About My Writing: I am currently focused on income investing through either common shares, preferred shares, or bonds. I will occasionally break away and write about the economy at large or a special situation involving a company I've been researching in. I target two articles per week for publication on Monday and Tuesday.About My Background: Bachelors in history/political science, Masters in Business Administration with a specialization in Finance and Economics. I enjoy numbers. I have been investing sinc ...

Search fieldEntering text into the input field will update the search result belowEntering text into the input field will update the search result below ...

Core Viewpoint - Service Properties Trust is conducting its Q2 2025 earnings conference call to discuss business performance and future outlook [2][3]. Group 1: Company Overview - The conference call features key company executives including Chris Bilotto (President and CEO), Jesse Abair (Vice President), and Brian Donley (CFO) [3]. - The call is being recorded and is intended for investors and analysts to gain insights into the company's performance [2]. Group 2: Forward-Looking Statements - The conference call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, indicating that actual results may differ from projections [4]. - The company does not commit to revising or publicly releasing updates to the forward-looking statements made during the call [5].

Financial Data and Key Metrics Changes - For Q2 2025, normalized funds from operations (FFO) were $57.6 million or $0.35 per share, down from $0.45 per share in the prior year quarter [20] - Adjusted EBITDAre decreased by $7.7 million year over year to $163.8 million, primarily impacted by an $8.8 million increase in interest expense and lower hotel returns [20] - The gross operating profit margin percentage declined by 300 basis points to 30.2% [20] Business Line Data and Key Metrics Changes - Hotel level EBITDA declined during the quarter due to elevated labor costs and inflationary pressures, with a notable $2.4 million of negative EBITDA attributed to renovation disruptions [11][20] - The 84 hotels expected to be retained generated RevPAR of $121, an increase of 1.5% year over year, but adjusted hotel EBITDA decreased by $7 million or 11.7% year over year [21] - The net lease portfolio consists of 742 service-oriented retail net lease properties with annual minimum rents of $387 million, over 97% leased with a weighted average lease term of 7.6 years [16] Market Data and Key Metrics Changes - RevPAR increased by 40 basis points year over year, outperforming the broader industry by 90 basis points [10] - The company is on track to complete 122 hotel sales totaling nearly 16,000 keys for gross proceeds of $966 million, implying a valuation of 18.4 times hotel EBITDA of $53 million over the trailing twelve months [9][20] Company Strategy and Development Direction - The company is transforming towards becoming a predominantly net lease REIT, focusing on divesting select hotels while retaining full-service, urban, and leisure-oriented properties [7][13] - The strategic shift aims to create a portfolio with minimal capital expenditure needs and stable cash flows, enhancing tenant and geographic diversity [14][18] - The company plans to maintain its capital recycling and deleveraging strategy into 2026, pursuing further hotel dispositions as market conditions improve [13] Management's Comments on Operating Environment and Future Outlook - Management noted softness in Q3, particularly in August, with expectations for a seasonal drop in leisure travel activity [28][29] - The company anticipates a sequential decline in Q3 due to seasonality and recent headwinds in the travel and lodging industries, projecting RevPAR of $98 to $101 [22] - Management expressed confidence in the pricing achieved for hotel sales, indicating strong participation in those assets [55] Other Important Information - The company fully drew down its $650 million credit facility as a precautionary measure to preserve liquidity [24] - The expected proceeds from the sale of 114 hotels will be used to repay $450 million of senior unsecured notes maturing in October 2026 [24] - Capital expenditures for 2025 are expected to be approximately $250 million, with a significant reduction to $150 million in 2026 [26] Q&A Session Summary Question: Can you expand on the renovation disruption in Q3 and headwinds in travel and lodging? - Management noted softness in Q3, particularly in August, with a seasonal drop in leisure travel expected [28][29] Question: Is the $150 million CapEx for 2026 elevated compared to normal? - Management indicated that the $150 million represents a significant reduction from previous years, aiming for a long-term CapEx run rate closer to 10% to 12% of total revenues [30][31] Question: What is the status of the $900 million hotel sales? - Management confirmed that due diligence is complete, and deposits are hard, with incremental closings expected between Q3 and Q4 [48][49] Question: What is the outlook for net lease investments? - Management indicated that net lease acquisitions could ramp up post-closing of hotel dispositions, with a steady state expected based on current run rates [45][46] Question: How does the company plan to address debt maturities? - Management plans to use proceeds from asset sales and operational improvements to address upcoming debt maturities [61][62]

Core Insights - Service Properties (SVC) reported revenue of $503.44 million for the quarter ended June 2025, reflecting a year-over-year decline of 1.9% [1] - The earnings per share (EPS) for the same period was $0.35, a significant improvement from -$0.45 a year ago [1] - The reported revenue exceeded the Zacks Consensus Estimate of $497.77 million by 1.14%, while the EPS surprise was 2.94% compared to the consensus estimate of $0.34 [1] Revenue Breakdown - Hotel operating revenues were $404.41 million, slightly above the average estimate of $397.67 million, but represented a year-over-year decline of 2% [4] - Rental income was reported at $99.03 million, which was below the average estimate of $100.12 million, showing a year-over-year decrease of 1.4% [4] Stock Performance - Over the past month, shares of Service Properties have returned +3.5%, outperforming the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Performance - Service Properties (SVC) reported quarterly funds from operations (FFO) of $0.35 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, but down from $0.45 per share a year ago, indicating a FFO surprise of +2.94% [1] - The company posted revenues of $503.44 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.14%, although this is a decrease from year-ago revenues of $512.95 million [2] Market Performance - Service Properties shares have increased approximately 3.5% since the beginning of the year, compared to the S&P 500's gain of 7.6% [3] - The current status of estimate revisions for Service Properties is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6] Future Outlook - The current consensus FFO estimate for the upcoming quarter is $0.30 on revenues of $474.76 million, and for the current fiscal year, it is $0.86 on revenues of $1.86 billion [7] - The outlook for the REIT and Equity Trust - Other industry is currently in the top 40% of over 250 Zacks industries, indicating a favorable environment for performance [8]

PART I. Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Service Properties Trust's unaudited condensed consolidated financial statements and accompanying notes for Q2 2025 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%E2%80%94%20June%2030%2C%202025%20and%20December%2031%2C%202024) This section provides a snapshot of the company's financial position at June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total assets | $6,932,512 | $7,119,558 | | Total liabilities | $6,236,568 | $6,267,685 | | Total shareholders' equity | $695,944 | $851,873 | - Total assets decreased by **$187,046 (2.6%)** from December 31, 2024, to June 30, 2025, primarily due to a decrease in real estate properties, net, and cash and cash equivalents, partially offset by an increase in assets of properties held for sale[8](index=8&type=chunk) - Shareholders' equity decreased by **$155,929 (18.3%)** from December 31, 2024, to June 30, 2025, mainly due to net losses and common distributions[9](index=9&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20%E2%80%94%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section details the company's financial performance for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income (Loss) (dollars in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $503,436 | $512,948 | $938,615 | $949,198 | | Total expenses | $438,599 | $474,447 | $885,901 | $890,320 | | Net loss | $(38,159) | $(73,850) | $(154,594) | $(152,233) | | Net loss per common share (basic and diluted) | $(0.23) | $(0.45) | $(0.93) | $(0.92) | - Net loss decreased by **$35,691 (48.3%)** for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to lower loss on asset impairment and absence of loss on early extinguishment of debt[10](index=10&type=chunk) - Net loss increased by **$2,361 (1.6%)** for the six months ended June 30, 2025, compared to the same period in 2024, mainly due to higher loss on asset impairment and increased interest expense[10](index=10&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20%E2%80%94%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section outlines changes in shareholders' equity for the periods ended June 30, 2025 and 2024 Condensed Consolidated Statements of Shareholders' Equity (dollars in thousands) | Metric | Balance at December 31, 2024 | Net Loss (6 months) | Distributions (6 months) | Balance at June 30, 2025 | | :--------------------------------- | :--------------------------- | :------------------ | :----------------------- | :----------------------- | | Total shareholders' equity | $851,873 | $(154,594) | $(3,333) | $695,944 | - Total shareholders' equity decreased from **$851,873 thousand** at December 31, 2024, to **$695,944 thousand** at June 30, 2025, primarily due to net losses and common distributions[11](index=11&type=chunk) - Common shares outstanding increased to **166,860,830** at June 30, 2025, from **166,636,537** at December 31, 2024, due