Q4 2021 RMR Group Inc Earnings Call
Good day and welcome to Rmr's fiscal fourth quarter 2021 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on a touchtone phone.
Do you withdraw your question. Please press Star then two please.
Please note this event is being recorded.
I'd now like to turn the conference over to Michael <unk>. Please go ahead.
Good morning, and thank you for joining Rmr's fourth quarter of fiscal 2021 conference call.
With me on today's call are president and CEO, Adam Portnoy, and Chief Financial Officer, Matt Jordan and.
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 November 16, 2021, and actual results may differ materially from those that we project the.
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 Dot RMR group Dot com investors are cautioned not to place undue reliance upon any forward looking statements and.
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 our earnings release and now I would like to turn the call over to Adam.
Thank you Michael and thank you all for joining US this morning I.
I am pleased to report that RMR finished the fiscal year on a high note as we delivered yet another strong quarter financially.
This quarter, we reported adjusted net income of <unk> 50 per share, which was at the high end of our guidance and representing 28% increase on a year over year basis.
Adjusted EBITDA this quarter was $26 $3 million, which represents a 27% increase compared to last year.
Subsequent to quarter end, one of our managed clients LPT announced a $4 billion acquisition of Monmouth Real estate investment Corporation.
<unk> owns a portfolio of 126 class a industrial logistics properties that are largely occupied by tenants, whose businesses are driven by e-commerce.
This acquisition is expected to be immediately accretive to ILP tea and will be funded through a combination of joint venture equity and debt.
The Monmouth acquisition is the largest single transaction ever announced spine RMR managed company.
Not only will the transaction significantly grow rmr's AUM, but it also highlights our Mars alignment with <unk> shareholders. For example, LPT does not plan to raise common equity to fund this transaction and equity for this transaction will come from forming a joint venture with institutional.
Private investors.
As a result this transaction also highlights the success RMR has had with building out our private capital fundraising capabilities and demonstrates how quickly our mark and scale its business with the current infrastructure.
Yeah.
Our ability to further expand our private capital relationships comes from our commercial real estate expertise operational excellence and World class client service.
This quarter, despite the pandemic related headwinds our organization again delivered another strong quarter of leasing activity as we arranged almost $2 9 million square feet of leases on behalf of our clients an increase of 40% sequentially.
More impressively, we arranged over $10 5 million square feet of leasing in fiscal year, 2021, which is a 39% increase compared to pre pandemic levels from fiscal year 2019.
Notably we saw encouraging leasing trends at OPI as tenants increasingly utilized their office space and prospective tenants have started making strategic real estate decisions.
Oh P. I, we arrange 659000 square feet of leases during the quarter, which is 37% above the trailing 12 month average and generated a weighted average lease term of almost 11 years.
With the Delta variant waning, we are optimistic that demand for office space will remain on a positive trajectory going forward.
Much like <unk> $114 million redevelopment of its life science asset and Torrey Pines, California, which is now 100% leased and expected to generate double digit cash on cash returns. There are also significant redevelopment opportunities in opi's portfolio as well.
We are currently advancing plans to convert OPI is 300000 square foot property in Seattle, Washington to life Science use AUM.
<unk> plans to invest $140 million in redevelopment capital in this project, which is expected to generate stabilized returns in excess of 10%.
Turning to DHT as of today.
<unk> entered new management agreements for all communities transitioning from five star to a diverse group of best in class Regional operators. We believe DHT is now well positioned to unlock value and improved performance within its senior living portfolio.
Operationally this quarter DHA shop portfolio, starting to improve from the lows experienced during the Covid pandemic COVID-19 pandemic.
Specifically same property shop occupancy from five star managed communities experienced its second consecutive quarter of occupancy growth with sales leads increasing 41% sequentially during the quarter and tour volumes also increasing materially in October.
We remain optimistic regarding the senior living sector, giving these encouraging signs and believe the industry will benefit from a rapidly growing target demographic that will drive demand for senior living in the future.
Turning to an update on SBC.
<unk> continues its repositioning efforts and is in the process of selling 68 hotels and an effort to improve the overall quality of the portfolio lower leverage reduce future capital expenditures and improved liquidity.
