RMR - Earnings call transcript Q3 2024

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Operator

Good morning, and welcome to the RMR Group Fiscal Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead.

Kevin Barry

Good morning, and thank you for joining RMR's Third Quarter Fiscal 2024 Conference Call. call Officer, and Matt today's and Adam on Financial Chief Jordan. me are CEO, President Portnoy; With In just question-and-answer company. a and without our like business the moment, note retransmission they will quarterly to consent call followed provide of results, prior today's by is the written a that session. I conference also and would recording details prohibited about the of forward-looking and Securities forward-looking are laws. These Today's the Private and XXXX, Act within differ we RMR's that contains on today, and statements from may materially the statements as Litigation conference other of beliefs XXXX call of meaning Reform actual of results project. those securities X, based expectations August revise company today's made the publicly in release any call. forward-looking The to results statements no conference undertakes or revision obligation of to the

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

In this non-GAAP accepted found income, I call, with EBITDA. our determined generally non-GAAP accordance reconciliation distributable to share, principles, now of will including numbers be the and A earnings in during addition, earnings to per turn net net Adam. adjusted U.S. adjusted figures income results. discuss can over accounting these we may in adjusted financial call

Adam Portnoy

of for all per in and Yesterday, distributable morning. income $XX EBITDA this thank per $X.XX, we quarter us adjusted and our with of line were earnings joining expectations results of million. $X.XX third Kevin, that you which adjusted Thanks, share share net reported included

results the to XX%. with a RMR underscore We well the remains believe ratio payout dividend of covered of quarterly platform. durability approximately continue these Our

fees years. asset manager, highly have XX our to scalable management a business As for over provided recurring RMR's stability alternative

throughout cash generating We ongoing and our cycles, with industry conditions flows changing needs. history strong market evolved to limited have while capital

Adding sectors, estate cash our portfolio public broadly and of managing no real macro a our all hand took declined fees. the equity, balance valuations and debt inflation. as action public of to estate both Clearly, to foundational billion and and industry across substantial across reflects the strong major Federal with stability management real $XX U.S. private investments few with weighed past the base have over on a years, as management the under clients debt. At both vehicles. enterprise diversified aggressive remains adversely the has RMR's on in this Assets the of corporate sheet values and level, Reserve a result, combat impacted business, dynamic

once the to we few and position the capital capture to inflation ease consensus began months. and there over a months, RMR clients. Along reduce the well credit Fortunately, for those interest housing. on estate to the and will markets coming strategic exists rates is past within significant continues that estate in the shift to in sentiment our bodes lines, favorable near-term best private initiatives again Fed on executing real the real This growing industry emphasis opportunity investor multifamily begin with that

previously record our vehicle the strong that existing and expertise for of announced fundraising started private Capital. track lending recently estate we First, Realty Tremont real debt platform, our utilizes

outlay relationships, than in expect leverage, RMR's this to an $XX to and the loans lever the at with $XXX with expect closed of of loans with middle hotel we net that With gross is keep which in of cash $XX advance one returns two less by approximately on in facility rate million loans. loans portfolio hand cash generate we see we quarter objective master via of we banking properties. Initially, these funding XX% million, initial these although floating at repurchase the our investments aggregate July, loans market and To mortgage industrial secured commitments Our to approximately with bridge are end, million. transitional mid-teens. will rate

a to the shift and fundraising repurchase third-party the identified our through repaid majority off substantial loan loans Looking sheet. of expected be are will are equity related ahead, and making RMR's facility investments investors portfolio as efforts, balance in we these are

Our is platform, move closer RMR focused help and which our that will second simultaneously initiative the platform on expanding to profitability. underwriting initial residential overall

with is tailwinds high U.S. to that opportunity continue growth, nature, the million. XXX-unit where $XX hand report was in Denver this a cash RMR's commitment million cost with has housing, which approximately property made X-year Residential on extensive and the expected equity is investors shortage rate, of based Residential the of acquisition, million. The in conviction interest-only pleased approximately supported inaugural returns transaction demographic experience. I'm by week, RMR long-term We home that costs of is in inclusive for combination have rent of growth. including for market the The $XX multifamily a mortgage. value-add investment upside, and operating teens which operational be markets, fixed garden-style is will to total of future on community the to primed overall Sunbelt the an acquisition its ownership for $XX.X favorable a multifamily for RMR high generate to closed

plan remaining acquired RMR of the general acquisition, multifamily this as in utilizing sheet. RMR In the to partner. with our the syndicate investment the While coming balance equity we this months, majority

debt this RMR. equity its and move once will is sheet syndicated, result, associated the balance investment off a for As

is multifamily participants. RMR and over We Our of XXX active to stages both on have capitalize investment various again on an off-market that currently we market that in an current the increase review have hope now reflects deals. in demonstrated deals residential for pipeline we

effort REITs operational maximize and the initiatives, remain equity strategies to financial in assisting long-term the focused on execution managed our performance. an with of strategic their we their Beyond

