Q1 2022 RMR Group Inc Earnings Call

Good day and welcome to the RMR group fiscal first quarter of 2022 earnings call.

Speaker 1: Good day and welcome to the RMR group fiscal first quarter 2022 earnings call. All participants will be in a listen on the mode. Should you need assistance in significant concerns, especially by pressing star than 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 touchstone phone. To withdraw your question, please press star then two.

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Speaker 1: Please note this event is being recorded. I would now like to turn the conference over to Michael Paudish, Director of Investor Relations. Please go ahead.

Please note. This event is being recorded I would now like to turn the conference over to Michael Kearney Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining Rmr's first quarter of fiscal 2022 conference call.

Speaker 2: Good morning, and thank you for joining RMR's first quarter of fiscal 2022 conference call.

With me on today's call are president and CEO , Adam Portnoy, and Chief Financial Officer, Matt Jordan.

Speaker 2: With me on today's call are President and CEO Adam Portnoy and Chief Financial Officer Matt Jordan.

Just a moment they will provide details about our business and quarterly results followed by a question and answer session I.

Speaker 2: 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.

Speaker 2: I would like to note that the recording and retransmission of today's conference call 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.

Speaker 2: 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 January 28, 2022, and actual results may differ materially from those that we project.

Speaker 2: These forward-looking statements are based on RMR's beliefs and expectations as of today, January 28, 2022, and actual results may differ materially from those that we project.

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.

Speaker 2: Company owner takes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's copy of the book.

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.

Speaker 2: Additional information concerning factors that could cause those differences is contained in our filings with the Security 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.

Speaker 2: investors are cautioned not to place undue reliance upon any forward-looking statement.

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.

Speaker 2: 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.

Speaker 2: Reconciliation of net income determined in accordance with US generally accepted accounting principles to adjust the net income, adjust earnings per share, adjust the EBITDA, and calculation of adjust the 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.

Thank you Michael and thank you all for joining US this morning for.

For the first quarter of fiscal 2022, which ended on December 31.

Speaker 3: For the first quarter of fiscal 2022, which ended on December 31st, we reported adjusted net income of $0.46 per share and adjusted EBITDA of $23.3 million.

We reported adjusted net income of 46 per share and adjusted EBITDA of $23 3 million.

Speaker 3: We ended calendar year 2021 with $33.4 billion of assets under management and remain well capitalized with over $100,000,000,000,000 of cash and no debt.

We ended calendar year, 2021 was $33 $4 billion of assets under management and remain well capitalized with over $181 million of cash and no debt.

As we begin calendar year 2022, we are increasingly optimistic about our business.

Speaker 3: As we begin calendar year 2022, we are increasingly optimistic about our business.

Despite the continued headwinds in certain of our clients are facing related to COVID-19 variance over 87% of the adult population is at least partially vaccinated in the United States recent consumer spending has trended higher in the fourth quarter GDP growth was approximately 7%.

Speaker 3: Despite the continued headwinds and certain of our clients are facing related to COVID-19 variants, over 87% of the adult population is at least partially vaccinated in the United States. Recent consumer spending has trended higher, and the fourth quarter GDP growth was approximately 7%

Real estate fundamentals are generally healthy and continue to be supported by a strong commercial real estate market as fourth quarter transaction volumes increased 97% year over year.

Speaker 3: Real estate fundamentals are generally healthy and continue to be supported by a strong commercial real estate market. As sports quarter transaction volumes increased 97% year over year.

These trends are influencing the strong fundamentals across the majority of the real estate portfolio that RMR managers.

Speaker 3: These trends are influencing the strong fundamentals across the majority of the real-state portfolio that are in our management.

From an operational perspective, our organization continued its focus on delivering high quality wellness focused in amenity rich buildings to our tenants. This was evidenced by leasing volumes. This quarter. There were the highest levels over the last decade as RMR arranged approximately 4 million square feet of leases for an average.

Speaker 3: From an operational perspective, our organization continued its focus on delivering high quality, wellness focused, and amenity rich buildings to our tenants.

Speaker 3: This was evidenced by leasing volumes this quarter. There were the highest levels over the last decade. As RMR arranged, approximately 4 million square feet of leases for an average term of 8.5 years, and with an average gap rate roll-up in excess of 7%.

Each term of eight five years and with an average GAAP rent roll up in excess of 7%.

Leasing levels represented an increase of 39% sequentially and a 35% increase over pre pandemic 2019 comparable period leasing volumes, while the industrial sector remains robust this quarter's leasing activity was spread broadly across all of the real estate sectors, we manage.

Speaker 3: These leasing levels represented an increase of 39% sequentially and a 35% increase over pre-pandemic 2019 comparable period leasing volume.

Speaker 3: While the industrial sector remains robust, this quarter's leasing activity was spread broadly across all the real estate sectors we managed. We also remain confident in the future of office and the prospect of increased business travel to fuel increased hospitality and leisure spending in the coming months.

We also remain confident in the future of office and the prospect of increased business travel to fuel increased hospitality leisure spending in the coming months.

Before moving to some of the notable private capital announcements of the quarter I wanted to first highlight some significant strategic steps taken to best position our client companies for success.

Speaker 3: Before moving to some of the notable private capital announcements of the quarter, I wanted to first highlight some significant strategic steps taken to best position our client companies for success.

As a reminder, we are limited as to what we can discuss this quarter regarding our public clients as we are reporting results in advance of them.

Speaker 3: As a reminder, we are limited as to what we can discuss this quarter regarding our public clients as we are reporting results in advance of them.

First despite tracking ahead of its peers on a three year total return basis throughout most of the year market volatility in the fourth quarter adversely impacted Opi's total return relative to its peer group, resulting in no incentive fee for calendar year 2021, while we were disappointed we remain hiring.

Speaker 3: First, despite tracking ahead of its peers on a three-year total return basis throughout most of the year, market volatility in the fourth quarter adversely impacted O.P.I.'s total return relative to its peer group, resulting in no incentive fee for calendar year 2021.

Speaker 3: While we were disappointed, we remain highly encouraged by OPI's three-year total return of 14.4%, which reflects OPI's successful bee-leveraging and capital recycling initiatives over the last three years.

Courage by OPI three year total return of 14, 4%, which reflects OPI successful deleveraging and capital recycling initiatives over the last three years. Similarly, IOP Te's total return over the past three years was 43, 9% and we're excited to continue utilizing private capital.

Speaker 3: Similarly, IOPTs totally turned over the past three years, was 43.9%. And we are excited to continue utilizing private capital partners to grow this company meaningfully without the need for dilutive equity rates.

Partners to grow this company meaningfully without the need for dilutive equity raises.

FCC continues to hit strategic repositioning milestones as the overall economy continues to improve earlier this year SBC announced the expected sale of 68 Sonesta hotels in the first quarter of 2022 in order to create a stronger hotel portfolio and enhance overall liquidity.

Speaker 3: SVC continues to hit strategic repositioning milestones as the overall economy continues to improve. Earlier this year, SVC announced the expected sale of 68 finesta hotels in the first quarter of 2022. In order to create a stronger hotel portfolio and enhance overall liquidity.

Operationally sonesta, which assume management of over 200 SBC on total owned hotels in 2021 has produced occupancy room rate and revpar metrics to remain on par with its peer set.

Speaker 3: Operation Lee Sinesta, which assumed management of over 200 SPC own totals in 2021, has produced occupancy, room rate, and rev par metrics that remain on par with its pierced-

DHT isn't a similar phase of repositioning its business as the company completed over 100 senior living operator transitions and continues to take proactive measures to improve its balance sheet.

Speaker 3: DHC is in a similar phase of repositioning its business. The company completed over 100 senior living operator transitions and continues to take proactive measures to improve its balance.

Following <unk> recent joint venture announcement, which I will discuss in more detail in a moment the company's currently well capitalized to reduce leverage and invest meaningfully in its portfolio.

Speaker 3: Following DHC's recent joint venture announcement, which I will discuss in more detail in a moment, the company is currently well-capitalized to reduce leverage and invest meaningfully in its portfolio.

Speaker 3: At both DHC and SBC, we believe the future reinstatement of dividends will significantly help to increase total shareholder returns in the future.

At both Ghd and SBC, we believe the future reinstatement of dividends will significantly help to increase total shareholder returns in the future.

Finally, we are pleased with the recent activity at our managed commercial mortgage REIT Seven Hills Realty Trust and continued.

Speaker 3: Finally, we are pleased with the recent activity at our managed commercial mortgage reach, seven hills realty trust, and continue to believe that the business has attractive long-term process.

We continue to believe that the business has attractive long term prospects.

During the fourth quarter seven hills raised its dividend, 67% on the heels of another quarter of record originations and at this pace. We expect they will fully deploy the remaining dry powder by this summer.

Speaker 3: During the fourth quarter, seven hills raised its dividend 67% on the heels of another quarter of record originations. And at this pace, we expect they will fully deploy the remaining dry powder by this summer.

Speaker 3: Seven Hills leverages RMR's Destin Class Originations platform that tells a strong default free track record which we believe will enable RMR to raise meaningful capital for this business line moving forward.

Seven Hills Leverages Rmr's best in class origination platform to tell its a strong default free track record, which we believe will enable RMR to raise meaningful capital for this business line moving forward.

I'd now like to turn to the more significant developments made within our private capital platform this quarter.

Speaker 3: I now like to turn to the more significant developments made within our private capital platform this quarter.

Starting with our industrial REIT IOP T. Depending 4 billion acquisition of Monmouth Real estate investment Corporation is currently expected to close this quarter.

Speaker 3: Starting with our industrial rate, IOPT. The pending $4 billion acquisition of Mommouth Real Estate Investment Corporation is currently expected to close this quarter. This portfolio is comprised of 126 Class A industrial logistics properties that are largely occupied by tenants whose businesses are driven by e-commerce.

This portfolio is comprised of 126 class a industrial logistics properties, they're largely occupied by tenants, whose businesses are driven by e-commerce .

