Good day, and welcome to The RMR Group fiscal third quarter 2021 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. 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 Q&A 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 6th, 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. 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 earnings release. Now, I would like to turn the call over to Adam. Thank you, Michael. Good afternoon. 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. 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 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 U.S. adult population has received at least one dose of the COVID vaccine. U.S. 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 are 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, and we underwrote approximately $3.5 billion of debt financing opportunities. Nevertheless, we continue to remain disciplined in our underwriting in the face of a very competitive market environment. From an operating perspective this quarter, we saw many positive signs, most notably continued leasing momentum across our platform. This quarter, we arranged over 2 million sq ft of leases on behalf of our client companies with a weighted average lease term of over 11 years and an average roll-up in rent of just over 9%. We believe the office workplace remains a critical part of most businesses, and our continued leasing velocity reinforces this belief. I also would like to take a moment to highlight our expanded development capabilities, which is important as growth through acquisitions becomes more difficult. Over the last few years, we have taken on increasingly larger scale development projects with OPI's 20 Mass Ave redevelopment, a great current example of our expanding capabilities. This project is a 427,000 sq ft RMR-managed redevelopment project in Washington, D.C. with total cost of approximately $200 million that is expected to be delivered in the first quarter of 2023. As it relates to the strength of our tenants, we remain pleased with cash collection rates that continue to hover at approximately 99%. Additionally, in an environment of elevated inflation, our clients remain well-positioned with over 80% of our leases at RMR-managed assets having inflation protection measures such as contractual rent bumps or CPI adjustments. I'd now like to highlight some of the recent notable activities at our client companies. In May, OPI raised $300 million of senior unsecured notes and used the proceeds to pay down higher cost debt. This offering was 6x oversubscribed, which is a positive indication of interest in OPI and commercial office real estate generally. In June, OPI acquired two class A office properties for a total of $550 million and commenced the redevelopment of 20 Mass Ave, which I highlighted earlier. We expect OPI will continue its successful strategy of recycling capital into higher quality and better performing assets, which has increased the portfolio's weighted average lease term, decreased OPI's CapEx burden, and expanded the company's footprint into faster growing markets. As previously announced, DHC and Five Star amended their management agreements, which allows for the transition of 108 senior living communities from Five Star to a diverse group of best-in-class operators. This process is well underway and should be completed by calendar year-end, as DHC has already announced that 76 communities are under agreement to be managed by four new operators. The transition of these communities should ultimately be mutually beneficial and leave each respective client company better positioned. DHC's same property SHOP occupancy experienced its first sequential quarter increase since the pandemic began. We believe senior living will benefit from many fundamental tailwinds, including limited supply growth and a rapidly growing target demographic that supports demand for senior living over the next decade. Turning to SVC, and more specifically, its hotel portfolio that is managed primarily by Sonesta. Since the conversion of 205 hotels over the past three quarters, Sonesta has been able to deliver significant improvements in occupancy, room rates, and RevPAR. These positive trends, which have occurred despite the ongoing pandemic and the disruption of transitioning hotels from other managers, have resulted in SVC reporting positive hotel EBITDA this quarter for the first time since the first quarter of 2020. As currently one of the largest hotel brands in the U.S., Sonesta continues to invest in its infrastructure and franchising capabilities, positioning it very well for the future. At TravelCenters of America, which is also one of SVC's largest tenants, they reported adjusted EBITDA of $73.5 million this past quarter, an increase of 82% compared to the same period in 2019. These results highlight the progress TA has made in its business since the beginning of 2020. Before I turn to our cash deployment initiatives, I want to note that RMR Mortgage Trust and Tremont Mortgage Trust remain on track to complete their merger with shareholder votes scheduled for mid-September. As a reminder, we expect the combined platform to benefit from enhanced scale with fully invested assets expected to approach $1 billion, as well as to be immediately accretive to both sets of shareholders, provide increased shareholder liquidity, and reduce their respective cost of capital. We ended the quarter with approximately $400 million in cash. As mentioned last quarter, our board continues to assess potential alternatives for excess cash beyond what is required to fund growth initiatives. It remains our expectation that the most likely form of a return of capital to shareholders will be in the form of a special one-time dividend later this year. With regards to our growth initiatives, we remain committed to organically building relationships with providers of private LP capital, and we continue to dialogue with a handful of potential real estate private M&A targets. We are hopeful to announce progress on each of these initiatives for growth in the coming months. Finally, as I mentioned last quarter, we have begun building our own internal capital markets team to expand into other sources of private capital, such as family offices and high net worth investors, and expect to announce more regarding this initiative on our next quarterly earnings call. I'll now turn the call over to Matt Jordan, our Chief Financial Officer, who will review our financial results for the quarter. 