RMR Group Q1 2026 The RMR Group Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 The RMR Group Inc Earnings Call
Speaker #1: Good morning, and welcome to the RMR Group fiscal first quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker #1: today's presentation, there will be an opportunity to ask press star, then one on your telephone questions. To ask a question, you may question, please press star, then two.
Speaker #1: this event is being recorded. I would now like to turn the conference over to Bryan Maher, Senior Vice keypad. After Please note President. Please go ahead.
Speaker #2: Thank To withdraw your you. Good morning, and thank you for joining RMR's fiscal first quarter 2026 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.
Brian Maher: Thank you. Good morning, and thank you for joining RMR's fiscal first quarter 2026 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-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 1995 and other securities laws. These forward-looking statements are based on RMR's beliefs and expectations as of today, February 5, 2026, and actual results may differ materially from those that we project.
Brian Maher: Thank you. Good morning, and thank you for joining RMR's fiscal first quarter 2026 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-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 1995 and other securities laws. These forward-looking statements are based on RMR's beliefs and expectations as of today, February 5, 2026, and actual results may differ materially from those that we project.
Speaker #2: In just a moment, they Today's conference call contains 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, February 5th, 2026, and actual results may differ materially from those that we project.
Speaker #2: will provide details about our business and quarterly results, followed by a question-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.
Speaker #2: The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements within the meaning of the privacy statements made in today's call.
Brian Maher: The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, which can be found on our website at RMRGroup.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we may discuss non-GAAP numbers during this call, including Adjusted Net Income per share, Distributable Earnings, and Adjusted EBITDA. A reconciliation of net income determined in accordance with US Generally Accepted Accounting Principles to these non-GAAP figures can be found in our financial results. I'll now turn the call over to Adam.
Brian Maher: The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, which can be found on our website at RMRGroup.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we may discuss non-GAAP numbers during this call, including Adjusted Net Income per share, Distributable Earnings, and Adjusted EBITDA. A reconciliation of net income determined in accordance with US Generally Accepted Accounting Principles to these non-GAAP figures can be found in our financial results. I'll now turn the call over to Adam.
Speaker #2: 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 rmrgroup.com.
Speaker #2: Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we may discuss non-GAAP numbers during this call, including adjusted net income per share, distributable earnings, and adjusted EBITDA.
Speaker #2: A reconciliation of net income can determine in accordance with U.S. Generally Accepted Accounting Principles to these non-GAAP figures, can be found in our financial results.
Speaker #2: I'll now turn the call
Speaker #2: over to Adam. Thanks,
Adam Portnoy: Thanks, Brian, and thank you all for joining us this morning. Yesterday, we reported Q1 results that exceeded or at the high end of our expectations, highlighted by distributable earnings of $0.47 per share, adjusted net income of $0.20 per share, and adjusted EBITDA of $19.5 million. I'm also happy to highlight that the strategic actions we have undertaken over the past two years at DHC and ILPT helped drive continued share price improvements at each REIT, and in turn, resulted in RMR receiving $23.6 million in incentive fees for calendar year 2025. While there's more work ahead, the strategic steps taken thus far have helped generate significant positive returns for shareholders of DHC and ILPT.
Adam Portnoy: Thanks, Brian, and thank you all for joining us this morning. Yesterday, we reported Q1 results that exceeded or at the high end of our expectations, highlighted by distributable earnings of $0.47 per share, adjusted net income of $0.20 per share, and adjusted EBITDA of $19.5 million. I'm also happy to highlight that the strategic actions we have undertaken over the past two years at DHC and ILPT helped drive continued share price improvements at each REIT, and in turn, resulted in RMR receiving $23.6 million in incentive fees for calendar year 2025. While there's more work ahead, the strategic steps taken thus far have helped generate significant positive returns for shareholders of DHC and ILPT.
Speaker #3: Good morning. Yesterday, we—Bryan, and thank you all for joining us. This reported first quarter results that exceeded or were at the high end of our expectations, highlighted by distributable earnings of $0.47 per share, adjusted net income of $0.20 per share, and adjusted EBITDA of $19.5 million.
Speaker #3: I'm also happy to highlight that the strategic actions we have undertaken over the past two years at DHC and ILPT helped drive continued share price improvements at each REIT.
Speaker #3: And in turn, resulted in RMR receiving $23.6 million in incentive fees for calendar year 2025. While there is more work taken thus far have helped generate significant positive returns for ahead, the strategic steps and ILPT.
Adam Portnoy: In 2025, DHC and ILPT were the 1st and 3rd best-performing REITs in the United States, as measured by total shareholder return. Although the economic environment continues to experience elevated uncertainty, RMR remained active this past quarter, executing on our client's strategic initiatives. While we are limited in what we can discuss today because we are reporting results in advance of our publicly traded client companies, I'd like to highlight several noteworthy accomplishments from the quarter. DHC continued its focus on improving SHOP NOI margins and selling non-core assets to further delever its balance sheet. In Q4, DHC completed its sale of 37 properties for gross proceeds of approximately $250 million, and for the full year, DHC sold 69 properties for approximately $605 million.
Adam Portnoy: In 2025, DHC and ILPT were the 1st and 3rd best-performing REITs in the United States, as measured by total shareholder return. Although the economic environment continues to experience elevated uncertainty, RMR remained active this past quarter, executing on our client's strategic initiatives. While we are limited in what we can discuss today because we are reporting results in advance of our publicly traded client companies, I'd like to highlight several noteworthy accomplishments from the quarter. DHC continued its focus on improving SHOP NOI margins and selling non-core assets to further delever its balance sheet. In Q4, DHC completed its sale of 37 properties for gross proceeds of approximately $250 million, and for the full year, DHC sold 69 properties for approximately $605 million.
Speaker #3: 2025, In DHC and ILPT were the number one and number three best-performing REITs in the United States, as measured by total shareholder environment continues to experience return.
Speaker #3: Elevated uncertainty remained this past quarter, although RMR remained active, executing on our clients' strategic initiatives. While we are limited in what we can discuss today because we are reporting results in advance of our publicly traded client companies, I'd like to highlight several noteworthy accomplishments from the quarter.
Speaker #3: DHC continued its focus on improving shop NOI margins and selling non-core assets to further de-lever its balance sheet. In the fourth quarter, DHC completed its sale of 37 properties for gross proceeds of approximately $250 million, and for the full year, DHC sold 69 properties for approximately $605 million.
Speaker #3: Partially using these asset sales proceeds, DHC zero-coupon senior secured notes, 2026. Leaving DHC with no debt maturities until 2028. This repayment further strengthened DHC's balance flexibility, and unencumbered 45 collateral properties representing $850 million in gross book value.
Adam Portnoy: Partially using these asset sales proceeds, DHC also fully repaid its zero-coupon senior secured notes due in 2026, leaving DHC with no debt maturities until 2028. This repayment further strengthened DHC's balance sheet, increased financial flexibility, and unencumbered 45 collateral properties, representing $850 million in gross book value. During the quarter, DHC also completed its announced transition of 116 SHOP communities from AlerisLife to new operators that have proven track records and well-established regional footprints. DHC anticipates material SHOP NOI improvements as these new operators increase revenues and right-size operations. SVC continues to make significant progress selling non-core hotels to delever its balance sheet.
Adam Portnoy: Partially using these asset sales proceeds, DHC also fully repaid its zero-coupon senior secured notes due in 2026, leaving DHC with no debt maturities until 2028. This repayment further strengthened DHC's balance sheet, increased financial flexibility, and unencumbered 45 collateral properties, representing $850 million in gross book value. During the quarter, DHC also completed its announced transition of 116 SHOP communities from AlerisLife to new operators that have proven track records and well-established regional footprints. DHC anticipates material SHOP NOI improvements as these new operators increase revenues and right-size operations. SVC continues to make significant progress selling non-core hotels to delever its balance sheet.
Speaker #3: During the quarter, DHC also completed its announced transition of 116 SHOP communities from Alaris Life to new operators that have proven track records and well-established regional footprints.
Speaker #3: DHC anticipates material shop NOI improvements as these new operators increase revenues and right-size operations. SVC continues to make hotels to de-lever its balance sheet.
Speaker #3: During the quarter, SVC completed the sale of 66 hotels for approximately $534 million, significant progress selling non-core and sold a total of 112 hotels in 2025 for $859 million.