As a result, IMTT does not plan to raise common equity to fund this transaction and expects to fund a portion of the acquisition with private capital raised via large institutional joint venture partners not only does this transaction grow RMR as assets under management, but also highlights our Mars in alignment with our client shareholders.

Speaker 3: As a result, IOPT does not plan to raise common equity to fund this transaction and expects the fund a portion of the acquisition with private capital-raised via large institutional joint venture partners.

Speaker 3: Not only does this transaction grow RMRs assets under management, but also highlights RMRs alignment with our client shareholders by expanding access to capital and growth opportunities with high quality assets.

By expanding access to capital and growth opportunities with high quality assets.

In addition to the pending Monmouth acquisition <unk> also announced that it contributed six industrial properties due to existing industrial joint venture for $206 million. This transaction effectively raise equity capital at net asset value versus at a discount at the corporate level for LPG.

Speaker 3: In addition to the pending Monmouth acquisition, IOPT also announced that it contributed six industrial properties to its existing industrial joint venture for $206 million. This transaction effectively raises equity capital at net asset value versus at a discount at the corporate level for IOPT, which will be used to reduce leverage and fund future growth.

Which will be used to reduce leverage and fund future growth.

Finally, just before the end of the year <unk> announced a $378 million joint venture sale of a 35% equity interest in its two building life science property in the Seaport district of Boston.

Speaker 3: Finally, just before the end of the year, DHC announced a $378 million joint venture sale of a 35% equity interest in its two-building life science property in the Seaport District of Boston.

DHA acquired this property for $1 1 billion in 2014, and the current valuation of the property is $1 7 billion.

Speaker 3: DHE acquired this property for $1.1 billion in 2014, and the current valuation of the property is $1.7 billion. underscoring the attractive return on investment achieved in a relatively short period of time.

Underscoring the attractive return on investment achieved in a relatively short period of time.

We have repeatedly stated that our ability to further expand our private capital relationships comes from our commercial real estate expertise operational excellence and World class client service.

Speaker 3: We have repeatedly stated that our ability to further expand our private capital relationships comes from our commercial real estate expertise, operational excellence and world class client service.

Transactions announced in the fourth quarter collectively raises our private capital assets under management from one $3 billion to $3 2 billion. This quarter were an increase of 139%. We believe this firmly highlights the organic success Rmr's had had building out our private cap.

Speaker 3: The transactions announced in the fourth quarter collectively raises our private capital assets under management from $1.3 billion to $3.2 billion this quarter, where an increase of 139%. We believe this firmly highlights the organic success RMRs had building out our private capital fundraising capabilities and demonstrates how quickly RMR can scale its business with its current infrastructure.

Little fundraising capabilities and demonstrates how quickly RMR can scale its business with its current infrastructure.

I'll now turn the call over to Matt Jordan, Our Chief Financial Officer, who will review our financial results for the quarter. Thanks, Adam and good morning, everyone as Adam highlighted earlier this quarter. We reported adjusted net income of 46 per share and adjusted EBITDA of $23 $3 million with both of these measures being slightly below our quarterly guidance.

Speaker 3: I will now turn the call over to Matt Jordan, our Chief Financial Officer, who will review our financial results for the quarter.

Speaker 4: Thanks, Adam, and good morning, everyone. As Adam highlighted earlier, this quarter we reported a Justin Net income of 46 cents per share and adjusted EBEDU of $23.3 million. With both of these measures being slightly below our quarterly guidance, primarily due to cash compensation coming in higher than our expectation.

Primarily due to cash compensation coming in higher than our expectations.

Management and advisory service revenues were $46 million, which was in line with our guidance for the quarter.

Speaker 4: Management and Advisory Service revenues were $46 million, which was in line with our guidance to the quarter.

Revenues this quarter, representing an increase of $4 $7 million on a year over year basis, and a sequential quarter decline of approximately $800000.

Speaker 4: Revenue to this quarter represents an increase of $4.7 million on a year-over-year basis, and a sequential quarter decline of approximately

The sequential quarter decline was primarily attributable to a reduction in business management fees at SBC in DHT share.

Speaker 4: The sequential quarter decline was primarily attributable to a reduction in business management fees at SBC and DAT, as share price declines throughout the quarter adversely impacted their respective interests.

Share price declined throughout the quarter adversely impacted their respective enterprise values.

I would continue to highlight our expectations of revenue growth from construction management fees. As this quarter includes fees of $3 2 million or 31% sequential quarter increase.

Speaker 4: I would continue to highlight our expectations of revenue growth from construction management

Speaker 4: As this quarter includes fees of $3.2 million, a 31% sequential quarter in...

As we highlighted last quarter construction volumes are expected to further increase throughout the fiscal year as many of our clients embark on redevelopment and repositioning activities within their respective portfolios.

Speaker 4: As we highlighted last quarter, construction volumes are expected to further increase throughout the fiscal year. As many of our clients embark on redevelopment and repositioning activities within their respective portfolios.

Looking ahead to next quarter, we expect revenues to be between 48 and $49 million driven by the following factors.

Speaker 4: Looking ahead to next quarter, we expect revenues to be between $48 and $49 million driven by the following facts.

We are deriving base business management fees from projected enterprise values at THC SBC in OPI using recent share price levels and factoring in the deconsolidation of $620 million in joint venture mortgage debt at D. H C.

Speaker 4: First, we are deriving based business management fees from projected enterprise values at DHC, SVC and OPI, using recent share price.

Speaker 4: And factoring in the deconsolidation of $620 million in joint venture mortgage debt at DHC.

Secondly, the Monmouth transaction is expected to generate approximately $2 million in incremental business and property management fees per month.

Speaker 4: Secondly, the Monmouth Transaction is expected to generate approximately $2 million in incremental business and property management fees per month.

Over time. These amounts are subject to change based on how much joint venture capital is raised and property disposition activity occurs.

Speaker 4: Over time, these amounts are subject to change based on how much joint venture capital is raised and property disposition activity occurs.

Third private capital joint venture activity is expected to generate approximately $1 million in incremental fees next quarter.

Speaker 4: Third, private capital joint venture activity is expected to generate approximately $1 million in incremental feed.

And lastly, the continued increases in construction management fees I previously highlighted will generate approximately $1 $5 million in incremental revenues next quarter.

Speaker 4: And lastly, the continued increases in construction management fees I previously highlighted will generate approximately $1.5 million in incremental revenues next quarter.

Turning to expenses cash compensation of $31 $8 million represented an increase of approximately $2 $8 million sequentially.

Speaker 4: Cash compensation of $31.8 million represented an increase of approximately $2.8 million sequentially, which was driven by...

Which was driven by annual Merit increases.

Bonus inflation as well as an unexpected slowdown in vacation usage, most likely tied to the recent COVID-19 variance search.

Speaker 4: Bonus inflation, as well as an unexpected slowdown in vacation usage, most likely tied to the recent COVID variant.

Looking ahead, we expect cash compensation to be approximately $32 5 million next quarter, driven primarily by payroll tax and 401K contribution contributions resetting on January one.

Speaker 4: Looking ahead, we expect cash compensation to be approximately $32.5 million.

Speaker 4: driven primarily by payroll tax and 401k contracts.

Speaker 4: contributions resetting on January 1st along with continued investments in roles to support the growth of the organization.

Along with continued investments in roles to support the growth of the organization.

G&A was $7 $7 million this quarter and represents run rate levels for the organization.

Speaker 4: G&A was $7.7 million this quarter and represents run rate levels for the organization.

With that said as in previous years, we expect our board of directors will be issued annual share grants in March which will result in next quarter, including incremental G&A costs of approximately $600000 beyond our run rate levels.

Speaker 4: With that said, as in previous years, we expect our board of directors will be issued annual share grants in March, which will result in the next quarter including incremental GNA costs of approximately $600,000 beyond our run rate level.

Aggregating these collective insights on next quarter, we expect adjusted earnings per share to range from 48 to <unk> 50 per share.

Speaker 4: Aggregating these collective insights on next quarter, we expect adjusted earnings per share to range from $0.48 to $0.50 per share, and adjusted EBITDA to range from $24.5 to $25.5 million, both of which represent meaningful, sequential, and cost-effective earnings.

And adjusted EBITDA to range from $24 five to $25 5 million, both of which represent meaningful sequential quarter increases.

We closed the quarter with over $181 million in cash and continue to have no debt.

Speaker 4: Close the quarter with over $181 million in cash and continue to have no

We believe our balance sheet leaves us well positioned to pursue a variety of strategies to expand our private capital business.

Speaker 4: We believe our balance sheet leaves us well-positioned to pursue a variety of strategies to expand our private capital.

That concludes our formal remarks, operator would you. Please open the line for questions.

Speaker 4: That concludes our formal remarks. Operator, would you please open the line?

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Our first question comes from Bill Katz with Citigroup. Please go ahead.

Speaker 1: Our first question comes from Bill Katz with Citigroup, please go ahead.

Good morning, Thank you very much for taking the questions and your guidance, maybe a big picture question to get started.

Speaker 5: Morning, thank you very much for taking the questions and your guidance. Maybe a big picture question to get started. Just sort of curious, as you migrate the capital from the managed REIT to the private markets, at what point do you think that actually it becomes a net contribution to the firm from here? And do the economics, is there any sort of arbitrage in the economics as the dollars move from the public REIT into the private space?

Just sort of curious as you migrate the capital from the managed REIT to the private markets.

What point do you think that actually becomes a net contribution to the firm from here and do the economics is there any sort of arbitrage and the economics as to dollars moved from the public REIT into the private space.

Sure.

Speaker 3: Sure. Good morning Bill. From a big picture perspective, generally speaking the way those deals are structured there's not a meaningful difference in the expected fees that we will generate whether they're in the REIT or in the private vehicle.

Bill.

From a big picture perspective.

Generally speaking the way those deals are structured there is not a meaningful difference in the expected fees that we will generate whether they're in the REIT or in the private.

