Good day, and welcome to The RMR Group Fiscal Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Michael Kodesch, Director of Investor Relations. Please go ahead, sir.

Good afternoon, and thank you for joining RMR's third quarter of fiscal 2021 conference call. With me on today's call are President and CEO, Adam Portnoy; and Chief Financial Officer, Matt Jordan. In just a moment, they will provide details about our business and quarterly results followed by a question-and-answer session. I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on RMR's beliefs and expectations as of today, August 6, 2021, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, which can be found on our website at www.rmrgroup.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we may discuss non-GAAP measures during this call, including adjusted net income, adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margin. Reconciliation of net income determined in accordance with US Generally Accepted Accounting Principles to adjusted net income, adjusted earnings per share, adjusted EBITDA and the calculation of adjusted EBITDA margin can be found in our earnings release. And now, I would like to turn the call over to Adam.

Thank you, Michael. Good afternoon, and thank you all for joining us. This quarter, I'm pleased to report adjusted net income of $0.47 per share, an increase of 27% on a sequential quarter basis and 24% on a year-over-year basis. Further, adjusted EBITDA of $24.4 million represents a 16% increase on a sequential quarter basis and a 25% increase on a year-over-year basis. Our results this quarter highlight the significant progress we've made over the past year navigating the pandemic. As I reflect on the last 15 months, one of the lasting impressions I come away with is the resiliency of our platform and the commitment of our people to this organization. To begin today's quarterly commentary, I want to start by discussing what we're seeing across the commercial real estate sectors we manage and how some of our key operating metrics are trending. As of today, over 70% of the US adult population has received at least one dose of the COVID vaccine. US airline traveler totals are at the highest levels seen since the beginning of the pandemic and we are experiencing increased office utilization rates at the properties we manage. In terms of organic AUM growth, due to the combination of increasing levels of capital being allocated to commercial real estate investments generally and historically low interest rates, we continue to experience significant competition for acquisition at our client companies, most notably in the industrial, life science and high quality office property sectors. Illustrations of the competitive landscape for deploying capital most impactful at our company, ILPT, our private industrial fund and the Tremont Mortgage platform as each of these groups has over $500 million of dry powder to put to work. For example, this quarter alone, our organization has screened over $6.6 billion in industrial deals…

Thanks, Adam, and good afternoon, everyone. This quarter's results were robust, characterized by strong momentum across many of our key operating and financial metrics. We recorded sequential quarter and year-over-year increases in every headline metric, the majority of which were also in line with our guidance for the quarter. I'll plan to spend most of my prepared remarks detailing the drivers behind our results as well as expectations for the fourth fiscal quarter. Management and advisory services revenues increased for the fourth straight quarter, with revenues reaching $45.5 million, a $3.5 million increase on a sequential quarter basis. This increase was primarily driven by the following factors. First, the average enterprise value at OPI, DHC and SVC increased meaningfully this quarter, adding almost $1.9 million in incremental revenues. Secondly, for many of the reasons articulated by Adam earlier, our managed operators had strong operating results, which in turn led to approximately $1.6 million of incremental fees. And lastly, as typically occurs over the course of each calendar year, construction activity across our clients increased sequentially, which in turn generated approximately $800,000 in incremental construction management fees. Looking ahead to next quarter, we expect management and advisory service revenues to be between $46 million and $47.5 million under the following assumptions. First, no material changes from July 2021 average enterprise values across our managed equity REITs. Secondly, revenues from our managed operators are expected to be flat as growth at Sonesta and TA is expected to be muted by declines at Five Star as they transition DHC communities to other operators. And lastly, continued increases in construction activity across the platform that should generate approximately $1 million in incremental revenues. This meaningful increase in construction management fees is primarily due to next quarter being our first full quarter realizing incremental fees…

[Operator Instructions] Today's first question comes from Bryan Maher with B. Riley FBR. Please go ahead.

Good afternoon, everyone. A couple of questions from me. And first of all, congratulations on what seems like we're turning the corner on a lot of different levels here. Given we've listened to obviously all of the calls, most of your managed REITs have sizable chunks of liquidity and we continue to hear as you mentioned Adam the difficulty in buying assets at reasonable prices. That all being said and with ILPT and TA and others having some land available, how deep is the appetite or willingness to develop ground-up at RMR versus continuing to chase assets at really low cap rates?