$X.X behalf feet leasing arranged clients. financings billion During our the we over quarter, of X.X million new square on and of executed of

completed and maturities XXXX upcoming as a highlights challenging year, conditions. on well financings, debt total the including few upcoming debt a billion nearly $X.X executing as reduced REITs. ongoing maturity equity secured of market OPI Since to on intensely navigating address is exchange to managed their beginning of to OPI the $XXX June is reduced million. strategies the approximately in its debt Turning strategic $XXX that across debt office by the million focused

continue and cash along a science driven debt results, operating from the adviser, momentum continued We growth and focus with OPI's address evaluate NOI by continued same-property SHOP leasing OPI's Last to reflecting portfolio expenses. quarterly a improved on in generated all office year-over-year activity maturities on their life and of & basis increase third-party segment XX% a occupancy medical DHC segment. DHC basis, shop to strong possible Company. Moelis double-digit rent strategies night, reported within

sales. SVC not will remains shareholder on report in management underperforming until you DHC's next operator later what we and driving will investments targeted hear limiting today, capital As transitions strategic long-term laser-focused value property week, earnings can through discuss communities, today.

of some $XXX proceeds markets $X.X X-year Although activity. SVC of SVC used X-year this balance billion stable $XXX offering notes, I diversified cash fully capital RMR's including until client want on which to XXXX. In roster a June, its do highlight of solid revenues, leaves guaranteed million a debt strong hand remains from of free and the redeem notes. closing, recent In sheet. SVC with recurring closed senior unsecured any to notes XXXX and business maturities, virtually and maturities debt million

President initiatives taking the create estate our real navigate and challenges drive capital and Chief our and current to in sector Jordan, Executive now turn Matt economic Vice are the advancing environment call We that, future value the its for necessary Officer. actions to private growth to while RMR shareholders. With long-term best to clients position Financial over and I'll

Matthew Jordan

Thanks, Adam, morning, everyone. and good

$X.XX share, earnings net For the third adjusted per of per and quarter, of $XX reported we million share. of EBITDA income adjusted $X.XX distributable

All in related approximately of seasonal to were $XXX,XXX service REITs, offset expected sequentially, million, fees. primarily line fee in equity from our quarter. with decrease $XX our Recurring of which a improvements in Sonesta partially for by declines were management management revenues managed revenues the expectations due

Next as values This quarter, and further expect thoughtfully slow an service current $XX.X spending. assumes we our capital clients of range their enterprise at equity million. volumes REITs at at construction slightly revenues managed expected to be our down to recurring levels million $XX stay manage range

$XXX,XXX last Turning true-up to a the favorable seasonal usage. vacation of was $XX sequentially, increase mainly Cash by compensation million, of an offset bonus which impact quarter, expenses. reflects approximately

cash to to headcount reductions decline strategic the the quarter challenges rate $X also we of ahead sector Adam the were quarter, cash $XX the reflects next the million, this continued approximately for XX.X% like with impacts level expect tough which decline RMR selectively expectation in we projected to compensation I expected savings. reimbursement to annual in this highlight forward. Recurring decision as estate million. This light real approximately represents make Looking quarter, in quarter June that financial earlier. G&A highlighted remain cost expect to well. expenses going generate our our Consistent within of million corporate made we $XX.X will would to next at transactions, to

relates quarter it rate the investment and over a as XX.X% investment, we of in RMR cash-on-cash while to value-add approximately owns First, to this pretax return. on $XXX,XXX of multifamily income EBITDA contribute the quarter expecting basis, asset, a $XXX,XXX are XXX% in equivalent per adjusted Denver per or run the