The private vehicle.

We have been embarking.

Speaker 3: You know, we've been embarking, you know, for the last few years on a concerted effort to try to get more and more private capital AUM under management.

For the last few years on a concerted effort to try to get more and more private capital AUM under management and that is coincide as especially in the last couple of years with a need for some of our REIT to delever.

Speaker 3: And as coincided, especially in the last couple years, with a need for some of our reach to deliver, given largely what happened in some instances with COVID and what's happened to their business.

Largely what's happened in some instances with with Covid and what's happened to the businesses. So it's sort of a perfect situation, where we were able to take some.

Speaker 3: So it's sort of a perfect situation where we were able to take some assets at some of our REITs that needed to be levered, and in some instances, do it at an increase in value, and then put them into a private vehicle that we can continue to manage.

Assets at some of our REIT that needed to Delever and in some instances do it.

An increase in value and then put them into a private vehicle that we can continue to manage.

Speaker 3: You're right that that doesn't effectively increase AUM in the short term. But really what we've been trying to do for the last couple of years is build a base, and that's really what we did over the last few years with the deals that have already occurred, the 3.2 billion.

And youre right that that doesn't effectively increased AUM in the short term, but really what we've been trying to do for the last couple of years is build the base and Thats really what we did over the last few years with the deals has been that have already occurred the $3 2 billion I think the Monmouth transaction is really a demarcation.

Speaker 3: I think the Monmouth transaction is really a demarcation or sort of indicates sort of the beginning of when it's gonna start to grow net AUM going forward. To put it in perspective, the Monmouth transaction is the largest transaction that the organization's 36 years of history has ever taken on, it's $4 billion.

Different sure indicates sort of the beginning of when it's going to start to grow net.

AUM going forward to put in perspective, the marmot transaction is the largest transaction that the organization is 36 years of history has ever taken on its $4 billion.

It's also the only transaction of any size that we've ever done that we are not raising public company equity to fund it.

Speaker 3: It's also the only transaction of any size that we've ever done, that we are not raising public company equity to fund it.

That's pretty remarkable I stayed a lot around the organization, that's a pretty remarkable change for us we are largely raising all the equity there from private institution partners and the only way we could do that is from the relationships. We built over the last few years and sort of building up the current AUM. So.

Speaker 3: pretty remarkable. I say it a lot around the organization. That's a pretty remarkable change for us. We are largely raising all the equity there from private institutional partners. And the only way we could do that is from the relationships we built over the last few years in sort of building up the current AUM.

So I look at the moment transaction is hopefully all incremental.

Speaker 3: So I look at the Monmouth transaction, is hopefully all incremental assets on AUM that would not have been able to occur if we hadn't built out those relationships.

Assets in AUM that would not have been able to occur. If we had built out those relationships and so I see that as sort of a watershed moment. This transaction and I think that going forward. This is the beginning of us being able to actually grow AUM within the private sector.

Speaker 3: And so I see that as sort of a watershed moment, this transaction, and I think that going forward, this is the beginning of us being able to actually grow AUM within the private sector, private side of the business, meaning.

Side of the business meaningfully.

Speaker 3: rather than just taking assets let's say from the existing vehicles and sort of putting it from one pocket into the other not really growing AUM. I do think going forward we're now at that point where I do think it's going to start to accelerate and we're going to be able to do more and more.

Rather than just taking assets, let's say from the existing vehicles and sort of putting it from one pocket into the other not really growing.

AUM I do think going forward, we're now at that point, where I do think it's going to start to accelerate and we're going to be able to do more and more.

Grow AUM net on the <unk>.

Speaker 3: grow a u m net on the uh... on the private side math you want to talk about a shed largely we try to keep the fee

On the private side, Matt do you want to talk I said, largely we try to keep the fee.

It's generally in line, but why don't you talk on a short term what's going on yeah.

Speaker 4: you know that's generally in line but why don't you talk on the short term what's going on? Yeah, so for the at my prepare marks we we highlighted next quarter we're going to see incremental fees of about a million dollars.

In my prepared remarks, we highlighted next quarter, we're going to see incremental fees of about $1 million that is largely even though the arrangements are intended to be largely neutral.

Speaker 4: that is largely, even though the arrangements are intended to be largely neutral, there is a step up in fair value that we saw as significant that Adam highlighted at the Vertex building. And then you also have the phenomenon right now in the case of DHC, where they're paying us on a base fee basis on an enterprise value basis, which is the lower measure and on an implied.

There is a step up in fair value that we saw a significant that Adam highlighted at the vertex building.

And then you also have the phenomenon right now in the case of D. H C, where they're paying us on.

Based fee basis on an enterprise value basis, which is the lower measure and our implied.

Fee basis that they are paying at about 32 basis points. So under the joint venture agreements. There is an inherent step up in the short term given where DH six enterprise value. Currently sits so we're going to see $1 million sequential increase.

Speaker 6: fee basis that they're paying at about 32 basis points.

Speaker 6: So under the joint venture agreement, there's an inherent step up in the short term, given where DHC's enterprise value currently sits. So we're gonna see a million dollars sequential increase quarter over quarter that should normalize.

Quarter over quarter that should normalize over time.

Okay. That's helpful. Maybe just a follow up on mom missed any updated guidance in terms of how you think that the funding mix will play through and then and maybe one last big picture question for you on one hand, your net cash balance sheet is clean and a cash build sequentially.

Speaker 5: Okay, that's helpful. Maybe just a follow up on Mom with any updated guidance in terms of how you think that the funding mix will play through and then add a maybe one last big picture question for you. On one hand, you're a net cash. You bounce each the clean and the cash built sequentially, but it also sounds like a deal multiples out there might be a bit on the higher side. So it gives a sense of how to think about capital deployment from here. Thanks for taking all the questions.

But it also sounds like a deal multiples out there might be a bit on the high side. So it give us a sense of how to think about capital deployment from here. Thank you. Thanks for taking all the questions sure. So bill on the mom transaction. This is unfortunate we can't say much more than what's been already publicly announced and obviously <unk> Hasnt announced its earnings yet were made any.

Speaker 3: Sure. So, Bill, on the Monmouth transaction, this is, unfortunately, we can't say much more than what's been already publicly announced. And obviously, ILPT hasn't announced its earnings yet or made any public further disclosures around the transaction. I can tell you the following. The shareholder vote at Monmouth is scheduled currently for February 17th, and the closing is expected to occur shortly thereafter.

Further disclosures around the transaction I can tell you the following the shareholder vote in Monmouth is scheduled currently for February 17th and the closing of these is expected to occur shortly thereafter.

When we announced the amendment Mommas transaction, there was sort of two big ranges, we told the marketplace or IOP detailed the market. It said, we'd raise between $430 million and $101 3 billion of equity and that it would sell between zero and $1 $6 billion of sales what I can tell you definitive.

Speaker 3: When we announced the MAMMOTH transaction, there were sort of two big ranges, we told the marketplace, or ILPT told the marketplace.

Speaker 3: It said we'd raise between $430 million and $1.3 billion of equity, and that it would sell between $0 and $1.6 billion a sale.

Speaker 3: What I can tell you definitively is we're going to be off sort of the, we're not going to be at the worst case scenarios of those ranges. We will raise more than 430 million of equity and we will sell less than 1.6 billion. So I can directionally tell you things are going to be better, we think, than sort of the outlier worst case funding scenarios that we outlined, but I can't really go much further than that.

Lee is we're going to be off sort of we're not going to be at the worst case scenarios of those ranges, we will raise more than $430 million of equity and we will sell less than $1 6 billion. So I can directionally tell you things are going to be better we think than sort of the outlier worst case funding scenarios that we outlined.

I cant really go much further than that.

Regards to big picture net cash and what we're how we're thinking about cash as you know, we obviously in the third quarter announced and paid a large one time special dividend of $7 a share that got our retained cash down by roughly $400 million of about $180 million today.

Speaker 3: With regards to big picture net cash and how we're thinking about cash, as you know, we obviously, in the third quarter, announced and paid a large one-time special dividend of $7 a share that got our retained cash down by roughly $400 million to about $180 million today.

And we have no debt outstanding.

Speaker 3: and we have no debt outstanding you know for the last few years we've been talking a lot about how we want to retain a cash balance

For the last few years, we've been talking a lot about how we want to retain the cash balance so that we could do two things look at two different things to deploy that cash one to think about strategic M&A and two to invest.

Speaker 3: so that we could do two things. Look at two different things and deploy that cash. One, to think about strategic M&A and two to invest.

Speaker 3: co-investments for new vehicles, neither of which we've had to do.

Investments for new <unk> for new vehicles, neither of which we've had to do on one side, we've actually been very fortunate in the fact that we've gotten as of today is $3 2 billion of AUM under management on the private capital side, we've not had to use $1 co investment dollars. That's been that's been very fortunate for RMR, but im not sure thats going to continue that way as we continue to.

Speaker 3: On one side, we've actually been very fortunate in the fact that we've gotten, as of today, 3.2 billion of AUM under management. On the private capital side, we've not had to use $1 of co-investment dollars. That's been very fortunate for RMR, but I'm not sure that's going to continue that way as we continue to grow the business and launch new vehicles.

Grow the business and launch new vehicles on the strategic M&A side.

Speaker 3: On the strategic M&A side, I think we talked a lot about this the last quarter especially. We are not proactively looking for acquisitions. For a couple of years, we were very proactively looking for acquisitions. We've had many conversations with folks. As I said on the last quarter, we went down the road pretty far with three different parties.

I think we talked a lot about this last quarter, especially we are not pro actively looking for acquisitions for a couple of years. We are very proactively looking for acquisitions, we've sort of had many Congress. We had many conversations with folks as I said on the last quarter. We we went down the went down the road.

Pretty far with three different parties.

Entered into LOI start negotiating the contract all of those three deals came apart not because of economics, but really over social issues, we feel pretty good that we have.

