10-Q 1 svc-20240331.htm 10-Q svc-20240331
0000945394false12/312024Q1http://fasb.org/srt/2023#HotelMemberhttp://fasb.org/srt/2023#HotelMemberhttp://fasb.org/srt/2023#HotelMemberhttp://fasb.org/srt/2023#HotelMember00009453942024-01-012024-03-3100009453942024-05-03xbrli:shares00009453942024-03-31iso4217:USD00009453942023-12-310000945394svc:SeniorSecuredNotesMember2024-03-310000945394svc:SeniorSecuredNotesMember2023-12-310000945394svc:SeniorUnsecuredNotesMember2024-03-310000945394svc:SeniorUnsecuredNotesMember2023-12-310000945394us-gaap:NonrelatedPartyMember2024-03-310000945394us-gaap:NonrelatedPartyMember2023-12-310000945394us-gaap:RelatedPartyMember2024-03-310000945394us-gaap:RelatedPartyMember2023-12-31iso4217:USDxbrli:shares00009453942023-01-012023-03-310000945394us-gaap:CommonStockMember2023-12-310000945394svc:CumulativeCommonDistributionsMember2023-12-310000945394us-gaap:AdditionalPaidInCapitalMember2023-12-310000945394us-gaap:RetainedEarningsMember2023-12-310000945394us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000945394us-gaap:RetainedEarningsMember2024-01-012024-03-310000945394us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310000945394us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310000945394us-gaap:CommonStockMember2024-01-012024-03-310000945394svc:CumulativeCommonDistributionsMember2024-01-012024-03-310000945394us-gaap:CommonStockMember2024-03-310000945394svc:CumulativeCommonDistributionsMember2024-03-310000945394us-gaap:AdditionalPaidInCapitalMember2024-03-310000945394us-gaap:RetainedEarningsMember2024-03-310000945394us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310000945394us-gaap:CommonStockMember2022-12-310000945394svc:CumulativeCommonDistributionsMember2022-12-310000945394us-gaap:AdditionalPaidInCapitalMember2022-12-310000945394us-gaap:RetainedEarningsMember2022-12-310000945394us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-3100009453942022-12-310000945394us-gaap:RetainedEarningsMember2023-01-012023-03-310000945394us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310000945394us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310000945394us-gaap:CommonStockMember2023-01-012023-03-310000945394svc:CumulativeCommonDistributionsMember2023-01-012023-03-310000945394us-gaap:CommonStockMember2023-03-310000945394svc:CumulativeCommonDistributionsMember2023-03-310000945394us-gaap:AdditionalPaidInCapitalMember2023-03-310000945394us-gaap:RetainedEarningsMember2023-03-310000945394us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-3100009453942023-03-310000945394srt:HotelMember2024-03-31svc:hotel0000945394svc:NetLeasePropertyMember2024-03-31svc:propertyxbrli:pure0000945394us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2024-03-310000945394us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2023-12-310000945394us-gaap:RelatedPartyMember2024-01-012024-03-310000945394us-gaap:RelatedPartyMember2023-01-012023-03-31svc:roomutr:sqft0000945394svc:HotelsAndNetLeasePropertiesMember2024-01-012024-03-310000945394us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2024-01-012024-03-310000945394srt:HotelMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2024-01-012024-03-310000945394srt:HotelMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2024-03-310000945394svc:NetLeasePropertyMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2024-01-012024-03-310000945394svc:NetLeasePropertyMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2024-03-310000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMembersvc:NetLeasePropertyMember2024-03-310000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2024-03-310000945394us-gaap:SubsequentEventMembersvc:NetLeasePropertyMember2024-05-030000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberus-gaap:SubsequentEventMembersvc:NetLeasePropertyMember2024-05-030000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberus-gaap:SubsequentEventMembersvc:NetLeasePropertyMember2024-04-012024-05-03svc:agreementsvc:tenant0000945394svc:SonestaInternationalHotelsCorporationMembersrt:HotelMemberus-gaap:RelatedPartyMember2024-03-310000945394srt:HotelMembersvc:HyattHotelsCorporationMemberus-gaap:RelatedPartyMember2024-03-310000945394svc:RadissonHospitalityIncMembersrt:HotelMemberus-gaap:RelatedPartyMember2024-03-310000945394svc:IHGAgreementMembersrt:HotelMember2024-03-310000945394svc:TravelCentersOfAmericaIncMembersvc:NetLeasePropertyMemberus-gaap:RelatedPartyMember2024-03-31svc:travelCenter0000945394svc:SonestaInternationalHotelsCorporationMembersrt:HotelMembersvc:FullServiceHotelMember2024-03-310000945394svc:SonestaInternationalHotelsCorporationMembersrt:HotelMembersvc:LimitedServicesHotelMember2024-03-310000945394svc:SelectServiceHotelsMembersvc:SonestaInternationalHotelsCorporationMembersrt:HotelMember2024-03-310000945394svc:SonestaAgreementMember2024-03-310000945394srt:HotelMembersvc:SonestaAgreementMember2024-03-31svc:renewalOption0000945394srt:HotelMembersvc:SonestaAgreementMember2024-01-012024-03-310000945394srt:HotelMembersvc:SonestaAgreementMember2023-01-012023-03-310000945394svc:ReturnOfCapitalMembersvc:SonestaInternationalHotelsCorporationMembersrt:HotelMembersvc:SonestaAgreementMember2024-03-310000945394svc:ReturnOfCapitalMembersvc:SonestaInternationalHotelsCorporationMembersrt:HotelMembersvc:SonestaAgreementMember2023-03-310000945394svc:ReturnOfCapitalMembersvc:SonestaInternationalHotelsCorporationMembersrt:HotelMember2024-03-310000945394svc:SonestaInternationalHotelsCorporationMembersrt:HotelMember2024-03-310000945394svc:SonestaInternationalHotelsCorporationMembersrt:HotelMember2023-12-310000945394svc:ReturnOfCapitalMembersvc:SonestaInternationalHotelsCorporationMembersrt:HotelMember2023-12-310000945394svc:SonestaAgreementMember2020-02-272020-02-270000945394srt:HotelMembersvc:SonestaAgreementMember2023-12-310000945394srt:HotelMembersvc:HyattHotelsCorporationContractMember2024-01-012024-03-310000945394srt:HotelMembersvc:HyattHotelsCorporationContractMember2024-03-310000945394srt:HotelMembersvc:HyattHotelsCorporationContractMember2023-01-012023-03-310000945394srt:HotelMembersvc:HyattHotelsCorporationContractMember2024-02-012024-02-290000945394svc:RadissonAgreementMembersrt:HotelMember2024-01-012024-03-310000945394svc:RadissonAgreementMembersrt:HotelMember2024-03-310000945394svc:RadissonAgreementMembersrt:HotelMember2023-01-012023-03-310000945394svc:RadissonAgreementMember2024-01-012024-03-310000945394svc:RadissonAgreementMember2023-01-012023-03-310000945394svc:MarriottInternationalIncMembersrt:HotelMembersvc:MarriottContractsMember2023-01-012023-03-310000945394srt:HotelMembersvc:MarriottContractsMember2023-01-012023-03-310000945394svc:IHGAgreementMembersrt:HotelMember2024-01-012024-03-310000945394svc:IHGAgreementMembersrt:HotelMember2023-01-012023-03-310000945394svc:IHGAgreementMember2024-01-012024-03-310000945394svc:IHGAgreementMember2023-01-012023-03-310000945394svc:NetLeasePropertyMember2024-01-012024-03-310000945394svc:NetLeasePropertyMember2024-03-31svc:brandsvc:industry0000945394us-gaap:CreditConcentrationRiskMembersvc:TravelCentersOfAmericaMembersvc:NetLeasePropertyMembersvc:RealEstateInvestmentPropertyAtCostMember2024-01-012024-03-310000945394svc:TravelCentersMembersvc:TravelCentersOfAmericaIncMembersvc:TravelCentersAgreementMember2024-03-31svc:lease0000945394svc:TravelCentersMembersvc:TravelCentersOfAmericaIncMember2024-01-012024-03-310000945394svc:TravelCentersOfAmericaIncMember2024-03-310000945394svc:BPProductsNorthAmericaIncMember2024-03-310000945394svc:TravelCentersMembersvc:TravelCentersOfAmericaIncMember2023-01-012023-03-310000945394svc:TravelCentersMembersvc:TravelCentersOfAmericaIncMember2024-03-310000945394svc:TravelCentersMembersvc:TravelCentersOfAmericaIncMember2023-12-310000945394svc:SpiritMTAREITTransactionMember2024-01-012024-03-310000945394svc:SpiritMTAREITTransactionMember2023-01-012023-03-310000945394svc:COVID19Member2024-03-310000945394svc:COVID19Member2023-12-310000945394svc:SonestaInternationalHotelsCorporationMember2024-03-310000945394svc:SonestaInternationalHotelsCorporationMember2023-12-310000945394svc:SonestaAgreementMember2023-12-310000945394svc:SonestaAgreementMember2024-01-012024-03-310000945394svc:SonestaAgreementMember2023-01-012023-03-310000945394svc:SonestaInternationalHotelsCorporationMember2024-01-012024-03-310000945394svc:SonestaInternationalHotelsCorporationMember2023-01-012023-03-310000945394svc:TravelCentersOfAmericaMember2023-05-150000945394svc:TravelCentersOfAmericaMember2023-05-150000945394svc:TravelCentersOfAmericaMember2023-12-310000945394svc:TravelCentersOfAmericaIncMembersvc:BPProductsNorthAmericaIncMember2023-05-150000945394svc:TravelCentersOfAmericaMember2023-01-012023-03-310000945394us-gaap:SeniorNotesMembersvc:SeniorUnsecuredNotesMember2024-03-310000945394us-gaap:SeniorNotesMembersvc:SeniorSecuredNotesMember2024-03-310000945394us-gaap:MortgagesMember2024-03-310000945394us-gaap:RevolvingCreditFacilityMember2024-03-310000945394us-gaap:RevolvingCreditFacilityMember2023-06-290000945394us-gaap:RevolvingCreditFacilityMember2023-06-292023-06-29svc:extensionOption0000945394srt:MinimumMemberus-gaap:RevolvingCreditFacilityMembersvc:SecuredOvernightFinancingRateSOFRMember2024-01-012024-03-310000945394srt:MaximumMemberus-gaap:RevolvingCreditFacilityMembersvc:SecuredOvernightFinancingRateSOFRMember2024-01-012024