RMR - Earnings call transcript Q3 2022

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Operator

Good day, and welcome to the RMR Fiscal Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I would now like to turn the conference over to Michael Kodesch, Director of Investor Relations. Please go ahead, sir.

Michael Kodesch

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

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

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

Adam Portnoy

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

XX%, quarter increases of We $XX.X sequential EBITDA per XX% adjusted of results and share of pleased financial with adjusted are report $X.XX respectively. net income another to quarter strong million.representing of and

estate, today's on structure primarily operating RMR's unique in highly As an remains alternative asset focused core environment. attractive commercial manager real

experience large America. important and located in activity over North advantage and rates new in throughout increasing properties our commercial have estate which This as and These related real environment. to is slowing of competitive as macroeconomic reductions especially today expertise buyers trends scale, to ongoing size transaction interest as includes the Our X,XXX well as rising managing resulted over challenges navigate years XX adjust commercial rooted in estate economic sellers we in inflation, significant activity. real is this

markets historically traded in REITs. X in management. our from The almost additional continued these currently said, during almost that billion growth private we to that capital equity RMR publicly revenue last equity significant platform From With our equity Access AUM assets traded have from ago, private opportunity a have private grow management within publicly has gives path these $X an success demonstrated volatility. pronounced market under REITs. just REITs. in existing X our times increases capital under seen we built private years AUM While capital remains to for with have $X of like of away capital there raising especially years our growth,

fiscal Moreover, durability public this Based publicly these at third almost grow significant significant revenues. the capital our the REITs. downside and there from limited of majority structures revenues equity capital of XX% traded our from reach the quarter, these the With our real vast on For representing estate clients. revenues came equity equity these of is we to AUM there upside REITs revenue generate AUM. need the today, to without fee is managed

all by EBITDA. it the the of benefits $XX to remarkable incremental sale and our and generate potential public years almost Furthermore, number for up term. demand flow-through high-quality, any XXX% the assets, On operating ability weighted logistics continued leased XX%. RMR's quarter strong well-located underlying the enhances currently thrive we rent to private internally excludes growing and economic assets, assets in prior credit because of of this of put through of XX e-commerce-focused value almost properties highlight both roll industrial Ultimately, markets consolidated quarter's ILPT-owned increase environment. in highlighting with and for are was approach two-pronged executed is the this assets. within and of Almost leasing X.X externally activity average plans more robust venture results capital of this XX% historical average at As for arranged approach. tenants To industrial reach than Monmouth more costs activity and of which approximately square we of Earlier supporting gap close we the doubling a million this X previous the any feet the of industrial assets feet equity discussed calls, Investment weighted incentive well-leased acquisition. almost and could Corporation, additional respective This and on strategic prices. enterprise to joint if portfolio are highly quality closed XX% quarter's sales. term this of between incentivized Monmouth acquiring with ILPT share close approximately clients financing a an behalf with recent RMR annually focus in million years revenues the includes fees. assets. alluded perspective, year, that property industrial ILPT's their quarter, we We this Monmouth lease lease includes XX leases interest square approximately Real attractive long-term our average our to million on this ILPT's Estate acquisition

decision its of potential which estate has made buyers conditions, the decisions, meaningful in deterioration these led short and any reduced ILPT in market venture pause to dividend assets. preserve joint to real current In conjunction interest environment, given partners with discussions However, to quarterly the the ILPT liquidity rate a with term.

the tailwinds remain Permenant same-property in their as office place. these are We results tenants put solutions possible short-term and fundamentals cash work financing in represent until OPI strong as NOI hybrid FFO. environments. Despite are growth transition in both and reported a strength, to quarter's space included remain this period recently needs assess quarter longer-term continue of this normalized operating that core strong ILPT that robust and weather comfortable will challenges fundamentals

OPI's well-leased continuing to curated while Over recycling into years, encouraged have internal engagement the trends last OPI has averages. office its stronger space of security assets one by national activity of sector the as tenants. headwinds Despite we OPI U.S. government across carefully tenant in X capital the our exceeds core suggests largest its leasing the its office portfolio seeing is portfolio, that metrics remain and sector, tenant

to improvement. Turning retail year-over-year our TravelCenters strong of America, hotel and service almost adjusted remarkably of a quarter, businesses. was representing million business EBITDA this At XX% with $XXX

growth has SVC's diversity, compared While portfolio established factor possible REITs. other adjusted that resilient operating benefits should inflation possible business in EBITDA in SVC, headwinds, to reflects normalized possible distinguishing FFO margins of pressures recession when TA a and At a withstand continued a the in the future. hotel-focused model on represent

