Good morning, and welcome to The RMR Group Fiscal Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please also note that this event is being recorded today. I would now like to turn the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining RMR's fourth quarter fiscal 2023 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 our quarterly results, followed by a question-and-answer session. I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on RMR's beliefs and expectations as of today, November 16, 2023, 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 numbers during this call, including adjusted net income, adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margin. A reconciliation of net income determined in accordance with U.S. generally accepted accounting principles to adjusted net income, adjusted earnings per share, adjusted EBITDA and the calculation of adjusted EBITDA margin can be found in our financial results. I will now turn the call over to Adam.

Thanks, Kevin. And thank you all for joining us this morning. RMR finished fiscal year 2023 with solid financial results, once again highlighting the stability of our platform in light of a challenging year for commercial real estate. This stability stems in large part from the fact that most of our recurring fee revenue is generated from long-term perpetual and private capital funds. For the fourth -- fiscal fourth quarter, we reported adjusted net income per share of $0.48 and adjusted EBITDA of $25.4 million. Our quarterly distribution remains well covered and we ended the quarter with strong liquidity, no debt and assets under management of approximately $36 billion. We remain on track to acquire CARROLL multifamily platform and expect the transaction to close by the end of the year. As a reminder, this accretive acquisition provides us an opportunity to gain meaningful scale in the multifamily space through a vertically integrated platform, with strong operational expertise and a proven track record. It also advances RMR's private capital growth strategy in terms of both AUM and expanded private capital relationships. Since announcing this deal, both organizations have been focused on obtaining the third-party consents required to close the transaction. We have also been joining the CARROLL management team in meetings with capital partners to introduce them to RMR and to ensure they appreciate the benefits of the combined platform. The feedback from all partners has been very positive and they have all communicated an eagerness to continue investing in multifamily properties with RMR once the transaction closes and commercial real estate markets stabilize. As a reminder, in addition to its third-party management business and growing development capabilities, existing CARROLL fund series has the potential to make more than $3 billion of additional multifamily investments through 2025. We look forward to…

Thanks, Adam. Good morning, everyone. For the fourth quarter, we reported adjusted net income of $0.48 per share, adjusted EBITDA of $25.4 million and an adjusted EBITDA margin of over 53%. Our quarterly results exceeded the high end of our guidance, primarily due to construction management fees coming in stronger than expected as well as the favorable impact of our continued focus on cost containment. As Adam highlighted earlier, we expect the CARROLL transaction to close by the end of the year. As we continue to invest time in preparing to integrate the two organizations, we remain excited about the increased scale, expanded sector diversification and added operational expertise to the transaction results in. Given the uncertainty of exactly when the CARROLL transaction will close, any financial guidance for next quarter will be focused solely on RMR's legacy business. Recurring service revenues were $45.4 million this quarter, which was down $1.7 million sequentially. This decrease was in line with expectations and primarily attributable to the full quarter impact and the resulting loss of service revenues of the TA transaction that closed in mid-May. As it relates to next quarter, based upon the current enterprise values of our Managed Equity REITs and typical seasonal declines at Sonesta, we expect recurring service revenues to be between $42.5 million and $44 million. It's also worth noting that this quarter, we generated $468,000 in incentive fees from Seven Hills Realty Trust, our commercial mortgage REIT. Seven Hills continues to outperform its peer group by taking advantage of the recent pullback by traditional CRE lenders to invest at attractive terms. Our Tremont lending team has curated a strong loan portfolio that underscores their disciplined underwriting and asset management capabilities even in this period of volatile market conditions. Turning to expenses. Recurring cash compensation of approximately…

[Operator Instructions] At this time, we will take our first question, which will come from Bryan Maher with B. Riley. Please go ahead.

Great. Thank you, and good morning everyone. Just a couple for me. Adam and Matt, you know, maybe in light of the managed REITs being either in the market now or expected to be in the market for some refinancing, and I know SVC just did their deal last week, are you seeing any increased appetite from lenders as it relates to what's happened just this week with the pullback in rates and maybe a desire to kind of lock something in before interest rates possibly head back down, which, I guess, would be favorable to your execution?

