Q4 2025 RMR Group Inc Earnings Call

Signal conference specialist by pressing Star then zero on your telephone keypad.

Please note this event is being recorded.

I would now like to turn the conference over to Brian Moore Senior Vice President. Please go ahead.

Mitch Germain: Thank you.

Operator: Again, if you have a question, please press star then one. The next question comes from John Massocca with B. Riley. Please go ahead.

Thank you and good morning. Thank you for joining Rmr's fiscal fourth quarter 2025 conference call with me on today's call are President and CEO, Adam Portnoy, Chief Operating Officer, Matt Jordan, and Chief Financial Officer, Matt Brown in just a moment they will provide details about our business and quarterly results followed by a question.

John Massocca: Good morning. Maybe just sticking with that question quickly, is there any expected additional negative flow-through from the loss of managing AlerisLife as we think beyond next quarter?

And answer session I would also like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Today's conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 and other securities laws. These forward looking statements are based on Rmr's beliefs.

Matt Jordan: The full wind down should happen by the end of this year. While we're expecting about a $1 million decrease in fee revenue this coming quarter, we did earn $1.4 million in fiscal Q4. There'll be another kind of $400,000 deduct when we roll forward to fiscal Q2.

And expectations as of today November 13, 2025, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward looking statements made in today's conference call additional information concerning factors that could cause those differences.

John Massocca: Okay. Maybe moving on to OPI, can you just walk through what the advisory agreement looks like after two years if you're still managing that portfolio?

<unk> is contained in our filings with the Securities and Exchange Commission, which can be found on our website at RMR group Dot Com <unk>.

<unk> are cautioned not to place undue reliance upon any forward looking statements. In addition, we may discuss non-GAAP numbers. During this call, including adjusted net income per share distributable earnings and adjusted EBITDA. A reconciliation of net income determined in accordance with U S. Generally accepted accounting principles to these non <unk>.

Adam Portnoy: Sure. It's a term sheet we entered into with what will be likely the new equity owners of OPI upon emergence. It's a five-year term. The first two years are set at $14 million per year in business management fees. The property management stays unchanged. During the first two years, that $14 million stays the same, whether the portfolio shrinks or grows, or it doesn't matter what the size of the portfolio is, that stays in place at $14 million per year. After two years, there's a negotiation.

GAAP figures can be found in our financial results I will now turn the call over to Adam.

Thanks, Brian and thank you all for joining us this morning.

Yesterday, we reported fourth quarter results that were in line with our expectations highlighted by distributable earnings of 44 per share adjusted net income of 22 per share and adjusted EBITDA of $25 million.

Spite, our continued unsettled economic environment RMR was active this past quarter executing on our clients' strategic initiatives. The majority of these activities took place at our managed equity Reits, where we completed nearly $2 billion of accretive debt financings at attractive rates and we completed over 300 million.

Adam Portnoy: I think, look, the reason it was set up that way is with the new owners of OPI, I think there's a little bit of hesitancy about how to structure the fee in terms of what it should be based on because we're not quite sure exactly the size and the makeup of OPI, let's say, over the next couple of years. We're confident, and I think the new investors or new owners of OPI are confident that we will still be managing it over the next two to three years. As part of that, I think they just want to see how the next couple of years play out, what's the size of the company. It could shrink from the size it is today. It could also grow from the size it is today.

And asset sales.

We believe these efforts are being recognized in the public markets as demonstrated by the share price improvements at both DH C and L. P T D.

<unk> share price improvements have resulted in DHT and LPT, both accruing potential incentive fees for RMR, which highlights the alignment of interest RMR has with the shareholders of our managed equity Reits, while subject to change these potential incentive fees could be approximately 22 million.

Adam Portnoy: I mean, part of what we've had discussions with the new owners about is that this vehicle might be used, and I'm not saying this will be used, I'm saying it might be used as a vehicle to roll up other distressed office portfolios in the marketplace. I mean, we're pretty encouraged that we found a group of investors that currently own the debt that wanted to equitize their debt and really want to go long on office because they really see it as a great opportunity both from a macro perspective. I think they also feel pretty good about the portfolio itself, meaning there's a lot of pain that the OPI portfolio has gone through, but the vast majority of that pain is behind us.

In 2025.

Turning to a few notable updates at our perpetual capital clients.

<unk> posted solid quarterly results led by strong sector tail winds benefiting THC senior housing segment as well as the significant capital that has been invested in <unk> communities.

Consolidated shop, NOI increased 8% year over year to $29 6 million led by a 210 basis point increase in occupancy to 81, 5% and a five 3% increase in average monthly rates.

Turning to a few notable updates at a Perpetual Capital clients DHC posted solid, quarterly results, led by strong sector Tailwind, benefiting DHC, senior housing, segments, as well as the significant Capital that has been invested in DHC communities.

<unk> continued focus on shop operations.

Adam Portnoy: Looking forward, it looks much better than what we've gone through over the last two or three years in terms of leasing prospects, and cash flow or NOI that's going to be coming out from the property. The other thing I'll mention in the term sheet that's on file and is public is it also contemplates a significant incentive fee to be structured for RMR as well. It's anticipated that upfront, we will be getting 2% of the reorganized company, and then another 8% that's a little bit more ambiguous, but will be benchmarked to sort of outperforming benchmarks. Basically, think about it as sort of structured like a classic promote that you might see in a private equity type investment. That's what I think the other 8% will be structured like.

She has also been executing on its trend on its strategic transformation more specifically ghd announced the successful sale of noncore assets at attractive valuations as it further deleverage its balance sheet.

Consolidated shop. Noi increased 8% year-over-year to 29.6 million. Led by a 210 basis point increase in occupancy to 81.5% and a 5.3% increase, in average monthly rates.

During the quarter <unk> also began executing on its announced transition of 116 shop communities from our latest life to new operators that have proven track records and well established regional footprints the transition of all 116 communities is.

Beyond its continued, focus on shop operations. DHC has also been executing on its turn on its strategic transformation.

More specifically DHC announced the successful sale of non-core assets at attractive valuations as it further. Delegates, its balance sheet.

<unk> ticker occur by year end 2025.

SBC continues to make significant progress selling noncore hotels to delever its balance sheet.

During the quarter SBC completed the sale of 40 hotels for over $292 million and is on pace to sell a total of 121 hotels in 2025 for $959 million.

Adam Portnoy: I think there's going to also be a higher degree of alignment between the manager and the new equity owners in terms of performing, doing a good job in managing the portfolio, and generating a healthy return for those equity holders.

During the quarter, DHC also began executing on its announced transition of 116 shop communities from Aaris Life to new operators that have proven track records. While establishing regional footprints, the transition of all 116 communities is expected to occur by year-end 2025.

<unk> also successfully completed a zero coupon bond offering that raised $490 million in net proceeds that were used to repay <unk> revolving credit facility and retire the remainder of <unk> 2026 debt maturities.

John Massocca: Okay. Kind of a longer-term question given you have the two-year contract, locked-in contract in place. How kind of flexible is G&A spending to managing OPI? I guess how much could you potentially bring down G&A if for whatever reason at the end of two years post-emergence from bankruptcy, the portfolio goes a different direction, or the owners want to go a different way? Is there kind of a high amount of leverage into how you can kind of pull down G&A if you're not managing OPI here in a couple of years?

