Core Insights - The upcoming earnings season is expected to reveal negative EPS revisions, indicating potential distress in the near-term performance of several real estate stocks [2] Group 1: EPS Revisions - Negative EPS revisions are prevalent among small and mid-cap REITs, suggesting a challenging outlook for these companies [2] - Service Properties Trust is highlighted as one of the worst-performing REITs based on its EPS revision grades [2]

Core Viewpoint - The article discusses Service Properties Trust (NASDAQ: SVC) and reflects on its previous rating of "Hold" due to concerns despite a high dividend yield of 9.69% [1]. Group 1 - The company has been previously analyzed over two years ago, with a focus on its dividend yield and financial stability [1]. - The author expresses a personal investment strategy aimed at achieving financial independence through dividend stocks, indicating a preference for steady income [1].

Core Viewpoint - The article discusses Service Properties Trust (NASDAQ: SVC) and reflects on its previous rating as a "Hold" due to concerns despite a high dividend yield of 9.69% [1]. Group 1 - The company has been previously analyzed over two years ago, with a focus on its dividend yield and financial stability [1]. - The aim of the analysis is to build a financial portfolio for financial independence, emphasizing the importance of dividend stocks for steady income [1].

Core Viewpoint - Service Properties Trust (SVC) has made significant progress in its hotel dispositions and actions to enhance its balance sheet, indicating a strategic shift in its asset management approach [1] Group 1: Hotel Sales - In the fourth quarter of 2025 to date, SVC has completed the sale of 66 hotels, totaling 8,294 keys, generating approximately $534 million in gross proceeds [1] - Year to date, SVC has sold 112 hotels, amounting to 14,631 keys, with total gross proceeds of around $859 million [1]

Financial Data and Key Metrics Changes - Normalized FFO for Q3 2025 was $33,900,000 or $0.20 per share, down from $0.32 per share in the prior year quarter [19] - Adjusted EBITDAre decreased by $10,000,000 year over year to $145,000,000, primarily impacted by a $13,100,000 decline in adjusted hotel EBITDA and an $8,700,000 increase in interest expense [19][20] - Overall financial results were affected by a decline in gross operating profit margin percentage to 24.4%, down 330 basis points from the prior year [19] Business Line Data and Key Metrics Changes - Hotel portfolio generated adjusted hotel EBITDA of $44,300,000, an 18.9% decline from the prior year due to softer demand and expense pressures [20] - RevPAR for the retained hotel portfolio increased by 60 basis points year over year to $114, while the overall hotel portfolio's RevPAR increased by 20 basis points year over year [10][20] - The triple net lease segment reported rent growth over 2%, stable rent coverage, and occupancy over 97% [13] Market Data and Key Metrics Changes - Domestic leisure travel has declined to its lowest point in several years, reflecting heightened price sensitivity and a shift towards shorter booking windows [9] - The U.S. travel market continues to face headwinds with uneven demand trends amid persistent economic uncertainty [9] Company Strategy and Development Direction - The company is focused on capital recycling initiatives, including the sale of 121 hotels for gross proceeds of $959,000,000, with 69 hotel sales expected to close in November and December [7][8] - The strategic shift towards a net lease company is intended to improve portfolio fundamentals and provide optionality with financing sources [8][15] - Significant capital investments have been made to elevate the quality and performance of hotels, with renovations completed at approximately 45% of the retained hotel portfolio [12] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment is characterized by economic uncertainty and a cautious consumer mindset [9] - The company expects the disposition pipeline to normalize, supporting stability and margin improvement as it moves into 2026 [11] - Future guidance for Q4 includes projected RevPAR of $86 to $89 and adjusted hotel EBITDA in the range of $20,000,000 to $25,000,000, considering seasonality and recent headwinds [21] Other Important Information - The company raised over $850,000,000 in proceeds, including $295,000,000 from asset sales during the quarter and approximately $490,000,000 from the issuance of new zero coupon bonds [7][8] - The company has a current debt outstanding of $5,500,000,000 with a weighted average interest rate of 5.9% [22] Q&A Session Summary Question: How realistic is it that all remaining hotel sales will close by year-end? - Management indicated that they are tracking to close 40% to 50% of the remaining balance in November, with the rest in December [27][28] Question: Can you discuss the $27,000,000 impairment taken in the quarter? - Management explained that it was related to shifting purchase price allocations among portfolios and does not indicate further impairments [30] Question: What is the outlook for price coverage in the travel center portfolio? - Management noted that while there has been a decline in coverage, it is stabilizing and not a major concern due to backing from BP [32][34] Question: How did hotel EBITDA perform versus expectations? - Management stated that timing of asset sales was the biggest driver of performance, with several one-time impacts affecting results [38][40] Question: What is the rationale behind issuing zero coupon bonds? - The primary goal was to provide headroom with covenants and improve liquidity, allowing for better management of debt maturities [49][51] Question: Will there be further hotel dispositions in 2026? - Management confirmed plans for continued dispositions in 2026, focusing on hotels with negative EBITDA [58]

