Service Properties Trust

Previous wording

In response to significant and prolonged increases in inflation, the U.S. Federal Reserve raised interest rates multiple times since the beginning of 2022. Although the U.S. Federal Reserve has indicated that it may lower rates in 2024, we cannot be sure that it will do so, and interest rates may remain at the current high levels or continue to increase. These inflationary pressures in the United States, as well as global geopolitical instability and tensions, have given rise to uncertainty regarding economic downturns or a possible recession and potential disruptions in the financial markets. Consumer confidence, corporate travel and lodging demand will continue to be affected by economic and market conditions, unemployment levels, work from home policies, use of technologies and broader economic trends. Increased labor costs and other price inflation, including due to supply chain challenges, may continue to negatively impact our hotel operations and the operations of our tenants. An economic recession or continued or intensified disruptions in the financial markets could adversely affect our financial condition, operations at our hotels, our tenants and their ability or willingness to renew our leases or pay rent to us, may restrict our ability to obtain new or replacement financing, would likely increase our cost of capital, and may cause the values of our properties to decline.

Current wording

In response to significant and prolonged increases in inflation, the U.S. Federal Reserve raised interest rates multiple times since the beginning of 2022. Although the U.S. Federal Reserve has indicated that it may lower rates in 2024, we cannot be sure that it will do so, and interest rates may remain at the current high levels or increase. These inflationary pressures in the United States, as well as global geopolitical instability and tensions, have given rise to uncertainty regarding economic downturns or a possible recession and potential disruptions in the financial markets. Consumer confidence, corporate travel and lodging demand will continue to be affected by economic and market conditions, unemployment levels, work from home policies, use of technologies and broader economic trends. Increased labor costs and other price inflation may continue to negatively impact our hotel operations and the operations of our tenants. An economic recession or continued or intensified disruptions in the financial markets could adversely affect our financial condition, operations at our hotels, our tenants and their ability or willingness to renew our leases or pay rent to us, may restrict our ability to obtain new or replacement financing, would likely increase our cost of capital, and may cause the values of our properties to decline.

Previous wording

Management Agreements and Leases. At March 31, 2024, we owned 220 hotels operated under four agreements. We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At March 31, 2024, we also owned 749 service-focused retail properties leased to 177 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. Our condensed consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and net lease operating expenses from our net lease properties.

Current wording

Management Agreements and Leases. At June 30, 2024, we owned 220 hotels operated under four agreements. We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At June 30, 2024, we also owned 749 service-focused retail properties leased to 178 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. Our condensed consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and net lease operating expenses from our net lease properties.

Previous wording

Hotel Portfolio. As of March 31, 2024, we owned 220 hotels. During the three months ended March 31, 2024, the U.S. hotel industry generally realized increases in revenue per available room, or RevPAR, compared to the same period in 2023. Our hotels produced year over year declines in RevPAR, which we believe is partially a result of disruption and displacement at certain of our hotels undergoing renovation and decreased business activity in areas where some of our hotels are located. The following table provides a summary for all of our hotels with these revenue metrics for the periods presented, which we believe are key indicators of performance at our hotels.

Current wording

Hotel Portfolio. As of June 30, 2024, we owned 220 hotels. During the three and six months ended June 30, 2024, the U.S. hotel industry generally realized increases in revenue per available room, or RevPAR, compared to the same periods in 2023. Our hotels produced year over year declines in RevPAR, which we believe is partially a result of disruption and displacement at certain of our hotels undergoing renovation and decreased business activity in areas where some of our hotels are located. The following table provides a summary for all of our hotels with these revenue metrics for the periods presented, which we believe are key indicators of performance at our hotels.

Previous wording

Comparable Hotels Data. We present RevPAR, average daily rate, or ADR, and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods. We define comparable hotels as those that were owned by us and were open and operating for the entirety of the periods being compared. For the three months ended March 31, 2024 and 2023, our comparable results exclude two hotels. One of the hotels was not owned for the entirety of the periods and the other suspended operations during part of the periods presented. The following table provides a summary of these revenue metrics for the periods presented.