SVC continues to make significant progress selling non-core hotels to de-lever. Its balance sheet during the quarter. SBC completed. The sale of 40 hotels for over 292 million in is on Pace to sell, a total of 121 hotels, in 2025, for 959 billion million dollars. SVC also succeed.

Beyond the deleveraging efforts, we remain focused on helping SBC drive EBITDA growth across its hotel portfolio, despite softening demand and ongoing revenue displacement from render from.

Asian activity.

Further our organization continues to keep sbcs triple net lease portfolio, which is anchored by the travel centers leased to investment grade rated BP well leased to ensure SBC benefits from the stable cash flows these assets generate.

Successfully completed a zero coupon Bond offering, that raised 490 million in net proceeds, that were used to repay svcs revolving credit facility and retire. The remainder of svcs, 2026 debt maturities,

Adam Portnoy: The short answer is we spent a lot of time thinking about that. As you know, John, we don't have P&Ls by business line, right? That's one of the advantages of the economies of scale for our clients, that they basically manage with RMR, and we get those economies because we get the spread costs across the entire structure. We don't have P&Ls, let's say, by business line or client. I can tell you this much. Office as an asset class is probably the most management-intensive asset class that we manage at RMR. While I don't believe this will be the case, if we were to not be managing, let's say, a large office portfolio at the company, I do think there would be significant cost cuts that we could take. I don't believe to even go even further.

Beyond the deleveraging efforts, we remain focused on helping SVC Drive, ibido growth across its Hotel portfolio. The spike softening demand and ongoing Revenue displacement from Ren from renovation activity.

Seven hills, our mortgage REIT delivered another solid quarter supported by fully performing $642 million loan portfolio.

Hills has been exploring ways to generate new equity capital to ensure the REIT can continue to capitalize on the robust pipeline of investment opportunities are tremor commercial lending team generates to that end seven hills recently announced a rights offering to raise approximately 65.

Well, least to ensure SVC benefits from the stable, cash flows. These assets generate

7 Hills are mortgage rate delivered in other solid quarter, supported by fully performing 642 million dollar loan portfolio.

Million dollars of new equity, which should allow for over $200 million and gross new loan investments.

Adam Portnoy: We're not quite sure what would happen to margins, but there's a scenario where we might have less cash flow but higher margins, if you can follow me, because we just know intuitively there's a lot of people that work on the office portfolio versus other portfolios we run. I think we would be able to, in what I believe is an unlikely situation where we are no longer managing a large office portfolio, correspondingly reduce costs at the organization.

<unk> offering is structured so that shareholders of record on November 10th where given a transferable rights to buy one new share for every two shares. They currently own importantly, RMR, which is seven hills largest shareholder has agreed to backstop this offering essentially acquired.

7 Hills has been exploring ways to generate new equity capital to ensure they can continue to capitalize on the robust pipeline of investment opportunities that Tremont Commercial Lending's team generates. To that end, 7 Hills recently announced a rights offering to raise approximately $65 million in new equity, which should allow for over $2.0 billion in gross new loan investments.

Any unexercised rights as a demonstration of our confidence in seven hills business prospects going forward.

Lastly in late October OPI after exploring all possible strategies to address its capital structure entered into a restructuring support agreement or RSA, where certain holders of its senior secured notes to restructure its corporate debt.

The rights offering is structured. So that shareholders of record on November 10th were given a transferable right to buy 1. New share for every 2 shares. They currently own.

John Massocca: You touched on it a little bit with Mitch's question, but thinking about kind of Seven Hills and selling kind of the loans that were on RMR's balance sheet to Seven Hills, what was kind of the logic there? Maybe I'm misremembering past calls, but it felt like there might have been an opportunity to grow the loan book within on the RMR balance sheet. Is there some kind of change strategically where you're no longer seeing that as attractive? Just kind of curious the thought process behind that transaction.

Importantly, RMR, which is 7 Hills. Largest shareholder has agreed to back, stop, this offering essentially acquiring any unexercised rights as a demonstration of our confidence. In 7 Hills Business prospects, going forward.

As part of the RSA OPI voluntarily initiated initiated a court supervised process under chapter 11 of the U S bankruptcy code.

This agreement will meaningfully strengthened <unk> financial position and Delever the balance sheet.

Lastly, in late October OPI after exploring all possible strategies to address its capital structure entered into a restructuring support agreement or RSA with certain holders of its senior secured notes to restructure its corporate debt.

As part of the RSA RMR has agreed to continue managing OPI for a five year term that starts upon <unk> emergence from bankruptcy RMR will receive a flat business management fee. During the first two years of $14 million per year.

Matt Jordan: Yeah, John, it's Matt. If we go back in time about a year ago when we put these loans on our balance sheet, the goal was for them to be part of a seed portfolio to help us with the fundraising process. They've been well-performing, incredibly strong loans that have contributed to RMR's earnings, quite frankly, in a significant way. It's now been 12 to 18 months since those loans were initiated. As we fundraise in a very competitive environment, I think it's fair to say one of the loans actually matures next July, I believe. Their attractiveness from a seed perspective had fallen off. At the same time, you have Seven Hills that's raising this significant money. We want to make sure they can quickly deploy those proceeds.

As part of the RSA OPI voluntarily initiated initiated a court supervised process under chapter 11 of the US bankruptcy code, this agreement will meaningfully strengthen opi's financial position and de-lever the balance sheet.

And our property management agreement will remain unchanged.

To support Opi's operations. During this process OTI entered into a debtor in possession financing of $125 million.

As part of the RSA RMR has agreed to continue managing OPI for a 5-year term that starts upon opi's and emergence from bankruptcy.

We remain committed to supporting the assets vendors and tenants of OPI throughout this process and look forward to updating you as new information becomes available in the future.

Our marble will receive a flat business management fee during the first 2 years of 14 million per year.

And our property management agreement will remain unchanged.

To conclude we are pleased with the progress RMR has made over the past quarter assisting our public company clients with their financial and strategic objectives. Our perpetual capital clients also provide RMR with stable cash flows, which we can use to pursue new growth initiatives in the private capital space.

To support opi's operations. During this process OPI entered into a debtor in possession financing of 125 million.

Matt Jordan: By selling these loans at par to Seven Hills, it allows them to start quickly deploying, secure their dividend, which is also critical to this rights offering. It just was a successful transaction for both sides.

We remain committed to supporting the assets vendors, and tenants of OPI throughout this process and look forward to updating you as new information becomes available in the future.

To drive future revenue and earnings growth.

With that I'll now turn the call over to Matt Jordan Executive Vice President and Chief operating officer to provide added insights on our platform and private capital growth initiatives. Thanks, Adam and good morning, everyone. As Adam mentioned this past quarter was active on a number of fronts across the RMR platform.

John Massocca: Okay. With Seven Hills in mind, any updates you can provide on how the rights offering is looking at this moment? I know obviously there's moving pieces and things you might not be able to talk about, but just was kind of curious if there was any outlook on the amount of the rights offering you expect RMR to participate in.

To conclude. We are pleased with the progress. RMR has made over the past quarter. Assisting, our public company clients with their financial and strategic objectives.

Our Perpetual Capital clients also provide RMR with stable, cash flows, which we can use to pursue New Growth initiatives in the private Capital space to drive future revenue and earnings growth.