to common share grants, partially offset by repurchases and forfeitures[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%94%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section presents the company's cash flow activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (dollars in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $38,193 | $42,893 | | Net cash used in investing activities | $(94,307) | $(142,799) | | Net cash used in financing activities | $(15,241) | $(68,468) | | Decrease in cash and cash equivalents and restricted cash | $(71,355) | $(168,374) | | Cash and cash equivalents and restricted cash at end of period | $86,031 | $29,456 | - Net cash provided by operating activities decreased by **$4,700 (10.9%)** in the first six months of 2025 compared to 2024, primarily due to lower returns from the hotel portfolio[14](index=14&type=chunk)[150](index=150&type=chunk) - Net cash used in investing activities decreased by **$48,492 (33.9%)** in the first six months of 2025, driven by higher proceeds from real estate sales and decreased real estate improvements, partially offset by acquisitions[14](index=14&type=chunk)[150](index=150&type=chunk) - Net cash used in financing activities decreased by **$53,227 (77.7%)** in the first six months of 2025, mainly due to lower distributions to common shareholders[14](index=14&type=chunk)[150](index=150&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, significant transactions, and segment information [Note 1. Organization and Basis of Presentation](index=9&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) This note describes Service Properties Trust's structure as a REIT and its investment portfolio - Service Properties Trust is a REIT that invests in **200 hotels** and **742 service-focused retail net lease properties** as of June 30, 2025[21](index=21&type=chunk) - The company consolidates its wholly-owned taxable REIT subsidiaries (TRSs) as variable interest entities (VIEs), with TRS assets totaling **$164,817 thousand** and liabilities totaling **$101,712 thousand** as of June 30, 2025[24](index=24&type=chunk) [Note 2. Recent Accounting Pronouncements](index=9&type=section&id=Note%202.%20Recent%20Accounting%20Pronouncements) This note discusses the company's evaluation of new accounting standards, including income tax and expense disaggregation disclosures - The company is evaluating the impact of ASU No. 2023-09 (Income Taxes) effective for annual periods beginning after December 15, 2024, which requires enhanced income tax disclosures[25](index=25&type=chunk) - The company is evaluating the impact of ASU 2024-03 (Income Statement - Expense Disaggregation Disclosures) effective for annual periods beginning after December 15, 2026, which requires disaggregation of specific expense categories[26](index=26&type=chunk) [Note 3. Revenue Recognition](index=11&type=section&id=Note%203.%20Revenue%20Recognition) This note explains the company's policies for recognizing hotel operating revenues and rental income from operating leases - Hotel operating revenues are recognized when goods and services are provided, while rental income from operating leases is recognized on a straight-line basis over the lease term[27](index=27&type=chunk)[28](index=28&type=chunk) Rental Income Adjustments (dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Straight-line rent adjustment | $2,683 | $4,778 | $6,561 | $10,546 | | Percentage rent | $501 | $471 | $1,347 | $1,015 | [Note 4. Per Common Share Amounts](index=11&type=section&id=Note%204.%20Per%20Common%20Share%20Amounts) This note details the calculation methods for basic and diluted earnings per common share - Basic earnings per common share are calculated using the two-class method, and diluted earnings per common share use the more dilutive of the two-class method or treasury stock method[30](index=30&type=chunk) - No dilutive common shares were included in the calculation for the three and six months ended June 30, 2025 and 2024, as they would have been antidilutive[30](index=30&type=chunk) [Note 5. Real Estate Properties](index=11&type=section&id=Note%205.%20Real%20Estate%20Properties) This note provides details on the company's real estate portfolio, including acquisitions, dispositions, and capital improvements - As of June 30, 2025, the company owned **200 hotels (35,101 rooms)** and **742 service-focused retail net lease properties (13,162,020 sq ft)**, with an aggregate undepreciated book value of **$9,541,028 thousand**[31](index=31&type=chunk) Capital Improvements (dollars in thousands) | Period | Capital Improvements | | :--------------------------------- | :------------------- | | Six months ended June 30, 2025 | $84,944 | | Six months ended June 30, 2024 | $135,124 | - During the six months ended June 30, 2025, the company acquired **seven net lease properties** for **$29,923 thousand** and sold **13 properties** for **$49,296 thousand**[33](index=33&type=chunk)[35](index=35&type=chunk) - As of June 30, 2025, **116 hotels** and **nine net lease properties** were classified as held for sale, with total assets of properties held for sale at **$849,100 thousand**[37](index=37&type=chunk) [Note 6. Management Agreements and Leases](index=13&type=section&id=Note%206.%20Management%20Agreements%20and%20Leases) This note describes the company's hotel management agreements and its net lease portfolio details - As of June 30, 2025, **200 hotels** were managed by Sonesta (**175 hotels**), Hyatt (**17 hotels**), Radisson (**7 hotels**), and IHG (**1 hotel**)[39](index=39&type=chunk)[40](index=40&type=chunk) - The Sonesta agreement, expiring January 31, 2037, provides for an annual owner's priority return and an additional **80%** of operating profits after certain deductions[42](index=42&type=chunk) Returns from Hotel Agreements (dollars in thousands) | Agreement | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sonesta | $65,518 | $75,130 | $83,687 | $102,505 | | Hyatt | $3,263 | $3,314 | $6,390 | $2,206 | | Radisson | $2,038 | $1,789 | $3,441 | $3,240 | | IHG | $776 | $1,536 | $3,019 | $3,129 | - The company plans to sell **122 Sonesta-managed hotels**, with agreements to amend and restate management agreements for the **59 retained hotels**, modifying fees and performance provisions[46](index=46&type=chunk)[49](index=49&type=chunk) - As of June 30, 2025, the net lease portfolio comprised **742 properties** with **$386,521 thousand** in annual minimum rents and a weighted average remaining lease term of **7.6 years**, with **97.3% occupancy**[52](index=52&type=chunk) - TA is the largest tenant, leasing **175 travel centers** with annual minimum rents of **$264,262 thousand**, guaranteed by BP Corporation North America Inc[53](index=53&type=chunk)[54](index=54&type=chunk) Reserves for Uncollectable Rents (dollars in thousands) | Period | Reserve Recorded (Reduction to Rental Income) | | :--------------------------------- | :-------------------------------------------- | | Three months ended June 30, 2025 | $1,142 | | Six months ended June 30, 2025 | $1,377 | | Three months ended June 30, 2024 | $377 | | Six months ended June 30, 2024 | $1,042 | [Note 7. Equity Method Investment](index=16&type=section&id=Note%207.%20Equity%20Method%20Investment) This note outlines the company's equity investment in Sonesta and related accounting treatment - The company owns **34%** of Sonesta's common stock, accounted for under the equity method, with a carrying value of **$111,653 thousand** at June 30, 2025[58](index=58&type=chunk)[59](index=59&type=chunk) Equity in Losses of an Investee (Sonesta) (dollars in thousands) | Period | Equity in Losses | | :--------------------------------- | :--------------- | | Three months ended June 30, 2025 | $526 | | Three months ended June 30, 2024 | $2,716 | | Six months ended June 30, 2025 | $4,473 | | Six months ended June 30, 2024 | $8,054 | - A liability of **$42,000 thousand** for the initial investment in Sonesta is being amortized as a reduction to hotel operating expenses, with an unamortized balance of **$28,753 thousand** at June 30, 2025[61](index=61&type=chunk) [Note 8. Indebtedness](index=18&type=section&id=Note%208.%20Indebtedness) This note details the company's principal debt obligations, including revolving credit, senior notes, and mortgage notes - Principal debt obligations at June 30, 2025, include **$100,000 thousand** under a **$650,000 thousand** revolving credit facility, **$4,075,000 thousand** in senior unsecured notes, **$1,000,000 thousand** in senior secured notes, **$605,632 thousand** in net lease mortgage notes, and **$45,000 thousand** under a variable funding note (VFN)[64](index=64&type=chunk) - The revolving credit facility matures on June 29, 2027, with interest based on SOFR plus a margin (**2.50%** as of June 30, 2025); as of August 1, 2025, the facility was fully drawn[65](index=65&type=chunk)[66](index=66&type=chunk) - The company announced the early redemption of **$350,000 thousand 5.25%** senior unsecured notes due 2026, expected around September 4, 2025[70](index=70&type=chunk) Net Lease Mortgage Notes Summary (dollars in thousands) | Note Class | Principal Outstanding as of June 30, 2025 | Coupon Rate | Maturity | | :--------------------------------- | :---------------------------------------- | :---------- | :------------- | | Class A | $301,441 | 5.15% | February 2028 | | Class B | $171,991 | 5.55% | February 2028 | | Class C | $132,200 | 6.70% | February 2028 | | Total / weighted average | $605,632 | 5.60% | | - The VFN, issued January 27, 2025, permits borrowings up to **$45,000 thousand**, maturing January 27, 2027, with interest based on SOFR plus a margin of **1.75%**[73](index=73&type=chunk) [Note 9. Shareholders' Equity](index=20&type=section&id=Note%209.%20Shareholders'%20Equity) This note describes changes in shareholders' equity, including common share awards and distributions - During the six months ended June 30, 2025, the company awarded **32,490 common shares** on March 26, 2025, and **40,425 common shares** on June 13, 2025, as part of Trustee compensation[74](index=74&type=chunk)[75](index=75&type=chunk) - The company purchased **29,956 common shares** during the six months ended June 30, 2025, to satisfy tax withholding obligations from former officers and employees[76](index=76&type=chunk) Common Share Distributions (dollars in thousands, except per share amounts) | Declaration Date | Record Date | Paid Date | Dividend Per Common Share | Total Distributions | | :--------------------------------- | :---------------- | :---------------- | :------------------------ | :------------------ | | January 16, 2025 | January 27, 2025 | February 20, 2025 | $0.01 | $1,666 | | April 10, 2025 | April 22, 2025 | May 15, 2025 | $0.01 | $1,667 | | Total (6 months) | | | $0.02 | $3,333 | [Note 10. Business and Property Management Agreements with RMR](index=20&type=section&id=Note%2010.