Good day, and welcome to The RMR Group fiscal first quarter 2022 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Michael Kodesch, Director of Investor Relations. Please go ahead. Good morning, and thank you for joining RMR's first quarter of fiscal 2022 conference call. With me on today's call are President and CEO, Adam Portnoy, and Chief Financial Officer, Matt Jordan. In just a moment, they will provide details about our business and quarterly results, followed by a question and answer session. I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on RMR's beliefs and expectations as of today, January 28, 2022, and actual results may differ materially from those that we project. 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. 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 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, and thank you all for joining us this morning. For the first quarter of fiscal 2022, which ended on December 31, we reported adjusted net income of $0.46 per share and adjusted EBITDA of $23.3 million. We ended calendar year 2021 with $33.4 billion of assets under management and remain well capitalized with over $181 million of cash and no debt. As we begin calendar year 2022, we are increasingly optimistic about our business. Despite the continued headwinds and certain of our clients are facing related to COVID-19 variants, over 87% of the adult population is at the least partially vaccinated in the United States. Recent consumer spending has trended higher, and the fourth quarter GDP growth was approximately 7%. Real estate fundamentals are generally healthy and continue to be supported by a strong commercial real estate market, as fourth quarter transaction volumes increased 97% year-over-year. These trends are influencing the strong fundamentals across the majority of the real estate portfolio that RMR manages. From an operational perspective, our organization continued its focus on delivering high quality, wellness-focused, and amenity-rich buildings to our tenants. This was evidenced by leasing volumes this quarter that were the highest levels over the last decade, as RMR arranged approximately four million sq ft of leases for an average term of 8.5 years and with an average GAAP rent roll-up in excess of 7%. These leasing levels represented an increase of 39% sequentially and a 35% increase over pre-pandemic 2019 comparable period leasing volumes. While the industrial sector remains robust, this quarter's leasing activity was spread broadly across all the real estate sectors we manage. We also remain confident in the future of office and the prospect of increased business travel to fuel increased hospitality and leisure spending in the coming months. Before moving to some of the notable private capital announcements of the quarter, I wanted to first highlight some significant strategic steps taken to best position our client companies for success. As a reminder, we are limited as to what we can discuss this quarter regarding our public clients as we are reporting results in advance of them. First, despite tracking ahead of its peers on a three-year total return basis throughout most of the year, market volatility in the fourth quarter adversely impacted OPI's total return relative to its peer group, resulting in no incentive fee for calendar year 2021. While we were disappointed, we remain highly encouraged by OPI's three-year total return of 14.4%, which reflects OPI's successful deleveraging and capital recycling initiatives over the last three years. Similarly, ILPT's total return over the past three years was 43.9%, and we are excited to continue utilizing private capital partners to grow this company meaningfully without the need for dilutive equity raises. SVC continues to hit strategic repositioning milestones as the overall economy continues to improve. Earlier this year, SVC announced the expected sale of 68 Sonesta hotels in the first quarter of 2022 in order to create a stronger hotel portfolio and enhance overall liquidity. Operationally, Sonesta, which assumed management of over 200 SVC-owned hotels in 2021, has produced occupancy, room rate, and RevPAR metrics that remain on par with its peer set. DHC is in a similar phase of repositioning its business as the company completed over 100 senior living operator transitions and continues to take proactive measures to improve its balance sheet. Following DHC's recent joint venture announcement, which I will discuss in more detail in a moment, the company is currently well-capitalized to reduce leverage and invest meaningfully in its portfolio. At both DHC and SVC, we believe the future reinstatement of dividends will significantly help to increase total shareholder returns in the future. Finally, we are pleased with the recent activity at our managed commercial mortgage REIT, Seven Hills Realty Trust, and continue to believe that the business has attractive long-term prospects. During the fourth quarter, Seven Hills raised its dividend 67% on the heels of another quarter of record originations. At this pace, we expect they will fully deploy the remaining dry powder by this summer. Seven Hills leverages RMR's best-in-class originations platform that touts a strong default-free track record, which we believe will enable RMR to raise meaningful capital for this business line moving forward. I'd now like to turn to the more significant developments made within our private capital platform this quarter. Starting with our industrial REIT, ILPT. The pending $4 billion acquisition of Monmouth Real Estate Investment Corporation is currently expected to close this quarter. This portfolio is comprised of 126 Class A industrial and logistics properties that are largely occupied by tenants whose businesses are driven by e-commerce. As a result, ILPT does not plan to raise common equity to fund this transaction and expects to fund a portion of the acquisition with private capital raised via large institutional joint venture partners. Not only does this transaction grow RMR's assets under management, but also highlights RMR's alignment with our client shareholders by expanding access to capital and growth opportunities with high-quality assets. In addition to the pending