Adam Portnoy: Yes. Sure. So first off, yes, generally the way you described. It is how we are thinking about it is that we will be deploying capital as we enter the second half of the year and that will accelerate more as we get into 2025. The earn-out is based on what we refer to as the Fund 7, and deploying that capital and how much of that capital gets deployed by the end of 2025 and some different parameters around it?
Matt Jordan: Yes, it’s pretty ratably run as the $200 million — the first $50 million doesn’t count to the earn-out but everything above $50 million starts that $20 million gets earned ratably from $51 million forward. So it aligns everyone here. We’re getting that money out.
Ronald Kamdem: Got it.
Matt Jordan: And then on the — I guess Ron I — can add is that on the EBITDA and contribution of deployment, I think it’s just important to remind folks on the RMR residential side how they make money and earn revenue, is largely property management construction management as deals are required and they’re a manager. But the big hit to revenues is on acquisition fees. So, as that money is deployed and new deals are made, the residential business under the current construct of their GP fund, they’re getting about 65 basis points on each acquisition from an acquisition fee. So, ramping this business up and putting money out, will immediately generate sizable impacts to revenue.
Ronald Kamdem: Got it. And my second question is a two-parter, but it’s kind of unrelated. But so, part one is really just on — I think you talked about sort of on private — sovereign wealth funds sort of interest in some of the assets. Just curious from your — like how are those conversations going with the sovereign wealth fund in terms of some of your assets, are there more opportunities to do JVs and part two, which is unrelated at the EBITDA guidance for the second fiscal quarter. It’s — I guess it’s $21 million to $22 million or $23 million. Is it dipping all because of the GNA? Or is there anything else we should be looking for? Thanks.
Matt Jordan: I’ll take the second part. It’s dipping because of the revenue hit. I think this quarter’s results speak to the flow through and the power of this platform, because we — revenues grew so rapidly. We saw almost a direct hit of bottom line benefit and now the inverse is happening next quarter. We have a certain infrastructure, construction revenue and construction fees are down. Enterprise values are stable, but not increasing. And that has a direct flow through adversely to EBITDA, which is driving the decrease. There’s a little bit of cost headwinds, but it’s really at the revenue line, which is dipping pretty sizably.
Adam Portnoy: With regards to sovereign wealth fund relationships the company has the existing ones. Those are largely in what I would call core core-plus vehicles, which as you are generating core core-plus type return sovereign wealth funds are in our relationships. And I think generally, given the current environment and sort of the lack of capital in the marketplace, their return expectations have increased and they’re now increasingly looking for what I’d call closer to value add type return. So call it, mid teens or low teen returns which are historically different than what you would normally receive in a core core-plus vehicle. So saying all that, our existing vehicles are fine. Those relationships are fine there. We expect to continue to manage them for some time.
But we don’t think there’s going to be a lot of growth in today’s environment in those existing joint ventures, just because the return hurdles that the sovereign wealth funds there are in our — that our relationships are with are just higher. And I also think that generally speaking for sovereign wealth funds as a blanket statement or institutional capital that we’ve been interacting with is, the return expectations are higher. You may — and that sort of ties back to what I said a couple of times, I think during the call which is the areas where we’re trying to organically grow are areas, where we think we can raise private capital around the debt fund I mentioned, it may be on a residential — residential discretionary fund which probably come later in the year or into ’25.
But those are all types of funds. I’m talking about January, those type of returns that we call it mid teens or low teen returns on a sort of a value add basis, you’re on our type returns. And so that’s why we’re focused on that because, that’s also what the market is looking for and the sovereign wealth funds that we have relationships, as well as ones that we just talked to, those are the sort of return criteria they’re looking for? I would tell you broadly speaking sovereign wealth funds today are looking at more debt strategies. As I think, most people that are putting money to work in real estate, if they are putting money to work, are looking at private credit strategies or debt funds, which is why we’re focused on that part of our business as well.
Ronald Kamdem: Helpful. Thanks, so much.
Operator: Yes, this concludes our question and answer session. I would now like to turn the conference back over to Adam Portnoy, President and Chief Executive Officer for any closing remarks.
Adam Portnoy: Thank you all for joining us today. Operator, that concludes our call.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.