From an operational perspective, Spc's hotel EBITDA has been positive on a monthly basis since April due to elevated leisure demand strong performance within its extended stay hotel portfolio and slowly improving business travel demand.
So NASA the primary operator of Spc's lodging assets today <unk> is executing on its plans to improve operational performance across the portfolio.
For their hotels managed by Sonesta comparable hotel activity. This quarter saw average occupancy increase almost three percentage points to 61%.
Average daily rate increased 12, 5% and revpar increased over 18% on a sequential quarter basis.
These results were achieved despite disruption in the quarter from the Delta variant.
Lastly, RMR mortgage trust and trauma mortgage trust completed their merger on September 30th to create seven Hills Realty Trust <unk>.
Our merger, creating a larger more diversified commercial mortgage REIT with an expanded capital base improved access to capital and greater financial strength with.
With significant dry powder available and expected interest rate increases ahead, seven hills focus on middle market floating rate transitional bridge loans leaves it well positioned in the current environment.
This quarter seven hills closed six new loans, representing $140 million in originations, which is the highest level of quarterly originations since going public in 2017.
Following the $7 per share special dividend in September RMR ended the quarter with nearly $160 million in cash and we continue to have no debt. Despite.
Despite this special dividend, we remain well capitalized to expand our business in support of this effort. We recently announced the hiring of an in house resource to establish a capital markets team focused on sourcing private capital from high net worth investors family offices targeted registered investment advisors foundations and endowments.
We look forward to announcing additional progress on our private capital growth initiatives in the coming months.
I'll now turn the call over to Matt Jordan, Our Chief Financial Officer, who will review our financial results for the quarter. Thanks.
Thanks, Adam and good morning, everyone. This quarter's results continue to demonstrate strong momentum across many of our key operating and financial metrics.
We again recorded sequential and year over year increases in every headline metric. The majority of which were also in line with our guidance for the quarter.
Before I discuss our results and expectations for next quarter I'd like to touch on the Monmouth transaction.
One method is expected to close in the first half of calendar 'twenty, two and will generally generate incremental annual run rate revenues. So the ultimate amounts are subject to how much joint venture capitalists raised and how many properties that ultimately disposed of.
While there won't be incremental overhead cost our historical investments in people processes and technology will substantially minimize these costs.
We expect to have more definitive guidance on Monmouth related fees and any incremental cost on our next earnings call.
Turning to this quarter's results and our expectations for next quarter.
Management and advisory service revenues increased for the fifth straight quarter with revenues, reaching $46 8 million or $1 $3 million increase on a sequential quarter basis.
This increase is attributable to property management fees from recent REIT acquisition increased construction management fees tied to our expanded oversight of client redevelopment activity.
And revenue growth at our manage operating companies.
Looking ahead to next quarter, we expect revenues to be flat based upon October average enterprise values at our managed equity REIT.
And seasonal declines at our manage operating companies that will be offset by increases in construction management revenues.
As it relates to incentive fees OPI continues to accrue an incentive fee for calendar 2021.
As we highlighted on our last earnings call S&P global discontinued the SNL indices that we historically benchmarked our REIT together.
As a result, we agreed with the boards of the managed equity REIT to transition prospectively to the applicable sub sector MSCI indices for each managed equity REIT.
If October 31, <unk> had been the end of a measurement period, we would have earned an annual incentive fee of approximately $9 million.
Turning to expenses for the quarter.
Cash compensation of $29 million was down sequentially and was lower than our expectations for the quarter largely due to the timing of open positions being filled.
After considering annual merit increases that were effective October one.
<unk> bonus inflation and strategic headcount investments, we expect cash compensation to be approximately $31 million next quarter.
G&A was $7 $3 million this quarter, an increase of approximately $1 million sequentially, primarily due to increased third party costs related to our expanded role in hotel and senior living construction.
As it relates to our expanded construction oversight this quarter, we oversaw a $54 million in construction and almost 20% increase from last quarter.
As we look into fiscal 'twenty, two we expect construction volumes to further increase to $75 million next quarter and $150 million per quarter in calendar 'twenty two.
These projections for construction volumes are conservative estimates to reflect possible supply chain disruption.
Construction management fees will in turn expand to almost $3 $5 million next quarter.
And then had almost $6 million per quarter in calendar 'twenty two.