Thanks, Bryan, and good afternoon. That's a really good question, and I'm glad you picked up on it from the prepared remarks because it is a growing part, development activity, redevelopment activity has been becoming a bigger part of the whole RMR story. I would say, it's still a minority part of our story, it's still a small part, but I think it's going to grow over time. At the very least, I think, to be a significant or major commercial real estate operator, investor, manager in this country, you have to have significant development capabilities sort of as a minimum. And we've sort of been developing that internally through hires and growing a much larger department within RMR that's focused on development. I would say in the short to medium-term, most of the development activity that is occurring is sort of ancillary to our existing real estate holdings. And that's in the form of when you have 2,200 properties in every state in the country and then also in Canada and the Caribbean, you have a lot of different properties, a lot of different periods, going through a lot of different cycles. And there is obviously a handful of properties that their useful life may have expired and that the area around them have developed into other locales that would mean that that real estate would become much more valuable if it was converted into something else. And that's sort of the, what I call, the low-hanging fruit that we've been most focused on. That's what you're seeing at 20 Mass Ave, that's what we saw when we talked about the Torrey Pines redevelopment that happened at DHC that's largely completed, it was over $100 million. That's what you see when you hear SVC talk about doing something in…

Do you think we could see a scenario where within your private investment vehicles or yourself personally buying and developing land of the various uses that the managed REITs target with the end game that the managed REITs are a takeout such that the REITs don't have the overhang of non-EBITDA generating capital at work?

It's certainly possible, Bryan. I'd put that as less likely, and I'll tell you why. It's not because I'm not confident in our development capabilities or being able to do it. It's obviously a related party transaction if RMR was to build something and then try to sell it into the REITs. And fortunately or unfortunately, we have a lot of related party existing relationships. And whenever we engage in further related party transactions, they're generally difficult to explain in the marketplace. And for whatever reason, they're often looked at - some groups of investors look at them skeptically. So, I'm not sure that's really the way we're thinking about it or plan to do it. If we did start buying greenfield, again, the first place you might see it and this is not going to be meaningful, might be in and around industrial. But if we did that, it would be on ILPT's balance sheet. We probably wouldn't do that, let's say, on RMR or personally or outside and then try to sell it to ILPT.

Okay. And just shifting gears, so clearly it looks like from this week's earnings that DHC and SVC have probably turned the corner here with a lot more positive outlook for the next 12 to 18 months. With what you're seeing kind of internally, who do you think accelerates faster out of the downturn, DHC or SVC?

I love your question, Bryan. It's a funny way - I haven't thought of it that way, but it's --

…like better.

Yes. It's like a horse race. Look both of them, you're right, DHC and SVC are the two REITs, they have most been negatively impacted by what's happened with COVID and they're both going through, you're correct, the second quarter - second calendar quarter for - results for both those companies was very good and we are - as you're right, it does feel like we've sort of turned the corner and things are getting better. There are so many variables that are at play as we think through the fall and into 2022 that affect how these -- both those companies come out. And, of course, it all comes back to COVID. On the SVC side, it's about how fast does business travel come back and does the Delta variant sort of make that harder as we get into the fall for business travel to come back? And the question -- the answer is nobody really knows, but everyone suspects it's going to have some impact. On the DHC side, it's the same thing. As - if COVID becomes a bigger part of the story in the US economy, then does that hinder the ability to see occupancy grow? The good news is I think both businesses are going to improve as we get further into '21 and certainly into '22. It's very hard to say at what rate. That's I think what we debate and what we spend a lot of times thinking about is the speed at which the recovery will happen in both. Both are recovering and both are expected to keep recovering and getting positive. It's just very hard to say which one is going to do it faster. And so, that's the basic answer.

Great. Thanks, Adam. All from me.

And our next question today comes from Jim Sullivan of BTIG. Please go ahead.

Thank you. So, Adam, I'd like to just kind of follow on to some of the questions that Bryan had and let's start with capital allocation. The -- in terms of the development activity as opposed to acquisitions, presumably there is a risk premium there. And I'm curious, if you could explain to us how you think about that, what kind of hurdle rate do you have for development? Number one. And then I guess when you think about in connection with the alternative of acquisitions in a very expensive environment, where you're - how far off are you from the market? If you've underwritten a lot of products and maybe advanced to second or third rounds, how far off do you find the market from where you're willing to put capital into acquisitions?