of earlier $X.XX earnings distributable adjusted per it adjusted in to strategic to next no quarter $XXX,XXX to After with approximately Operator, bonuses paid loans from pretax we in a to the growth our range are million cash, range using which the quarter, concludes we million run over July, returns rate and still million corporate expect from in a flexibility each mortgage outlined and please open of next ample you approximately million the on share. In fact $XX those questions? in share to ended relates $X.XX assumptions, collective the quarter cash-on-cash continue to per $XX initiatives. That XX,XXX $X.XX share closed $XXX consideration $XXX basis, September, transactions and the as contribute giving EBITDA earnings end loans per investing these shares, to to would per providing debt. annual XX%. Aggregating between Secondly, and expect $X.XX formal remarks. million count expect share EBITDA to range to we line income quarter to that us with we represents adjusted closing, of cash approximately we and strategic

Operator

will our come from B. first question Maher Securities. Riley And Instructions]. today with Bryan [Operator

Bryan Maher

at, a that et stages type what Just type, of can looking a you couple those asset talk in about bit regionally are you deals Maybe break this country, various of granularity, maybe little are? more me cetera. the deals down by from When XXX morning.

Adam Portnoy

currently deals multifamily managing the platform, dynamic expertise which sort they're investment again, made Denver. of the is in generally the in Sure, Bryan. of markets, criteria leveraging assets They the Sunbelt billion-plus primarily XXX those throughout $X to value-add that's of they're Residential have their Sunbelt. of or fit where RMR typically -- characteristics we Basically, the the investments. Similar they that

So garden-style value-add. community It's typical Sunbelt it's apartment mostly complexes. multifamily,

Bryan Maher

And of is what coming motivation across deals? the that you're on the these sellers

Adam Portnoy

lot frame, specific maturity, to A lot sellers debt really opportunity a actually a an that transaction can the for debt, it sort because close on put ways very need drove can of on and shortened our to of had opportunity some the what of That's we sheet time it. repay that opened up to us. balance in typical be in That's an we created driving and factor. order actually meet most the drive

some is The quite is to the reason. the becoming or plan for not the could business that cash constrained and other renovate property And is its improve landlord a it flow. thing cash operations be through

property, cash And constrained. so they've they to earlier sort offload would the probably to of they're become because liked looking have than

there's then bit challenge So of the of sort lot potential say, I first exploring selling, even the sellers They a hire may for are do the seeing. get back. third decide what of is to explore, -- BOVs, see get second of team little and they We they or they that bids transact. they round would and is get part forced round that not Meaning you're bids, market. pull they brokers,

when will So out. unfortunately, put a we're -- transact if property actually somebody to they it's know also hard

Bryan Maher

that's you was I'm for not interest shifting think and I despite Just ILPT to really your we're the if about that fact -- prepared rates, in decline that intentional would me say it sure seem don't know fairly or the overlevered comments. you waiting it's and including that not. But recently I sharper heard anything we have suffers with could rates gears. tee today, in et but interest a to add? entity got leverage opportunity like that kind there and it fundamentals, that an got on of to some cetera. But expense on interest great that's you JV great thoughts that's lower opportunity, up seems managed assets, Do maybe sharply any the that me to just REIT. from start the

Adam Portnoy

largely Bryan. with Sure. said, agree I everything you

of you're to are our interest REITs, all to I of specifically but think from businesses our rates, all lower ILPT. benefit going lower maybe -- highlight right

But lower didn't we it in an amount impact right of talk have you're right, interest on it high point You're outsized leverage debt, because prepared will rates company remarks. that to about the definitely out has. of that has and the

As impact in out rates the come will to down, ability terms. of those really the favorable more cash our have existing positive flow, interest refinance it only on debt not a but

So you're right, high. tailwinds. come great that due. they ILPT, Rolling Fundamentals Occupancy as strong. very very up has company, rents are is

positioned it, that extra it's you're interest benefit So just manner from deleveraging that outsized boost flow company -- a company to an can lower rates is and cash right, well if from add naturally of interest we're in increasing of roll on an from is lower rent rates. that top maybe and you

Bryan Maher

And me, XXs We the Page at you've other decline that Matt. drive reduction going When some with efforts kind that margin just lower run maybe taken think XX-ish headcount up that or things that's Do And this presentation. rate are on for to adjusted adjusted to of from XX-ish for back all the on new percent. for you is degree? look EBITDA the the I of EBITDA me. margin see last XX and some to

Matthew Jordan

what No. back get we range. definitely used XX% to Bryan, the in to want to we're

and driving the But the last is force we will breakeven business I acquisition RMR is year business think the a the did containment Residential clearly cost right now. now measures right big help.