Speaker 3: enter it into LOI, start negotiating the contract. All those three deals came apart, not because of economics, but really over social issues. We feel pretty good that we have a

Speaker 3: you know, scurried the universe of potential partners that we would like to partner with or buy.

Scurried the universe of potential partners that we would like to partner with or buy.

Speaker 3: uh... they know where out there i'm not ruling out mna but i think it's going to be more inbound or reversing inquiries things that come to us we receive phone calls

I know we're out there I'm not ruling out M&A, but I think it's going to be more inbound or reverse inquiry things that come to us we received phone calls.

Speaker 3: I think we are very much in the deal flow now because we were so proactive for over two years out in the marketplace that

We are very much in the deal flow now because we were proactive for over two years out in the marketplace.

Companies and advisers and brokers know about us and our appetite, but we are much more sort of sitting back and waiting and waiting for to see if an opportunity presents itself and so I am less optimistic because we are not proactively doing it that that's going to be a source of where to use capital that way I can't rule it out.

Speaker 3: companies and advisors and brokers know about us in our appetite, but we are much more sort of sitting back and waiting waiting for the CFN opportunity presents itself. And so I am less optimistic because we are not proactively doing it that that's going to be a source of our, you know, where to use capital that way.

Speaker 3: It can't rule it out. Something might show up that we would be very very creative and attractive for us, but we're not, you know, that's not something we're proactively looking at every day.

Something might show up that we would be very.

Very accretive and attractive for us, but we're not that's not something we're proactively looking at everyday.

Thank you.

Our next question comes from Bryan Maher with FBR <unk> co.

Speaker 1: Our next question comes from Brian Moore, but be early security please go ahead.

Please go ahead.

Speaker 7: Good morning, Adam and Matt, and thanks for that information so far. Two kind of bigger picture questions for me. As it comes down to DHC and SVC, which has been challenged for the past two years with COVID.

Good morning, Adam and Matt and thanks for that information so far two kind of bigger picture questions for me as it comes down to D C and FCC, which has been challenged for the past two years with Covid.

And I know you can't give us specifics related to occupancy trends, maybe a D. H C or the hotels component of SBC, but would you expect with the trend of what you're seeing if those two managed REIT.

Speaker 7: And I know you can't give us specifics related to occupancy trends, maybe a DHC or the hotel component of SVC, but would you expect with the trend of what you're seeing at those two managed REITs that maybe by the back half of 2022 it starts to become a little bit more business as usual as opposed to, you know, all of the transitions that have been going on more recently?

Maybe by the back half of 2022.

To become a little bit more business as usual as opposed to.

All of the transitions that have been going on more recently.

Sure from a big picture perspective, you're absolutely right, Brian those two vehicles Doj and FCC has been the most severely hit by Covid and they've suffered the most specifically within their portfolios at SBC hotels and within DHT, the CV senior living communities.

Speaker 3: Sure, from a big picture perspective, you're absolutely right, Brian . Those two vehicles, D H E and S we see have been the most severely hit by COVID and they've suffered the most.

Speaker 3: Specifically within their portfolios at SBC hotels and within DHC the senior living community

Speaker 3: Yes, overall we're generally optimistic things are going to get better in the second half for 2022 for both those sectors, single living as well as hotels. If I had to put my thumb up in the air and decide which one was going to get better faster, I'm a little bit more optimistic that the hotels can come back faster and may come back faster. You know, we're pretty...

Yes. Overall, we are generally optimistic things are going to get better in the second half of 2022 for both those sectors senior living as well as hotels.

I had to put my thumb up in the air and decide which one was going to get better faster or a little bit more optimistic that the hotels can come back faster and may come back faster, we're pretty we're fairly optimistic that hotel business travel may rebound better than people think as we enter the second and third.

Speaker 3: We're fairly optimistic that hotel business travel may rebound better than people think as we enter the second and third quarters, and especially in the second half of the year. And that's sort of informed by two data points that we've been able to observe over the last.

Quarters, and especially in the second half of the year.

That sort of informed by two data points that we've been able to observe over the last couple of years and especially by the fact that now with Sonesta affiliated company that we can now get data daily now versus the way we were getting good data hotel data before but now we get it obviously much more frequently.

Speaker 3: couple of years, and especially by the fact that now, you know, with Synesta affiliated company that we can now get data, you know, daily now versus the way we were getting, we were getting data, good data, hotel data before, but now we get it obviously much more frequently. You know, what's...

We think when you look back at 2021 and hotels for example.

Speaker 3: We think, you know, when you look back at 2021 in hotels, for example,

Look back at Q3.

Speaker 3: You look back at Q3 really this summer and that's when COVID was waning and visit towel picked up much faster than people originally thought it was going to pick up. And even, you know, trailed into parts of Q4. And to have hotel occupancy actually rebounded better than all the prognosticators out there were talking about how fast it was gonna come back. Obviously things have sort of settled back now with the Omnicon variant since December and into January .

Really the summer and Thats, when Covid was waning and digital picked up much faster than people. Originally thought it was going to pick up and even trailed into parts of Q4, and total hotel occupancy actually bound rebounded better than all of the Prognosticators out there we're talking about how fast it was going to come back obviously things have sort of settled back.

Now with the Omnicom variant since December and into January the.

The second thing that gives us.

Speaker 3: The second thing that gives us, you know, a data point to give us some, you know, optimism is, unlike the first half of 2001, where large group events, corporate events, we're large in just being canceled.

Data point that gives us some optimism is unlike the first half of 'twenty, one where large group Vince corporate events were largely just being canceled.

We're not seeing cancellations in fact, some are going off.

Speaker 3: We're not seeing cancellations. In fact, some are going off. You know, in the hotel industry last this early, this week was the Alice conference and the healthcare industry, the OSHA conference went off this week. So there are conferences happening, but we're seeing folks in the hotel space, not canceled, just push it out by a quarter, pushing out events one, two quarters. That also gives us a sense of optimism. So we're seeing, we have specific data points that we've now seen over the last

In the hotel industry lost this early this week was the analyst conference and the health care industry.

The conference went off this week, so there are conferences happening.

But we're seeing folks in the hotel space not canceled just push it out by quarter pushing out events. One two quarters that also gives us a sense of optimism. So we're seeing we have specific data points that we've now seen over the last.

Speaker 3: you know, 18 months within hotels, it gives us a fair amount of optimism. Things might get better much faster in hotels, and the second half of some of the prognosis that Cater's out there talking about. Senior living is...

18 months with the hotels that gives us a fair amount of optimism that things might get really get better much faster and hotels in the second half and some of the chronology prognosticators out there talking about senior living is a little more difficult.

Sure I think the trends that were occurring before COVID-19 have just been accelerated like many things are during COVID-19 thing trends got accelerated and one of those trends that got accelerated was people staying at home longer.

Speaker 3: there i think the trends that were occurring before COVID-19 have just been accelerated like many things have done kovat think trends got accelerated one of those trends that got accelerated was people staying at home longer

Speaker 3: and being able to deliver get their services in the home or where they are for much longer than they used to or realizing they can and coven sure fed this and I think what you're seeing it

And being able to deliver as get their services in the home where they are for much longer than they used to are realizing they can and COVID-19 sort of fed this and I think what youre seeing at one of our.

One of our affiliated companies in <unk> life used to be called five stars that they've really taken a focus on.

Speaker 3: One of our affiliated companies in Leroy's life used to be called five stars that they've really taken a focus on, you know.

Recognizing this trend and trying to address that now what does that mean for DHA in occupancy I think it's going to take it's not going to snap back as fast in senior living it is going to be a little bit more gradual and take time.

Speaker 3: in senior living, it's going to be a little bit more gradual and take time.

Speaker 3: to get the occupancy to grow. We are seeing growth in occupancy at senior living. It certainly is above where it was in the depths of let's say March and April of 21, which is really the low point in senior living occupancy. And it has improved steadily since then. It's just a much more gradual improvement. And so I do think things will get better, but I think it's gonna take us beyond 22 into 23. It's gonna really start to see meaningful improvement in the senior living.

To get the occupancy to grow we are seeing growth in occupancy.

At senior living it certainly is above where it was in the depths of lets say March and April of 'twenty, one, which is really the low point in senior living occupancy and it has improved steadily. Since then it's just a much more gradual improvement and so I do think things will get better, but I think it's going to take us beyond 'twenty two into 'twenty. Three if you will really start to see meaningful improve.

<unk> and the senior living space.

Okay. Thanks for that and then my second question relates to you talked a lot about your leasing results and we've been hearing that from other companies, we cover as well, including office. Most importantly can you talk a little bit about.

Speaker 7: Thanks for that. And my second question relates to you talk a lot about your leasing results and we've been hearing that from other companies we cover as well, including office most importantly. Can you talk a little bit of

Speaker 7: you know, the skepticism that we keep hearing out there, you know, from some investors related to people actually returning to office, relative to what we're seeing in, you know, medical office building and regular office building, leasing activity, you know, in real terms, every quarter that you and others keep reporting.

The skepticism that we keep hearing out there.

From some investors related to people actually returning to office relative to what we're seeing in medical office building in regular office building leasing activity in REIT.

Real terms every quarter that you and others keep reporting.

Yes, Youre right there is.

Speaker 3: Yeah, you're right. There's a lot of things that may, you can read into that. I imagine many tenants were looking at the market and thought this was a pretty good time to lock in a long-term lease.

And I think the industry had a record fourth quarter in terms of leasing activity.

A lot of things that you can read into that.

I imagine many tenants were looking at the market thought this was a pretty good time to lock in a long term lease.

The state of the office market for example, and so that led to a lot of that leasing activity in the fourth quarter.

Speaker 3: given the state of the office market, for example. And so that led to a lot of that leasing activity in the fourth quarter. But generally, I think you're, what we're seeing in terms of

But generally I think you are.

What we're seeing in terms of.

Through occupancy and has a lot of different data points out there, including our own portfolio.