Thanks, Jim. I think we are not far off, and we are winning transactions. It's just -- it's a very broad funnel at the top, and you have to basically go through a lot of processes some more widely marketed than others to sort of get to that deals that we win. Obviously, this past quarter, we bought $550 million of very high quality office properties and we announced some small acquisitions at ILPT and the industrial side. So, we are able to make acquisitions. And I think we will be able to grow through acquisitions going forward. In terms of our capital allocation risk premium, again, we have the -- we -- the reason I said to the earlier question about focused on development of incumbent legacy properties is we have a built-in often low basis in the land and in the product - in the real estate as it exists today on the balance sheet. And so, it helps us in terms of getting that good return on a development. Meaning, if we were to just buy a vacant parcel in the same location of some of these properties, the development potential will be factored into the cost of the land or the greenfield. And so, that can -- into your returns. So, part of the reason we're focused on trying to do development activities at, what I call, incumbent properties is because we have that built-in low basis. And it's easy to get to the hurdle. Generally speaking, what are we building towards, high single-digits on a core return for development, high single-digits. Does it depend on if it's industrial or if it's office or even if it's going to be mixed use or even if it's some other asset side, it sort of varies. But generally speaking across the board, we are targeting high single-digits, but that's incorporating the fact that we already have a low basis in the real estate. So, that's how it helps get a good return for that client company when we put the additional capital to work. Hopefully I've answered…

No, yes, thank you for that. One other alternative in terms of the capital allocation, and obviously we've seen it especially with some of the multifamily REITs is to have an active developer capital program or structured finance book, we've seen companies like SL Green do it in office and Main Street retail and UDR and others do it in multifamily. And you have your mortgage REITs, which do a different types of business, I believe. But I'm just curious whether you have kind of taken a serious look at starting a developer capital program, where you provide that mezz level to the developers and sometimes retain an option to buy the property at the end of the steroids. Is that something you're looking at?

Jim, it's something we're not seriously looking at. We have looked more - it's related to what you're talking about takeout commitments, meaning rather than just providing the financing as part of the development phase with a takeout attached, we have looked in circumstances of just committing to a forward takeout for a developer. I think we probably do that before we commit to the financing, especially if it's on a spec basis, even the forward commitments that we've looked at and haven't done. I'm just telling what we have looked at, has been around developments that have usually a tenant intel, meaning it's a build-to-suit and/or subject to getting the building leased before we could take a takeout. Yes, you can get some cap rate discount or however you want to think about it, it's a little better. But of course you're - it's the time value of money, it's when is that takeout going to be done, is how we've thought about. So, specifically to answer your question, no, we haven't looked at it that way in terms of probably mezz financing for development. We still on the lending side, which you are right, it's related to what you're talking about. We find we have a pretty robust pipeline. I think we can get a lot of money out to work looking just sort of at this transitional value-add, light value-add bridge loans. And we're seeing the - on a risk-adjusted basis, we feel more comfortable putting money there at the moment.

Okay. And then final question from me. Regarding the PE platform, when the RMR was talking about a major investment in PE, a PE platform a while ago, ultimately you scaled that back and to the point where you - the lion's share of the cash will go toward a special dividend. And I'm just curious, you guys have investigated presumably a lot of opportunities in terms of a PE platform. And I'm just curious, whether the issue was that pricing expectations for the sellers were just too rich or whether there was simply an absence of opportunities, whether it would be kind of a good meeting of the minds or marriage in terms of the personnel that - whose platform you'd be buying?