-03-310000945394us-gaap:RevolvingCreditFacilityMembersvc:SecuredOvernightFinancingRateSOFRMember2024-03-310000945394us-gaap:RevolvingCreditFacilityMembersrt:HotelMember2024-03-310000945394us-gaap:RevolvingCreditFacilityMembersvc:NetLeasePropertyMember2024-03-310000945394srt:HotelMemberus-gaap:RevolvingCreditFacilityMember2024-02-012024-02-290000945394srt:HotelMemberus-gaap:RevolvingCreditFacilityMember2024-02-290000945394srt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310000945394srt:MaximumMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310000945394us-gaap:RevolvingCreditFacilityMember2023-03-310000945394us-gaap:MortgagesMember2023-02-100000945394svc:CouponRateFivePointOneFiveMemberus-gaap:MortgagesMember2024-03-310000945394svc:CouponRateFivePointOneFiveMemberus-gaap:MortgagesMember2024-01-012024-03-310000945394svc:CouponRateFivePointFiveFiveMemberus-gaap:MortgagesMember2024-03-310000945394svc:CouponRateFivePointFiveFiveMemberus-gaap:MortgagesMember2024-01-012024-03-310000945394svc:CouponRateSixPointSevenZeroMemberus-gaap:MortgagesMember2024-03-310000945394svc:CouponRateSixPointSevenZeroMemberus-gaap:MortgagesMember2024-01-012024-03-310000945394svc:NetLeaseMortgageNotes560PercentDue2028Memberus-gaap:MortgagesMember2024-03-310000945394svc:CouponRateFivePointOneFiveMemberus-gaap:MortgagesMember2023-02-100000945394svc:CouponRateFivePointFiveFiveMemberus-gaap:MortgagesMember2023-02-100000945394us-gaap:MortgagesMember2023-02-102023-02-100000945394us-gaap:MortgagesMember2024-01-012024-03-3100009453942024-01-112024-01-110000945394us-gaap:SubsequentEventMember2024-04-112024-04-11svc:employee0000945394svc:AmendedAndRestateBusinessManagementAgreementMembersvc:ReitManagementAndResearchLLCMember2024-03-310000945394svc:ReitManagementAndResearchLLCMembersvc:AmendedAndRestateBusinessManagementAgreementMember2024-01-012024-03-310000945394svc:ReitManagementAndResearchLLCMembersvc:AmendedAndRestateBusinessManagementAgreementMember2023-01-012023-03-310000945394svc:ReitManagementAndResearchLLCMember2024-01-012024-03-310000945394svc:AmendedAndRestateBusinessManagementAgreementMembersvc:ReitManagementAndResearchLLCMember2024-01-012024-03-310000945394svc:AmendedAndRestateBusinessManagementAgreementMembersvc:ReitManagementAndResearchLLCMember2023-01-012023-03-310000945394svc:PropertyManagementFeesMembersvc:ReitManagementAndResearchLLCMember2024-01-012024-03-310000945394svc:PropertyManagementFeesMembersvc:ReitManagementAndResearchLLCMember2023-01-012023-03-310000945394svc:ConstructionAndSupervisionFeesCapitalizedMembersvc:ReitManagementAndResearchLLCMember2024-01-012024-03-310000945394svc:ConstructionAndSupervisionFeesCapitalizedMembersvc:ReitManagementAndResearchLLCMember2023-01-012023-03-310000945394svc:ReitManagementAndResearchLLCMembersvc:TravelCentersOfAmericaMember2024-03-310000945394svc:ReitManagementAndResearchLLCMember2024-03-31svc:segment0000945394us-gaap:OperatingSegmentsMembersvc:HotelSegmentMember2024-01-012024-03-310000945394svc:NetLeaseSegmentMemberus-gaap:OperatingSegmentsMember2024-01-012024-03-310000945394us-gaap:CorporateNonSegmentMember2024-01-012024-03-310000945394us-gaap:OperatingSegmentsMembersvc:HotelSegmentMember2024-03-310000945394svc:NetLeaseSegmentMemberus-gaap:OperatingSegmentsMember2024-03-310000945394us-gaap:CorporateNonSegmentMember2024-03-310000945394us-gaap:OperatingSegmentsMembersvc:HotelSegmentMember2023-01-012023-03-310000945394svc:NetLeaseSegmentMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-310000945394us-gaap:CorporateNonSegmentMember2023-01-012023-03-310000945394us-gaap:OperatingSegmentsMembersvc:HotelSegmentMember2023-12-310000945394svc:NetLeaseSegmentMemberus-gaap:OperatingSegmentsMember2023-12-310000945394us-gaap:CorporateNonSegmentMember2023-12-310000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberus-gaap:FairValueInputsLevel1Member2024-03-310000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberus-gaap:FairValueInputsLevel2Member2024-03-310000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberus-gaap:FairValueInputsLevel3Member2024-03-310000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2024-01-012024-03-310000945394us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMembersrt:HotelMember2024-03-310000945394svc:SeniorNotes4.50PercentDue2025Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes4.50PercentDue2025Member2024-03-310000945394svc:SeniorNotes4.50PercentDue2025Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes4.50PercentDue2025Member2023-12-310000945394svc:SeniorNotes4.50PercentDue2025Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes7.50PercentDue2025Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes7.50PercentDue2025Member2024-03-310000945394svc:SeniorNotes7.50PercentDue2025Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes7.50PercentDue2025Member2023-12-310000945394svc:SeniorNotes7.50PercentDue2025Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes5.25PercentDue2026Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes5.25PercentDue2026Member2024-03-310000945394svc:SeniorNotes5.25PercentDue2026Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes5.25PercentDue2026Member2023-12-310000945394svc:SeniorNotes5.25PercentDue2026Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes4.75PercentDue2026Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes4.75PercentDue2026Member2024-03-310000945394us-gaap:EstimateOfFairValueFairValueDisclosureMembersvc:SeniorNotes4.75PercentDue2026Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes4.75PercentDue2026Member2023-12-310000945394us-gaap:EstimateOfFairValueFairValueDisclosureMembersvc:SeniorNotes4.75PercentDue2026Member2023-12-310000945394svc:SeniorNotes4.95PercentDue2027Member2024-03-310000945394svc:SeniorNotes4.95PercentDue2027Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2024-03-310000945394svc:SeniorNotes4.95PercentDue2027Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394svc:SeniorNotes4.95PercentDue2027Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes4.95PercentDue2027Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes550PercentDue2027Member2024-03-310000945394svc:SeniorNotes550PercentDue2027Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2024-03-310000945394svc:SeniorNotes550PercentDue2027Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394svc:SeniorNotes550PercentDue2027Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes550PercentDue2027Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394svc:NetLeaseMortgageNotes560PercentDue2028Memberus-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:MortgagesMember2024-03-310000945394svc:NetLeaseMortgageNotes560PercentDue2028Memberus-gaap:MortgagesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394svc:NetLeaseMortgageNotes560PercentDue2028Memberus-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:MortgagesMember2023-12-310000945394svc:NetLeaseMortgageNotes560PercentDue2028Memberus-gaap:MortgagesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes3.95PercentDue2028Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes3.95PercentDue2028Member2024-03-310000945394svc:SeniorNotes3.95PercentDue2028Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes3.95PercentDue2028Member2023-12-310000945394svc:SeniorNotes3.95PercentDue2028Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes4.95PercentDue2029Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes4.95PercentDue2029Member2024-03-310000945394us-gaap:EstimateOfFairValueFairValueDisclosureMembersvc:SeniorNotes4.95PercentDue2029Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes4.95PercentDue2029Member2023-12-310000945394us-gaap:EstimateOfFairValueFairValueDisclosureMembersvc:SeniorNotes4.95PercentDue2029Member2023-12-310000945394svc:SeniorNotes4375PercentDue2030Member2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes4375PercentDue2030Member2024-03-310000945394svc:SeniorNotes4375PercentDue2030Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMembersvc:SeniorNotes4375PercentDue2030Member2023-12-310000945394svc:SeniorNotes4375PercentDue2030Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes8.625PercentDue2031Member2024-03-310000945394svc:SeniorNotes8.625PercentDue2031Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2024-03-310000945394svc:SeniorNotes8.625PercentDue2031Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394svc:SeniorNotes8.625PercentDue2031Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310000945394svc:SeniorNotes8.625PercentDue2031Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMember2024-03-310000945394us-gaap:EstimateOfFairValueFairValueDisclosureMember2024-03-310000945394us-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310000945394us-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11527
SERVICE PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland04-3262075
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts, 02458-1634
(Address of Principal Executive Offices) (Zip Code)
617-964-8389
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of each Exchange on which Registered
Common Shares of Beneficial InterestSVCThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Number of registrant’s common shares of beneficial interest, $.01 par value per share, outstanding as of May 3, 2024: 165,759,899.


