The Rmr Group Inc. · NASDAQ:RMR
The Rmr — RMR Group — Investor Presentation (March 2023)
38 slides from The Rmr's investor presentation, Mar 29, 2023
Slide 1: Investor Presentation March 2023
1 INVESTOR PRESENTATION March 2023
Slide 2: Warning Regarding Forward-Looking Statements and Disclaimers
2 WARNING REGARDING FORWARD-LOOKING STATEMENTS AND DISCLAIMERS This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws that are subject to risks and uncertainties. These statements may include words su
Slide 3: RMR Is a Dynamic Alternative Asset Manager
3 RMR IS A DYNAMIC ALTERNATIVE ASSET MANAGER • Over 35 years of experience with buying, selling, financing and operating CRE. • Vertically integrated, nationwide operator of CRE across most real estate sectors. • Scalable platform and a deep bench of experienced management. The RMR Group (Nasdaq: RM
Slide 4: Investment Highlights
4 INVESTMENT HIGHLIGHTS Stable revenue base with approximately 75% of RMR service revenues generated from 20-year evergreen contracts with fixed base management fees. Significant potential upside to base and incentive fee revenues as underlying share prices recover. With more than $200 million of ca
Slide 5: Assets Under Management and Client Information
5 ASSETS UNDER MANAGEMENT AND CLIENT INFORMATION 440 First Street, NW, Washington, DC
Slide 6: Assets Under Management (AUM) by Source
6 ASSETS UNDER MANAGEMENT (AUM) BY SOURCE $30,039,248 80% $7,354,919 20% $37,394,167 $30,121,349 90% $3,318,261 10% $33,439,610 $20,601,677 83% $4,107,449 17% $24,709,126(1) $21,306,431 87% $3,127,521 13% $24,433,952 Perpetual Capital Private Capital AUM Fee-Earning AUM 1Q’23 1Q’22 ($ in thousands)
Slide 7: Management and Advisory Services Revenues by Source
7 MANAGEMENT AND ADVISORY SERVICES REVENUES BY SOURCE(1) (1) Past fees are not an indication of future fees. For additional information regarding the fee provisions in these management agreements, please see our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. For management
Slide 8: Perpetual Capital AUM
8 Commercial Real Estate Fee-Earning Sector AUM AUM ($ in thousands) ($ in thousands) Service Properties Trust (Nasdaq: SVC)(1) Hotels / Retail $ 11,273,106 $ 6,906,152 Diversified Healthcare Trust (Nasdaq: DHC) Medical Office & Life Science / Residential 7,364,926 3,235,870 Office Properties Income
Slide 9: Private Capital AUM and Investment Performance
9 PRIVATE CAPITAL AUM AND INVESTMENT PERFORMANCE • Private Capital AUM increased more than 120% to $7.4 billion compared to $3.3 billion last year. Inception to 1Q'23 Date Fee-Earning Net Internal Net Internal AUM AUM Rate of Return Rate of Return ($ in thousands) ($ in thousands) Industrial Real Es
Slide 10: Client Contractual Relationship
10 Client Contractual Relationship(1) MANAGED EQUITY REITS RMR earns fees pursuant to Business Management and Property Management Agreements that renew each year for successive 20 year terms. • Base business management revenues principally consist of monthly fees generally based on 50 bps per annum
Slide 11: RMR Platform
11 RMR PLATFORM 1224 Hammond Drive, Atlanta, GA
Slide 12: RMR Benefits from Deep Bench of Management and Scalable Platform
• Legal • Marketing • Market Research • Risk Management • Tax RMR BENEFITS FROM BOTH A DEEP BENCH OF EXPERIENCED SENIOR MANAGEMENT AND A SCALABLE PLATFORM SENIOR VICE PRESIDENTS RMR SHARED SERVICES • Accounting • Acquisitions/Dispositions • Administration • Asset Management • Building Operations • C
Slide 13: National Vertically Integrated Operating Platform Is a Differentiator
13 NATIONAL VERTICALLY INTEGRATED OPERATING PLATFORM IS A DIFFERENTIATOR AND COMPETITIVE ADVANTAGE RMR corporate headquarters RMR offices Puerto Rico Ontario, CAN Newton (Boston) New York / Long Island Hartford Philadelphia Baltimore / Annapolis Washington D.C. (3) Richmond (2) Orlando Columbia Atla
Slide 14: Our Diversified Approach Drives Our Performance
14 Our Diversified Approach Drives Our Performance Despite a challenging economic environment, both the durability of RMR’s business and diversity of the real estate sectors in which we manage assets contributed to strong first quarter results consistent with our quarterly guidance. Our asset manage