Sure. It's a good question. Just to be clear, I would not say it's completely off the table. I was more optimistic that that was going to be our primary way of growing the private capital business some quarters ago. My think - our thinking around that has shifted a little bit more, where I think we have a very good opportunity and we will be successful growing it internally or organically ourselves. I mean, we talked about that in the prepared remarks. We are having advanced discussions with being able to put hopefully together and I still believe this number billions of dollars to work in and around private capital that we will organically place. That all being said, we haven't completely put aside the idea of doing something with - through M&A. And to-date, the reason we haven't done something is not because of price. I would say, to-date, we entered this market, it's now several quarters, maybe a year or two that we've been doing this now. And we had lots of discussions. I would say as much of this has been about us being very choosy about what we want to acquire. And more specifically, I don't think you're going to see us buy, and this gets really nuanced within the industry a shop that is heavily reliant on closed-end funds that do opportunistic investing in real estate. That's a bridge too far from what we do and shops that are focused on that, and that's the majority of the private real estate shops that exist out there. Our focus has been just we are more interested in dealing with folks that are more - they're investing sort of more core real estate, less closed-end funds, maybe more separate managed accounts. And that just fits better,…

Okay, very good. Thanks for that, Adam.

And our next question today comes from Kenneth Lee at RBC Capital Markets. Please go ahead.

Hi. Thanks for taking my question. Just one about the larger scale developments. You mentioned that this is an area that could grow over time. And you also mentioned that you are right now ramping up your capability. Just wondering, if you could just perhaps give us a better sense of the potential timeframes involved where you can reach that level of capability and where we could start to see more meaningful contributions? Thanks.

Yes. I don't want to put too much - I don't want to overstate the level of contribution that this business could be providing here in the short to medium term as we get in. When I say short to medium term, 2021, 2022, probably well into 2023. This is - one development takes a long time when - and the specialty type of developments we're talking about. For example, 20 Mass Ave development we mentioned in our prepared script, this is something that's a $200 million project, it's started, it's not going to be delivered till Q1 2023. We have a handful of other projects of sort of the same scale that as I think about it, those projects they will start in the coming years as we get into '22 and to '23, those projects will begin on the scale like what we're talking about. So, I think it's an important capability for an organization like ourselves. And I think as time goes on, years from now, I think this could be something that's quite - that could become more meaningful. Maybe we're somewhat - or I'm conservative. What I'm trying - what we're trying to do is sort of build up our capabilities over time. And I think it also sort of helps legitimize us in the eyes of investors that we're sort of a full service vertically integrated real estate company that can do all stripes of things real estate with the focus generally that we're generally focused on core real estate, either buying, managing or building the core real estate. That's really our focus. And so, I don't want to overstate it. Again, not to pick on industrial, but that could be the one place that you could see a small uptick in the stuff, where we could start maybe doing some more development there. And again, it'd be development of the core. I like to see us walk before we run. We have one development project going on down in Dallas. It's going to be - it's a $10 million project all-in, if that. And I really like to see us do it successfully before we start green lighting many more projects, so it's going to be a process we go through. But I do think it will be an - it's important for us for multiple reasons and someday could be a bigger part of our story.

Got you. That's very helpful. And one follow-up question, if I may. You mentioned in the prepared remarks about the S&P REIT indexes being discontinued. Could you just talk a little bit more about what you see could be the potential impact to incentive fees, given the calculations uses three-year measurement periods? Thanks.

Yes. Good question, Ken. So, pretty similar to our prepared remarks, this is something we've learned from S&P in the last three or four weeks. We're in the process of assessing alternatives. To be fair, the ultimate goal is to find an index, an alternative with S&P or otherwise that very closely mirrors what we have today with the hope that there will not be a significant change to where the current incentive fee is trending, whether it'd be the SNL index or a replacement index. So, that's our goal and I think we'll have more to say on this at our next earnings call or in advance of our next earnings call, but we need to go through a process where we talk to both the RMR boards and the respective REIT boards over the next few weeks as we identify alternatives.

Got you, very helpful. Thanks again.

Our next question today comes from Ronald Kamdem with Morgan Stanley. Please go ahead. Hello, Ronald. Your line is open. Or you're on mute, perhaps.

Yes. Can you hear me now?

Yes.

Okay, great. Sorry about that. Just had a quick follow-up on sort of the S&P index expiration. And I can appreciate you guys are still sort of in the middle of conversations, so you may not know. But would the idea be finding a new index for calculation for the remaining of the year or is there a chance to just redo the calculation even for sort of the time that's already passed with the current index? Hopefully, that made sense.

I think both alternatives are a possibility, Ron. I think we just need to go through the process of assessing what the alternative is and then what the process of adoption will be with each respective board and the RMR Board.