SERVICE PROPERTIES TRUST
FORM 10-Q
March 31, 2024

INDEX
 Page
References in this Quarterly Report on Form 10-Q to the Company, SVC, we, us or our include Service Properties Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.
2

Part I. Financial Information
Item 1. Financial Statements
SERVICE PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
 March 31, 2024December 31, 2023
ASSETS  
Real estate properties:  
Land$1,968,963 $1,972,145 
Buildings, improvements and equipment7,846,174 7,814,192 
Total real estate properties, gross9,815,137 9,786,337 
Accumulated depreciation(3,237,999)(3,181,797)
Total real estate properties, net6,577,138 6,604,540 
Acquired real estate leases and other intangibles, net124,573 130,622 
Assets held for sale8,700 10,500 
Cash and cash equivalents71,287 180,119 
Restricted cash16,039 17,711 
Equity method investment111,014 113,304 
Due from related persons21,400 6,376 
Other assets, net301,368 292,944 
Total assets$7,231,519 $7,356,116 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Revolving credit facility$ $ 
Senior secured notes, net969,039 968,017 
Senior unsecured notes, net3,995,757 3,993,327 
Mortgage notes payable, net561,349 558,876 
Accounts payable and other liabilities580,268 587,005 
Due to related persons10,437 22,758 
Total liabilities6,116,850 6,129,983 
Commitments and contingencies
Shareholders’ equity:  
Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 165,768,058 and 165,769,595 shares issued and outstanding, respectively
1,658 1,658 
Additional paid in capital4,557,890 4,557,473 
Cumulative other comprehensive income1,974 2,318 
Cumulative net income2,392,117 2,470,500 
Cumulative common distributions(5,838,970)(5,805,816)
Total shareholders’ equity1,114,669 1,226,133 
Total liabilities and shareholders’ equity$7,231,519 $7,356,116 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

SERVICE PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
 20242023
Revenues:  
Hotel operating revenues$336,236 $334,796 
Rental income100,014 94,413 
Total revenues436,250 429,209 
Expenses: 
Hotel operating expenses305,086 299,566 
Net lease operating expenses4,723 3,905 
Depreciation and amortization93,107 100,039 
General and administrative10,506 10,911 
Transaction related costs 887 
Loss on asset impairment2,451  
Total expenses415,873 415,308 
(Loss) gain on sale of real estate, net(2,963)41,898 
Gain on equity securities, net 49,430 
Interest income1,962 2,786 
Interest expense (including amortization of debt issuance costs, discounts and premiums of $7,226 and $5,232, respectively)
(91,414)(81,580)
Loss on early extinguishment of debt (44)
(Loss) income before income tax (expense) benefit and equity in losses of an investee(72,038)26,391 
Income tax (expense) benefit (1,007)3,780 
Equity in losses of an investee(5,338)(4,221)
Net (loss) income(78,383)25,950 
Other comprehensive loss:
Equity interest in investee’s unrealized losses(344)(214)
Other comprehensive loss(344)(214)
Comprehensive (loss) income $(78,727)$25,736 
Weighted average common shares outstanding (basic and diluted)165,158 164,867 
Net (loss) income per common share (basic and diluted)$(0.48)$0.16 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

SERVICE PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(dollars in thousands)
(unaudited)
Number of
Shares
Common
Shares
Cumulative
Common
Distributions
Additional
Paid in
Capital
Cumulative
Net Income
Cumulative
Other
Comprehensive
Income
Total
Balance at December 31, 2023165,769,595 $1,658 $(5,805,816)$4,557,473 $2,470,500 $2,318 $1,226,133 
Net loss— — — — (78,383)— (78,383)
Equity interest in investee’s unrealized losses— — — — — (344)(344)
Common share grants— — — 430 — — 430 
Common share repurchases(1,537)— — (13)— — (13)
Distributions— — (33,154)— — — (33,154)
Balance at March 31, 2024165,768,058 $1,658 $(5,838,970)$4,557,890 $2,392,117 $1,974 $1,114,669 
Balance at December 31, 2022165,452,566 $1,655 $(5,673,386)$4,554,861 $2,503,279 $2,383 $1,388,792 
Net income— — — — 25,950 — 25,950 
Equity interest in investee’s unrealized losses— — — — — (214)(214)
Common share grants— — — 514 — — 514 
Common share repurchases(4,971)— — (46)— — (46)
Common share forfeitures(1,600)— — (1)— — (1)
Distributions— — (33,090)— — — (33,090)
Balance at March 31, 2023165,445,995 $1,655 $(5,706,476)$4,555,328 $2,529,229 $2,169 $1,381,905 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

SERVICE PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three Months Ended March 31,
20242023
Cash flows from operating activities:
Net (loss) income$(78,383)$25,950 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization93,107 100,039 
Net amortization of debt issuance costs, discounts and premiums as interest7,226 5,232 
Straight line rental income(5,768)2,448 
Loss on early extinguishment of debt 44 
Loss on asset impairment2,451  
Gains on equity securities, net (49,430)
Equity in losses of an investee5,338 4,221 
Loss (gain) on sale of real estate, net2,963 (41,898)
Other non-cash income expense, net(925)(781)
Changes in assets and liabilities:
Due from related persons(15,024)(16,889)
Other assets(1,801)4,254 
Accounts payable and other liabilities(6,077)(18,492)
Due to related persons(4,033)(2,325)
Net cash (used in) provided by operating activities(926)12,373 
Cash flows from investing activities:
Real estate improvements(76,261)(28,551)
Hotel managers’ purchases with restricted cash(1,002)(1,558)
Net proceeds from sale of real estate5,826 144,361 
Investment in Sonesta(3,392) 
Net cash (used in) provided by investing activities(74,829)114,252 
Cash flows from financing activities:
Proceeds from mortgage notes payable, net of discounts 576,946 
Repayment of mortgage notes payable(489)(163)
Repayment of senior unsecured notes (500,000)
Payment of debt issuance costs(1,093)(19,856)
Repurchase of common shares(13)(46)
Distributions to common shareholders(33,154)(33,090)
Net cash (used in) provided by financing activities(34,749)23,791 
(Decrease) increase in cash and cash equivalents and restricted cash
(110,504)150,416 
Cash and cash equivalents and restricted cash at beginning of period197,830 45,420 
Cash and cash equivalents and restricted cash at end of period$87,326 $195,836 
Supplemental disclosure of cash and cash equivalents and restricted cash:
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents$71,287 $180,616 
Restricted cash(1)
16,039 15,220 
Total cash and cash equivalents and restricted cash$87,326 $195,836 
(1) Restricted cash consists of amounts escrowed pursuant to the terms of our hotel management agreements to fund capital improvements at our hotels and amounts escrowed as required by certain of our debt agreements.
Supplemental cash flow information:
Cash paid for interest$82,664 $91,614 
Cash paid for income taxes$115 $37 
Non-cash investing activities:
Real estate improvements accrued, not paid$39,705 $10,642 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(unaudited)

Note 1. Organization and Basis of Presentation
Service Properties Trust, or we, us or our, is a real estate investment trust, or REIT, organized on February 7, 1995 under the laws of the State of Maryland, which invests in hotels and service-focused retail net lease properties. At March 31, 2024, we owned, directly and through our subsidiaries, 220 hotels and 749 service-focused retail net lease properties.
Basis of Presentation
The accompanying condensed consolidated financial statements of us are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2023, or our 2023 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period have been included. These condensed consolidated financial statements include our accounts and the accounts of our subsidiaries, all of which are 100% owned directly or indirectly by us. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods and those of our managers and tenants are not necessarily indicative of the results that may be expected for the full year.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include the allowance for credit losses, purchase price allocations, useful lives of fixed assets and impairment of real estate and related intangibles.
We have determined that each of our wholly owned taxable REIT subsidiaries, or TRSs, is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC. We have concluded that we must consolidate each of our wholly owned TRSs because we are the entity with the power to direct the activities that most significantly impact such VIEs’ performance and we have the obligation to absorb losses or the right to receive benefits from each VIE that could be significant to the VIE and are, therefore, the primary beneficiary of each VIE. The assets of our TRSs were $159,964 and $142,789 as of March 31, 2024 and December 31, 2023, respectively, and consist primarily of our TRSs’ investment in Sonesta Holdco Corporation’s, or Sonesta’s, common stock and amounts due from and working capital advances to certain of our hotel managers. The liabilities of our TRSs were $99,706 and $81,262 as of March 31, 2024 and December 31, 2023, respectively, and consist primarily of amounts payable to certain of our hotel managers. The assets of our TRSs are available to satisfy our TRSs’ obligations and we have guaranteed certain obligations of our TRSs.
Note 2. Recent Accounting Pronouncements
On November 27, 2023, the FASB issued Accounting Standards Update, or ASU, No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU No. 2023-07, which requires public entities to: (i) provide disclosures of significant segment expenses and other segment items if they are regularly provided to the Chief Operating Decision Maker, or the CODM, and included in each reported measure of segment profit or loss; (ii) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by ASC 280, Segment Reporting, or ASC 280, in interim periods; and (iii) disclose the CODM’s title and position, as well as an explanation of how the CODM uses the reported measures and other disclosures. The amendments in ASU No. 2023-07 are incremental to the requirements in ASC 280 and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. ASU No. 2023-07 should be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact ASU No. 2023-07 will have on our consolidated financial statements and disclosures.
7

