Q - Service Properties Trust

Previous wording

We are a REIT organized under the laws of the State of Maryland. As of March 31, 2025, we owned 941 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 June 30, 2025, we owned 942 properties in 46 states, the District of Columbia, Canada and Puerto Rico.

Previous wording

Management Agreements and Leases. At March 31, 2025, we owned 202 hotels operated under four agreements. We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At March 31, 2025, we also owned 739 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 condensed consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and net lease operating expenses from our net lease properties.

Current wording

Management Agreements and Leases. At June 30, 2025, we owned 200 hotels operated under four agreements. We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At June 30, 2025, we also owned 742 service-focused retail properties leased to 174 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. Our condensed consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and net lease operating expenses from our net lease properties.

Previous wording

Hotel Portfolio. As of March 31, 2025, we owned 202 hotels. During the three months ended March 31, 2025, 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 2024 periods. Our hotels produced increases in ADR and outpaced the industry increases in RevPAR, which we believe is partially a result of renovation disruption in the 2024 period.

Current wording

Hotel Portfolio. As of June 30, 2025, we owned 200 hotels. During the three and six months ended June 30, 2025, the U.S. hotel industry generally realized increases in average daily rate, or ADR, and decreases in revenue per available room, or RevPAR, compared to the corresponding 2024 periods. Our hotels produced increases in ADR and RevPAR, which we believe is partially a result of renovation disruption in the 2024 period.

Previous wording

Comparable Hotels Data. We present occupancy, ADR and RevPAR 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 each of the three months ended March 31, 2025 and 2024, our comparable results exclude one hotel that suspended operations during the periods presented. The following table provides a summary of these revenue metrics for the periods presented.

Current wording

Comparable Hotels Data. We present occupancy, ADR and RevPAR 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. The following table provides a summary of these revenue metrics for the periods presented.

Previous wording

Net Lease Portfolio. As of March 31, 2025, we owned 739 service-focused retail net lease properties with an aggregate of 13,189,476 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 $380,568. Our net lease properties were 97.8% occupied as of March 31, 2025 with a weighted (by annual minimum rent) average lease term of 7.8 years, operating under 136 brands in 21 distinct industries. TA is our largest tenant and as of March 31, 2025, 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.

Current wording

Net Lease Portfolio. As of June 30, 2025, we owned 742 service-focused retail net lease properties with an aggregate of 13,162,020 square feet leased to 174 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $386,521. Our net lease properties were 97.3% occupied as of June 30, 2025 with a weighted (by annual minimum rent) average lease term of 7.6 years, operating under 136 brands in 21 distinct industries. TA is our largest tenant and as of June 30, 2025, leased 175 of our travel centers under five master leases that expire in 2033 and require annual minimum rents of $264,262. In addition, TA receives an annual credit of $25,000 as a result of prepaid rent. BP Corporation North America Inc. guarantees payment under the TA leases, subject to a cap.

Previous wording

Hotel operating revenues. The decrease in hotel operating revenues is primarily a result of our sales of certain hotels since January 1, 2024 ($7,798), partially offset by increases in occupancy and average rates at certain hotels during the 2025 period ($6,525). Additional operating statistics of our hotels are included in the tables beginning on page 32.

Current wording

Hotel operating revenues. The decrease in hotel operating revenues is primarily a result of our sales of certain hotels since April 1, 2024 ($11,654), partially offset by increases in occupancy and average rates at certain hotels during the 2025 period ($3,573). Additional operating statistics of our hotels are included in the tables beginning on page 38.

Previous wording

Rental income. The increase in rental income is primarily a result of higher rental income recognized at certain of our net lease properties ($710), partially offset by our sales of certain net lease properties since January 1, 2024 ($508).

Current wording

Rental income. The decrease in rental income is primarily a result of lower rental income recognized in the 2025 period ($1,423) and the sale of certain net lease properties since April 1, 2024 ($271), partially offset by our acquisitions of certain net lease properties since April 1, 2024 ($263).

Previous wording

Hotel operating expenses. The increase in hotel operating expenses is primarily a result of increases in wages and benefits ($6,967) and other operating expenses ($2,697) in the 2025 period, partially offset by our sales of certain hotels since January 1, 2024 ($8,910).

Current wording

Hotel operating expenses. The increase in hotel operating expenses is primarily a result of increases in wages and benefits ($8,496) and other operating expenses ($3,954) in the 2025 period, partially offset by our sales of certain hotels since April 1, 2024 ($11,784).

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, 2024 ($2,129) and our sale of certain net lease properties since January 1, 2024 ($535).