From a nonresidential leasing perspective, despite continued headwinds this past quarter RMR ranged almost one 4 million square feet of leases and for the full fiscal year, almost 8 million square feet of leases at rental rates approximately 14% higher than previous rents for the same space.

Adam Portnoy: Sure, John. You mentioned it is sort of early. The way rights offerings typically work, not just this company, but the way they always do, is unfortunately, everyone sort of waits to the last minute, which you have to keep the rights out. You have to have about a month outstanding before people have a deadline to exercise their right. For whatever reason, I guess people like to keep their options open to the very last minute, you just do not know to the very end how many people are going to be exercising their rights. What I can tell you is that as part of the rights offering, we retained UBS Investment Bank as the dealer manager.

With that. I'll now turn the call over to Matt Jordan Executive Vice President and Chief Operating Officer to provide added insights on our platform and private Capital Growth initiatives. Thanks, Adam. Good morning, everyone. As Adam mentioned this past quarter was active on a number of fronts across the AR platform.

We believe these results speak to the hard work of our people proactively engaging both tenants and the brokerage community.

Beyond leasing the platform continues to invest in our people technology and brand building to ensure we stand out in a competitive fundraising environment.

From a non-residential leasing perspective, despite continued headwinds, this past quarter we arranged almost 1.4 million square feet of leases. For the full fiscal year, we arranged almost 8 million square feet of leases at rental rates approximately 14% higher than previous rents for the same space.

Fundraising remains challenging we believe 2026 will be a better year for institutional investments in real estate as recent conversations our capital formation team is having with potential partners have reinforced commitments to the United States and many of the sectors we operate in.

We believe these results speak to the hard work of our people, proactively engaging both tenants and the brokerage community.

Adam Portnoy: Part of their job, and one of their jobs, is to basically solicit interest from outside investors that might want to buy the rights that other shareholders want to sell, meaning shareholders that do not want to exercise. While there has been very little trading, it has only been a few days in the rights themselves. What has been encouraging is that we have had quite a bit of interactions with new shareholders that are interested in perhaps buying rights from other shareholders that do not want to exercise them. Existing shareholders decide they do not want to exercise them, so they want to sell them. We are working with UBS to try to help identify potential buyers of those. What I am saying is it is too early to tell, but we are having lots of meetings, right? There is interest out there.

Beyond leasing the platform continues to invest in our people, technology, and brand building to ensure we stand out in a competitive fundraising environment.

Further while many private capital investors are limiting how many new manager relationships they form given the effort associated with underwriting a new manager there.

Breadth and scale of our platform remains an attractive differentiator.

Our current fund raising efforts remain focused on residential credit and select development opportunities, though as I noted the diversity and scale of our platform will allow us to pivot quickly based on investor feedback.

While fundraising remains challenging, we believe 2026 will be a better year for institutional investments in real estate. Recent conversations the capital formation team is having with potential partners have reinforced commitments to the United States and many of the sectors we operate in.

Further, while many private capital investors are limiting how many new manager relationships they form, given the effort associated with underwriting a new manager.

As it relates to RMR residential, which currently manages almost $5 billion and value add residential real estate.

The breadth and scale of our platform remain an attractive differentiator.

We formally launched fundraising for the enhanced growth venture in early September.

Our efforts are focused on finding up to three large investors to invest approximately $250 million in multifamily real estate.

Our current fundraising efforts remain focused on residential credit and select development opportunities though. As I noted the diversity and scale of our platform will allow us to Pivot quickly based on investor feedback.

This venture is targeting value add returns and provides investors the ability to share and property level in general partner economics.

Adam Portnoy: To get to the heart of your question, which is, well, how much is RMR going to have to spend here, or do we have to spend any? I think our base case assumption is that we don't expect that we're going to have to basically pull on the backstop beyond our 11% ownership, meaning we own 11% today. We expect to exercise up to that 11%. It could be that we end up exercising some amount. I think it would be less than, let's say, half, if I had to guess. There is a possibility somewhere between 11% and 50% of the offering itself we might have to backstop. Again, it's very early. I mean, I do not believe it would be more than half the offering. I think that's pretty, I don't want to say locked in stone, but it's hard to imagine that scenario.

Rmr's commitment via almost $100 million in seed investments provides investors certainty that committed monies can be immediately put to work as well as providing them a portfolio they can readily underwrite.

We formally launch fundraising for the enhanced growth Venture in early September.

The seed investments include the two acquisitions closed this quarter for a gross aggregate cost of $143 $4 million.

Our efforts are focused on finding up to 3. Large investors to invest approximately 250 million in multifamily. Real estate. This Venture is targeting value add returns and provides investors the ability to share and property level in general partner economics.

One is the 266 unit property near Raleigh, North Carolina, and the other is a 275 unit property in the Orlando, Florida.

We expect there to be a meaningful to be meaningful updates regarding the enhanced growth venture by early spring.

Our market's commitment via almost $100 million in seed investments provides investors certainty that committed monies can be immediately put to work, as well as providing them a portfolio they can readily underwrite.

Within the retail sector, we continue to source investment opportunities as we build a portfolio of value add multi tenant retail properties as part of establishing a track record in this sector are.

The seed Investments include the 2 acquisition closed, this quarter for a gross aggregate cost of 143.4 million.

1 is a 266 unit property near Raleigh North Carolina.

And the other is a 275 unit property near Orlando, Florida.

Our first investment of $21 million community shopping center outside of Chicago closed earlier this year and is executing on its underwritten business plan we.

Adam Portnoy: I think our base case is that we will just be exercising up to the 11%. Could we end up exercising a little bit over that to fill out the backstop? Yes. It is very hard to know for sure where the numbers are going to shake out.

We expect there to be meaningful updates regarding the enhanced growth venture by early spring.

We are currently assessing market opportunities with the goal of it adding at least two more similarly sized deals.

As it relates to our credit strategy, although we expect to close on the sale of two loans that are on our balance sheet. Later. This month, we continue to explore opportunities to form a strategic venture with institutional capital.

Within the retail sector, we continue to Source investment opportunities, as we build a portfolio of value, add multi-tenant retail properties, as part of establishing a track record in this sector.

John Massocca: Okay. I appreciate all that detail. That's it for me. Thank you.

Our first investment, a 21 million dollar Community shopping center outside of Chicago closed earlier this year and is executing on its underwritten business plan.

Operator: We now have a follow-up from Mitch Germain with Citizens Bank. Please go ahead.

Real estate credit remains a high conviction strategy and we believe <unk> track record middle market focus and strong underwriting and asset management teams are attractive differentiators.

We are currently assessing Market opportunities with the goal of adding at least 2 more, similarly sized deals.

John Massocca: Thank you very much. Just quickly on the, I know that, Matt, you talked about a bit of a true-up on interest expense because you've had it in place for subquarter. Do we have a similar true-up for the, what's the true-up for the rental income associated with the two residential assets that were acquired mid-quarter? How should we think about that?

With that I'll now turn the call over to Matt Brown, Executive Vice President and our Chief Financial Officer.

As it relates to our credit strategy, although we expect to close on the sale of 2 loans that are on our balance sheet. Later this month, we continue to explore opportunities to form a strategic Venture with institutional capital,

Thanks, Matt and good morning, everyone.

As Adam highlighted this quarter, we reported adjusted EBITDA of $25 million distributable.

Earnings of <unk> 44 per share and adjusted net income of <unk> 22 per share all of which were in line with our expectations recurring service revenues were approximately $45 5 million.