Financial Data and Key Metrics Changes - Normalized FFO for Q3 2025 was $33.9 million or $0.20 per share, down from $0.32 per share in the prior year quarter [15] - Adjusted EBITDA RE decreased by $10 million year over year to $145 million, primarily impacted by a $13.1 million decline in adjusted hotel EBITDA and an $8.7 million increase in interest expense [15][16] - Gross operating profit margin percentage declined by 330 basis points to 24.4% [15] Business Line Data and Key Metrics Changes - Hotel portfolio generated adjusted hotel EBITDA of $44.3 million, an 18.9% decline from the prior year due to softer demand and expense pressures [16] - REVPAR for the retained portfolio increased by 60 basis points year over year to $114, while the 76 domestic exit hotels not yet sold generated REVPAR of $72, a decline of 1% [16][17] - The triple net lease segment reported annualized base rent growth of 2.3% and NOI increased by 50 basis points year over year [12] Market Data and Key Metrics Changes - The U.S. travel market is facing headwinds, with domestic leisure travel declining to its lowest point in several years, reflecting heightened price sensitivity and shorter booking windows [7] - The triple net lease market continues to show resilience and growth, driven by consumer preferences for convenience and affordability [10] Company Strategy and Development Direction - The company is focused on capital recycling initiatives, strengthening its balance sheet, and transitioning towards a net lease company [5][6] - Significant capital investments have been made to elevate hotel quality, with renovations completed at nearly 45% of the retained hotel portfolio [9] - The company plans to continue with hotel dispositions in 2026, focusing on negative EBITDA hotels [48] Management's Comments on Operating Environment and Future Outlook - Management noted that the travel industry is experiencing softness, with cost pressures and a cautious consumer mindset impacting performance [7][36] - The company expects to see stability and margin improvement as the disposition pipeline normalizes and renovated hotels capture additional market share [9][20] - Fourth-quarter guidance projects REVPAR of $86-$89 and adjusted hotel EBITDA in the $20-$25 million range, considering seasonality and recent headwinds [17] Other Important Information - The company raised over $850 million in proceeds, including $295 million from asset sales during the quarter [5] - The company has $5.5 billion of debt outstanding with a weighted average interest rate of 5.9% [18] - Full-year CapEx guidance has been lowered from $250 million to approximately $200 million due to a shift in the pace of deployment [20] Q&A Session Summary Question: How realistic is it that all remaining hotel sales will close by year-end? - Management indicated that they are tracking to close 40-50% of the remaining balance in November, with the rest in December [23] Question: Can you discuss the $27 million impairment taken in the quarter? - Management clarified that it was related to shifting purchase price allocations and does not indicate further impairments [25] Question: What is the expectation for the declining rent coverage in the travel center portfolio? - Management noted that while there has been a decline, they are not particularly concerned due to the investment-grade backing from BP [27] Question: Can you elaborate on the hotel portfolio's Q3 performance? - Management explained that the timing of asset sales and some insurable events contributed to the performance being below expectations [32] Question: What is the rationale behind issuing zero-coupon bonds? - The primary goal was to provide headroom with covenants and improve liquidity, allowing for better management of debt maturities [40] Question: What is the outlook for potential further dispositions in 2026? - Management confirmed plans to continue with hotel dispositions in 2026, focusing on negative EBITDA hotels [48]

Financial Results and Supplemental Information THIRD QUARTER 2025 November 5, 2025 | Service Properties Trust Announces Third Quarter 2025 Financial Results | 4 | | --- | --- | | Third Quarter 2025 Highlights | 5 | | Key Financial Data | 8 | | Condensed Consolidated Statements of Income (Loss) | 9 | | Condensed Consolidated Balance Sheets | 10 | | Debt Summary | 11 | | Debt Maturity Schedule | 12 | | Leverage Ratios, Coverage Ratios and Debt Covenants | 13 | | Capital Expenditures Summary | 14 | | Property ...