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)

On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, or ASU No. 2023-09, which requires public entities to enhance its annual income tax disclosures by requiring: (i) consistent categories and greater disaggregation of information in the rate reconciliation, and (ii) income taxes paid disaggregated by jurisdiction. ASU No. 2023-09 should be applied prospectively but entities have the option to apply it retrospectively to all prior periods presented in the financial statements. ASU No. 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact ASU No. 2023-09 will have on our consolidated financial statements and disclosures.
Note 3. Revenue Recognition
We report hotel operating revenues for managed hotels in our condensed consolidated statements of comprehensive income (loss). We generally recognize hotel operating revenues, consisting primarily of room and food and beverage sales, when goods and services are provided.
We report rental income for leased properties in our condensed consolidated statements of comprehensive income (loss). We recognize rental income from operating leases on a straight line basis over the terms of the lease agreements. We increased rental income by $5,768 and reduced rental income by $2,448 for the three months ended March 31, 2024 and 2023, respectively, to record scheduled rent changes under certain of our leases on a straight line basis. Other assets, net, includes $64,151 and $56,833 of straight line rent receivables at March 31, 2024 and December 31, 2023, respectively.
Certain of our lease agreements require additional percentage rent if gross revenues of our properties exceed certain thresholds defined in our lease agreements. We determine percentage rent due to us under our leases monthly, quarterly or annually, as applicable, depending on the specific lease terms, and recognize it when all contingencies are met and the rent is earned. We recorded percentage rent of $544 and $343 for the three months ended March 31, 2024 and 2023, respectively. We did not have any deferred estimated percentage rent for the three months ended March 31, 2024. We had deferred estimated percentage rent of $2,385 for the three months ended March 31, 2023. See Note 6 for further information on this deferred estimated percentage rent.
We own all the escrowed reserves established for the regular refurbishment of our hotels, or FF&E reserves. We do not report the FF&E reserves for our managed hotels as FF&E reserve income.
Note 4. Per Common Share Amounts
We calculate basic earnings per common share using the two class method. We calculate diluted earnings per common share using the more dilutive of the two class method or the treasury stock method. Unvested common share awards and other potentially dilutive common shares, together with the related impact on earnings, are considered when calculating diluted earnings per share. The calculation of basic and diluted earnings per common share is as follows (amounts in thousands, except per share data):
Three Months Ended March 31,
20242023
Numerators:
Net (loss) income$(78,383)$25,950 
Income attributable to unvested participating securities(122)(117)
Net (loss) income used in calculating earnings per share$(78,505)$25,833 
Denominators:
Weighted average common shares outstanding - basic and diluted165,158 164,867 
Net (loss) income per common share - basic and diluted$(0.48)$0.16 


8

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
Note 5. Real Estate Properties
As of March 31, 2024, we owned 220 hotels with an aggregate of 37,697 rooms or suites and 749 service-focused retail net lease properties with an aggregate of 13,384,219 square feet that are primarily subject to “triple net” leases, or net leases where the tenant is generally responsible for payment of operating expenses and capital expenditures of the property during the lease term. Our properties had an aggregate undepreciated carrying value of $9,825,433, including $10,296 related to properties classified as held for sale as of March 31, 2024.
We funded capital improvements to certain of our properties of $68,782 during the three months ended March 31, 2024.
Dispositions
During the three months ended March 31, 2024, we sold four properties for an aggregate sales price of $6,247, excluding closing costs. The sales of these properties as presented in the table below do not represent significant dispositions, individually or in the aggregate, nor do they represent a strategic shift in our business. As a result, the results of the operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).
Quarter SoldProperty TypeNumber of PropertiesRooms or Suites / Square FeetGross Sales PriceLoss on Sale of Real Estate
Q1 2024Hotel184 $3,315 $(836)
Q1 2024Net Lease334,849 2,932 (2,127)
4
84 / 34,849
$6,247 $(2,963)
As of March 31, 2024, we had 13 net lease properties with an aggregate of 142,329 square feet and an aggregate carrying value of $8,654 classified as held for sale. See Note 14 for further information on these properties.
As of May 3, 2024, we have entered into an agreement to sell one net lease property with 3,381 square feet for a sale price of $1,250, excluding closing costs. This pending sale is subject to conditions; accordingly, we cannot be sure that we will complete this sale, that this sale will not be delayed or that the terms will not change. We continue to market 12 net lease properties with an aggregate of 138,948 square feet for sale. We believe it is more likely than not that the sales of these properties will be completed within one year.
Note 6. Management Agreements and Leases
As of March 31, 2024, we owned 220 hotels included in four operating agreements and 749 service-focused retail properties net leased to 177 tenants. We do not operate any of our properties.
As of March 31, 2024, all 220 of our hotels were managed by subsidiaries of the following companies: Sonesta (195 hotels), Hyatt Hotels Corporation, or Hyatt (17 hotels), Radisson Hospitality, Inc., or Radisson (seven hotels), and InterContinental Hotels Group, plc, or IHG (one hotel). As of March 31, 2024, we owned 749 service-focused retail net lease properties with 177 tenants, including 175 travel centers leased to TA, our largest tenant. Hereinafter, these companies are sometimes referred to as our managers and/or tenants, or collectively, operators.
9

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
Hotel Agreements
Sonesta Agreement. As of March 31, 2024, Sonesta managed 40 of our full-service hotels, 111 of our extended stay hotels and 44 of our select service hotels pursuant to management agreements for all of the hotels, which we collectively refer to as our Sonesta agreement. The hotels Sonesta managed for us comprised approximately 50.0% of our total historical real estate investments.
Our Sonesta agreement, which expires on January 31, 2037 and includes two 15-year renewal options, provides that we are paid an annual owner’s priority return if gross revenues of the hotels, after payment of hotel operating expenses and management and related fees (other than Sonesta’s incentive fee, if applicable), are sufficient to do so. The Sonesta agreement further provides that we are paid an additional return equal to 80% of the operating profits, as defined therein, after paying the owner’s priority return, reimbursing owner or manager advances, funding FF&E reserves and paying Sonesta’s incentive fee, if applicable. We do not have any security deposits or guarantees for our Sonesta hotels. We realized returns under our Sonesta agreement of $27,375 and $30,237 during the three months ended March 31, 2024 and 2023, respectively.
Our Sonesta agreement requires us to fund capital expenditures made at our hotels. We incurred capital expenditures for hotels included in our Sonesta agreement in an aggregate amount of $46,996 and $17,643 during the three months ended March 31, 2024 and 2023, respectively, which resulted in increases in our contractual annual owner’s priority returns of $2,820 and $1,059, respectively. Our annual priority return under our Sonesta agreement as of March 31, 2024 was $356,773. We owed Sonesta $5,215 and $13,300 for capital expenditures and other reimbursements at March 31, 2024 and December 31, 2023, respectively. Sonesta owed us $21,400 and $6,376 in owner’s priority returns and other amounts as of March 31, 2024 and December 31, 2023, respectively. Amounts due from Sonesta are included in due from related persons and amounts owed to Sonesta are included in due to related persons in our condensed consolidated balance sheets. Our Sonesta agreement requires that 5% of the hotel gross revenues be escrowed for future capital expenditures as FF&E reserves, subject to available cash flows after payment of the owner’s priority returns due to us. No FF&E escrow deposits were required during either the three months ended March 31, 2024 or 2023.
Pursuant to our Sonesta agreement, we incurred management, reservation and system fees and reimbursement costs for certain guest loyalty, marketing programs and third-party reservation transmission fees of $27,015 and $26,136 for the three months ended March 31, 2024 and 2023, respectively. These fees and costs are included in hotel operating expenses in our condensed consolidated statements of comprehensive income (loss). In addition, we incurred procurement and construction supervision fees payable to Sonesta of $400 and $207 for the three months ended March 31, 2024 and 2023, respectively, which amounts have been capitalized in our condensed consolidated balance sheets and are depreciated over the estimated useful lives of the related capital assets.
We are required to maintain working capital for each of our hotels managed by Sonesta and have advanced a fixed amount based on the number of rooms in each hotel to meet the cash needs for hotel operations. As of each of March 31, 2024 and December 31, 2023, we had advanced $48,490 of initial working capital to Sonesta net of any working capital returned to us on termination of the applicable management agreements in connection with hotels we have sold. These amounts are included in other assets, net in our condensed consolidated balance sheets. Any remaining working capital would be returned to us upon termination in accordance with the terms of our Sonesta agreement.
See Notes 7 and 11 for further information regarding our relationships, agreements and transactions with Sonesta.
10