Just led in under the service TA. with half of retail sector SVC's thesis assets are by

to debt robust notes. $XXX strength third-party in has of regards benefited being by beginning hotel DHC quarter improvements of fundamentals. repaid new transitioning stabilization. to XX. continue coverage and XXX began sequential to With the retail with of shop rate a it segment this another X.Xx XX hotels, covenants, million completed regional SVC, of SVC reinforce last communities now average of of peak RevPAR million ongoing expectations. year. rates has of $XXX were over As the June NOI for from to the reported I almost of of year, highlighted, compliance DHC previously increases being aggregate of historical SVC's hotel senior its due hotels growth to occupancy With at net to and well all levels Specific XX%. in exceeded year same-property daily prior lodging quarter which industry lease strength average as has late SVC's The portfolio. industry sold rents ahead TA's very yet its management the Since service portfolio the growth led and ago, primarily A results the process portfolio's broader operators, results SVC's-owned to minimum the

increased This NOI XXX quarter, transition communities positive signs focused points regionally in and operating operators occupancy improved driving improve, both results. basis that to are these continues the

equity venture of making science regaining and additional debt, in its DHC its with towards repaid is sold $XXX existing progress X.XX% covenants. quarter, the million life an joint During debt property Boston XX% compliance interest

We announced improve and DHC's living with hopeful will are AlerisLife, are results we at recent senior continued capital coming quarters. encouraged recently operating in at assets and the to continue plan trends DHC DHC's by the restructuring that investments in

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

its During originations the quarter, end. with Seven was Hills portfolio quarter remained aggregate committed default-free million at $XXX and new capital

rising on which leaves portfolio rate interest year it today, ago. and public benefit vehicles average assets over X loan managed rate We its have public billion for $X.X XXX% consists in and going closing, management In growth investments, billion because private Seven over environment Hills that growth. continued earnings of the well per our $XX which represents from expect floating positioned current since years under will of collectively

also significant traded REITs. earlier, remains opportunities existing highlighted without improvements revenue As publicly I for share any through our AUM growth equity at price there growth

Financial organically quarter. we now optimistic M&A private will who activity Matt the Chief that, ample through our results With Officer, Additionally, turn either come. review opportunities that or to remain to AUM the to call the there capital possible our grow in are Jordan, for years financial over I'll

Matthew Jordan

metric significant basis quarter EBITDA management finishing of and primarily higher was everyone. million ILPT's both good sequential or tied afternoon, higher almost of and million was and sequential Adam, a construction increases on quarter, the $XX guidance. $X.X The which $X to the adjusted over $X.XX basis. strong fiscal Total adjusted per impact on a and third Monmouth in above the of continued increases acquisition, $X million, Thanks, full operating midpoint fee to growth million quarter in and our income increase quarter, revenues Sonesta revenues in attributable performance quarter reported quarter this we million sequential TA. fees the representing of were each net In share of $XX.X year-over-year

the our well increases management $XX and Looking expect revenues as managed we to in on equity expectations construction current continued values of fees. enterprise $XX of ahead quarter, fourth million to REITs based generate our as between million of the

was Turning approximately quarter our which compensation cash corresponding sequentially was reimbursement to expenses $XXX,XXX and increase this slightly an for Cash to the this quarter rate million, quarter. of improved $XX.X XX%.

select leverage While Boston, solutions these rates remained and have industry ahead labor wage retention mitigate outsourcing to headwinds. secondary to both our we hiring continue Greater remain in headwind, of employee and benchmarks, and locations especially inflation scarcity technology, a

Looking ahead, rate our approximately compensation to XX%. at quarter fourth expect at $XX we remain remain the million cash for and reimbursement to

the continue result As per and for to covered quarter at these no share share should fourth leaves collective believe forecasted with of well sheet per RMR's current $XXX share $X.XX ratio to from to $X.XX $XX debt. from in $XX to variety and of adjusted a We remains have the EBITDA to balance position quarter payout quarterly $X.XX guidance strategies a adjusted unchanged to our closed million. with range us remains expectations, million of We per pursue almost range dividend expand cash our a XX%. of million platform. approximately earnings

of to RMR's we portion the I Before the begin would report. recently first question-and-answer acknowledge sustainability like published call,

our contributions collective to X people. would directly overview a managed by comprehensive operate listening RMR goals, questions. our have the energy, Operator, our That to a water encourage the we emissions, emissions across provides we thus pledged investments in our by remarks. are in concludes a reach would and XXXX. the gas whereby we've see greenhouse reaching report please promise, to including sustainability successes and XXXX, waste overview driving X with Our line can making the website We of we emission of far you long-term formal net a sustainability we in reduction target had open communities the go reductions, RMR's to XX% those well readers as ESG to where as of properties

Operator

[Operator Maher from with Riley question B. Today's FBR. first comes Instructions]. Bryan

Bryan Maher

me. A couple questions for of

hotels you Sonesta going in have as the next bought, in or of SVC's this the Sonesta relates contribution. buying any properties four to markets? forward X with thoughts earlier conjunction Do that On Sonesta's growth gateway bought trajectory year know kind well, it more year front, over Manhattan you we in on

Adam Portnoy

for that thanks Bryan, Sonesta. question Sure. about Yes.

