Service Properties Trust

Note 4. Management Agreements and Leases

As of December 31, 2024, we owned 206 hotels included infour operating agreements and 742 service-focused retail properties net leased to 177 tenants. We do not operate any of our properties.

As of December 31, 2024, all 206 of our hotels were managed by subsidiaries of the following companies: Sonesta (181 hotels), Hyatt (17 hotels), Radisson (seven hotels) and IHG (one hotel). As of December 31, 2024, our 742 service-focused retail net lease properties were leased by 177 tenants, including 175 travel centers leased to TA, our largest tenant.

Hotel Agreements

Sonesta Agreement. As of December 31, 2024, Sonesta managed 39 of our full service hotels,100 of our extended stay hotels and 42 of our select service hotels pursuant to management agreements for all of the hotels, which we collectively refer to as our Sonesta agreement. The hotels Sonesta managed for us comprised approximately 50.0% of our total historical real estate investments.

We acquiredone hotel in June 2023, and we and Sonesta added this hotel to our Sonesta agreement. We sold 14 andtwo Sonesta branded hotels during the years ended December 31, 2024 and 2023, respectively. See Note 3 for further information regarding our acquisition and disposition activities.

Our Sonesta agreement, which expires on January 31, 2037 and includestwo 15-year renewal options, provides that we are paid an annual owner’s priority return if gross revenues of the hotels, after payment of hotel operating expenses and management and related fees (other than Sonesta’s incentive fee, if applicable), are sufficient to do so. The Sonesta agreement further provides that we are paid an additional return equal to 80% of the operating profits, as defined therein, after paying the owner’s priority return, reimbursing owner or manager advances, funding FF&E reserves and paying Sonesta’s incentive fee, if applicable. We do not have any security deposits or guarantees for our Sonesta hotels. We realized returns under our Sonesta agreement of $189,386, $226,181 and $196,721 during the years ended December 31, 2024, 2023 and 2022, respectively.

Our Sonesta agreement requires us to fund capital expenditures made at our hotels. We made capital expenditures for hotels included in our Sonesta agreement in an aggregate amount of $258,337 and $172,028 during the years ended December 31, 2024 and 2023, respectively, which resulted in increases in our contractual annual owner’s priority returns of $15,488 and $10,321, respectively. Our annual priority return under our Sonesta agreement as of December 31, 2024 was $356,172. We owed Sonesta $18,199 and $13,300 for capital expenditures and other reimbursements as of December 31, 2024 and 2023, respectively. Sonesta owed us $3,911 and $6,376 in owner’s priority returns and other amounts as of December 31, 2024 and 2023, respectively. Amounts due from Sonesta are included in due from related persons and amounts owed to Sonesta are included in due to related persons in our consolidated balance sheets. Our Sonesta agreement requires that 5% of the hotel gross revenues be escrowed for future capital expenditures as FF&E reserves, subject to available cash flows after payment of the owner’s priority returns due to us. No FF&E escrow deposits were required during any of the years ended December 31, 2024, 2023 or 2022.

Pursuant to our Sonesta agreement, we incurred management, reservation and system fees and reimbursement costs for certain guest loyalty, marketing programs and third-party reservation transmission fees of $119,628, $118,146 and $114,563 for the years ended December 31, 2024, 2023 and 2022, respectively. These fees and costs are included in hotel operating expenses in our consolidated statements of comprehensive income (loss). In addition, we incurred procurement and construction supervision fees payable to Sonesta of $2,877 and $1,791 for the years ended December 31, 2024 and 2023, respectively, which amounts have been capitalized in our consolidated balance sheets and are depreciated over the estimated useful lives of the related capital assets.

We are required to maintain working capital for each of our hotels managed by Sonesta and have advanced a fixed amount based on the number of rooms in each hotel to meet the cash needs for hotel operations. As of December 31, 2024 and 2023, we had advanced $46,466 and $48,490, respectively, of initial working capital to Sonesta net of any working capital returned to us on termination of the applicable management agreements in connection with hotels we have sold. These amounts are included in other assets, net in our consolidated balance sheets. Any remaining working capital would be returned to us upon termination in accordance with the terms of our Sonesta agreement.

In general, we and Sonesta may terminate the management agreement for events of default, casualty and condemnation events, although Sonesta may not terminate for certain events of default. We also have the right to terminate the management agreement if minimum performance thresholds are not met for anythree offour applicable consecutive years beginning with the 2023 calendar year. Pursuant to our Sonesta agreement, we or Sonesta may be obligated to pay the other party damages if the terminating party terminates a management agreement due to the other party’s event of default.

See Notes 5 and 9 for further information regarding our relationships, agreements and transactions with Sonesta.

