Service Properties Trust
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 26, 2025
SVC$5.20-5.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-28.
0000945394-24-000015
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0000945394-25-000014
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 130 previous paragraphs and 135 current paragraphs.
59 unchanged; 64 reworded; 10 added; 7 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 19 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
In October 2024, we announced our plan to sell 114 extended stay and select service hotels managed by Sonesta with an aggregate of 14,925 keys and an aggregate net carrying value of $850,000. We expect to sell these hotels in 2025 and use the net sales proceeds from these sales to repay debt. To further improve our liquidity beginning with the fourth quarter of 2024, we reduced our regular quarterly cash distribution rate on our common shares from $0.20 per common share to $0.01 per common share, which we expect to result in $127,000 of annual savings.
Current report
Results of Operations (amounts in thousands, except per share data)
Current report
In February 2025, we entered into an agreement to acquire one net lease property with 5,120 square feet for a purchase price of $5,297, excluding closing costs. We expect to complete this acquisition in the first quarter of 2025 using cash on hand.
Current report
In October 2024, we announced our plan to sell 114 extended stay and select service hotels managed by Sonesta with an aggregate of 14,925 keys and an aggregate net carrying value of $850,000. We expect to sell these hotels in 2025 and use the net sales proceeds from these sales to repay debt.
Current report
Availability under our revolving credit facility is partially based on the performance of the properties serving as collateral under the facility. Based on expectations of performance of certain of the collateral properties, we and our lenders amended the credit facility in October 2024 to temporarily reduce the required collateral property debt yield from 12% to 8.5% from September 30, 2024 through December 31, 2024, and increase the required collateral property debt yield to 9.5% for the quarter ending March 31, 2025; 10% for the quarter ending June 30, 2025; 11% for the quarter ending September 30, 2025; and 12% for the quarter ending December 31, 2025 and thereafter. Subject to meeting these revised collateral property debt yield levels and meeting other conditions, we will continue to have full access to undrawn amounts under our revolving credit facility.
Current report
In February 2025, we and our lenders further amended our revolving credit facility to reduce the required debt service coverage ratio covenant from 1.50 times to 1.30 times effective with respect to the fourth quarter of 2024 and continuing through the end of the loan term. In order to exercise the first extension option, we would be required to maintain the 1.50 times debt service coverage level as of and for the duration of the extension period. We also agreed to change the required collateral property debt yield to 10% effective with respect to the first quarter of 2025 and continuing through the end of the loan term and to swap collateral properties as follows: 49 hotels with an aggregate of 8,197 keys and an aggregate undepreciated carrying value of $1,402,307 will be released from the collateral pool and 35 travel centers leased to TA, which travel centers we refer to as our TA No. 5 lease, with an aggregate undepreciated carrying value of $601,684, will be added as collateral to our revolving credit facility. Of the hotels being released from the collateral pool, 38 hotels with an aggregate of 5,078 keys and an aggregate undepreciated carrying value of $689,592 are part of our hotel disposition plan. The corresponding equity pledges will be swapped as well. We expect to complete this collateral swap by the end of the second quarter of 2025.
Current report
Senior Guaranteed Unsecured Notes Issuance and Repayment of 2025 Maturities
Current report
In June 2024, we issued$700,000 aggregate principal amount of the 2029 Notes and$500,000 aggregate principal amount of the 2032 Notes in underwritten public offerings. The aggregate net proceeds from these offerings were $1,162,077, after underwriting discounts and other offering expenses. These 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 our foreign subsidiaries and certain other excluded subsidiaries. Such other excluded subsidiaries include, but are not limited to, subsidiaries whose equity has been pledged to secure borrowings under our credit agreement and our 2031 Notes and subsidiaries whose assets secure our net lease mortgage notes. We used the net proceeds from the issuance of these notes and cash on hand to redeem all of our outstanding 7.50% senior unsecured notes due 2025 and purchase and satisfy and discharge all of our outstanding 4.50% senior unsecured notes due 2025.