Got it. Makes sense. Just - one of the things I wanted to follow up on is the conversation earlier about private capital vehicles. I know you talked about historically maybe get - potentially getting exposure to multifamily sector. Just curious, how much of that has played into sort of the search in terms of a core real estate manager? And if not, realistically, what's the path to maybe executing on something on the multifamily side if you're still contemplating it?

Yes. I would say that it hasn't been, let's say, a requirement or a criteria that the firm must be in the multifamily space. But that all being said, most core private equity firms have a multifamily aspect to them. And I think just about everyone we've talked to had some level of multifamily, either that's one of their core competencies or they have some amount of it. And so, I think if we were to do anything in and around that, let's say, make an acquisition, I think it would likely come with some multifamily expertise. And, of course, that would be obviously an area we could try to grow around that. If we don't make - do something in multifamily in terms of a M&A, I think we would have to explore building it out on our own and without require is - supplementing some of the folks here at RMR that have a little bit more expertise in and around multifamily and basically building it. And that could be reusing some of our capital to seed a fund of some sort or an initiative or a vehicle hopefully with some outside capital alongside us to sort of get it up and going, but that would be probably the way we would think about doing it. I don't - just to be clear though, that's not something that we are actively trying to set up today, so I don't want you to think that you're going to see a multifamily platform suddenly announced at RMR that we're going to organically build. That's not something we are actively trying to build. I think based on the handful of conversations, where shorter one is run to ground to the very end these conversations with a handful of folks and see if we can get one across the line. And if we do, then it likely will come with a multifamily aspect to it and sort of build from there. So, that's how we're thinking about it.

Helpful. Thank you.

[Operator Instructions] Our next question comes from Owen Lau with Oppenheimer. Please go ahead.

Thank you for taking my question. I want to go back to special dividend. I think, Adam, you mentioned RMR is still considering paying special dividend by the end of this year. I think last quarter, you mentioned a decision may be made by September and RMR could return 50% of cash on hand. I'm asking because in your prepared remark, you also mentioned RMR may announce something, like some growth initiatives in the coming months. I just want to see whether September and 50% are still valid here. Thank you.

Thanks, Owen. Yes. So, the - our thinking and timing and sizing around the dividend since our last quarterly call really hasn't changed. We continue to think that it could be up to half, let's say, of our cash, which is roughly half of our cash is today $200 million and our plan is to still hopefully make a decision by September or by our fiscal year-end, which is September 30th.

Okay, got it. That's very helpful. And then a quick modeling question on Sonesta. I think it has been doing quite well. Last quarter, you mentioned the revenue of Sonesta will go up to like $1.6 million in the fourth fiscal quarter, I think which is $500,000 higher. And I think this quarter, Matt, you mentioned something like you are expecting this to be flat from this quarter or next quarter. I just want to make sure I understand the dynamic here. Thank you.

Hi, Owen. Yes, thank you. I know you're largely asking a very specific modeling question, but let me just say a couple of things about Sonesta, which I'm glad you opened up the floor to that. Sonesta is doing very, very well. SVC, one of our largest clients announced its earnings earlier today, first time it's announced positive hotel EBITDA since the pandemic began for the quarter and that's largely because of the performance of Sonesta, which has been very, very strong, probably stronger than we initially thought it would be. It's been so far - it's been so strong at Sonesta that you also heard SVC talk this morning about how they were marketing 69 hotels for sale and they mentioned that they are selling them initially with the idea that they will be encumbered by brand. It is - the response in the marketplace to Sonesta has been so robust that when we went out to brokers to talk about valuations for potential selling of the hotels, and this was a little bit of a surprise even to myself and to others, we heard back that they thought that selling them encumbered by Sonesta would be very little if no discount to showing them unencumbered. And I point that out because it speaks to the marketplace opportunity that SVC and Sonesta are experiencing, which is - and I don't think any of us have fully realized it when we bought, let's say, Red Lion and put the whole Sonesta business together largely on necessity because of our managers defaulted on us. But today in the marketplace, we are now one of the largest hotel companies. And as we go out to talk to folks about franchising, the reception we are getting is incredibly robust. And it's because, one,…

Yes. So, Owen to your specific on the modeling. So, this quarter, Sonesta generated about $1.5 million in fee revenue. Based on where they see leisure travel and hopefully some resumption post Labor Day of business travel, we're modeling them out at about $1.8 million next quarter. Now, please keep in mind in my prepared remarks, we're net-net, while they are up, the operators as a whole should end up, all things being equal, back at $7 million, which is where they are this quarter.