Hyatt Agreement. As of December 31, 2024, Hyatt managed 17 of our select service hotels pursuant to a portfolio management agreement that expires on March 31, 2031, or our Hyatt agreement, and provides that, as of December 31, 2024, we are to be paid an annual owner’s priority return of $17,455. Any returns we receive from Hyatt are currently limited to the hotels’ available cash flows, if any, after payment of operating expenses. Hyatt has provided us with a $30,000 limited guarantee for 75% of the aggregate annual owner’s priority returns due to us that will become effective upon substantial completion of planned renovations of the hotels, which occurred in January 2025. We realized returns under our Hyatt agreement of $5,860, $9,371 and $12,281 during the years ended December 31, 2024, 2023 and 2022, respectively. In February 2024, we funded $2,300 of additional working capital to Hyatt. We may recover this amount in the future, if cash flows are sufficient to pay our owner’s priority return and other amounts in accordance with our Hyatt agreement. During the years ended December 31, 2024 and 2023, we incurred capital expenditures for certain hotels included in our Hyatt agreement of $31,665 and $46,679, respectively, which resulted in an aggregate increase in our contractual annual owner’s priority returns of $1,900 and $2,801, respectively.

Radisson Agreement. As of December 31, 2024, Radisson managed seven of our full service hotels pursuant to a portfolio management agreement that expires on July 31, 2031, or our Radisson agreement, and provides that we are to be paid an annual owner’s priority return of $10,913. Radisson has provided us with a $22,000 limited guarantee for 75% of the aggregate annual owner’s priority returns due to us that became effective on January 1, 2023, subject to adjustment for planned renovations of certain hotels, which were completed in December 2024. We realized returns under our Radisson agreement of $6,518, $6,266 and $6,387 for the years ended December 31, 2024, 2023 and 2022, respectively. During the year ended December 31, 2024, the hotels under this agreement generated cash flows that exceeded the guaranteed owner’s priority level due to us for the period. During the year ended December 31, 2023, the hotels under this agreement generated cash flows that were less than the guaranteed owner’s priority level due to us for the period, and Radisson made $650 of guaranty payments to cover the shortfall. The available balance of the guaranty was $21,350 as of December 31, 2024. During the years ended December 31, 2024 and 2023, we incurred capital expenditures of $778 and $7,660, respectively, for the hotels included in our Radisson agreement, which resulted in an aggregate increase in our contractual owner’s priority returns of $47 and $460, respectively.

Marriott Agreement. As of December 31, 2023, we sold all 16 hotels previously managed by Marriott International, Inc., or Marriott. We realized a net operating loss under our management agreement with Marriott of $2,762 during the year ended December 31, 2023 and a return of $8,942 during the year ended December 31, 2022. We didnot incur capital expenditures for any of the hotels included in our management agreement with Marriott during either of the years ended December 31, 2023 or 2022.

IHG Agreement. Our management agreement with IHG forone hotel expires on January 31, 2026. We realized returns under our management agreement with IHG of $5,051, $4,800 and $3,561 for the years ended December 31, 2024, 2023 and 2022, respectively. Any returns we receive from IHG are limited to the hotel’s available cash flows, if any, after payment of operating expenses. During the year ended December 31, 2023, we recovered $5,797 of working capital that we previously funded under our IHG agreement and expensed in 2021 to transaction related costs when the amount was not expected to be recovered. The amount recovered is included in transaction related costs in our consolidated statements of comprehensive income (loss). During the years ended December 31, 2024 and 2023, we incurred capital expenditures for our hotel in our IHG agreement of $1,124 and $542, respectively.

As of December 31, 2024, we owned 742 service-focused retail net lease properties with an aggregate of 13,292,519 square feet with leases requiring annual minimum rents of $380,863 with a weighted (by annual minimum rents) average remaining lease term of 8.0 years. Our net lease properties were 97.6% occupied and leased by 177 tenants operating under 136 brands in 21 distinct industries.

TA Leases. As of December 31, 2024, TA is our largest tenant, representing 28.7% of our total historical real estate investments. We lease to TA a total of 175 travel centers under five master leases that expire in 2033, or our TA leases, subject to TA’s right to extend those leases, and require annual minimum rents of $259,080 as of December 31, 2024. TA receives a monthly rent credit totaling $25,000 per year over theten-year initial term of the TA leases as a result of rent it prepaid. On February 28, 2024, TA acquired the leasehold interest of one of our travel centers from a third party landlord. The aggregate minimum rent due to us under our leases with TA for the remaining 175 travel centers was unchanged as a result of TA’s acquisition of this leasehold interest.

As of December 31, 2024, the number of travel centers, the terms and the annual minimum rents owed to us by TA under our TA leases was as follows:

(1)TA hasfive renewal options often years each under each of our TA leases.

(2)Annual minimum rent increases by 2% each year through the initial term often years and any of thefive ten-year extension options that may be exercised. There is no percentage rent due under our TA leases.

Our TA leases are “triple net” leases that require TA to pay all costs incurred in the operation of the leased travel centers, including personnel, utility, inventory, customer service and insurance expenses, real estate and personal property taxes, environmental related expenses, underground storage tank maintenance costs and ground lease payments at those travel centers at which we lease the property and sublease it to TA. Our TA leases generally require TA to indemnify us for certain environmental matters and for liabilities that arise during the terms of the leases from ownership or operation of the leased travel centers. Our TA leases do not require FF&E escrow deposits. However, TA is required to maintain the leased travel centers, including structural and non-structural components. BP Corporation North America Inc., a subsidiary of BP p.l.c., guarantees payment under each of the TA leases, limited to an aggregate cap which was $3,037,475 as of December 31, 2024.