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
Hyatt Agreement. As of March 31, 2024, Hyatt managed 17 of our select service hotels pursuant to a portfolio management agreement that expires on March 31, 2031, or our Hyatt agreement, and provides that, as of March 31, 2024, we are to be paid an annual owner’s priority return of $16,769. Any returns we receive from Hyatt are currently limited to the hotels’ available cash flows, if any, after payment of operating expenses. Hyatt has provided us with a $30,000 limited guarantee for 75% of the aggregate annual owner’s priority returns due to us that will become effective upon substantial completion of planned renovations of the hotels, which we currently expect to occur in 2024. We realized a net operating loss of $1,108 during the three months ended March 31, 2024 and returns of $2,323 during the three months ended March 31, 2023 under our Hyatt agreement. In February 2024, we funded $2,300 of additional working capital to Hyatt. We may recover this amount in the future, if cash flows are sufficient to pay our owner’s priority return and other amounts in accordance with our Hyatt agreement. During the three months ended March 31, 2024, we incurred capital expenditures for certain hotels included in our Hyatt agreement of $20,225, which resulted in an aggregate increase in our contractual annual owner’s priority returns of $1,214. We did not incur capital expenditures for any of the hotels included in our Hyatt agreement during the three months ended March 31, 2023.
Radisson Agreement. As of March 31, 2024, Radisson managed seven of our full-service hotels pursuant to a portfolio management agreement that expires on July 31, 2031, or our Radisson agreement, and provides that we are to be paid an annual owner’s priority return of $10,883. Radisson has provided us with a $22,000 limited guarantee for 75% of the aggregate annual owner’s priority returns due to us that became effective on January 1, 2023, subject to adjustment for planned renovations of certain hotels, which we currently expect to be completed by the end of the second quarter of 2024. We realized returns under our Radisson agreement of $1,451 and $1,565 during the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, the hotels under this agreement generated cash flows that were less than the guaranteed owner’s priority level due to us for these periods, and we reduced hotel operating expenses by $522 and $335, respectively, to record the guaranteed amount of the shortfalls due from Radisson. The available balance of the guaranty was $20,828 as of March 31, 2024. During the three months ended March 31, 2024 and 2023, we incurred capital expenditures of $286 and $2,375, respectively, for the hotels included in our Radisson agreement, which resulted in an aggregate increase in our contractual owner’s priority returns of $17 and $143, respectively.
Marriott Agreement. As of March 31, 2023, we had sold all 16 hotels previously managed by Marriott International, Inc., or Marriott. We realized a net operating loss of $2,762 during the three months ended March 31, 2023, under our management agreement with Marriott. We did not incur capital expenditures for any of the hotels included in our management agreement with Marriott during the three months ended March 31, 2023.
IHG Agreement. Our management agreement with IHG for one hotel expires on January 31, 2026. We realized returns under our management agreement with IHG of $1,593 and $763 during the three months ended March 31, 2024 and 2023, respectively. Any returns we receive from IHG are limited to the hotel’s available cash flows, if any, after payment of operating expenses. During the three months ended March 31, 2024 and 2023, we incurred capital expenditures of $149 and $59, respectively, for the hotel included in our IHG agreement.
Net Lease Portfolio
As of March 31, 2024, we owned 749 service-focused retail net lease properties with an aggregate of 13,384,219 square feet with leases requiring annual minimum rents of $374,941 with a weighted (by annual minimum rents) average remaining lease term of 8.7 years. Our net lease properties were 97.3% occupied and leased by 177 tenants operating under 137 brands in 21 distinct industries.
11

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
TA Leases. As of March 31, 2024, TA is our largest tenant, representing 28.6% of our total historical real estate investments. We lease to TA a total of 175 travel centers under five master leases that expire in 2033, or our TA leases, subject to TA’s right to extend those leases, and require annual minimum rents of $254,000 as of March 31, 2024. TA receives a monthly rent credit totaling $25,000 per year over the 10-year initial term of the TA leases as a result of rent it prepaid. On February 28, 2024, TA acquired the leasehold interest of one of our travel centers from a third party landlord. The aggregate minimum rent due to us under our leases with TA for the remaining 175 travel centers was unchanged as a result of TA’s acquisition of this leasehold interest.
Our TA leases are “triple net” leases that require TA to pay all costs incurred in the operation of the leased travel centers, including personnel, utility, inventory, customer service and insurance expenses, real estate and personal property taxes, environmental related expenses, underground storage tank maintenance costs and ground lease payments at those travel centers at which we lease the property and sublease it to TA. Our TA leases generally require TA to indemnify us for certain environmental matters and for liabilities that arise during the terms of the leases from ownership or operation of the leased travel centers. Our TA leases do not require FF&E escrow deposits. However, TA is required to maintain the leased travel centers, including structural and non-structural components. BP Corporation North America Inc. guarantees payment under each of the TA leases, limited to an aggregate cap which was $3,037,475 as of March 31, 2024.
We recognized rental income from our TA leases of $67,834 and $62,141 for the three months ended March 31, 2024 and 2023, respectively. Rental income was increased by $4,309 and reduced by $3,241 for the three months ended March 31, 2024 and 2023, respectively, to record the scheduled rent changes on a straight line basis. As of March 31, 2024 and December 31, 2023, we had receivables for current rent amounts owed to us by TA and straight line rent adjustments of $25,459 and $19,816, respectively, included in other assets, net in our condensed consolidated balance sheets.
Until May 15, 2023, our TA leases required TA to pay us percentage rent based upon increases in certain sales. We recognized percentage rent due under our TA leases as rental income when all contingencies were met. We did not recognize any percentage rent during the three months ended March 31, 2023 under our TA leases. We had aggregate deferred percentage rent under our TA leases of $2,385 for the three months ended March 31, 2023.
For more information regarding our relationships with TA, including the TA Merger (as defined below), see Notes 7 and 11.
Our other net lease agreements generally provide for minimum rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. We recognized rental income from our net lease properties (excluding TA) of $32,180 and $32,272 for the three months ended March 31, 2024 and 2023, respectively, which included $1,459 and $793, respectively, of adjustments to record scheduled rent changes under certain of our leases on a straight line basis.
We continually review receivables related to rent, straight line rent and property operating expense reimbursements and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. The review includes an assessment of whether substantially all of the amounts due under a tenant’s lease are probable of collection. For leases that are deemed probable of collection, revenue continues to be recorded on a straight line basis over the lease term. For leases that are deemed not probable of collection, revenue is recorded as cash is received. We recognize all changes in the collectability assessment for an operating lease as an adjustment to rental income. We recorded reserves for uncollectable amounts and reduced rental income by $665 and $3,540 for the three months ended March 31, 2024 and 2023, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $4,101 and $3,436 as of March 31, 2024 and December 31, 2023, respectively, included in other assets, net in our condensed consolidated balance sheets.
12

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
Note 7. Other Investments
Equity Method Investment
As of both March 31, 2024 and December 31, 2023, we owned 34% of Sonesta’s outstanding common stock. We account for our 34% non-controlling interest in Sonesta under the equity method of accounting.
As of March 31, 2024 and December 31, 2023, our investment in Sonesta had a carrying value of $111,014 and $113,304, respectively. On the date of acquisition of our initial equity interest in Sonesta (February 27, 2020), the cost basis of our investment in Sonesta exceeded our proportionate share of Sonesta’s total stockholders’ equity book value by an aggregate of $8,000. As required under GAAP, we are amortizing this difference to equity in earnings of an investee over 31 years, the weighted average remaining useful life of the real estate assets and intangible assets and liabilities owned by Sonesta as of the date of our acquisition. We recorded amortization of the basis difference of $65 in each of the three months ended March 31, 2024 and 2023. We recognized losses of $5,338 and $4,221 related to our investment in Sonesta for the three months ended March 31, 2024 and 2023, respectively. These amounts, which include amortization of the basis difference, are included in equity in losses of an investee in our condensed consolidated statements of comprehensive income (loss).
We recorded a liability of $42,000 for the fair value of our initial investment in Sonesta, as no cash consideration was exchanged related to the modification of our management agreement with, and investment in, Sonesta. This liability for our investment in Sonesta is included in accounts payable and other liabilities in our condensed consolidated balance sheets and is being amortized on a straight line basis through the initial term of the Sonesta agreement, January 31, 2037, as a reduction to hotel operating expenses in our condensed consolidated statements of comprehensive income (loss). We reduced hotel operating expenses by $621 for each of the three months ended March 31, 2024 and 2023, for amortization of this liability. As of March 31, 2024 and December 31, 2023, the unamortized balance of this liability was $31,858 and $32,479, respectively.
During the three months ended March 31, 2024, we made a $3,392 pro rata capital contribution to Sonesta to support its growth initiatives, including its franchising efforts. We continue to maintain our 34% ownership in Sonesta after giving effect to this contribution.
See Notes 6 and 11 for further information regarding our relationships, agreements and transactions with Sonesta.
Investment in Equity Securities
Until May 15, 2023, we owned 1,184,797 shares, or approximately 7.8%, of TA common stock, which were reported at fair value based on quoted market prices (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of the end of the period, with changes in fair value recorded in earnings in our condensed consolidated statements of comprehensive income (loss). As of May 15, 2023, our historical cost basis for these shares was $24,418 and our carrying value for these shares was $101,893. On May 15, 2023, BP Products North America Inc. acquired TA pursuant to a merger, or the TA Merger, for $86.00 per share of TA common stock in cash. During the three months ended March 31, 2023, we recorded gains of $49,430 to adjust the carrying value of our former investment in shares of TA common stock to its fair value.
Note 8. Indebtedness
Our principal debt obligations at March 31, 2024 were: (1) $4,025,000 aggregate outstanding principal amount of senior unsecured notes; (2) $1,000,000 aggregate outstanding principal amount of senior secured notes; and (3) $608,079 aggregate outstanding principal amount of net lease mortgage notes. We had no amounts outstanding under our revolving credit facility as of March 31, 2024.
Our $650,000 secured revolving credit facility is available for general business purposes, including acquisitions. We can borrow, repay, and reborrow funds available under our revolving credit facility until maturity and no principal repayments are due until maturity. The maturity date of our revolving credit facility is June 29, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date of the facility by two additional six-month periods.
13