I share this additional color on our construction fee revenues as we expect there'll be some incremental third party cost to supplement our internal resources.
Looking ahead to fiscal 'twenty, two we expect G&A cost to be approximately $707 $5 million next quarter.
An increase to approximately $8 $5 million per quarter in calendar 'twenty two.
As it relates to our income tax rate, we expect our tax rate for fiscal 'twenty two to settle at 14, 7% as.
As the current fiscal year includes a favorable 60 basis point reduction associated with executive compensation deduction limitation.
In summary, we expect operating tailwind to help offset some of the cost inflation. We are projecting with adjusted earnings per share are expected to range from 47 to 49 per share and adjusted EBITDA to range from $24 million to $25 million next quarter.
We believe our balance sheet leaves us well positioned to pursue a range of capital allocation strategies.
With a focus on the continued growth of our private capital business.
That concludes our formal remarks, operator would you. Please open the line for questions.
We will now begin the question and answer session.
You ask a question press Star then one that I touched on phone if you're using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
And the first question comes from Bryan Maher with B Riley FBR. Please go ahead.
Good morning, Matt and Adam Thanks for all that color.
Two questions for me. This morning, one on the M N. Our acquisition at the end of the day when all set and done Adam what would you anticipate ends up in JV, what ends up being sold and what ends up being capped by I L. P T.
Sure. Thanks for that question, Brian Yes.
We don't know precisely how it's all going to shake out I can tell you sort of the two.
Think there's sort of two to base cases are two different ways you could.
Jake out one the entire portfolio could end up in a JV with probably two or more partners.
With IL <unk>.
Retaining our co investment in that JV that sort of one extreme.
The other extreme is is probably that we.
Keep it on balance sheet, we only move forward with one JV partner.
That we've essentially.
We aligned up today.
For a significant equity investment in it if that's the case the portfolio the $4 billion portfolio would probably shrink.
About 1 billion and a half dollars of $1 6 billion.
In either case, the transaction will be accretive fairly.
Fairly sizable accretive to <unk>.
And that sure it will sort of leverage will sort of be.
Between six and eight times debt to EBITDA for <unk>, it sort of depends on where it shakes out that sort of where it shakes out I call it in and around closing longer term, depending on how much leverage we have it may make sense to try to sell.
Sell additional assets longer term that may be not part of the monmouth's portfolio and or bring in additional equity partners post closing.
That we could bring in as well, but those are the sort of two ends of the benchmark. It's either the full thing goes into the JV, it's still accretive.
It is very accretive for Iot.
Or sort of go into a partial JV, where it remains on the balance sheet, but all of the equity is raised from just one partner and the other thing to highlight I think is very important.
Sort of <unk>.
I alluded in your question, we're not raising any and have no plans to raise any equity capital from the share share issuance in IOP.
We think this highlights the high alignment of interests between <unk> more than how we structured this the fact that we were able to find third party capital.
There was able to there was interest initiative.
<unk> partnered with us to do this deal also highlights we think the strength of the RMR platform and the success. We have had in building out those relationships over the last couple of years. So I think there is positives in la Paz as royalty tier to allow pauses for RMR.
Sort of I look at it as it's a really great transaction to a really good transaction either way. It's a win win for both it's just a matter of exactly how it is going to shake out.
And in your discussions with sovereign wealth funds, what would you characterize as their appetite to do more of these deals and you know above and beyond and then our and what is there.
How are they viewing this is it simply that it's better relative risk adjusted returns and a fairly simple process and they've gotten to know RMR.
Blaine capital into certain industries route you and do you suspect we might see any other similar type deals maybe not of that size across the other managed REIT.
Yes, I would say the appetite from sovereign wealth funds generally is pretty robust to continue to invest in commercial real estate in the United States in certain sectors, especially in and around industrial I think the fact that we have had a successful joint venture get off the ground. So far with a couple of sovereigns and <unk> certainly.
Was it helped us.
This deal.
<unk> announced this deal as well.
Yes, I think this relationship with what I'd call permanent capital providers equity capital providers like the sovereigns is going to continue to grow for our company at RMR and I think theyre going to be ways that we're going to be able to do deals and transactions.