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. The average enterprise value at OPI, DHC, and SVC increased meaningfully this quarter, adding almost $1.9 million in incremental revenues. 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. 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. 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. 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 from recent amendments to our management agreements with DHC and SVC that provides for RMR to oversee all major capital projects and repositionings at hotels and senior living communities for a 3% fee. Moving to incentive fees from our managed equity REITs, OPI continues to accrue an incentive fee for calendar 2021. As a reminder, we only record incentive fee revenue at December 31st of each year. If June 30th had been the end of a measurement period, we would have earned an annual incentive fee of approximately $22.2 million. With regards to the calculation of our incentive fees, we were recently informed by S&P Global that the SNL indices we benchmark our REITs against will be discontinued effective August 7th. We are currently working with S&P to identify an alternative with the goal of finding REIT indices that most closely replicate the performance of the expiring legacy SNL benchmarks. Turning to expenses for the quarter. Cash compensation of $30.5 million and our cash reimbursement rate of 43% this quarter were both flat on a sequential quarter basis. Based on our headcount assumptions, statutory payroll tax withholding limits being reached, and post-pandemic vacation usage, next quarter, we expect cash compensation to be approximately $30 million. As it relates to equity-based compensation, with our fiscal year-end approaching, RMR share awards to officers and employees will occur in September. Based on RMR's historical grant levels, we expect approximately $500,000 in incremental equity compensation next quarter, the large majority of which is not recoverable. As Adam noted earlier, adjusted EBITDA this quarter was $24.4 million, an increase of 16% on a sequential quarter basis. Our adjusted EBITDA margin this quarter was 51.1%, a sequential quarter increase of 300 basis points. Our adjusted EBITDA margin getting back over 50% illustrates the operating leverage of the platform and our earnings potential as we experience service revenue growth. Looking ahead to next quarter, we expect adjusted earnings per share to range from $0.48 to $0.51 per share and adjusted EBITDA to be between $24.5 and $26.5 million. Before we go to questions, I would like to highlight that we recently ranked first on the BOMA International 360 Performance Program standings. We always look to highlight our vertically integrated platform and believe this to be a differentiator when meeting with potential sources of private capital. RMR's national real estate operations teams focus solely on our clients' assets, we remain proud of our investments in sustainability, continual education and training of our team members, and maintaining superior relationships with our tenants. That concludes our formal remarks. Operator, would you please open the line to questions? Absolutely. We will now begin the Q&A session. If you would like to ask a question, please press star then one on your touch-tone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Bryan Maher with B. Riley FBR. Please go ahead. Good afternoon, everyone. A couple of questions from me. 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, 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. 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. 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 going through a lot of different cycles. There's 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 real estate would become much more valuable if it was converted into something else. 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 the Nashville market on a site that is currently a travel center. That site itself could be upwards of a billion-dollar mixed use for the 5 million sq ft redevelopment. I think it is going to become a bigger part of what we do. In the industrial side, you'll probably notice we have our first, what I'd call, a relatively modest development going on down in the Dallas market that we indicated at ILPT. We bought the land from an affiliate company, and are going to be developing that into industrial. I think it will continue to be a growing part of our business going forward. I don't think it's going to overtake just the traditional buying core real estate, managing core real estate. I think that's going to be the lion's share of what we do for the foreseeable future. I do think there'll be more and more sort of opportunities to what I call build to core. That's really what we're doing. We're building products to core real estate, with pretty healthy returns. Eventually, medium to long term, this is probably years away. I could see us deploying, buying vacant lots, vacant land, buying properties specifically with the idea that you would tear it down or redevelop or develop something on that. I think that's more longer term. You could see us do it, maybe the first place you might start to see us do something like that on a limited basis might be in and around industrial. What we're seeing there, just because of the competition for acquiring industrial properties. That sort of gives you a flavor for what we're doing around development and redevelopment. 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 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. 