Adam Portnoy: During the quarter, SVC completed the sale of 66 hotels for approximately $534 million and sold a total of 112 hotels in 2025 for $859 million. SVC also announced the early redemption of $300 million of its senior unsecured notes due February 2027, using these proceeds from hotel sales. Beyond the deleveraging efforts, we remain focused on helping SVC drive EBITDA growth across its hotel portfolio, despite ongoing revenue displacement from renovation activity. Sonesta, which manages the majority of SVC's owned hotels, and which is 34% owned by SVC, recently announced the appointment of Keith Pierce and Jeff Leer as co-CEOs, effective 1 April. These individuals will be instrumental in growing the Sonesta platform, while also working to improve EBITDA margins at the SVC-owned hotels.
Adam Portnoy: During the quarter, SVC completed the sale of 66 hotels for approximately $534 million and sold a total of 112 hotels in 2025 for $859 million. SVC also announced the early redemption of $300 million of its senior unsecured notes due February 2027, using these proceeds from hotel sales. Beyond the deleveraging efforts, we remain focused on helping SVC drive EBITDA growth across its hotel portfolio, despite ongoing revenue displacement from renovation activity. Sonesta, which manages the majority of SVC's owned hotels, and which is 34% owned by SVC, recently announced the appointment of Keith Pierce and Jeff Leer as co-CEOs, effective 1 April. These individuals will be instrumental in growing the Sonesta platform, while also working to improve EBITDA margins at the SVC-owned hotels.
Speaker #3: SVC also announced the early redemption of $300 million of its senior unsecured notes due February 2027, using these proceeds from hotel sales. Beyond the de-leveraging efforts, we remain focused on helping SVC drive EBITDA growth across its hotel portfolio despite ongoing revenue displacement from renovation activity.
Speaker #3: Synesta, which manages the majority of SVC's owned hotels, and which is 34% owned by SVC, recently announced the appointment of Keith Pierce and Jeff Lear as co-CEOs effective April 1st.
Speaker #3: These individuals will be instrumental in growing the Synesta platform while also working to improve EBITDA margins at the SVC-owned hotels. ILPT had a successful year of leasing activity and indicated during its third quarter earnings
Adam Portnoy: ILPT had a successful year of leasing activity and indicated during its third quarter earnings call that it was expecting a strong end to the year as it finalized a large number of lease renewals. The REIT successfully refinanced over $1.2 billion of debt in 2025 and materially increased its dividend. ILPT is actively exploring the refinancing of its remaining $1.4 billion of floating rate debt, which currently has a final maturity date of March 2027. Seven Hills, our mortgage REIT, completed a rights offering in December that raised gross proceeds of $65.2 million. This new capital should allow for over $200 million in gross loan investments. RMR agreed to backstop the offering, acquiring any rights not exercised as a demonstration of our confidence in Seven Hills and our Tremont lending platform.
Adam Portnoy: ILPT had a successful year of leasing activity and indicated during its third quarter earnings call that it was expecting a strong end to the year as it finalized a large number of lease renewals. The REIT successfully refinanced over $1.2 billion of debt in 2025 and materially increased its dividend. ILPT is actively exploring the refinancing of its remaining $1.4 billion of floating rate debt, which currently has a final maturity date of March 2027. Seven Hills, our mortgage REIT, completed a rights offering in December that raised gross proceeds of $65.2 million. This new capital should allow for over $200 million in gross loan investments. RMR agreed to backstop the offering, acquiring any rights not exercised as a demonstration of our confidence in Seven Hills and our Tremont lending platform.
Speaker #1: Call that it was expecting a end to strong the year as it finalized a large number of lease The REIT successfully renewals . REIT successfully refinanced over $1.2 billion of debt in 2025 , and increased its materially renewals dividend .
Speaker #1: It is actively exploring the refinancing of its remaining $1.4 billion of floating rate debt, which currently has a final maturity date of March 2027.
Speaker #1: Seven Hills Our mortgage REIT , completed a offering in that December gross proceeds rights raised of $65.2 million . This new should capital allow for over $200 million in gross loan investments .
Speaker #1: RMR agreed to backstop the offering , acquiring any rights not a exercised as demonstration of our confidence Seven Hills and our in Tremont lending platform .
Adam Portnoy: The offering resulted in subscriptions for approximately 5.5 million shares, or 73.2% of the common shares offered. The RMR purchased the remaining 2 million shares for $17.4 million. With a pipeline of approximately $1 billion in potential lending opportunities, I'm confident our organization will quickly deploy these new proceeds in an accretive manner. In the fourth quarter alone, Seven Hills deployed $101 million into 3 new loans, which will complement its existing fully performing loan portfolio. Lastly, as we noted on our fourth quarter earnings call, on 30 October 2025, OPI filed Chapter 11 bankruptcy. The bankruptcy process remains ongoing, and we will update investors as new information becomes available.
Adam Portnoy: The offering resulted in subscriptions for approximately 5.5 million shares, or 73.2% of the common shares offered. The RMR purchased the remaining 2 million shares for $17.4 million. With a pipeline of approximately $1 billion in potential lending opportunities, I'm confident our organization will quickly deploy these new proceeds in an accretive manner. In the fourth quarter alone, Seven Hills deployed $101 million into 3 new loans, which will complement its existing fully performing loan portfolio. Lastly, as we noted on our fourth quarter earnings call, on 30 October 2025, OPI filed Chapter 11 bankruptcy. The bankruptcy process remains ongoing, and we will update investors as new information becomes available.
Speaker #1: The offering resulted in subscriptions for approximately 5.5 million shares , or 73.2% of the common shares offered . The RMR purchased the remaining 2 million shares for $17.4 million , with a of pipeline approximately lending potential $1 billion in confident .
Speaker #1: I'm organization our quickly deploy these new in a manner . proceeds In the fourth quarter alone . Seven Hills opportunities $101 million into three new loans , will existing which fully performing complement its loan portfolio .
Speaker #1: Lastly , as we noted on our fourth quarter earnings call on October 30th , OPI 2025 , filed 11 bankruptcy . This , the bankruptcy process remains ongoing and we will investors as new chapter information update becomes available .
Adam Portnoy: We are hopeful the process will be concluded by the summer, and in the meantime, we remain committed to supporting the assets, vendors, and tenants of OPI. To conclude, we are pleased with the progress RMR has made over the past quarter, assisting our public and private company clients with their financial and strategic objectives. Importantly, our perpetual capital clients provide RMR with stable cash flows, which we have used to pursue new growth initiatives in the private capital space 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.
Adam Portnoy: We are hopeful the process will be concluded by the summer, and in the meantime, we remain committed to supporting the assets, vendors, and tenants of OPI. To conclude, we are pleased with the progress RMR has made over the past quarter, assisting our public and private company clients with their financial and strategic objectives. Importantly, our perpetual capital clients provide RMR with stable cash flows, which we have used to pursue new growth initiatives in the private capital space 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.
Speaker #1: We are process will be concluded by the hopeful the summer and in the meantime , we remain supporting the assets , committed to and tenants vendors of OPI to we conclude , are pleased with the progress RMR has made over the past quarter our public , assisting clients company and their with private financial and objectives .
Speaker #1: strategic Importantly , perpetual capital clients our provide RMR with cash flows stable , which have used to pursue initiatives in the private capital space to future revenue and growth drive .
Speaker #1: we .
Speaker #1: 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, private capital, and initiatives.
Matt Jordan: Thanks, Adam, and good morning, everyone. Despite continued economic uncertainty, for the full year, RMR arranged nearly 10 million sq ft of leasing at rental rates approximately 13% higher than previous rents for the same space. These results continue to demonstrate the strong relationships our leasing and property management teams have with our tenants and the brokerage community. On the private capital side of our business, we continue to make the investments necessary to further scale our platform and reduce the use of third-party placement agents. To that end, we recently announced the hiring of Peter Welch to lead international capital formation. Peter is an experienced real estate and capital markets executive that will be a strong complement to Mary Smendzwick, who leads our North American capital formation efforts.