Real estate credit remains a high conviction strategy. And we believe traumas track record, Middle Market, focus and strong underwriting and asset management teams are attractive. Differentiators

Matt Jordan: Yeah, I think the best way to think about our wholly owned portfolio, which includes the two residential acquisitions from the quarter, is we're expecting about $3.2 million of NOI to be contributed on a quarterly basis for those while they remain on the balance sheet.

With that, I'll now turn the call over to Matt Brown Executive Vice President and our Chief Financial Officer.

Thanks Matt and good morning everyone.

The sequential quarter increase of approximately $1 $5 million driven primarily by increases in enterprise values at THC, LPT, and SBC and higher construction supervision fees.

John Massocca: That's aligned with this quarter. Is that the way to think about it? I think we're at $3.2 million right now.

Next quarter, we expect recurring service revenues to decrease to approximately $42 $5 million driven by lost fee revenue from the announced sale of <unk> business and decreases in certain of our managed Reits enterprise values from accretive debt financings and asset sales as we strategically manage their debt levels.

As Adam highlighted this quarter, we reported adjusted EPA of 20.5 million, distributable earnings of $0.44 per share, and adjusted net income of $0.22 per share, all of which were in line with our expectations.

Matt Jordan: The owned real estate contributed about $650,000 of EBITDA in Q4, that will grow to just over $3 million on a run rate basis.

Recurring service revenues were approximately 45.5 million, a sequential quarter increase of approximately 1.5 million driven primarily by increases in Enterprise values at DHC iot and SVC and higher construction supervision fees.

Turning to expenses recurring cash compensation was $38 $5 million this quarter, which was consistent with the prior quarter looks.

John Massocca: Okay. How should we think about you guys are pretty flush with cash, but obviously with the rights offering and some acquisitions that you're making, how should we think about that balance on a go-forward basis?

Looking ahead to next quarter, we expect cash compensation to decline to approximately $37 million as recent cost containment measures continue to positively impact earnings we.

Next quarter, we expect recurring service revenues to decrease to approximately $42.5 million, driven by lost fee revenue from the announced sale of Eros, Life's business, and decreases in certain of our managed rates from a creative debt financing and asset sales as we strategically manage their debt levels.

We expect our cash compensation reimbursement rate to be between 46, and 47% going forward.

Adam Portnoy: You're right to point out the rights offering. I think it's hard for us to put a stake in the ground to say exactly where we think things will be. As we sit today, we don't believe, based on all the actions we have underway, that we will be drawing on the revolver. That's not something we think. It could be that we use more cash, obviously, than we have on the balance sheet today. We will be getting proceeds from the sale of the loans themselves. There will be a liquidity event, we hope and think, as we get into 2026, as we sell the enhanced growth fund. What?

Turning to expenses, recurring cash compensation was 38.5 million this quarter which was consistent with the prior quarter.

Recurring G&A this quarter was $10 1 million a modest sequential quarter increase driven by costs associated with our ongoing private capital fund raising efforts, we expect recurring G&A to remain at these levels over the next couple of quarters.

Looking ahead to next quarter, we expect cash compensation to decline to approximately 37 million as recent Cost Containment measures continue to positively impact earnings.

Interest expense this quarter increased to $1 $7 million following the acquisitions of two leveraged residential properties that Matt highlighted inter.

We expect our cash compensation reimbursement rate to be between 46 and 47% going forward.

Interest expense next quarter is expected to increase to approximately $2 $6 million as we incur a full quarter of interest on these new mortgages.

Recurring GNA. This quarter was 10.1 million. A modest sequential quarter. Increase driven by costs associated with our ongoing, private Capital fundraising efforts

We expect recurring GNA to remain at these levels over the next couple of quarters.

It is also worth noting that this quarters income tax rate of 21, 4% reflects year end adjustments primarily related to stock based compensation for modeling purposes, we expect our tax rate to decline to approximately 15% in Q1 based on our current forecast for incentive fees, we may earn for calendar year 2025, and two <unk>.

John Massocca: Plus incentive fees.

Adam Portnoy: Plus incentive fees that we'll be getting, hopefully, at the end of the year. We don't think we'll be drawing on the revolver, if that's maybe the question. It's hard to know exactly where the cash balance will be. I will say that we don't feel cash constrained. We're still very active in terms of all of our initiatives, in terms of continuing to look at other retail properties. We continue to look at sort of JV investments, GP investments on the residential side. I think we feel that we're not constrained in our ability to continue to do things. We are waiting to see where the rights offering shakes out and where the incentive fees actually shake out for the year.

Interest expense this quarter increased to 1.7 million following the Acquisitions of 2 leveraged Residential Properties. That Matt highlighted interest expense. Next quarter is expected to increase to approximately 2.6 million as we incur a full quarter of interest on these new mortgages.

Only 18% for Q2 to Q4.

As Matt mentioned on the call last quarter, we believe cash flow measures such as adjusted EBITDA and distributable earnings per share are becoming more relevant when comparing our results to prior periods and other alternative asset managers, our private capital business is accretive to our cash flow, but as we continue to use RMR strong balance sheet for strategic growth.

It is also worth noting that this quarter's income tax rate of 21.4%. Reflects year-end adjustments, primarily related to stock-based compensation

For modeling purposes. We expect our tasks rate to decline to approximately 15% in q1, based on our current forecast for incentive fees, we may earn for calendar year 2025 and to approximately 18% for Q2 to Q4

<unk> expenses, such as depreciation and interest will have an adverse impact on certain financial metrics such as adjusted net income per share.

John Massocca: Thank you.

Aggregating the collective assumptions I've outlined next quarter, we expect adjusted EBITDA to be between $18 million to $20 million distributable earnings to be between 42, and <unk> 44 per share and adjusted net income to be between 16 and 18 per share.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Adam Portnoy, President and Chief Executive Officer, for any closing remarks.

Adam Portnoy: Thank you all for joining our call today. Institutional investors should contact RMR Investor Relations if you would like to schedule a meeting with management. Operator, that concludes our call.

This expected decline in quarterly results is mainly due to the sale of the <unk> life's business for the fiscal fourth quarter and full year, we earned one 4% and $5 $7 million, respectively. Our fee revenue on the <unk> life contract.

As Matt mentioned on the call last quarter, We Believe cash flow measures such as adjusted Ava and distributable earnings per. Share are becoming more relevant When comparing our results to Prior periods and other alternative asset managers. Our private Capital business is a creative to our cash flow. But as we continue to use rmr's, strong balance sheet for strategic growth initiatives, expenses, such as depreciation and interest will have an adverse impact on certain Financial metrics such as adjusted, net income per share.

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

We expect to offset this loss revenue with increases in Dht's enterprise value as new operators that have well established regional footprints and proven track records should help drive NOI growth.

And adjusted net income to be between 16 and 18 cents per share.

This expected decline in quarterly results is mainly due to the sale of of a Lara's life's business.

We ended the quarter with $162 million of total liquidity, including $62 million in cash and $100 million of capacity on our undrawn revolving credit facility.

For the fiscal fourth quarter. And full year, we earned 1.4 and 5.7 million respectively of fee revenue on the Yaris life contract.

Finally, as Adam mentioned at September 30 was the end of the measurement period, we would earn incentive fees from THC and <unk> of approximately $22 million in the aggregate.