Current wording

Comparable Hotels Data. We present RevPAR, average daily rate, or ADR, and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods. We define comparable hotels as those that were owned by us and were open and operating for the entirety of the periods being compared. For the three and six months ended June 30, 2024 and 2023, our comparable results exclude two hotels. One of the hotels was not owned for the entirety of the periods and the other hotel suspended operations during part of the periods presented. The following table provides a summary of these revenue metrics for the periods presented.

Previous wording

Net Lease Portfolio. As of March 31, 2024, we owned 749 service-focused retail net lease properties with an aggregate of 13,384,219 square feet leased to 177 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $374,941. Our net lease properties were 97.3% occupied as of March 31, 2024 with a weighted (by annual minimum rent) average lease term of 8.7 years, operating under 137 brands in 21 distinct industries. TA is our largest tenant and as of March 31, 2024, leased 175 of our travel centers under five master leases that expire in 2033 and require annual minimum rents of $254,000. In addition, TA receives an annual credit of $25,000 as a result of prepaid rent. BP Corporation North America Inc. guarantees payment under these leases, subject to a cap.

Current wording

Net Lease Portfolio. As of June 30, 2024, we owned 749 service-focused retail net lease properties with an aggregate of 13,384,219 square feet leased to 178 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $380,457. Our net lease properties were 97.3% occupied as of June 30, 2024 with a weighted (by annual minimum rent) average lease term of 8.4 years, operating under 139 brands in 21 distinct industries. TA is our largest tenant and as of June 30, 2024, leased 175 of our travel centers under five master leases that expire in 2033 and require annual minimum rents of $259,080. In addition, TA receives an annual credit of $25,000 as a result of prepaid rent. BP Corporation North America Inc. guarantees payment under the TA leases, subject to a cap.

Previous wording

Hotel operating revenues. The increase in hotel operating revenues is primarily a result of our hotel acquisition ($9,886), partially offset by the sale of certain of our hotels since January 1, 2023 ($7,829) and the displacement and disruption at certain of our hotels undergoing renovation and decreased business activity in areas where some of our hotels are located ($617). Additional operating statistics of our hotels are included in the tables beginning on page 29.

Current wording

Hotel operating revenues. The increase in hotel operating revenues is primarily a result of a hotel acquisition ($5,899) in the 2023 period and increased occupancy at certain hotels during the 2024 period ($2,801), partially offset by the sale of certain of our hotels since April 1, 2023 ($541). Additional operating statistics of our hotels are included in the tables beginning on page 33.

Previous wording

Rental income. The increase in rental income is primarily a result of the amended TA leases that were effective starting in May 2023.

Current wording

Rental income. The increase in rental income is primarily a result of the amended TA leases that were effective starting in May 2023 ($2,574), partially offset by decreases in our other net lease portfolio as a result of lower rental income recognized and the sale of certain net lease properties since April 1, 2023 ($1,564).

Previous wording

Net lease operating expenses. The increase in net lease operating expenses is primarily the result of increased property management fees in the 2024 period ($549) and increases in other operating expenses at certain net lease properties ($574), partially offset by our sale of certain net lease properties since January 1, 2023 ($305).

Current wording

Net lease operating expenses. The increase in net lease operating expenses is primarily the result of increased property management fees in the 2024 period ($565) and increases in other operating expenses at certain net lease properties ($727), partially offset by our sale of certain net lease properties since April 1, 2023 ($706).

Previous wording

Depreciation and amortization - hotels. The increase in depreciation and amortization - hotels is primarily a result of depreciation and amortization related to capital expenditures made since January 1, 2023 and our acquisition of a hotel in June 2023 ($4,053), partially offset by certain of our depreciable assets becoming fully depreciated since January 1, 2023 ($2,352).