We recognized rental income from our TA leases of $271,334, $266,263 and $259,093 for the years ended December 31, 2024, 2023 and 2022, respectively. Rental income increased by $14,272 and $7,932 for the years ended December 31, 2024 and 2023, respectively, and decreased by $13,143 for the year ended December 31, 2022, to record the scheduled rent changes on a straight line basis. TA was required to pay us previously deferred rent obligations in quarterly installments of $4,404 through January 31, 2023. TA paid us the final quarterly installment owed to us in January 2023. As of December 31, 2024 and 2023, we had receivables for current rent amounts owed to us by TA and straight line rent adjustments of $40,097 and $19,816, respectively, included in other assets, net in our consolidated balance sheets.

Until May 15, 2023, our TA leases required TA to pay us percentage rent based upon increases in certain sales. We recognized percentage rent due under our TA leases as rental income when all contingencies were met. We recognized percentage rent of $3,507 and $10,578 during the years ended December 31, 2023 and 2022, respectively, under our TA leases.

For further information regarding our relationships with TA, including the TA Merger, as defined below, see Notes 5 and 9.

Our other net lease agreements generally provide for minimum rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight-line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. We recognized rental income from our net lease properties (excluding TA) of $128,889, $129,566 and $135,522 for the years ended December 31, 2024, 2023 and 2022, respectively, which included $4,269, $5,233 and $5,367, respectively, of adjustments to record scheduled rent changes under certain of our leases on a straight line basis.

We continually review receivables related to rent, straight-line rent and property operating expense reimbursements and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. The review includes an assessment of whether substantially all of the amounts due under a tenant’s lease are probable of collection. For leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For leases that are deemed not probable of collection, revenue is recorded as cash is received. We recognize all changes in the collectability assessment for an operating lease as an adjustment to rental income. 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, and reduced our reserves for uncollectable amounts and increased rental income by $320 during the year ended December 31, 2022, 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.

Additional lease information (as lessor). As of December 31, 2024, our leases with parties other than our TRSs, provide for contractual minimum rents to be paid to us during the remaining current terms as follows:

Additional lease information (as lessee). As of December 31, 2024, eight of our hotels were subject to ground leases where we are the lessee. In addition, our hotel operators enter various leases on our behalf in the normal course of business at our hotels, or our hotel operating leases. We calculated right of use assets and lease liabilities as the present value of the remaining lease payment obligations for our operating leases, which include the ground leases and hotel operating leases, over the remaining lease term using our estimated incremental borrowing rate. The right of use assets and related lease liabilities are included within other assets, net and accounts payable and other liabilities, respectively, in our consolidated balance sheets.

At December 31, 2024 and 2023, our right of use assets and related lease liabilities each totaled $150,846 and $157,127, respectively, which represented our future obligations under our operating leases and are included inother assets, net andaccounts payable and other liabilities, respectively, in our consolidated balance sheets. Our operating leases require minimum fixed rent payments, percentage rent payments based on a percentage of hotel revenues in excess of certain thresholds and rent payments equal to the greater of a minimum fixed rent or percentage rent. Rental expense related to our hotel operating leases of $9,476, $9,618 and $11,148 for the years ended December 31, 2024, 2023 and 2022, respectively, is included in hotel operating expenses within our consolidated statements of comprehensive income (loss). For operating leases related to our net lease properties, our tenants are required to pay the rental expense. As of December 31, 2024, our operating leases provide for contractual minimum rent payments to third parties during the remaining lease terms, as follows:

(1) The weighted average discount rate used to calculate the lease liability and the weighted average remaining term for our ground leases (assuming all extension options) and our hotel operating leases are approximately 5.4% and 19 years (range ofthree months to 63 years) and 5.7% and 34 years (range ofthree months to 49 years), respectively.

Generally, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant did not perform obligations under a ground lease or did not renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected property.

Note 5. Other Investments

Equity Method Investment

As of both December 31, 2024 and 2023, we owned 34% of Sonesta’s outstanding common stock. We account for our 34% non-controlling interest in Sonesta under the equity method of accounting.

As of December 31, 2024 and 2023, our investment in Sonesta had a carrying value of $115,818 and $113,304, respectively. On the date of acquisition of our initial equity interest in Sonesta (February 27, 2020), the cost basis of our investment in Sonesta exceeded our proportionate share of Sonesta’s total stockholders’ equity book valueby an aggregate of $8,000. As required under GAAP, we are amortizing this difference to equity in earnings of an investee over 31 years, the weighted average remaining useful life of the real estate assets and intangible assets and liabilities owned by Sonesta as of the date of our acquisition. We recorded amortization of the basis difference of$260 in each of the years ended December 31, 2024, 2023 and 2022. We recognized (losses) earnings of $(12,299), $(4,382)and$2,856 related to our investment in Sonesta for the years ended December 31, 2024, 2023 and 2022, respectively. These amounts, which include amortization of the basis difference, are included in equity in (losses) earnings of an investee in our consolidated statements of comprehensive income (loss).

