The RMR Group Inc.

Good morning and welcome to the RMR Group fourth quarter and fiscal year 2020 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask your question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Michael Kodesh, Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today. With me on today's call are President and CEO Adam Portnoy and Chief Financial Officer Matt Jordan. In just a moment, they will provide details about our business and performance for the fourth quarter and full year of fiscal 2020, followed by a question and answer session. We'd like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on RMR's beliefs and expectations as of today, November 20, 2020. And actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, or SEC, which can be found on our website at www.rmrgroup.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, We may discuss non-GAAP numbers during this call, including adjusted net income, adjusted earnings per share, adjusted EBITDA, and adjusted EBITDA margin. Reconciliation of net income determined in accordance with U.S. generally accepted accounting principles to adjusted net income, adjusted earnings per share, adjusted EBITDA, and the calculation of adjusted EBITDA margin can be found in the news release we issued this morning. And now, I would like to turn the call over to Adam.

Thanks, Michael, and good morning, everyone. For the fiscal fourth quarter, we are pleased to report sequential increases in adjusted EBITDA, adjusted EBITDA margin, and adjusted net income per share. These improvements were driven by increases in stock prices at some of our managed equity REITs, stabilized operations at our managed operators, and successful cost mitigation efforts at RMR. Moving into fiscal year 2021, we remain focused on ensuring our client companies have adequate liquidity to weather a prolonged economic downturn, while at the same time being prepared to take advantage of strategic opportunities that may present themselves. As we end fiscal year 2020, I believe our efforts have resulted in each of our client companies being well positioned for the future. Over time, I'm hopeful these efforts should help us earn back a portion of the over $55 million in lost revenues we are currently experiencing, as the majority of our managed equity REITs continue paying base business management fees on an enterprise value basis versus the higher historical gross investment basis. Turning to some of the more significant highlights across our client companies, we are very proud to have announced this week the formation of our inaugural private capital investment vehicles. which is led by an investment from a large top tier global sovereign wealth fund. This global sovereign wealth fund represents a new relationship for RMR. This new investment vehicle has initial investments of $680 million in 12 industrial properties. Our existing client company ILPT sold the initial properties into the vehicle and maintains a 22% ownership stake in the venture. ILPT also expects that its leverage will be substantially reduced as a result of this transaction. And we plan to grow this vehicle with additional industrial properties in the future. We also hope this new investment vehicle marks the beginning of a new line of business for RMR, which includes managing large pools of private capital on behalf of institutional clients for investments in core real estate assets. From an operations perspective, ILPT's same property cash basis NOI during the quarter increased 1.9% on a year-over-year basis. Tenant leasing demand at ILPT has also displayed continued strength as it entered into almost 800,000 square feet of leases during the quarter. Finally, ILPT continues to collect over 98% of rents. Moving to our office REIT. OPI continues to benefit from its high credit quality tenant base, including a large number of government tenants and its limited exposure to gateway city markets, which have tended to be more negatively affected by the pandemic. Consolidated occupancy remains above 91%, and OPI continues to experience robust rent collections at close to 99%. As a result of its stable tenant base, OPI's same property cash basis NOI increased 1.7% over the prior year. We were further encouraged by the quarter's strong leasing activity as OPI executed almost 600,000 square feet of leases for a 31% roll-up in rent and a weighted average lease term of more than 10 years. In 2020, OPI has issued over $400 million in senior notes with proceeds used to repay all amounts outstanding on their $750 million unsecured revolving credit facility. As a result, OPI's balance sheet remains investment-grade rated, its leverage stands at the low end of its target range, and its dividend remains well covered. Switching gears to our healthcare REIT, while DHC continues to experience pandemic-related headwinds at its senior living communities, the company remains well capitalized with over $1 billion of liquidity and no near-term debt maturities. Additionally, it's important to remember that approximately 77% of DHC's NOI now comes from its office segment, which continues to benefit from a healthy life science real estate market. During the quarter, leasing activity in DHC's office segment more than doubled sequentially, as DHC executed over 200,000 square feet of leases with a 4.1% roll-up in rents and a weighted average lease term of seven years. On the senior living side of the business, 97% of DHC's communities are now open for new admissions. While the majority of residents currently moving into communities are generally needs-based, we believe there is currently significant pent-up demand in the markets from seniors deferring move-in decisions. DHC's primary operator, Five Star, is currently working with additional referral sources to attract new residents without undermining rate or profitability. New resident leads were up 35% in the quarter, with conversion rates getting back to pre-pandemic levels, and move-ins increased 31% over the prior quarter, both positive trends for DHC's senior living portfolio. Finally, our busiest REIT continues to be SVC. SVC continues to face the most significant pandemic-related challenges amongst all our client companies, as hotels, restaurants, and other service retail businesses are facing a difficult environment. Operationally, SVC has seen steady hotel occupancy advances in most markets, as suburban extended stay hotels and select service hotels continue to outperform urban full-service hotels. All but two of SVC's 329 hotels are now open, and overall occupancy has steadily increased to 46% in September from a low of 21% in April. The biggest news this quarter at SVC involved its inability to reach a resolution with IHG and Marriott after each failed to make their minimum required payments to the company. SVC's board decided to terminate these operators and transition management of these operators' hotels to Senesta. RMR is dedicating significant time and effort currently to assist Senesta in preparing for a successful transition, which is expected to begin at the end of November. In addition, measures taken to improve liquidity further include the recently announced issuance of $450 million of senior unsecured notes due in 2027, and successfully securing waivers for all financial covenants through July 2022 on its $1 billion revolving credit facility. It's also important to note that over 25% of SBC's rents come from travel centers of America, which continues to perform well during the pandemic. TA reported yet another strong quarter of increased adjusted EBITDA and net income. TA also closed on its $85 million public stock offering in early July, which provided important liquidity to the company. Turning to our efforts to expand and grow the RMR platform. As capital markets and fundamentals begin to recover from the lows of the pandemic, conversations with sources of private capital, both existing and possible new relationships, have gained momentum. While we have nothing specific to announce at this time, we remain confident that our private capital management business will continue to expand, either externally through an acquisition of a third-party platform or organically via relationships we establish on our own, such as the new investment vehicle with a global sovereign wealth fund that we recently announced that involves one of our client companies. Before I turn it over to Matt, I'd like to reaffirm our confidence in the strategic actions we have taken in reaction to the ongoing pandemic at our client companies and reinforce the fact that RMR remains well fortified by our 20-year evergreen contracts with the managed equity REITs and our healthy operating cash flows. As I've said in prior calls, given the current economic environment, I continue to believe that over the next 12 to 18 months, they may likely be unique opportunities to take advantage of in the market that will benefit our platform for years to come. I'll now turn the call over to Matt Jordan, our Chief Financial Officer.