Current report
Net Lease Mortgage Notes
Current report
On January 27, 2025, our wholly owned, special purpose bankruptcy remote, indirect subsidiary, SVC ABS LLC, or the Issuer, issued a variable funding note, or VFN, secured by the 315 net lease properties that also secure our existing $606,611 of net lease mortgage notes. The VFN permits borrowings on a revolving basis up to $45,000 and the Issuer can borrow, repay and reborrow funds available until maturity. The maturity date of the VFN is January 27, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, can be extended by one year at the Issuer’s option. The VFN requires interest payments only on drawings under the VFN based on SOFR plus a margin of 1.75%, and an unused commitment fee of 50 basis points per annum paid on undrawn amounts. We borrowed $45,000 for general business purposes under the VFN upon closing.
Removed paragraphs (7)
Previous report
BP completed the TA Merger on May 15, 2023. We received $379,292 in cash as part of this transaction, including $188,000 in prepaid rent from TA, $101,892 in merger consideration for the TA common shares we owned, and $89,400 for certain tradenames and trademarks associated with TA’s business we owned.
Previous report
During the year ended December 31, 2023, we purchased one hotel in Miami Beach, Florida with 250 rooms for a sales price of $165,400, excluding closing costs, using cash on hand.
Previous report
In February 2023, one of our subsidiaries, SVC ABS LLC, or the Issuer, issued $610,200 in aggregate principal amount of net lease mortgage notes. The notes are non-recourse and secured by the assets of the Issuer, which include 308 net lease retail properties with annual minimum rents of $63,283 and a gross book carrying value of $755,116 as of December 31, 2023. The net proceeds from this issuance were $550,564 after initial purchaser discounts and offering costs. We redeemed our 4.50% senior notes due in 2023 at a redemption price equal to the principal amount of $500,000, plus accrued and unpaid interest to, but excluding the date of redemption in March 2023, using the proceeds from these net lease mortgage notes.
Previous report
The net lease mortgage notes are summarized below:
Previous report
In November 2023, we issued $1,000,000 principal amount of 8.625% senior secured notes due 2031, or the 2031 Notes. The aggregate net proceeds from this offering were $967,525, after initial purchaser discounts and other offering expenses. These notes are fully and unconditionally guaranteed on a joint and several basis by (i) newly formed wholly owned subsidiaries, or the TA Landlord Subsidiaries, that are the landlords with respect to 70 properties leased to TA with a gross carrying value of $785,876 as of December 31, 2023 and the immediate parent entity of the TA Landlord Subsidiaries, or the Pledgor, and (ii) all of our subsidiaries that guarantee our existing senior unsecured notes. The subsidiary guarantee provided by the Pledgor is secured by first-priority liens on the equity interests of the TA Landlord Subsidiaries. The Pledgor and the TA Landlord Subsidiaries have agreed not to guarantee any of our or our subsidiaries other indebtedness. We redeemed our 4.65% and 4.35% senior unsecured notes due in 2024 for redemption prices equal to the principal amounts of $350,000 and $825,000, respectively, plus accrued and unpaid interest to, but excluding the date of redemption in December 2023, using the proceeds from the 2031 Notes and cash on hand.
Previous report
(2)See above for our definition of annualized minimum rent.
Previous report
(1)See page 67 for our definition of annualized minimum rent.
Reworded paragraphs (64)
Previous wording
We are a REIT organized under the laws of the State of Maryland. As of December 31, 2023, we owned 973 properties in 46 states, the District of Columbia, Canada and Puerto Rico.
Current wording
We are a REIT organized under the laws of the State of Maryland. As of December 31, 2024, we owned 948 properties in 46 states, the District of Columbia, Canada and Puerto Rico.
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
Consumer confidence, corporate travel and lodging demand will continue to be affected by economic and market conditions, inflationary pressures, uncertainties surrounding interest rates, 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 December 31, 2023, we owned 221 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 December 31, 2023, we also owned 752 service-focused retail properties leased to 175 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. Our 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 December 31, 2024, we owned 206 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 December 31, 2024, we also owned 742 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 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 December 31, 2023, we owned 221 hotels. In 2023, the U.S. hotel industry generally realized increases in average daily rate, or ADR, revenue per available room, or RevPAR, and occupancy compared to the corresponding 2022 periods. 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 December 31, 2024, we owned 206 hotels. In 2024, the U.S. hotel industry generally realized increases in average daily rate, or ADR, and revenue per available room, or RevPAR, compared to the corresponding 2023 periods. Our comparable hotels produced year over year declines in ADR and 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.