Slide 15: RMR's Comprehensive Approach to Real Estate
15 RMR’S COMPREHENSIVE APPROACH TO REAL ESTATE Executing Passionately • Engrained culture- “Like we own it.” • Sophisticated in-house engineering. • Best in class responsiveness. • Agile, accountable, & entrepreneurial. Maximizing Results • Accretive capital deployment. • Market leading leasing exec
Slide 16: A Winning Tradition
16 A WINNING TRADITION #6 in Retail Real Estate Ownership #5 in Hotel Real Estate Ownership #9 in Senior Living Real Estate Ownership #15 in Office Real Estate Ownership #8 in Industrial Real Estate Ownership #6 Senior Living Operator #8 Hotel Operator Domestic Scale Across U.S. Sectors(1) RMR Recog
Slide 17: Demonstrated Commitment to ESG
17 OPI ENERGY STAR Partner of the Year I Sustained Excellence (awarded in 2022) RMR ENERGY STAR Partner of the Year I Sustained Excellence (awarded in 2022) RMR named "2022 Top Places to Work" for the third year in a row by The Boston Globe. RMR named "Best Place to Work" in 2022 by Globe St. Real E
Slide 18: Value Proposition
18 VALUE PROPOSITION Sonesta Resort Hilton Head Island
Slide 19: Limited Management Fee Downside from Current REIT Stock Price Levels
19 $0.7M or ~3% $3.0M or ~7% $1.1M or ~3% $5.7M or ~15% - 5 10 15 20 25 30 35 40 45 DHC OPI ILPT SVC Millions ($) Annualized Management Fees Property Mgmt Fees Construction Mgmt Fees Base Mgmt Fees - Debt (E.V.) Base Mgmt Fees - Equity (E.V.) LIMITED MANAGEMENT FEE DOWNSIDE FROM CURRENT REIT STOCK P
Slide 20: Maximum vs Actual Base Business Management Fee
20 $22 $24 $26 $28 $30 $32 $34 $36 $38 $40 Maximum Base Business Management Fee Actual Base Business Management Fee Actions underway at the Managed Equity REITs to improve share prices include, but are not limited to: • Improving the balance sheets at SVC, DHC and ILPT. • SVC has executed on $560 mi
Slide 21: Growth in RMR's Construction Management Fees
21 GROWTH IN RMR’S CONSTRUCTION MANAGEMENT FEES $98 $138 $168 $195 $426 $461 $4.9 $6.9 $8.4 $9.2 $19.2 $17.6 -$5 $5 $15 $25 $35 $45 $55 $65 $75 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 2018 2019 2020 2021 2022 2023 Construction Management Fees (Millions) Total RMR Managed Capital Spend (M
Slide 22: RMR's Adjusted EBITDA Margin Reflects Operating Leverage
22 $92M $100M $107M $120M $108M $91M $93M $106M $106M 55% 57% 57% 59% 57% 50% 51% 51% 51% 0% 10% 20% 30% 40% 50% 60% $0 $20 $40 $60 $80 $100 $120 $140 2015 2016 2017 2018 2019 2020 2021 2022 2023 Millions Adjusted EBITDA Adjusted EBITDA Margin RMR’S ADJUSTED EBITDA MARGIN REFLECTS ITS DEMONSTRATED O
Slide 23: Strong Balance Sheet & Well Covered Dividend
23 STRONG BALANCE SHEET & WELL COVERED DIVIDEND Dividend Payout Summary Balance Sheet (1) Adjusted EBITDA and Distributable Earnings are non-GAAP financial measures. See Appendix for a reconciliation of these financial measures to the most directly comparable financial measures calculated in accorda
Slide 24: Potential for Robust Growth Opportunities
24 POTENTIAL FOR ROBUST GROWTH OPPORTUNITIES LEVERAGING THE RMR PLATFORM TO DRIVE SHAREHOLDER VALUE • Diverse client platform allows RMR to benefit from its Managed REITs capitalizing on strategic opportunities and weathering real estate cycles. • Gross acquisition volume of approximately $12 billio
Slide 25: Appendix
25 APPENDIX 4000 Principio Pkwy, North East, MD
Slide 26: Corporate Structure Overview
26 CORPORATE STRUCTURE OVERVIEW Note: All ownership percentages represent economic interest, and not voting interest, as of December 31, 2022. (1) Adam Portnoy is the sole trustee and an owner of ABP Trust. In addition to ownership of 1,000,000 shares of Class B-1 Common Stock, ABP Trust and Adam Po
Slide 27: Definitions and Additional Notes
27 DEFINITIONS AND ADDITIONAL NOTES Actual Base Business Management Fee: Actual base business management fees paid, which was based on the average market capitalization for each Managed Equity REIT when the average market capitalization was lower than the historical cost of real estate assets for th
Slide 28: Definitions and Additional Notes Cont.