With the reach with not with the Reits I think theres going to be a lot of different ways, we're going to grow.
This way with regards with regards to <unk>.
Their appetite to put money to work in different asset classes, yes.
I think generally industrial multifamily, especially within sectors of office. They are very focused on putting money to work I would even say in sectors of retail you might be surprised if they have appetite to put money to work. So.
The only place I think there are probably a little shy to put money to work today is probably within hotels.
Some downtown office towers, they are general office.
Probably the senior living.
Sector is an area that they are probably little shy to put money to work those are the areas. We're involved in but not sure. It gives you a feel for what their appetite is like.
Thank you Adam.
Okay.
The next question comes from Ronald Camden with Morgan Stanley. Please go ahead.
Hey, just sticking on the LPT deal.
Maybe can you provide just any color on your conversations with.
The private capital partners, what are they sort of evaluating to decide how much to participate within this deal.
If you could just give us a sense of that.
Is it their own capital sources is it.
How much industrials they want is the quality of the markets.
What would make them take on more of this deal and then less of this deal what are the factors.
Yeah. So.
Thank you for that question.
They're very the partners, we're talking to theirs.
Generally speaking most institutions.
It went into the last.
If you start in 2019, there were almost all across the board you look at institutions investments in commercial real estate. There were all underway industrial everybody. This is pre pandemic wanted to increased allocations to industrial that just became almost on steroids as we got into the pandemic.
And so theres, even more desire to increase their exposure to industrial I think the things that were.
We're attractive about the mom this transaction for the partners, we are talking with the things we've talked about in <unk>.
<unk> when it announced the transaction.
Very high quality real estate.
Average age of the buildings is about nine years. The average lease terms about eight years, it's almost 100% leased it's over 80% investment grade rated.
It's in some ways, it's a high core plus core portfolio of industrial.
Super core.
Our portfolio of industrial assets and I think they appropriately we're thinking about what type of returns. They wanted to get on that type of investment, which allowed us working with them to ultimately win the portfolio and I think they also leaned a lot on us because.
We are very close to the ground with regards to what's going on in the industrial sector.
There's been a lot of press written about how IOP T was the successful bidder for Monmouth, but there were other bidders that are better known than US. There. We're also bidding and the day, we outbid them I would argue that we actually because of the way, we're set up and the amount and the number of transactions, we look at from an industrial <unk>.
<unk> I mean, we're actively looking at the sub $50 million transaction level, we look at transactions $50 million to $100 million. We can also look at transactions of $150 million. It's just because of the way we are organized with our almost 35 offices around the country.
The relationships, we have in multiple different markets.
We had a really we have a really good sense of where the market is more industrial real estate today.
And we feel very confident that we.
We bought this at a discount to where it would trade sort of broken up meaning some people call you buy wholesale and you could sell retail we're actually pretty optimistic if we are if we ended up going down the path that we have to sell some assets here.
We might end up selling them at a higher price than we allocated to these assets based on the purchase price of 4 billion, meaning cap rates.
We have seen cap rates for lower quality real estate with lower credit quality.
In worst markets trade at lower cap rates than what we're going into with this transaction and four 4%. So I think all of those factors sort of played played a role in.
The partners that we're talking with the partners that were talking to you regarding this transaction I think they feel very excited about the transaction and again everybody is under allocated in industrial and this is an opportunity to buy a large portfolio will answer one last part of your question you asked if it's direct capital. This is direct capital we're talking to.
These are not syndicators, we're not talking to some intermediary that then Tom we are talking to the actual provider and manager of the actual capital itself. It's a sovereign wealth investor that we are dealing with that is wind up and most of the capital we're talking to that potentially also come into the transaction is the same.
<unk> characterization of that capital direct capital not dealing intermediaries not dealing with syndicators, we're dealing with the ultimate sort of provider of the capital.
Great and then just my second one was just so.
So.
Extent that this goes mostly on balance sheet.
I think the presentation talked about anywhere from zero to $1 $6 billion of sales of assets. I was just curious on that if you know to the extent that it is going that route what what sort of a high level, how you decide which assets to keep which assets to sell or theyre, just obvious sell candidates geographic wise or how are you.
You go about sort of parsing.
Which ones you keep with once you sell.
Sure it's a great question.