We expect to offset this loss Revenue with increases in DHC, Enterprise Value as new operators that have well established Regional Footprints, and proven track records should help Drive noi growth.

That concludes our prepared remarks, operator, please open the line for questions.

We ended the quarter with 162 million of total liquidity, including 62 million in cash, and 100 million of capacity, on our undrawn revolving credit facility.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys is that anytime. Your question has been addressed and you would like to withdraw. Your question. Please press Star then queue. At this time, we will pause momentarily to assemble our roster.

Finally, as Adam mentioned, if September 30th was the end of the measurement period, we would earn incentive fees from DHC and iOPT of approximately $22 million in the aggregate.

That concludes our prepared remarks operator, please open the line for questions.

Sure.

The first question comes from Mitch Germain with citizens Bank. Please go ahead.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

Hi, good morning.

<unk>.

I'm just curious about opi's fee. It does it in effect go quarter over quarter.

If at any time your question has been addressed and you would like to withdraw your question, please press star. Then 2 at this time we will pause momentarily to assemble our roster.

Hi, Mitch.

I think your question you broke up for me is about Opi's fees.

The first question comes from Mitch, Germaine with Citizens Bank. Please go ahead.

Yes, effectively is pretty much flat.

Hi, good morning. Um

We were earning just under $14 million Im just under $14 million a year on a business management basis. It was 13 and change.

I'm curious about opi's fee, it does it in effect. Go up quarter quarter,

Over the last 12 months give or take and so we have a contractor will be earning 14 million fixed fee for the first two years per year $14 million on the property management agreement Nothing's changed all the economics or are the exact same as they were prior to the filing during the just to be very.

Hi Mitch. Uh, I think your your question you broke up for me is about opi's fees. Um, yes, effectively is pretty much flat, uh, we were earning just under 14 million, I'm just under 14 million dollars a year on a business management basis. It was like 13 and change.

Cleared during dependency of the bankruptcy itself, we are operating under the existing contract. So we probably will earn a little bit less than a $14 million run rate during dependency of the bankruptcy, but upon emergence from bankruptcy. That's when the clock starts and that's when the $14 million.

Per year goes into effect.

I'll just say it might be correlated to your question look the fact that we entered into what we call a restructuring support agreement we think.

Leads to hopefully a much faster bankruptcy process and allows us to get out of bankruptcy hopefully.

Uh, over the last 12 months give or take. And so we have a contractor that will be earning 14 million fix me for the first 2 years per year, 14 million on the property management agreement, nothing's changed. All the economics are are the exact same as they were uh prior to the file during the just to be very clear during the pendency of the bankruptcy itself, we are operating under the existing contract so we probably will earn a little bit less than a 14 million dollar run rate during dependency of the bankruptcy, but upon emergence from the bankruptcy

Oster than if we had not entered within our RSA. So.

It's a little unclear exactly when will emerge, but I think roughly speaking it's first half of 2026 will emerge.

Gotcha. Thank you.

I think Adam you mentioned.

Where your focus is on the private capital side in terms of fundraising.

Maybe I missed it but I Didnt hear you mentioned shopping centers as a competency that youre raising capital for yet.

That's when the clock starts. And that's when the 14 million per year goes into effect. Um, part I'll just say what, you know, it might be a quarterly or to your question. Look, the fact that we entered into what we call a restructuring support agreement. You know, we think, uh, leads to hopefully a much faster bankruptcy process and allows us to get out of bankruptcy hopefully, uh, faster than if we had not entered within our RSA. So, uh, it's a little unclear exactly, when we'll emerge but I think roughly speaking. It's first. Half of 2026. Will emerge.

So, thank you. Um,

You guys are obviously, you owned one and Youre looking to allocate capital to others. So maybe just kind of go over where that shift with regards to your profit capital strategy.

I think Adam, you mentioned.

Where your uh focus is on the private Capital side in terms of fundraising. Um,

Sure sure Mitch So it's a great question, Matt touched a little bit on this in his prepared remarks, but youre right. We have it on our balance sheet. We think we have a lot of core competency in retail we run a very large multibillion dollar existing retail portfolio.

Maybe I missed it, but I didn't hear you mention. Um, shopping centers as a competency that you're raising capital for yet. You guys are obviously you own 1 and you're looking to allocate Capital to others. So maybe just trying to go over where that sits with regards to your private Capital strategy.

Today, we have a very large very competent retail asset management team on staff.

It's not front and center, but already in parts of our organization given the size and breadth of the different portfolios, we do actually run shopping centers in different parts of the business.

Let's say buried within some other asset classes or buried within some of the portfolios. So we do have experience there we think.

The law for a lot of reasons investing in neighborhood grocery anchored specifically.

Shopping centers is a great thing to be doing right now retail has really gone through transformation over the last 10 to 15 years, and we really have a pretty good supply demand dynamic going on where there's not a lot of new supply and demand is sort of finally caught up with the existing.

Supply and so we see a lot of interesting opportunities to basically put money to work.

Sure sure Mitch so uh it's a great question. Matt touched a little bit on this and is prepared remarks but you're right, we have it on our balance sheet, we think we have a lot of core competency in retail. You know, we run a very large multi-billion dollar existing retail portfolio, you know. Uh, today we have a very large very competent uh retail asset management team on staff. We you know, it's not front and center but already in parts of our organization, given the size and breadth of the different portfolios. We do actually run shopping centers in different parts of the business. Uh, let's say, buried within some other asset classes or buried within some of the portfolios. So we do have experience there. We think, um, a lot for a lot of reasons investing in neighborhood and grocery anchored. Specifically, uh, shopping centers is a great thing to be doing right now. Retail has really gone through transformation.

And through either capital improvements or re tenant thing a center, we can generate outsized returns and we're doing that first on our balance sheet, but we're pretty confident that we're going to be successful with that.

And that will be able to then take that.

Demonstrate that track record and raise more capital around that going forward, Matt do you want to add anything to that no I think Mitch we have the one asset outside of Chicago and the point, we were making in the prepared remarks, we're hoping to at least add a couple more of similar size scale to build the whole a fulsome track record that we.

Can go out and fundraise around.

Hopefully a couple of years from now.

Gotcha, and then did I hear that you guys have a couple of additional loan investments that are <unk>.

On your agreement.

Mishear that.

We don't have new Rms.

All RMR itself, we do not have any new loan investments. We are I don't think we discussed in our prepared remarks, but as in our public disclosures, we are selling or having an agreement to sell.

15 years and we really have a pretty good Supply demand uh, Dynamic going on where there's not a lot of new supply. And demand is sort of finally caught up with the existing, uh, Supply. And so, we see a lot of interesting opportunities to, basically, put money to work. And through either Capital Improvements or reten, a center, we can generate outsized returns, and we're doing that first on our balance sheet, but we think we're pretty confident, that we're going to be successful with that. Uh, and that we'll be able to then take that, you know, demonstrate that track record and raise more Capital around that going forward. Matt. You want to add anything to that. No. And I think Mitch, uh, we have the 1 outside of Chicago and and the point we were making in the prepared. Remarks is, we're hoping to at least add a couple more of similar size scale to build the whole a wholesome track record uh that we can go out and fundraise around uh and hopefully a couple of years.

Years from now.

Got you and then did I hear that? You guys have a couple of additional loan Investments that are

The two loans that we have on our balance sheet.

Under agreement. Did I miss hear that?

