• Adjusted Net Income Per Share: $0.34

• Distributable Earnings Per Share: $0.51

• Adjusted EBITDA: $21.8 million

• Recurring Service Revenues: $48 million

• Mortgage Loans Adjusted EBITDA Contribution: Approximately $1.3 million this quarter

• Denver Multifamily Investment Net Operating Income: Approximately $900,000 this quarter

• Recurring Cash Compensation: $44 million

• Recurring G&A Expenses: $10.2 million

• Income Tax Rate: 18.9%

• Warning! GuruFocus has detected 3 Warning Signs with RMR.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The RMR Group Inc (NASDAQ:RMR) reported fourth quarter results that were generally in line with expectations, with adjusted net income per share of $0.34 and adjusted EBITDA of $21.8 million.

• The company is seeing increased transaction activity and a more energized fundraising environment, with heightened interest from legacy institutional partners and potential new capital partners.

• RMR's real estate lending platform, Tremont Realty Capital, has originated $67 million in aggregate commitments for its private debt vehicle, expected to generate returns in the mid-teens.

• The RMR Residential platform is expanding, with the acquisition of a 240-unit garden-style community in Denver, showing increased rental rates as leases roll.

• RMR is actively assisting its managed equity REITs with operational and financial strategies, including significant leasing arrangements and strategic asset sales to improve liquidity and reduce leverage.

Negative Points

• The commercial real estate industry continues to experience an elongated fundraising cycle, posing challenges for RMR's capital raising efforts.

• Recurring service revenues decreased by approximately $900,000 sequentially, primarily driven by declines in Managed Equity REIT share prices and construction supervision fees.

• Adjusted earnings per share were adversely impacted by depreciation and amortization costs from the Denver multifamily acquisition and year-end tax rate true-ups.

• The company anticipates that recurring G&A expenses will increase to approximately $11 million next quarter due to higher third-party construction oversight costs.

• RMR's public managed REITs are experiencing a shrinking AUM through asset sales, which could lower base management fees in the near term.

Q & A Highlights

Q: When we look at your cash position, what percentage do you think you'll deploy in RMR Residential and other private capital AUM initiatives? How much do you need to retain for RMR operations? A: A significant portion of our cash is available for investment in various initiatives. We are focused on pivoting the platform and seeding new investments. For general operations, we need to retain about $5 million to $10 million. We are generating around $90 million of adjusted EBITDA, with about $20 million available for growth capital after taxes and dividends.