It's a question we're still working our way through in this.
We obviously entered the transaction with a idea of which properties. We would look to think about selling but we havent finalized that process yet.
The hard thing with this portfolio and your people are going to think I'm being cute, but the whole portfolio is really high quality and so when we talk about selling assets General view is.
We'd like to sell the lower quality assets within the portfolio, but that is on a relative basis within the portfolio. So.
Not quote me specifically on these numbers, but for example, if the whole portfolio is being bought at a four cap.
There are some buildings that like probably worth three and a half and there are some buildings worth four and a half we're probably going to migrate towards a majority of the portfolio that we think about selling is going to be more in the four.
The little look the lesser quality within the portfolio. So more of the properties that might be at the four or five cap rate now that all being said, that's where the value. We put on them. We honestly believe that if we go out the market on an individual basis or small portfolio will probably do better than that just because what we're seeing in the market, but I think.
That sort of gives you a sense of how we're looking at the portfolio.
For the potential sales.
That's super helpful. If I could sneak in one more.
Just on senior housing because you touched on it but you've obviously seen sort of the occupancy pick up from the Nic data, but maybe what are you seeing in terms of labor costs. You know, we heard about the labor shortages.
Just any color there thanks.
Sure within the senior living business.
Are the company, we oversee five star.
<unk> is clearly experiencing the same things you hear about throughout the industry.
There are labor issues in filling open positions.
They have been addressing that partly addressing that by.
Increasing wages, it's not a one size fits all and all markets because we have a portfolio in several different markets the sort of COVID-19.
It sort of depends on.
The prevailing wage in that market what are your competitors.
What with the team is doing is even providing more flexibility to regions into community leaders to sort of have more discretion in terms of trying to increase wages if necessary to try to fill some of those labor shortages throughout the portfolio, but it's real we not only see les.
Ever shortages.
And in a wage inflation in senior living we obviously run a large hotel portfolio within the organization. We also run a large.
A large number of trucks at stops that have a large number of employees. This is pervasive pervasive not just in senior living but sort of across the cross industries and it sort of the same story across the board.
Seeing.
Helpful. Thank you.
The next question comes from Jim Sullivan with <unk>. Please go ahead.
Thank you.
Just continuing with some questions on the private capital.
Initiatives.
I'm not sure you may have disclosed this but.
Uh huh.
I think you've indicated you have one definite sovereign wealth investor for the <unk> transaction.
Did you indicate whether that sovereign wealth investor had also done business on the prior JV you had structured with IMTT.
Sure I'm not sure if we've disclosed it but I am happy to tell you that that sovereign investor, Yes, we have done business with them before and they are involved with us in the prior.
Our LPG joint venture, yes, so they have a long history with US yes, yes, okay. Good. Thanks.
I was.
Interested in your comment about them.
About building.
Sourcing group private capital sourcing group internally.
Are you going after.
Different pockets of capital.
Did you put together I guess this quarter, maybe last quarter as well and I wonder kind of two part question.
A really kind of a three part question but.
Do you have a kind of target.
The amount of capital that you would like the group to to raise our number one number two what is the incremental cost.
For putting together this group.
You have.
And then thirdly is there is there a specific vehicle that.
That the group will be raising capital for for example, an open ended fund of some sort what is the what is the shape of this to come that we should expect.
Yes, so thanks Tim.
Your tier three part question with target capital raise.
I don't think we have a specific number out there other than multi billions of dollars.
No we wouldn't be taking this on unless we could get well north.
Of a $1 billion raised this way, we actually feel pretty bullish that we're going to be able to raise significant amounts of capital.
Away from the public markets in private.
Private investors going forward sovereign wealth funds being one source of the capital, but I think theres going to be opportunities in other channels as well.
And so theres no real ceiling to the amount of capital.
But we certainly have pretty high hopes that it will be in the billions.
The incremental cost today, it's not very much at all.
Just have one dedicated resource internally.
As that group gained more success I think youll see the the <unk>.
<unk> resources sort of grow.
I think the I don't fully.
Let me put it this way I don't think youre going to see us.
Adding a.
Significant amount of costs before we start seeing significant amount of dollars range. So it's going to be sort of incremental costs along the way.
And as they are as they have more success.