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
Interest payable on drawings under our revolving credit facility is based on the secured overnight financing rate, or SOFR, plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of March 31, 2024. As collateral for all loans and other obligations under the credit facility, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 69 properties, including 66 hotels and three net lease properties, with an aggregate undepreciated carrying value of $1,612,216 as of March 31, 2024. In addition, in order to maintain compliance with the minimum collateral property availability covenant as defined in the credit agreement, in February 2024, we added three hotels with an aggregate undepreciated carrying value of $115,039 as of March 31, 2024, as collateral under the agreement. We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of March 31, 2024 and 2023, the annual interest rate payable on borrowings under our revolving credit facility was 7.84% and 7.36%, respectively. We had no borrowings outstanding under our revolving credit facility for the three months ended March 31, 2024 or 2023.
Our debt agreements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes The RMR Group LLC, or RMR, ceasing to act as our business manager. Our debt agreements also contain covenants, including those that restrict our ability to incur debts or to make distributions under certain circumstances and generally require us to maintain certain financial ratios. Borrowings under our revolving credit facility are subject to meeting ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions. We believe we were in compliance with the terms and conditions of our debt agreements as of March 31, 2024.
Net Lease Mortgage Notes
Our $610,200 in aggregate principal amount of net lease mortgage notes were issued on February 10, 2023 by our wholly owned, special purpose bankruptcy remote, indirect subsidiary, SVC ABS LLC, or the Issuer. The Issuer is a separate legal entity and is the sole owner of its assets and liabilities. The assets of the Issuer are not available to pay or otherwise satisfy obligations to the creditors of any owners or affiliates of the Issuer.
Our net lease mortgage notes are summarized below:
Note Class
Principal Outstanding as of March 31, 2024
Coupon RateInitial Term (in years)Maturity
Class A$303,348 5.15%5February 2028
Class B172,531 5.55%5February 2028
Class C132,200 6.70%5February 2028
Total / weighted average$608,079 5.60%
The Class A notes and the Class B notes require monthly principal repayments at an annualized rate of 0.50% and 0.25% of the balance outstanding, respectively, and the Class C notes require interest payments only, with balloon payments due at maturity. The notes mature in February 2028 and may be redeemed without penalty 24 months prior to the scheduled maturity date beginning in February 2026. The notes are non-recourse and are secured by 308 net lease retail properties owned by the Issuer. The current leases relating to those properties require annual minimum rents of $65,070 and had an aggregate undepreciated carrying value of $754,006 as of March 31, 2024.
14

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
Note 9. Shareholders’ Equity
Share Purchases
During the three months ended March 31, 2024, we purchased an aggregate of 1,537 of our common shares, valued at a weighted average share price of $8.54 per common share, from certain former employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares. We withheld and purchased these common shares at their fair market values based upon the trading prices of our common shares at the close of trading on The Nasdaq Stock Market LLC, or Nasdaq, on the applicable purchase dates.
Distributions
During the three months ended March 31, 2024, we declared and paid regular quarterly distributions to common shareholders as follows:
Declaration DateRecord DatePaid DateDividend Per Common ShareTotal Distributions
January 11, 2024January 22, 2024February 15, 2024$0.20 $33,154 
On April 11, 2024, we declared a regular quarterly distribution to common shareholders of record as of April 22, 2024 of $0.20 per common share, or approximately $33,152. We expect to pay this amount on or about May 16, 2024 using cash on hand.
Note 10. Business and Property Management Agreements with RMR
We have no employees. The personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR to provide management services to us: (1) a business management agreement, which relates to our business generally, and (2) a property management agreement, which relates to our property level operations of our net lease portfolio, the office building component of one of our hotels and major renovation or repositioning activities at our hotels that we may request RMR to manage from time to time.
Pursuant to our business management agreement with RMR, we recognized net business management fees of $7,757 and $8,385 for the three months ended March 31, 2024 and 2023, respectively. Based on our common share total return, as defined in our business management agreement, as of each of March 31, 2024 and 2023, no incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2024 or 2023. The actual amount of annual incentive fees for 2024, if any, will be based on our common share total return, as defined in our business management agreement, for the three-year period ending December 31, 2024, and will be payable in January 2025. We did not incur an incentive fee payable to RMR for the year ended December 31, 2023. We include business management fee amounts in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).
Pursuant to our property management agreement with RMR, we recognized aggregate property management and construction supervision fees of $3,180 and $1,412 for the three months ended March 31, 2024 and 2023, respectively. Of those amounts, for the three months ended March 31, 2024 and 2023, $1,484 and $945, respectively, of property management fees were expensed to net lease operating expenses in our condensed consolidated statements of comprehensive income (loss) and $1,696 and $467, respectively, of construction and supervision fees were capitalized as building improvements in our condensed consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.
15

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR on our behalf. We are generally not responsible for payment of RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR employees assigned to work exclusively or partly at our net lease properties and the office building component of one of our hotels, our share of the wages, benefits and other related costs of RMR’s centralized accounting personnel, our share of RMR’s costs for providing our internal audit function, and as otherwise agreed. Our property level operating expenses are generally incorporated into rents charged to our tenants, including certain payroll and related costs incurred by RMR. We reimbursed RMR $1,094 and $1,003 for these expenses and costs for the three months ended March 31, 2024 and 2023, respectively. We included these amounts in net lease operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss).
Note 11. Related Person Transactions
We have relationships and historical and continuing transactions with TA, Sonesta, RMR, The RMR Group, Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. As of the effective time of the TA Merger on May 15, 2023, TA is no longer a related person to us. RMR is a majority owned subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam D. Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR. John G. Murray, our other Managing Trustee and our former President and Chief Executive Officer, also serves as an officer and employee of RMR and as president and chief executive officer of Sonesta. In addition, each of our other officers serves as an officer of RMR. Some of our Independent Trustees also serve as independent trustees of other public companies to which RMR or its subsidiaries provide management services. Mr. Portnoy serves as chair of the boards and as a managing trustee of these public companies. Other officers of RMR, including certain of our officers, serve as managing trustees or officers of certain of these companies.
RMR provides management services to us and, until the TA Merger, provided services to TA, and Mr. Portnoy, until the TA Merger, also served as the chair of the board of directors and as a managing director of TA and, as of immediately prior to the TA Merger, beneficially owned 661,506 shares of TA common stock (including through RMR), representing approximately 4.4% of TA’s outstanding shares of common stock.
See Notes 6 and 7 for further information regarding our relationships, agreements and transactions with TA.
Sonesta. Sonesta is a private company. Mr. Portnoy is the largest owner and controlling shareholder and a director of Sonesta. Mr. Murray is a director of Sonesta and is its president and chief executive officer, and he is an officer and employee of RMR. Sonesta’s other director serves as RMR’s and RMR Inc.’s executive vice president, general counsel and secretary, as a managing director of RMR Inc. and as our Secretary. RMR also provides certain services to Sonesta. As of March 31, 2024, we owned 34% of Sonesta’s outstanding shares of common stock and Sonesta managed 195 of our hotels. See Notes 6 and 7 for further information regarding our relationships, agreements and transactions with Sonesta.
Our Manager, RMR. We have two agreements with RMR to provide management services to us. See Note 10 for further information regarding our management agreements with RMR.
For further information about these and certain other such relationships and certain other related person transactions, refer to our 2023 Annual Report.
Note 12. Income Taxes
We have elected to be taxed as a REIT under the United States Internal Revenue Code of 1986, as amended, or the IRC, and, as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. We are subject to income tax in Canada, Puerto Rico and certain states despite our qualification for taxation as a REIT. Further, we lease our managed hotels to our wholly owned TRSs that, unlike most of our subsidiaries, file a separate consolidated tax return and are subject to federal, state and foreign income taxes. Our consolidated income tax provision (or benefit) includes the income tax provision (or benefit) related to the operations of our TRSs and certain state and foreign income taxes incurred by us despite our qualification for taxation as a REIT.
16