Matt Jordan: Thanks, Adam, and good morning, everyone. Despite continued economic uncertainty, for the full year, RMR arranged nearly 10 million sq ft of leasing at rental rates approximately 13% higher than previous rents for the same space. These results continue to demonstrate the strong relationships our leasing and property management teams have with our tenants and the brokerage community. On the private capital side of our business, we continue to make the investments necessary to further scale our platform and reduce the use of third-party placement agents. To that end, we recently announced the hiring of Peter Welch to lead international capital formation. Peter is an experienced real estate and capital markets executive that will be a strong complement to Mary Smendzwick, who leads our North American capital formation efforts.
Speaker #2: Adam , and good morning , Despite continued Thanks , economic everyone .
Speaker #2: uncertainty full year arranged for the nearly , armor 10,000,000ft² of at leasing rental rates approximately 13% higher than previous for the same space rents results continue to demonstrate the strong .
Speaker #2: Uncertainty for the full year remains, but the nearly 10,000,000 ft² of armor leased at rental rates approximately 13% higher than previous rents for the same space continues to demonstrate the strong results. These results reflect the relationships our leasing and property management teams have with our Officer and the tenants.
Speaker #2: capital On the side of our continue to make the business , we investments necessary to scale our further platform and brokerage third party use of placement agents .
Speaker #2: that end , we announced the Welch hiring of to lead recently Capital Peter Formation Peter is an . experienced estate and To markets executive a strong that will be Mary Smithwick , who leads our North capital American formation .
Speaker #2: that end , we announced the Welch hiring of to lead recently Capital Peter Formation Peter is an . experienced estate and To markets executive a strong that will be Mary Smithwick , who leads our North capital American formation efforts Peter is based in Australia and joins RMR with a mandate to Armagh's expand globally brand and help raise capital for current and future strategies .
Matt Jordan: Peter is based in Australia and joins RMR with a mandate to expand RMR's brand globally and help raise capital for current and future strategies. Although the fundraising environment remains challenging, our current efforts are primarily focused on residential and select development opportunities, though the depth of our platform will allow us to pivot based on investor feedback. At RMR Residential, which represents $4.5 billion in value-add residential real estate across over 18,000 owned and managed units, our portfolio ended the year on a strong note. Our managed portfolio is approximately 93% occupied, with resident retention for the year coming in at over 70% and resident delinquencies at nominal levels. We are seeing similar trends within RMR's owned residential portfolio, with each of the five communities remaining on track with their stated business plans.
Matt Jordan: Peter is based in Australia and joins RMR with a mandate to expand RMR's brand globally and help raise capital for current and future strategies. Although the fundraising environment remains challenging, our current efforts are primarily focused on residential and select development opportunities, though the depth of our platform will allow us to pivot based on investor feedback. At RMR Residential, which represents $4.5 billion in value-add residential real estate across over 18,000 owned and managed units, our portfolio ended the year on a strong note. Our managed portfolio is approximately 93% occupied, with resident retention for the year coming in at over 70% and resident delinquencies at nominal levels. We are seeing similar trends within RMR's owned residential portfolio, with each of the five communities remaining on track with their stated business plans.
Speaker #2: Although the fundraising remains challenging , our effort to current primarily focus on residential and select development opportunities , though the depth of our platform will allow us to pivot based on investor feedback in Armagh Residential , which represents residential real estate across 18,000 owned and managed units .
Speaker #2: Our portfolio ended the year on a strong . Our note managed portfolio is approximately with 93% occupied resident retention for the year coming in at over resident 70% and at delinquencies levels .
Speaker #2: We seeing are similar trends Armagh's within owned residential portfolio , with remaining on five communities each of the their stated business plans . As it relates to Armagh's enhanced growth , venture fundraising , which launched in September , our goal remains to partner with Raise group of approximately $250 million .
Matt Jordan: As it relates to RMR's enhanced growth venture fundraising, which launched in September, our goal remains to partner with a select group of investors to raise approximately $250 million. As we've noted before, we believe this venture is unique in the current competitive marketplace, as it provides investors with the ability to share in property level and general partner economics. We look forward to providing further updates related to this important initiative on future calls. Turning to the retail sector, we continue to underwrite investment opportunities as we work to build a portfolio of value-add retail properties on our balance sheet to generate a track record we can raise money around in future years. Our first investment, the previously disclosed $21 million shopping center outside of Chicago, is ahead of its business plan, given our retail team's successful leasing efforts.
Matt Jordan: As it relates to RMR's enhanced growth venture fundraising, which launched in September, our goal remains to partner with a select group of investors to raise approximately $250 million. As we've noted before, we believe this venture is unique in the current competitive marketplace, as it provides investors with the ability to share in property level and general partner economics. We look forward to providing further updates related to this important initiative on future calls. Turning to the retail sector, we continue to underwrite investment opportunities as we work to build a portfolio of value-add retail properties on our balance sheet to generate a track record we can raise money around in future years. Our first investment, the previously disclosed $21 million shopping center outside of Chicago, is ahead of its business plan, given our retail team's successful leasing efforts.
Speaker #2: As we've noted before , this venture believe is unique in we the current marketplace as it provides investors with the ability to share in property level and partner general economics .
Speaker #2: We look forward to further providing updates related to this important initiative on future calls . Turning to the retail sector , we continue to underwrite environment opportunities as we work to build a of value portfolio add retail properties on our balance sheet to generate a track record .
Speaker #2: We can raise money around in future years . Our first investment , the previously disclosed $21 million shopping center outside of is Chicago , ahead of our of its business team's retail plan .
Matt Jordan: As it relates to our credit strategy, we recently closed on the sale of two loans totaling $61.7 million, which netted RMR $16.6 million in proceeds after repaying the associated secured financing facility. During our approximate year-and-a-half holding period, these loans generated returns to RMR of just over 14%. While RMR continues to invest in our people, technology, and brand building, we remain committed to improving our Adjusted EBITDA margins. We have been steadfast in controlling costs and have made significant strides in headcount rationalization through process improvement, the implementation of AI initiatives, and reducing functional redundancies across our more than 30 locations nationwide. With that, I'll now turn the call over to Matt Brown, Executive Vice President and our Chief Financial Officer.
Matt Jordan: As it relates to our credit strategy, we recently closed on the sale of two loans totaling $61.7 million, which netted RMR $16.6 million in proceeds after repaying the associated secured financing facility. During our approximate year-and-a-half holding period, these loans generated returns to RMR of just over 14%. While RMR continues to invest in our people, technology, and brand building, we remain committed to improving our Adjusted EBITDA margins. We have been steadfast in controlling costs and have made significant strides in headcount rationalization through process improvement, the implementation of AI initiatives, and reducing functional redundancies across our more than 30 locations nationwide. With that, I'll now turn the call over to Matt Brown, Executive Vice President and our Chief Financial Officer.
Speaker #2: efforts successful leasing . Given As it our credit relates to strategy , we recently closed on the sale of two loans our totaling $61.7 million , which netted RMR $16.6 million in proceeds .
Speaker #2: repaying After the associated secured financing facility . our approximate year and a half holding period . These loans generated returns to generated RMR of just over 14% , while Armagh continues to invest in our people , technology and building .
Speaker #2: We remain brand improving our adjusted EBITDA margins . We have been steadfast in controlling costs and have made significant strides in headcount rationalization through process improvement .
Speaker #2: The implementation of AI initiatives and reducing functions across our more than 30 locations nationwide. With that, I'll now turn the call over to Brown, Executive Vice President and Chief Financial Officer.
Matt Brown: Thanks, Matt, and good morning, everyone. For our Q1, we reported adjusted EBITDA of $19.5 million, distributable earnings of $0.47 per share, and adjusted net income of $0.20 per share, all of which exceeded or are at the high end of our guidance. Recurring service revenues were approximately $43 million, a sequential quarter decrease of approximately $2.5 million, driven primarily by the wind down of AlerisLife's business and a decrease in SVC's enterprise value as proceeds from hotel sales were used to repay debt.
Matt Brown: Thanks, Matt, and good morning, everyone. For our Q1, we reported adjusted EBITDA of $19.5 million, distributable earnings of $0.47 per share, and adjusted net income of $0.20 per share, all of which exceeded or are at the high end of our guidance. Recurring service revenues were approximately $43 million, a sequential quarter decrease of approximately $2.5 million, driven primarily by the wind down of AlerisLife's business and a decrease in SVC's enterprise value as proceeds from hotel sales were used to repay debt.
