Good morning, and welcome to the RMR Group Fiscal First Quarter 2026 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Bryan Maher, Senior Vice President. Please proceed.

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. 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 U.S. 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.

Thanks, Bryan, and thank you all for joining us this morning. Yesterday, we 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. 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 is more work ahead, the strategic steps taken thus far have helped generate significant positive returns for shareholders of DHC and ILPT. In 2025, DHC and ILPT were the #1 and #3 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 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. DHC continued its focus on improving SHOP NOI margins and selling non-core assets to further delever 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. Partially using these asset sale 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 strengthens 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. 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 April 1st. These individuals will be instrumental in growing the Sonesta 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 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. 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 three new loans, which will complement its existing fully performing loan portfolio. Lastly, as we noted on our fourth quarter earnings call on October 30, 2025, OPI filed Chapter 11 bankruptcy. The bankruptcy process remains ongoing, and we will update investors as new information becomes available. 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.

Thanks, Adam, and good morning, everyone. Despite continued economic uncertainty for the full year, RMR arranged nearly 10 million square feet 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, and he will be a strong complement to Mary Smendzuik, who leads our North American Capital Formation efforts. 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. 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. 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 1.5 years 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.

Thanks, Matt, and good morning, everyone. For our first quarter, 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. As Adam noted earlier, we earned aggregate incentive fees of $23.6 million for the year ending December 31st, 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 first quarter 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. During the quarter, we earned approximately $400,000 of fees from AlerisLife that will impact results in the second quarter as the business was substantially sold by December 31st. 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. 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. During the quarter, we sold two 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 million 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. 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.

The first question today is from Mitch Germain with Citizens Bank.

Peter's addition, Adam, I think the comments from either you or Matt, I apologize where 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 kind of what you were trying to accomplish with your fundraising?

Sure. Good morning, Mitch. That's an important question. Let me provide some context regarding Peter's hire. Approximately six months ago, we did not have any dedicated personnel focused on private capital fundraising. Now, with Peter and Mary on board, along with some support staff, we have four dedicated individuals at the RMR Group solely focused on raising capital privately. To put it simply, Mary is primarily focused on capital raising in the U.S., while Peter is concentrated on international efforts, particularly in Asia and the Middle East. Regarding your question about whether this signifies a change, it does not. It is more about enhancing our previous efforts. Six months ago, we did not have dedicated personnel for capital raising, although we were informally engaging with individuals in Asia and the Middle East. Peter's hire really amplifies our efforts by bringing in someone with extensive experience and connections in that market. We don't view this as a significant change but rather as an enhancement to our existing strategy. As a firm, we are confident about the team we've built, and we are optimistic about seeing positive results as the year advances.

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 $1 billion debt pipeline. So can you just kind of describe to us kind of what sort of products you're looking to raise capital for in the market today?

Yes. I believe being a vertically integrated, middle market-focused player in commercial real estate allows us to deploy capital across various sectors for our clients. This versatility is an attractive feature of RMR in the market, and few firms can offer what we do. This makes us a preferred option for those looking to invest in the U.S. middle market with a manager capable of handling diverse needs. Looking ahead to 2026, we're particularly focused on launching our multifamily fund. We have nearly $100 million allocated to support this initiative, and we are optimistic about achieving success in this area. Regarding capital deployment, we're planning to increase our investments in multifamily and continue making loans and investing in retail. There may also be select development opportunities we pursue. From my discussions in the market this year, I’ve noticed a decrease in interest in industrial and lending sectors, while there's been a rise in conversations about office spaces and consistent interest in multifamily, which remains strong throughout the cycle. I hope this provides some clarity.

The next question is from John Massocca with B. Riley.

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 part of the driver of relative outperformance to kind of what you were expecting at the time of the 4Q '25 earnings call.

Yes, this is Matt. That's a great question and something we wanted to highlight. Most of the five assets are still early in their lifecycle, and they are all value-add residential communities located in the Sunbelt. We're looking at a 3- to 5-year business plan, targeting mid- to high-teen returns by the end of that period. As we approach year-end, we're seeing very strong operational results. The capital improvements we are making are leading to rent premiums as we anticipated. We reported a 70% tenant retention or resident retention rate, which is crucial in this market. There have been many headlines regarding oversupply in the multifamily sector, but if you're able to retain tenants and residents, you're experiencing rent growth in our portfolio of nearly 5%, while new tenancies are seeing rents decrease by 4% to 5%. All of this is working in our favor, and we are optimistic about the trends we see in our business plans.

As you consider the performance of your properties, do you believe the strong performance in the broader Sunbelt market is better than anticipated when you were underwriting, or is it due to specific properties that are driving this outperformance?

I believe that's a key part of our strategy. We are working to raise funds based on the expertise of our team, which has a long history, particularly the group we acquired in December 2023. They possess extensive knowledge of the markets. Our management team has significant experience and understands the nuances within each submarket, including the best locations for demographic trends, resident retention, and rent growth potential. We truly think that our internal resources and the data we can leverage present unique fundraising opportunities, even in a tough market like the one we're currently facing.

Okay. Matt, could you explain how you transition from the $0.20 of adjusted net income in the first quarter of '26 to the $0.12 to $0.14 guidance you're providing? I assume there are some tax implications involved. I'm also curious about the depreciation aspect that was mentioned, considering you have essentially the same real estate assets on your balance sheet as you did in the fourth quarter of '25. What factors are influencing those numbers?

Sure. So it's a good question. A couple of things that I noted in the prepared remarks. We earned in the quarter about $400,000 on our AlerisLife contract. That business, all the assets were substantially sold by December 31st. So that's a headwind heading into the second quarter for us. The loan portfolio, 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, construction management fees are expected to be lower in the calendar first quarter. That's a normal trend we see. And then we are expecting with debt pay downs at DHC and SVC that have occurred towards the end of calendar 2025, that's going to impact management fees as well. And then lastly, in March of each year, we generally grant shares to our trustees. So that's a couple of cents impact as well in the second quarter.

Okay. I appreciate that. And then in terms of kind of the investment outlook, you mentioned loans again. What's the appetite for loan investments and just kind of the long-term strategy there, especially given the recent sale of kind of the loans you had on balance sheet at 4Q '25 and to Seven Hills?

From a lending or credit perspective, we see it as a growth engine for the RMR Group. At Seven Hills, we completed a successful rights offering in December, in which RMR participated. We now own roughly 20% of Seven Hills, which has over $200 million in new loans available to invest from that offering, along with maturing loans that need capital reinvestment. We anticipate a busy 2026 with new loans being underwritten, primarily at the Seven Hills mortgage REIT. Currently, we are not planning to add more loans to the RMR balance sheet, as our initial aim was to support a lending vehicle. While discussions with private capital about managing a credit strategy continue, it’s no longer necessary for us to seed a portfolio on our balance sheet. We expect to successfully raise capital for credit in the future, but even without additional private capital in 2026, we believe we will have an active year, mainly focused on deploying funds through the Seven Hills mortgage REIT.

Okay. I appreciate that clarity. And then one last one for me. 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 maybe even start thinking about moving some of those assets off RMR's balance sheet?

So not to sound flippant, but ASAP, meaning we want to do it as fast as possible. It's really the #1 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 to seed the vehicle. Look, it's very hard to put an exact pin into exactly what's going to happen. I would say the management team and 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, we're talking September 30th. So sometime between now and the end of the fiscal year, we would like to have that vehicle funded and those assets move, 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 #1 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.

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

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

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