$X XXs got margins $X low is those million that you've of each quarter right to So margin that's business. And to million revenue driving X the now. down

this those to what profitability, hopeful to see very transaction to return back you're business later margins for am you'll used temporary that, and that as this I back markets RMR. volumes So year is rebound will and seeing go come

Operator

[Operator Instructions].

Ronald Our next Morgan Stanley. with question Kamdem from will come

Ronald Kamdem

sort that going balance thinking are said the for pipeline, comments, out in me. the dollars the sheet. And the returns to I Just just sort two of you opening what deals, that ones Is could like XXX should the of be the any but quick you're what look about in on right this keep and sort the in of on forward? year we multifamily Back of thoughts door, to terms think range teens. going that

Adam Portnoy

Sure.

RMR going forward. repositioning in we're outsized -- regards with the they on think we adding higher cash-on-cash on value profile, So terms those property to us are the the of multifamily EBITDA of the terms rents. We're where whole. bottom investments to and it's to so for generating contribution investments Yes, value-add and getting -- return of and sweet spot expect sort to get Matt a -- as the because I returns in an the a on basis, XX% highlighted, to as that's clearly

you going on do have this to continue In we It's many time a we're to pipeline, a terms little that the to if that time so debt we have syndicate to hard some period able I a the putting able had our other nuanced balance answering syndicate we It's answer. But context, syndicate pace give deal, it'll shortened the a really be year. a equity. opportunity, seller, and had it XXX how of very that And said sheet we very sheet. peg we very be -- fixed question frame. Because deals. put slower to we a if due, basically, with bit are the in what of to have then little fortunate because Denver our than equity motivated the had afterwards, be to the them an we balance happened will be might the to to which before, prior coming of enough on and

RMR. And balance it able down before we on put take thought let's we put, we strong that confident be be we forward, it going so be investment, we'll such our -- will to syndicate handed we before our uses said, most it. it capacity a because just afterwards. That We're actually up I just we'll close. would we up was let's syndicate deals opportunistic, syndicated at sheet, imagine look, But

we're it able end the up this. able be much having volume. We to that we two of more more to balance as like the to our deals to the be do cash we higher one might just close them won't So deals the having use syndicate because to and sheet prior closing have, up closing sheet And end how of constraints balance much. or the natural we

a is are else. on velocity and deals to wide the sheet we we balance would That somewhere range. this XX could it afterwards and be on between more So anything that more syndicate them I whether the depending going prior or putting to really to range, put able do, whether and syndicating It's X than then we're closing. drives

Ronald Kamdem

then you gears what $XX And same opportunities? if the could there ventures, comments of -- door? $XX deals, million rate What's Helpful. should pipeline million. to on two we question, terms can good any sort sort in again, thinking and about? be through the Maybe lending I And switch of just getting of the on run a volumes and

Adam Portnoy

Yes.

invest the us crowded private to lending first lending a what's bit market it doing in that this we're we in the and a don't lending, into. We to a seeding that investor we faster. is there and about. we a -- that raise think able the focused our because loans actually to we're that benefit situation. estate loans a you but real give all differentiates LPs What likely more market. in this happening is have to balance us history out on we not different only that need is of we're think we for fund raise tuned making raise that's market on are and large money So underwrite actually portfolio pool I the will are fund an money, since can little have given And talking of actually sheet. it's What

somewhere thinking between two already we're think two. four. We I have to

on So then seed fundraising having can very underwrite maybe again, strategy. the focused portfolio -- there's that LP another that on two a sheet, balance and around then the accelerate investors we put seeding which,

two -- up it don't I more than is, over to more see loans, the sheet more loan, may end imagine one it will we next us months. So balance short I putting on the and be X just the answer be X can't

Operator

And conclude over this any back I'd Portnoy, President question-and-answer session. our to the to conference Chief will closing remarks. Adam like Executive Officer, turn and for

Adam Portnoy

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

Operator

The lines now you time. at has your may Thank concluded. attending now presentation, conference disconnect today's for you and this

The RMR Group Inc. (RMR) 2 Aug 242024 Q3 Earnings call transcript