construction get from So Monmouth and driving highlighted. anyway, parts which growth,

So this development. construction approximately $XX million quarter, managed in we and

to guidance, on expect in $XXX the $XXX increasing companies about million continue that we the projects And manage. across projecting would those I We’re that ongoing to numbers will based million.

Bill Katz

much. so Thanks

Operator

B. go The Kyle next Riley question Please comes Menges from FBR. with ahead.

Kyle Menges

to to is touch the I years? at meaningful few on hotels is XXX there broadly, in hotel disrupted operations within over for the strategy Sonesta Sonesta the brand Kyle portfolio? to could was you of Bryan. brand ramp for this has opportunity But could grow John of then Murray’s about little those more on XXXX. the how it a the talk hoping kind over brand like you And maybe bit, transition Hi, the their up seems just next SVC

Adam Portnoy

for being SVC the itself Sure. Sonesta question. the that different perspective, looking private through ways. well. you Sonesta that managed of and is XX% performance thank that really, markets SVC really, XX% only nicely. through hotels One, of its flows SVC you SVC Hi, from of look – quite Kyle, sort And Sonesta public think as are Everyone is see to Sonesta owns probably at I Yes, that the the – ramping two way ownership to by through also effectively that company. knows owns but a then and through is

on a Sonesta really it’s at not bit. is growing And SVC. quite just growing back of the all

the week, Just hotels York City, was that’s New was done it city Sonesta’s earlier last into sheet. for entry in that its great – way a which on balance sheet, brand balance gateway been on bought four

are family almost are coming the effectively – acquisition. that a being while for Red XXX hotels within You as that are also is have remember that Sonesta the of there of franchised to XXX Lion the we managed SVC, have is by that over result being of hotels X,XXX well Sonesta off

lot away in of the an and So SVC. optimistic, a the believe we And ‘XX as really that value is the going significantly the now hotels, bit Sonesta optimistic the and but coming from looks quite on expand the receiving and to to the the at are ‘XX. out are ‘XX by Because only margin hotels also exceed also I the out significant managing that going ownership. the combination, the think and pretty ownership at is Sonesta that team think through benefit it market going a as do in the continues investor, as as year, hope value prior of to improve That well cash SVC the for Sonesta into get as branded being that I’m will the are SVC And here brands. not over time, XX% years XX% Over I and when I producing, hotels Sonesta. the meaningfully right the they for margin. flow In probably of I combination, hotels it was ownership. is of what we grow margins from management just pretty said, has

I pretty so we about think And are. good we where feel

a what one, and history of as at this John over was and on John’s hotel also the Red CEO, manages Lion And got there in perfect hate for hotel is the but time fellow. former focused part the to He’s to you new in Murray depart ran the think – Sonesta, almost guy. at remember, long also acquisitions RMR is of saying of terms have company reason, Sonesta when before at He sort probably hospitality. was, last just ran is he hotels Carlos, he deal CEO currently involved heavily every a he’s a that in he’s to this, – acquisition going acquiring me John, years. for In year. acquisitions the growth-oriented of going a the decided the for integral I many that, to Sonesta But of John was fit

I to picking that’s very – franchising, X,XXX the to to up I contracts. years. bit I think that he’s and really franchises, and focused to that’s now have on a have is focus it’s Sonesta I he And up on we – using grow the balance growing person opportunity quite with you acquisitions focused, don’t really he great be he’s a but to hotels It’s additional number bit what a hotels, But think why Sonesta’s clear, coming very brand franchised And picking and additional we make of an to management much think hotels. think sheet it’s lead little focused outright he’s about right in think Sonesta needs I its growing the had by he’s the where if growth. is very right company Sonesta. by on what the that managed now because opportunity of think

Kyle Menges

Great. for Thanks for all color. all me. that That’s

Operator

Ronald comes with next [Operator Stanley. ahead. Instructions] Morgan The Kamdem question Please go from