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
During the three months ended March 31, 2024, we recognized income tax expense of $1,007, which includes $621 of state tax expense and $386 of foreign tax expense. During the three months ended March 31, 2023, we recognized an income tax benefit of $3,780, which includes $2,297 of state tax benefit and $1,483 of foreign tax benefit.
Note 13. Segment Information
We aggregate our hotels and net lease portfolio into two reportable segments, hotel investments and net lease investments, based on their similar operating and economic characteristics.
Three Months Ended March 31, 2024
HotelsNet LeaseCorporateConsolidated
Revenues:    
Hotel operating revenues$336,236 $ $ $336,236 
Rental income 100,014  100,014 
Total revenues336,236 100,014  436,250 
Expenses:    
Hotel operating expenses 305,086   305,086 
Net lease operating expenses 4,723  4,723 
Depreciation and amortization 55,086 38,021  93,107 
General and administrative   10,506 10,506 
Loss on asset impairment 2,451  2,451 
Total expenses 360,172 45,195 10,506 415,873 
Loss on sale of real estate, net(836)(2,127) (2,963)
Interest income 63 105 1,794 1,962 
Interest expense  (11,517)(79,897)(91,414)
(Loss) income before income tax expense and equity in losses of an investee
(24,709)41,280 (88,609)(72,038)
Income tax expense  (1,007)(1,007)
Equity in losses of an investee   (5,338)(5,338)
Net (loss) income$(24,709)$41,280 $(94,954)$(78,383)
 As of March 31, 2024
HotelsNet LeaseCorporateConsolidated
Total assets$3,971,296 $3,046,807 $213,416 $7,231,519 
17

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
Three Months Ended March 31, 2023
HotelsNet LeaseCorporateConsolidated
Revenues:   
Hotel operating revenues $334,796 $ $ $334,796 
Rental income 94,413  94,413 
Total revenues 334,796 94,413  429,209 
Expenses:    
Hotel operating expenses 299,566   299,566 
Net lease operating expenses 3,905  3,905 
Depreciation and amortization 53,385 46,654  100,039 
General and administrative   10,911 10,911 
Transaction related costs  887 887 
Total expenses 352,951 50,559 11,798 415,308 
Gain on sale of real estate, net41,898   41,898 
Gain on equity securities, net  49,430 49,430 
Interest income 30 2 2,754 2,786 
Interest expense  (6,322)(75,258)(81,580)
Loss on early extinguishment of debt  (44)(44)
Income (loss) before income tax benefit and equity in losses of an investee23,773 37,534 (34,916)26,391 
Income tax benefit  3,780 3,780 
Equity in losses of an investee   (4,221)(4,221)
Net income (loss)$23,773 $37,534 $(35,357)$25,950 
 As of December 31, 2023
HotelsNet LeaseCorporateConsolidated
Total assets$3,943,213 $3,084,686 $328,217 $7,356,116 
18

SERVICE PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)
(unaudited)
Note 14. Fair Value of Assets and Liabilities
The table below presents certain of our assets carried at fair value at March 31, 2024, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.
Fair Value at Reporting Date Using
DescriptionTotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Non-recurring Fair Value Measurement Assets:
Assets of properties held for sale (1)
$1,863 $ $ $1,863 
(1)We recorded a loss on asset impairment of $2,451 during the three months ended March 31, 2024, to reduce the carrying value of five net lease properties in our condensed consolidated balance sheet to their estimated fair value less costs to sell based on brokers’ opinion of values (Level 3 inputs as defined in the fair value hierarchy under GAAP).
In addition to the assets included in the table above, our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, revolving credit facility, net lease mortgage notes, senior notes and security deposits. At March 31, 2024 and December 31, 2023, the fair values of these financial instruments approximated their carrying values in our condensed consolidated balance sheets due to their short-term nature or floating interest rates, except as follows:
March 31, 2024December 31, 2023
Carrying Value (1)
Fair Value
Carrying Value (1)
Fair Value
Senior Unsecured Notes, due 2025 at 4.50%
$349,353 $341,950 $349,181 $341,688 
Senior Unsecured Notes, due 2025 at 7.50%
796,591 810,784 796,007 808,888 
Senior Unsecured Notes, due 2026 at 5.25%
347,883 338,587 347,601 339,780 
Senior Unsecured Notes, due 2026 at 4.75%
448,499 419,436 448,347 419,909 
Senior Unsecured Notes, due 2027 at 4.95%
397,861 369,984 397,672 362,108 
Senior Unsecured Notes, due 2027 at 5.50%
445,913 428,958 445,631 412,002 
Net Lease Mortgage Notes, due 2028 at 5.60%
561,349 580,423 558,876 585,784 
Senior Unsecured Notes, due 2028 at 3.95%
395,643 342,336 395,355 327,708 
Senior Unsecured Notes, due 2029 at 4.95%
420,675 347,935 420,477 351,726 
Senior Unsecured Notes, due 2030 at 4.375%
393,339 305,332 393,056 310,524 
Senior Secured Notes, due 2031 at 8.625%
969,039 1,066,440 968,017 1,047,430 
Total financial liabilities$5,526,145 $5,352,165 $5,520,220 $5,307,547 
(1)Carrying value includes unamortized discounts, premiums and certain debt issuance costs.
At March 31, 2024 and December 31, 2023, we estimated the fair values of our senior notes using an average of the bid and ask price of the notes (Level 2 inputs) as of the measurement dates. At March 31, 2024 and December 31, 2023, we estimated the fair value of our net lease mortgage notes using discounted cash flow analyses and current prevailing market rates as of the measurement dates (Level 3 inputs). As Level 3 inputs are unobservable, our estimated value may differ materially from the actual fair value.
19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2023 Annual Report.
Overview (dollars in thousands, except per share amounts and per room hotel data)
We are a REIT organized under the laws of the State of Maryland. As of March 31, 2024, we owned 969 properties in 46 states, the District of Columbia, Canada and Puerto Rico.
In response to significant and prolonged increases in inflation, the U.S. Federal Reserve raised interest rates multiple times since the beginning of 2022. Although the U.S. Federal Reserve has indicated that it may lower rates in 2024, we cannot be sure that it will do so, and interest rates may remain at the current high levels or continue to increase. These inflationary pressures in the United States, as well as global geopolitical instability and tensions, have given rise to uncertainty regarding economic downturns or a possible recession and potential disruptions in the financial markets. Consumer confidence, corporate travel and lodging demand will continue to be affected by economic and market conditions, unemployment levels, work from home policies, use of technologies and broader economic trends. Increased labor costs and other price inflation, including due to supply chain challenges, may continue to negatively impact our hotel operations and the operations of our tenants. An economic recession or continued or intensified disruptions in the financial markets could adversely affect our financial condition, operations at our hotels, our tenants and their ability or willingness to renew our leases or pay rent to us, may restrict our ability to obtain new or replacement financing, would likely increase our cost of capital, and may cause the values of our properties to decline.
Management Agreements and Leases. At March 31, 2024, we owned 220 hotels operated under four agreements. We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At March 31, 2024, we also owned 749 service-focused retail properties leased to 177 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. Our condensed consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and net lease operating expenses from our net lease properties.
Hotel Portfolio. As of March 31, 2024, we owned 220 hotels. During the three months ended March 31, 2024, the U.S. hotel industry generally realized increases in revenue per available room, or RevPAR, compared to the same period in 2023. Our hotels produced year over year declines in RevPAR, which we believe is partially a result of disruption and displacement at certain of our hotels undergoing renovation and decreased business activity in areas where some of our hotels are located. The following table provides a summary for all of our hotels with these revenue metrics for the periods presented, which we believe are key indicators of performance at our hotels.
Three Months Ended March 31,
20242023Change
All Hotels
No. of hotels220 220 — 
No. of rooms or suites37,697 37,527 170 
Occupancy56.3 %57.6 %(1.3) pts
ADR$139.83 $138.73 0.8 %
RevPAR $78.69 $79.91 (1.5)%
Comparable Hotels Data. We present RevPAR, average daily rate, or ADR, and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods. We define comparable hotels as those that were owned by us and were open and operating for the entirety of the periods being compared. For the three months ended March 31, 2024 and 2023, our comparable results exclude two hotels. One of the hotels was not owned for the entirety of the periods and the other suspended operations during part of the periods presented. The following table provides a summary of these revenue metrics for the periods presented.
20