Monmouth acquisition, ILPT also announced that it contributed six industrial properties to its existing industrial joint venture for $206 million. This transaction effectively raises equity capital at net asset value versus at a discount at the corporate level for ILPT, which will be used to reduce leverage and fund future growth. Finally, just before the end of the year, DHC announced a $378 million joint venture sale of a 35% equity interest in its two building life science property in the Seaport district of Boston. DHC acquired this property for $1.1 billion in 2014, and the current valuation of the property is $1.7 billion, underscoring the attractive return on investment achieved in a relatively short period of time. We have repeatedly stated that our ability to further expand our private capital relationships comes from our commercial real estate expertise, operational excellence, and world-class client service. The transactions announced in the fourth quarter collectively raises our private capital assets under management from $1.3 billion to $3.2 billion this quarter, or an increase of 139%. We believe this firmly highlights the organic success RMR's had building out our private capital fundraising capabilities and demonstrates how quickly RMR can scale its business with its current infrastructure. 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 morning, everyone. As Adam highlighted earlier, this quarter we reported adjusted net income of $0.46 per share and adjusted EBITDA of $23.3 million, with both of these measures being slightly below our quarterly guidance, primarily due to cash compensation coming in higher than our expectations. Management and advisory service revenues were $46 million, which was in line with our guidance for the quarter. Revenues this quarter represent an increase of $4.7 million on a year-over-year basis, and a sequential quarter decline of approximately $800,000. The sequential quarter decline was primarily attributable to a reduction in business management fees at SVC and DHC as share price declines throughout the quarter adversely impacted their respective enterprise values. I would continue to highlight our expectations of revenue growth from construction management fees, as this quarter includes fees of $3.2 million, a 31% sequential quarter increase. As we highlighted last quarter, construction volumes are expected to further increase throughout the fiscal year as many of our clients embark on redevelopment and repositioning activities within their respective portfolios. Looking ahead to next quarter, we expect revenues to be between $48 million and $49 million, driven by the following factors. First, we are deriving base business management fees from projected enterprise values at DHC, SVC, and OPI using recent share price levels and factoring in the deconsolidation of $620 million in joint venture mortgage debt at DHC. Secondly, the Monmouth transaction is expected to generate approximately $2 million in incremental business and property management fees per month. Over time, these amounts are subject to change based on how much joint venture capital is raised and property disposition activity occurs. Third, private capital joint venture activity is expected to generate approximately $1 million in incremental fees next quarter. Lastly, the continued increases in construction management fees I previously highlighted will generate approximately $1.5 million in incremental revenues next quarter. Turning to expenses. Cash compensation of $31.8 million represented an increase of approximately $2.8 million sequentially, which was driven by annual merit increases, bonus inflation, as well as an unexpected slowdown in vacation usage, most likely tied to the recent COVID variant surge. Looking ahead, we expect cash compensation to be approximately $32.5 million next quarter, driven primarily by payroll tax and 401(k) contributions resetting on January first, along with continued investments in roles to support the growth of the organization. G&A was $7.7 million this quarter and represents run rate levels for the organization. With that said, as in previous years, we expect our board of directors will be issued annual share grants in March, which will result in next quarter, including incremental G&A costs of approximately $600,000 beyond our run rate levels. Aggregating these collective insights on next quarter, we expect adjusted earnings per share to range from $0.48-$0.50 per share and adjusted EBITDA to range from $24.5 million-$25.5 million, both of which represent meaningful sequential quarter increases. We closed the quarter with over $181 million in cash and continue to have no debt. We believe our balance sheet leaves us well positioned to pursue a variety of strategies to expand our private capital business. That concludes our formal remarks. Operator, would you please open the line to questions? We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Bill Katz with Citigroup. Please go ahead. Morning. Thank you very much for taking the questions and your guidance. Maybe a big picture question to get started. Just sort of curious, as you migrate the capital from the managed REIT to the private markets, at what point do you think that it actually becomes a net contribution to the firm from here? Is there any sort of arbitrage in the economics as the dollars move from the public REIT into the private space? Sure. Good morning, Bill. From a big picture perspective, generally speaking, the way those deals are structured, there's not a meaningful difference in the expected fees that we will generate, whether they're in the REIT or in the private vehicle. You know, we've been embarking, you know, for the last few years on a concerted effort to try to get more and more private capital AUM under management. That's coincided, especially in the last couple years, with a need for some of our REITs to de-lever, given largely what's happened in some instances with COVID and what's happened to their businesses. Sort of a perfect situation where we were able to take some assets at some of our REITs that needed to de-lever and in some instances, do it at a, you know, an increase in value and then put them into a private vehicle