The costs will probably go will increase for that group, but it's not going to be front end loaded.
If you understand what I mean.
In terms of the vehicles.
<unk>.
Yes, we have.
A couple of vehicles that we are very focused on.
Approaching the market with today I'm not going to get too specific about the vehicles other than to say that they are structured.
Like an open end fund, meaning the permanent capital vehicles. So they do provide some liquidity, but theyre not but it's not an open end fund that sort of.
It's permanent capital vehicles that.
Do allow for some ability to redeem your interests over time, but the way we are structuring it is a pretty sizeable lock up in the first.
Called several years of investment and then there is limited liquidity events on the on the out years.
It sort of being set up as we think about it in the permanent capital basis and.
Look.
Yes.
In terms of the asset classes, you can think about what I said earlier on the call. It's in the areas that investors have appetite for and which we feel pretty good about in terms of their long term growth prospects.
Industrial.
It's also sectors of the office space, such as like medical office buildings or life science buildings.
It could be sectors of.
The retail space, we own a lot of retail within the organization, but it's pretty focused on service oriented net net lease retail, which retail has been covered with pretty badly bad brush stroke through the pandemic, but net leased single tenant retail has actually done quite well and we only.
<unk> portfolio of those so that could be an area that we could.
Could expand into so I think we have a lot of different areas that we could take the platform and yes. We are we have some we have a couple of vehicles that we are.
Getting geared up to take to market and we based on initial feedback from sort.
Sort of.
Testing those vehicles out with a call it a handful or more than a handful of investors has gotten pretty pretty pretty positive reaction. So far so we feel pretty optimistic about the success, we may have with it.
And just Oh.
I'm curious given the liquidity on the RMR balance sheet as well as.
The liquidity, that's available with with either operators or manage rates would you expect.
That.
Any of that will be sourced for to put skin in the game as it were.
Yeah.
Before you market the product before they start to market the product directly to family offices et cetera.
Yes.
The short answer is yes, that's really as I think about the liquidity on our balance sheet, that's primarily where I think about it might be being used as co investment into some of these vehicles as we get them going.
As the debt is sort of how we view our market in terms of when the money comes in.
From a timing perspective, just the way these vehicles were sort of thinking about them.
They would the money would probably come in simultaneously to co investment would come and simultaneously with the sort of the investment from third parties I don't think it would be in advance of it would be sort of lined up to come in at the same time as the third party capital comes in so that's the way we're thinking about it.
Okay, then finally for me.
The the private equity platform acquisition.
Idea that's been talked about for several quarters now, but you haven't been able to find the right fit is this new platform.
Instead of that or are you still looking to acquire a private equity platform.
Sure, Yes, we've talked about it you're right Jim we've talked about for many quarters couple of years, probably we've been talking about it.
I don't know if its instead of but it certainly.
Where our focus is now is trying to we've had a fair amount of success I think we're going to have more success in the coming months and quarters.
Around the private capital capabilities Inorganically growing it so that is clearly where our focus is.
We were very focused for about two years.
Acquiring a platform when I say focus we were actively I don't know hows the St hunting for a platform.
<unk>, reaching out to different firms identifying firms we were working with third party advisors to help us do this.
And we pretty much scoured the universe of potential partners, we got down the road three different times with three different partners, where we had reached agreement on principle.
The economics were done and all three deals sure unraveled over social issues essentially the founders of the business has decided that they did not want to exit.
And they wanted to and so they ended up not doing a deal with anybody it's not just with us. They just didn't do a deal with anybody and it wasn't overprice it was over so social issues.
So we sort of spent two years.
At 333 bites it at three different apples tried to make it happen.
<unk>.
After the third one which really happened this summer sort of walked away from us after we reached agreement.
A lot of term sheet agreed to.
We sort of step back and said you know.
We probably should not be focused on as much proactive energy around.
M&A. So that's that's really the change, meaning we're not actively sort of.
Going out there we don't have any third party advisers on retention that are helping us seek out those types of partners that all being said for the last two years, we've met a lot of people. So we.
We know a lot of folks and we just in the last quarter, we were approached by a group that.
Has indicated that its interesting in selling that we have not talked to before and they approached us because they knew we were active in the marketplace.