Those are being sold.

There is currently no plan.

To put more loans on RMR balance sheet, what I did mentioned in my prepared remarks is we have a rights offering that we're in the middle of.

Yes occurring at seven Hills, and we expect as a result of that we will have about $65 million of equity, which provides for about $200 million in additional loan investments that we plan to deploy over the following call. It six months.

To get that money out and if your average loan size is $25 million Thats call. It.

Eight loans, 8% to 10 loans give or take that will be new loans that we will be putting money out at seven hills.

Thank you last one for me, Matt maybe just kind of go through the puts and takes to get you to your forecast in the first quarter, maybe a bridge from where you where you ended.

The fiscal fourth quarter to how you get to the first quarter in terms of your guidance. Please.

Uh, we don't have new at RMR itself. We do not have any new loan Investments. We are, I don't think we discussed in our prepared remarks. But isn't our public disclosures? We are selling or have an agreement to sell, uh, the 2 loans that we have on our balance sheet. Um, those are being sold. Um, there's currently no plan, uh, to put more loans on rmr's balance sheet. What I did mention in my prepared, remarks is, we have a rights offering that we're in the middle of at purring at 7th Hills. And we expect as a result of that, we'll have about 65 million dollars of equity which provides for about $200 million in additional loan Investments that we plan to deploy over the following call at 6 months. Uh to get that money out and you know if your average loan size is 25 million that's call it you know uh 8 loans, 8 to 10, loans give or take that will be new loans that we

Will be putting money out at 7 Hills.

Sure I will focus on adjusted EBITDA for that so fiscal fourth quarter was $25 million.

Our forecast for fiscal Q1 is $18 million to $20 million. The major impact of that is the sale of <unk> business and the wind down of that today, we earned 60 basis points on the revenue of our senior living communities and as that winds down.

Thank you. Last 1 from the Matt. Maybe just kind of go through the puts and takes to get you to your forecast. In the first quarter, maybe a bridge from where you, where you ended, uh, uh, the fiscal fourth quarter to how you get to first quarter in terms of your guidance, please?

We're expecting revenues to decrease about $1 million for that alone. So that's the major headline.

The decrease from Q fiscal Q4 to fiscal Q1.

Thank you.

Again, if you have a question. Please press Star then one.

The next question comes from John <unk> with B Riley. Please go ahead.

Good morning, maybe just sticking with that question quickly.

Sure, I'll focus on, uh, adjusted IBA for that. So fiscal fourth quarter was 20 and a half million dollars. Uh, our forecast for fiscal, q1 is 18 to 20 million, the major impact of that is the uh sale of Eros life's business and the wind down of that today. You know, we earn 60 basis points, on the revenue of our senior living communities and is that winds down. Uh, we're expecting uh, revenues to decrease about a million dollars for that alone. So that's the major headline, uh, from the decrease from Q. Fiscal Q4 to fiscal q1.

Thank you.

Is there any expected additional negative flow through from the loss of managing <unk> life as we think beyond the next quarter.

again, if you have a question, please press star then 1

So the full wind down should happen.

The next question comes from John Misoa with B. Riley. Please go ahead.

By the end of this year.

So while we're expecting about $1 million decrease in fee revenue.

Coming quarter.

We will we did earn $1 4 million in fiscal Q4, so there'll be another kind of $400000 deduct what we when we roll forward the fiscal Q2.

Good morning. Uh, maybe just sticking with that question. Quickly, is there any expected additional negative flow through from the loss of, uh, managing Aeris life as I think beyond the next quarter?

Okay.

And then moving on to OPI.

Can you just walk through what the.

Advisory agreement looks like.

After two years, if youre still managing.

So the the full line down should happen, um, by the end of this year. Um, so while we're expecting about a million dollar decrease in fee Revenue, uh, this coming quarter, um, we will, we did earn 1.4 million in fiscal Q4 so there'll be another kind of $400,000, uh, deduct

That portfolio.

When we, when we roll forward, the fiscal Q2.

Sure. So it's a it's a term sheet, we entered into with the with.

With the with the what will like what will be likely the new equity owners of OPI. Upon emergence. It's a five year term. The first two years are set at $14 million per year in our business management fees property management stays unchanged.

Um and then be moving on to Opi uh can we just walk through what the um advisor agreement looks like?

After 2 years, if, if you're still managing, um, that portfolio.

And during the first two years, if now that $14 million stays the same whether the portfolio shrinks or grows it doesn't matter what the size of the portfolio is that sort of stays in place at $14 million per year. After two years.

There's a negotiation and I think.

Look the reason it was set up that way is with the new owners of OPI I think there is a little bit of hesitancy about how to structure. The fee in terms of what it should be based on because we're not quite sure exactly the size and the makeup of OPI, let's say.

For the next couple of years, we're confident and I think the new investors are new owners of OPI are confident that we will still be managing it over the next two to three years, but as part of that I think they just wanted to see how the next couple of years play out what's the size of the company.

It could shrink from the size. It is today it could also grow from the size. It is today I mean part of what we have had discussions with the new owners about is this vehicle might be used in saying this will be used I am saying it might be used as a vehicle to roll up other distressed.

14 million stays the same, whether the portfolio shrinks or grows or doesn't matter what the size of the portfolio is that's sort of stays in place at 14 million per year. After 2 years. Um, we there's a negotiation and I think look the reason it was set up that way is with the new owners of OPI. I think there's a little bit of a hesitancy about how to structure the fee in terms of what it should be based on because we're not quite sure exactly the size and the makeup of OPI, let's say over the next couple years, we're confident. And I think the new investors or new owners of OPI are confident that we will still be managing it over the next 2 to 3 years. But you know, as part of that I think they just want to see how the next couple years play out. What's the size of the company, you know?

The officer office portfolios in the marketplace I mean, we're pretty encouraged it we found a group of investors that currently own the depth I wanted to echo ties there that really want to go long on office, because they really see as a great opportunity both from a macro perspective, and I think they also feel pretty good.

It's, you know, it could shrink from the size, it is today. It could also grow from the size, it is today. I mean, part of what we've had discussions with the new owners about is that this vehicle might be used and not saying this will be used.

About the portfolio itself, meaning theres, a lot of pain, but the OPI portfolio has gone through but the vast majority of that pain is behind us.

<unk> Ford it looks much better than what we've gone through over the lax last two or three years in terms of leasing prospects and cash flow or NOI, that's going to be coming out from the property. The other thing ill mention in the term sheet that's on file and it is public.

It also contemplates a significant incentive fee to be structured.

For RMR as well.

It's in twice to paid that upfront, we will be getting 2% of the reorganized company and then another 8%, it's a little bit more ambiguous, but there'll be benchmark just sort of.

I'm saying it might be used as a vehicle to roll up other distressed officer office portfolios in the marketplace. I mean, we're pretty encouraged that we found a group of investors that currently own the debt that wanted to equit their debt and really want to go long on office because they really see there's a great opportunity both from a macro perspective and I think they also feel pretty good about the portfolio itself. Meaning there's a lot of pain that the OPI portfolio has gone through but the vast majority of that pain is on is behind us, uh, looking forward. It looks much better than what we've gone through over the last last 2 or 3 years in terms of leasing prospects and cash flow or noi. That's going to be coming out from the property. The other thing I'll mention in the term sheet that's on file and it's public.

Outperforming benchmarks may basically.