分组1 - Service Properties (SVC) reported quarterly funds from operations (FFO) of $0.2 per share, missing the Zacks Consensus Estimate of $0.21 per share, and down from $0.32 per share a year ago, representing an FFO surprise of -4.76% [1] - The company posted revenues of $478.77 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 1.86%, and down from $491.17 million year-over-year [2] - Service Properties has surpassed consensus FFO estimates three times over the last four quarters, but has underperformed the market with shares losing about 22.4% since the beginning of the year [2][3] 分组2 - The current consensus FFO estimate for the coming quarter is $0.13 on revenues of $457.11 million, and for the current fiscal year, it is $0.74 on revenues of $1.88 billion [7] - The Zacks Industry Rank for REIT and Equity Trust - Other is currently in the top 34% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Property Ownership and Sales - As of September 30, 2025, the company owned 912 properties across 46 states, the District of Columbia, Canada, and Puerto Rico[118] - The company sold 52 hotels with a total of 7,114 keys for a combined sales price of $391,352,000 and entered into agreements to sell 69 hotels for $567,500,000[120] - The company sold 56 properties for a combined sales price of $343,893 during the nine months ended September 30, 2025, and has agreements to sell 69 hotels for a total of $567,500[168] - The company acquired 20 net lease properties for a total purchase price of $54,701 during the nine months ended September 30, 2025, and has agreements to acquire five additional properties for $25,350[169] Financial Performance - Total revenues for the three months ended September 30, 2025, were $478,770,000, a decrease of 2.5% compared to $491,171,000 in the same period of 2024[130] - Hotel operating revenues decreased by 3.4% to $377,576,000, primarily due to hotel sales since July 1, 2024[131] - The company reported a net loss of $46,945,000 for the three months ended September 30, 2025, compared to a net loss of $46,901,000 in the same period of 2024[130] - Rental income decreased by $271 million (0.1%) to $300,441 million in the nine months ended September 30, 2025, compared to $300,712 million in 2024[143] - Hotel operating revenues decreased by $22,713 million (2.0%) to $1,116,944 million in the nine months ended September 30, 2025, compared to $1,139,657 million in 2024[143] - Total revenues decreased by $22,984 million (1.6%) to $1,417,385 million in the nine months ended September 30, 2025, compared to $1,440,369 million in 2024[143] - Net loss increased by $2,405 million (1.2%) to $201,539 million in the nine months ended September 30, 2025, compared to $199,134 million in 2024[143] - Revenues for the nine months ended September 30, 2025 were $1,134,198, while expenses were $1,395,011, resulting in a net loss of $260,813[195] Occupancy and Rates - As of September 30, 2025, the overall occupancy rate for all hotels was 68.9%, an increase of 1.0 percentage points compared to 67.9% in 2024[203] - The average daily rate (ADR) for all hotels decreased to $145.50 from $147.27, reflecting a decline of 1.2%[203] - Revenue per available room (RevPAR) for all hotels was $100.25, slightly up by 0.2% from $100.05 in the previous year[203] - The average occupancy for retained hotels was 67.8%, up from 66.4% in the previous year[203] - The Royal Sonesta Hotels® achieved an occupancy rate of 67.5% for the three months ended September 30, 2025, unchanged from the previous year[203] - Sonesta Hotels & Resorts® saw an increase in occupancy from 60.5% to 64.8%, a change of 4.3 percentage points[203] - The Crowne Plaza® brand reported a 2.9 percentage point increase in occupancy to 65.6% compared to 62.7% in 2024[203] Net Lease Portfolio - The net lease portfolio consisted of 752 properties with an aggregate of 13,185,953 square feet, achieving 97.3% occupancy and requiring annual minimum rents of $388,745,000[128] - The company’s largest tenant, TA, leased 175 travel centers under master leases requiring annual minimum rents of $264,262,000[128] - The net lease properties were 97.3% occupied as of September 30, 2025, with 20 properties