We recorded a liability of $42,000 for the fair value of our initial investment in Sonesta, as no cash consideration was exchanged related to the modification of our management agreement with, and investment in, Sonesta. This liability for our investment in Sonesta is included in accounts payable and other liabilities in our consolidated balance sheets and is being amortized on a straight-line basis through the initial term of the Sonesta agreement, January 31, 2037, as a reduction to hotel operating expenses in our consolidated statements of comprehensive income (loss). We reduced hotel operating expenses by $2,484 for each of the years ended December 31, 2024, 2023 and 2022, for amortization of this liability. As of December 31, 2024 and 2023, the unamortized balance of this liability was $29,995 and $32,479, respectively.

In 2024 and 2023, we funded capital contributions to Sonesta of $15,266 and $5,134, respectively, to support its growth initiatives, including its franchising efforts. In 2022, we funded an aggregate of $45,470 of capital contributions to Sonesta related to Sonesta’s acquisition of a portfolio offour hotels located in New York, New York. We continue to maintain our 34% ownership in Sonesta after giving effect to these contributions.

Summarized financial information for Sonesta as of December 31, 2024 and 2023, and for the years ended December 31, 2024, 2023 and 2022 is as follows:

See Notes 4 and 9 for further information regarding our relationships, agreements and transactions with Sonesta.

Investment in Equity Securities

Until May 15, 2023, we owned 1,184,797 shares, or approximately 7.8%, of TA common stock, which were reported at fair value based on quoted market prices (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of the end of the period, with changes in fair value recorded in earnings in our consolidated statements of comprehensive income (loss). As of May 15, 2023, our historical cost basis for these shares was $24,418 and our carrying value for these shares was $101,893. On May 15, 2023, BP Products North America Inc. acquired TA pursuant to a merger, or the TA Merger, for $86.00 per share of TA common stock in cash. We recorded a gain of $48,837 and a loss of $8,104 during the years ended December 31, 2023 and 2022, respectively, to adjust the carrying value of our former investment in shares of TA common stock to its fair value.

See Notes 4 and 9 for further information regarding our relationships, agreements and transactions with TA.

Note 6. Indebtedness

Our principal debt obligations at December 31, 2024 were: (1) $150,000 of outstanding borrowings under our $650,000 revolving credit facility; (2) $4,075,000 aggregate outstanding principal amount of senior unsecured notes; (3) $1,000,000 aggregate outstanding principal amount of senior secured notes; and (4) $606,611 aggregate outstanding principal amount of net lease mortgage notes.

Revolving Credit Facility

Our $650,000 secured 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 bytwo additionalsix-month periods.

Interest payable on drawings under our revolving credit 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, 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 andthree 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. The weighted average interest rate for borrowings under our revolving credit facility was 7.43% for the year ended December 31, 2024. We hadno borrowings outstanding under our revolving credit facility during the year ended December 31, 2023. 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.

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.

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 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.

Our debt agreements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes RMR ceasing to act as our business manager. Our debt agreements also contain covenants, including those that restrict our ability to incur debts or to make distributions under certain circumstances and generally require us to maintain certain financial ratios. Borrowings under our revolving credit facility are subject to meeting ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions. We believe we were in compliance with the terms and conditions of our debt agreements as of December 31, 2024.

Senior Guaranteed Unsecured Notes Issuance

In June 2024, we issued $700,000 aggregate principal amount of 8.375% senior guaranteed unsecured notes due 2029 and $500,000 aggregate principal amount of 8.875% senior guaranteed unsecured notes due 2032 in underwritten public offerings. The aggregate net proceeds from these notes 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 8.625% senior secured notes due 2031, and subsidiaries whose assets secure our net lease mortgage notes.

Repayment of 2025 Maturities

In June 2024, we redeemed all of our outstanding 7.50% senior unsecured notes due 2025 for a redemption price equal to the principal amount of $800,000, plus accrued and unpaid interest and a premium equal to a make whole amount. As a result of the redemption, we recorded a loss on early extinguishment of debt of $17,681 during the year ended December 31, 2024, which represented the make whole premium and the write-off of unamortized discounts and issuance costs related to these notes.

In June 2024, we repurchased $272,803 principal amount of our $350,000 4.50% senior unsecured notes due 2025 at a total cost of $270,396, excluding accrued interest, pursuant to a cash tender offer. Also in June 2024, we effected the satisfaction and discharge of the remaining $77,197 principal amount of our $350,000 4.50% senior unsecured notes due 2025 that were not purchased as part of the tender offer in accordance with their terms. As a result of these transactions, we recorded a gain on early extinguishment of debt of$1,500 during theyear ended December 31, 2024, which represented the discount to par paid to repurchase the notes, net of the write-off of unamortized discounts and issuance costs related to these notes.

Net Lease Mortgage Notes

Our$610,200 in aggregate principal amount of net lease mortgage notes were issued on February 10, 2023 by our wholly owned, special purpose bankruptcy remote, indirect subsidiary, SVC ABS LLC, or the Issuer. The Issuer is a separate legal entity and is the sole owner of its assets and liabilities. The assets of the Issuer are not available to pay or otherwise satisfy obligations to the creditors of any owners or affiliates of the Issuer.