%20Business%20and%20Property%20Management%20Agreements%20with%20RMR) This note explains the company's reliance on RMR for management services and associated fees - The company has no employees and relies on RMR for personnel and management services through a business management agreement and a property management agreement[79](index=79&type=chunk) Management Fees and Expense Reimbursements (dollars in thousands) | Financial Statement Line Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net business management fees | $6,900 | $7,440 | $13,830 | $15,197 | | Net lease operating expenses (property management) | $2,110 | $1,505 | $4,197 | $2,989 | | Construction supervision fees (capitalized) | $465 | $1,334 | $1,122 | $3,030 | | Expense reimbursement | $1,105 | $1,032 | $2,300 | $2,126 | - No incentive fees were included in net business management fees for the three and six months ended June 30, 2025, as they are based on common share total return for the three-year period ending December 31, 2025[83](index=83&type=chunk) [Note 11. Related Person Transactions](index=22&type=section&id=Note%2011.%20Related%20Person%20Transactions) This note discloses relationships and transactions with affiliated companies and key personnel - The company has relationships and transactions with Sonesta, RMR, RMR Inc., and other affiliated companies, with shared Trustees and officers[85](index=85&type=chunk) - Adam Portnoy, Chair of the Board, is the controlling shareholder of RMR Inc. and Sonesta, highlighting significant related party influence[85](index=85&type=chunk)[87](index=87&type=chunk) [Note 12. Income Taxes](index=22&type=section&id=Note%2012.%20Income%20Taxes) This note explains the company's income tax status as a REIT and its taxable REIT subsidiaries - As a REIT, the company is generally not subject to federal and most state income taxation, but its wholly-owned TRSs are subject to federal, state, and foreign income taxes[89](index=89&type=chunk) Income Tax Expense (dollars in thousands) | Period | Income Tax Expense | | :--------------------------------- | :----------------- | | Three months ended June 30, 2025 | $457 | | Three months ended June 30, 2024 | $524 | | Six months ended June 30, 2025 | $1,300 | | Six months ended June 30, 2024 | $1,531 | [Note 13. Segment Information](index=23&type=section&id=Note%2013.%20Segment%20Information) This note provides financial data for the company's hotel and net lease investment segments - The company operates in two reportable segments: hotel investments (managed by Sonesta, Hyatt, Radisson, IHG) and net lease investments (service-focused retail properties, including TA travel centers)[92](index=92&type=chunk) Segment Revenues and Profit (Loss) (dollars in thousands) | Metric | Hotels (3 months) | Net Lease (3 months) | Total (3 months) | Hotels (6 months) | Net Lease (6 months) | Total (6 months) | | :--------------------------------- | :---------------- | :------------------- | :--------------- | :---------------- | :------------------- | :--------------- | | Total revenues | $404,405 | $99,031 | $503,436 | $739,368 | $199,247 | $938,615 | | Segment profit (loss) | $21,765 | $40,657 | $62,422 | $(39,553) | $88,252 | $48,699 | Segment Assets and Capital Expenditures (dollars in thousands) | Metric | Hotels (Assets) | Net Lease (Assets) | Corporate (Assets) | Total Assets | Hotels (CapEx) | Net Lease (CapEx) | Total CapEx | | :--------------------------------- | :-------------- | :----------------- | :----------------- | :----------- | :------------- | :---------------- | :---------- | | As of June 30, 2025 | $3,833,268 | $2,899,726 | $199,518 | $6,932,512 | $83,962 (6 months) | $982 (6 months) | $84,944 (6 months) | [Note 14. Fair Value of Assets and Liabilities](index=29&type=section&id=Note%2014.%20Fair%20Value%20of%20Assets%20and%20Liabilities) This note details the fair value measurements of the company's assets and liabilities, including impairment charges Non-recurring Fair Value Measurement Assets (dollars in thousands) | Description | Total Fair Value | Level 2 Inputs | Level 3 Inputs | | :--------------------------------- | :--------------- | :------------- | :------------- | | Assets of properties held for sale | $127,800 | $126,450 | $1,350 | - The company recorded impairment charges of **$52,861 thousand** for **17 hotels** (Level 2 inputs) and **$1,795 thousand** for **two net lease properties** (Level 3 inputs) during the six months ended June 30, 2025[105](index=105&type=chunk) - Fair values of senior notes are estimated using bid and ask prices (Level 2), while net lease mortgage notes use discounted cash flow analyses and market rates (Level 3)[106](index=106&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and liquidity, highlighting key trends, strategic initiatives, and the performance of its hotel and net lease portfolios [Overview](index=30&type=section&id=Overview) This section outlines the company's strategic focus on debt reduction, net lease growth, and hotel portfolio optimization - The company's strategy focuses on reducing debt, growing its net lease portfolio, and improving the performance of retained hotels after planned dispositions[111](index=111&type=chunk) - As of August 1, 2025, the company sold **eight Sonesta-managed hotels** for **$45,600 thousand** and has agreements to sell **114 more** for **$919,952 thousand**[110](index=110&type=chunk) - The U.S. hotel industry saw increases in ADR and decreases in RevPAR for the three and six months ended June 30, 2025, compared to 2024, while the company's hotels experienced increases in both[113](index=113&type=chunk) All Hotels Operating Statistics (Comparable Basis) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (pts/%) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (pts/%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | Occupancy | 69.2 % | 69.1 % | 0.1 pts | 63.6 % | 63.1 % | 0.5 pts | | ADR | $146.32 | $146.02 | 0.2 % | $145.67 | $144.64 | 0.7 % | | RevPAR | $101.27 | $100.85 | 0.4 % | $92.63 | $91.28 | 1.5 % | [Results of Operations (Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024)](index=32&type=section&id=Results%20of%20Operations%20(Three%20Months%20Ended%20June%2030%2C%202025%2C%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024)) This section analyzes the company's financial performance for the three months ended June 30, 2025, versus 2024 Key Financial Changes (Three Months Ended June 30, 2025 vs. 2024) (dollars in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--------------------------------- | :----- | :----- | :------- | :------- | | Hotel operating revenues | $404,405 | $412,486 | $(8,081) | (2.0)% | | Rental income | $99,031 | $100,462 | $(1,431) | (1.4)% | | Total revenues | $503,436 | $512,948 | $(9,512) | (1.9)% | | Hotel operating expenses | $328,913 | $328,247 | $666 | 0.2 % | | Total depreciation and amortization | $75,030 | $95,674 | $(20,644) | (21.6)% | | Loss on asset impairment | $17,654 | $34,887 | $(17,233) | (49.4)% | | Interest expense | $(102,679) | $(93,850) | $(8,829) | 9.4 % | | Net loss | $(38,159) | $(73,850) | $35,691 | (48.3)% | | Net loss per common share | $(0.23) | $(0.45) | $0.22 | (48.9)% | - Hotel operating revenues decreased due to hotel sales, partially offset by increased occupancy and rates at certain hotels[121](index=121&type=chunk) - Depreciation and amortization decreased significantly due to hotels classified as held for sale and fully depreciated net lease assets[124](index=124&type=chunk) - Interest expense increased due to higher weighted average interest rates[128](index=128&type=chunk) [Results of Operations (Six Months Ended June 30, 2025, Compared to the Six Months Ended June 30, 2024)](index=34&type=section&id=Results%20of%20Operations%20(Six%20Months%20Ended%20June%2030%2C%202025%2C%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202024)) This section analyzes the company's financial performance for the six months ended June 30, 2025, versus 2024 Key Financial Changes (Six Months Ended June 30, 2025 vs. 2024) (dollars in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--------------------------------- | :----- | :----- | :------- | :------- | | Hotel operating revenues | $739,368 | $748,722 | $(9,354) | (1.2)% | | Rental income | $199,247 | $200,476 | $(1,229) | (0.6)% | | Total revenues | $938,615 | $949,198 | $(10,583) | (1.1)% | | Hotel operating expenses | $634,753 | $633,333 | $1,420 | 0.2 % | | Total depreciation and amortization | $164,130 | $188,781 | $(24,651) | (13.1)% | | Loss on asset impairment | $54,721 | $37,338 | $17,383 | 46.6 % | | Gain (loss) on sale of real estate, net | $590 | $(2,995) | $3,585 | (119.7)% | | Interest expense | $(204,196) | $(185,264) | $(18,932) | 10.2 % | | Net loss | $(154,594) | $(152,233) | $(2,361) | 1.6 % | | Net loss per common share | $(0.93) | $(0.92) | $(0.01) | 1.1 % | - Hotel operating revenues decreased due to hotel sales, partially offset by increases in occupancy and average rates[133](index=133&type=chunk) - Loss on asset impairment increased significantly, reflecting a higher number of properties written down to fair value less costs to sell[139](index=139&type=chunk) - The company recorded a net gain on sale of real estate in 2025, compared to a loss in 2024, due to the sale of **six hotels** and **seven net lease properties**[140](index=140&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity, capital resources, debt management, and future funding requirements - Net lease rent coverage was **2.04x** as of June 30, 2025, down from **2.25x** as of June 30, 2024[147](index=147&type=chunk) - The company's consolidated income available for debt service to debt service ratio was **1.49x** as of June 30, 2025, which is below the **1.50x** covenant requirement for incurring additional