Current 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 April 1, 2024 ($3,308) and our sale of certain net lease properties since April 1, 2024 ($401).

Previous wording

Loss on asset impairment. We recorded a $37,067 loss on asset impairment during the 2025 period to reduce the carrying value of 16 hotels to their estimated fair value less costs to sell. We recorded a $2,451 loss on asset impairment during the 2024 period to reduce the carrying value of five net lease properties to their estimated fair value less costs to sell.

Current wording

Loss on asset impairment. We recorded a $17,654 loss on asset impairment during the 2025 period to reduce the carrying value of 17 hotels and two net lease properties to their estimated fair value less costs to sell. We recorded a $34,887 loss on asset impairment during the 2024 period to reduce the carrying value of eight hotels and three net lease properties to their estimated fair value less costs to sell.

Previous wording

Income tax expense. The decrease in income tax expense is primarily due to a decrease in state tax expense ($268), partially offset by an increase in foreign tax expense ($104) during the 2025 period.

Current wording

Income tax expense. The decrease in income tax expense is primarily due to a decrease in foreign tax expense ($126), partially offset by an increase in state tax expense ($59) during the 2025 period.

Previous wording

Net lease operating expenses. The increase in net lease operating expenses is primarily the result of increased property management fees ($594) and other operating expenses ($311) in the 2025 period.

Current wording

Net lease operating expenses. The increase in net lease operating expenses is primarily the result of increased property management fees ($1,208) and other operating expenses at certain net lease properties ($178) in the 2025 period.

Previous wording

Depreciation and amortization - hotels. The decrease in depreciation and amortization - hotels is primarily a result of certain of our depreciable assets becoming fully depreciated since January 1, 2024 ($5,769) and our sale of certain hotels since January 1, 2024 ($2,498), partially offset by depreciation and amortization related to capital expenditures made since January 1, 2024 ($6,924).

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, 2024 ($5,437) and certain of our depreciable assets becoming fully depreciated since January 1, 2024 ($936).

Previous wording

General and administrative. The decrease in general and administrative costs is primarily due to decreases in business management fees ($827) and other professional fees ($123) in the 2025 period.

Current wording

General and administrative. The decrease in general and administrative costs is primarily due to decreases in business management fees ($1,367) and other professional fees ($46) in the 2025 period.

Previous wording

Gain (loss) on sale of real estate, net. We recorded a $746 net gain on sale of real estate during the 2025 period in connection with the sales of four hotels and three net lease properties. We recorded a $2,963 net loss on sale of real estate during the 2024 period in connection with the sales of one hotel and three net lease properties.

Current wording

Gain (loss) on sale of real estate, net. We recorded a $590 net gain on sale of real estate during the 2025 period in connection with the sale of six hotels and seven net lease properties. We recorded a $2,995 loss on sale of real estate during the 2024 period in connection with the sale of one hotel and three net lease properties.

Previous wording

As of March 31, 2025, all 202 of our hotels were managed by four hotel operating companies. Our 739 service-focused retail net lease properties were leased to 175 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 March 31, 2025, Sonesta is our largest hotel manager (177 hotels) and TA is our largest tenant (175 travel centers).

Current wording

As of June 30, 2025, all 200 of our hotels were managed by four hotel operating companies. Our 742 service-focused retail net lease properties were leased to 174 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 June 30, 2025, Sonesta is our largest hotel manager (175 hotels) and TA is our largest tenant (175 travel centers).

Previous wording

We recorded reserves for uncollectable amounts and reduced rental income by $235 and $665 for the three months ended March 31, 2025 and 2024, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $4,959 and $5,058 as of March 31, 2025 and December 31, 2024, respectively, included in other assets, net in our condensed consolidated balance sheets.

Current wording

We recorded reserves for uncollectable amounts and reduced rental income by $1,142 and $1,377 for the three and six months ended June 30, 2025, respectively, based on our assessment of the collectability of rents. We recorded reserves for uncollectable amounts and reduced rental income by $377 and $1,042 for the three and six months ended June 30, 2024, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $6,016 and $5,058 as of June 30, 2025 and December 31, 2024, respectively, included in other assets, net in our condensed consolidated balance sheets.

Previous 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 2.07x and 2.37x as of March 31, 2025 and 2024, 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 2.04x and 2.25x as of June 30, 2025 and 2024, 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 and VFN. 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.