Our net lease mortgage notes are summarized below:

The Class A notes and the Class B notes require monthly principal repayments at an annualized rate of 0.50% and 0.25% of the balance outstanding, respectively, and the Class C notes require interest payments only, with balloon payments due at maturity. The notes mature in February 2028 and may be redeemed without penalty 24 months prior to the scheduled maturity date beginning in February 2026. The notes are non-recourse and are secured by 315 net lease retail properties owned by the Issuer. As of December 31, 2024, the current leases relating to those properties required annual minimum rents of $66,632 and had an aggregate undepreciated carrying value of $760,033.

On January 27, 2025, 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 byone 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.

The required principal payments due during the next five years and thereafter under all our outstanding debt at December 31, 2024 were as follows:

Note 7. Shareholders’ Equity

Share Awards

We have common shares available for issuance under the terms of our Amended and Restated 2012 Equity Compensation Plan, or the 2012 Plan. During the years ended December 31, 2024, 2023 and 2022, we awarded shares to our Trustees, officers and other employees of RMR as follows:

The value of the share awards were based upon the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq, on the date of the awards. The common shares awarded to our Trustees vest immediately. The common shares awarded to our officers and certain other employees of RMR (in those capacities) vest infive equal annual installments beginning on the date of the award. Shares forfeited are recognized as they occur. Share awards are expensed ratably over the vesting period and the value of such share awards are included in general and administrative expense in our consolidated statements of comprehensive income (loss).

A summary of shares awarded, vested, forfeited and unvested under the terms of the 2012 Plan for the years ended December 31, 2024, 2023 and 2022 is as follows:

The 1,024,441 unvested shares as of December 31, 2024 are scheduled to vest as follows:320,980 shares in 2025,289,362 shares in 2026,239,080 shares in 2027 and 175,019 shares in 2028. As of December 31, 2024, the estimated future compensation expense for the unvested shares was $5,021. The weighted average period over which the compensation expense will be recorded is approximately 24 months. During the years ended December 31, 2024, 2023 and 2022, we recorded $3,620, $3,417 and $2,775, respectively, of compensation expense related to the 2012 Plan.

At December 31, 2024,217,189 of our common shares remain reserved for issuance under the 2012 Plan.

Share Purchases

During the years ended December 31, 2024, 2023 and 2022, we purchased our common shares from our officers and certain other current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of our common shares as follows:

Distributions

During the years ended December 31, 2024, 2023 and 2022, we paid distributions on our common shares as follows:

(1)Qualified Dividends are a subset of, and included in, the Ordinary Income amount.

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.

Cumulative Other Comprehensive Income (Loss)

Cumulative other comprehensive income (loss) represents our share of the comprehensive income (loss) of Sonesta. See Notes 4, 5 and 9 for further information regarding this investment.

Note 8. Business and Property Management Agreements with RMR

We haveno employees. The personnel and various services we require to operate our business are provided to us by RMR. We havetwo agreements with RMR to provide management services to us: (1) a business management agreement, which relates to our business generally, and (2) a property management agreement, which relates to our property level operations of our net lease portfolio, the office building component of one of our hotels and major renovation or repositioning activities at our hotels that we may request RMR to manage from time to time. See Note 9 for further information regarding our relationships, agreements and transactions with RMR.

Management Agreements with RMR. Our management agreements with RMR provide for an annual base management fee, an annual incentive management fee and property management and construction supervision fees, payable in cash, among other terms:

•Base Management Fee. The annual base management fee payable to RMR by us for each applicable period is equal to the lesser of:

◦the sum of (a)0.7% of the average aggregate historical cost of our real estate investments up to $250,000, plus (b)0.5% of the average aggregate historical cost of our real estate investments exceeding $250,000; and

◦the sum of (a)0.7% of the average closing price per share of our common shares on the stock exchange on which such shares are principally traded, during such period, multiplied by the average number of our common shares outstanding during such period, plus the daily weighted average of the aggregate liquidation preference of each class of our preferred shares outstanding during such period, plus the daily weighted average of the aggregate principal amount of our consolidated indebtedness during such period, or, together, our Average Market Capitalization, up to $250,000, plus (b)0.5% of our Average Market Capitalization exceeding $250,000.

The average aggregate historical cost of our real estate investments includes our consolidated assets invested, directly or indirectly, in equity interests in or loans secured by real estate and personal property owned in connection with such real estate (including acquisition related costs and costs which may be allocated to intangibles or are unallocated), all before reserves for depreciation, amortization, impairment charges or bad debts or other similar non-cash reserves.

•Incentive Management Fee. The incentive management fee which may be earned by RMR for an annual period is calculated as follows:

◦An amount, subject to a cap based on the value of our common shares outstanding, equal to 12% of the product of:

•our equity market capitalization on the last trading day of the year immediately prior to the relevant three year measurement period, and

•the amount (expressed as a percentage) by which the total return per share, as defined in the business management agreement and further described below, of our common shareholders (i.e., share price appreciation plus dividends) exceeds the total shareholder return of the applicable market index, or the benchmark return per share, for the relevant measurement period. The MSCI U.S. REIT/Hotel & Resort REIT Index is the applicable benchmark index.