Think about it as sort of structured like our classic promote that you might see in a private equity type investment that's what I think the other 8% will be structured like so I think there is going to also be a high degree of alignment between the manager and the new equity owners in terms of performing doing a good job in managing.

Is it also contemplates? A significant incentive fee to be structured uh for RMR as well.

The portfolio and generating a healthy return for those equity holders.

Okay.

Kind of a longer term question given.

Anticipated that upfront. We will be getting 2% of the reorganized company and then another 8% that's a little bit more ambiguous, but there will be S Benchmark to sort of uh outperforming benchmarks. May basically, uh, think about is sort of structured like our classic promote that you might see in a private Equity type investment. That's what I think. The other 8% will be structured. Like, so I think there's going to

To your contract locked in contracts in place, but how kind of flexible is in G&A spending.

<unk>.

Managing <unk> I guess I guess, how much could you potentially bring down G&A if for whatever reason.

also be a high degree of alignment between uh the manager and the new Equity owners in terms of Performing, you know, doing a good job and managing the portfolio and generating a healthy return for those Equity holders

At the end of two years post emergence from bankruptcy.

The portfolio is different direction or the owners want to go a different way like is there a kind of a high amount of leverage into how you can kind of pull down G&A, if youre not managing OPI here in a couple of years.

Okay, um, it's kind of a longer term question, given, you know, you, you the 2 year contract you locked in contract in place, but, uh, how kind of flexible is GNA spending?

To.

The short answer is we spent a lot of time thinking about that is as you know John we don't.

You know managing OPI, I guess, I guess how much could you potentially bring down GNA if for whatever reason?

Half P&l's by business line right. That's one of the advantages of the economies of scale for our clients that they basically manage with RMR and we get those economies because we get the spread costs across the entire structure. So we don't have P&L, let's say by business line or client, but I can tell you. This much.

At the end of 2 years, post-emergent and bankruptcy, you know, the portfolio goes a different direction or the owners want to go a different way. Like, you know, is there a kind of a high amount of leverage into how you can kind of pull down G&A? If you're not managing OPI here in a couple of years?

Office as an asset class.

He is probably the most management intensive asset class that we manage at RMR.

And so while I don't believe this will be the case, if we were to not be managing lets say a large office portfolio with the company I do think there would be significant cost cuts that we could take I don't believe even go even further.

The short answer is we spent a lot of time thinking about that is as you know, John we don't, you know uh have p&ls by business line. Right. That's 1 of these advantages of the economies of scale for the our clients that they basically manage with RMR and we get those economies because we get the spread costs across the entire structure. So we don't have p&ls. Let's say buy business line or client, but I can tell you this much.

Office as an asset class is probably the most management-intensive asset class that we manage at RMR.

Not quite sure where it would happen to margins but.

There is a scenario, where we might have less cash flow, but higher margins. If you can follow me because we just know intuitively theres a lot of people that work on the office portfolio versus other portfolios. We run so I think we would be able to in the unlike.

And so while I don't believe this will be the case if we were to not be managing, let's say a large office portfolio at the company. I do think there would be significant Cost Cuts that we could take. I don't believe that. Even go even further, we're not quite sure where it would happen to margins, but

What I believe is unlikely.

<unk>, where we are no longer managing a large office portfolio I think we would be able to correspondingly reduce costs at the organization.

You touched on it a little bit with <unk> question, but thinking about kind of seven hills and selling kind of the loans that were on RMR balance sheet $2 seven hills, what was kind of the logic, there maybe I'm misremembering past calls, but it felt like.

As we run. So, I think we would be able to in the unlike what I believe is unlikely, uh, situation where we are no longer managing a large office portfolio. I think we would be able to correspondingly reduce costs that the organization

There might have been a.

<unk> to grow the loan book within on the RMR balance sheet is there something kind of changed strategically where you're no longer seeing that as attractive just kind of curious the thought process behind that transaction.

Yes, John its Matt So if we go back in time about.

You touched on it a little bit with, uh, Mitch's question. But, um, thinking about kind of the 7 Hills and selling kind of the loans that were on rmr's, balance sheet to 7 Hills. What was kind of the logic there? Maybe I'm misremembering past calls, but it felt like

A year ago, when we put these loans on our balance sheet. The goal was for them to be part of the seed portfolio to help us with the fund raising process.

And they've been well performing incredibly strong loans that have contributed to RMR is earnings quite frankly in a significant way.

There might have been a a opportunity to grow the loan book within on the RMR. Balance sheet, is there some kind of change strategically, where you're no longer seeing that as attractive? Just kind of curious, the the thought process uh, behind that transaction.

But it's now been <unk>.

<unk> months to 18 months since those loans were initiated.

And as we fund raise in a very competitive environment I think it's fair to say one of the loans actually matures next June July I believe so their attractiveness from a seat perspective.

Yeah, John's Matt. So if we go back in time about uh a year ago, when we put these loans on our balance sheet, the goal was for them to be part of a seed portfolio to help us with the fundraising process.

Uh and they've been well performing incredibly strong loans uh that have contributed to rmr's earnings quite frankly in a significant way.

And fallen off.

And at the same time, you have seven hills, that's raising the significant money, we want to make sure. They can quickly deploy those proceeds and by selling these loans at par to seven hills. It allows them to start quickly deploying.

Um, but it's now been, you know, 12 to 18 months since those loans were initiated. Um, and as we fundraised in a very competitive environment, I think it's fair to say 1 of the loans, actually, matures. Next J July, I believe. So, they're attractiveness from a seed perspective. Uh,

Secure their dividend, which is also critical to this rights offering.

Had fallen off.

And it just was the successful transaction for both sides.

Okay.

With seven hills in mind any updates you can provide on how the rights offering is looking at this moment I know, it's obviously, there's moving pieces and things you might be able to talk about but.

This was kind of curious if there was any outlook on the amount of the rights offering you expect RMR too.

And at the same time, you have 7 Hills, that's raising this significant money. We want to make sure uh, they can quickly deploy those proceeds and by selling these loans at par to 7 Hills, it allows them to start quickly deploying uh, secure their dividend, which is also critical to this rights offering. Um, and it it just was a successful uh transaction for both sides.

Dissipated.

Sure John So.

You mentioned it is sort of early in the way. These rights wait rights offerings typically work not just this company, but the way. They always do is unfortunately, you really don't everyone's sort of waits till the last minute, which you have to keep the rights you have to have the about a month outstanding before people have a deadly.

Um, with 7 Hills in mind, any updates you can provide on how the rights offering is looking at this moment? I know it's obvious there are moving pieces and things you might not be able to talk about, but I was kind of curious if there was any outlook on the amount of the rights offering you expect RMR to participate in.

To exercise the right and so whatever region I guess.

People like to keep their options open to the very last minute.

Just don't know to the very end, how many people are going to be exercising their rights. What I can tell you is that.

As part of the rights offering we retained UBS investment bank as the dealer manager and part of their job in one of their job is to basically solicited interest from outside investors that might want to buy the rights there.

And the other shareholders want yourself, meaning shareholders that don't want to exercise and while theres been very little trading it's only been a few days in the Reits themselves. What has been encouraging is that we have had a quite a bit of interactions with share new shareholders that are interested in.