Speaker #3: Thanks ,
Speaker #3: Matt , morning , and good everyone For our first quarter , we adjusted Vice
Speaker #3: $19.5 million , distributable earnings of and adjusted net $0.47 per share $0.20 per share income of , all of which exceeded or were at the high end of our guidance .
Speaker #3: Recurring service revenues were $43 million . A sequential quarter decrease of approximately approximately $2.5 million , driven primarily by the wind down of Alaris Life's business and a decrease in Svcs enterprise value .
Speaker #3: As proceeds hotel sales were used to repay debt . As Adam noted earlier , we earned and our aggregate incentive of $23.6 million for the year ending fees December 31st , including $17.9 million from DHC and $5.7 million from ILT these REIT's respective .
Matt Brown: As Adam noted earlier, we earned aggregate incentive fees of $23.6 million for the year ending December 31, including $17.9 million from DHC and $5.7 million from ILPT, as these REITs' respective total returns per share exceeded the applicable benchmark total return for the 3-year measurement period. These fees were paid in January, adding to our overall liquidity and further improving our dividend coverage. Next quarter, we expect recurring service revenues to decrease to approximately $41 million, driven by lower construction supervision fees, as calendar Q1 spend is often lower for our clients, as well as decreases in certain of our managed REITs enterprise values and property management fees from strategic asset sales that were used to repay debt.
Matt Brown: As Adam noted earlier, we earned aggregate incentive fees of $23.6 million for the year ending December 31, including $17.9 million from DHC and $5.7 million from ILPT, as these REITs' respective total returns per share exceeded the applicable benchmark total return for the 3-year measurement period. These fees were paid in January, adding to our overall liquidity and further improving our dividend coverage. Next quarter, we expect recurring service revenues to decrease to approximately $41 million, driven by lower construction supervision fees, as calendar Q1 spend is often lower for our clients, as well as decreases in certain of our managed REITs enterprise values and property management fees from strategic asset sales that were used to repay debt.
Speaker #3: total As returns share per exceeded the applicable benchmark total return for the three year measurement period . These fees were paid in January , adding to overall our further liquidity and improving our dividend coverage .
Speaker #3: quarter , we recurring service expect to decrease Next approximately $41 million , driven by lower construction supervision fees as calendar first quarter spend is often lower for our clients , as well decreases in as managed certain of our retail enterprise property management fees values and from strategic asset sales used to repay debt during the quarter , we earned approximately $400,000 of fees from Alaris Life .
Matt Brown: During the quarter, we earned approximately $400,000 of fees from AlerisLife that will impact results in Q2 as the business was substantially sold by December 31. Our wholly owned portfolio of residential properties and one retail property contributed $1.4 million of increased net operating income in the quarter, mainly driven by the two residential acquisitions completed last quarter. Turning to expenses. Recurring cash compensation was $37.4 million, a sequential quarter decrease of approximately $1 million, driven by our emphasis on cost containment and aligning our employees' total rewards to overall results. Looking ahead to next quarter, we expect recurring cash compensation to remain at or slightly below this level, with a cash compensation reimbursement rate of approximately 45% as compared to 46% this quarter.
Matt Brown: During the quarter, we earned approximately $400,000 of fees from AlerisLife that will impact results in Q2 as the business was substantially sold by December 31. Our wholly owned portfolio of residential properties and one retail property contributed $1.4 million of increased net operating income in the quarter, mainly driven by the two residential acquisitions completed last quarter. Turning to expenses. Recurring cash compensation was $37.4 million, a sequential quarter decrease of approximately $1 million, driven by our emphasis on cost containment and aligning our employees' total rewards to overall results. Looking ahead to next quarter, we expect recurring cash compensation to remain at or slightly below this level, with a cash compensation reimbursement rate of approximately 45% as compared to 46% this quarter.
Speaker #3: That will impact results in the second quarter . As the business was substantially sold by December 31st . Our wholly residential properties and one retail property portfolio contributed $1.4 million of increased net operating income quarter , mainly driven by the two residential acquisitions quarter completed last .
Speaker #3: Turning to expenses , recurring cash compensation was sequential quarter decrease of driven approximately $1 million , by our emphasis on cost and aligning our employees containment rewards to total overall Looking ahead to next we .
Speaker #3: quarter , expect recurring cash compensation to remain at or slightly below this level with a cash compensation reimbursement rate of approximately 45% as compared to 46% this quarter .
Matt Brown: Recurring G&A this quarter was $10.5 million, a modest sequential quarter increase driven by normal course legal and professional fees. Excluding the impact of annual director share grants we expect to make in March, we expect recurring G&A to remain at these levels over the next couple of quarters. Interest expense this quarter increased to $2.6 million, as we incurred a full quarter of interest expense on the two leveraged residential properties acquired last quarter. Interest expense is expected to remain at current levels going forward. It is also worth noting that this quarter's income tax rate of 14.8% reflects the impact of incentive fees. For modeling purposes, we expect our tax rate to increase to approximately 17% in the second quarter.
Matt Brown: Recurring G&A this quarter was $10.5 million, a modest sequential quarter increase driven by normal course legal and professional fees. Excluding the impact of annual director share grants we expect to make in March, we expect recurring G&A to remain at these levels over the next couple of quarters. Interest expense this quarter increased to $2.6 million, as we incurred a full quarter of interest expense on the two leveraged residential properties acquired last quarter. Interest expense is expected to remain at current levels going forward. It is also worth noting that this quarter's income tax rate of 14.8% reflects the impact of incentive fees. For modeling purposes, we expect our tax rate to increase to approximately 17% in the second quarter.
Speaker #3: Recurring G&A this quarter was $10.5 million , modest a sequential quarter increase driven by normal legal course and professional fees . Excluding the impact of annual director share grants .
Speaker #3: expect to make in we We expect recurring G&A to remain at these levels over the next couple of quarters . Interest expense March , increased to $2.6 million as we quarter a full quarter of interest expense on this the two leveraged properties acquired last quarter residential Interest expense is .
Speaker #3: to remain at expected current levels , going forward . It is also worth noting that this quarter's income rate of 14.8% reflects impact of the tax incentive fees modeling for purposes .
Speaker #3: expect our tax rate to We increase to approximately 17% in the second quarter . During we sold two existing RMR investments to the quarter , Seven Hills , which prior to the sale $411,000 to earnings in contributed quarter .
Matt Brown: During the quarter, we sold 2 existing RMR loan investments to Seven Hills, which, prior to the sale, contributed $411,000 to earnings in the quarter. In addition, we participated in Seven Hills' rights offering by exercising RMR subscription rights and backstopping the transaction, which increased our ownership to 20.3%. Beginning next quarter, we expect to see an increase of $800,000 in quarterly Adjusted EBITDA from additional dividends on this increased investment. Aggregating the collective assumptions I've outlined, next quarter, we expect Adjusted EBITDA to be approximately $17 to 19 million, distributable earnings to be between $0.41 and $0.43 per share, and Adjusted Net Income to be between $0.12 and $0.14 per share.
Matt Brown: During the quarter, we sold 2 existing RMR loan investments to Seven Hills, which, prior to the sale, contributed $411,000 to earnings in the quarter. In addition, we participated in Seven Hills' rights offering by exercising RMR subscription rights and backstopping the transaction, which increased our ownership to 20.3%. Beginning next quarter, we expect to see an increase of $800,000 in quarterly Adjusted EBITDA from additional dividends on this increased investment. Aggregating the collective assumptions I've outlined, next quarter, we expect Adjusted EBITDA to be approximately $17 to 19 million, distributable earnings to be between $0.41 and $0.43 per share, and Adjusted Net Income to be between $0.12 and $0.14 per share.
Speaker #3: In addition, we participated in Seven Hills REITs by exercising RMR subscription rights and offering backstopping the transaction, which increased our ownership to 20.3%.
Speaker #3: next quarter , we Beginning expect to see an increase of $800,000 in quarterly adjusted EBITDA from additional dividends increased on this investment . Aggregating the collective assumptions of outlined next quarter , we expect adjusted EBITDA to be approximately 17 to $19 million , distributable earnings to be between 41 and $0.43 per share , and income between 12 and $0.14 per share to be .