For purposes of the total return per share of our common shareholders, share price appreciation for a measurement period is determined by subtracting (1) the closing price of our common shares on Nasdaq on the last trading day of the year immediately before the first year of the applicable measurement period, or the initial share price, from (2) the average closing price of our common shares on theten consecutive trading days having the highest average closing prices during the final 30 trading days in the last year of the measurement period.

◦The calculation of the incentive management fee (including the determinations of our equity market capitalization, initial share price and the total return per share of our common shareholders) is subject to adjustments if we issue or repurchase our common shares, or if our common shares are forfeited, during the measurement period.

◦No incentive management fee is payable by us unless our total return per share during the measurement period is positive.

◦The measurement periods arethree year periods ending with the year for which the incentive management fee is being calculated.

◦If our total return per share exceeds 12% per year in any measurement period, the benchmark return per share is adjusted to be the lesser of the total shareholder return of the applicable market index for such measurement period and 12% per year, or the adjusted benchmark return per share. In instances where the adjusted benchmark return per share applies, the incentive management fee will be reduced if our total return per share is between 200 basis points and 500 basis points below the applicable market index in any year, by a low return factor, as defined in the business management agreement, and there will be no incentive management fee paid if, in these instances, our total return per share is more than 500 basis points below the applicable market index in any year, determined on a cumulative basis (i.e., between 200 basis points and 500 basis points per year multiplied by the number of years in the measurement period and below the applicable market index).

◦The incentive management fee is subject to a cap. The cap is equal to the value of the number of our common shares which would, after issuance, represent 1.5% of the number of our common shares then outstanding multiplied by the average closing price of our common shares during theten consecutive trading days having the highest average closing prices during the final 30 trading days of the relevant measurement period.

◦Incentive management fees we paid to RMR for any period may be subject to “clawback” if our financial statements for that period are restated due to material non-compliance with any financial reporting requirements under the securities laws as a result of the bad faith, fraud, willful misconduct or gross negligence of RMR and the amount of the incentive management fee we paid was greater than the amount we would have paid based on the restated financial statements.

Business management fees are included in included in general and administrative expenses in our consolidated statements of comprehensive income (loss). We did not incur any incentive management fees pursuant to our business management agreement for the years ended December 31, 2024, 2023 or 2022.

•Property Management and Construction Supervision Fees. The property management fees payable to RMR by us for each applicable period are equal to 3.0% of gross collected rents and the construction supervision fees payable to RMR by us for each applicable period are equal to 5.0% of construction costs for our net lease portfolio, and the office building component of one of our hotels that are subject to our property management agreement with RMR. We and RMR include the properties we lease to TA in our property management agreement. The property management fees payable to RMR by us for the properties we lease to TA are equal to 1.0% of gross collected rents for the 2024 calendar year,2.0% of gross collected rents for the 2025 calendar year and 3.0% of gross collected rents for the 2026 calendar year and thereafter. Pursuant to our property management agreement with RMR, RMR oversees any major capital projects and repositioning activities at our hotels, including our hotels that are managed by Sonesta, as we may request from time to time. RMR receives the same fee previously paid to Sonesta for these services, which is equal to 3% of the cost of any such major capital project or repositioning activity. Property management fees are included in other net lease operating expenses in our consolidated statements of comprehensive income (loss) and construction supervision fees are capitalized as building improvements in our consolidated balance sheets and are depreciated over the estimated useful lives of the related capital assets.

•Expense Reimbursement. We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR on our behalf. We are generally not responsible for payment of RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR employees assigned to work exclusively or partly at our net lease properties and the office building component of one of our hotels, our share of the wages, benefits and other related costs of RMR’s centralized accounting personnel, our share of RMR’s costs for providing our internal audit function, and as otherwise agreed. Our property level operating expenses are generally incorporated into rents charged to our tenants, including certain payroll and related costs incurred by RMR which are included in net lease operating expenses and general and administrative expenses, as applicable, in our consolidated statements of comprehensive income (loss).

•Term. Our management agreements with RMR have terms that end on December 31, 2044, and automatically extend on December 31st of each year for an additional year, so that the terms of our management agreements thereafter end on the 20th anniversary of the date of the extension.

•Termination Rights. We have the right to terminate one or both of our management agreements with RMR: (i) at any time on 60 days’ written notice for convenience, (ii) immediately on written notice for cause, as defined therein, (iii) on written notice given within 60 days after the end of an applicable calendar year for a performance reason, as defined therein, and (iv) by written notice during the 12 months following a change of control of RMR, as defined therein. RMR has the right to terminate the management agreements for good reason, as defined therein.

•Termination Fee. If we terminate one or both of our management agreements with RMR for convenience, or if RMR terminates one or both of our management agreements for good reason, we have agreed to pay RMR a termination fee in an amount equal to the sum of the present values of the monthly future fees, as defined therein, for the terminated management agreement(s) for the term that was remaining prior to such termination, which, depending on the time of termination would be between 19 and 20 years. If we terminate one or both of our management agreements with RMR for a performance reason, we have agreed to pay RMR the termination fee calculated as described above, but assuming aten year term was remaining prior to the termination. We are not required to pay any termination fee if we terminate our management agreements with RMR for cause or as a result of a change of control of RMR.