Uh, about a month outstanding before people have a deadline to exercise the right? And so, whatever the reason—and I guess it’s, you know, people like to keep their options open to the very last minute—you just don’t know till the very end how many people are going to be exercising their rights. What I can tell you is that, you know, as part of the rights offering, we retained UVS Investment Bank as the dealer manager, and part of their job—and one of their jobs—is to basically solicit interest from outside investors that might want to buy the rights.

Perhaps buying rights from other shareholders that don't want to don't want to exercise of existing shareholders decided they don't want to exercise them. So they want to sell them and we are working with UBS to try to help identify potential buyers of those and what I'm, saying is it's too early to tell but we're having lots of meetings right and so there is.

Interest out there.

To get to the heart of your question, which is well how much is arm are going to have to spend here or do we have to spend any I think our base case assumption is that.

We don't expect that we're going to have to drop.

Basically pull on the backstop beyond our 11% ownership, meaning we own 11% today, we expect to exercise up to that 11%.

Could be that we end up exercising some amount I think it would be less than let's say half if may if I had to guess and so there is a possibility somewhere between 11% and 50% of the offering itself we might have to do.

Uh that other shareholders want to sell meaning shareholders that don't want to exercise. And while there's been very little trading, it's only been a few days in the rights themselves. What has been encouraging is that we have had uh quite a bit of interactions with Cher new shareholders that are interested in perhaps buying REITs from other shareholders that don't want to buy, don't want to exercise them existing shareholders decide. They don't want to exercise them so they want to sell them and we are working with UBS to try to help identify potential buyers of those. And what I'm saying is, it's too early to tell but we're having lots of meetings, right? And so there is interest out there uh, you know, to get to the heart of your question which is well, how much is armor going to have to spend here or do we have to spend any? I think our base case assumption

We might have to backstop, but again, it's very early I mean, I do not believe it would be more than half the offering I think that's pretty pretty I don't want to say locked in stone, but its hard to imagine that scenario.

Is that you know, we don't expect that, we're going to have to draw uh uh basically pull on the back, stop beyond our 11% ownership. Meaning we own 11% today. We expect to exercise up to that 11% you know. It could be that we end up exercising some amount. I think it would be less than let's say half.

And I think our base case is that we will just be exercise just exercising up to the 11%.

Would we be end up exercising a little bit over that to fill out the backstop, yes, but it's very hard to know for sure where the numbers are going to shake out.

I think that's, you know, pretty pretty. I don't want to say locked in stone, but it's hard to imagine that scenario.

Okay.

Appreciate all the detail.

Thank you.

Okay.

We now have a follow up from Mitch Germain with citizens Bank. Please go ahead.

um and I think it's you know, our base case is that we will just be exercised you know just exercising up to the 11%

Thank you very much just quickly on the I know that Matt you talked about a bit of a true up on interest expense because you've got a.

Could we be end up? Exercising a little bit over that to fill out the back? Stop. Yes. But it's very hard to know for sure where the numbers are going to shake out.

I appreciate all that detail. Um, that's it for me. Thank you.

Yep.

Had it in place for sub quarter do we have a similar true up for the what's the short for the <unk>.

Our rental income associated with the two residential assets.

That were acquired in the quarter, how should we think about that.

Yes, I think I think the best way to think about our wholly owned portfolio, which includes the two residential acquisitions from the quarter.

Uh, thank you very much. Just quickly on the, um, I know that Matt, you talked about a bit of a true-up on interest expense because you've got a...

Had it, uh, in place for a sub quarter. Do we have a similar true up?

We're expecting about $3 2 million of NOI to be contributed.

For the, what's the true for the? Um, rental income associated with the 2 residents?

On a quarterly basis for those while they remain on the balance sheet.

Um, that were required mid quarter. How should we think about that?

So thats.

Aligned with this quarter is that the way to think about it I think we are at $3 2 million right now.

The owned real estate contributed about 650000 of EBITDA in Q4, so that will grow to just over $3 million on a run rate basis.

Yeah, I think I think the best way to think about our wholly owned portfolio, which includes the 2 residential Acquisitions from the quarter. Uh, is we're expecting, uh, about 3.2 million of noi to be contributed, uh, on a quarterly basis for those while they remain on the balance sheet.

Oh, okay.

So that's a line with this quarter. Is that the way to think about it. I think we're at 3.2 million right now.

And then how should we think about.

You guys are pretty flush with cash, but obviously with the rights offering in some acquisitions that you're making so how should we think about.

That balance on a go forward basis.

The owned real estate contributed about $650,000 of EBIT in Q4, so that'll grow to just over $3 million on our run-rate basis.

So.

Youre right.

Oh, okay. Um,

Two two point out the rights offering I think it's hard for us to.

And then how should we think about, um,

Put a stake in the ground to say exactly where we think things will be.

As we sit today, we don't believe based on all the actions we have underway that we will be drawing on the revolver, that's not something we think but.

You guys are pretty flush with cash, but obviously with the rights offering and some Acquisitions that you're making, so how should we think about um, you know, that balance going to go for our basis?

It could be that we use more cash obviously than we have on the balance sheet today.

We will be getting proceeds from the sale of the loans themselves.

So, uh, you're right to point out the rights offering. I think it's hard for us to, you know, put a stake in the ground to say exactly where we think things will be.

There will be a liquidity event, we hope and think as we get into 2026.

We sell the enhanced.

Growth fund.

But plus incentive plus incentive fees that we will be getting hopefully at the end of the year.

So we don't think we'll be drawing on the revolver. If that's maybe the question it's hard to know exactly where the cash balance will be I will say that we're not we don't feel cash constrained we're still very active in terms of all of our initiatives in terms of.

As we sit today, we don't believe based on all the actions. We have underway that we will be re uh, drawing on the revolver. That's not something we think, but um, it could be that we use more cash obviously than we have on the balance sheet today. Uh, we will be getting proceeds from the sale of the, of the loans themselves. Uh, you know, they will be in a liquidity event. We hope. And think, as we get into 2026,

as we, uh, sell the enhanced, uh, growth fund, uh,

Continuing to look at other retail properties, we continue to look at sort of JV investments GP investments on the residential side.

So I think we feel that we're not constrained in our ability to continue to do things, but we are waiting to see where the rights offering shakes out.

And where their incentive fees actually shake out for the year.

Thank you.

This concludes our question and answer session I would now like to turn the conference back over to Adam Portnoy, President and Chief Executive Officer for any closing remarks.

What plus incentive fees plus incentive fees that we'll be getting hopefully at the end of the year. Uh, so we don't think we'll be drawing on the revolver if that's maybe the question. Uh, it's hard to know exactly where the cash balance will be. I will say that we're not, you know, we don't feel cash constrained, you know, we're still very active in terms of all of our initiatives. In terms of, you know, continuing to look at other retail properties. We continue to look at sort of JV Investments GP Investments on the residential side, um, you know, so I think we feel that we're not constrained and our ability to continue to do things, but we are waiting to

Thank you all for joining our call today institutional investors should contact RMR Investor Relations. If you would like to schedule a meeting with management.

See where the rights offering shapes out uh and where the re Center fees actually shake out for the year.

Thank you.

Operator that concludes our call.

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

This concludes our question-and-answer session. I would like to turn the conference back over to Adam Portnoy, President and Chief Executive Officer, for any closing remarks.

Thank you all for joining our call today. Institutional investors should contact RMR investor relations if you would like to schedule a meeting with management operator that concludes our call.

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