Previous wording
Comparable Hotels Data. We present RevPAR, 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 entire periods being compared. For the years ended December 31, 2023 and 2022, 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, 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 years ended December 31, 2024 and 2023, our comparable results exclude one hotel that was not owned for the entirety of the periods presented and one other hotel that suspended operations during the periods presented. The following table provides a summary of these revenue metrics for the periods presented.
Previous wording
Net Lease Portfolio. As of December 31, 2023, we owned 752 service-focused retail net lease properties with an aggregate of 13,341,172 square feet leased to 175 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $372,319. Our net lease properties were 97.1% occupied as of December 31, 2023 with a weighted (by annual minimum rent) average lease term of 8.8 years, operating under 137 brands in 21 distinct industries. TA is our largest tenant. On May 15, 2023, BP completed the TA Merger and we amended our leases with TA. We received $379,292 in cash as part of the transaction, including $188,000 of prepaid rent, $101,892 for the TA common shares we owned and $89,400 for certain tradenames and trademarks associated with TA’s businesses that we owned. As of December 31, 2023, we leased 176 of our travel centers to TA under five master leases that expire in 2033 and require annual minimum rents of $254,000, and BP Corporation North America Inc. guarantees payment under these leases, subject to a cap. TA receives an annual credit of $25,000 as a result of the prepaid rent.
Current wording
Net Lease Portfolio. As of December 31, 2024, we owned 742 service-focused retail net lease properties with an aggregate of 13,292,519 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 $380,863. Our net lease properties were 97.6% occupied as of December 31, 2024 with a weighted (by annual minimum rent) average lease term of 8.0 years, operating under 136 brands in 21 distinct industries. TA is our largest tenant and as of December 31, 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
Additional details of our hotel operating agreements, our net lease agreements and the TA Merger are set forth in Notes 4 and 9 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.
Current wording
Additional details of our hotel operating agreements and our net lease agreements are set forth in Note 4 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Previous wording
Hotel operating revenues. The increase in hotel operating revenues is primarily a result of higher occupancies and average rates at certain of our hotels in the 2023 period ($123,238), partially offset by the sale of certain of our hotels since January 1, 2022 ($112,548). Additional operating statistics of our hotels are included in the tables on page 66.
Current wording
Hotel operating revenues. The increase in hotel operating revenues is primarily a result of higher occupancies and average rates at certain of our hotels in 2024 ($21,096) and a hotel acquisition in June 2023 ($16,396), partially offset by the sale of certain hotels since January 1, 2023 ($18,821). Additional operating statistics of our hotels are included in the tables beginning on page 66.
Previous wording
Rental income. The increase in rental income is primarily the result of the amended TA leases in the 2023 period ($7,170), partially offset by our sale of certain net lease properties ($5,815) and lease expirations at certain net lease properties ($1,193) since January 1, 2022.
Current wording
Rental income. The increase in rental income is primarily a result of the TA leases that were amended in May 2023 ($5,071) and higher rental income recognized at certain net lease properties in 2024 ($302), partially offset by the sale of certain net lease properties since January 1, 2023 ($979).
Previous wording
Hotel operating expenses. The decrease in hotel operating expenses is primarily the result of our sale of certain hotels since January 1, 2022 ($109,031), partially offset by an increase in occupancy at certain managed hotels resulting in increases in wages ($62,969), increases in rooms related expenses ($31,558), and increases in utilities ($3,800) and other operating expenses ($7,253).
Current wording
Hotel operating expenses. The increase in hotel operating expenses is primarily a result of a hotel acquisition in June 2023 ($10,971) and increases in labor and benefits ($27,782), real estate taxes and insurance ($12,904) and other operating expenses ($18,012) in 2024, partially offset by our sale of certain hotels since January 1, 2023 ($19,422).
Previous wording
Net lease operating expenses. The increase in net lease operating expenses is the result of higher operating expenses at certain net lease properties primarily as a result of vacancies ($1,490) and increases in other operating expenses ($2,997).
Current wording
Net lease operating expenses. The increase in net lease operating expenses is primarily the result of increased property management fees ($2,335) and other operating expenses ($2,019) in 2024, partially offset by our sale of certain net lease properties since January 1, 2023 ($2,200).