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. For whatever reason, Some groups of investors look at them skeptically. 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. Just shifting gears. 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, 18 months. With what you're seeing internally, who do you think accelerates faster out of the downturn, DHC or SVC? I love your question, Bryan. It's a funny way to I haven't thought of it that way. Which of your kids do you like better? Yeah, it's like a horse race. Look, both of them, you're right. DHC and SVC are the two REITs that have most been negatively impacted by what's happened with COVID, and they're both going through. You're correct. The second calendar quarter results for both those companies was very good, and 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 both those companies come out. 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? 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. If COVID becomes a bigger part of the story in the U.S. economy, 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 2021 and certainly into 2022. 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 of 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. That's the basic answer. Great. Thanks, Adam. All for me. Our next question today comes from Jim Sullivan at BTIG. Please go ahead. Thank you. Adam, I'd like to just kind of follow on to some of the questions that Bryan had and start with capital allocation. In terms of the development activity as opposed to acquisitions, presumably there's a risk premium there. 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 it in connection with the alternative of acquisitions in a very expensive environment. How far off are you from the market if you've underwritten a lot of product and maybe advanced to the 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, we are winning transactions. It's just a very broad funnel at the top. You have to basically go through a lot of processes. Some are 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 on the industrial side. We are able to make acquisitions, and I think we will be able to grow through acquisitions going forward. In terms of capital allocation and risk premium, again, the reason I said to the earlier question about focused on development at incumbent legacy properties is we have a built-in, often low basis in the land and the real estate as it exists today on the balance sheet. 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 would be factored into the cost of the land or the greenfield, that can eat into your returns. 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, it's easier 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 type? It sort of varies, but generally speaking, across the board, we're targeting high single digits. That's incorporating the fact that we already have a low basis in the real estate. That's how it helps get a good return for that client company when we put the additional capital to work. Hopefully that answers. Yeah, thank you for that. One other alternative in terms of 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 mainstream retail, and UDR and others do it in multifamily. You have your mortgage REITs, which do a different type of business, I believe. I'm just curious whether you've 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 stay period. 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'd 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 you what we've looked at, has been around developments that have usually a tenant in tow, 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. Of course, it's the time value of money. It's when is that takeout going to be done, is how we've thought about. Specifically to answer your question, no, we haven't looked at it that way in terms of providing mezz financing for development. We still, on the lending side, which you're right, it's related to what you're talking about. We find we have a pretty robust pipeline and think we can get a lot of money out to work looking just sort of at these transitional value add, light value add, bridge loans. We're seeing that on a risk-adjusted basis, we feel more comfortable putting money there at the moment. Okay, then final question from me regarding the PE platform. When RMR was talking about a major investment in a PE platform a while ago, ultimately you scaled that back to the point where the lion's share of the cash will go toward a special dividend. I'm just curious, you guys have investigated presumably a lot of opportunities in terms of a PE platform. 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 where there would be kind of a good meeting of the minds or marriage in terms of the personnel 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. Our thinking around it has shifted a little bit more where I think we have a very good opportunity and will be successful growing it internally or organically ourselves. 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 through M&A. 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. 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. 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. 