debt[148](index=148&type=chunk)[173](index=173&type=chunk) - The company expects to fund **$170,000 thousand** for hotel capital improvements in the last six months of 2025 and **$150,000 thousand** in 2026 using cash on hand[152](index=152&type=chunk) - As of August 1, 2025, the **$650,000 thousand** revolving credit facility was fully drawn as a precautionary measure to preserve financial flexibility[160](index=160&type=chunk) Debt Maturities as of June 30, 2025 (dollars in thousands) | Year | Debt Maturities | | :--------------------------------- | :-------------- | | 2025 | $979 | | 2026 | $801,958 | | 2027 | $851,958 | | 2028 | $1,000,737 | | 2029 | $1,125,000 | | Thereafter | $1,900,000 | | Total | $5,680,632 | [Property and Operating Statistics](index=44&type=section&id=Property%20and%20Operating%20Statistics) This section provides detailed operating statistics for the company's hotel and net lease property portfolios - As of June 30, 2025, the company's portfolio included **200 hotels** and **742 net lease properties** across **46 states, DC, Canada, and Puerto Rico**, with **145 distinct brands**[186](index=186&type=chunk) Hotel Operating Statistics by Brand (Three Months Ended June 30, 2025) | Brand Level | No. of Hotels | Occupancy | ADR | RevPAR | | :--------------------------------- | :------------ | :-------- | :-------- | :------- | | Full Service Total/Average | 47 | 67.0 % | $191.77 | $128.48 | | Focused Service Total/Average | 37 | 74.7 % | $134.25 | $100.31 | | Retained Hotels Total/Average | 84 | 69.0 % | $175.89 | $121.30 | | Exit Hotels Total/Average | 116 | 69.5 % | $107.75 | $74.94 | | All Hotels Total/Average | 200 | 69.2 % | $146.32 | $101.27 | - During the six months ended June 30, 2025, net lease renewals for **383,743 sq ft (14 properties)** achieved weighted average rents **10.8%** above prior rents[190](index=190&type=chunk) Top 10 Net Lease Brands by Annualized Minimum Rent (as of June 30, 2025) | Brand | No. of Properties | Annualized Minimum Rent | Percent of Total Annualized Minimum Rent | Rent Coverage | | :--------------------------------- | :---------------- | :---------------------- | :--------------------------------------- | :------------ | | TravelCenters of America Inc. | 131 | $180,329 | 46.7 % | 1.31 x | | Petro Stopping Centers | 44 | $83,933 | 21.7 % | 1.31 x | | The Great Escape | 14 | $7,711 | 2.0 % | 4.75 x | | Life Time Fitness | 3 | $5,770 | 1.5 % | 2.84 x | | Buehler's Fresh Foods | 5 | $5,657 | 1.5 % | 2.72 x | | Heartland Dental | 59 | $4,841 | 1.3 % | 4.71 x | | Norms | 10 | $3,826 | 1.0 % | 3.36 x | | Express Oil Change | 23 | $3,717 | 1.0 % | 5.77 x | | AMC Theatres | 5 | $3,564 | 0.9 % | 1.68 x | | Pizza Hut | 40 | $3,552 | 0.9 % | 2.14 x | Net Lease Expirations by Year (as of June 30, 2025) | Year | Number of Properties | Annualized Minimum Rent Expiring | Percent of Total Annualized Minimum Rent Expiring | | :--------------------------------- | :------------------- | :------------------------------- | :------------------------------------------------ | | 2025 | 20 | $6,379 | 1.7% | | 2026 | 103 | $11,584 | 3.0% | | 2027 | 35 | $12,768 | 3.3% | | 2028 | 22 | $9,613 | 2.5% | | 2029 | 76 | $10,512 | 2.7% | | 2030 | 34 | $6,343 | 1.6% | | 2031 | 28 | $5,195 | 1.3% | | 2032 | 35 | $2,902 | 0.8% | | 2033 | 213 | $270,515 | 69.9% | | 2034 | 22 | $5,726 | 1.6% | | 2035 | 46 | $19,393 | 5.0% | | 2036 | 15 | $6,050 | 1.6% | | 2037 | 11 | $3,244 | 0.8% | | 2038 | 6 | $1,201 | 0.3% | | 2039 | 10 | $3,686 | 1.0% | | 2040 | 18 | $2,419 | 0.6% | | 2041 | 8 | $2,626 | 0.7% | | 2042 | — | — | —% | | 2043 | 7 | $2,096 | 0.5% | | 2044 | 2 | $278 | 0.1% | | 2045 | 11 | $3,991 | 1.0% | | Total | 722 | $386,521 | 100.0% | [Non-GAAP Financial Measures](index=49&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial measures like FFO and Normalized FFO for supplemental performance analysis - The company presents non-GAAP financial measures, including Funds From Operations (FFO) and Normalized FFO, to provide supplemental information on operating performance for a REIT[202](index=202&type=chunk)[203](index=203&type=chunk) FFO and Normalized FFO (dollars in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(38,159) | $(73,850) | $(154,594) | $(152,233) | | FFO | $55,863 | $57,764 | $66,049 | $78,868 | | Normalized FFO | $57,603 | $73,810 | $68,439 | $94,916 | | FFO per common share | $0.34 | $0.35 | $0.40 | $0.48 | | Normalized FFO per common share | $0.35 | $0.45 | $0.41 | $0.57 | | Distributions declared per share | $0.01 | $0.20 | $0.02 | $0.40 | [Critical Accounting Estimates](index=43&type=section&id=Critical%20Accounting%20Estimates) This section outlines the significant accounting estimates and judgments used in preparing the financial statements - Significant estimates include consolidation of VIEs, purchase price allocations, useful lives of fixed assets, lease classification, and impairment assessment of real estate and equity investments[184](index=184&type=chunk) - No significant changes in critical accounting estimates have occurred since December 31, 2024[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, primarily interest rate fluctuations, and its strategies for managing these risks, including an analysis of fixed and floating rate debt and the potential impact of interest rate changes on financial performance - The company is exposed to interest rate risks and manages this by monitoring financing alternatives; no material changes in strategy since December 31, 2024[205](index=205&type=chunk) Fixed Rate Debt Summary (as of June 30, 2025) (dollars in thousands) | Debt Type | Principal Balance | Annual Interest Rate | Annual Interest Expense | Maturity | | :--------------------------------- | :---------------- | :------------------- | :---------------------- | :------- | | Senior unsecured notes (various) | $3,025,000 | 3.950%-5.250% | $130,588 | 2026-2030 | | Net lease mortgage notes | $605,632 | 5.600% | $33,915 | 2028 | | Senior guaranteed unsecured notes (various) | $1,650,000 | 5.500%-8.875% | $127,750 | 2027-2032 | | Senior secured notes | $1,000,000 | 8.625% | $86,250 | 2031 | | Total | $5,680,632 | | $361,803 | | - A hypothetical immediate one percentage point increase in interest rates would increase annual interest cost by approximately **$56,806 thousand** for fixed rate debt if refinanced[206](index=206&type=chunk) - Floating rate debt includes **$100,000 thousand** outstanding under the revolving credit facility and **$45,000 thousand** under the VFN as of June 30, 2025; the revolving credit facility was fully drawn as of August 1, 2025[208](index=208&type=chunk) Impact of One Percentage Point Increase in Floating Interest Rates (dollars in thousands, except per share amounts) | Scenario | Interest Rate Per Year | Outstanding Debt | Total Interest Expense Per Year | Annual Per Share Impact | | :--------------------------------- | :--------------------- | :--------------- | :------------------------------ | :---------------------- | | At June 30, 2025 | 6.63 % | $145,000 | $9,614 | $0.06 | | One percentage point increase | 7.63 % | $145,000 | $11,064 | $0.07 | | Fully drawn (June 30, 2025) | 6.63 % | $695,000 | $46,079 | $0.28 | | Fully drawn (one percentage point increase) | 7.63 % | $695,000 | $53,029 | $0.32 | [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and includes a warning about forward-looking statements, outlining various risks and uncertainties that could impact future results - Management concluded that disclosure controls and procedures were effective as of June 30, 2025[215](index=215&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[216](index=216&type=chunk) [Warning Concerning Forward-Looking Statements](index=52&type=section&id=Warning%20Concerning%20Forward-Looking%20Statements) This section cautions readers about forward-looking statements and outlines risks that could impact future results - The report contains forward-looking statements regarding economic conditions, liquidity, capital expenditures, asset sales, debt reduction, and hotel portfolio rebalancing[218](index=218&type=chunk) - Key risks include the ability of Sonesta to operate hotels, unfavorable market conditions, ability to sell properties at target prices, and limitations on incurring additional debt due to covenant breaches[219](index=219&type=chunk) - The company does not intend to update or change forward-looking statements unless required by law[222](index=222&type=chunk) [Statement Concerning Limited Liability](index=54&type=section&id=Statement%20Concerning%20Limited%20Liability) This section clarifies the limited personal liability of the company's trustees, officers, and shareholders - The Declaration of Trust limits personal liability for trustees, officers, shareholders, employees, or agents, directing all claims solely to the assets of Service Properties Trust[224](index=224&type=chunk) PART II. Other Information This section provides additional information, including risk factors, equity security sales, and required exhibits [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section outlines specific risks related to the company's business, including potential non-compliance with debt agreements, restrictions on incurring additional debt, and increased concentration in service-focused retail net lease properties after planned hotel sales - The company may fail to comply with debt agreement covenants, such as the consolidated income available for debt service to debt service ratio (**1.49x** vs. **1.50x** required), restricting its ability to incur additional debt[226](index=226&type=chunk)[227](index=227&type=chunk) - Upon completion of pending hotel sales, the company's investments will be more heavily concentrated in service-focused retail net lease properties, increasing exposure to cyclical economic conditions in that sector[229](index=229&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's purchases of its own equity securities during the quarter ended June 30, 2025, primarily to satisfy tax withholding obligations related to common share awards Issuer Purchases of Equity Securities (Quarter Ended June 30, 2025) | Calendar Month | Number of Common Shares Purchased | Average Price Paid per Share | | :--------------------------------- | :------------------------------ | :--------------------------- | | April 1, 2025 - April 30, 2025 | 3,073 | $2.61 | | May 1, 2025 - May 31, 2025 | 19,397 | $1.92 | | June 1, 2025 - June 30, 2025 | 5,947 | $2.35 | | Total | 28,417 | $2.08 | - These purchases were made to satisfy tax withholding and payment obligations for former officers and employees in connection with the vesting of prior common share awards[230](index=230&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, indentures for various debt instruments, management agreements, and certifications - The exhibits include the Amended and Restated Declaration of Trust, Third Amended and Restated Bylaws, and various supplemental indentures for senior unsecured and secured notes[231](index=231&type=chunk)[232](index=232&type=chunk) - Key agreements such as the Amended, Restated and Consolidated Pooling Agreement with Sonesta and the Fourth Amendment to the Third Amended and Restated Credit Agreement are also filed[233](index=233&type=chunk) [Signatures](index=59&type=section&id=Signatures) This section contains the signatures of the company's President and Chief Executive Officer, Christopher J. Bilotto, and Chief Financial Officer and Treasurer, Brian E. Donley, certifying the filing of the report - The report is signed by Christopher J. Bilotto, President and Chief Executive Officer, and Brian E. Donley, Chief Financial Officer and Treasurer, on August 5, 2025[236](index=236&type=chunk)