Current wording

Depreciation and amortization - hotels. The increase in depreciation and amortization - hotels is primarily a result of depreciation and amortization related to capital expenditures made since April 1, 2023 and our acquisition of a hotel in June 2023 ($4,300), partially offset by certain of our depreciable assets becoming fully depreciated since April 1, 2023 ($2,360).

Previous wording

General and administrative. The decrease in general and administrative costs is primarily due to a decrease in business management fees in the 2024 period ($628), partially offset by an increase in other professional fees ($223).

Current wording

General and administrative. The decrease in general and administrative costs is primarily due to decreases in other professional fees ($891) and business management fees ($848) in the 2024 period.

Previous wording

Loss on asset impairment. We recorded a $2,451 loss on asset impairment during the 2024 period to reduce the carrying value of five net lease properties to their estimated fair value less costs to sell.

Current wording

Loss on asset impairment, net. We recorded a $34,887 net loss on asset impairment during the 2024 period to reduce the carrying value of eight hotels and three net lease properties to their estimated fair value less costs to sell. We recorded a $9,005 net loss on asset impairment during the 2023 period to reduce the carrying value of 16 net lease properties to their estimated fair value less costs to sell.

Previous wording

Interest income. The decrease in interest income is due to lower average cash balances invested during the 2024 period.

Current wording

Interest income. The decrease in interest income is due to lower average cash balances invested during the 2024 period compared to the 2023 period.

Previous wording

Interest expense. The increase in interest expense is primarily due to higher weighted average interest rates during the 2024 period.

Current wording

Interest expense. The increase in interest expense is primarily due to higher weighted average interest rates during the 2024 period compared to the 2023 period.

Previous wording

Income tax (expense) benefit. The change in income tax (expense) benefit is primarily a result of recording state and foreign tax expense during the 2024 period compared to state and foreign tax benefits in the 2023 period.

Current wording

Income tax expense. The decrease in income tax expense is primarily due to decreases in state tax expense ($2,796) and foreign tax expense ($1,927) during the 2024 period compared to the 2023 period.

Previous wording

Hotel operating expenses. The increase in hotel operating expenses is primarily a result of our hotel acquisition ($6,575), increases in wages and benefits ($5,470) and property insurance and other operating expenses ($3,843), partially offset by our sale of certain hotels since January 1, 2023 ($10,368).

Current wording

Hotel operating expenses. The increase in hotel operating expenses is primarily a result of a hotel acquisition ($10,936) in the 2023 period and increases in wages and benefits ($12,373), property insurance ($8,460) and other operating expenses ($4,360) in the 2024 period, partially offset by our sale of certain hotels since January 1, 2023 ($11,462).

Previous wording

Depreciation and amortization - net lease properties. The decrease in depreciation and amortization - net lease properties is primarily a result of our sale of certain net lease properties since January 1, 2023 ($5,543) and certain of our depreciable assets becoming fully depreciated ($3,090).

Current wording

Depreciation and amortization - net lease properties. The decrease in depreciation and amortization -net lease properties is primarily a result of our sale of certain net lease properties since January 1, 2023 ($6,718) and certain of our depreciable assets becoming fully depreciated since January 1, 2023 ($2,752).

Previous wording

Transaction related costs. Transaction related costs for the 2023 period primarily consisted of costs related to potential acquisitions.

Current wording

Transaction related costs. Transaction related costs for the 2023 period primarily consisted of costs related to hotel rebranding activity, the demolition of certain vacant properties and potential acquisitions.

Previous wording

(Loss) gain on sale of real estate, net. We recorded a $2,963 net loss on sale of real estate during the 2024 period in connection with the sales of three net lease properties and one hotel. We recorded a $41,898 net gain on sale of real estate during the 2023 period in connection with the sale of 18 hotels.

Current wording

(Loss) gain on sale of real estate, net. We recorded a $2,995 net loss on sale of real estate during the 2024 period in connection with the sale of one hotel and three net lease properties. We recorded a $41,836 net gain on sale of real estate during the 2023 period in connection with the sale of 18 hotels and two net lease properties.