Speaker 3: you know true occupancy and there's a lot of different data points out there including our own portfolio. You know the port the metric we were I've been focused on was around labor day uh... we were seeing in September

The ports the metric where I've been focused on was around labor day.

We were seeing in September around 30% of buildings office buildings in our portfolio.

Speaker 3: 30% of buildings, office buildings in our portfolio had people in them or 30% occupied you could almost say with 30% capacity. That was slowly creeping up and by the time we got the Thanksgiving beginning of the summer that was about 40% is what we saw. That's obviously come back as we got into January .

Had people in them, we're 30% occupied you could almost say with 30% capacity that was slowly creeping up and by the time, we got to Thanksgiving beginning in December that was about 40% is what we saw that's obviously come back as we've gotten into January .

But I would say that our view firmly in the fall and I think it's going to be this case as we get into the spring as well.

Speaker 3: But I would say that our view firmly in the fall and I think it's gonna be this case as we get into the spring as well. The delay in return to office is less and less about health and safety and more and more around employee work preference.

The delay in return to office is less and less about health and safety and more and more around employee work preferences and I think many employers, especially larger employers to large employer more this is becoming an issue is just such a tight labor.

Speaker 3: And I think many employers, especially larger employers, but larger than the employer, and more this is becoming an issue, is just in such a tight labor market, you know, many employees have been working from home and be able to have a very flexible schedule for two years now.

<unk>.

Employ many employees have been working from home and be able to have a very flexible schedule for two years now.

Many of them in a tight labor market are not eager to return to the office full time and I think many companies are trying to work through what is their high bred workplace environment going to look like and I think that is really what's going to happen and I do think youre going to see that play out.

Speaker 3: It's many of them in a tight labor market are not eager to return to the office full time. And I think many companies are trying to work through what is their high-bred workplace environment going to look for.

Speaker 3: and i think that is really what's gonna happen and i do think you can see that play out

Speaker 3: in the spring. That's what we think. That all being said, I'll just give a quick commercial on our portfolio. Look, we own a large number of MLBs. We own a large number of life science buildings. We own a large number. Those buildings themselves obviously are work-from-home resistant.

The spring that is that's what we think that all being said I will just give a quick commercial on our portfolio look we own a large number of mlps, we own a large number of life science buildings.

We own a large number of those buildings themselves obviously, our work from home resistant ebay.

Basically they have to be occupied the folks that do the work there what we've been doing over the last couple of years in our office portfolio at OPI, specifically has been really trying to think about.

Speaker 3: uh... you basically they have to be occupied the folks that do the work there you know what we've been doing over the last couple years in our office portfolio of the i specifically has been really trying to think about we don't think offices are going away but we do think

We don't think offices are going away, but we do think in this environment.

Speaker 3: you know, it's just going to be accentuated. The better located, the newer buildings with more amenities are going to be what tenants want. And so we've been pretty active and you saw that at OPI last year, you know, buying newer modern, well-eminentized, well-located office buildings, and investing of maybe buildings in the suburbs that are older than aren't as well-eminentized.

<unk> going to be accentuated the better located the newer buildings with more amenities are going to be what tenants want and so we've been pretty active and you saw that at OPI last year.

Buying newer modern well and monetized well located office buildings.

<unk> of maybe buildings in the suburbs that are older that arent as well amount of times that is what we've been doing at OPI for some time I imagine we're going to continue to do that because in the current office environment I think it is.

Speaker 3: That is what we've been doing at OPI for some time. I imagine we're going to continue to do that because in the current office environment, I think it's important to have a portfolio that way.

It's as important as ever as ever to have a portfolio that way.

Great. Thanks, Adam.

Our next question comes from James <unk> with BPI. Please go ahead.

Speaker 1: Our next question comes from Jane Sullivan with BTID. Please go ahead.

Thank you.

I just wanted to.

Speaker 8: I just wanted to talk with Matt here about the guide for the next quarter in terms of the top line guide.

Talk with Matt here about the the guide for <unk>.

Next quarter.

In terms of the topline guide.

Yeah.

That guide I think it's 48 to $49 now.

Speaker 8: that guy, I think, is 48 to 49. Now back with the fourth quarter, obviously, you had provided a guide that assumed that first quarter would be flat with fourth quarter. Came in a little below that. And as I understand, you're prepared comments. That was because of two of the reads, Manager and FISA, two of the reads, declining. So the question in providing the guide for the second quarter.

Now back with the fourth quarter. Obviously, you had provided a guide that assume that first quarter would be flat with fourth quarter came in a little below that.

And as I understand in your prepared comments that was because of two of the rates management fees are two of the rates are declining.

So the question.

In providing the guide for the second quarter.

What are you assuming regarding.

Speaker 8: What are you assuming regarding...

Speaker 8: you know, the two reads that had that were the source of the negative comp. And how do you factor that into these quarterly guides, these share price changes, which have obviously been pretty significant years?

The two routes that had the that was the source of the negative comp and how do you. How do you factor that into these quarterly guides the share price changes, which have obviously been pretty significant year to date.

The great question, Jim and we try and do our best to Prognosticate, where share prices will land, especially if those two rates.

Speaker 6: The great question to him and we try and do our best to prognosticate. We're share prices will land, especially if those two reach. And what we've done in our guide, this quarter, is we've looked back.

What we've done in our guide this quarter as we've looked back.

Over the last seven or so weeks given the significant volatility.

Speaker 6: over the last seven or so weeks given the significant volatility in both directions to try and come up with an average and that is what we've based our guide on in our forecast number. So just around $9 for SVC and just around $3 per share. It's 85 thirty each and I think it's going to be 12 for now, right? So Social

In both directions to try and come up with an average and that is what we based our guide on.

And our forecast number so just around $9 for SBC and just around $3 per share for DHT.

Okay. So you take the kind of the average close or the average trading range and just just provide an average for that and build that into the model correct and in periods of greater stability quite frankly, if I look back to last quarter, we will use say the current month.

Speaker 8: Okay, so you take the average clothes or the average trading range and just provide an average for that and build that.

Speaker 6: Correct. In periods of greater stability, quite frankly, if I look back to last quarter, we'll use say the current month as a proxy since that is the first, typically we're reporting results at the end of the first month of the quarter that's coming up. But given the volatility we're seeing, we took a little more of a conservative approach.

As the proxy since that is the first typically we're reporting our results at the end of the first quarter first month of the quarter.

That's coming up.

But given the volatility were seeing we took a little more of a conservative approach this quarter.

Okay Fair enough I appreciate that and then.

Speaker 8: Okay, fair enough, appreciate that. And then question for Adam.

Question for Adam.

You know, obviously you talked to.

Speaker 8: Obviously, you talked in answering the prior question about the outlook over the course of the year. The topic to your over the last several weeks, of course, has been the rate of inflation. And clearly, the hotel portfolio is probably very well positioned.

In answering the prior question.

The outlook over the course of the year.

The topic does your over.

Over the last several weeks of course has been the rate of inflation.

Inflation.

And.

Clearly the hotel portfolio is probably very well positioned for an inflationary environment.

Speaker 8: for an inflationary environment. And I'm curious when you think about your more triple net lease.

And.

I'm curious when you think about you.

You're more triple net lease.

Speaker 8: Portfolios as opposed to the more active Portfolio like the hotel Portfolio currently. How do you feel about your exposure to rising inflation overall and really I'm looking here at the the net least Portfolio the office Portfolio as well as

Portfolios is it.

Opposed to the more active.

Our portfolio like the hotel portfolio currently how do you feel about your exposure to rising inflation overall and really I'm looking here at the <unk>.

Lease portfolio, the office portfolio as well as Oh.

The health care.

Sure. So thanks, Tim Yes, I think generally speaking we have a very diverse portfolio that.

Speaker 3: Sure. So thanks, Jim. Yeah, I think generally speaking, we have a very diverse portfolio that you know runs the gamut all the way at one extreme as you point out in hotels where rates are set daily all the way to the other extreme where you have you know long-term 15-year net lease let's say in an office building and in between we have everything in between.

Runs the gamut all the way at one extreme as you pointed out in hotels, where rates are set daily.

All the way to the other extreme where you have long term 15 year net lease leases lets say in an office building.

And in between we have everything in between two obviously.

Speaker 3: you know, for example, the senior housing assets, you know, rates are monthly, but they're usually reset, you know, annually if not quarterly. So you have, you know, fairly often you can reset rates there. I will tell you in the what you categorize broadly as within retail industrial office portfolio, you're right, we tend to have a well occupied longer lease turned and let's say many of our peers.

For example, in the senior housing assets rates or monthly, but they're usually reset.

Annually, if not quarterly so you have fairly.

Often you can reset rates there I will tell you in the what you categorize broadly is within retail industrial office portfolio, you're right. We tend to have a well occupied longer lease term than let's say many of our peers.

With the exception maybe at OPI, where the average lease term I believe is about five years, so it's not quite as long.

Speaker 3: With the exception maybe at OPI where the average lease term I believe is about five years, so it's not quite as long

<unk> in the industrial it is a little longer pushing up to 10 years on the retail portfolio. It is pushing up to 10 years of THC.

Speaker 3: Obviously, at ILPT and the industrial, it is a little longer pushing up to 10 years on the retail portfolio. It is pushing up.

Speaker 3: 10 years, a D.H.C. on the M.O.B. and Life Science portfolio. I think it's also maybe just over five years. So it's not, it's what I want to point out that it's not overwhelmingly a 10, 15 year, net lease portfolio. That all being said.

On the.

The mob and life science portfolio I think it's also maybe just over five years. So it's not.

One I want to point out that its not overwhelmingly a 10 15 year net lease portfolio that all being said.

Speaker 3: 80% of what you, what's in that retail, broadly industrial, broadly office, and I'm including an office, general office, M.O.Bs, life science buildings, we have 80% of those leases, either CPI adjustments and or fixed step up.