28 DEFINITIONS AND ADDITIONAL NOTES CONT. Non-GAAP Measures: Several non-GAAP measures are referenced in this presentation, including EBITDA, Adjusted EBITDA, Distributable Earnings and Adjusted EBITDA Margin. The RMR Group Inc. considers EBITDA, Adjusted EBITDA, Distributable Earnings and Adjusted
Slide 29: Base Business Management and Property Management Fees by Client
29 DEFINITIONS AND ADDITIONAL NOTES CONT. BASE BUSINESS MANAGEMENT & ADVISORY FEES ($ in thousands) 1Q'23 DHC $ 3,664 ILPT 5,902 OPI 3,639 SVC 8,168 SEVN 1,091 ALR 1,264 TA 4,191 Total Perpetual Capital 27,919 Sonesta 2,111 Other private entities 3,012 Total Private Capital 5,123 Total Base Business
Slide 30: Total Management and Advisory Services Revenue by Client
30 TOTAL MANAGEMENT & ADVISORY SERVICES REVENUE ($ in thousands) 1Q'23 DHC $ 6,456 ILPT 9,020 OPI 10,208 SVC 9,768 SEVN 1,091 ALR 1,264 TA 4,191 Total Perpetual Capital 41,998 Sonesta 2,126 Other private entities 5,515 Total Private Capital 7,641 Total Management & Advisory Services Revenues $ 49,63
Slide 31: Reconciliation of EBITDA and Adjusted EBITDA from Net Income
31 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF EBITDA AND ADJUSTED EBITDA FROM NET INCOME(1) See footnotes on pages 33 and 34. ($ in thousands) 1Q'23 Net income $ 14,240 Income tax expense 2,484 Depreciation and amortization 268 EBITDA 16,992 Other asset amortization 2,354 Operat
Slide 32: Net Income Margin, Adjusted EBITDA Margin and Distributable Earnings
32 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES CONT. CALCULATION OF NET INCOME MARGIN, ADJUSTED EBITDA MARGIN AND DISTRIBUTABLE EARNINGS ($ in thousands) 1Q'23 Calculation of Net Income Margin: Total management and advisory services revenues $ 49,639 Net income $ 14,240 Net Income Margin 28.7% Cal
Slide 33: Non-GAAP Footnotes
33 1. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures calculated as presented in the tables above. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are supplemental measures used to assess operating performance, along with net income, net income attributable to T
Slide 34: Non-GAAP Footnotes Cont.
34 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES CONT. 3. Distributable Earnings is a non-GAAP financial measure calculated as presented in the table above. The RMR Group Inc. considers Distributable Earnings to be an appropriate measure of its operating performance, along with net income attributab
Slide 35: Illustrative Calculation of Incentive Fees from Managed Equity REITs
35 ILLUSTRATIVE CALCULATION OF INCENTIVE FEES FROM MANAGED EQUITY REITS The incentive fee is equal to twelve percent (12%) of the product of the Equity Market Capitalization (as defined in the applicable agreement) and the amount by which the Total Return per share exceeds the Benchmark Return per s
Slide 36: Explanation of RMR Inc.'s GAAP Effective Tax Rate
36 EXPLANATION OF RMR INC.’S GAAP EFFECTIVE TAX RATE RMR LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, RMR LLC is generally not subject to U.S. federal and most state income taxes. Any taxable income or loss generated by R
Slide 37: Illustrative Calculation of Noncontrolling Interest
37 ILLUSTRATIVE CALCULATION OF NONCONTROLLING INTEREST ABP Trust owns 15,000,000 redeemable Class A Units of RMR LLC, representing 47.5% of the economic interest of RMR LLC as of December 31, 2022, which is presented as a noncontrolling interest in RMR Inc.’s consolidated financial statements. Three
Slide 38: 38 INVESTOR PRESENTATION March 2023
38 INVESTOR PRESENTATION March 2023