**Quarterly Results** [Second Quarter 2025 Highlights](index=4&type=section&id=Second%20Quarter%202025%20Highlights) SVC met Q2 2025 expectations, progressing its net lease REIT transformation with hotel sales, debt reduction, and strong portfolio performance - Company is **transforming into a majority net lease REIT**[8](index=8&type=chunk) - **$900 million** under binding agreements for **114 Sonesta hotels** (**14,925 keys**), with closings expected late Q3 and Q4 2025. Total 2025 hotel sales proceeds expected to be **$966 million**. **Proceeds to repay debt**[8](index=8&type=chunk)[14](index=14&type=chunk) - Quarterly distribution of **$0.01** per common share **declared**[10](index=10&type=chunk) Key Financial Metrics (Q2 2025) | Metric | Value | | :----------------------- | :---------------- | | Net loss | $(38.2) million | | Normalized FFO | $57.6 million | | Adjusted EBITDAre | $163.8 million | | Hotel RevPAR | $101.27 | | Adjusted Hotel EBITDA | $73.1 million | | Net Lease occupancy | 97.3% | | Net Lease rent coverage | 2.04x | Investment Activity (Q2 2025) | Category | Value | | :-------------------- | :---------- | | Capital Expenditures | $39.2 million | | Net Lease Property Sales | $13.7 million (4 properties, 140,512 sq ft) | | Net Lease Property Acquisitions | $29.9 million (7 properties, 83,436 sq ft) | | Weighted Average Lease Term (Acquisitions) | 16.1 years | | Rent Coverage (Acquisitions) | 2.60x | - Borrowed **$550 million** under revolving credit facility on July 1, 2025, **fully drawn** as of August 5, 2025, holding **$670 million** cash on hand[15](index=15&type=chunk) - Announced **early redemption** of **$350 million 5.25%** senior unsecured notes due 2026, expected around September 4, 2025, using cash on hand[15](index=15&type=chunk) **Financials** [Key Financial Data](index=8&type=section&id=Key%20Financial%20Data) This section provides a snapshot of SVC's key financial performance indicators and balance sheet items across several quarters Selected Income Statement Data (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | | :-------------------- | :------------------ | :------------------ | :----------- | | Total revenues | $503.4 million | $512.9 million | (1.9%) | | Net loss | $(38.2) million | $(73.8) million | 48.3% (improvement) | | FFO | $55.9 million | $57.8 million | (3.3%) | | Normalized FFO | $57.6 million | $73.8 million | (22.0%) | | CAD | $16.8 million | $3.4 million | 387.7% | | Adjusted EBITDAre | $163.8 million | $171.5 million | (4.5%) | Per Common Share Data (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------- | :------ | :------ | :----------- | | Net loss | $(0.23) | $(0.45) | 48.9% (improvement) | | FFO | $0.34 | $0.35 | (2.9%) | | Normalized FFO | $0.35 | $0.45 | (22.2%) | | CAD | $0.10 | $0.02 | 400.0% | Capitalization (as of 6/30/2025) | Metric | Value (USD) | | :-------------------------------- | :------------------ | | Total common shares | 166,860,830 | | Closing price | $2.39 | | Equity market capitalization | $398.8 million | | Debt (principal balance) | $5.83 billion | | Total market capitalization | $6.22 billion | Liquidity (as of 6/30/2025) | Metric | Value (USD) | | :-------------------------------- | :------------------ | | Cash and cash equivalents | $63.2 million | | Available borrowings under secured revolving credit facility | $550.0 million | | Total liquidity | $613.2 million | Selected Balance Sheet Data (6/30/2025 vs 12/31/2024) | Metric | 6/30/2025 (USD) | 12/31/2024 (USD) | Change | | :-------------------- | :-------------------- | :--------------------- | :------- | | Total gross assets | $10.20 billion | $10.36 billion | (1.5%) | | Total assets | $6.93 billion | $7.12 billion | (2.6%) | | Total liabilities | $6.24 billion | $6.27 billion | (0.5%) | | Total shareholders' equity | $695.9 million | $851.9 million | (18.3%) | [Condensed Consolidated Statements of Income (Loss)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20%28Loss%29) This statement details SVC's Q2 2025 revenues and expenses, showing a reduced net loss year-over-year Revenues (Three Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change | | :-------------------- | :--------------- | :--------------- | :----------- | | Hotel operating revenues | $404.4 million | $412.5 million | (1.96%) | | Rental income | $99.0 million | $100.5 million | (1.42%) | | Total revenues | $503.4 million | $512.9 million | (1.85%) | Expenses (Three Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change | | :-------------------------- | :--------------- | :--------------- | :----------- | | Hotel operating expenses | $328.9 million | $328.2 million | 0.20% | | Depreciation and amortization | $75.0 million | $95.7 million | (21.58%) | | Loss on asset impairment | $17.7 million | $34.9 million | (49.40%) | | Total expenses | $438.6 million | $474.4 million | (7.56%) | Net Loss (Three Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change | | :------- | :--------------- | :--------------- | :----------- | | Net loss | $(38.2) million | $(73.8) million | 48.32% (improvement) | | Net loss per common share | $(0.23) | $(0.45) | 48.89% (improvement) | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents SVC's financial position, showing decreased assets and equity, and increased assets held for sale Assets (June 30, 2025 vs December 31, 2024) | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | Change | | :-------------------------------- | :------------------------ | :-------------------------- | :------- | | Total real estate properties, net | $5.45 billion | $6.37 billion | (14.49%) | | Assets of properties held for sale | $849.1 million | $43.1 million | 1869.9% | | Cash and cash equivalents | $63.2 million | $143.5 million | (55.9%) | | Total assets | $6.93 billion | $7.12 billion | (2.63%) | Liabilities and Shareholders' Equity (June 30, 2025 vs December 31, 2024) | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | Change | | :-------------------------- | :------------------------ | :-------------------------- | :------- | | Unsecured debt, net | $4.03 billion | $4.02 billion | 0.16% | | Secured debt, net | $1.69 billion | $1.69 billion | 0.13% | | Total liabilities | $6.24 billion | $6.27 billion | (0.49%) | | Total shareholders' equity | $695.9 million | $851.9 million | (18.29%) | [Debt Summary](index=11&type=section&id=Debt%20Summary) This section details SVC's debt portfolio, categorizing it by secured and unsecured debt, highlighting interest rates and maturity dates Debt Composition (as of June 30, 2025) | Debt Type | Principal Balance (USD) | Weighted Average Interest Rate | Weighted Average Years to Maturity | | :---------------------- | :---------------------------- | :----------------------------- | :-------------------------------- | | Secured Floating Rate Debt | $145.0 million | 6.627% | 1.9 | | Secured Fixed Rate Debt | $1.61 billion | 7.484% | 5.0 | | Unsecured Fixed Rate Debt | $4.08 billion | 5.930% | 3.3 | | **Total / Weighted Average** | **$5.83 billion** | **6.375%** | **3.7** | - SVC announced **early redemption** of **$350 million 5.25%** senior unsecured notes due 2026, expected around September 4, 2025, using cash on hand[25](index=25&type=chunk) - As of July 1, 2025, SVC borrowed **$550 million** under its revolving credit facility as a precautionary measure, **fully drawn** as of August 5, 2025[25](index=25&type=chunk) [Debt Maturity Schedule](index=12&type=section&id=Debt%20Maturity%20Schedule) This section illustrates SVC's debt maturity profile, showing principal payments across future years for various debt types Debt Maturity Profile (Principal amounts in USD) | Year | Unsecured Fixed Rate Debt | Secured Floating Rate Debt | Secured Fixed Rate Debt | Total | | :--- | :------------------------ | :------------------------- | :---------------------- | :---- | | 2025 | $2.0 million | $145.0 million | $0 | $147.0 million | | 2026 | $800.0 million | $0 | $0 | $800.0 million | | 2027 | $850.0 million | $0 | $0 | $850.0 million | | 2028 | $400.0 million | $0 | $600.7 million | $1.00 billion | | 2029 | $1.13 billion | $0 | $0 | $1.13 billion | | 2030 | $400.0 million | $0 | $0 | $400.0 million | | 2031 | $0 | $0 | $1.00 billion | $1.00 billion | | 2032 | $500.0 million | $0 | $0 | $500.0 million | Secured vs. Unsecured Debt (as of June 30, 2025) | Debt Type | Percentage | | :---------- | :--------- | | Secured Debt | 30.1% | | Unsecured Debt | 69.9% | [Leverage Ratios, Coverage Ratios and Debt Covenants](index=13&type=section&id=Leverage%20Ratios%2C%20Coverage%20Ratios%20and%20Debt%20Covenants) This section details SVC's leverage and coverage ratios, along with compliance with senior note debt covenants for Q2 2025 Leverage Ratios (Trailing Twelve Months Ended June 30, 2025) | Metric | 6/30/2025 | 6/30/2024 | Change | | :---------------------------------------------------------------- | :-------- | :-------- | :------- | | Net debt / total gross assets | 56.5% | 55.1% | **+1.4 pts** | | Net