that we can continue to manage. You're right that doesn't effectively increase AUM in the short term. Really what we've been trying to do for the last couple of years is build a base, and that's really what we did over the last few years with the deals that have already occurred, the $3.2 billion. I think the Monmouth transaction is really a demarcation or sort of a different sort of indicates sort of the beginning of when it's going to start to grow net AUM going forward. To put it in perspective, the Monmouth transaction is the largest transaction that the organization in its 36 years of history has ever taken on. It's $4 billion. It's also the only transaction of any size that we've ever done that we are not raising public company equity to fund it. That's pretty remarkable. I say it a lot around the organization. That's a pretty remarkable change for us. We are largely raising all the equity there from private institutional partners. The only way we could do that is from the relationships we built over the last few years in sort of building up the current AUM. I look at the Monmouth transaction as hopefully all incremental assets on AUM that would not have been able to occur if we hadn't built out those relationships. I see that as sort of a watershed moment, this transaction, and I think that going forward, this is the beginning of us being able to actually grow AUM within the private sector, private side of the business meaningfully, rather than just taking assets, let's say, from the existing vehicles and sort of putting it from one pocket into the other, not really growing, AUM. I do think going forward, we're now at that point where I do think it's going to start to accelerate and we're going to be able to do more and more grow AUM net on the, on the private side. Matt, do you want to talk? I said largely we try to keep the fee, you know, that's generally in line, but why don't you talk on the short term what's going on? Yeah. For the in my prepared remarks, we highlighted next quarter we're going to see incremental fees of about $1 million. That is largely even though the arrangements are intended to be largely neutral, there is a step up in fair value that we saw significant that Adam highlighted at the Vertex building. You also have the phenomenon right now in the case of DHC, where they're paying us on a base fee basis, on an enterprise value basis, which is the lower measure and on an implied fee basis that they're paying at about 32 basis points. Under the joint venture agreement, there's an inherent step-up in the short term given where DHC's enterprise value currently sits. We're gonna see a $1 million sequential increase quarter-over-quarter that should normalize over time. Okay, that's helpful. Maybe just a follow-up on Monmouth. Any updated guidance in terms of how you think that the funding mix will play through? And then, Adam, maybe one last big picture question for you. On one hand, your net cash, your balance sheet's clean, your net cash built sequentially, but it also sounds like deal multiples out there might be a bit on the higher side. So give us a sense of how to think about capital deployment from here. Thank you. Thanks for taking all the questions. Sure. Bill, on the Monmouth transaction, again, this is unfortunately, we can't say much more than what's been already publicly announced, and obviously ILPT hasn't announced its earnings yet or made any public further disclosures around the transaction. I can tell you the following: the shareholder vote in Monmouth is scheduled currently for February 17th, and the closing is expected to occur shortly thereafter. When we announced the Monmouth transaction, there was sort of two big ranges we told the marketplace or ILPT told the market. It said we'd raise between $430 million and $1.3 billion of equity, and that it would sell between $0 and $1.6 billion of sales. What I can tell you definitively is we're gonna be off sort of the. We're not gonna be at the worst case scenarios of those ranges. We will raise more than $430 million of equity, and we will sell less than $1.6 billion. If I can directionally tell you things are gonna be better, we think, than sort of the outlier worst case funding scenarios that we outlined, but I can't really go much further than that. With regards to big picture net cash and how we're thinking about cash, as you know, we obviously, in the third quarter, announced and paid a large one-time special dividend of $7 a share. That got our retained cash down by, you know, roughly $400 million to about $180 million today. We have no debt outstanding. You know, for the last few years, we've been talking a lot about how we want to retain a cash balance so that we could do two things, look at two different things to deploy that cash. One, to think about strategic M&A, and two, to invest, co-investments for new vehicles, neither of which we've had to do. On one side, we've actually been very fortunate in the fact that we've gotten, as of today, $3.2 billion of AUM under management. On the private capital side, we've not had to use $1 of co-investment dollars. That's been very fortunate for RMR, but I'm not sure that's gonna continue that way as we continue to grow the business and launch new vehicles. On the strategic M&A side, you know, I think we talked a lot about this the last quarter, especially. You know, we are not proactively looking for acquisitions. For a couple years, we were very proactively looking for acquisitions. We've sort of had many conversations with folks. As I said on the last quarter, we went down the road pretty far with three different parties, entered into LOI, started negotiating the contract. All those three deals came apart, not because of economics, but really over social issues. We feel pretty good that we have, like, you know, scoured the universe of potential partners that we would like to partner with or buy. They know we're out there. I'm not ruling out M&A, but I think it's gonna be more inbound or reverse inquiry, things that come to us. We receive phone calls. I think we are very much in the deal flow now because we were so proactive for over two years out in the marketplace that companies and advisors and brokers know about us