Matt Brown: As we have stated on previous earnings calls, while our wholly owned portfolio is contributing to adjusted EBITDA and distributable earnings, it is negatively impacting adjusted net income as we incur depreciation and interest expense, which will continue to impact us until these investments are sold into private capital strategies. We ended the quarter with nearly $150 million of total liquidity, including nearly $50 million in cash and $100 million of capacity on our undrawn revolving credit facility. With the $23.6 million in incentive fees collected in January, our liquidity profile leaves us well positioned to execute on our strategic objectives. That concludes our prepared remarks. Operator, please open the line for questions.
Matt Brown: As we have stated on previous earnings calls, while our wholly owned portfolio is contributing to adjusted EBITDA and distributable earnings, it is negatively impacting adjusted net income as we incur depreciation and interest expense, which will continue to impact us until these investments are sold into private capital strategies. We ended the quarter with nearly $150 million of total liquidity, including nearly $50 million in cash and $100 million of capacity on our undrawn revolving credit facility. With the $23.6 million in incentive fees collected in January, our liquidity profile leaves us well positioned to execute on our strategic objectives. That concludes our prepared remarks. Operator, please open the line for questions.
Speaker #3: As we have stated on earnings calls , while our wholly owned portfolio is contributing to adjusted EBITDA and earnings , distributable it is impacting negatively adjusted net income as depreciation and interest we incur will continue to expense , which impact us until these investments are into private sold capital .
Speaker #3: strategies ended the We nearly quarter with $150 million of total liquidity , including $50 million in and $100 million of capacity on our cash undrawn credit revolving With facility .
Speaker #3: $23.6 million in incentive fees collected in Our January . leaves us well positioned to liquidity profile our execute on strategic objectives . That concludes our prepared open the line for questions .
Speaker #3: $23.6 million in incentive fees collected in January leaves us well positioned to liquidity profile our execute on strategic objectives. That concludes our prepared remarks. Operator, please open the line for questions.
Matt Jordan: We will now begin the question-and-answer session. To ask a question, you may press Star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Operator: We will now begin the question-and-answer session. To ask a question, you may press Star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today is from Mitch Germain with Citizens Bank. Please go ahead.
Speaker #4: now We begin the answer question and session ask a . To question , you may star , press then telephone keypad . If you are one on your using a speakerphone , please pick up your before pressing the keys handset .
Operator: ... To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today is from Mitch Germain with Citizens Bank. Please go ahead.
Speaker #4: To withdraw your question , please press star then two . At time , this we momentarily assemble to our . roster The first question today from Mitch is Please go ahead .
Mitch Germain: Thank you very much. Peter's addition, Adam, I think, the comments from either you or Matt, I apologize, were it was complementing your existing fundraising efforts. But is this really kind of globalizing what you're doing currently, or was that already part of, you know, kind of what you were trying to accomplish with your fundraising?
Mitch Germain: Thank you very much. Peter's addition, Adam, I think, the comments from either you or Matt, I apologize, were it was complementing your existing fundraising efforts. But is this really kind of globalizing what you're doing currently, or was that already part of, you know, kind of what you were trying to accomplish with your fundraising?
Speaker #5: Thank you very much
Speaker #5: Peters . addition . Adam . I
Speaker #5: the comments from either you or Matt , I apologize , were Germain with it was complimenting your citizen Bank . existing efforts , but is this really globalizing what you're fundraising currently doing , or was that already part of kind of , you what you know , kind of to accomplish with your fundraising were trying ?
Adam Portnoy: Sure. Good morning, Mitch. It's a good question. Let me put some context around Peter's hire. So, you know, if you go back almost six months ago, we had no dedicated folks focused on private capital fundraising, and now we have, including Peter and Mary, which are senior folks, and there's some people working for them. We have four dedicated people now at the RMR Group, dedicated wholly to raising capital privately. If I had to very simply describe Mary and Peter in sort of, again, very senior roles, Mary's very focused, sort of US-focused capital raising, and Peter is very focused ex-US and with a real focus on Asia and Middle East. To get to the heart of your question, is this sort of a change? No, it's not really a change.
Adam Portnoy: Sure. Good morning, Mitch. It's a good question. Let me put some context around Peter's hire. So, you know, if you go back almost six months ago, we had no dedicated folks focused on private capital fundraising, and now we have, including Peter and Mary, which are senior folks, and there's some people working for them. We have four dedicated people now at the RMR Group, dedicated wholly to raising capital privately. If I had to very simply describe Mary and Peter in sort of, again, very senior roles, Mary's very focused, sort of US-focused capital raising, and Peter is very focused ex-US and with a real focus on Asia and Middle East. To get to the heart of your question, is this sort of a change? No, it's not really a change.
Speaker #1: Good morning Mitch . It's a good question . Let me put some around context Peters So , you know , if you go almost six months back we had no ago , dedicated folks focused on private , fundraising , and now we capital have including Mary , which are Peter and senior folks .
Speaker #1: And there people working for them . are some four dedicated people now We have at the , dedicated raising to RMR Group capital privately .
Speaker #1: If I had to very you if describe Peter wholly senior . Sure . very very focused sort of us capital raising of and Peter is very ex focused us and with a real with a real focus on Asia East .
Speaker #1: To get to the heart of your question sort change ? of a No , it's not really a change . It's just sort of bolstering what we were trying to do .
Adam Portnoy: It's just sort of bolstering what we were trying to do. There were again, we didn't have people dedicated, you know, six months ago, to raising capital. But that being said, on an ad hoc basis, we were meeting with folks in Asia and the Middle East, or out of those parts of the region about those parts of the globe. I think Peter's hire really sort of supercharges that and has someone dedicated with a really, you know, for lack of a better word, a Rolodex that and experience in that market raising capital from those types of sources. So we just, we don't think it's a real change. We just think it's sort of bolstering what we've been trying to do.
Adam Portnoy: It's just sort of bolstering what we were trying to do. There were again, we didn't have people dedicated, you know, six months ago, to raising capital. But that being said, on an ad hoc basis, we were meeting with folks in Asia and the Middle East, or out of those parts of the region about those parts of the globe. I think Peter's hire really sort of supercharges that and has someone dedicated with a really, you know, for lack of a better word, a Rolodex that and experience in that market raising capital from those types of sources. So we just, we don't think it's a real change. We just think it's sort of bolstering what we've been trying to do.
Speaker #1: There again , we didn't have people dedicated , you know , six months ago to raise capital . But said , that being on an ad hoc basis , we were meeting with in Asia and the East or out of Middle those folks parts of the or I parts of the think region those sort of really hire supercharges that .
Speaker #1: And and has someone dedicated with a really , you know , for lack of a better word , a Rolodex that and experience in that market .
Speaker #1: Raising those of capital from types sources . So we just we don't think it's a real change . think it's sort of what we've been to do .
Adam Portnoy: Look, I think as a firm, we feel really good about the team we've assembled, and we're hopeful as the year progresses, we're going to see some results.
Adam Portnoy: Look, I think as a firm, we feel really good about the team we've assembled, and we're hopeful as the year progresses, we're going to see some results.
Speaker #1: trying And think as a firm , really we feel good about the We just team . We've assembled and we're the year progresses , we're going to look , I see some results .
Mitch Germain: Great. Last one for me. I think the comments were multifamily and development were initial focus, or maybe that's where you're seeing the most interest. But you do have a retail asset. You talked about a billion-dollar debt pipeline. So can you just kind of describe to us kind of, you know, what sort of products you're looking to raise capital for in the market today? Thank you.
Mitch Germain: Great. Last one for me. I think the comments were multifamily and development were initial focus, or maybe that's where you're seeing the most interest. But you do have a retail asset. You talked about a billion-dollar debt pipeline. So can you just kind of describe to us kind of, you know, what sort of products you're looking to raise capital for in the market today? Thank you.
Speaker #5: Great . Last . I comments were think the multifamily and development one for me initial focus . Or maybe that's where you're seeing the most but you do interest , have a retail asset .
Speaker #5: You talked about pipeline, $1 billion debt. So, can you just kind of describe to us what products you're looking to sort of issue in the capital market?
Adam Portnoy: Yeah, sure, Mitch. I think, you know, being a vertically integrated, sort of middle-market-oriented, focused nationwide player in commercial real estate that touches all sort of major sectors, you know, we, we can deploy capital for clients pretty much in any sector. And I think when we're out talking to clients or potential clients, that's a really attractive attribute about RMR and sort of our positioning in the marketplace. There's not a lot of firms that sort of check the boxes that we check, and so we're very attractive, sort of, place for folks that want to deploy capital, especially in the US middle market, and want to pick a manager that can do lots of different things for them.