debt / gross book value of real estate assets and cash and cash equivalents | 60.0% | 59.1% | **+0.9 pts** | | Secured debt / total assets | 25.0% | 22.4% | **+2.6 pts** | | Variable rate debt / net debt | 2.5% | 0.0% | **+2.5 pts** | Coverage Ratios (Trailing Twelve Months Ended June 30, 2025) | Metric | 6/30/2025 | 6/30/2024 | Change | | :---------------------------------------------------------------- | :-------- | :-------- | :------- | | Rolling four-quarter Adjusted EBITDAre / rolling four-quarter interest expense | **1.4x** | **1.7x** | **(0.3x)** | | Net debt / rolling four-quarter Adjusted EBITDAre | **10.2x** | **9.4x** | **+0.8x** | Senior Note Debt Covenants (Trailing Twelve Months Ended June 30, 2025) | Covenant | Required Minimum/Maximum | 6/30/2025 | Compliance | | :---------------------------------------------------------------- | :----------------------- | :-------- | :--------- | | Total unencumbered assets / unsecured debt | 150% (minimum) | 190.0% | Met | | Total debt / adjusted total assets | 60.0% (maximum) | 55.9% | Met | | Secured debt / adjusted total assets | 40.0% (maximum) | 16.8% | Met | | Consolidated income available for debt service / debt service | 1.50x (minimum) | 1.49x | Not Met (below 1.50x) | | Total unencumbered assets in guarantor subsidiaries / senior guaranteed unsecured debt | 2.2x (minimum) | 4.51x | Met | - As of June 30, 2025, SVC was **below the covenant levels** under its debt agreements necessary to incur additional debt[34](index=34&type=chunk) [Capital Expenditures Summary](index=14&type=section&id=Capital%20Expenditures%20Summary) This section outlines SVC's Q2 2025 capital expenditures, showing a year-over-year decrease in total capital improvements Capital Expenditures (Three Months Ended June 30) | Category | Q2 2025 (USD) | Q1 2025 (USD) | Q2 2024 (USD) | Change (QoQ) | Change (YoY) | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Hotel capital improvements | $37.9 million | $42.5 million | $65.2 million | (10.9%) | (41.9%) | | Lease related costs | $0.3 million | $0.3 million | $1.0 million | 0.4% | (72.5%) | | Recurring capital expenditures | $38.1 million | $42.8 million | $66.2 million | (10.9%) | (42.4%) | | Redevelopment and other activities | $1.1 million | $3.0 million | $0.3 million | (63.6%) | 312.3% | | **Total capital improvements & FF&E Reserve fundings** | **$39.2 million** | **$45.8 million** | **$66.5 million** | **(14.3%)** | **(40.9%)** | [Property Acquisitions and Dispositions](index=15&type=section&id=Property%20Acquisitions%20and%20Dispositions) This section details SVC's property acquisition and disposition activities, focusing on hotel divestment and net lease acquisitions Acquisitions (Since January 1, 2025) | Quarter Acquired | Number of Properties | Property Type | Square Footage | Purchase Price (USD) | Weighted Average Lease Term | Average Rent Coverage | | :--------------- | :------------------- | :------------ | :------------- | :------------------------- | :-------------------------- | :-------------------- | | Q2 2025 | 7 | Net Lease | 83,436 | $29.9 million | 16.1 years | 2.60x | | Q3 2025 (since July 1st) | 7 | Net Lease | 54,141 | $14.5 million | 13.1 years | 2.34x | | **Total** | **14** | | **137,577** | **$44.4 million** | **15.0 years** | **2.50x** | Dispositions (Since January 1, 2025) | Quarter Disposed | Number of Properties | Property Type | Rooms/Square Footage | Sales Price (USD) | | :--------------- | :------------------- | :------------ | :------------------- | :---------------------- | | Q1 2025 | 3 Hotels, 3 Net Lease | Hotel, Net Lease | 420 rooms, 103,043 sq ft | $15.1 million (Hotels), $3.1 million (Net Lease) | | Q2 2025 | 1 Hotel, 3 Net Lease | Hotel, Net Lease | 94 rooms, 140,512 sq ft | $4.5 million (Hotel), $13.7 million (Net Lease) | | Q3 2025 (since July 1st) | 2 Hotels, 1 Net Lease | Hotel, Net Lease | 234 rooms, 33,106 sq ft | $6.6 million (Hotel), $6.6 million (Hotel), $0.9 million (Net Lease) | | **Total** | **16** | | **1,006 rooms, 276,661 sq ft** | **$63.2 million** | **Portfolio Information** [Portfolio Summary](index=17&type=section&id=Portfolio%20Summary) SVC's portfolio comprises 942 properties, including hotels and net lease assets, diversified across tenants, brands, industries, and states Portfolio Composition (as of June 30, 2025) | Category | Count | Details | Investment (USD) | % of Total Investment | | :------------------ | :---- | :-------------------- | :--------------------- | :-------------------- | | Hotel Properties | 200 | 35,101 rooms | $6.34 billion | 55.7% | | Net Lease Properties | 742 | 13,162,020 sq ft | $5.04 billion | 44.3% | | **Total Properties** | **942** | | **$11.38 billion** | **100.0%** | - Diversification Facts: **178 Tenants/Operators**, **145 Brands**, **22 Industries**, **46 States**[42](index=42&type=chunk) - Top Geographical Diversification (by investment): California (**13%**), Texas (**7%**), Florida (**7%**), Illinois (**6%**), Georgia (**8%**)[45](index=45&type=chunk) [Consolidated Portfolio Diversification by Industry](index=18&type=section&id=Consolidated%20Portfolio%20Diversification%20by%20Industry) This section details SVC's portfolio diversification by industry, with hotels and travel centers as the largest segments Top Industries by Investment (as of June 30, 2025) | Industry | Investment (USD) | Percent of Total Investment | | :-------------------------- | :--------------------- | :-------------------------- | | Hotels | $6.34 billion | 55.7% | | Travel Centers | $3.31 billion | 29.1% | | Restaurants - Quick Service | $280.8 million | 2.5% | | Health and Fitness | $196.1 million | 1.7% | | Restaurants - Casual Dining | $193.4 million | 1.7% | [Consolidated Portfolio by Geographical Diversification](index=19&type=section&id=Consolidated%20Portfolio%20by%20Geographical%20Diversification) This section provides a geographical breakdown of SVC's portfolio by investment, with California, Texas, and Florida as top states Top 5 States by Total Investment (as of June 30, 2025) | State | Total Investment (USD) | % of Total Investment | Hotel Investment (USD) | Net Lease Investment (USD) | | :---------- | :--------------------------- | :-------------------- | :--------------------------- | :------------------------------- | | California | $1.49 billion | 13.1% | $1.21 billion | $273.1 million | | Texas | $812.0 million | 7.1% | $309.7 million | $502.3 million | | Florida | $754.2 million | 6.6% | $495.6 million | $258.6 million | | Illinois | $694.2 million | 6.0% | $413.2 million | $281.1 million | | Georgia | $673.2 million | 5.8% | $407.7 million | $265.5 million | - Top **10 states** account for **55.7%** of total investment, **61.2%** of hotel investment, and **49.5%** of net lease investment[52](index=52&type=chunk) [Hotel Portfolio by Brand](index=20&type=section&id=Hotel%20Portfolio%20by%20Brand) This section details SVC's hotel portfolio by brand, with Royal Sonesta and Sonesta Hotels & Resorts representing the largest investments Top Hotel Brands by Investment (as of June 30, 2025) | Brand | Number of Hotels | Number of Rooms or Suites | Investment (USD) | Percent of Total Hotel Investment | Investment Per Room or Suite | | :------------------------ | :--------------- | :------------------------ | :--------------------- | :-------------------------------- | :--------------------------- | | Royal Sonesta Hotels® | 17 | 5,663 | $1.95 billion | 30.7% | $344,175 | | Sonesta Hotels & Resorts® | 22 | 7,207 | $1.47 billion | 23.1% | $203,542 | | Sonesta ES Suites® | 52 | 6,689 | $1.07 billion | 16.8% | $159,272 | | Sonesta Select® | 38 | 5,551 | $633.3 million | 10.0% | $114,093 | | Sonesta Simply Suites® | 46 | 5,894 | $556.3 million | 8.8% | $94,376 | [Hotel Operating Statistics by Service Level - All Hotels - Three Months Ended June 30, 2025](index=21&type=section&id=Hotel%20Operating%20Statistics%20by%20Service%20Level%20-%20All%20Hotels%20-%20Three%20Months%20Ended%20June%2030%2C%202025) This section provides Q2 2025 hotel operating statistics, showing modest RevPAR growth but a decline in Adjusted Hotel EBITDA All Hotels Operating Statistics (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------- | :-------- | :-------- | :------- | | Occupancy | 69.2% | 69.1% | **+0.1 pts** | | ADR | $146.32 | $146.02 | **+0.2%** | | RevPAR | $101.27 | $100.85 | **+0.4%** | | Adjusted Hotel EBITDA | $73.3 million | $83.2 million | **(11.8%)** | Retained Hotels (Total/Average, Three Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------- | :-------- | :-------- | :------- | | Occupancy | 69.0% | 68.2% | **+0.8 pts** | | ADR | $175.89 | $175.21 | **+0.4%** | | RevPAR | $121.30 | $119.51 | **+1.5%** | | Adjusted Hotel EBITDA | $53.5 million | $60.6 million | **(11.7%)** | Exit Hotels (Total/Average, Three Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------- | :-------- | :-------- | :------- | | Occupancy | 69.5% | 70.2% | **(0.7) pts** | | ADR | $107.75 | $108.72 | **(0.9%)** | | RevPAR | $74.94 | $76.32 | **(1.8%)** | | Adjusted Hotel EBITDA | $19.9 million | $22.6 million | **(12.1%)** | [Hotel Operating Statistics by Service Level - All Hotels - Six Months Ended June 30, 2025](index=22&type=section&id=Hotel%20Operating%20Statistics%20by%20Service%20Level%20-%20All%20Hotels%20-%20Six%20Months%20Ended%20June%2030%2C%202025) This section presents H1 2025 hotel operating statistics, indicating modest RevPAR growth but a significant decline in Adjusted Hotel EBITDA All Hotels Operating Statistics (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------- | :-------- | :-------- | :------- | | Occupancy | 63.6% | 63.1% | **+0.5 pts** | | ADR | $145.67 | $144.64 | **+0.7%** | | RevPAR | $92.63 | $91.28 | **+1.5%** | | Adjusted Hotel EBITDA | $98.5 million | $115.9 million | **(15.0%)** | Retained Hotels (Total/Average, Six Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------- | :-------- | :-------- | :------- | | Occupancy | 62.9% | 61.8% | **+1.1 pts** | | ADR | $175.02 | $173.59 | **+0.8%** | | RevPAR | $110.15 | $107.21 | **+2.7%** | | Adjusted Hotel EBITDA | $73.4 million | $84.3 million | **(12.9%)** | Exit Hotels (Total/Average, Six Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------- | :-------- | :-------- | :------- | | Occupancy | 64.4% | 64.9% | **(0.5) pts** | | ADR | $107.97 | $108.40 | **(0.4%)** | | RevPAR | $69.59 | $70.33 | **(1.1%)** | | Adjusted Hotel EBITDA | $25.1 million | $31.5 million | **(20.5%)** | [Net Lease Portfolio by Brand](index=23&type=section&id=Net%20Lease%20Portfolio%20by%20Brand) This section outlines SVC's net lease portfolio by brand, with TravelCenters of America as the largest tenant by investment and rent Top 5 Net Lease Brands by Investment (as of June 30, 2025) | Brand | Investment (USD) | Percent of Total Investment | Annualized Minimum Rent (USD) | Percent of Total Annualized Minimum Rent | Rent Coverage | | :-------------------------- | :--------------------- | :-------------------------- | :---------------------------------- | :--------------------------------------- | :------------ | | TravelCenters of America Inc. | $2.25 billion | 44.8% | $180.3 million | 46.7% | 1.31x | | Petro Stopping Centers | $1.02 billion | 20.1% | $83.9 million | 21.7% | 1.31x | | The Great Escape | $98.2 million | 1.9% | $7.7 million | 2.0% | 4.75x | | Life Time Fitness | $92.6 million | 1.8% | $5.8 million | 1.5% | 2.84x | | Buehler's Fresh Foods | $76.5 million | 1.5% | $5.7 million | 1.5% | 2.72x | - Total Net Lease Portfolio (as of June 30, 2025): **742 properties**, **13,162,020 sq ft**, **$5.04 billion** investment, **$386.5 million** annualized minimum rent, **2.04x** average rent coverage[60](index=60&type=chunk) [Net Lease Portfolio by Industry](index=24&type=section&id=Net%20Lease%20Portfolio%20by%20Industry) This section categorizes SVC's net lease portfolio by industry, with Travel Centers dominating investment and annualized minimum rent Top 5 Net Lease Industries by Investment (as of June 30, 2025) | Industry | Investment (USD) | Percent of Total Investment | Annualized Minimum Rent (USD) | Percent of Total Annualized Minimum Rent | Rent Coverage | | :-------------------------- | :--------------------- | :-------------------------- | :---------------------------------- | :--------------------------------------- | :------------ | | Travel Centers | $3.31 billion | 65.7% | $267.6 million | 69.2% | 1.33x | | Restaurants - Quick Service | $280.8 million | 5.6% | $19.6 million | 5.1% | 2.99x | | Restaurants - Casual Dining | $193.4 million | 3.8% | $12.1 million | 3.1% | 2.94x | | Health and Fitness | $196.1 million | 3.9% | $11.8 million | 3.1% | 2.23x | | Grocery Stores | $129.2 million | 2.6% | $9.3 million | 2.4% | 3.22x | - Total Net Lease Portfolio (as of June 30, 2025): **742 properties**, **13,162,020 sq ft**, **$5.04 billion** investment, **$386.5 million** annualized minimum rent, **2.04x** average rent coverage[64](index=64&type=chunk) [Net Lease Portfolio by Tenant (Top 10)](index=25&type=section&id=Net%20Lease%20Portfolio%20by%20Tenant%20%28Top%2010%29) This section identifies SVC's top 10 net lease tenants, with TravelCenters of America Inc. as the largest by investment and rent Top 10 Tenants by Investment (as of June 30, 2025) | Tenant | Brand Affiliation | Investment (USD) | Percent of Total Investment | Annualized Minimum Rent (USD) | Rent Coverage | Weighted Average Lease Term (years) | | :-------------------------------- | :------------------------------------------ | :--------------------- | :-------------------------- | :---------------------------------- | :------------ | :---------------------------------- | | TravelCenters of America Inc. | TravelCenters of America / Petro Stopping Centers | $3.27 billion | 64.9% | $264.3 million | 1.31x | 7.9 | | Universal Pool Co., Inc. | The Great Escape | $98.2 million | 1.9% | $7.7 million | 4.75x | 2.2 | | Healthy Way of Life II, LLC | Life Time Fitness | $92.6 million | 1.8% | $5.8 million | 2.84x | 10.0 | | Styx Acquisition, LLC | Buehler's Fresh Foods | $76.5 million | 1.5% | $5.7 million | 2.72x | 10.3 | | Professional Resource Development, Inc. | Heartland Dental | $61.1 million | 1.2% | $4.8 million | 4.71x | 0.8 | | Norms Restaurants, LLC | Norms | $53.7 million | 1.1% | $3.8 million | 3.36x | 20.0 | | Express Oil Change, L.L.C. | Express Oil Change | $49.7 million | 1.0% | $3.7 million | 5.77x | 9.8 | | Pilot Travel Centers LLC | Flying J Travel Plaza | $41.7 million | 0.8% | $3.3 million | 3.14x | 3.5 | | Automotive Remarketing Group, Inc. | America's Auto Auction | $38.3 million | 0.8% | $3.2 million | 9.08x | 9.8 | | Fleet Farm Group LLC | Fleet Farm | $37.8 million | 0.8% | $2.8 million | 2.15x | 11.0 | | **Subtotal, Top 10** | | **$3.82 billion** | **75.8%** | **$305.1 million** | **1.69x** | **7.9** | [Net Lease Portfolio - Expiration Schedule](index=26&type=section&id=Net%20Lease%20Portfolio%20-%20Expiration%20Schedule) This section details the net lease portfolio's expiration schedule, showing significant annualized minimum rent expiring in 2033 Annualized Minimum Rent Expiration (as of June 30, 2025) | Year | Annualized Minimum Rent Expiring (USD) | Percent of Total Annualized Minimum Rent Expiring | Cumulative Percent of Total Annualized Minimum Rent Expiring | | :--- | :------------------------------------------- | :------------------------------------------------ | :---------------------------------------------------------- | | 2025 | $6.4 million | 1.7% | 1.7% | | 2026 | $11.6 million | 3.0% | 4.7% | | 2027 | $12.8 million | 3.3% | 8.0% | | 2028 | $9.6 million | 2.5% | 10.5% | | 2029 | $10.5 million | 2.7% | 13.2% | | 2030 | $6.3 million | 1.6% | 14.8% | | 2031 | $5.2 million | 1.3% | 16.1% | | 2032 | $2.9 million | 0.8% | 16.9% | | 2033 | $270.5 million | 69.9% | 86.8% | | 2034 | $5.7 million | 1.6% | 88.4% | | 2035 | $19.4 million | 5.0% | 93.4% | | 2036 | $6.1 million | 1.6% | 95.0% | | 2037 | $3.2 million | 0.8% | 95.8% | | 2038 | $1.2 million | 0.3% | 96.1% | | 2039 | $3.7 million | 1.0% | 97.1% | | 2040 | $2.4 million | 0.6% | 97.7% | | 2041 | $2.6 million | 0.7% | 98.4% | | 2042 | $0 | 0.0% | 98.4% | | 2043 | $2.1 million | 0.5% | 98.9% | | 2044 | $0.3 million | 0.1% | 99.0% | | 2045 | $4.0 million | 1.0% | 100.0% | | **Total** | **$386.5 million** | **100.0%** | | - Weighted Average Lease Term: **7.6 years**[71](index=71&type=chunk) [Net Lease Portfolio - Occupancy Summary](index=27&type=section&id=Net%20Lease%20Portfolio%20-%20Occupancy%20Summary) This section provides an occupancy summary for SVC's net lease portfolio, showing a **97.3%** occupancy rate as of June 30, 2025 Net Lease Occupancy (as of June 30, 2025 vs June 30, 2024) | Metric | 6/30/2025 | 6/30/2024 | | :-------------------------- | :-------- | :-------- | | Properties (end of period) | 742 | 749 | | Vacant properties end of the period | 20 | 20 | | Percentage of properties leased | 97.3% | 97.3% | **Appendix** [Company Profile and Research Coverage](index=29&type=section&id=Company%20Profile%20and%20Research%20Coverage) This section profiles Service Properties Trust (SVC) as a REIT, managed by The RMR Group, and lists its research and rating coverage - Company Type: **REIT owning hotels and service-focused retail net lease properties**[80](index=80&type=chunk) - Management: **Managed by The RMR Group** (Nasdaq: RMR), an alternative asset management company with approximately **$40 billion** in assets under management as of June 30, 2025[81](index=81&type=chunk) - Research Coverage: B. Riley Securities, Inc., Wells Fargo Securities, and Oppenheimer & Co. Inc[82](index=82&type=chunk) - Rating Agencies: Moody's Investors Service and S&P Global[82](index=82&type=chunk) [Governance Information](index=30&type=section&id=Governance%20Information) This section lists the members of SVC's Board of Trustees and its key officers, outlining the company's leadership structure - **Board of Trustees**: Christopher J. Bilotto (Managing Trustee), Laurie B. Burns (Independent Trustee), Robert E. Cramer (Independent Trustee), Donna D. Fraiche (Lead Independent Trustee), William A. Lamkin (Independent Trustee), Rajan C. Penkar (Independent Trustee), and Adam D. Portnoy (Chair of the Board & Managing Trustee)[84](index=84&type=chunk) - **Officers**: Christopher J. Bilotto (President and Chief Executive Officer), Jesse W. Abair (Vice President), and Brian E. Donley (Chief Financial Officer and Treasurer)[84](index=84&type=chunk) [Calculation of FFO, Normalized FFO and CAD](index=31&type=section&id=Calculation%20of%20FFO%2C%20Normalized%20FFO%20and%20CAD) This section reconciles net loss to FFO, Normalized FFO, and CAD, detailing adjustments for non-GAAP performance and distribution capacity FFO, Normalized FFO, and CAD (Three Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change | | :-------------------- | :--------------- | :--------------- | :----------- | | Net loss | $(38.2) million | $(73.8) million | 48.3% (improvement) | | FFO | $55.9 million | $57.8 million | (3.3%) | | Normalized FFO | $57.6 million | $73.8 million | (22.0%) | | CAD | $16.8 million | $3.4 million | 387.7% | Per Common Share Amounts (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------- | :------ | :------ | :----------- | | Net loss | $(0.23) | $(0.45) | 48.9% (improvement) | | FFO | $0.34 | $0.35 | (2.9%) | | Normalized FFO | $0.35 | $0.45 | (22.2%) | | CAD | $0.10 | $0.02 | 400.0% | [Calculation of EBITDA, EBITDAre and Adjusted EBITDAre](index=32&type=section&id=Calculation%20of%20EBITDA%2C%20EBITDAre%20and%20Adjusted%20EBITDAre) This section presents the calculation of EBITDA, EBITDAre, and Adjusted EBITDAre, providing insights into operating performance before certain impacts EBITDA, EBITDAre, and Adjusted EBITDAre (Three Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change | | :-------------------- | :--------------- | :--------------- | :----------- | | Net loss | $(38.2) million | $(73.8) million | 48.3% (improvement) | | EBITDA | $140.0 million | $116.2 million | 20.5% | | EBITDAre | $160.9 million | $154.1 million | 4.4% | | Adjusted EBITDAre | $163.8 million | $171.5 million | (4.5%) | [Calculation and Reconciliation of Hotel EBITDA and Adjusted Hotel EBITDA - All Hotels](index=33&type=section&id=Calculation%20and%20Reconciliation%20of%20Hotel%20EBITDA%20and%20Adjusted%20Hotel%20EBITDA%20-%20All%20Hotels) This section details the calculation of Hotel EBITDA and Adjusted Hotel EBITDA, showing a year-over-year decrease despite stable revenues Hotel Operating Revenues and Expenses (Three Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change | | :-------------------- | :--------------- | :--------------- | :----------- | | Hotel operating revenues | $404.4 million | $412.5 million | (1.96%) | | Hotel operating expenses | $332.8 million | $330.1 million | 0.82% | | Hotel EBITDA | $71.6 million | $82.4 million | (13.0%) | | Adjusted Hotel EBITDA | $73.1 million | $82.4 million | (11.4%) | | Adjusted Hotel EBITDA Margin | 18.1% | 20.0% | (1.9) pts | Hotel Operating Revenues and Expenses (Six Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change | | :-------------------- | :--------------- | :--------------- | :----------- | | Hotel operating revenues | $739.4 million | $748.7 million | (1.25%) | | Hotel operating expenses | $646.1 million | $637.4 million | 1.36% | | Hotel EBITDA | $93.3 million | $111.3 million | (16.2%) | | Adjusted Hotel EBITDA | $96.0 million | $111.3 million | (13.8%) | | Adjusted Hotel EBITDA Margin | 13.0% | 14.9% | (1.9) pts | [Notes to Condensed Consolidated Statements of Income (Loss) and Calculations of FFO, Normalized FFO, CAD, EBITDA, EBITDAre, Adjusted EBITDAre, Hotel EBITDA and Adjusted Hotel EBITDA](index=34&type=section&id=Notes%20to%20Condensed%20Consolidated%20Statements%20of%20Income%20%28Loss%29%20and%20Calculations%20of%20FFO%2C%20Normalized%20FFO%2C%20CAD%2C%20EBITDA%2C%20EBITDAre%2C%20Adjusted%20EBITDAre%2C%20Hotel%20EBITDA%20and%20Adjusted%20Hotel%20EBITDA) This section provides explanatory notes to financial statements and non-GAAP calculations, detailing adjustments and significant events - **Asset Impairment**: SVC recorded a net loss on asset impairment of **$17.7 million** for Q2 2025 (**17 hotels** and **2 net lease properties**) and **$54.7 million** for the six months ended June 30, 2025 (**17 hotels** and **2 net lease properties**)[94](index=94&type=chunk)[95](index=95&type=chunk) - **Real Estate Sales**: SVC recorded a net loss on sale of real estate of **($0.2) million** for Q2 2025 (**4 hotels**, **4 net lease properties**) and a gain of **$0.6 million** for the six months ended June 30, 2025 (**6 hotels**, **7 net lease properties**)[94](index=94&type=chunk) - **Rental Income Adjustment**: Rental income increased by **$2.7 million** for Q2 2025 and **$6.6 million** for the six months ended June 30, 2025, due to straight-line recognition of scheduled rent changes[95](index=95&type=chunk) - **Transaction Related Costs**: Transaction related costs for Q2 2025 were **$1.3 million**, primarily for hotel renovations[95](index=95&type=chunk) - **Early Debt Extinguishment**: No loss on early extinguishment of debt in Q2 2025, compared to **$16.0 million** in Q2 2024[95](index=95&type=chunk) [Non-GAAP Financial Measures and Certain Definitions](index=35&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Certain%20Definitions) This section defines SVC's non-GAAP financial measures and key operational terms, explaining their methodologies and relevance - **FFO and Normalized FFO**: Calculated based on **Nareit definition**, adjusting net income for real estate depreciation, impairment, and gains/losses on sales. Normalized FFO further adjusts for specific non-recurring items[98](index=98&type=chunk) - **CAD (Cash Available for Distribution)**: Defined as Normalized FFO minus proportionate share of Normalized FFO from equity method investment, plus operating cash flow distributions, less real estate related capital expenditures and other non-cash/non-recurring items[99](index=99&type=chunk) - **EBITDA, EBITDAre, and Adjusted EBITDAre**: EBITDAre is based on **Nareit definition**, adjusting EBITDA for real estate sales gains/losses and impairment. Adjusted EBITDAre includes further adjustments[100](index=100&type=chunk) - **Hotel EBITDA and Adjusted Hotel EBITDA**: **Hotel operating revenues less hotel operating expenses**, with Adjusted Hotel EBITDA **excluding items not reflective of ongoing operating performance**[101](index=101&type=chunk) - Other Key Definitions: Includes **Adjusted Hotel EBITDA Margin**, **Adjusted Total Assets**, **Annualized Dividend Yield**, **Annualized Minimum Rent**, **Average Daily Rate (ADR)**, **Cash Cap Rate**, **Chain Scale**, **Comparable Hotels Data**, **Consolidated Income Available for Debt Service**, **Debt**, **Earnings and Adjustments Attributable to an Investee**, **Exit Hotels**, **FF&E Reserves**, **FF&E Reserve Deposits Not Funded by Hotel Operations**, **GAAP**, **GAAP Cap Rate**, **General and Administrative Expense Paid in Common Shares**, **Gross Book Value of Real Estate Assets**, **Hotel Capital Improvements and FF&E Reserve Fundings**, **Investment**, **Lease Related Costs**, **Occupancy**, **Non-Cash Expenses**, **Non-Cash Interest Expense**, **Non-Cash Revenues**, **Owner's Priority Return**, **Redevelopment and Other Activities**, **Rent Coverage**, **Retained Hotels**, **Revenue per Available Room (RevPAR)**, **Rolling Four Quarter CAD**, **SOFR**, **Total Gross Assets**, and **Weighted Average Lease Term**[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) [WARNING CONCERNING FORWARD-LOOKING STATEMENTS](index=38&type=section&id=WARNING%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section cautions against undue reliance on forward-looking statements, which are subject to risks and uncertainties, and may not be updated - **Nature of Statements**: Contains **forward-looking statements** about strategic priorities, hotel sales, balance sheet strengthening, debt repayment, portfolio optimization, and long-term value[126](index=126&type=chunk) - **Risks and Uncertainties**: Statements are subject to inherent uncertainties, including market conditions, interest rates, inflation, supply chain disruptions, economic downturns, ability to sell properties, debt covenants, liquidity, and operational challenges[127](index=127&type=chunk) - **Disclaimer**: Advises against undue reliance on **forward-looking statements** and states no intention to update them unless legally required[128](index=128&type=chunk)

Strategic Transformation - SVC is transforming into a majority net lease REIT by selling a significant portion of its hotel portfolio[10, 18] - Anticipated gross proceeds from hotel sales in 2025 are $966 million[21] - Net lease assets will represent 71% of pro forma Adjusted EBITDAre for LTM 2Q25 after the hotel sales[21] - 114 hotels (14,925 keys) are earmarked for sale in 2H25, with $900 million under binding agreement[21] Financial Highlights - SVC's LTM Adjusted EBITDAre is $565.238 million[147] - Pro Forma Net Debt / LTM Adjusted EBITDAre is expected to be 93x after hotel dispositions[40] - SVC has $60 billion of unencumbered assets pro forma for anticipated hotel dispositions[45] Net Lease Portfolio - The net lease portfolio has 742 properties with $3865 million in annualized minimum rent[13] - TravelCenters of America (TA) accounts for 68% of annualized minimum net lease rents as of 2Q25[21] - Approximately 97% of net leases have embedded growth through contractual rent escalators[21] Hotel Portfolio - The pro forma hotel portfolio will consist of 84 hotels with 19,942 keys[23, 29] - The pro forma hotel portfolio is expected to generate $144 million in EBITDA[29] - The ADR for the pro forma hotel portfolio is expected to be $17180 and RevPAR is expected to be $10840[29]

Summary of Service Properties Trust (SVC) Conference Call Company Overview - Service Properties Trust (SVC) primarily operates in the lodging and net lease sectors, with a portfolio of over 200 hotels and more than 700 net lease properties, focusing on travel centers and necessity-based retail [3][4] Key Points Portfolio Strategy - SVC is undergoing a repositioning strategy, divesting certain hotel assets to focus more on a net lease strategy, particularly full-service hotel operations [4] - The company is actively marketing 123 hotels, with 114 focused service hotels being a significant part of the divestment strategy [11][12] - The divestment process has seen considerable interest, with 50 groups initially offering on the portfolio, narrowed down to four potential buyers [12] Financial Performance - RevPAR (Revenue per Available Room) grew modestly by over 2.5%, impacted by renovations and labor cost increases [6][7] - The hotel industry is facing challenges, including a pullback in RevPAR and softness in international travel, particularly affecting government contract revenues [8][9] Use of Proceeds - Proceeds from hotel sales, estimated at $800 million, will primarily be used to repay maturing senior notes and potentially reduce other debts [15][16] - The company aims to improve its balance sheet and leverage, targeting a reduction of leverage by one full turn post-divestment [43] Travel Center Assets - The travel center assets are considered the "crown jewels" of SVC's portfolio, with leases guaranteed by British Petroleum (BP) [22][24] - Despite recent challenges in fuel margins and freight demand, SVC remains confident in the long-term value of these assets [27] Net Lease Strategy - SVC's net lease portfolio includes over 700 properties, primarily consisting of quick-service restaurants (QSRs) and grocery stores [28][29] - The company is looking to expand its net lease acquisitions, with a pipeline of $40 million to $50 million under contract [29][30] Future Outlook - SVC anticipates that the remaining hotel portfolio will consist of 83 hotels, predominantly full-service, which are expected to yield better performance post-renovation [18][20] - The company is focused on maintaining a diversified REIT structure while emphasizing growth in the net lease sector [50][51] Capital Expenditures - Significant capital expenditures are planned, with $300 million spent in 2024 and $250 million projected for the current year, primarily on renovations [47][48] - The company expects capital expenditures to normalize after mid-2026 [49] Dividend Policy - Currently, SVC pays a minimal dividend of one cent per quarter, with future increases contingent on improved EBITDA and successful completion of asset sales [44][45] Transition Narrative - SVC is viewed as a transition story, focusing on deleveraging and enhancing the value of its portfolio, with a goal to narrow the discount to NAV (Net Asset Value) [52][53] Additional Insights - The company is strategically positioned to benefit from a strong buyer pool for its hotel assets, which may lead to favorable pricing [35] - Future growth will be supported by a flexible financing structure through a master trust, enhancing capital deployment opportunities [31][39]