and our appetite. We are much more sort of sitting back and waiting to see if an opportunity presents itself. I am less optimistic because we are not proactively doing it, that that's gonna be a source of our you know, where to use capital that way. I can't rule it out. Something might show up that we would be very very creative and attractive for us. We're not you know, that's not something we're proactively looking at every day. Thank you. Our next question comes from Bryan Maher with B. Riley Securities. Please go ahead. Good morning, Adam and Matt, and thanks for that information so far. Two kind of bigger picture questions from me. As it comes down to DHC and SVC, which has been challenged for the past two years with COVID. I know you can't give us specifics related to occupancy trends, maybe at DHC or the hotels component of SVC. Would you expect with the trend of what you're seeing at those two managed REITs, that maybe by the back half of 2022, it starts to become a little bit more business as usual, as opposed to, you know, all of the transitions that have been going on more recently? Sure. From a big picture perspective, you're absolutely right, Bryan. Those two vehicles, DHC and SVC, have been the most severely hit by COVID, and they've suffered the most, specifically within their portfolios at SVC hotels and within DHC, senior living communities. Yes, overall, we're generally optimistic things are gonna get better in the second half of 2022 for both those sectors, senior living as well as hotels. If I had to put my thumb, you know, up in the air and decide which one was gonna get better faster, I'm a little bit more optimistic that the hotels can come back faster and may come back faster. You know, we're fairly optimistic that hotel business travel may rebound better than people think as we enter the second and third quarters, and especially in the second half of the year. You know, that's sort of informed by two data points that we've been able to observe over the last couple years, and especially by the fact that now, you know, with Sonesta affiliated company that we can now get data, you know, daily now versus the way we were getting data, good data, hotel data before, but now we get it obviously much more frequently. You know, we think, you know, when you look back at 2021 in hotels, for example, you look back at Q3, really the summer, and that's when COVID was waning, and business travel picked up much faster than people originally thought it was going to pick up, and even, you know, trailed into parts of Q4. Hotel occupancy actually rebounded better than all the prognosticators out there were talking about how fast it was gonna come back. Obviously, things have sort of settled back now with the Omicron variant since December and into January. The second thing that gives us, you know, a data point that gives us some, you know, optimism is, unlike the first half of 2021, where large group events, corporate events were largely just being canceled, we're not seeing cancellations. In fact, some are going off, you know. There were in the hotel industry early this week with the ALIS conference. In the healthcare industry, the ASHA conference went off this week. There are conferences happening. We're seeing folks in the hotel space not cancel, just push it out by a quarter, pushing out events one, two quarters. That also gives us a sense of optimism. We're seeing. We have specific data points that we've now seen over the last, you know, 18 months within hotels that gives us a fair amount of optimism that things might get better much faster in hotels in the second half than some of the prognosticators out there are talking about. Senior living is a little more difficult. There, I think the trends that were occurring before COVID have just been accelerated. Like many things, during COVID, trends got accelerated. One of those trends that got accelerated was people staying at home longer, and being able to deliver, get their services in the home or where they are for much longer than they used to or realizing they can, and COVID sort of fed this. I think what you're seeing at one of our affiliated companies, AlerisLife, used to be called Five Star, that they've really taken a focus on, you know, recognizing this trend and trying to address that. Now, what does that mean for DHC and occupancy? I think it's not gonna snap back as fast in senior living. It's gonna be a little bit more gradual and take time to get the occupancy to grow. We are seeing growth in occupancy at senior living. It certainly is above where it was in the depths of, let's say, March and April of 2021, which is really the low point in senior living occupancy, and it has improved steadily since then. It's just a much more gradual improvement. I do think things will get better, but I think it's gonna take us beyond 2022 into 2023 until we really start to see meaningful improvement in the senior living space. Yeah. Thanks for that. My second question relates to, you talked a lot about your, you know, leasing results, and we've been hearing that from other companies we cover as well, including office, most importantly. Can you talk a little bit about, you know, the skepticism that we keep hearing out there, you know, from some investors related to people actually returning to office relative to what we're seeing in, you know, medical office building and regular office building leasing activity, you know, in real terms every quarter that you and others keep reporting? Yeah, you're right. There's us and I think the industry had a record fourth quarter in terms of leasing activity. You know, there's a lot of things that you can read into that. You know, I'd imagine many tenants were looking at the market and thought this was a pretty good time to lock in a long-term lease given the state of their office market, for example. That led to a lot of that leasing activity in the fourth quarter. Generally, I think what we're seeing in terms of, you know, true occupancy, and there's a lot of different data points out there, including our own portfolio. You know, the metric I've been focused on was around Labor Day. We were seeing in September around 30% of buildings, office buildings in our portfolio, had