The RMR Group Inc.

Good morning and welcome to the RMR Group Fiscal Second Quarter 2023 Earnings Conference 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 one on your telephone keypad. 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 Melissa McCarthy, Manager of Investor Relations. Please go ahead.

Good morning, and thank you for joining RMR's second quarter of fiscal 2023 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 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, May 4th, 2023, 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 under 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 financial results. On today's call, we will discuss the planned merger between OPI and DHC in our prepared remarks. OPI and DHC have not yet filed a preliminary joint proxy and registration statement with the SEC, and therefore we will not be taking questions about the merger. In addition, we will discuss the planned acquisition of TA by BP. As a special meeting of TA shareholders to approve the merger takes place on May 10th, we will not be taking questions on this transaction either. And now I'd like to turn the call over to Adam.

Thanks, Melissa, and thank you all for joining us this morning. In the second fiscal quarter of 2023, we continue to navigate a challenging economic environment for commercial real estate. Despite this turbulent backdrop, we are pleased to report solid financial results highlighted by adjusted earnings per share of 49 cents, adjusted EBITDA of $25.3 million, and an annual dividend of $1.60 per share that remains secure and well covered. Collectively, these results are a reflection of our diverse client base and durable business model. As it relates to operating fundamentals across our platform, We are proud of the tireless efforts of our employees to drive continued value at our managed assets, with RMR ranging almost 2 million square feet of leasing on behalf of our clients at a weighted average lease term of over nine years during the quarter. This leasing velocity across our managed portfolio resulted in a quarter-end consolidated occupancy rate of almost 96%. Count the year 2023, so far has been marked by three milestone events among RMR's client companies, all of which look to address the unique opportunities and challenges certain of our clients faced as we look to position them for long-term sustainable success. First, in February, TA announced that it entered into a definitive agreement to be acquired by BP for $1.3 billion. TA has been on a transformational journey over the last three years, and we are pleased with the 84% premium this transaction represents for TA shareholders. There is a special meeting of TA shareholders scheduled for May 10th to approve the transaction, and earlier this week, TA announced that both ISS and Glass-Lewis came out in support of the transaction. Assuming TA gets the requisite shareholder approval, the sale is expected to close on May 15th. Second, in March, Alaris Life announced that ABP Trust successfully completed a tender offer at an 85% premium to the prior 30-day average trading price. We believe that Alaris Life, now a private company, will be able to enhance its focus on operational excellence and best position the company to successfully deliver on its business plan. Lastly, in April, two of our perpetual capital clients, DHC, and OPI announced an agreement to merge and change the combined company's name to Diversified Properties Trust. The merger will create a diversified REIT with a broad portfolio, defensive tenant base, and strong growth potential. Financially, the merger is expected to be accretive to both entities' leverage and cash flow. The combined entity is expected to provide a sustainable annual dividend of $1 per share, with the potential for dividend growth in the future. As it relates to DHC, it is facing a number of serious near-term challenges driven largely by debt covenant restrictions that prevent it from issuing or refinancing debt. This problem is exacerbated by DHC having $700 million of debt coming due in early 2024, and DHC does not expect to be in debt covenant compliance before this debt comes due. As a result, one of the biggest benefits of this merger for DHC is that upon its completion, the combined company will be in debt covenant compliance and can access regular way refinancing of its debt maturities. In addition, while the shop recovery is underway and trending favorably, it is not happening fast enough and further capital is needed. In addition to debt refinancing capital, to fund investments in DHC's portfolio, to help drive the ongoing turnaround in the senior living properties. Finally, DHC also benefits from the merger with OPI by immediately providing a significant increase in its dividend for shareholders. Absent the merger, DHC does not anticipate reinstating its regular dividend until 2025. As it relates to OPI, they are facing a number of current and longer-term challenges. as office sector headwinds are likely to negatively affect office owners for the foreseeable future. More specifically, the financing environment for office properties is, and is expected to remain, very difficult for the foreseeable future. One of the biggest benefits of the merger for OPI is that it provides it with greater access to capital sources, including low-cost government and agency debt. OPI's office portfolio will also require increased capital investments in the coming years, and OPI was facing an unsustainable dividend rate prior to the merger announcement. By merging with DHC, OPI gains access to an attractive, unencumbered portfolio of medical office buildings and life science properties, and we expect OPI will benefit long-term from the expected eventual recovery in DHC's shop portfolio. Turning to other highlights of notes across our clients. During the quarter, SVC further enhanced its financial profile by redeeming its June 2023 senior notes using the proceeds from a $610 million issuance of net lease mortgage notes. In light of the challenging capital markets environment, we are pleased with this financing and believe it's attributable to the strength and positive outlook of SVC's retail portfolio. SVC is also expected to benefit from BP's acquisition of TA, as SVC will receive approximately $379 million in cash from the transaction. SVC also strengthens its tenant credit characteristics because the amended travel center leases will be guaranteed by BP's A-minus credit ratings. SVC's hotel portfolio also continues to experience positive operating fundamentals with robust increases in occupancy, ADR, and REVPAR. With all facets of SVC's business improving, we believe SVC is possibly on a path to generate incentive fees to RMR in the future. At Seven Hills Realty Trust, our publicly traded mortgagery, we believe there remain significant opportunities to grow this part of our business. Seven Hills portfolio remains default free a testament to our disciplined underwriting and asset management capabilities. In addition, with the recent pullback by many regional banks, Seven Hills has seen its pipeline swell to over $1 billion in possible transactions. Whether it be at Seven Hills or a new private capital vehicle, we believe our successful lending platform leaves us well positioned to possibly grow this type of AUM for RMR in the future. With almost $200 million in cash and no debt, We believe our durable business model affords us the benefit of patience to take advantage of strategic opportunities that we believe will result from the ongoing market volatility. I'll now turn the call over to Matt Jordan, our Chief Financial Officer.