•Transition Services. RMR has agreed to provide certain transition services to us for 120 days following an applicable termination by us or notice of termination by RMR, including cooperating with us and using commercially reasonable efforts to facilitate the orderly transfer of the management and real estate investment services provided under our business management agreement and to facilitate the orderly transfer of the management of the managed properties under our property management agreement, as applicable.

•Vendors. Pursuant to our management agreements with RMR, RMR may from time to time negotiate on our behalf with certain third party vendors and suppliers for the procurement of goods and services to us. As part of this arrangement, we may enter agreements with RMR and other companies to which RMR or its subsidiaries provides management services for the purpose of obtaining more favorable terms from such vendors and suppliers.

•Investment Opportunities. Under our business management agreement with RMR, we acknowledge that RMR may engage in other activities or businesses and act as the manager to any other person or entity (including other REITs) even though such person or entity has investment policies and objectives similar to ours and we are not entitled to preferential treatment in receiving information, recommendations and other services from RMR.

In January 2025, in connection with a $100,000 credit agreement and related security agreement entered into by RMR and certain of its subsidiaries with Citibank, N.A., or Citibank, and the other lenders party thereto, we consented to the pledge and assignment of RMR’s interest in our management agreements under the security agreement. Pursuant to the consent, we agreed, among other things, that upon notice that an event of default under the RMR credit agreement has occurred and is continuing, we will continue to make all payments under our management agreements in accordance with the instructions of Citibank, and that if there is an event of default by RMR under our management agreements that would allow us to terminate or suspend our obligations, we will not terminate or suspend without notice to Citibank and provide Citibank 30 days to cure the default on RMR’s behalf. The consent was approved by our Independent Trustees.

For the years ended December 31, 2024, 2023 and 2022, the business management fees, property management fees and construction supervision fees recognized in our consolidated financial statements were as follows:

(1)The net business management fees we recognized for each of the years ended December 31, 2024, 2023 and 2022 reflect a reduction of $3,585 for the amortization of the liability we recorded in connection with our former investment in RMR Inc.

Note 9. Related Person Transactions

We have relationships and historical and continuing transactions with TA, Sonesta, RMR, RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. Following the TA Merger, TA ceased being a related party. RMR is a majority owned subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and is chair of the board of directors and a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR. John Murray, our other Managing Trustee and our former President and Chief Executive Officer, also serves as an officer and employee of RMR and as president and chief executive officer of Sonesta. In addition, each of our other officers serves as an officer of RMR. Some of our Independent Trustees also serve as independent trustees of other public companies to which RMR or its subsidiaries provide management services. Adam Portnoy serves as chair of the boards and as a managing trustee of these public companies. Other officers of RMR, including Mr. Murray and certain of our officers, serve as managing trustees or officers of certain of these companies.

Our Manager, RMR. We havetwo agreements with RMR to provide management services to us. See Note 8 for further information regarding our management agreements with RMR.

Share Awards to RMR Employees. As described in Note 7, we award shares to our officers and other employees of RMR annually. Generally, one fifth of these awards vest on the award date and one fifth vests on each of the next four anniversaries of the award dates. In certain instances, we may accelerate the vesting of an award, such as in connection with the award holder’s retirement as an officer of us or an officer or employee of RMR. These awards to RMR employees are in addition to the share awards to our Managing Trustees, as Trustee compensation, and the fees we paid to RMR. See Note 7 for information regarding our share awards activity as well as certain share purchases we made in connection with share award recipients satisfying tax withholding obligations on the vesting of share awards.

TA. We lease 175 of our travel centers to TA under the TA leases. RMR provides management services to us and, until the TA Merger, provided services to TA, and Mr. Portnoy, until the TA Merger, also served as the chair of the board of directors and as a managing director of TA and, as of immediately prior to the TA Merger, beneficially owned 661,506 shares of TA common stock (including through RMR), representing approximately 4.4% of TA’s outstanding shares of common stock.

See Notes 4 and 5 for further information regarding our relationships, agreements and transactions with TA.

Sonesta. Sonesta is a private company of which Adam Portnoy, one of our Managing Trustees, is a director and the controlling stockholder. One of Sonesta’s other directors and president and chief executive officer is our other Managing Trustee and former President and Chief Executive Officer, and Sonesta’s other director serves as one of RMR Inc.’s managing directors, as RMR’s and RMR Inc.’s executive vice president, general counsel and secretary and as our Secretary. Certain other officers and employees of Sonesta are former officers and employees of RMR. RMR also provides certain services to Sonesta. As of December 31, 2024, we owned 34% of Sonesta’s outstanding shares of common stock and Sonesta managed 181 of our hotels. See Notes 4 and 5 for further information regarding our relationships, agreements and transactions with Sonesta.

Note 10. Income Taxes

Our provision (benefit) for income taxes consists of the following:

A reconciliation of our effective tax rate and the current U.S. Federal statutory income tax rate is as follows:

Deferred income tax balances generally reflect the net tax effects of temporary differences between the carrying amounts of certain of our assets and liabilities in our consolidated balance sheets and the amounts used for income tax purposes and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. In December 2023, our subsidiary which operates in Puerto Rico elected to be taxed as a corporation for purposes of Puerto Rico tax law. This election increased the entity’s tax rate in Puerto Rico from 29.0% to 37.5%. The result of this change is primarily offset by available tax concessions in Puerto Rico. Significant components of our deferred tax assets and liabilities are as follows:

Net deferred tax liabilities are included in accounts payable and other liabilities in our consolidated balance sheets.