people in them, were 30% occupied, you could almost say, with 30% capacity. That was slowly creeping up, and by the time we got to Thanksgiving, beginning of December, that was about 40%, is what we saw. That's obviously come back as we've gotten into January. I would say that our view firmly in the fall, and I think it's gonna be this case as we get into the spring as well, the delay in return to office is less and less about health and safety and more and more around employee work preferences. I think many employers, especially larger employers, the larger the employer, the more this is becoming an issue, is just in such a tight labor market, you know, many employees have been working from home and been able to have a very flexible schedule for two years now. Many of them, in a tight labor market, are not eager to return to the office full time. I think many companies are trying to work through what is their hybrid workplace environment going to look like. I think that is really what's gonna happen. I do think you're gonna see that play out in the spring. That's what we think. That all being said, I'll just give a quick commercial on our portfolio. Look, we own a large number of MOBs, a large number of life science buildings. Those buildings themselves obviously are work from home resistant. You basically, they have to be occupied, the folks that do the work there. You know, what we've been doing over the last couple years in our office portfolio at OPI specifically has been really trying to think about, you know. We don't think offices are going away, but we do think in this environment, you know, it's just gonna be accentuated. The better located, the newer buildings with more amenities are going to be what tenants want. We've been pretty active, and you saw that at OPI last year, you know, buying newer, modern, well-amenitized, well-located office buildings, divesting of maybe buildings in the suburbs that are older, that aren't as well amenitized. That is what we've been doing at OPI for some time. I imagine we're gonna continue to do that because in the current office environment, I think it's as important as ever to have a portfolio that way. Great. Thanks, Adam. Our next question comes from Jim Sullivan with BTIG. Please go ahead. Thank you. I just wanted to talk with Matt here about the guide for next quarter in terms of the top line guide. That guide, I think is $48 million-$49 million. Now back with the fourth quarter, obviously, you had provided a guide that assumed that first quarter would be flat with fourth quarter. Came in a little below that. As I understand your prepared comments, that was because of two of the REITs, management fees at two of the REITs, declining. The question, in providing the guide for the second quarter, what are you assuming regarding, you know, the two REITs that were the source of the negative comp? How do you factor that into these quarterly guides, these share price changes, which have obviously been pretty significant year-to-date? It's a great question, Jim, and we try and do our best to prognosticate where share prices will land, especially at those two REITs. What we've done in our guide this quarter is we've looked back over the last seven or so weeks, given the significant volatility in both directions to try and come up with an average. That is what we've based our guide on in our forecast number. Just around $9 for SVC and just around $3 per share for DHC. Okay. You take the, kind of the average close or the average trading range and just provide an average for that and build that into the model. Correct. In periods of greater stability, quite frankly, if I look back to last quarter, we'll use, say, the current month, as a proxy. Typically, we're reporting results at the end of the first month of the quarter, that's coming up. But given the volatility we're seeing, we took a little more of a conservative approach this quarter. Okay, fair enough. Appreciate that. Then question for Adam. You know, obviously, you talked in answering the prior question about the outlook over the course of the year. You know, the topic du jour over the last several weeks, of course, has been the rate of inflation. Clearly the hotel portfolio is probably very well-positioned for an inflationary environment. I'm curious, when you think about your more triple net lease portfolios as opposed to the more active portfolio like the hotel portfolio currently, how do you feel about your exposure to rising inflation overall? Really I'm looking here at the net lease portfolio, the office portfolio, as well as the healthcare. Sure. Thanks, Jim. Yeah, I think generally speaking, we have a very diverse portfolio that, you know, runs the gamut all the way at one extreme, as you pointed out, in hotels, where rates are set daily, all the way to the other extreme, where you have, you know, long-term 15-year net lease, leases, let's say, in an office building. And in between, we have everything in between, too, obviously. You know, for example, in the senior housing assets, you know, rates are monthly, but they're usually reset, you know, annually, if not quarterly. You have, you know, fairly, often you can reset rates there. I will tell you in the what you categorize broadly as within retail, industrial, office portfolio, you're right, we tend to have a well-occupied longer lease term than, let's say, many of our peers, with the exception maybe at OPI, where the average lease term, I believe, is about five years, so it's not quite as long. Obviously, at ILPT in the industrial, it is a little longer, pushing up to 10 years. On the retail portfolio, it is pushing up to 10 years. At DHC, on the MOB and life science portfolio, I think it's also maybe just over five years. So it's not. One, I wanna point out that it's not, you know, overwhelmingly a 10, 15-year, you know, net lease portfolio. That all being said, 80% of what's in that retail, broadly industrial, broadly office, and I'm including in office, general office, MOBs, life science buildings, we have in 80% of those leases, either CPI adjustments and/or fixed step-ups. I think we feel pretty good that that will largely cover us in this, what hopes to be a short to medium-term period of high