Adam Portnoy: Yeah, sure, Mitch. I think, you know, being a vertically integrated, sort of middle-market-oriented, focused nationwide player in commercial real estate that touches all sort of major sectors, you know, we, we can deploy capital for clients pretty much in any sector. And I think when we're out talking to clients or potential clients, that's a really attractive attribute about RMR and sort of our positioning in the marketplace. There's not a lot of firms that sort of check the boxes that we check, and so we're very attractive, sort of, place for folks that want to deploy capital, especially in the US middle market, and want to pick a manager that can do lots of different things for them.
Speaker #5: Thank you . today
Speaker #1: Mitch , you , sure . being a vertically middle know , integrated sort of oriented , market nationwide player in commercial real estate , that touches all sort of major think , sectors .
Speaker #1: Now, you know, we can deploy—we do for clients—pretty much in any focused sector. And I think when we're out with clients or talking to potential attractive clients, that's really a key attribute about our capital and sort of our RMR positioning in the marketplace.
Speaker #1: in the There's lot of not a that sort of check firms the boxes that we check . And so very attractive sort of for place want to folks that deploy capital , especially in the US middle market , and want to pick a manager that can do lots of things for different them .
Speaker #1: in the There's lot of not a that sort of check firms the boxes that we check . And so very attractive sort of for place want to folks that deploy capital , especially in the US middle market , and want to pick a manager that can do we're being said , our conversations that are going on where we're today and focused for 2026 , we're very focused multifamily fund getting our ground the .
Adam Portnoy: That all being said, based on our conversations that are going on today and where we're focused, for 2026, we're very focused on getting our multifamily fund off the ground. As Matt highlighted, we have close to $100 million on our balance sheet deployed to sort of seed that effort. We feel good and optimistic that as 2026 continues to come along, that we will be able to have some successes there in trying to launch that fund or that separate, large separate account that we think we're going to put together around multifamily. In terms of deploying capital at the RMR level, as we think about across all of our clients, I think you've touched on it. As I think about 2026, I think we'll continue to put more money out multifamily.
Adam Portnoy: That all being said, based on our conversations that are going on today and where we're focused, for 2026, we're very focused on getting our multifamily fund off the ground. As Matt highlighted, we have close to $100 million on our balance sheet deployed to sort of seed that effort. We feel good and optimistic that as 2026 continues to come along, that we will be able to have some successes there in trying to launch that fund or that separate, large separate account that we think we're going to put together around multifamily. In terms of deploying capital at the RMR level, as we think about across all of our clients, I think you've touched on it. As I think about 2026, I think we'll continue to put more money out multifamily.
Speaker #1: on As Matt we have close to $100 million on our highlighted , balance sheet , deployed to sort of seed that effort . We good and feel optimistic that 2026 to come to continues along , that we will be able to be have some in trying to successes there launch as separate that account we think we're going together to put around multifamily .
Speaker #1: of deploying capital at the RMR level , as we think about across our all of clients , I think you've on In terms about 2026 , I think we'll continue to more money out it .
Adam Portnoy: I think we'll continue to put money out on the loan side, making loans. I think we will continue to put money out retail. We talked a little bit about that, what we're doing on our balance sheet. I think there's going to be a select number of development opportunities that we might embark on, too. Those are sort of the focuses that we have. I will tell you, just in conversations in the marketplace since this year began, you know, what's sort of interesting to me, you know, big picture, a little less interest, or people talking about industrial, a little less interest, people talking about lending, a little more interest in people talking about office, and a continued interest in talking about multifamily, which has been strong, you know, for throughout the cycle.
Adam Portnoy: I think we'll continue to put money out on the loan side, making loans. I think we will continue to put money out retail. We talked a little bit about that, what we're doing on our balance sheet. I think there's going to be a select number of development opportunities that we might embark on, too. Those are sort of the focuses that we have. I will tell you, just in conversations in the marketplace since this year began, you know, what's sort of interesting to me, you know, big picture, a little less interest, or people talking about industrial, a little less interest, people talking about lending, a little more interest in people talking about office, and a continued interest in talking about multifamily, which has been strong, you know, for throughout the cycle.I hope that gives you some context.
Speaker #1: multifamily . I think we'll continue to As I think put money out on the loan side , loans . we will continue to put making out retail .
Speaker #1: multifamily . I think we'll continue to As I think put money out on the loan side , loans . we will continue to put making out I think We talked a little bit about that and what we're doing on our balance sheet , and I think to be a select number of development there's going opportunities that we might on too .
Speaker #1: So those are sort of the focuses that we have . I will tell you , just in conversations in the marketplace last . over the this year began , you know , what sort of interesting to me , you know , big little less interest picture or talking about people industrial , little a interest .
Speaker #1: People talking less about lending a more little interest in people talking about office and a continued talking interest in about multifamily , which been strong .
Speaker #1: has You know , throughout the cycle . So you some I hope that gives .
Speaker #1: has You know , throughout the cycle . So you some I hope that gives . context
Adam Portnoy: I hope that gives you some context.
Operator: Next question, please. Again, if you have a question, please press star, then one. The next question is from John Massocca with B. Riley. Please go ahead.
Operator: Next question, please. Again, if you have a question, please press star, then one. The next question is from John Massocca with B. Riley. Please go ahead.
Speaker #6: Next please . question ,
Speaker #4: Press, please. Again, then one. Next, the John Massocca question, Riley is from Ahead Star.
John Massocca: Good morning.
John Massocca: Good morning.
Speaker #4: .
Speaker #7: Good Morning .
Speaker #7: morning
Adam Portnoy: Morning. Good morning, John.
Adam Portnoy: Morning. Good morning, John.
John Massocca: How are you again? How would you kind of view the performance of the multifamily assets on balance sheet, maybe even relative to expectations? When we were talking last quarter, it seemed like that was called out as, as part of the driver of relative outperformance to, to kind of what you were expecting at the time of the Q4 2025 earnings call.
John Massocca: How are you again? How would you kind of view the performance of the multifamily assets on balance sheet, maybe even relative to expectations? When we were talking last quarter, it seemed like that was called out as, as part of the driver of relative outperformance to, to kind of what you were expecting at the time of the Q4 2025 earnings call.
Speaker #1: Good . morning John .
Speaker #7: How's it going? How would you view the performance of the assets on the balance sheet, maybe even relative to expectations?
Speaker #7: When we were talking last quarter , it that was called out as as part of the relative outperformance of what you expecting to kind seemed like call at the time
Matt Jordan: ... Yeah, just, this is Matt. It's a great question, and something we did intentionally highlight. So most of the five assets are still early in their life cycle, and again, those are all value-add, residential communities in the Sun Belt. So you're looking at a three to five-year business plan, all targeted mid to high teen returns, you know, by the end of that business plan. And so again, as we look at most of those being a year in, we're seeing really strong operational results. We're seeing the, capital improvements we're making, resulting in, premiums on the rent as we underwrote. You know, we highlighted some of the key measures. You know, a 70% tenant retention or resident retention rate is incredibly important in this market right now.
Matt Jordan: Yeah, just, this is Matt. It's a great question, and something we did intentionally highlight. So most of the five assets are still early in their life cycle, and again, those are all value-add, residential communities in the Sun Belt. So you're looking at a three to five-year business plan, all targeted mid to high teen returns, you know, by the end of that business plan. And so again, as we look at most of those being a year in, we're seeing really strong operational results. We're seeing the, capital improvements we're making, resulting in, premiums on the rent as we underwrote. You know, we highlighted some of the key measures. You know, a 70% tenant retention or resident retention rate is incredibly important in this market right now.
Speaker #7: .
Speaker #2: just this is and Matt . It's a great Yeah , And question . something we did intentionally highlight . So most of the are early in their still five assets life cycle .
Speaker #2: And again, those are all add value residential Sunbelt. So you're looking at a business plan all targeted mid to high returns, 3 to 5 year—no, by the business team plan.
Speaker #2: And so again , as we look at those most of being a year in , we're really seeing strong operational results . seeing the capital improvements we're making resulting in on the as we underwrote premiums we highlighted some of measures , you know , a 70% tenant retention or the key resident retention rate is incredibly in this market We're now .