Previous wording

Loss on early extinguishment of debt. We recorded a $44 loss on early extinguishment of debt in the 2023 period in connection with our redemption of certain senior unsecured notes.

Current wording

Loss on early extinguishment of debt, net. We recorded a $16,048 loss on early extinguishment of debt, net in the 2024 period as a result of the redemption and purchase of certain senior notes in the 2024 period. We recorded a $282 loss on early extinguishment of debt, net in connection with our redemption of certain senior unsecured notes and the write off of certain deferred financing costs relating to the amendment of our revolving credit facility in the 2023 period.

Previous wording

As of March 31, 2024, all 220 of our hotels were managed by four hotel operating companies. Our 749 service-focused retail net lease properties were leased to 177 tenants as of March 31, 2024. The costs of operating and maintaining our properties are generally paid by the hotel managers as agents for us or by our tenants for their own account. Our hotel managers and tenants derive their funding for property operating expenses and for returns and rents due to us generally from property operating revenues and, to the extent these parties themselves fund our owner’s priority returns and rents, from their separate resources. As of March 31, 2024, our hotel managers included Sonesta (195 hotels), Hyatt (17 hotels), Radisson (seven hotels), and IHG (one hotel). TA is our largest tenant (175 travel centers).

Current wording

As of June 30, 2024, all 220 of our hotels were managed by four hotel operating companies. Our 749 service-focused retail net lease properties were leased to 178 tenants as of June 30, 2024. The costs of operating and maintaining our properties are generally paid by the hotel managers as agents for us or by our tenants for their own account. Our hotel managers and tenants derive their funding for property operating expenses and for returns and rents due to us generally from property operating revenues and, to the extent these parties themselves fund our owner’s priority returns and rents, from their separate resources. As of June 30, 2024, our hotel managers included Sonesta (195 hotels), Hyatt (17 hotels), Radisson (seven hotels) and IHG (one hotel). TA is our largest tenant (175 travel centers).

Previous wording

We recorded reserves for uncollectable amounts and reduced rental income by $665 and $3,540 for the three months ended March 31, 2024 and 2023, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $4,101 and $3,436 as of March 31, 2024 and December 31, 2023, respectively, included in other assets, net in our condensed consolidated balance sheets.

Current wording

We recorded reserves for uncollectable amounts and reduced rental income by $377 and $1,042 for the three and six months ended June 30, 2024, respectively, based on our assessment of the collectability of rents. We recorded reserves for uncollectible amounts and reduced rental income by $1,813 and $5,353 for the three and six months ended June 30, 2023, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $4,366 and $3,436 as of June 30, 2024 and December 31, 2023, respectively, included in other assets, net in our condensed consolidated balance sheets.

Previous wording

We define net lease coverage as earnings before interest, taxes, depreciation, amortization and rent, or EBITDAR, divided by the annual minimum rent due to us weighted by the minimum rent of the property to total minimum rents of the net lease portfolio. Tenants with no minimum rent required under the lease are excluded. EBITDAR amounts used to determine rent coverage are generally for the latest twelve-month period, based on the most recent operating information, if any, furnished by our tenants. Operating statements furnished by our tenants often are unaudited and, in certain cases, may not have been prepared in accordance with GAAP and are not independently verified by us. In instances where we do not have tenant financial information, we calculate an implied coverage ratio for the period based on other tenants with available financial statements operating the same brand or within the same industry. As a result, we believe using this implied coverage metric provides a more reasonable estimated representation of recent operating results and the financial condition for those tenants. Our net lease properties generated coverage of 2.37x and 2.98x as of March 31, 2024 and 2023, respectively.