inflation. Obviously, you know, commercial real estate and especially core commercial real estate have traditionally been a very good hedge in a high inflationary environment, especially if you're willing to hold it for 5-10 years, which is our typical hold period for us in our REITs as well as in our joint ventures. I think overall, we feel pretty good. Look, we've held a pretty diverse portfolio, and part of what we try to do from RMR's perspective is make sure we have a diverse portfolio, so we're not, you know, sort of putting all of our eggs in one sort of sector or one lease type. That's served us pretty well over the last 36 years of being in operations. You know, we've obviously operated through many cycles, and I think that diversity has served us well. Granted, we're probably in a higher inflationary environment than we've seen in a long time, but I think we are, you know, reasonably, if not well positioned to deal with it in the coming years. Just to follow up on that, you mentioned CPI adjustments, which are typical, I guess, typically annual adjustments. Is it not true, though, in healthcare that oftentimes those CPI adjustments were capped at either a specific rate or a specific percentage of CPI? Is it in fact full CPI adjustments? Sometimes they're capped, sometimes they're fixed rates. Jim, honestly, it's. Different markets have different conventions. The industry doesn't necessarily follow one convention, as you know. Within, generally within office and within MOB specifically as well, you will have a different market convention, let's say, in the Boston market than you might have in the Dallas market versus you might have in the Denver market. That's that old saying that all real estate is sort of local. Real estate leasing is hyper-local in terms of how it gets structured. You know, we talk all the time about net effective rents. When you cut through it all, that's what we are always looking at at RMR and when we're looking through everything. Because we look at a nationwide portfolio, we have to adjust all these different variables, you know, nuances as leases are negotiated by different market conventions to get down to the net effective rents. Generally, it's all over the place. It's not necessarily one way, let's say in MOBs. It really depends on the market. Okay. Final question from me. Adam, the company is obviously in an enviable position with no debt and plenty of cash on the balance sheet. You made mention in the prepared comments about how many transactions the company's been involved in and the portfolio of companies has been involved in. Given what has been kind of a significant pivot here in terms of the macro variables, inflation, higher interest rates moving up, can you share with us your sense as to where cap rates are going? Do you have a sense that cap rates are finally gonna start moving higher along with interest rates and inflation or not? You know, they feel like it's hard to see them go any lower. Let me put it that way. My view is they have got to go up a little bit. I think they're gonna be tempered in their raise. I don't think you're gonna see a one-for-one correlation to, you know, increased debt costs and inflation having a meaningful impact on increases in cap rates. The reason I say that, you know, we're pretty active in the market. There is a tremendous amount of capital trying to be put to work in real estate. Just to make a quick anecdote. Yesterday, Blackstone announced their earnings. They talked a lot about the BREIT. They're raising $5 billion a month just in their BREIT. That money has got to be deployed. That is just a fraction of what needs to be deployed market-wise. Unfortunately, folks are more and more, including us, focused on certain sectors over other sectors. That sort of demand for the real estate and supply of money looking for a home is going to temper that growth in cap rates. I think cap rates are probably gonna moderate. They're gonna come up a little bit because debt costs are gonna move. But look, before the current, I'll give you an anecdote. We don't play a lot in the multifamily space, but we lend against multifamily projects. We have lent money, and this is prior to the run-up in rates or expected run-up in rates, prior to the announcements of increase in inflation. This is six months ago. We were lending money out to certain hotel... I'm sorry, to certain multifamily owners at higher rates than the cap rate that they were going into the deal at. Now, of course, these were value add plays. They were planning to turn it around over a period of time, but that just gives you a sense. You know, we're making first lien mortgages against a multifamily project. You know, our rates, I'm gonna make it up, you know, 3.5, and the cap rate going in is 3. And we would spend a lot of time looking at that, and that just gives you a feel for the amount of money trying to be put to work in the space. Now, of course, there was a business plan there, and they're planning to increase NOI over the two, three years, but they have to do it. Going in, the debt costs more than the cap rate. That gives you a sense of how much money is out there, and it's gonna temper those cap rate expansions. Sure. Okay, well, listen, that's great. Thanks. Thanks, Adam. Yep. Question comes from Ronald Kamdem at Morgan Stanley. Please go ahead. Great. Just going back to sort of the private capital transactions that happened during the quarter. Just trying to get a sense of how much more is there to come down the road. Are there sort of other assets that sort of would make sense for these types of transactions, both at ILPT and DHC? Is this something where we could see happen in the other two REITs, you know, the office and OPI and SVC? Thanks. Sure. Generally speaking, we are having conversations with private capital partners pretty much on all types of commercial real estate that we manage every sector. You can go the gamut. It can be office, industrial, hotels, senior living. Service retail. Every type of sector we are in, we are having some level of conversation with others around that. Some of those conversations would involve vehicles that potentially could include our REITs, and some of those conversations are involving vehicles