Previous wording
Depreciation and amortization - hotels. The decrease in depreciation and amortization - hotels is primarily the result of certain of our depreciable assets becoming fully depreciated since January 1, 2022 ($8,523) and our sale of certain hotels since January 1, 2022 ($6,342), partially offset by depreciation and amortization related to capital expenditures made since January 1, 2022 ($7,484) and our acquisition of a hotel in the 2023 period ($2,200).
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 January 1, 2023 and our acquisition of a hotel in June 2023 ($14,207), partially offset by certain of our depreciable assets becoming fully depreciated since January 1, 2023 ($5,283) and the sale of certain hotels since January 1, 2023 ($3,860).
Previous wording
Depreciation and amortization - net lease properties. The decrease in depreciation and amortization - net lease properties is primarily a result of certain of our depreciable assets becoming fully depreciated since January 1, 2022 and our sale of certain net lease properties since January 1, 2022 ($15,396), partially offset by depreciation and amortization related to capital expenditures since January 1, 2022 ($3,529).
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 ($7,727) and certain of our depreciable assets becoming fully depreciated since January 1, 2023 ($9,611).
Previous wording
General and administrative. The increase in general and administrative costs is primarily due to increases in other professional fees ($2,259), share award expenses ($642) and accounting related fees ($235), partially offset by a decrease in business management fees in the 2023 period ($2,143).
Current wording
General and administrative. The decrease in general and administrative costs in 2024 is primarily due to decreases in business management fees ($3,699) and other professional fees ($1,459).
Previous wording
Transaction related costs. Transaction related costs for the 2023 period primarily consist of the partial recovery of a working capital reserve related to the IHG portfolio previously deemed uncollectable and expensed during 2021 ($5,797), partially offset by costs related to hotel rebranding activity, demolition of certain vacant properties and potential acquisitions ($4,174). Transaction related costs for the 2022 period primarily consist of costs related to our exploration of possible financing transactions ($1,920).
Current wording
Transaction related costs. Transaction related costs in 2024 primarily consist of costs related to various labor litigation matters, re-opening costs and other professional fees related to major renovation projects at certain of our hotels. Transaction related costs in 2023 primarily consisted of the partial recovery of a working capital reserve related to the IHG portfolio previously deemed uncollectable and expensed during 2021 ($5,797), partially offset by costs related to hotel rebranding activity, demolition of certain vacant properties and potential acquisitions ($4,174).
Previous wording
Loss on asset impairment, net. We recorded a $9,544 loss on asset impairment during the 2023 period to reduce the carrying value of one hotel and 16 net lease properties to their estimated fair value less costs to sell. We recorded a $10,989 loss on asset impairment during the 2022 period to reduce the carrying value of 26 hotels and five net lease properties to their estimated fair value less costs to sell.
Current wording
Loss on asset impairment, net. We recorded a $56,212 loss on asset impairment, net in 2024 to reduce the carrying value of ten hotels and ten net lease properties to their estimated fair value or estimated fair value less costs to sell. We recorded a $9,544 loss on asset impairment, net in 2023 to reduce the carrying value of one hotel and 16 net lease properties to their estimated fair value less costs to sell.
Previous wording
Gain on sale of real estate, net. We recorded a $43,239 net gain on sale of real estate during the 2023 period in connection with the sales of 18 hotels and 13 net lease properties, and a $47,818 net gain on sale of real estate in the 2022 period in connection with the sales of 65 hotels and 21 net lease properties.
Current wording
Gain on sale of real estate, net. We recorded a $6,269 net gain on sale of real estate in 2024 in connection with the sales of 15 hotels and ten net lease properties, and a $43,239 net gain on sale of real estate in 2023 in connection with the sales of 18 hotels and 13 net lease properties.
Previous wording
Gain (loss) on equity securities, net. Gain (loss) on equity securities, net represents the adjustment to the carrying value of our former investment in shares of TA common stock to its fair value.
Current wording
Gain on equity securities, net. Gain on equity securities, net represents the adjustment to the carrying value of our former investment in shares of TA common stock to its fair value.
Previous wording
Interest income. The increase in interest income is primarily due to higher interest rates and higher average cash balances invested during the 2023 period.
Current wording
Interest income. The decrease in interest income is due to lower average cash balances invested during 2024 compared to 2023.