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 investing sort of more core real estate, less closed-end funds, maybe more separate managed accounts. That just fits better. There's a lot more synergies with what we do in our organization with a firm like that. We've narrowed the focus to be that. I think it took us a while to figure this out, that this is what we wanted to do as an organization if we were going to do this from an M&A perspective and be successful at an M&A from doing this on an M&A perspective. To date, the firms we have talked to that sort of check all the boxes, meet that criteria, it has not been about price. It's been more about we want to do a control transaction. That's not just financially, but to a certain extent, operationally. We think we can bring, for example, significant synergies to bear on an organization like I've identified on expenses. The seller has to be comfortable with that sort of arrangement as we go forward. It hasn't been price, it's just been more meeting of the minds culturally getting together with groups. Also us being more picky and being very choosy about what it is we are willing to buy. Okay, very good. Thanks for that, Adam. Our next question today comes from Kenneth Lee in 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're also mentioning that you are right now ramping up your capability. Just wondering if you could just perhaps give us a better sense of the potential time frames involved where you can reach that level of capability and where we could start to see more meaningful contributions. Thanks. Yeah. I don't want to overstate the level of contribution that this business could be providing here in the short to medium term. When I say short to medium term, 2021, 2022, probably well into 2023. One, development takes a long time, and especially the 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 2022 into 2023, those projects will begin on the scale like what we're talking about. I think it's an important capability for an organization like ourselves, and I think as time goes on, as years from now, I think this could be something that could become more meaningful. Maybe we're somewhat or I'm conservative. What we're trying to do is sort of build up our capabilities over time. 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. I don't want to overstate it. Not to pick on industrial, but that could be the one place that you could see a small uptick in this stuff, where we could start maybe doing some more development there. It would be development, the core. I like to see us walk before we run. We have one development project going on down in Dallas. It's a $10 million project all in, if that. I really like to see us do it successfully before we start green-lighting many more projects. It's going to be a process we go through. I do think it's important for us for multiple reasons, and someday could be a bigger part of our story. Got you. That's very helpful. One follow-up question, if I may. You mentioned 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 use a three-year measurement periods? Thanks. Yeah, good question, Ken. 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 be the SNL index or a replacement index. 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. We need to go through a process where we talk to both The RMR Group 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. Yeah. Can you hear me now? Yes. Okay, great. Sorry about that. I had a quick follow-up on sort of the S&P index expiration. I can appreciate you guys are still sort of in the middle of conversations, 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 Group 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 potentially getting exposure to multi-family sector. Just curious how much that has played into sort of the search, in terms of a core real estate manager. If not, realistically, what's the path to maybe executing on something on the multi-family side if you're still contemplating it? Yeah, I would say that it hasn't been, let's say, a requirement or criteria that the firm must be in the multifamily space. That all being said, most core private equity firms have a multifamily aspect to them. 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. 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. Of course, that would be obviously an area we could try to grow around that. If we don't do something in multifamily, in terms of M&A, I think we would have to explore building it out on our own. Would that 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. That could be using 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. That would be probably the way we would think about doing it. Just to be clear, though, that's not something that we are actively trying to set up today. 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 we sort of want to run to ground to the very end these conversations with a handful of folks and see if we can get one across the line. If we do, then it likely will come with a multifamily aspect to it and sort of build from there. That's how we're thinking about it. Helpful. Thank you. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star then one. Our next question comes from Owen Lau at 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 remarks, 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. 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. 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. 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. I think that this quarter, Matt, you mentioned something like you're expecting this to be flat from this quarter, 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 things about Sonesta, which I'm glad you opened up the floor to that. Sonesta is doing 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 strong, probably stronger than we initially thought it would be. 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're selling them initially with the idea that they would be encumbered by brand. 