that would not include our REITs. You know, the overwhelming you know, what's going on at our REITs, and so the question is, could you see other things happen at the other REITs? This is all sort of tied together. What we are very focused on, and we haven't collected an incentive fee for two years at RMR, and so I want to point out that we're very focused on the fact that we haven't collected incentive fees. One of the things that we think we need to do with those REITs is de-lever, because we are running at a little bit higher leverage than we typically run, especially. That's across the board. At DHC and SVC, the two things that I think will do the most to increase the shareholder return, in addition to de-leveraging, is also to reinstate the dividend. I can't really give guidance on when that's gonna happen, but we hope it's gonna happen sooner rather than later. Because I think the faster we can reinstate the dividend and de-lever, better returns we get. I tell you all that story as it relates to private capital because it plays into, yes, we could, if it made sense for our other REITs, enter into additional joint ventures because it behooves them to de-lever. Because it again, by de-leveraging and getting the dividends reinstated, especially DHC and SVC, it behooves everybody so that those companies' total shareholder returns are improved. I think I'm talking what I'm really saying is a high alignment of interest between RMR, our actions, and the shareholders of the different REITs, and that's really what I'm trying to talk about. At the same time, it does lead to, yes, we could be doing additional joint ventures at the other vehicles, but it's because we want to de-lever and get those shareholder returns to improve so we can start earning incentive fees. Great. That's helpful. Just back on ILPT. You know, I think you talked about private capital getting involved, whether it's one, two, or three. Just any color on, you know, what's sort of the debate, what's driving the decision either to get involved or not involved, and what's driving the amount of capital commitments they're willing to put there. You know, I can appreciate conversations are still fluid, but just sort of curious what that money is debating. At the ILPT, I think the question is really, you know, the capital partners that we're out talking to about that. I think the conversations are overall going well. I really can't say much more than what I said before in the sense that, you know, when we announced the transaction, we said that we would be raising private capital at the smallest amount, $430 million, at the greatest amount, $1.3 billion. What I think we can feel comfortable saying definitively here in this forum before ILPT announces its earnings and before there's a shareholder vote at Monmouth is that we will raise more than $430 million of private capital. I think generally the conversations are going well, and we feel optimistic that we will close. One, not only close, but fund it, largely along the lines that we hope to. Great. I wanna switch gears to expenses a little bit. You know, thinking about sort of wage pressures, just what are you seeing on the ground in sort of the construction business in terms of wages for workers, and if you can give us a sense of sort of magnitude of what wage increases are there, that'd be great. Sure. I don't have great insight into what we're seeing specifically with contractors. I can give you anecdotes more generally around what we're seeing across our platform. You know, remember RMR, we're a commercial real estate company, alternative asset management company. Principally, that's where we generate the large majority of our revenues. That all being said, we do have affiliate operating businesses. If you look at those affiliate operating businesses, if they're fully employed, they have 45,000 employees. We currently have about 20% open positions, roughly, or 8,000 job openings across the board. That is about 2.5x the normal job openings. That just gives you a sense, you know, that's not necessarily construction, but that gives you a sense in the broader economy, what we're seeing across the board. You know, generally speaking, at our operating companies in the fourth quarter, and this is a very general statement, depends on the market, depends on the position, about 5% growth in wages. I'll let Matt talk about what we saw in the fourth quarter here at RMR. Yeah. While wage inflation is definitely real, Ron, and I'll come back to that in a second. I do wanna just reinforce this quarter, cash comp came in higher than where we had guided. Primarily due to vacation usage, believe it or not, which was a sizable amount of the miss over half a million dollars, just not being where it normally would be in a non-COVID, especially a COVID variant environment. That was the driver. Now we are a September 30 year-end, as you know. Merit increases go effective October 1, so they were baked into our forecast. I will tell you that wage inflation is real, so incorporating normal merit increases plus market adjustments, we averaged about 7%. Going forward, what I would just to piggyback off Adam's point, while salary inflation continues to be real, I would say the thing that will create the most volatility in our forecasting of cash comp and what probably keeps me up at night is labor shortage. As we're growing as an organization, as we're creating new roles, finding the talent. You know, we do our best in our forecasting to predict when jobs will be filled and at what rates. Finding that talent and when it will come on board to support this organization and the growth we're going to experience with Monmouth and the other private capital transactions is probably the biggest variable, that we're experiencing as a firm. Great. That's it for me. Helpful. Thank you. As a reminder, if you have a question, please press star then one to be joined into the queue. Our next question comes from Owen Lau with Oppenheimer. Please go ahead. Good morning, and thank you for taking my question. Going back to the comp and competition, you just mentioned a lot of openings, a lot of competition. I don't think it's specific to RMR, but how do you tackle these rising labor costs at