Matt Jordan: You know, you read a lot of headlines about oversupply in the multifamily space, but if you're holding on to tenants, and residents, you're seeing rent growth that in our portfolio is approaching 5% versus new tenancy being rolled downs in rent of 4% to 5%. So all of that has played really well in our favor, and we like where things are trending right now on those business plans.
Matt Jordan: You know, you read a lot of headlines about oversupply in the multifamily space, but if you're holding on to tenants, and residents, you're seeing rent growth that in our portfolio is approaching 5% versus new tenancy being rolled downs in rent of 4% to 5%. So all of that has played really well in our favor, and we like where things are trending right now on those business plans.
Speaker #2: know , you read important You of headlines right about oversupply in the multifamily space , but if you're to and residents tenants , you're seeing rent growth .
Speaker #2: That in our portfolio is approaching 5% versus new a lot rolled rent downs in of 4 to 5% . all of that has really our well in played So And we where things like those trending right business are favor .
Speaker #2: now on plans .
John Massocca: I guess maybe as you think about, I mean, I know it's a small sample set of assets, but as you think about where your properties are performing, I mean, does that product, you think of maybe a stronger performance in kind of the broader Sun Belt market than was expected when you were underwriting, or is it something, you know, property specific that's causing the outperformance?
John Massocca: I guess maybe as you think about, I mean, I know it's a small sample set of assets, but as you think about where your properties are performing, I mean, does that product, you think of maybe a stronger performance in kind of the broader Sun Belt market than was expected when you were underwriting, or is it something, you know, property specific that's causing the outperformance?
Speaker #7: And I guess maybe think about I mean , as you it's a sample small of assets , about but as you where your properties are performing , I mean , is that think of maybe a kind of the performance in broader Sunbelt market stronger was expected .
Speaker #7: When you were underwriting ? Or is it something property specific that's the causing outperformance
Matt Jordan: I think that's part of the secret sauce we're trying to fundraise around, that our folks have a long history. You know, the team we acquired back in December of 2023, they know those markets well. We, you know, we have a long-tenured management team who knows within each submarket, you know, where what intersections, what streets, you know, where you're gonna see the best demographic trends, and the best resident retention and rent growth possibilities. So you hit the nail on the head. You know, we believe what we have in-house and the data we're able to maximize is something we can fundraise around and find unique opportunities, even in a very challenging market like we're in right now.
Matt Jordan: I think that's part of the secret sauce we're trying to fundraise around, that our folks have a long history. You know, the team we acquired back in December of 2023, they know those markets well. We, you know, we have a long-tenured management team who knows within each submarket, you know, where what intersections, what streets, you know, where you're gonna see the best demographic trends, and the best resident retention and rent growth possibilities. So you hit the nail on the head. You know, we believe what we have in-house and the data we're able to maximize is something we can fundraise around and find unique opportunities, even in a very challenging market like we're in right now.
Speaker #2: that's part I think of the secret we're sauce trying fundraise to around that . Our folks have a long history . You know , we the team in acquired back December of 23 , markets they know .
Speaker #2: you know , we Well . We have a long tenured team knows within each who submarket , you know , where what what streets , you intersections , to see the you're going best demographic trends and the resident best retention .
Speaker #2: And rent growth possibilities . So that you hit the the head , you know , we in what we nail on have house and the data we're able to maximize is can fundraise and find in in a very challenging something we now opportunities in right .
Speaker #2: market like we're
John Massocca: Okay. And then maybe for Matt, can you maybe walk us through, you know, how you kind of get from the $0.20 of adjusted net income in kind of Q1 2026 to, to the 12 to 14 you're guiding for? I mean, I imagine there's some tax impact in there. And I was kind of curious on the depreciation side that got called out, just given it's gonna give a basically the same amount of assets, you know, real estate assets on balance sheet as you did at Q4 2025 end. Just kind of curious what the pushes and pulls there are.
John Massocca: Okay. And then maybe for Matt, can you maybe walk us through, you know, how you kind of get from the $0.20 of adjusted net income in kind of Q1 2026 to, to the 12 to 14 you're guiding for? I mean, I imagine there's some tax impact in there. And I was kind of curious on the depreciation side that got called out, just given it's gonna give a basically the same amount of assets, you know, real estate assets on balance sheet as you did at Q4 2025 end. Just kind of curious what the pushes and pulls there are.
Speaker #7: Okay . And then maybe for for you walk us through , know , how you kind of from get the $0.20 of in kind income Q 26 to of one the 12 to 14 ?
Speaker #7: You're guiding for ? imagine there's some tax impact in there . just kind of curious on the side that depreciation called out got given just basically it seems the same amount of adjusted net assets , you to real estate assets on balance sheet as you did know , at four Q 25 , just kind of pushes and pulls curious what the are there
Adam Portnoy: Sure. So, it's a good question. A couple things that I noted in the prepared remarks. You know, we earned in the quarter about $400,000 on our AlerisLife contract. That business, all the assets were substantially sold by 31 December, so that's a headwind heading into the Q2 for us. The loan portfolio, you know, we earned about $400,000 on that as well. Those loans were sold in mid-quarter, so mid-November. And then in addition to that, you know, construction management fees are expected to be lower in the calendar Q1. That's a normal trend we see. And then we are expecting, with debt paydowns at DHC and SVC that have occurred, towards the end of calendar 2025, that's gonna impact management fees as well.
Matt Brown: Sure. So, it's a good question. A couple things that I noted in the prepared remarks. You know, we earned in the quarter about $400,000 on our AlerisLife contract. That business, all the assets were substantially sold by 31 December, so that's a headwind heading into the Q2 for us. The loan portfolio, you know, we earned about $400,000 on that as well. Those loans were sold in mid-quarter, so mid-November. And then in addition to that, you know, construction management fees are expected to be lower in the calendar Q1. That's a normal trend we see. And then we are expecting, with debt paydowns at DHC and SVC that have occurred, towards the end of calendar 2025, that's gonna impact management fees as well.
Speaker #3: it's a good
Speaker #3: question . A couple of So . things that I noted in the prepared Sure . know , we remarks . earned in You the quarter , about $400,000 on our contract business , all Alaris the assets were sold life by December 31st .
Speaker #3: question . A couple of So . things that I noted in the prepared Sure . know , we remarks . earned in You the quarter , about $400,000 on our contract business , all Alaris the assets were sold life So that's a heading into the us .
Speaker #3: The . portfolio You earned 400,000 on that well . Those loans were know , we sold in we mid as and then in addition to that Mid-quarter .
Speaker #3: know , construction management fees are headwind lower in the expected to be calendar second quarter for normal first quarter . That's a trend .
Speaker #3: We So see . And then we are expecting with debt paydowns at at DHC and that have occurred towards the end of calendar 2025 .
Speaker #3: That's going to impact management as well . And then you lastly , know , in March of each year we generally grant shares to our So that's a trustees .
Adam Portnoy: And then lastly, you know, in March of each year, we generally grant shares to our trustees. So that's a couple cents impact as well, in the second quarter.
Matt Brown: And then lastly, you know, in March of each year, we generally grant shares to our trustees. So that's a couple cents impact as well, in the second quarter.
Speaker #3: impact as couple well cents . In the .
John Massocca: Okay. Appreciate that. Then, in terms of kind of the investment outlook, you mentioned loans again. You know, what's the appetite for loan investments and just kind of the long-term strategy there, especially given, you know, the recent sale of, of kind of the on- you know, the loans you had on balance sheet at Q4 2025 and to Seven Hills?
John Massocca: Okay. Appreciate that. Then, in terms of kind of the investment outlook, you mentioned loans again. You know, what's the appetite for loan investments and just kind of the long-term strategy there, especially given, you know, the recent sale of, of kind of the on- you know, the loans you had on balance sheet at Q4 2025 and to Seven Hills?
Speaker #7: mentioned loans again you know , . the Appreciate that . what's loan And just strategy long investments . term there , kind of the especially given the recent appetite for sale kind of the of know , , you the loans you had on balance sheet , it fork , you 25 and to .