80% of what you what's in that retail broadly industrial broadly office and including an office General office <unk> life Science buildings, we have in 80% of those leases.

Either CPI adjustments <unk> fixed step ups. So I think we feel pretty good that that will largely cover us in this what hopes to be a short to medium term period of high inflation.

Speaker 3: So I think we feel pretty good that that will largely cover us in this, what hopes to be a short, the medium term period of high inflation. And obviously, you know, commercial real estate.

And obviously commercial real estate.

And especially core commercial real estate has traditionally been a very good hedge in a high inflationary environment, especially if youre willing to hold it for five to 10 years, which is our typical hold period for us in a REIT as well as in our joint ventures. So I think overall, we feel pretty good look we've been in we've been held a pretty diverse.

Speaker 3: especially core commercial real estate have traditionally been a very good hedge in a high inflationary environment, especially if you're willing to hold it for five to ten years, which is our typical hope period for us in our reach as well as in our joint venture.

Speaker 3: So I think overall we feel pretty good. Look, we've been in, we've been held a pretty diverse portfolio and part of what we try to do from our Mars perspective is make sure we have a diverse portfolio.

Folio and part of what we tried to do from Rmr's perspective is make sure we have a diverse portfolio. So we're not sort of off all of our eggs in one sort of sector and to a <unk> type of ore one lease type and that served us pretty well over the last 36 years of being operations and we've obviously operates in many cycles.

Speaker 3: So we're not sort of all of our eggs in one sort of sector into a one type of or one lease type.

Speaker 3: And that served us pretty well over the last 36 years and being operations. And we've obviously operated through many cycles and I think that diversity has served us well. Granted, we're probably in a higher inflationary environment than we've seen in a long time. But I think we are reasonably, if not well, positioned to deal with it in the coming years.

I think that diversity to serve this well granted we're probably in a higher inflationary environment than we've seen in a long time, but I think we are.

Reasonably if not well positioned to deal with it in the coming years.

Just to just to follow up on that you mentioned CPI adjustments.

Speaker 8: Just to follow up on that, you mentioned CPI adjustments, which are typical, I guess, typically annual adjustments.

Which are typical I guess typically annual adjustments.

Speaker 8: Is it not true, though, in health care that oftentimes the CPI adjustments were capped at either a specific rate or a specific percentage of CPI or was it, is it in fact full CPI?

Is it not true, though in health care that oftentimes the CPI.

Just since we're capped at either a specific rate or specific percentage of CPI or was it is it in fact full CPI adjustments.

Sometimes their cap, sometimes they are fixed rates.

Speaker 3: Sometimes the cap sometimes the fixed rates, Jim honestly it's

Honestly it's.

<unk>.

Different markets have different conventions.

Speaker 3: Different markets have different conventions. The industry doesn't necessarily follow one convention. As you know, generally within office, and within MMOE specifically as well, you will have a different market convention, let's say, in the Boston market than you might have in the Dallas market versus you might have in the Denver market. That's that old saying that all real estate.

The industry doesn't necessarily follow one convention as you know within generally within office and within that mobile you specifically as well you will have a different market convention, let's say in the Boston market and you might have in the Dallas market versus you might have in the Denver market.

That old, saying it all real estate sort of local real estate leasing is hyper local in terms of how it gets structured we talk all the time about net effective rents when you cut through it all that's what we are always looking at at RMR and when we're looking through everything because because we look at our nationwide.

Speaker 3: real estate leasing is hyper local in terms of how it gets structured you know we talk all the time about net effective rents when you cut through at all that's what we are always looking at at rm r and when we're looking through everything because because we look at a nation-wide portfolio we have to adjust all these different variables

Portfolio, we have to adjust all of these different variable.

Nuances as leases are.

Speaker 3: you know, nuances as leases are...

<unk> negotiated by different market convention to get down to the effect net effective rents.

Speaker 3: negotiated by different market conventions to get down to the affect net effective rent.

So generally it's all over the place it's not necessarily one way, let's say in <unk>.

Speaker 3: And so generally it's all over the place. It's not necessarily one way, let's say, an MOBs versus it really depends on the more.

Versus it really depends on the market.

Okay, and then final final question for me.

Speaker 8: Okay, and then final question for me. Adam, the company's obviously in an enviable position with no debt and plenty of cash on the balance sheet and you made mention in the prepared comments about how many transactions the company has been involved in and the portfolio of the company has been involved.

Adam the company's obviously in an enviable position with no debt and plenty of cash on the balance sheet.

I had mentioned in the prepared comments about how much.

Any transactions the company has been involved in the portfolio of companies that have been involved in and.

Speaker 8: And given what has been kind of a significant pivot here in terms of the macro variables, inflation higher, interest rates moving up.

Given what has been kind of a significant pivot here.

So the macro variables inflation higher interest rates moving up can.

Can you share with us your sense as to where cap rates are going.

Speaker 8: Can you share with us your census to where cap rates are going? Do you have a sense that cap rates are finally going to start moving higher along with interest rates and inflation or not?

Do you have a sense that that cap rates are finally going to start moving higher along with interest rates and inflation or not.

No.

Speaker 3: You know, they feel like it's hard to see them go any lower, let me put it that way. I think they were modestly, my view is they have got to go up a little bit.

They feel like it's hard to see them go any lower let me put it that way I think they were modestly my view is they have got to go up a little bit I think theyre going to be tempered in their raise I don't think you're going to see a one for one correlation to incur.

Speaker 3: I think they're going to be tempered in their race. I don't think you're going to see a one-for-one correlation to increased cost for increased debt costs and inflation having a meaningful impact on increases in cap rates. And the reason I say that, we're pretty active in the market. There is a tremendous amount of capital trying to be put to work.

Increased cost.

For let's.

Increased debt costs and inflation, having a meaningful impact on increases in cap rates and the reason I say that we're pretty active in the market. There is a tremendous amount of capital trying to be put to work in real estate.

Just to make a quick anecdote yesterday Blackstone announced their earnings they talked a lot about the <unk> REIT. They are raising $5 billion a month just in their b REIT that money is got to be deployed that is just a fraction of what needs to be deployed market wise and.

Speaker 3: Just to make a quick antidote. Yesterday, Blockstone announced their earnings. They talked a lot about the B-REET. They're raising $5 billion a month just in their B-REET. That money has got to be deployed. That is just a fraction of what needs to be deployed market-wise. And unfortunately, folks are more and more, including us, focused on certain sectors over other sectors.

Fortunately folks are more and more including us focused on certain sectors over other sectors.

Speaker 3: And so that sort of demand for the real estate and supply of money looking for a home is going to temper that growth in caprate. So I think caprates are probably gonna moderate, they're gonna come up a little bit because debt costs are gonna move. But look, before the current, I'll give you an antidote. We don't play a lot in the multi-family space, but we lend against multi-family projects.

So that sort of demand for the real estate and supply of money looking for a home is going to temper that growth in cap rate. So I think cap rates are probably going to moderate going to come up a little bit because that costs are going to move.

But look before at the current.

Give you an anecdote we don't play a lot in the multifamily space, but we lend against multifamily projects. We have lent money. This is prior to the run up in rates or your expected run up in rates prior to the announcements of increased inflation. This was six months ago.

Speaker 3: We have lent money. This is prior to the run up in rates or expected run up in rates prior to the announcements of increase inflation. This was six months ago.

We were lending money out to certain hotel I'm, sorry to certain multifamily owners.

Speaker 3: We were ledding money out to certain hotel, I'm sorry, to certain multifamily owners. It higher rates than the cap rates that they were going into the deal at. Now, of course, these were value outplays, they were planning to turn it around over a period of time, but that just gives you a sense. And we're making first lean mortgages against the multifamily project. You know, our rates, I'm gonna make it up, you know, three and a half and the cap rate going in is three.

Owners.

At higher rates than the cap rate that they were going into the deal and now of course. These were value add plays they were planning to turn it around over a period of time, but that just gives you a sense, we're making first lien mortgages.

Against a multifamily project.

Our rates I am going to make it up three and a half and the cap rate going in as three.

Speaker 3: And we would spend a lot of time looking at that and that just gives you a feel for the amount of money trying to be put to work in the space. Now of course there was a business plan there and their planning to increase NLI over the two to three years but they have to do it. Going in the debt cost more than the cap rate. That gives you a sense of how much money is out there and it's gonna temper those cap rate expansions. Sure, okay, well let's...

And we would spend a lot of time looking at that and that just gives you a feel for the amount of money trying to be put to work.

In the space now of course, there was a business plan, there and they're planning to increase NOI over the two to three years, but they have to do it going in that cost more than the cap rate that gives you a sense of how much money is out there is going to temper that those cap rate expansions.

Sure, Okay, well listen that's great. Thanks, Thanks, Adam.

Yeah.

Speaker 9: Our next question comes from Ronald Camden, but more you're standing please go ahead.

Okay.

Great and just going back to sort of the private capital transactions that happened during the quarter.

Speaker 10: Great. Just going back to sort of the private capital transactions that happened during the quarter, trying to get a sense of how much more is there to come down the road, or there sort of other assets that sort of would make sense for these types of transactions, both at IOPT and DHT, and is this something where we could see happen in the other two REITs, you know, the office and OPI and FEC. Thanks.

Just trying to get a sense of how much more is there to come down. The road are there sort of other assets that sort of would make sense for these types of transactions both at <unk> and THC and is this something where we could see happen in the.

The other two REIT.

The office and OPI and FCC. Thanks.

Sure generally speaking we are having conversations with private Cardinal partners pretty much on all types of commercial real estate that we.

Speaker 3: So generally speaking, we are having conversations with private carat-minal partners pretty much on all types of commercial real estate that we manage every sector.

Manage every sector.

Speaker 3: So you can go the gamut. It can be office industrial hotels, senior living, and service retail. Every type of sector we are in, we are having some level of conversation with others around that. Some of those conversations would involve vehicles that potentially could include our reads and some of those conversations are involving vehicles that would not include our reads.