Previous wording
Interest expense. The decrease in interest expense is due to lower outstanding debt balances, partially offset by higher weighted average interest rates in the 2023 period.
Current wording
Interest expense. The increase in interest expense is primarily due to higher weighted average interest rates during 2024 compared to 2023.
Previous wording
Loss on early extinguishment of debt. We recorded a $1,524 loss on early extinguishment of debt in the 2023 period related to the write-off of deferred financing costs and unamortized discounts in connection with the repayment of certain senior unsecured notes and the write-off of certain deferred financing costs relating to the amendment of our revolving credit facility. We recorded a $791 loss on early extinguishment of debt in the 2022 period related to the write-off of deferred financing costs and unamortized discounts relating to the amendment of our revolving credit facility and the repayment of certain unsecured senior notes.
Current wording
Loss on early extinguishment of debt, net. We recorded a $16,181 loss on early extinguishment of debt, net in 2024 as a result of the redemption and purchase of certain senior notes. We recorded a $1,524 loss on early extinguishment of debt in 2023 related to the write-off of deferred financing costs and unamortized discounts in connection with the repayment of certain senior unsecured notes and the write-off of certain deferred financing costs relating to the amendment of our revolving credit facility.
Previous wording
Income tax benefit. The increase in income tax benefit is primarily related to a change in deferred tax liabilities related to our Puerto Rico hotel. See Note 10 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for further information.
Current wording
Income tax (expense) benefit. The change in income tax (expense) benefit is primarily a result of increases in our foreign tax expense ($1,863) and state tax expense ($1,037) in 2024. See Note 10 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for further information.
Previous wording
Equity in (losses) earnings of an investee. Equity in (losses) earnings of an investee represents our proportionate share of the (losses) earnings of Sonesta.
Current wording
Equity in losses of an investee. Equity in losses of an investee represents our proportionate share of the losses of Sonesta.
Previous wording
Net loss. Our net loss and our net loss per common share (basic and diluted) each decreased in the 2023 period compared to the 2022 period primarily due to the revenue and expense changes discussed above.
Current wording
Net loss. Our net loss and our net loss per common share (basic and diluted) each increased in 2024 compared to 2023 primarily due to the revenue and expense changes discussed above.
Previous wording
Liquidity and Capital Resources (dollars in thousands, except share amounts)
Current wording
Liquidity and Capital Resources (dollars in thousands, except per share amounts)
Previous wording
As of December 31, 2023, all 221 of our hotels were managed and operated by four hotel operating companies. Our 752 service-focused retail net lease properties were leased to 175 tenants as of December 31, 2023. 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 December 31, 2023, our hotel managers included Sonesta (195 hotels), Hyatt (17 hotels), Radisson (eight hotels), and IHG (one hotel). TA is our largest tenant (176 travel centers).
Current wording
As of December 31, 2024, all 206 of our hotels were managed and operated by four hotel operating companies and our 742 service-focused retail net lease properties were leased to 177 tenants. 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 December 31, 2024, our hotel managers included Sonesta (181 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 $4,927 and reduced our reserves for uncollectable amounts and increased rental income by $320 for the years ended December 31, 2023 and 2022, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $3,436 and $7,697 as of December 31, 2023 and 2022, respectively, included in other assets in our consolidated balance sheets.
Current wording
We recorded reserves for uncollectable amounts and reduced rental income by $2,158 and $4,927 during the years ended December 31, 2024 and 2023, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $5,058 and $3,436 as of December 31, 2024 and 2023, respectively, included in other assets, net in our 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 2.46x and 3.00x as of December 31, 2023 and 2022, respectively.
Current wording
We define net lease rent 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 rent coverage of 2.10x and 2.46x as of December 31, 2024 and 2023, respectively.
Previous wording
Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are owner’s priority returns from our hotels, rents from our net lease portfolio and borrowings under our revolving credit facility. We receive owner’s priority returns and rents from our managers and tenants monthly. We may receive additional returns, percentage rents and our share of the operating profits of our managed hotels after payment of management fees and other deductions, if any, either monthly or quarterly, and these amounts are usually subject to annual reconciliations. We believe that these sources of funds will be sufficient to meet our operating expenses and capital expenditures, pay debt service obligations and make distributions to our shareholders for the next twelve months and for the foreseeable future thereafter. However, as a result of economic conditions, including if the U.S. enters an economic recession, or otherwise, our managers and tenants may become unable or unwilling to pay owner’s priority returns and rents to us when due, and, as a result, our cash flows and net income would decline and we may need to reduce the amount of, or even eliminate, our distributions to common shareholders.
