The RMR Group Inc.

Good day and welcome to the RMR fiscal third quarter 2022 earnings conference call. All participants will be in a 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 a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Michael Kodesh, Director of Investor Relations. Please go ahead, sir.

Good afternoon, and thank you for joining RMR's third quarter of fiscal 2022 conference call. With me on today's call are President and CEO Adam Portnoy and Chief Financial Officer Matt Jordan. In just a moment, they'll provide details about our business and quarterly results, followed by a question and answer session. I would 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, August 5, 2022, 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, 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. The reconciliation of net income determined in accordance with U.S. generally accepted accounting principles to adjust net income, adjusted earnings per share, adjusted EBITDA, and the calculation of adjusted EBITDA margin can be found in our earnings release. And now I would like to turn the call over to Adam.

Thanks, Michael, and thank you for joining us this afternoon. We are pleased to report another strong quarter of financial results. with adjusted net income of 59 cents per share and adjusted EBITDA of $29.4 million, representing sequential quarter increases of 18% and 14%, respectively. As an alternative asset manager focused primarily on core commercial real estate, RMR's unique structure remains highly attractive in today's operating environment. Our competitive advantage is rooted in over 35 years of experience in managing commercial real estate, as well as our large size and scale, which includes over 2,100 properties located throughout North America. This expertise is especially important today as we navigate the ongoing macroeconomic challenges related to rising inflation, increasing interest rates, and slowing economic activity. These trends have resulted in significant reductions in commercial real estate transaction activity as buyers and sellers adjust to this new environment. While we have historically seen increases in AUM from growth at our existing publicly trade equity REITs, the last two years have demonstrated our success in raising private capital to grow our AUM away from these equity REITs. From almost $0 of private capital under management just two years ago, we have built a platform that currently has almost $4 billion of private capital assets under management, Access to private capital markets gives RMR an additional path for continued growth, especially during times like these with pronounced market volatility. With that said, there remains significant revenue opportunity within our publicly traded equity REITs. For the third fiscal quarter, almost 75% of our revenues came from our managed public real estate capital clients. with our publicly traded equity REITs representing the vast majority of these revenues. Based on the capital structures of these equity REITs today, there is significant fee durability and limited downside to the revenues we generate from this AUM. Moreover, there is significant fee revenue upside without the need to grow AUM at these equity REITs, as we are highly incentivized to increase their respective share prices. To put this in perspective, If we close the gap between enterprise value and the historical cost of the equity REIT's underlying assets, we could generate approximately $53 million of incremental revenues annually with close to 100% flow through to EBITDA. This number is all the more remarkable because it excludes the potential for any incentive fees. Ultimately, this two-pronged approach, growing internally and externally through both public and private capital markets, enhances RMR's ability to thrive within almost any economic environment. Furthermore, our operating results this quarter highlight the benefits of this approach. RMR arranged almost 5 million square feet of leases on behalf of our clients this quarter, more than doubling the previous quarter's activity, with a weighted average lease term of approximately 19 years and a weighted average roll-up in rent of almost 26%. Almost 80% of this quarter's leasing activity was executed at ILPT-owned assets, highlighting the continued robust demand for industrial and logistics properties and supporting our recent focus on acquiring well-leased and attractive industrial assets. Earlier this year, ILPT closed on the strategic acquisition of Monmouth Real Estate Investment Corporation, which includes approximately 26 million square feet of high-quality e-commerce-focused industrial assets. ILPT's consolidated portfolio of well-located assets are currently 99% leased by strong credit-quality tenants with a 9.2 years weighted average lease term. On prior calls, we discussed ILPT's long-term financing plans for the Monmouth acquisitions. which included the sale of additional equity interest in an industrial joint venture that includes Monmouth assets and property sales. However, given the current interest rate environment, which has led to a meaningful deterioration in real estate market conditions, ILPT made the decision to pause any discussions with potential joint venture partners and buyers of assets. In conjunction with these decisions, ILPT reduced its quarterly dividend to preserve liquidity in the short term, We are comfortable that ILPT will weather these short-term challenges as the core operating fundamentals remain robust and represent strong tailwinds until permanent financing solutions are put in place. OPI recently reported strong results this quarter that included growth in both same property cash NOI and normalized FFO. Despite this quarter's strength, office fundamentals remain in a period of transition. as tenants continue to assess their longer-term space needs and possible hybrid work environments. Over the last three years, OPI has carefully curated its portfolio, recycling capital into stronger, well-leased core assets, while continuing to have the security of the U.S. government as one of its largest tenants. Despite headwinds in the office space sector, we remain encouraged by OPI's leasing trends And our internal tenant activity metrics suggests OPI is seeing tenant engagement across its portfolio that exceeds national office sector averages. Turning to our hotel and service retail businesses. At Travel Science of America, business was remarkably strong with adjusted EBITDA of almost $123 million this quarter, representing a 67% year-over-year improvement. While inflation and a possible recession represent possible headwinds, TA has established a resilient business model that should withstand possible pressures on operating margins in the future. At SVC, growth in normalized FFO and adjusted EBITDA reflects the continued benefits of SVC's portfolio diversity, a distinguishing factor when compared to other hotel-focused REITs. Just under half of SVC's assets are in the service retail sector, led by its leases with TA. As I previously highlighted, TA's results continue to reinforce the strength of SVC's service retail portfolio, with aggregate coverage of its net lease portfolio's minimum rents being a very robust 2.8 times as of June 30th. With regards to SVC's owned hotels, The portfolio has benefited from the ongoing improvements to lodging industry fundamentals. Specific to SVC, hotel average daily rates this quarter were at historical peak levels, and RevPar growth exceeded the broader hotel industry average by over 18%. Since the beginning of the year, SVC has sold 59 hotels for almost $510 million and repaid $500 million of senior notes. The strength of SVC's results has led to it now being in compliance with all debt covenants, well ahead of prior expectations. DHC reported yet another sequential quarter of NOI growth in its same property shop segment due primarily to rate increases and occupancy stabilization. A year ago, DHC began the process of transitioning management of 107 communities to new third-party regional operators. which completed late last year. This quarter, occupancy in the transition communities increased 210 basis points, and NOI continues to improve, both positive signs that these regionally focused operators are driving improved operating results. During the quarter, DHC repaid $500 million of 9.75% debt, sold an additional 10% equity interest in its existing Boston Life Science property joint venture, and is making progress towards regaining compliance with its debt covenants. We are encouraged by recent trends at DHC and with continued capital investments in DHC's senior living assets and the recently announced restructuring plan at Alaris Life, we are hopeful that DHC's operating results will continue to improve in the coming quarters. Finally, at our commercial mortgage rate, Seven Hills Realty Trust, We continue to believe that the business has attractive long-term growth prospects. During the quarter, Seven Hills portfolio remained default free and with new originations, its aggregate committed capital was $735 million at quarter end. We expect that Seven Hills will benefit from the current rising interest rate environment because its portfolio consists of 100% floating rate loan investments. which leaves it well-positioned for continued earnings growth. In closing, our public and private managed vehicles collectively have over $37 billion in assets under management today, which represents over $1.3 billion of growth per year on average since going public seven years ago. As I highlighted earlier, there also remain significant opportunities for revenue growth without any AUM growth, through share price improvements at our existing publicly traded equity REITs. Additionally, we remain optimistic that there are ample opportunities to grow private capital AUM, either organically or through possible M&A activity in the years to come. With that, I'll now turn the call over to Matt Jordan, our Chief Financial Officer, who will review our financial results for the quarter.