It's probably not a transaction that's going to work for us, but just the fact that they reached out to us and I don't think they reached out to many groups I think it was a very small group of folks they reached out to.
Is sort of indicative of that were out there people know we're there.
We will continue to evaluate M&A, we're not adverse to it we'd like to do it I just think it's going to be more.
Reverse inquiry, it's going to come to us more than us sort of seeking it out on our own.
Okay very good thanks for that answer.
Again, if you'd like to ask a question press Star then one to join the queue.
The next question comes from Kenneth Lee with RBC capital markets. Please go ahead.
Hi, Thanks for taking my question.
Just one on the ILP team on Ms.
Announcement there.
Could you just talk broadly how the economics could potentially defer for RMR just based on the two scenarios that you outlined.
Whether it be the asked us could go on the JV or retain on the balance sheet.
Hey, Ken.
Clearly given all the variables Adam outlined the range is pretty wide, but just to give you ballpark from a gross fee run rate it could be as low as $7 million based on the facts as we know them today to as high as $22 million.
And as we highlighted in our prepared remarks, I think over the next few months before our next call we'll have more clarity to provide but that is the range as we see it today.
Great very helpful.
And then just one follow up around the the prepared remarks, you talked about construction revenues and seeing some potential impact from supply chain wondering if you could just elaborate upon that thanks.
I don't think its anything different than what you are hearing in the news are seeing elsewhere I just think we in the numbers I quoted.
We wanted to be clear that we hedge those a bit our hope is to exceed those ranges, but those numbers reflect some of the delays we're seeing.
And getting product in the.
Price inflation, we're seeing on the jobs in the construction we're doing.
And as I am, giving you forecasts out into late into 'twenty two.
There's just so many variables that we just wanted to make clear the $150 million per quarter in calendar 'twenty two.
Obviously subject to change, but nonetheless, we're hoping we can beat those numbers.
Gotcha.
Helpful. Thanks again.
The next question comes again from Jim Sullivan with <unk>. Please go ahead.
Sure Thanks for allowing another follow up here.
Very specific question you've talked previously.
Terms of Densification projects about a.
Forward the travel center site in Nashville.
Or maybe an existing travel center site in Nashville and I.
Wonder if you could give us an update as to if there is one for what their plans are around that location.
Sure specifically around the Nashville site that is a project that is.
Still I would say relatively early days, we are we have gotten broad.
First round approvals.
From the city.
I think in terms of.
How large it could be it could be as large as upwards of 4 million square feet of mixed use.
It's a 20 acre site, it's got four basically city blocks that you could think about that are available.
But for redevelopment.
What we are in the process of trying to figure out now.
Obviously, it would be a staged development and we're trying to figure out what is the first stage.
The good news is I can just tell you at a high level, there's been a lot of interest.
From.
Both I call office and retail.
Tenants that are interested in anchoring.
The first phase of that project I think that is a project that.
Its earliest we would not be talking about.
Kicking off actual construction until late into 'twenty, two or sometime well into 'twenty two.
Before it can really get going but it is it is a project is progressing we are continuing to do a lot of work on it we feel very bullish about our national market generally we feel very bullish about the east bank and what's going on in that side of the river next to where the Titans play and there's a lot of different development projects were not the only.
Parcel and large parcel that is being planned for redevelopment over there.
For investors listening in on this call maybe the closest analogy that we see to the East Bank and it's very it's actually very analogous to us as is here in the Boston market. It's a lot like the seaport district, so across the river in an area that if you looked at here in Boston 10, 15 years ago was nothing but a bunch of part.
Parking lots and today, it's a really well developed mixed used almost second downtown Boston.
It feels very similar down there on the East Bank.
When you go there and you walk and you look at it and you talk about what you see what's happening in Nashville.
And arguably <unk>.
Boston has got a lot of very positive attributes, but Nashville, it's clearly a market that's growing and we feel pretty good about the prospects for a development on the East Bank there.
Okay. Thanks.
Okay.
This concludes our question and answer session I will now turn the conference back over to Adam Portnoy for any closing remarks.
Thank you all for joining us today, operator that concludes our call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
Yeah.
Okay.
Yes.
[music].
Okay.
Yes.
[music].
Sure.
[music].
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Yes.
[music].
Yes.