The RMR Group Inc.

Good morning and welcome to the RMR Fiscal Fourth Quarter 2022 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 a question, you may press star then 1 on your touch-tone phone. To withdraw from the question queue, please press star then 2. 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 RMR's fourth 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 will provide details about our business and quarterly results, followed by a question and answer session. I'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 15, 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. A 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 our earnings release. And now, I would like to turn the call over to Adam.

Thanks, Michael, and thank you all for joining us this morning. For the fourth quarter, we reported adjusted net income of 57 cents per share and adjusted EBITDA of $29.5 million dollars. both increases of at least 12% on a year-over-year basis. This quarter's results are indicative of RMR's resilient business model, which can perform well in all economic cycles. While commercial real estate transaction activity has slowed meaningfully, we think there remains a strong investment case to be made for RMR and its clients as our collective organization continues to proactively work through the ongoing headwinds related to inflation, increasing interest rates, and capital markets volatility. From a leasing perspective, fundamentals across our managed assets continue to trend favorably as we arrange 2.7 million square feet of leases on behalf of our clients, which resulted in a 23% roll-up in rents and a weighted average lease term of 5.8 years. For the entire fiscal year 2022, leasing volumes exceeded 13.5 million square feet, a 28% increase compared to fiscal year 2021, and a 78% increase compared to pre-pandemic levels in fiscal year 2019. Historically, real estate has performed well through inflationary environments. Also, most real estate leases typically have mechanisms to reprice rents to offset cost increases. This is especially true for shorter lease-term asset types such as hospitality and senior living. Additionally, a majority of the leases within our managed office industrial and service retail portfolios currently have expense recovery provisions that largely offset the effects from the current inflationary environment on property operating expenses. Before turning it over to Matt, I want to briefly touch upon some highlights across our platform. First, at ILPT, we continue to experience strong operating fundamentals. ILPT's portfolio is over 99% leased, and this quarter we facilitated new and renewal leases for approximately 1.7 million square feet and weighted average rental rates that were 77.5% higher than prior rental rates for the same space. This quarter we also organized a $1.2 billion debt financing that enabled ILPT to fully repay the bridge loan facility used for the Monmouth acquisition earlier this year. We are pleased with the outcome of this debt refinancing, and we believe ILPT has both the time and flexibility to execute on deleveraging strategies because it has no debt maturities for almost five years. At OPI, despite the challenges seen across the office sector, we were pleased with same property cash basis NOI growth and continued leasing momentum as we facilitated 606,000 square feet of new and renewal leasing, including a new lease for 84,000 square feet to anchor its life science development project in Seattle, Washington. Overall, OPI's 90.7% portfolio occupancy continues to lead the industry and its balance sheet remains well positioned with $629 million of total liquidity and no senior notes maturing until mid-year 2024. At SVC, FFO doubled from prior year levels, while EBITDA increased 26% year-over-year, both a reflection of the continued benefits of SVC's portfolio diversification and further improvements in lodging fundamentals. SVC's lodging operating improvements were most pronounced within the full-service portfolio which benefited from strength across major coastal and destination markets, as well as the continued recovery of urban full-service and suburban select-service hotels. Additionally, SVC's service retail assets, led by its leases with TA, continue to perform solidly with occupancy at 98% and rent coverage increasing sequentially to 2.9 times as of September 30th. This positive operating momentum helped support SVC's decision to reinstate its normal quarterly dividend at 20 cents per share, which represents an FFO payout ratio of only 37%. This decision was driven by SVC's continued improvements in portfolio operating metrics, coupled with available liquidity of over $800 million, including over $100 million of cash and over $700 million of undrawn amounts on its revolving credit facility. At DHC, this quarter saw same property cash basis NOI in their office portfolio segment increase 4.7% year over year and 1.2% sequentially. As it relates to DHC senior living portfolio, while inflationary pressures continue to impact operating costs, occupancy improved 110 basis points sequentially which was DHC's sixth consecutive quarter of occupancy growth. We are confident in DHC's ability to both refinance any upcoming debt maturities and continue investing in its senior living communities because DHC is well capitalized with over $800 million of cash as of September 30th. To conclude, I'd like to reaffirm our confidence in the ultimate recovery of our managed equity REITs as we help them navigate these turbulent markets. I also believe it's important to reinforce our alignment with our REIT shareholders, as RMR's revenues and cash flows are directly impacted by changes in our managed equity REIT share prices. To put this in perspective, if we close the gap between enterprise value and the historical cost of our managed equity REIT's underlying assets, we would generate approximately $60 million of incremental revenues annually. Our incentive fee structure with the managed equity REITs further aligns us with shareholders because the only way we can earn incentive fees is if we exceed each REITs respective peer group shareholder return. While we do not expect to earn incentive fees in calendar year 2022, we remain optimistic that the strategic steps we are taking across our clients will improve total shareholder returns and in turn increase the likelihood of receiving incentive fees in the future. While we appreciate the stability our managed equity REITs provide us, we also continue to pursue external opportunities to grow and diversify our platform. This past fiscal year represented another transformative year for the organization, with AUM increasing $4.6 billion, and most importantly, private capital AUM growing to $3.9 billion. Access to private capital gives RMR an additional path for continued growth, especially during times like these with pronounced market volatility. As I have said on prior calls, given the current economic environment, I expect there may be unique opportunities to take advantage of in the market that will benefit our platform for years to come. With $190 million of cash and no debt, we remain well-positioned to do just that. I'll now turn the call over to Matt Jordan, our Chief Financial Officer.