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 selling them unencumbered. I point that out because it speaks to the marketplace opportunity that SVC and Sonesta are experiencing, 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 out of necessity because of our managers defaulted on us. Today in the marketplace, we are now one of the largest hotel companies. As we go out to talk to folks about franchising, the reception we are getting is incredibly robust, and it's because, one, we may not charge the same rate that a Marriott would. Maybe more importantly, two factors. One, Sonesta is an owner/operator, not just a franchise company. Two, it's much more getting in on the early days of what could be a potential major brand. The analogy I use is. You're sort of getting in as a franchisee with Sonesta, sort of the third, the fourth inning. If you're jumping in with Marriott, you're in the eighth or ninth inning. They've saturated the market. If you're an extended stay hotel and you want to buy one of the hotels we're selling at SVC, you're going to be maybe the 20th Marriott or the 15th Hilton, or the 10th Hyatt in that marketplace on extended stay. You might be the only Sonesta or one of three Sonestas, and we may not charge as much. It's been really interesting to see the response we're getting in the marketplace, which explains why I think SVC is going to be able to hopefully sell the hotels encumbered and likely not pay and not realize any discount in the pricing. Which at first might be a little bit of a surprise to people, but it also speaks to the power of the Sonesta brand in this marketplace today. Matt, why don't you talk about the specifics? I'll enter specific on the modeling. This quarter, Sonesta generated about a million and a half dollars 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. Please keep in mind my prepared remarks were net net. While they're 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. $1.8 million from $1.5 million. Okay. Got it. Just one final clarification on the SNL benchmark. Will S&P discontinue all the benchmarks you're using or just one specific benchmark? 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. Got it. All of them. Okay. Thank you very much. Our next question is a follow-up from Bryan Maher with B. Riley FBR. Please go ahead. Great. Thanks. All 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 into the early innings as far as a fee or a marketing fee standpoint? What's the advantage to them, if you could quantify it in any way? Secondarily, Red Lion came with a lot of brands. 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 large brands within Red Lion, Americas Best Value Inn, that does very well, that continues to generate interest in the marketplace. But you're right that the focus has now been shifting towards Sonesta. When we shift the focus to Sonesta, it's been around more what I'd call the extended stay and the select service product. So sort of 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 the limited service product. There's a lot of interest, and that happens to be the vast majority of the 69 hotels that SVC is selling is extended stay under a select service. There's a vast amount of interest in talking to Sonesta about those transactions, those hotels, but also just franchising in general. 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 file where they have to be, and also working through at Sonesta, sort of finalizing brand standards so this can all sort of be rolled out to potential franchisees. In the beginning, I'm not going to put specific numbers on it, 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. Reiterating what I said before, this also was not something I think we fully realized the benefit of in when we put Sonesta together with Red Lion. We thought on a standalone, Red Lion was going to do very fine on its own. I don't think we fully appreciated the benefit that Sonesta's going to realize by tacking on that franchise system, which we have now done. Franchisees, they really like, not so much that it's less cost. I mean, of course, people like that. It's really that Sonesta is also an owner/operator. I can't underestimate this enough. The big brands have all gone so massively asset light. That is very pleasing to the investor community. It is very unpleasing to the franchise community that they have done that. The franchisees feel very put upon from the larger brand owners about being forced to hit brand standards. The fact that Sonesta itself manages and operates on behalf of SVC many of the hotels, the franchisees feel that, hey, there's a kindred spirit here. If they put a brand standard in place on the franchisees, they got to do it themselves at their own hotels. They like that because they think that we just will think more in line with franchisees along those lines. It's the whole idea that you're getting in with Sonesta. If you franchise, let's say, an extended stay hotel with us, you might be one of three in the entire marketplace, the whole metropolitan area where it's located. You'll be one of 25 for Marriott. That itself is also very exciting for franchisees. I think the potential for Sonesta is pretty robust. That all being said, we have to fully get through COVID and it is impacting the hotel industry, but no different for us than anybody else in the marketplace. There really is a competitive advantage, and I don't think we really fully grasp the competitive advantage that exists until we sort of put this all together and start talking to potential franchisees. Right. You keep referencing Marriott, you could probably throw Hilton in the same basket, we've heard a lot of pushback from owners about brand standards, as it relates to over the past year with COVID. When we think about Sonesta and the fact that 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 D.C. Doesn't the Royal Sonesta full service and luxury resorts give kind of an uplift to the whole brand? It just kind of resonates a little bit like Hyatt, which also historically has had skin in the game, you have Park Hyatt, you have all the different types of Hyatts, Hyatt Place, et cetera. Is that maybe the direction that Sonesta skews towards? The short answer is yes, Bryan. The fact that we have the high-end product, the Royal Sonesta Hotels and Resorts, definitely benefits the overall collection of brands at Sonesta that we have. 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 select service, but you will definitely see us grow the Royal Sonesta and Sonesta Hotels & Resorts. I think we're basically going after the lowest hanging fruit up front, 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. Yes, we will naturally move up the ladder and eventually start doing deals with Sonesta Hotels & Resorts 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. Ladies and gentlemen, this concludes our Q&A 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.