available for lease[205] - The top tenant, TravelCenters of America Inc., accounts for 68.0% of the total annualized minimum rent with $264,262,000[208] - The net lease properties are diversified across 21 distinct industries, with travel centers representing 68.8% of the annualized minimum rent[210] - The total investment in net lease properties is $5,055,676,000, with a significant portion allocated to travel centers[210] Debt and Financing - The company issued $580,155 in zero coupon senior secured notes due 2027 in September 2025, raising net proceeds of approximately $490,000[175] - The company redeemed $350,000 of its outstanding 5.25% senior unsecured notes due 2026 in September 2025, funded using cash on hand[176] - As of September 30, 2025, the company had total debt maturities of $5,910,298, with $1,432,113 due in 2027 and $1,000,737 due in 2028[180] - The company maintains a $650,000 secured revolving credit facility, with no borrowings outstanding as of September 30, 2025, and an annual interest rate of 6.74%[172] - As of September 30, 2025, total debt to adjusted total assets ratio was 57.5%, below the maximum covenant requirement of 60%[188] - Secured debt to adjusted total assets ratio stood at 23.9%, well below the maximum limit of 40%[188] - Consolidated income available for debt service to debt service ratio was 1.56x, exceeding the minimum requirement of 1.50x[188] - Total unencumbered assets to unsecured debt ratio was 202.6%, surpassing the minimum threshold of 150%[188] - Total unencumbered assets in guarantor subsidiaries to senior guaranteed unsecured debt ratio was 3.84x, above the minimum requirement of 2.20x[188] - The company’s fixed rate debt totals $5.910 billion, with an annual interest expense of $343.401 million[219] - A one percentage point increase in interest rates would increase the annual interest cost by approximately $53.301 million, excluding certain senior secured notes[219] - The company has no outstanding amounts under its revolving credit facility and $45 million under the Variable Funding Note (VFN) as of September 30, 2025[221] Cash Flow and Capital Expenditures - Cash and cash equivalents at the end of the nine months ended September 30, 2025, increased to $441,232 from $62,846 in 2024, representing a significant increase of 603%[162] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $136,305, a decrease of 8.3% from $149,043 in 2024[162] - The company funded $126,465 for capital improvements in excess of FF&E reserves during the nine months ended September 30, 2025, and expects to fund an additional $70,000 in Q4 2025 and $150,000 in 2026[165] Shareholder Distributions - The company declared a total distribution of $5,002 to common shareholders during the nine months ended September 30, 2025, with a quarterly distribution of $0.01 per share[170] - The company declared distributions of $0.01 per share for the three months ended September 30, 2025, compared to $0.20 per share for the same period in 2024[217] Strategic Focus - The company aims to transition to a service-focused retail net lease property portfolio while improving the performance of retained hotels[121] - The company is subject to various financial covenants that restrict its ability to incur additional debt and require maintenance of specific financial ratios[187] - The company’s strategy to manage interest rate exposure has not materially changed since December 31, 2024[218]

Financial Performance - Net loss of $46.9 million, or $0.28 per common share, for the third quarter of 2025[14] - Total revenues for Q3 2025 were $478,770, a decrease of 2.5% from $491,171 in Q3 2024[19] - Net loss for Q3 2025 was $46,945, compared to a net loss of $46,901 in Q3 2024, reflecting a slight increase in losses[19] - Funds from operations (FFO) for Q3 2025 were $30,432, down 45.6% from $55,863 in Q2 2025[18] - Adjusted EBITDAre for Q3 2025 was $145,018, a decrease from $154,992 in Q3 2024[18] - The company reported a rolling four-quarter CAD of $(88,250) for Q3 2025, compared to $(148,057) in Q3 2024[18] - The company experienced a loss on asset impairment of $27,067,000 for the three months ended September 30, 2025[86] - For the three months ended