Service Properties Trust(US:SVC)2020-11-09 19:04Financial Data and Key Metrics Changes - Normalized FFO for Q3 2020 was $23.2 million, a decrease from $155.6 million in the prior year quarter, reflecting a decline of $0.81 per share due to lower returns from IHG and Marriott agreements [25][26] - Adjusted EBITDAre was $103.6 million in Q3 2020, representing a 50.5% decline from the same period in 2019 [26] - RevPAR decreased by 56.6%, and gross operating profit margin percentage decreased by 18.2 percentage points to 21.2% [27] Business Line Data and Key Metrics Changes - Comparable hotels reported an average occupancy of 46% in Q3 2020, up from 30.1% in Q2 2020, with average daily rate increasing to $89.50 from $84.15 [11] - Extended stay hotels reported occupancy of 62.1%, significantly higher than 32.6% for limited service and 26% for full service hotels [12] - Operating losses for Sonesta and Wyndham portfolios were $22 million and $10.7 million respectively, with a $19 million decline in FF&E reserve income [25][26] Market Data and Key Metrics Changes - Rent collections from net lease retail tenants improved to 87.4% in October from a low of 45% in April [14] - TravelCenters of America, representing 25.6% of minimum returns, continued to operate and was current on rent obligations, with property level coverage at 2 times [14][18] - The hotel performance has shown improvement, with overall occupancy increasing to 46.7% by late October from a low of 21% in April [12] Company Strategy and Development Direction - The company is transitioning management and branding of hotels to Sonesta, aiming for greater flexibility and improved performance in challenging market conditions [10] - The focus is on suburban extended stay and select-service hotels, which are expected to outperform urban full-service hotels through at least 2021 [13] - The company has amended its $1 billion revolving credit facility to ensure liquidity and has secured waivers for financial covenants through mid-July 2022 [9][32] Management's Comments on Operating Environment and Future Outlook - Management believes the worst effects of the COVID-19 pandemic are behind, with gradual improvements observed since April [7] - The company anticipates that business travel may not recover as quickly as expected, impacting major brands' guest rewards programs [10] - Management expressed confidence in the recovery of the hotel sector by 2022, contingent on vaccine distribution [37] Other Important Information - The company has deferred $13.4 million of rent for certain retail tenants, with repayment expected over 12 to 24 months [19] - The company has sold 5 net lease properties for $5.9 million and has agreements to sell 39 hotels with a net carrying value of $204 million [21][22] - The company expects to fund approximately $50 million of capital improvements in Q4 2020, primarily for maintenance and ongoing renovations [31] Q&A Session Summary Question: Has the company received calls from Marriott regarding reversing decisions? - Management has not received any calls from IHG or Marriott and believes the vaccine news is favorable for the industry, potentially accelerating recovery in 2022 [37] Question: What is the status of the transition to Sonesta? - The transition is on schedule, with Sonesta enhancing its management team and preparing to take over hotels as planned [39] Question: What is the expected CapEx for the transition to Sonesta? - Approximately $50 million of CapEx is expected for Q4, with $30 million related to rebranding costs [46] Question: What is the current status of security deposits and guarantees? - The total amount for security deposits and guarantees at the end of Q3 is approximately $22 million, with $3 million from Hyatt and $19.5 million from Radisson [49] Question: Is the company considering selling TravelCenters assets? - Currently, the company is not contemplating selling more TravelCenters assets but is keeping options open [64]