Got it. So, $1.8 million from $1.5 million. Okay, got it. And then just one final clarification on the SNL benchmark. Will S&P discontinue all the benchmarks you're using or just one specific benchmark? I'm trying to understand better.

No. They've had some business transactions and mergers on their side and they need to discontinue any index that's tied to the SNL brand name. So, all of them --

Got it. Okay, thank you very much.

And our next question is a follow-up from Bryan Maher with B. Riley FBR. Please go ahead.

Great. Thanks. That Sonesta discussion got me thinking. And one thing that jumps to my mind is, can you maybe explain the advantage to the franchisees other than the getting in at the early innings? As far as the fee or a marketing fee standpoint, what's the advantage to that, and if you could quantify it in any way? And secondarily, Red Lion came with a lot of brand. I'm guessing that the focus really is on Sonesta and maybe Red Lion itself, do you think you might prune any of the other brands that came along with that transaction?

Sure. In terms of the brands themselves, at Red Lion, there could be one or two brands that over time we would prune over time. In terms of franchising, it's still very much a focus on the Red Lion brands themselves. There's a couple of large brands within Red Lion, Americas Best Value Inn that does very well, that continues to generate interest in the marketplace. That - but you're right that the focus has now been shifting towards Sonesta. And when we shift the focus to Sonesta, it's been around more, what I'd call, the extended stay in the select service product. So, what we have today is the ES Suites - Sonesta ES Suites, the Sonesta Simply Suites, which is the extended stay product, and Sonesta Select which is these limited service product. There is a lot of interest and that happens to be the vast majority of the 69 hotels that SVC is selling is extended stay and/or select service. There is a vast amount of interest in talking to Sonesta about those transactions, those hotels, but also just franchising in general. And I think SVC talked about this on this call this morning, but they're going through the franchising, getting the franchise disclosure documents filed and on - on file where they have to be and also working through at Sonesta sort of finalizing brand standard. So, this can all sort of be rolled out to potential franchisees. Look, in the beginning, I'm not going to put specific numbers on it, but you can think it's going to be a little modestly less expensive than it would be for, let's say, a Marriott, which has sort of historically been the most expensive with regards to fees in the marketplace. Again, reiterating what I said before and…

Right. You keep referencing Marriott and you could probably throw Hilton in the same basket, and we've heard a lot of pushback from owners about brand standards as it relates to over the past year with COVID. But when we think about Sonesta and the fact you have the Royal Sonesta brand too, which I think if memory serves me you're putting on in the 20 Mass Ave property in DC. Doesn't the Royal Sonesta full service and luxury resorts give kind of an uplift to the whole brand? And it just kind of resonates a little bit like Hyatt, which also historically has had skin in the game and you have Park Hyatt and you have all the different types of Hyatts, Hyatt Place, et cetera. Is that maybe the direction that Sonesta skews towards?

Yes. The short answer is yes, Bryan. The fact that we have the high-end product, the Royal Sonesta, Sonesta hotels and resorts definitely benefits the overall brand - collection of brands at Sonesta that we have. And so, yes, it's definitely part of our strategy. I think not unlike the big brands, you're going to see more of our hotel units will be extended stay and select service, but you will definitely see us grow the Royal Sonesta and Sonesta hotels and resort. I think we're basically going after the lowest hanging fruit upfront just because we have gotten a lot of reverse inquiry on the extended stay and select service and we got to get that sort of up and going. But - yes, we will naturally move up the ladder and eventually start doing deals with Sonesta resort and hotels and Royal Sonestas. I just think we don't even have to go there quite yet because there's so much opportunity in the extended stay and select service that we try to work towards over the next several months, year or so.

Great, thank you.

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Adam Portnoy for closing remarks.

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

Thank you, sir. Today's conference call is now concluded. You may now disconnect your lines, and have a wonderful day.