Current wording

Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are returns generated from our hotels, rents from our net lease portfolio and borrowings under our revolving credit facility and VFN. We receive hotel 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 returns and rents to us when due, and, as a result, our cash flows and net income would decline. As of June 30, 2025, we did not meet the 1.50x consolidated income available for debt service to debt service ratio level necessary under our senior notes indentures to incur additional debt, and as a result, we will not be able to incur additional debt while the ratio is below this requirement. We may sell additional properties, access equity markets, refinance our debt with unsecured and/or secured debt, or seek other sources of capital if favorable conditions exist for us in order to enhance our liquidity, reduce debt and fund cash needs.

Previous wording

The change from cash flow used in operating activities in the 2024 period to cash flow provided by operating activities in the 2025 period is primarily due to lower cash paid for interest in the 2025 period. The decrease in cash flow used in investing activities in the 2025 period is primarily due to higher proceeds from the sale of real estate in the 2025 period and decreased real estate improvements during the 2025 period. The increase in cash flow used in financing activities in the 2025 period is primarily due to higher net borrowings in the 2025 period, partially offset by lower distributions to common shareholders during the 2025 period.

Current wording

The decrease in cash flow provided by operating activities in the 2025 period is primarily due to lower returns from our hotel portfolio in the 2025 period. The decrease in cash flow used in investing activities in the 2025 period is primarily due to higher proceeds from the sale of real estate in the 2025 period and decreased real estate improvements, partially offset by real estate acquisitions during the 2025 period. The decrease in cash flow used in financing activities in the 2025 period is primarily due to lower distributions to common shareholders during the 2025 period.

Previous wording

We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements. We lease 202 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 200 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 three months ended March 31, 2025, we funded $44,053 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $210,000 during the last nine months of 2025 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 six months ended June 30, 2025, we funded $82,838 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $170,000 during the last six months of 2025 and $150,000 in 2026 for capital improvements to certain hotels using cash on hand.

Previous wording

Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements. We own all the FF&E escrows for our hotels. During the three months ended March 31, 2025, certain of our hotel managers deposited $971 to these accounts and spent $1,124 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of March 31, 2025, there was $5,289 on deposit in these escrow accounts, which was held directly by us and is reflected in our condensed consolidated balance sheets as restricted cash.

Current wording

Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements. We own all the FF&E escrows for our hotels. During the six months ended June 30, 2025, certain of our hotel managers deposited $2,710 to these accounts and spent $2,064 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of June 30, 2025, there was $6,089 on deposit in these escrow accounts, which was held directly by us and is reflected in our condensed consolidated balance sheets as restricted cash.

Previous wording

Our net lease portfolio leases do not require FF&E escrow deposits and tenants under these leases are generally required to maintain the leased properties, including structural and non-structural components. We may provide tenant improvement allowances to tenants in certain cases or may develop sites with the intent to lease them. During the three months ended March 31, 2025, we funded $748 for capital improvements to our net lease properties. As of March 31, 2025, we had $1,382 of unspent leasing-related obligations related to certain of our net lease tenants.

Current wording

Our net lease portfolio leases do not require FF&E escrow deposits and tenants under these leases are generally required to maintain the leased properties, including structural and non-structural components. We may provide tenant improvement allowances to tenants in certain cases or may develop sites with the intent to lease them. During the six months ended June 30, 2025, we funded $982 for capital improvements to our net lease properties. As of June 30, 2025, we had $3,433 of unspent leasing-related obligations related to certain of our net lease tenants.

Previous wording

During the three months ended March 31, 2025, we sold seven properties for a combined sales price of $22,700, excluding closing costs. From April 1, 2025 through May 2, 2025, we sold one net lease property with 2,053 square feet for a sales price of $365, excluding closing costs. We have also entered into agreements to sell four hotels with a total of 492 keys for a combined sales price of $26,500, excluding closing costs, and one net lease property with 1,122 square feet for a sales price of $395, 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 are at various stages of selling 115 hotels with a total of 15,420 keys and six net lease properties with a total 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, including to repay debt.

Current wording

During the six months ended June 30, 2025, we sold 13 properties for a combined sales price of $49,296, excluding closing costs. From July 1, 2025 through August 1, 2025, we sold two hotels with a total of 234 keys for a combined sales price of $13,100, excluding closing costs, and one net lease property with 33,106 square feet for a sales price of $850, excluding closing costs. We have also entered into agreements to sell 114 hotels with a total of 14,925 keys for a combined sales price of $919,952, excluding closing costs, and two net lease properties with 10,301 square feet for a combined sales price of $1,395, 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 are at various stages of selling six net lease properties with a total of 80,249 square feet. We believe it is probable that the sales of the hotel properties will be completed in the second half of 2025 and the sales of the remainder of these properties will be completed within one year. We expect to use the net sales proceeds from these sales for general business purposes, including to repay debt.