Current wording
Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are owner’s priority returns from our hotels, rents from our net lease portfolio and borrowings under our revolving credit facility. We receive owner’s priority returns and rents from our managers and tenants monthly. We may receive additional returns, percentage rents and our share of the operating profits of our managed hotels after payment of management fees and other deductions, if any, either monthly or quarterly, and these amounts are usually subject to annual reconciliations. We believe these sources of funds will be sufficient to meet our operating expenses and capital expenditures, pay debt service obligations and make distributions to our shareholders for the next twelve months and for the foreseeable future thereafter. However, as a result of economic conditions, including if the U.S. enters an economic recession, or otherwise, our managers and tenants may become unable or unwilling to pay owner’s priority returns and rents to us when due, and, as a result, our cash flows and net income would decline.
Previous wording
The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands):
Current wording
The following is a summary of our sources and uses of cash flows for the periods presented:
Previous wording
The increase in cash provided by operating activities for the 2023 period compared to the prior year period is primarily due to $188,000 of prepaid rent received from TA, higher returns earned from our hotel portfolio and lower interest expense in the 2023 period. The change from cash flow from investing activities in the 2022 period to cash flow used in investing activities in the 2023 period is primarily due to lower proceeds from the sale of real estate, our hotel acquisition and increased real estate improvements during the 2023 period, partially offset by proceeds from the TA Merger. The decrease in cash flows used in financing activities in the 2023 period compared to the 2022 period is primarily due to proceeds from our senior secured notes and our net lease mortgage notes issued in the 2023 period, partially offset by increased distributions during the 2023 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 increase in 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, partially offset by acquisitions in the 2023 period. The change from cash flow used in financing activities in the 2023 period to cash flow provided by financing activities in the 2024 period is primarily due to higher net borrowings in the 2024 period.
Previous wording
We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements. We lease 221 hotels to our wholly owned TRSs that are managed by hotel operating companies. As a REIT, we do not expect to pay federal income taxes on the majority of our income; however, the income realized by our TRSs in excess of the rent they pay to us is subject to U.S. federal income tax at corporate income tax rates. In addition, the income we receive from our hotels in Canada and Puerto Rico is subject to taxes in those jurisdictions and we are subject to taxes in certain states where we have properties despite our qualification for taxation as a REIT.
Current wording
We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements. We lease 206 hotels to our wholly owned TRSs that are managed by hotel operating companies. As a REIT, we do not expect to pay federal income taxes on the majority of our income; however, the income realized by our TRSs in excess of the rent they pay to us is subject to U.S. federal income tax at corporate income tax rates. In addition, the income we receive from our hotels in Canada and Puerto Rico is subject to taxes in those jurisdictions and we are subject to taxes in certain states where we have properties despite our qualification for taxation as a REIT.
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 year ended December 31, 2023, we funded $226,590 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $250,000 during 2024 for capital improvements to certain hotels 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 year ended December 31, 2024, we funded $291,192 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $250,000 during 2025 for capital improvements to certain hotels 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 year ended December 31, 2023, certain of our hotel managers deposited $6,855 to these accounts and spent $5,406 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of December 31, 2023, there was $8,437 on deposit in these escrow accounts, which was held directly by us and is reflected in our 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 year ended December 31, 2024, certain of our hotel managers deposited $6,135 to these accounts and spent $6,375 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of December 31, 2024, there was $5,443 on deposit in these escrow accounts, which was held directly by us and is reflected in our 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 year ended December 31, 2023, we funded $4,060 for capital improvements to our net lease properties. As of December 31, 2023, we had $2,546 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 year ended December 31, 2024, we funded $5,494 for capital improvements to our net lease properties. As of December 31, 2024, we had $1,534 of unspent leasing-related obligations related to certain of our net lease tenants.