Current wording

We define net lease coverage as earnings before interest, taxes, depreciation, amortization and rent, or EBITDAR, divided by the annual minimum rent due to us weighted by the minimum rent of the property to total minimum rents of the net lease portfolio. Tenants with no minimum rent required under the lease are excluded. EBITDAR amounts used to determine rent coverage are generally for the latest twelve-month period, based on the most recent operating information, if any, furnished by our tenants. Operating statements furnished by our tenants often are unaudited and, in certain cases, may not have been prepared in accordance with GAAP and are not independently verified by us. In instances where we do not have tenant financial information, we calculate an implied coverage ratio for the period based on other tenants with available financial statements operating the same brand or within the same industry. As a result, we believe using this implied coverage metric provides a more reasonable estimated representation of recent operating results and the financial condition for those tenants. Our net lease properties generated coverage of 2.25x and 2.94x as of June 30, 2024 and 2023, respectively.

Previous wording

The change from cash flow provided by operating activities in the 2023 period to cash flow used in operating activities in the 2024 period is primarily due to higher interest expense and lower hotel returns in the 2024 period. The change from cash flow provided by investing activities in the 2023 period to cash flow used in investing activities in the 2024 period is primarily due to lower proceeds from the sale of real estate and increased real estate improvements during the 2024 period. The change from cash flow provided by financing activities in the 2023 period to cash flow used in financing activities in the 2024 period is primarily due to lower net borrowings in the 2024 period.

Current wording

The decrease in cash flow provided by operating activities in the 2024 period is primarily due to $188,000 of prepaid rent received from TA in the 2023 period, higher interest expense and lower hotel returns in the 2024 period. The change from cash flow provided by investing activities in the 2023 period to cash flow used in investing activities in the 2024 period is primarily due to proceeds from the sale of TA common shares and higher proceeds from the sale of real estate in the 2023 period and increased real estate improvements during the 2024 period. The increase in cash flow used in financing activities in the 2024 period is primarily due to higher net borrowings in the 2023 period.

Previous wording

Our hotel operating agreements generally provide that, if necessary, we may provide our managers with funding for capital improvements to our hotels in excess of amounts otherwise available in escrowed FF&E reserves or when no FF&E reserves are available. During the three months ended March 31, 2024, we funded $67,656 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $232,000 for capital improvements to certain hotels during the last nine months of 2024 using cash on hand and borrowings under our revolving credit facility.

Current wording

Our hotel operating agreements generally provide that, if necessary, we may provide our managers with funding for capital improvements to our hotels in excess of amounts otherwise available in escrowed FF&E reserves or when no FF&E reserves are available. During the six months ended June 30, 2024, we funded $130,519 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $195,000 for capital improvements to certain hotels during the last six months of 2024 using cash on hand and borrowings under our revolving credit facility.

Previous wording

Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements. We own all the FF&E escrows for our hotels. During the three months ended March 31, 2024, certain of our hotel managers deposited $871 to these accounts and spent $1,002 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of March 31, 2024, there was $5,551 on deposit in these escrow accounts, which was held directly by us and is reflected in our condensed consolidated balance sheets as restricted cash.

Current wording

Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements. We own all the FF&E escrows for our hotels. During the six months ended June 30, 2024, certain of our hotel managers deposited $2,597 to these accounts and spent $2,869 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of June 30, 2024, there was $5,411 on deposit in these escrow accounts, which was held directly by us and is reflected in our condensed consolidated balance sheets as restricted cash.

Previous wording

Our net lease portfolio leases do not require FF&E escrow deposits and tenants under these leases are generally required to maintain the leased properties, including structural and non-structural components. We may provide tenant improvement allowances to tenants in certain cases or may develop sites with the intent to lease them. During the three months ended March 31, 2024, we funded $511 for capital improvements to our net lease properties. As of March 31, 2024, we had $2,696 of unspent leasing-related obligations related to certain net lease tenants.

Current wording

Our net lease portfolio leases do not require FF&E escrow deposits and tenants under these leases are generally required to maintain the leased properties, including structural and non-structural components. We may provide tenant improvement allowances to tenants in certain cases or may develop sites with the intent to lease them. During the six months ended June 30, 2024, we funded $1,696 for capital improvements to our net lease properties. As of June 30, 2024, we had $2,192 of unspent leasing-related obligations related to certain of our net lease tenants.