Previous wording

From April 1, 2025 through May 2, 2025, we acquired three net lease properties with a total of 18,218 square feet for a combined purchase price of $12,597, excluding closing costs. We have also entered into agreements to acquire six net lease properties with a total of 69,236 square feet for a combined purchase price of $20,734, excluding closing costs. These pending acquisitions are subject to conditions; accordingly, we cannot be sure that we will complete these acquisitions, that these acquisitions will not be delayed or that the terms will not change.

Current wording

During the six months ended June 30, 2025, we acquired seven net lease properties with a total of 83,436 square feet for a combined purchase price of $29,923, excluding closing costs, using cash on hand. From July 1, 2025 through August 1, 2025, we acquired seven net lease properties with a total of 54,141 square feet for a combined purchase price of $14,524, excluding closing costs, using cash on hand. We have also entered into agreements to acquire six net lease properties with a total of 13,250 square feet for a combined purchase price of $10,254, excluding closing costs. We currently expect to fund these acquisitions using cash on hand. These pending acquisitions are subject to conditions; accordingly, we cannot be sure that we will complete these acquisitions, that these acquisitions will not be delayed or that the terms will not change.

Previous wording

During the three months ended March 31, 2025, we declared and paid a regular quarterly distribution to common shareholders using cash on hand as follows:

Current wording

During the six months ended June 30, 2025, we declared and paid a regular quarterly distribution to common shareholders using cash on hand as follows:

Previous wording

On April 10, 2025, we declared a regular quarterly distribution to common shareholders of record as of April 22, 2025 of $0.01 per common share, or approximately $1,666. We expect to pay this distribution on or about May 15, 2025 using cash on hand.

Current wording

On July 10, 2025, we declared a regular quarterly distribution to common shareholders of record as of July 21, 2025 of $0.01 per common share, or approximately $1,669. We expect to pay this distribution on or about August 14, 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 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.

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. We can borrow, subject to meeting certain financial covenants, 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 our revolving credit facility is based on SOFR plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of March 31, 2025. We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of March 31, 2025 and 2024, the annual interest rate payable on borrowings under our revolving credit facility was 6.91% and 7.84%, respectively. As of both March 31, 2025 and May 2, 2025, we had $50,000 outstanding under our revolving credit facility and $600,000 available for borrowings.

Current wording

Interest payable on drawings under our revolving credit facility is based on SOFR plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of June 30, 2025. We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of June 30, 2025 and 2024, the annual interest rate payable on borrowings under our revolving credit facility was 6.89% and 7.83%, respectively. As of June 30, 2025, we had $100,000 outstanding under our revolving credit facility and $550,000 available for borrowings. On July 1, 2025, we borrowed the remaining $550,000 available under our revolving credit facility as a precautionary measure to preserve financial flexibility. As of August 1, 2025, we remain fully drawn under our revolving credit facility.

Previous wording

As collateral for all loans and other obligations under the credit 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 67 properties, including 64 hotels and three net lease properties, with an aggregate undepreciated book value of $1,691,230 as of March 31, 2025. During the three months ended March 31, 2025, we sold two hotels that previously 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.

Current wording

As collateral for all loans and other obligations under our revolving credit 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 certain properties, as discussed below.

Previous wording

In February 2025, we and our lenders amended the agreement governing 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 are required to maintain a 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: 47 hotels with an aggregate of 7,981 keys and an aggregate undepreciated book value of $1,375,449 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 book value of $598,908, will be added as collateral to our revolving credit facility. Of the hotels being released from the collateral pool, 36 hotels with an aggregate of 4,862 keys and an aggregate undepreciated book value of $655,514 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 wording

In February 2025, we and our lenders amended the agreement governing our revolving credit facility to reduce the minimum fixed charge coverage ratio covenant from 1.50x to 1.30x 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 are required to maintain a 1.50x minimum fixed charge coverage ratio 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: 47 hotels with an aggregate of 7,981 keys were released from the collateral pool and 35 travel centers leased to TA, which we refer to as TA Lease No. 5, were added as collateral to our revolving credit facility. Our disposition plan includes 36 hotels with an aggregate of 4,862 keys and an aggregate undepreciated book value of $650,093 that were released from the collateral pool. The collateral swap was completed in May 2025. As of June 30, 2025, our revolving credit facility was secured by 55 properties, including 17 hotels and 38 net lease properties, with an aggregate undepreciated book value of $900,148.

Previous wording

On January 27, 2025, the Issuer issued a variable funding note secured by the 315 net lease properties that secure our existing $606,122 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. As of March 31, 2025, the annual interest rate payable on borrowings under the VFN was 6.16%. As of March 31, 2025, $45,000 was outstanding under the VFN.