Previous wording
During the year ended December 31, 2023, we sold 18 hotels with an aggregate of 2,526 rooms for an aggregate sales price of $157,230, excluding closing costs, and 13 net lease properties with an aggregate of 160,310 square feet for an aggregate sales price of $13,095, excluding closing costs. From January 1, 2024 through February 22, 2024, we sold one net lease property with 4,100 square feet for a sale price of $257, excluding closing costs. We have also entered into agreements to sell one hotel with 84 keys for $3,315 and four net lease properties with an aggregate of 55,276 square feet for an aggregate sales price of $3,121. 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 believe it is more likely than not that the sales of these properties will be completed by year end 2024. We continue to market five net lease properties with an aggregate of 98,422 square feet for sale. 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 year ended December 31, 2024, we sold 15 hotels with an aggregate of 1,910 rooms for an aggregate sales price of $97,315, excluding closing costs, and ten net lease properties with an aggregate of 96,929 square feet for an aggregate sales price of $8,547, excluding closing costs. From January 1, 2025 through February 24, 2025, we sold one hotel with 149 keys for a sales price of $4,000, excluding closing costs, and two net lease properties with an aggregate of 49,081 square feet for an aggregate sales price of $1,300, excluding closing costs. We have also entered into agreements to sell five hotels with an aggregate of 623 keys for an aggregate sales price of $28,500, excluding closing costs, and two net lease properties with an aggregate of 155,559 square feet for an aggregate sales price of $5,800, 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 two hotels with an aggregate of 234 keys and six net lease properties with an aggregate of 80,249 square feet for sale. We believe it is probable that the sales of these properties will be completed within one year. We expect to use the net sales proceeds from these sales for general business purposes.
Previous wording
During the year ended December 31, 2023, we funded $5,134 of capital contributions to Sonesta to support their growth initiatives, including their franchising efforts, using cash on hand.
Current wording
During the year ended December 31, 2024, we funded $15,266 of capital contributions to Sonesta to support its growth initiatives, including its franchising efforts, using cash on hand.
Previous wording
On January 11, 2024, we declared a regular quarterly distribution to common shareholders of record on January 22, 2024 of $0.20 per share, or $33,154. We paid this amount on February 15, 2024 using cash on hand.
Current wording
On January 16, 2025, we declared a regular quarterly distribution to common shareholders of record on January 27, 2025 of $0.01 per share, or $1,666. We paid this distribution on February 20, 2025 using cash on hand.
Previous wording
In order to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses, we maintain a $650,000 secured revolving credit facility which is governed by the amended and restated credit agreement that we entered into on June 29, 2023. This new facility replaced our prior $800,000 secured revolving credit facility, which had a maturity date of July 15, 2023, and is available for general business purposes, including acquisitions. We can borrow, repay, and reborrow funds available under the new facility until maturity and no principal repayments are due until maturity. Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions. The maturity date of the new facility is June 29, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date of the new facility by two additional six-month periods.
Current wording
In order to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses, we maintain a $650,000 secured revolving credit facility which is governed by a credit agreement. This revolving credit facility is available for general business purposes, including acquisitions. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayments are due until maturity. Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions. The maturity date of our revolving credit facility is June 29, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date of the facility by two additional six-month periods.
Previous wording
Interest payable on drawings under the new facility is based on the secured overnight financing rate, or 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 December 31, 2023. As collateral for all loans and other obligations under the new 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 undepreciated carrying value of $1,594,253 as of December 31, 2023. 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 undepreciated carrying value of $114,635 as of December 31, 2023, 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 December 31, 2023, the annual interest rate payable on borrowings under our revolving credit facility was 7.88%. We had no borrowings outstanding under the facility as of December 31, 2023.
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 December 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 $1,717,254 as of December 31, 2024. During the year ended December 31, 2024, we sold three hotels that served as collateral under our revolving credit facility. In connection with the sales of these hotels, the hotels were released from the collateral pool in accordance with the terms of our revolving credit facility. 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 December 31, 2024 and 2023, the annual interest rate payable on borrowings under our revolving credit facility was 6.99% and 7.88%, respectively. As of December 31, 2024 and February 24, 2025, we had $150,000 and $50,000, respectively, outstanding under our revolving credit facility and $500,000 and $600,000, respectively, available for borrowing.
Showing the first 40 of 64 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report — wording carried from elsewhere
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.