Previous wording

During the three months ended March 31, 2024, we sold three net lease properties with an aggregate of 34,849 square feet for an aggregate sales price of $2,932, excluding closing costs, and one hotel with 84 rooms for a sales price of $3,315, excluding closing costs. As of May 3, 2024, we have entered into an agreement to sell one net lease property with 3,381 square feet for a sale price of $1,250, excluding closing costs. This pending sale is subject to conditions; accordingly, we cannot be sure that we will complete this sale, that this sale will not be delayed or that the terms will not change. We continue to market 12 net lease properties with an aggregate of 138,948 square feet for sale. We believe it is more likely than not that the sales of these properties will be completed within one year. In addition, we are also marketing 22 Sonesta hotels with an aggregate of 2,832 rooms for sale, including nine Sonesta ES Suites®, seven Sonesta Select®, five Sonesta Simply Suites® and one Sonesta Hotels & Resorts®. We cannot be sure we will sell any of these hotels or sell them for prices in excess of their carrying values. We expect to use the proceeds from these asset sales for general business purposes, which may include the repayment of debt.

Current wording

During the six months ended June 30, 2024, we sold one hotel with 84 rooms for a sale price of $3,315, excluding closing costs, and three net lease properties with an aggregate of 34,849 square feet for an aggregate sales price of $2,932, excluding closing costs. From July 1, 2024 through August 2, 2024, we sold two hotels with an aggregate of 346 keys for an aggregate sales price of $10,800, excluding closing costs, and three vacant net lease properties with an aggregate of 9,388 square feet for an aggregate sales price of $1,800, excluding closing costs. As of August 2, 2024, we have entered into agreements to sell 16 hotels with an aggregate of 1,930 keys for an aggregate sales price of $113,200, excluding closing costs, and one net lease property with 3,381 square feet for a sales price of $1,250, excluding closing costs. These pending sales are subject to conditions; accordingly, we cannot be sure that we will complete these sales, that these sales will not be delayed or that the terms will not change. We continue to market three hotels with an aggregate of 407 keys and nine net lease properties with an aggregate of 129,560 square feet for sale. We believe it is probable that the sales of these properties will be completed within one year.

Previous wording

During the three months ended March 31, 2024, we made a $3,392 pro rata capital contribution to Sonesta to support its growth initiatives, including its franchising efforts, and maintain our ownership percentage of Sonesta, using cash on hand.

Current wording

In March 2024, we made a $3,392 pro rata capital contribution to Sonesta to support its growth initiatives, including its franchising efforts, using cash on hand. We continue to maintain our 34% ownership in Sonesta after giving effect to this contribution.

Previous wording

During the three months ended March 31, 2024, we declared and paid regular quarterly distributions to our common shareholders using cash on hand as follows:

Current wording

During the six months ended June 30, 2024, we declared and paid regular quarterly distributions to our common shareholders using cash on hand as follows:

Previous wording

On April 11, 2024, we declared a regular quarterly distribution to common shareholders of record as of April 22, 2024 of $0.20 per common share, or approximately $33,152. We expect to pay this amount on or about May 16, 2024 using cash on hand.

Current wording

On July 11, 2024, we declared a regular quarterly distribution to common shareholders of record as of July 22, 2024 of $0.20 per common share, or approximately $33,178. We expect to pay this distribution on or about August 15, 2024 using cash on hand.

Previous wording

Interest payable on drawings under our revolving credit facility is based on SOFR plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of March 31, 2024. As collateral for all loans and other obligations under the facility, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 69 properties, including 66 hotels and three net lease properties, with an aggregate undepreciated carrying value of $1,612,216 as of March 31, 2024. In addition, in order to maintain compliance with the minimum collateral property availability covenant as defined in the credit agreement, in February 2024, we added three hotels with an aggregate undepreciated carrying value of $115,039 as of March 31, 2024 as collateral under the agreement. We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of March 31, 2024 and 2023, the annual interest rate payable on borrowings under our revolving credit facility was 7.84% and 7.36%, respectively. We had no borrowings outstanding under our revolving credit facility as of March 31, 2024.