So you can go the gamut it can be office industrial.

Hotels.

Senior living.

Service retail every type of sector. We are in we are having some level of conversation with others around that some of those conversations would involve vehicles that potentially could include our reach in some of those conversations are evolving vehicles that would not include our rights.

The overwhelming whats going on at our rights and so the question is could you see other things happened at the other Reits.

Speaker 3: you know the overwhelming you know what's going on at our reeds and so the question is could you see other things happen at the other reed

This is all sort of tied together, what we're very focused on and we havent collected an incentive fee for two years at RMR and so I want to point out that we're very focused on the fact that we haven't collected incentive fees and so one of the things that we think we need to do with those rights is de lever because we are running at a little bit higher leverage than we have.

Speaker 3: This is all sort of tied together. What we are very focused on, and we haven't collected an incentive fee for two years at RMR. So I want to point out that we're very focused on the fact that we haven't collected incentive.

Speaker 3: And so one of the things that we think we need to do with those reeds is de-lever because we are running it a little bit higher leverage than we have to do it typically run.

Typically run, especially and thats across the board.

Speaker 3: and that's across the board. At DHC and SVC, the two things that I think will do the most to increase the shareholder return, in addition to deleveraging, is also to reinstate the dividend. And I can't really give guidance on when that's going to happen, but we hope it's going to happen sooner rather than later. And because I think the faster we can reinstate the dividend and de-lever,

At DHT in FCC, the two things that I think will do the most to increase the shareholder return in addition to deleveraging.

Is also to reinstate the dividend and I can't really give guidance on when that's going to happen, but we hope it's going to happen sooner rather than later.

And because I think the faster we can reinstate the dividend and delever.

Better turns we get I'd tell you all of that story as it relates to private capital because it plays into yes, we could if it made sense, where our other reach enter into additional joint ventures, because it behooves them to delever, because it again by deleveraging and getting.

Speaker 3: better uh... turns we get i tell you all that story as it relates to private capital because it plays into yes we could if it made sense where our other reeds enter into additional joint ventures because it to who's them to do you lever

Speaker 3: Because, again, by deleveraging and getting the dividends reinstated, especially DHC and SVC, it behooves everybody so that those companies' total shareholder returns are improved. I think what I'm really saying is a high alignment of interest between RMRR actions and the shareholders of the different REITs. And that's really what I'm trying to talk about. But at the same time,

Dividends reinstated specialty DH DH CNS, we see it behooves, everybody so that those companies total shareholder returns.

Our improved I think I'm talking what I'm really saying is a high alignment of interests between RMR and our actions and the shareholders of the different REIT and Thats really what I'm trying to talk about but at the same time. It does lead to yes, we could be doing additional joint ventures at the other vehicles, but it's because we want to delever and get those REIT shareholders.

Speaker 3: It does lead to yes, we could be doing additional joint ventures at the other vehicles, but it's because we wanted to deliver and get those re-chairholder returns to improve so we can start earning incentive.

Turns to improve so we can start earning incentive fees.

Great. That's helpful and then just back on <unk>.

Speaker 10: great that's helpful and then just back on iol ct uh... you know i think you talked about uh... private private capital getting involved whether it's one two or or three just any color on you know what what sort of the debate uh... what's driving the decision either to get involved and what's driving the amount of capital commitment

I think you talked about.

Private private capital getting involved whether it's one two or three just any color on what what sort of the debate, what's driving the decision either to get involved and not involved in what's driving the amount of capital commitments.

Speaker 10: They're willing to put there. I can appreciate conversations that still flew it, but just sort of curious what that money is debating.

There will then put there I can appreciate conversation is still fluid, but just sort of curious.

What that money is debating.

Speaker 3: At the ILPT, I think the question is really, you know, the capital partners that we're out talking to about that. I think the conversations are overall going well, and I really can't say much more than what I said before in the sense that, you know, when we announced the transaction, we said that we would be raising private capital at the smallest amount of $430 million and the greatest amount, $1.3 billion.

Yes, <unk> I think the question is really you know the capital partners that were out talking to about that.

I think the conversations are overall growing well.

And I really can't say much more than what I said before in the sense that when we announced the transaction.

We said that we would be raising private capital at the smallest amount of $430 million at the greatest amount $1 3 billion.

I think we feel comfortable saying definitively here in this form before I LPT announces its earnings and before the shareholder vote at Monmouth is that we will raise more than $430 million of private capital and so I think generally the conversations are going well and we feel optimistic that we will close one not only closed and funded.

Speaker 3: What I think we could feel comfortable saying definitively here in this forum, before ILPT announces its earnings and before there's a shareholder vote at Monmouth, is that we will raise more than 430 million of private capital. So I think generally the conversations are going well, and we feel optimistic that we will not only close, but fund it largely along the lines that we hope.

Yeah.

<unk> largely long the lines that we hope to.

Great and then I wanted to switch gears to expenses a little bit.

Speaker 10: great and then i want to switch gears to expenses a little bit uh... you know thinking about sort of wage pressures uh... just what you see on the ground and toward the construction business in terms of uh... wages for workers and if you give us a sense of sort of magnitude of what what increases uh... what wage increases are are there that be great so um...

Thinking about sort of a wage pressures.

Just what are you seeing on the ground in sort of the construction business in terms of wages for workers and if you can give us a sense of sort of magnitude of what increases wage increases or are there that'd be great sure. So.

I don't have great insight to what we're seeing specifically with contractors I can give you anecdotal antidotes more generally around what we're seeing across our platform remember RMR, where commercial real estate company alternative asset management company, principally that's where we generate the large majority of our revenues that all being said, we do have affiliated operating businesses.

Speaker 3: I don't have great insight to what we're seeing specifically with contractors. I can give you antidotes more generally around what we're seeing across our platform. Remember, RMR, we're a commercial real estate company, alternative asset management company. Principally, that's where we generate the large majority of our revenues. That all being said, we do have affiliate operating business.

And if you look at those affiliate operating businesses. If they are fully employed they are 45000 employees. We currently have about 20% open positions roughly or 8000 job openings across the board that was about two five times the normal job openings. So that just gives you a sense.

Speaker 3: And if you look at those affiliate operating businesses, if they're fully employed, they have 45,000 employees.

Speaker 3: We currently have about 20% open positions, roughly, or 8,000 job openings across the board. That is about two and a half times the normal job openings. So that just gives you a sense.

That's not necessarily construction necessarily but that gives you a sense in the broader economy, what we're seeing across the board.

Speaker 3: you know, that's not necessarily construction necessarily, but that gives you a sense of the broader economy, what we're seeing across the board. You know, generally speaking, at our operating companies in the fourth quarter, and this is a very general statement, depends on the market, depends on the position, about 5% growth in wages. I'll let Matt talk about what we saw in the fourth quarter here at RMR. Yeah.

Generally speaking at our operating companies in the fourth quarter and this is a very general statement. It depends on the market presented on the position of about 5% growth in wages I'll, let Matt talk about what we saw in the fourth quarter here at RMR, Yeah. So while wage inflation is definitely real Ron and I'll come back to that in a SEC.

Speaker 6: While wage inflation is definitely real, Ron, and I'll come back to that in a second, I do want to just reinforce this quarter cash comp came in higher than where we had guided.

And I do want to just reinforce this quarter.

Cash comp came in higher than where we had guided primarily due to.

Speaker 6: primarily due to vacation usage, believe it or not, which was a sizable amount of the miss, over half a million dollars.

Vacation usage believe it or not which was a sizable amount of the miss over half a million dollars.

Speaker 6: just not being where it normally would be in a non-COVID, especially COVID variant environment.

Just not being where it normally would be in a non COVID-19 , especially COVID-19 variant environment.

And that was the driver now we are a September 30 year end as you know merit increases go effective October 1st so they were baked into our forecast I will tell you that wage inflation is real so incorporating normal merit increases plus market adjustments, we averaged about 7%.

Speaker 6: And that was the driver. Now, we are at September 30 year end, as you know. Merit increases go effective October 1st. So they were baked into our forecast. I will tell you that wage inflation is real. So incorporating normal merit increases plus market adjustments, we averaged about 7%.

Going forward, what I would just to piggyback up Adam's point, while salary inflation continues to be real I would say the thing that will create the most volatility in our forecasting of cash comp and what probably keeps me up at night is labor shortage.

Speaker 6: Going forward, what I would just to piggyback off Adam's point, while salary inflation continues to be real, I would say the thing that will create the most volatility in our forecasting of cash comp and what probably keeps me up at night is labor shortage. As we're growing as an organization, as we're creating new roles, finding the talent, which creates, you know, we do our best in our forecasting to predict when jobs will be filled and at what rate.

As we're growing as an organization is we're creating new roles finding the talent, which creates we do our best and are forecasting to predict when jobs will be filled and at what rates finding that talent and when it will come on board to support this organization and the growth, we're going to experience with <unk> and the other private capital transactions.

Speaker 6: finding that talent and when it will come on board to support this organization and the growth we're going to experience with Monmouth and the other private capital transactions is probably the biggest variable that we're experiencing as a firm.

Is probably the biggest variable.

That we're experiencing as a firm.

Great. That's it for me helpful. Thank you.

As a reminder, if you have a question.

Speaker 1: As it reminder, if you have a question, please press star then one to be joined in the queue. Our next question comes from Owen Laugh with Oppenheimer. Please go ahead.

And one can be joined in the queue.

Our next question comes from Owen Lau with Oppenheimer. Please go ahead.

Good morning, and thank you for taking my question.

Speaker 11: Good morning, and thank you for taking my question. Going back to the calm and competition, you just mentioned a lot of openings, a lot of competition. I don't think it's specific to RMR, but how do you tackle these rising labor costs at the same time being competitive to hire people? I would love to get your thoughts about how you manage that. Thank you.

Going back to the comp and competition you just mentioned a lot of openings lots.

Lots of competition.

I don't think it's specific to RMR, but how do you attack with these rising labor cost at the same time being competitive.