September 30, 2025, the company reported a net loss of $46,945,000 compared to a net loss of $38,159,000 for the previous quarter[87] - EBITDA for the three months ended September 30, 2025, was $135,537,000, a decrease from $140,007,000 in the prior quarter[87] - Adjusted EBITDAre for the three months ended September 30, 2025, was $145,018,000, down from $163,776,000 in the previous quarter[87] Asset and Investment Overview - Total assets as of September 30, 2025, were $6,980,324, a decrease from $7,119,558 as of December 31, 2024[20] - Total liabilities increased to $6,332,416 as of September 30, 2025, compared to $6,267,685 at the end of 2024[20] - Cash and cash equivalents rose to $417,415 as of September 30, 2025, up from $143,482 at the end of 2024[20] - Total investments amount to $10,750,101, with $5,694,425 allocated to hotels (53.0% of total investments) and $5,055,676 to net lease properties (47.0% of total investments)[41] - The company acquired 24 properties in 2025, with a total purchase price of $70,643 and an average cash cap rate of 7.4%[36] - The company has a total of 160 hotels, with an average investment per room of $192,796[56] - The portfolio includes 178 travel centers, which account for 30.8% of total investments, indicating a significant focus on this sector[48] - The company operates in a diverse range of industries, with 23 different categories represented in its portfolio, including health and fitness, movie theaters, and grocery stores[48] Debt and Liquidity - No significant debt maturities until February 2027, with $650.0 million of available borrowing capacity under the revolving credit facility[15] - As of September 30, 2025, total debt amounts to $5,505,298, with a weighted average interest rate of 5.896%[23] - The leverage ratio of net debt to total gross assets is 57.9%, an increase from 56.5% in the previous quarter[30] - The company has a total of $1,750,000 in debt maturing in 2026, with $1,500,000 maturing in 2027[26] - The weighted average lease term is 7.1 years, indicating a stable income stream from the portfolio[73] Hotel Operations - Hotel RevPAR was $100.25, consistent with guidance, while adjusted hotel EBITDA was $45.4 million[14] - For the three months ended September 30, 2025, hotel capital improvements totaled $43,208, while total capital improvements and FF&E reserve fundings reached $46,987[34] - For the three months ended September 30, 2025, the average occupancy rate for all hotels was 68.9%, an increase of 1.0 percentage points compared to 67.9% in 2024[57] - The average Daily Rate (ADR) for all hotels decreased by 1.2% to $145.50 in 2025 from $147.27 in 2024[57] - Adjusted Hotel EBITDA for all hotels decreased by 18.9% to $44,261,000 in 2025 from $54,552,000 in 2024[57] - The number of hotels operated decreased to 160 as of September 30, 2025, down from 200 in the previous quarter[90] Tenant and Lease Information - The net lease portfolio consists of 752 properties, totaling 13,185,953 square feet, with 178 properties in the travel centers industry, representing 65.5% of total investment[65] - TravelCenters of America Inc. is the largest tenant, accounting for 64.7% of total investment at $3,270,106,000, with an annualized minimum rent of $264,262,000 and a rent coverage ratio of 1.27x[69] - The average investment per property across the portfolio is $6,705, with an average annual minimum rent of $517,000[71] - The average lease term for the top 10 tenants is 7.6 years, with a weighted average rent coverage of 1.67x[69] Strategic Outlook - The company continues to explore market expansion opportunities and new strategies to enhance its portfolio and investment returns[41] - Forward-looking statements indicate SVC's efforts to enhance financial stability and potential acquisitions to optimize cash flow resilience[126] - Risks include market conditions, interest rate fluctuations, and the ability to maintain sufficient liquidity and refinance debt[127] - SVC's ability to increase occupancy and room rates is crucial for future revenue growth and operational success[127] - The company emphasizes the importance of diversifying sources of rents and returns to improve cash flow security[127]