Current wording

Interest payable on drawings under our revolving credit facility is based on SOFR plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of June 30, 2024. As collateral for all loans and other obligations under the facility, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 72 properties, including 69 hotels and three net lease properties, with an aggregate undepreciated carrying value of $1,738,959 as of June 30, 2024. We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of June 30, 2024 and 2023, the annual interest rate payable on borrowings under our revolving credit facility was 7.83% and 7.64%, respectively. We had no borrowings outstanding under our revolving credit facility as of June 30, 2024.

Previous wording

Our debt obligations at March 31, 2024 consisted of $5,025,000 aggregate principal amounts of senior notes and $608,079 aggregate principal amounts of mortgage notes secured by 308 net lease retail properties. For further information regarding our indebtedness, see Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Our debt obligations at June 30, 2024 consisted of $5,075,000 aggregate principal amounts of senior notes and $607,590 aggregate principal amounts of mortgage notes secured by 308 net lease retail properties. For further information regarding our indebtedness, see Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

As of March 31, 2024, adjusted total assets for covenant purposes as defined in our senior notes indentures were $10,650,576 and assets encumbered under our revolving credit facility, serving as collateral for our net lease mortgage notes or secured senior notes represented $3,508,130 of adjusted total assets, as defined in our senior notes indentures. Our unencumbered hotels, travel centers, other net lease properties and other corporate assets represent $4,478,040, $1,623,324, $829,546 and $211,536 of adjusted total assets, respectively.

Current wording

As of June 30, 2024, adjusted total assets for covenant purposes as defined in our senior notes indentures were $10,618,426 and assets encumbered under our revolving credit facility, serving as collateral for our net lease mortgage notes or secured senior notes represented $3,543,066 of adjusted total assets, as defined in our senior notes indentures. Our unencumbered hotels, travel centers, other net lease properties and other corporate assets represent $4,470,481, $1,605,020, $858,664 and $141,195 of adjusted total assets, respectively.

Previous wording

Our indentures and their supplements contain cross default provisions to any other debt of $20,000 or more ($50,000 or more in the case of our indenture entered into in February 2016 and its supplements, and our indenture entered into in November 2023 and its supplement). Similarly, our credit agreement has cross default provisions to other indebtedness that is recourse of $25,000 or more and indebtedness that is non-recourse of $75,000 or more. Neither our indentures and their supplements nor our credit agreement contain provisions for acceleration which could be triggered by a change in our debt ratings.

Current wording

Our indentures and their supplements contain cross default provisions to any other debt of $50,000 or more. Similarly, our credit agreement has cross default provisions to other indebtedness that is recourse of $25,000 or more and indebtedness that is non-recourse of $75,000 or more. Neither our indentures and their supplements nor our credit agreement contain provisions for acceleration which could be triggered by a change in our debt ratings.

Previous wording

Our 7.50% senior notes due 2025, or the 2025 Notes, and our 5.50% senior notes due 2027, or the 2027 Notes, are fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including our foreign subsidiaries and our subsidiaries pledged under our credit agreement and our net lease mortgage notes. The notes and the guarantees will be effectively subordinated to all of our and the subsidiary guarantors’ secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and will be structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $2,775,000 of senior unsecured notes do not have the benefit of any guarantees.

Current wording

Our 5.50% senior notes due 2027, or the 2027 Notes, the 2029 Notes and the 2032 Notes are fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including our foreign subsidiaries and our subsidiaries pledged under our credit agreement and our net lease mortgage notes. The notes and the guarantees will be effectively subordinated to all of our and the subsidiary guarantors’ secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and will be structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $2,425,000 of senior unsecured notes do not have the benefit of any guarantees.