Sure, Bryan, and good to hear from you. I guess with returns to capital -- your question is really about available capital or debt capital, specifically around commercial real estate and maybe even more specifically around our REITs. I would say it's hard to say if there's been any noticeable difference in just the last week and the pullback in rates. But I can tell you, we have a pretty good feel just from two publicly announced activities. One, the SVC financing that we -- you referenced and I referenced earlier where we raised $1 billion, and we were very pleased with the amount of interest in that transaction. You know, we raised that transaction. We launched it at $800 million, got well over $4 billion of interest, ended up accelerating the closing or the pricing of it by a day and upping the size by building $1 billion and lowering the price. So that was a pretty good indication to us that the debt markets are open for the right structure and the right real estate. The other activity that we are engaged in and we've publicly announced is with one of our companies with your firm, Bryan, B. Riley, we've engaged them to help us explore options for DHC. And I would say that, you know, generally speaking, we've had a pretty, you know, favorable response from investors generally in talking with the company. And so between those two data points, I would say there is debt in financing capital available in the marketplace in today's market. I think it's really, if anything, and this is just conjecture that, you know, buyers of debt, investors and debt have maybe concluded that the interest rates are either at their peak or close to their peak. And so therefore, they can have a little bit better idea about how to plan, and that's true for real estate as well when you sort of have an idea of where the interest rates may be, you can do a little better job planning. And so maybe that's really what's driving, you know, further interest by debt investors in commercial real estate financing, but maybe more specifically our businesses as well. So I think that answers your question, Bryan.

Yes. Pretty well. I mean when we think about, let's say, OPI going into next year, and I know you've been chipping away, you know, $100 million here, $100 million there with secured financing. Does the current environment open up a scenario where you can do something a little bit more profound? Or do you think as it relates to OPI and office in general, you keep going along the route of chipping away $100 million here, $100 million there?

Yes. I don't -- you know, without knowing exactly what you mean by profound, I mean, I think the current plan is to sort of go at it a little bit like you said, you know, $100 million here, $100 million there, sprinkling some asset sales, we do our bank credit facility that's coming due at OPI. I would say that we feel pretty good about our ability to redo that facility. It is due in about 2.5 months from now, and we feel comfortable that we will be able to renew that or redo that facility as well as put, you know, a certain amount of properties and put secured financing in place as well as I would not say sell a large number of properties, but sell enough properties that we can likely do it at acceptable enough prices that we can get through the next year at least and into 2025. That's not to say that there isn't a larger transaction to be done, but I -- you know, I think, generally speaking, large, you know, financings in and around the office is harder to do likely. It is not what we're planning to happen. That's not to say that if it doesn't become available, we wouldn't gauge in a transaction like that. But to do a large financing, debt financing of some sort, using offices' collateral or using an office REIT as the issuer is probably more difficult in the current environment. And our expectation is it may remain that way for some -- for a few quarters at least.

Thanks. One more for me, and I'll hop back in the queue. You know, when I look at all of the RMR companies and you know, I cover them all, except Seven Hills, and I look at the quarter after quarter leasing activity success throughout the various portfolios and the general high level of occupancy you run, even including OPI, what do you say to the naysayers out there as it relates to where the shares of the managed REITs have traded? I don't know, maybe for fear, vacancies increase or whatever. It's just not playing out in the numbers. So how do you -- what would you say to them?

So I think what we are incredibly focused on, you know, I can't specifically say why stocks trade where they trade. But I can say that all I -- what we can do as a management company is come to work every day and try to do as good a job as we can to preserve equity value for the different vehicles. And frankly, given the current environment, we're pretty focused on balance sheets, you know, at DHC and OPI and obviously, at SVC as well in the other vehicles. So you know, I think that's where our focus is and doing that in sort of the least disruptive way and to maximize shareholder value in that process is very much a focus for us. With regards to leasing, I agree with you. Our portfolio, we do an incredibly strong job leasing our portfolio. I think that's a testament to the RMR organization and the folks in the property management and asset management groups. I mean this is an organization that takes their job very seriously. These are professionals that have been doing this for their entire career. We have a nationwide network of offices and professionals doing this. I think we frankly do a better job leasing than most of our peers because of that and because we are so focused on commercial real estate almost exclusively. So yes, I think the platform is an incredible benefit for the individual REITs that are managed by RMR. And so I would argue that it's something that should be highlighted, and I'm glad you have -- you are highlighting it, Bryan, because I think it's something that we should be spending more time talking about and highlighting for investors. Our re-leasing efforts have been phenomenal. I mean, 12 million square feet in the fiscal year is a lot of leasing that we have done. And we are 96% leased across the board. So we feel pretty good about those metrics.

Thank you.

[Operator Instructions] And with no remaining questions, we will conclude our question-and-answer session. I would like to turn the conference back over to Adam Portnoy for any closing remarks.

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

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