I hotels. We're to into Sonesta, It great where number right has With are planning is really focus business. real is a a it's be pace. your that up that's about the having -- growing as would Sonesta. Its at franchise. that we had not could it's franchising say at acquisitions really growth the growing of Sonesta at hotels, that of coming. all the XX% around you're grow, pick that And say summer. manages really improvements starting of how through of is course, focus helps the on out to course, it again, I make majority as acquisitions and we on franchising in really the ruling back tie of unit And really Sonesta also grow Sonesta its expect see that's, then hotels itself good I on And its just franchises. together, you'll base, outright quarter to But franchise, roughly benefits XXX question the showcasing especially specifically grow focus they're to operations, over business in regards last to that indirectly revenues that X,XXX it ownership Sonesta, cash would SVC flow to quarter XXX RMR. about the going and its the

good about principally how about that's we're and growing pretty So at feel it. Sonesta, we thinking

Bryan Maher

acquisition have of years over then about balance opportunities, on And Okay. cash you sheet. the lot talked lot a a you've the

Is might I you anything there serves getting at. looking a dislocation that ramping going little a of some to were but on the people capital think up of of memory with slowed if couple at few deal the there's approaching activities. on that inbound me you bit, Is have revisit Wall markets inquiries that? and weakness you Street down given talk months were that because there no all past

Adam Portnoy

are ramping with the but in the word, we sure or not discussions up had I'm groups. right is discussions

a calls. in Really were much and back so, calling for we're to and/or something and that so, were of been quarter, XXXX, -- Bryan, very We every at in talked they high concerted inbound engagement Just that acquisition where meetings. so about to the them, but and adviser folks inquiries list had XXXX, where were we we months groups call. on would or an for I the say last you, there's recap X, actively not go getting sort we calling that occurring. in X, making stepping we've And maybe back want the course, of potential check would outbound been partners. of get process. And asking outgoing something beginning to X and/or in either calls, for circle actually engaged back talk going others, X a on level we've less have retained on we we're waiting from past and has they sitting we're for in short is a

speak of of or negotiating goes. couple terms So at process not and It's a a that quarter, there's purchase there's sale of have PSA, average, -- dialogue. pretty the we of, nothing imminent least we're every to anything But comes a and in regular on in occur. it I'd agreement like a conversations that. But say,

Bryan Maher

Yes.

for more two me. Just

or bit few over prepared JV you partners On quite your in the JV large participate couple other that? really Has some a potential partners? wealth you front, broadened can comments, which you you've or bit a want which has grown the past and years. funds seen to done referenced Can capital that past in as about little the talk year us give the that, X on or out private more have color sovereign what whatever over sources more

Adam Portnoy

funds are groups. point and we I with that, they're us with to us you we're increasing to business sometimes nothing over other so good greater without no they to us I I a very a to partner tend dialogue think referred have the there's specifically sovereign had to that, taking most we time is terms others. speak with with because suddenly and in that's funds, focused wealth are conversations other say with is what be Well, that prompting, on talking sovereign sovereign they a thing. have much us tell The -- this funds say new of. complement mandate which can that wealth to groups our But relationship and the than we've doing to we enjoying had wealth and yes, of suggest would on the

pretty on a that's of And through a audience so occasions immediately that. And already. good get happened we handful

a And few around mentioned sort ago with net offices in have dialogue of well. of other more so worth of high direct effort potential had a individuals. in that occurred and as There's definitely been family that and have with -- quarters we several conversations that focused several We couple folks. are constituent we and partners

or focused engage won't It M&A. And so well. ourselves I'd heard to is M&A. jump it internally on growing start say it progressing the through why dialogue us ago, couple like we're than And of tactfully you've doesn't on more relying mean a that's quarters you in things rather say organically of sort having

we that that just able ourselves. through to grow in means to it that that we are or the growth be Just continue AUM business confidence that to grow of going increasingly channel, doing gaining are sort means

Bryan Maher

And Okay. for last me. just

$XXX You're you per But over share Clearly, of a $X out about or sitting there ago, quarter don't special as any dividend Thinking year had or in ago. look $XXX on cash. big million nearly is special a million almost you next a year you thought potential X the have otherwise dividend. did capital? the return we that

Adam Portnoy

Board. around Yes. of have sort early for a to us It's probably at serious little dialogue that the any

I your sort of sourcing we've is ties that to similar, think sort using private of been thinking question back just what capital capital prior. about

typically look for vehicle investment. simplest co-investment. dollars you put sponsor, in for more capital of private as equity going of some they million As some of we managed fund hundred used and be that I in sort in could example, and some capital together more fund raising joint accounts, of specific put couple the of a the think we to engaging ventures, additional AUM Typically, about if growing that sort, a a separate around possibly you're think together

be is to start little going established. business, your of larger that than co-investment off when be As you you're more probably it might a in sort

of And that through we think it those there so of strategies in that's to of help why types money as is sort opportunities us keep present. sort have those reserve they and

We talk get we do -- and about inbound said, also, but we I when we're M&A not opportunistic, it's as calls.

Some any We that came if fruition. are of actually liquidity them conversations. to conversations interesting to those of keep like

Operator

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

Adam Portnoy

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

Operator

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

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

The RMR Group Inc. (RMR) 5 Aug 222022 Q3 Earnings call transcript