At December 31, 2024 and 2023, our consolidated TRS had a net deferred tax asset, prior to any valuation allowance, of $141,642 and $114,145, respectively, which consists primarily of the tax benefit of net operating loss carryforwards and tax credits. Because of the uncertainty surrounding our ability to realize the future benefit, we have provided a 100% valuation allowance against certain deferred tax assets as of December 31, 2024 and 2023. As of December 31, 2024 and 2023, our consolidated TRS had net operating loss carryforwards for federal income tax purposes of approximately $556,778 and $442,560, respectively, which partially expire starting in 2027. At December 31, 2024 and 2023, we recorded a deferred tax liability of $8,073 and $8,162, respectively, as a result of the book value to tax basis difference related to the accounting of an insurance settlement in 2021.

At December 31, 2024 and 2023, we, excluding our subsidiaries, had net operating loss carryforwards for federal income tax purposes of approximately $579,886 and $514,568, respectively, of which certain losses incurred prior to 2018 partially expire starting in 2027.

Note 11. Concentration

Geographic Concentration

At December 31, 2024, our 948 properties were located in 46 states in the United States, plus the District of Columbia, Ontario, Canada and Puerto Rico. Between 5% and 13% of our properties, by investment, were located in each of California, Texas, Florida, Illinois and Georgia. Ourtwo hotels in Ontario, Canada and our hotel in Puerto Rico represent 3.1% of our hotels, by investment, in the aggregate at December 31, 2024.

Credit Concentration

As of December 31, 2024, Sonesta operated 181 of our hotels and TA leased 175 of our net lease properties, representing 50.0% and 28.7%, respectively, of our investment. See Notes 4 and 9 for a discussion of our Sonesta and TA agreements.

Note 12. Segment Information

Our operating segments are based on our internal reporting structure and property type and are aligned with how our CODM reviews the operating results to allocate resources and assess segment performance. The CODM is our President and Chief Investment Officer. Ourtwo reportable segments are hotel investments and net lease investments. Our hotel investments segment consists of hotels managed by subsidiaries of Sonesta, Hyatt, Radisson and IHG. Our net lease investments segment consists of service-focused retail net lease properties, including travel centers leased to TA, our largest tenant.

The significant expense categories and amounts presented below align with the segment-level information that is regularly provided to our CODM. Our CODM reviews operating and financial results, including net income (loss) and its components, to allocate resources and assess segment performance. The accounting policies of our reportable segments are the same as those described in Note 2. The tables below present information about our segments.

(3) Other segment items for each reportable segment include transaction related costs, gains and losses on asset impairment and sale of real estate and interest income, as applicable.

(3) Other segment items for each reportable segment include gains and losses on asset impairment and sale of real estate and interest income, as applicable.

(3) Other segment items for each reportable segment include gains and losses on asset impairment and sale of real estate and interest income, as applicable.

Note 13. Fair Value of Assets and Liabilities

The table below presents certain of our assets carried at fair value at December 31, 2024, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.

(1)We recorded impairment charges totaling $13,641 during the year ended December 31, 2024, to reduce the carrying value ofthree hotels andtwo net lease properties in our consolidated balance sheet to their estimated fair value, less estimated costs to sell of $687, based on negotiated sales prices with third party buyers (Level 2 inputs as defined in the fair value hierarchy under GAAP).

(2)We recorded impairment charges totaling $4,512 during the year ended December 31, 2024, to reduce the carrying value ofone net lease property in our consolidated balance sheet to their estimated fair value, less estimated costs to sell of $68, based on brokers’ opinion of values (Level 3 inputs as defined in the fair value hierarchy under GAAP).

(3)We recorded impairment charges totaling $4,285 during the year ended December 31, 2024, to reduce the carrying value ofone net lease property in our consolidated balance sheet to its estimated fair value. We determined the estimated fair value of this property by discounting expected future cash flows based on prevailing market rents and including an exit capitalization rate to determine the final year of cash flows. Our assessment to determine the estimated fair value of this property used significant unobservable inputs (Level 3 inputs as defined in the fair value hierarchy under GAAP) including a discount rate of 7.0% and an exit capitalization rate of 6.3%.

In addition to the assets included in the table above, our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, revolving credit facility, net lease mortgage notes, senior notes and security deposits. At December 31, 2024 and 2023, the fair values of these financial instruments approximated their carrying values in our consolidated balance sheets due to their short-term nature or floating interest rates, except as follows:

(1)Carrying value includes unamortized discounts, premiums and certain debt issuance costs.

At December 31, 2024 and 2023, we estimated the fair values of our senior notes using an average of the bid and ask price of our then outstanding issuances of senior notes (Level 2 inputs). At December 31, 2024 and 2023, we estimated the fair value of our net lease mortgage notes using discounted cash flow analyses and current prevailing market rates as of the measurement date (Level 3 inputs). As Level 3 inputs are unobservable, our estimated value may differ materially from the actual fair value.