Current wording

On January 27, 2025, the Issuer issued the VFN secured by the 314 net lease properties that secure our existing $605,632 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. As of June 30, 2025, the annual interest rate payable on borrowings under the VFN was 6.04%. The weighted average annual interest rate for borrowings under the VFN was 6.05% for the three and six months ended June 30, 2025, respectively. As of both June 30, 2025 and August 1, 2025, $45,000 was outstanding under the VFN.

Previous wording

We currently expect to use cash on hand, the cash flows from our operations, borrowings under our revolving credit facility or VFN, net proceeds from any asset sales and net proceeds of offerings of equity or the incurrence of debt to fund our operations, capital expenditures, investments, future debt maturities, distributions to our shareholders and other general business purposes.

Current wording

We currently expect to use cash on hand, the cash flows from our operations, borrowings available under our revolving credit facility, if any, or VFN, net proceeds from any asset sales and net proceeds of offerings of equity or the incurrence of debt to fund our operations, capital expenditures, investments, future debt maturities, distributions to our shareholders and other general business purposes.

Previous wording

While we believe we will generally have access to various types of financings, including debt or equity, to fund our future acquisitions and to pay our debts and other obligations, we cannot be sure that we will be able to complete any debt or equity offerings or other types of financings or that our cost of any future public or private financings will not increase.

Current wording

While we believe we will generally have access to various types of financings, including debt or equity, to fund our future acquisitions and to pay our debts and other obligations, we cannot be sure that we will be able to complete any debt or equity offerings or other types of financings or that our cost of any future public or private financings will not increase. Also, as noted above, we are limited in our ability to incur additional debt pursuant to our debt agreements and are not permitted under our debt agreements to incur any debt while below the 1.50x consolidated income available for debt service to debt service ratio requirement under our public debt covenants as described below.

Previous wording

Our debt obligations at March 31, 2025 consisted of $50,000 of borrowings outstanding under our $650,000 revolving credit facility, $5,075,000 aggregate principal amounts of senior notes, $606,122 aggregate principal amounts of mortgage notes and $45,000 of borrowings outstanding under the VFN. For further information regarding our indebtedness, see Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Our debt obligations at June 30, 2025 consisted of $100,000 of borrowings outstanding under our $650,000 revolving credit facility, $5,075,000 aggregate principal amounts of senior notes, $605,632 aggregate principal amounts of net lease mortgage notes and $45,000 of borrowings outstanding under the VFN. For further information regarding our indebtedness, see Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Our publicly and privately issued senior notes are governed by our indentures and related supplements. These indentures and related supplements and our credit agreement contain covenants that generally restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios. Our credit agreement, net lease mortgage notes, secured senior notes and unsecured senior notes, indentures and their supplements 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. As of March 31, 2025, we believe we were in compliance with all of the covenants under our indentures and their supplements, net lease mortgage notes and our credit agreement.

Current wording

Our publicly and privately issued senior notes are governed by our indentures and related supplements. These indentures and related supplements and our credit agreement contain covenants that generally restrict our ability to incur debt, including debt secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios. Our credit agreement, net lease mortgage notes, secured senior notes and unsecured senior notes, indentures and their supplements 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. As of June 30, 2025, we believe we were in compliance with all of the covenants under our indentures and their supplements, net lease mortgage notes and our credit agreement, except as noted above and below.

Previous wording

As of March 31, 2025, adjusted total assets for covenant purposes as defined in our senior notes indentures were $10,462,373 and assets encumbered under our revolving credit facility, serving as collateral for our net lease mortgage notes or secured senior notes represented $3,466,968 of adjusted total assets, as defined in our senior notes indentures. Our unencumbered hotels, travel centers, other net lease properties and other corporate assets represent $4,389,459, $1,579,070, $819,950 and $206,926 of adjusted total assets, respectively.

Current wording

As of June 30, 2025, adjusted total assets for covenant purposes as defined in our senior notes indentures were $10,414,487 and assets encumbered under our revolving credit facility, serving as collateral for our net lease mortgage notes or secured senior notes represented $2,670,993 of adjusted total assets, as defined in our senior notes indentures. Our unencumbered hotels, travel centers, other net lease properties and other corporate assets represent $5,802,780, $916,092, $833,832 and $190,790 of adjusted total assets, respectively.

Previous wording

(1)Includes $875,222 of accumulated depreciation on assets of properties held for sale.

Current wording

(1)Includes $865,039 of accumulated depreciation on assets of properties held for sale.

Previous wording

Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our credit agreement and senior notes indentures.

Current wording

Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our debt agreements.