Speaker #7: Seven Hills
Adam Portnoy: Sure. So from a lending, from a lending perspective or credit perspective, it's a we consider it a growth engine for the RMR Group. I mean, at Seven Hills, we had a very successful rights offering that we completed in December. RMR participated in that. We now own about 20% of Seven Hills, but Seven Hills has about to over $200 million of new loans that it can put to put to work based on that rights offering, and it has, you know, just regular course loans maturing that require to be... require capital to be reinvested. So we expect to have a pretty active 2026 in terms of new loans being put to work or being underwritten in 2026, most of which I think will occur at the Seven Hills mortgage REIT.
Adam Portnoy: Sure. So from a lending, from a lending perspective or credit perspective, it's a we consider it a growth engine for the RMR Group. I mean, at Seven Hills, we had a very successful rights offering that we completed in December. RMR participated in that. We now own about 20% of Seven Hills, but Seven Hills has about to over $200 million of new loans that it can put to put to work based on that rights offering, and it has, you know, just regular course loans maturing that require to be... require capital to be reinvested. So we expect to have a pretty active 2026 in terms of new loans being put to work or being underwritten in 2026, most of which I think will occur at the Seven Hills mortgage REIT.
Speaker #1: in December offering that we . RMR participated in own that . We now about 20% of seven hills , but Seven Hills has about $200 million of new loans that it can put to put to that work rights it has , you know , just regular course loans maturing that require to acquired capital to be be reinvested .
Speaker #1: we expect to have a So pretty new 2026 in terms being put of to work or being underwritten in 2026 . Most of which I think will occur at Seven Hills mortgage the we sit today , I offering .
Adam Portnoy: As we sit here today, I don't think we're planning. Well, there's no plan to put additional loans on the RMR balance sheet. We originally did that because we were trying to seed a vehicle around loans. As we were out in the marketplace talking to private capital about funding a vehicle, for whatever reason, it became evident to us that we didn't really need to seed the vehicle on our balance sheet. I think we are still, we are still having conversations with groups about managing a credit strategy for them, but it's less required, I guess, is the right word, that we, that we seed a portfolio on our balance sheet. I think we will have some success in the future raising capital around credit.
Adam Portnoy: As we sit here today, I don't think we're planning. Well, there's no plan to put additional loans on the RMR balance sheet. We originally did that because we were trying to seed a vehicle around loans. As we were out in the marketplace talking to private capital about funding a vehicle, for whatever reason, it became evident to us that we didn't really need to seed the vehicle on our balance sheet. I think we are still, we are still having conversations with groups about managing a credit strategy for them, but it's less required, I guess, is the right word, that we, that we seed a portfolio on our balance sheet. I think we will have some success in the future raising capital around credit.
Speaker #1: planning we're there's no plan to put additional loans here balance As . We originally did rate . we were to And seed a vehicle sheet around loans .
Speaker #1: As we were out talking to marketplace private capital funding about vehicle for whatever, trying that we didn't really reason, it needs to seed the vehicle on our balance sheet.
Speaker #1: I still we think we're are still having conversations with groups about managing a credit strategy them . But for less required , I guess , is the right word that we that we see to portfolio on our it's balance sheet .
Speaker #1: I think we will have success in to us the future . around capital credit . But that all said , being even if we don't additional raise any private capital around credit in 2026 , I think have an year .
Adam Portnoy: But that all being said, even if we don't raise any additional private capital around credit in 2026, I think we're gonna have an active year. And I think we're going to be putting a lot of money out to work in the year, but it's mostly, if not all, going to be going through the Seven Hills Realty Trust.
Adam Portnoy: But that all being said, even if we don't raise any additional private capital around credit in 2026, I think we're gonna have an active year. And I think we're going to be putting a lot of money out to work in the year, but it's mostly, if not all, going to be going through the Seven Hills Realty Trust.
Speaker #1: we're going to be putting a And I think lot of money out work in the to to it's if be going not all , mostly , through the mortgage REIT
John Massocca: Okay, appreciate that clarity. And then one last one for me. You know, I, I know you kind of mentioned the focus is really on the multifamily fund. Is there some kind of timeline in your mind or expectations for when you would expect that capital to be fully raised and, and maybe even start thinking about moving some of those assets off RMR's balance sheet?
John Massocca: Okay, appreciate that clarity. And then one last one for me. You know, I, I know you kind of mentioned the focus is really on the multifamily fund. Is there some kind of timeline in your mind or expectations for when you would expect that capital to be fully raised and, and maybe even start thinking about moving some of those assets off RMR's balance sheet?
Speaker #7: clarity . And then one last one from me
Speaker #7: clarity . And then one last one from me
Speaker #7: know , you know , you kind of focus is mentioned the really on the . multifamily You Is there some kind of Seven Hills timeline in your mind or for when you would expect that capital fully to be raised .
Speaker #7: and start thinking about moving some of those assets off Mars balance sheet ?
Adam Portnoy: So not to sound flippant, but ASAP, meaning we want to do it as fast as possible. It's really the number one focus in terms of our private capital raising discussions in the marketplace. Again, we have lots of discussions on different strategies, but where we are being the most proactive in talking to folks and having conversations is around the multifamily platform and creating a vehicle and offloading those assets from RMR's balance sheet into the to seed the vehicle. Look, it's very hard to put an exact pin into exactly when it's going to happen. I would say the management team, myself, we would expect it to happen in fiscal year 2026. I don't know if that's early in fiscal year 2026 or late. And when we say fiscal year, you know, we're talking September 30.
Adam Portnoy: So not to sound flippant, but ASAP, meaning we want to do it as fast as possible. It's really the number one focus in terms of our private capital raising discussions in the marketplace. Again, we have lots of discussions on different strategies, but where we are being the most proactive in talking to folks and having conversations is around the multifamily platform and creating a vehicle and offloading those assets from RMR's balance sheet into the to seed the vehicle. Look, it's very hard to put an exact pin into exactly when it's going to happen. I would say the management team, myself, we would expect it to happen in fiscal year 2026. I don't know if that's early in fiscal year 2026 or late. And when we say fiscal year, you know, we're talking September 30.
Speaker #1: So not to sound flippant , but expectations ASAP , want to do it as fast as meaning we
Speaker #1: one focus in our private capital discussions in the marketplace . Again , we have lots of discussions on different raising strategies , but where we Appreciate that most proactive in folks and having conversations is around the platform and and creating a vehicle and offloading those assets from our multifamily balance sheet into Look , vehicle .
Speaker #1: seed . The the very hard to put a exact pin exactly what's going to into would say the management team myself , we would expect happen in I year 2026 .
Speaker #1: I don't know if that's early in year fiscal late , and when we say fiscal we're talking year , you know , So , sometime between the you know , it's year , we're the end of would like to have that vehicle fiscal funded and assets moved .
Adam Portnoy: So, you know, sometime between now and the end of the fiscal year, we would like to have that vehicle funded and those assets moved, but it's very hard to put a precise timeline on it. But I can tell you there's a lot of effort going in towards it. It's sort of the number one thing that our private capital group, we've invested a lot in our private capital, capital markets, investor relations group, and bringing talent on board, and I'm hopeful that we will meet that timeline.
Adam Portnoy: So, you know, sometime between now and the end of the fiscal year, we would like to have that vehicle funded and those assets moved, but it's very hard to put a precise timeline on it. But I can tell you there's a lot of effort going in towards it. It's sort of the number one thing that our private capital group, we've invested a lot in our private capital, capital markets, investor relations group, and bringing talent on board, and I'm hopeful that we will meet that timeline.
Speaker #1: those But very to put a hard precise timeline very you there's there's a lot towards it . It's sort number private of the capital we've effort going in lot our private capital , capital markets , investor invested a and relations group bringing talent on .
Speaker #1: And, Board, I'm hopeful that we will meet that timeline.
John Massocca: Okay, that's it for me. Thank you very much.
John Massocca: Okay, that's it for me. Thank you very much.
Speaker #7: Okay . That's it for me . Thank you very . much
Operator: This concludes our question and answer session. I would like to turn the conference back over to Adam Portnoy for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Adam Portnoy for any closing remarks.
Speaker #4: This concludes our question and answer would like to
Speaker #4: session . turn the I conference to back over Adam Portnoy 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.
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.
Speaker #1: Thank you for joining our call today. Institutional investors, please contact RMR Investor Relations. If you would like to—thank you, management. Operator, that concludes our call.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker #4: The now conference is concluded . Thank you for attending today's tell presentation . You may now disconnect .