To hire people.

Would love to get your thoughts about how you manage that and thank you.

So number one.

Speaker 4: Yes, so number one, greater Boston is incredibly competitive, and that's where the bulk of our corporate level employees that their overhead costs, if you will, to RMR reside.

Greater Boston is incredibly competitive and Thats, where.

The bulk of our corporate level employees that their overhead costs. If you will to RMR reside. So obviously, we're in the fortunate position.

Speaker 6: So obviously we're in the fortunate position of being profitable.

Being profitable.

Having a strong operating margins, which allows us to compete and stay commiserate with the market as we're seeing the inflation, especially in the more specialized roles whether it be technology and frankly, we're seeing it across all disciplines.

Speaker 6: you know, having strong operating margins, which allows us to compete and stay.

Speaker 6: commiserate with the market as we're seeing the inflation, especially in the more specialized roles, whether it be technology, and frankly, we're seeing it across all disciplines in the greater Boston market. But I think it comes back to the employee wellness and the different programs we've employed as an organization.

In the greater Boston market, but I think it comes back to the employee wellness and the different programs, we've employed as an organization to make this.

Speaker 6: to make this a place people want to come work at through career growth and opportunities as well as our benefits programs.

A place people want to come work at.

Through career.

Growth in opportunities as well as our benefits programs.

Speaker 6: and the amenities we provide, whether it be here at our corporate office or across the country.

And the amenities, we provide whether it be here at our corporate office or across the country.

Just a collective battle I think all of leadership in our HR organization.

Speaker 6: It's just a collective battle, I think, all of leadership in our HR organization takes the hard every day to make sure we're an employer of choice.

Makes the hard every day to make sure we're an employer of choice, yes, and the only thing I would add is that.

Speaker 3: Yeah, Owen, the only thing I would add is that, you know, while we do have a challenge filling open roles, our retention rate is pretty high in our corporate office.

While we have we do have the.

Challenge filling open roles, our retention rates are pretty high and our corporate office.

I Havent seen specific statistics, but I, just anecdotally think it's much higher than many of our peers.

Speaker 3: I haven't seen specific statistics, but I just anecdotally think it's much higher than many of our peers.

Speaker 3: in this market. What Matt's talking about, we have, you know, normal attrition that happens every year, but we have nothing outside of the normal attrition. Our metrics are, in fact, we're probably stronger this year in terms of

In this market.

Matt is talking about we have normal attrition that happens every year, but we have nothing outside of the normal attrition in our metrics in fact.

We are probably stronger this year in terms of.

Retention than we were in some of the years in 18 and 19, so we actually feel pretty good about retention, it's really filling new rules and we have had a handful of new roles that we've created as we have been growing and diversifying the portfolio that we're trying to fill.

Speaker 3: retention and we were you know in some of the years in 18 and 19 so we actually feel pretty good about retention It's really feeling new roles and we have had you know a handful of new roles

Speaker 3: that we've created as we've been growing and diversifying the portfolio that we're trying to fill. And they've become challenging in this environment. But our retention is very good. And I think it's important to point that out also.

And they've become challenging in this environment, but our retention is very good and I think it's important to point that out also.

Got it that's very helpful. And then Matt you talked about the guide in terms of incremental revenue I think thats very helpful. But could you. Please remind us how much rapidly RMR with January from private.

Speaker 11: Donnie, that's very helpful. And then Matt, you talked about the guide in terms of incremental revenue. I think that's very helpful. But could you please remind us how much revenue RMR will generate from the private will stay fund? My understanding is you charge 100 basis point on contributed capital. But how much is the base of these contributed capital?

They fund my understanding is you charge 100 basis point on contributed capital, but how much is the base of these country put our capital and then more broadly strategically speaking Adam you talk about.

Speaker 11: And then more broadly, strategically speaking, Adam, you talk about the limitation and the leverage on maybe some of the weeks like the HC and SVC. Is there any other major roadblock to present you from raising additional funds from asset owners and household traction and conversation with investors?

The limitation in the language on maybe some of the weeds like do you see an SPC.

Okay. Thank you Sandy auto major roadblock to prevent you from what are you seeing additional funds from from asset owners and household traction in compensation with.

Investors on that front. Thank you Yeah, let me take the first question in terms of growing the REIT.

Speaker 3: Yeah, let me take the first question in terms of growing the REITs. You know, the principal issue with growing the REITs is the stock price. You know, it's hard for us to compete for assets, especially high-quality assets, and that's what we are focused on, very high-quality assets.

Principal issue with growing the REIT.

As the stock price.

Hard for us to compete.

For assets, especially high quality assets and that's what we're focused on very high quality assets.

And unfortunately, they trade at low cap rates and so given our cost of equity capital, where those reach of trading we can't effectively.

Speaker 3: And unfortunately, they trade at low cap rates. And so given our cost of equity capital, where those three to trading, we can't effectively grow them, given where they're stock price.

Grow them.

Given where their stock prices are.

Some of the reach of closer to a point, where perhaps we could think about equity raises versus others, but none of them are at a point, where we would feel comfortable I think raising equity today. That's the biggest prohibitory, it's not necessarily that we can't buy things. It's just that we have to be able to fund the competitively on an equity basis and one of the things Thats.

Speaker 3: Some of the REITs are closer to a point where perhaps we could think about equity raises versus others, but none of them are at a point where we would feel comfortable, I think, raising equity today. That's the biggest prohibitor. It's not necessarily that we can't buy things. It's just that we have to be able to fund it competitively on an equity basis. And one of the things that's

I think we've done successfully by doing these joint ventures, not only has it de levered.

Speaker 3: I think we've done successfully by doing these joint ventures, not only has it de-leveraged

These companies.

Speaker 3: these companies, which is very important. I think long term, you can look at lots of stats. We've been in the REAP business for a long time. Lower leverage REAPs tend to outperform higher levels.

Which is very important I think long term you can look at lots of stats and we've been in the REIT business for a long time lower leveraged reached tend to outperform higher leverage rates.

Speaker 3: We've been able to raise the equity effectively by showing assets at NAV.

We've been able to raise the equity effectively by selling assets at AAV.

Speaker 3: which is very important from a REIT perspective. So versus selling equity at the corporate level at much below NAV, because that's where their stocks are trading. And so it's actually, I think, behooves the REITs to do this because it effectively raises equity capital without taking a discount and de-leverage.

Which is very important from a REIT perspective, so versus selling equity at the corporate level. It much below NAV, because thats, where the stocks are trading.

So it's actually I think behooves the rights to do this because it effectively raise equity capital without taking a discount and de levers.

Speaker 3: Eventually, look, we are optimistic that these stock prices are going to get better. And once they do get better, we'll start earning incentive fees. And we can then think about hopefully growing and raising equity to grow those vehicles on their own. But it's also important, I think, for the REIT shareholders and investors to understand, and this is another reason that private capital is important.

Eventually look we are optimistic the destock prices are going to get better and once they do get better we'll start earning incentive fees and we can then think about hopefully growing and raising equity to grow those vehicles on their own but it's also important I think for the REIT shareholders and investors to understand and this is this is this is another reason.

Private capital is important.

As important for those shareholders to understand that RMR can grow without raising equity at the REIT. That's an important element and thats, an if shareholders understand that we don't have to raise equity and do dilutive deals to grow that we have other avenues to grow the business.

Speaker 3: It's important for those shareholders to understand that RMR can grow without raising equity at the REITs, that's an important

Speaker 3: And if shareholders understand that we don't have to raise equity and do dilutive deals to grow, that we have other avenues to grow the business.

That actually helps I believe long term with the stock price performance because theres not this overhang that we're going to do an equity deal because it may be the only way to grow our AUM and so I think there's all sorts of reasons why it's important for us to build out the private capital, but the principal prohibit or he is not.

Speaker 3: That actually helps, I believe, long-term with the stock price performance because there's not this overhang that we're going to do an equity deal because it's maybe the only way to grow our AUM. And so I think there's all sorts of reasons why it's important for us to build out the private capital, but the principal prohibitor is not structural. It's really just we're not willing to issue equity at a very dilutive price at the REITs.

Structural it's really just.

Not willing to issue equity at a very dilutive price at the Reits.

The fund growth.

And then Owen I guess from a modeling perspective.

Speaker 6: And then Owen, I guess from a modeling perspective, the way I would think about it is the 3.2 billion in gross private capital AUM. We've disclosed this quarter on a fee paying basis that number is just over a billion and a half.

The way I would think about it is the $3 2 billion in gross private capital AUM.

<unk> disclosed this quarter on a fee paying basis that number is just over 1 billion and a half.

And then our arrangements which include some legacy arrangements.

Speaker 6: and then our arrangements, which includes some legacy arrangements.

Range anywhere from 50 to 100 basis points on that fee paying.

Speaker 6: range anywhere from 50 to 100 basis points on that fee-paying capital.

Capital.

With a weighted average.

Speaker 6: with a weighted average based on the arrangements we have today of about 60 basis points. So that gets you to just over 9 million annual run rate base fees.

Based on the arrangements, we have today of about 60 basis points. So that gets you that just over $9 million in annual run rate base fees.

From that fee paying capital and then as you model and think forward most of our current JV will be levered.

Speaker 6: from that fee paying capital. And then as you model and think forward, most of our current JVs will be levered at around 60% and will fall somewhere in that fee paying range of 50 to 100 basis points.

Our leverage at around 60%.

And we will fall somewhere in that fee paying range of 50 to 100 basis points.

Got it that's very helpful. Thank you very much.

This concludes our question and answer session.

Speaker 1: This concludes the question and answer session. I would like to turn the conference back over to Adam Portnoy for any closing remarks.

I'd like to turn the conference back over to Adam Portnoy for any closing remarks. Thank.

Thank you all for joining us today, operator that concludes our call.

Speaker 3: Thank you all for joining us today. I'm Brad, or that concludes our call.

Okay.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker 1: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.