Previous wording

A subsidiary guarantor’s guarantee of the 2025 Notes and 2027 Notes and all other obligations of such subsidiary guarantor under the indentures governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and such indenture under certain circumstances, including on or after the date on which (a) the notes have received a rating equal to or higher than Baa2 (or the equivalent) by Moody’s Investor Services, or Moody’s, or BBB (or the equivalent) by Standard & Poor’s Ratings Services, or S&P, or if Moody’s or S&P ceases to rate the notes for reasons outside of our control, the equivalent investment grade rating from any other rating agency and (b) no default or event of default has occurred and is continuing under the indenture. Our non-guarantor subsidiaries are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any amounts due on these notes or the guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments. The rights of holders of these notes to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries’ creditors and any preferred equity holders. As a result, these notes and the related guarantees will be structurally subordinated to all indebtedness, guarantees and other liabilities of our subsidiaries that do not guarantee these notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.

Current wording

A subsidiary guarantor’s guarantee of the 2027 Notes, the 2029 Notes and the 2032 Notes and all other obligations of such subsidiary guarantor under the indentures governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and such indenture under certain circumstances, including on or after the date on which (a) the notes have received a rating equal to or higher than Baa2 (or the equivalent) by Moody’s Investor Services, or Moody’s, or BBB (or the equivalent) by Standard & Poor’s Ratings Services, or S&P, or if Moody’s or S&P ceases to rate the notes for reasons outside of our control, the equivalent investment grade rating from any other rating agency and (b) no default or event of default has occurred and is continuing under the indenture. Our non-guarantor subsidiaries are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any amounts due on these notes or the guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments. The rights of holders of these notes to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries’ creditors and any preferred equity holders. As a result, these notes and the related guarantees will be effectively subordinated to all of our and the subsidiary guarantors’ secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and will be structurally subordinated to all indebtedness and other liabilities of our subsidiaries that do not guarantee these notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.

Previous wording

(1)Real estate properties, net as of March 31, 2024 includes $168,727 of properties owned directly by us and not included in the assets of the subsidiary guarantors.

Current wording

(1)Real estate properties, net as of June 30, 2024 includes $163,130 of properties owned directly by us and not included in the assets of the subsidiary guarantors.

Previous wording

As of March 31, 2024, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 146 distinct brands across 22 industries.

Current wording

As of June 30, 2024, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 148 distinct brands across 22 industries.

Previous wording

*We define comparable hotels as those that were owned by us and were open and operating for the entirety of the periods being compared. For the three months ended March 31, 2024 and 2023, our comparable results exclude two hotels; one of the hotels was not owned for the entirety of the periods presented and the other hotel suspended operations during part of the periods presented.

Current wording

*We define comparable hotels as those that were owned by us and were open and operating for the entirety of the periods being compared. For the three and six months ended June 30, 2024 and 2023, our comparable results exclude two hotels; one of the hotels was not owned for the entirety of the periods presented and the other hotel suspended operations during part of the periods presented.

Previous wording

As of March 31, 2024, our net lease properties were 97.3% occupied and we had 20 properties available for lease. During the three months ended March 31, 2024, we entered into lease renewals for 128,375 rentable square feet (eleven properties) at weighted (by rentable square feet) average rents that were 3.6% above the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 6.2 years. We also entered into new leases for 96,114 rentable square feet (two properties) at weighted (by rentable square feet) average rents that were 3.3% below the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 19.2 years.

Current wording

As of June 30, 2024, our net lease properties were 97.3% occupied and we had 20 properties available for lease. During the six months ended June 30, 2024, we entered into lease renewals for 243,505 rentable square feet (26 properties) at weighted (by rentable square feet) average rents that were 12.2% below the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 4.9 years. We also entered into new leases for 108,803 rentable square feet (four properties) at weighted (by rentable square feet) average rents that were 13.7% below the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 18.5 years.