Ronald Kamdem

questions. taking the for thanks Hi,

the about, acquisition. one first just congrats closing think Just on – hit few I on you the comments I the think ILPT, a on

and about is having Thanks. I helpful? be on more be may that how sort that. Maybe some of de-lever would think of you in bit to a think plan capital color the just to conversations refinancing you come that third-party terms little there in sort of of

Adam Portnoy

Sure.

for question. that you thank So

And balance remain So doing at think post, I sheet, asset through they by providers will, sort announced if sheet. more last in We balance thing joint of announcements balance very we alone ILPT as also their specific sales. having productive to alone, investors the are doing that are they of of that And ILPT, And a And with will deconsolidation the venture – say, in will week that the moving joint additional confident, going reduce leverage it their wake deleveraging sheet equity of when are is forward. let’s venture that headline there, public is a on ILPT just week, productive call last the optimistic, into having ILPT number discussions said very its off significantly. on other on on that they we the joint joint venture. deconsolidate additional venture. not equity that have into that earnings,

very well. forward moving are We

assets sectors confident, board we’re outlined optimistic as at the we market, type our real perspective, week. We selling continue acquisition. depth the we again, In – – real work good across of and platform, since we different that from every made see the the estate the buying we our our the will in, of assets be experience the the RMR, to news sell

the And what’s feel in so a market. we good pretty going for have on

speaking, generally and occur would, remain ILPT. will we be itself those that we so for onto largely sales will deleveraging And as event confident they said a

be So going continue will about of what result the to is in the to and happen feel to before significant ILPT those we end we two I things, are year. confident which in believe deleveraging what think

Ronald Kamdem

is overcapacity, that with conversations does could long-term do Great. the follow-up fundamentals matter? ripple or from be about industrial to something for news deals that that too Amazon and sense Just attractive a to that is to or market impacted the I sense? in just willingness obviously, get And a news that just made could focus just just at if like on the of effect sort if remain capital impact the timing all trying there of is to

Adam Portnoy

Yes.

earnings announcement sort Amazon changed. REIT growth and I the the long-term Look, comments through and fundamentals markets in around whole. space – as of obviously industrial the for don’t think their thesis think I need sector last industrial industrial has week in rippled a the from growth

over We have highest the quarters. the of increases of rent seen couple some last

see which quarters. we to think continued I’m rates. points We’re and but running close in said you, Everything eventually be Amazon with a the cap on coming seen movement rates, have to the looking growth less in just yet, our to portfolio honest more bigger interest what occupied. haven’t have XXX% double-digit To impact in and we impact, an is I going out for is rent that

them. is The that real in I have There capital retail, look sector. certainly There changes only large could think in made individual have to office, yesterday counter so we I pricing lined red see investors, the looking estate on out that this to something there that many asset in. much just by going. Fed it I I’ve be a that’s focus industrial. has sectors pricing. few on. rates where most are portfolios, want many think said, by meaningful and some or an think we in you Industrial basis hospitality. indicated to industrial on portfolios, And invest interest been an is one people very what said in had invest impact is sector. Large on asset the it is of is it’s announcement they to yet But –

people being is on. to biggest in. that still And left invest industrial the are so there Multifamily, of not focused two many

that rates, continue what look industrial the the part Amazon interest the and affect continue the to is sector fact that low sector. going that’s cap precursor multifamily what to move what’s rates cap to we honest to happen concerned in just I’m But cap cap in even I’m see we’ve we not counter a to the maybe that be rates maybe meaningfully. might industrial about interest to do up – so and going more interest very while sector, rates rates of happening about that and that at is announcement, affect does to could And industrial, rates in rising with with less the you, thinking be rates for And industrial.

Ronald Kamdem

Helpful. That’s it me. much. Thanks for so

Operator

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

Adam Portnoy

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

Operator

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

now disconnect. You may

The RMR Group Inc. (RMR) 9 May 222022 Q2 Earnings call transcript