the same time being competitive to hire people? I would love to get your thoughts about how you manage that. Thank you. Yeah. Well, number one, you know, Greater Boston is incredibly competitive, and that's where the bulk of our corporate level employees that are overhead costs, if you will, to RMR reside. Obviously, we're in the fortunate position of being profitable, you know, having a strong operating margins, which allows us to compete and stay commensurate with the market as we're seeing the inflation especially in the more specialized roles, whether it be technology, and frankly, we're seeing it across all disciplines, in the Greater Boston market. I think it comes back to the employee wellness and the different programs we've employed as an organization to make this a place people wanna come work at through career growth and opportunities, as well as our benefits programs and the amenities we provide, whether it be here at our corporate office or across the country. It's just a collective battle I think all of leadership in our HR organization takes to heart every day to make sure we're an employer of choice. Yeah. Owen, the only thing I would add is that, you know, while we do have a challenge filling open roles, our retention rate's pretty high in our corporate office. I haven't seen specific statistics, but I just anecdotally think it's much higher than many of our peers in this market. What Matt's talking about, we have, you know, normal attrition that happens every year, but we have nothing outside of the normal attrition. In fact, we're probably stronger this year in terms of retention than we were, you know, in some of the years in 2018 and 2019. We actually feel pretty good about retention. It's really filling new roles. We have had, you know, a handful of new roles that we've created as we've been growing and diversifying the portfolio that we're trying to fill, and they've become challenging, you know, in this environment. Our retention's very good, and I think it's important- To point that out also. Got it. That's very helpful. Then, Matt, you talked about the guide in terms of incremental revenue. I think that's very helpful. Could you please remind us how much revenue RMR will generate from the private real estate fund? My understanding is you charge 100 basis points on contributed capital, but how much is the base of this contributed capital? Then, more broadly, strategically speaking, Adam, you talk about the limitation and the leverage on maybe some of the REITs like DHC and SVC. Is there any other major roadblock to prevent you from raising additional funds from asset owners? How's the traction and conversation with investors on that front? Thank you. Yeah. Let me take the first question in terms of growing the REITs. You know, the principal issue with growing the REITs is the stock price. You know, it's hard for us to compete for assets, especially high quality assets, and that's what we are focused on, very high quality assets. Unfortunately, they trade at low cap rates. Given our cost of equity capital where those REITs are trading, we can't effectively grow them given where their stock prices are. Some of the REITs are closer to a point where perhaps we could think about equity raises versus others, but none of them are at a point where we would feel comfortable, I think, raising equity today. That's the biggest prohibitor. It's not necessarily that we can't buy things. It's just that we have to be able to fund it competitively on an equity basis. One of the things that's, I think, we've done successfully by doing these joint ventures, not only has it de-levered these companies, which is very important, I think long term, you can look at lots of stats. We've been in the REIT business for a long time. Lower leverage REITs tend to outperform higher leverage REITs. We've been able to raise the equity effectively by selling assets at NAV, which is very important from a REIT perspective. Versus selling equity at the corporate level at much below NAV, because that's where their stocks are trading. It actually, I think, behooves the REITs to do this because it effectively raises equity capital without taking a discount and delevers. Eventually, look, we are optimistic that these stock prices are gonna get better. Once they do get better, we'll start earning incentive fees, and we can then think about hopefully growing and raising equity to grow those vehicles on their own. It's also important, I think, for the REIT shareholders and investors to understand, and this is another reason that private capital is important. It's important for those shareholders to understand that RMR can grow without raising equity at the REITs. That's an important element. If shareholders understand that we don't have to raise equity and do dilutive deals to grow, that we have other avenues to grow the business, that actually helps, I believe, long term with the stock price performance because there's not this overhang that we're gonna do an equity deal because it's maybe the only way to grow our AUM. I think there's all sorts of reasons why it's important for us to build out the private capital. But the principal prohibitor is not, you know, structural. It's really just, you know, we're not willing to issue equity at a very dilutive price at the REITs to fund growth. Owen, I guess from a modeling perspective, the way I would think about it is the $3.2 billion in gross private capital AUM we've disclosed this quarter on a fee-paying basis. That number is just over $1.5 billion. Our arrangements, which include some legacy arrangements, range anywhere from 50-100 basis points on that fee-paying capital, with a weighted average, based on the arrangements we have today of about 60 basis points. That gets you to just over $9 million in annual run rate base fees, from that fee-paying capital. As you model and think forward, most of our current JVs will be levered, at or be... are levered at around 60%, and will fall somewhere in that fee-paying range of 50-100 basis points. Got it. That's very helpful. Thank you very much. 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 us today. Operator, that concludes our call. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.