Three Months Ended March 31,
20242023Change
Comparable Hotels
No. of hotels218 218 — 
No. of rooms or suites37,349 37,349 — 
Occupancy56.2 %57.8 %(1.6) pts
ADR$137.61 $138.81 (0.9)%
RevPAR$77.35 $80.18 (3.5)%
Net Lease Portfolio. As of March 31, 2024, we owned 749 service-focused retail net lease properties with an aggregate of 13,384,219 square feet leased to 177 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $374,941. Our net lease properties were 97.3% occupied as of March 31, 2024 with a weighted (by annual minimum rent) average lease term of 8.7 years, operating under 137 brands in 21 distinct industries. TA is our largest tenant and as of March 31, 2024, leased 175 of our travel centers under five master leases that expire in 2033 and require annual minimum rents of $254,000. In addition, TA receives an annual credit of $25,000 as a result of prepaid rent. BP Corporation North America Inc. guarantees payment under these leases, subject to a cap.
Additional details of our hotel operating agreements and our net lease agreements are set forth in Note 6 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

21

Results of Operations (amounts in thousands, except per share data)
Three Months Ended March 31, 2024, Compared to the Three Months Ended March 31, 2023
Three Months Ended March 31,
20242023Increase (Decrease)% Increase (Decrease)
Revenues:    
Hotel operating revenues$336,236 $334,796 $1,440 0.4 %
Rental income100,014 94,413 5,601 5.9 %
Total revenues436,250 429,209 7,041 1.6 %
Expenses:    
Hotel operating expenses305,086 299,566 5,520 1.8 %
Net lease operating expenses4,723 3,905 818 20.9 %
Depreciation and amortization - hotels55,086 53,385 1,701 3.2 %
Depreciation and amortization - net lease properties38,021 46,654 (8,633)(18.5)%
Total depreciation and amortization93,107 100,039 (6,932)(6.9)%
General and administrative10,506 10,911 (405)(3.7)%
Transaction related costs— 887 (887)n/m
Loss on asset impairment2,451 — 2,451 n/m
Total expenses415,873 415,308 565 0.1 %
(Loss) gain on sale of real estate, net(2,963)41,898 (44,861)(107.1)%
Gain on equity securities, net— 49,430 (49,430)n/m
Interest income1,962 2,786 (824)(29.6)%
Interest expense(91,414)(81,580)(9,834)12.1 %
Loss on early extinguishment of debt— (44)44 n/m
(Loss) income before income tax (expense) benefit and equity in losses of an investee(72,038)26,391 (98,429)n/m
Income tax (expense) benefit(1,007)3,780 (4,787)(126.6)%
Equity in losses of an investee(5,338)(4,221)(1,117)26.5 %
Net (loss) income$(78,383)$25,950 $(104,333)n/m
Weighted average common shares outstanding (basic and diluted)165,158 164,867 291 0.2 %
Net (loss) income per common share (basic and diluted)$(0.48)$0.16 $(0.64)n/m
References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.
Hotel operating revenues. The increase in hotel operating revenues is primarily a result of our hotel acquisition ($9,886), partially offset by the sale of certain of our hotels since January 1, 2023 ($7,829) and the displacement and disruption at certain of our hotels undergoing renovation and decreased business activity in areas where some of our hotels are located ($617). Additional operating statistics of our hotels are included in the tables beginning on page 29.
Rental income. The increase in rental income is primarily a result of the amended TA leases that were effective starting in May 2023.
Hotel operating expenses. The increase in hotel operating expenses is primarily a result of our hotel acquisition ($6,575), increases in wages and benefits ($5,470) and property insurance and other operating expenses ($3,843), partially offset by our sale of certain hotels since January 1, 2023 ($10,368).
22

Net lease operating expenses. The increase in net lease operating expenses is primarily the result of increased property management fees in the 2024 period ($549) and increases in other operating expenses at certain net lease properties ($574), partially offset by our sale of certain net lease properties since January 1, 2023 ($305).
Depreciation and amortization - hotels. The increase in depreciation and amortization - hotels is primarily a result of depreciation and amortization related to capital expenditures made since January 1, 2023 and our acquisition of a hotel in June 2023 ($4,053), partially offset by certain of our depreciable assets becoming fully depreciated since January 1, 2023 ($2,352).
Depreciation and amortization - net lease properties. The decrease in depreciation and amortization - net lease properties is primarily a result of our sale of certain net lease properties since January 1, 2023 ($5,543) and certain of our depreciable assets becoming fully depreciated ($3,090).
General and administrative. The decrease in general and administrative costs is primarily due to a decrease in business management fees in the 2024 period ($628), partially offset by an increase in other professional fees ($223).
Transaction related costs. Transaction related costs for the 2023 period primarily consisted of costs related to potential acquisitions.
Loss on asset impairment. We recorded a $2,451 loss on asset impairment during the 2024 period to reduce the carrying value of five net lease properties to their estimated fair value less costs to sell.
(Loss) gain on sale of real estate, net. We recorded a $2,963 net loss on sale of real estate during the 2024 period in connection with the sales of three net lease properties and one hotel. We recorded a $41,898 net gain on sale of real estate during the 2023 period in connection with the sale of 18 hotels.
Gain on equity securities, net. Gain on equity securities, net represents the adjustment to the carrying value of our former investment in shares of TA common stock to its fair value.
Interest income. The decrease in interest income is due to lower average cash balances invested during the 2024 period.
Interest expense. The increase in interest expense is primarily due to higher weighted average interest rates during the 2024 period.
Loss on early extinguishment of debt. We recorded a $44 loss on early extinguishment of debt in the 2023 period in connection with our redemption of certain senior unsecured notes.
Income tax (expense) benefit. The change in income tax (expense) benefit is primarily a result of recording state and foreign tax expense during the 2024 period compared to state and foreign tax benefits in the 2023 period.
Equity in losses of an investee. Equity in losses of an investee represents our proportionate share of the losses of Sonesta.
Net (loss) income. Our net (loss) income and net (loss) income per common share (basic and diluted) each decreased in the 2024 period compared to the 2023 period primarily due to the revenue and expense changes discussed above.
23

Liquidity and Capital Resources (dollars in thousands, except per share amounts)
Our Managers and Tenants
As of March 31, 2024, all 220 of our hotels were managed by four hotel operating companies. Our 749 service-focused retail net lease properties were leased to 177 tenants as of March 31, 2024. The costs of operating and maintaining our properties are generally paid by the hotel managers as agents for us or by our tenants for their own account. Our hotel managers and tenants derive their funding for property operating expenses and for returns and rents due to us generally from property operating revenues and, to the extent these parties themselves fund our owner’s priority returns and rents, from their separate resources. As of March 31, 2024, our hotel managers included Sonesta (195 hotels), Hyatt (17 hotels), Radisson (seven hotels), and IHG (one hotel). TA is our largest tenant (175 travel centers).
We recorded reserves for uncollectable amounts and reduced rental income by $665 and $3,540 for the three months ended March 31, 2024 and 2023, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $4,101 and $3,436 as of March 31, 2024 and December 31, 2023, respectively, included in other assets, net in our condensed consolidated balance sheets.
We define net lease coverage as earnings before interest, taxes, depreciation, amortization and rent, or EBITDAR, divided by the annual minimum rent due to us weighted by the minimum rent of the property to total minimum rents of the net lease portfolio. Tenants with no minimum rent required under the lease are excluded. EBITDAR amounts used to determine rent coverage are generally for the latest twelve-month period, based on the most recent operating information, if any, furnished by our tenants. Operating statements furnished by our tenants often are unaudited and, in certain cases, may not have been prepared in accordance with GAAP and are not independently verified by us. In instances where we do not have tenant financial information, we calculate an implied coverage ratio for the period based on other tenants with available financial statements operating the same brand or within the same industry. As a result, we believe using this implied coverage metric provides a more reasonable estimated representation of recent operating results and the financial condition for those tenants. Our net lease properties generated coverage of 2.37x and 2.98x as of March 31, 2024 and 2023, respectively.
Our Operating Liquidity and Capital Resources
Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are owner’s priority returns from our hotels, rents from our net lease portfolio and borrowings under our revolving credit facility. We receive owner’s priority returns and rents from our managers and tenants monthly. We may receive additional returns, percentage rents and our share of the operating profits of our managed hotels after payment of management fees and other deductions, if any, either monthly or quarterly, and these amounts are usually subject to annual reconciliations. We believe these sources of funds will be sufficient to meet our operating expenses and capital expenditures, pay debt service obligations and make distributions to our shareholders for the next twelve months and for the foreseeable future thereafter. However, as a result of economic conditions, including if the U.S. enters an economic recession, or otherwise, our managers and tenants may become unable or unwilling to pay owner’s priority returns and rents to us when due, and, as a result, our cash flows and net income would decline and we may need to reduce the amount of, or even eliminate, our distributions to common shareholders.
The following is a summary of our sources and uses of cash flows for the periods presented:
Three Months Ended March 31,
20242023
Cash and cash equivalents and restricted cash at the beginning of the period$197,830 $45,420 
Net cash (used in) provided by:
Operating activities(926)12,373 
Investing activities(74,829)114,252 
Financing activities(34,749)23,791 
Cash and cash equivalents and restricted cash at the end of the period$87,326 $195,836 
24

The change from cash flow provided by operating activities in the 2023 period to cash flow used in operating activities in the 2024 period is primarily due to higher interest expense and lower hotel returns in the 2024 period. The change from cash flow provided by investing activities in the 2023 period to cash flow used in investing activities in the 2024 period is primarily due to lower proceeds from the sale of real estate and increased real estate improvements during the 2024 period. The change from cash flow provided by financing activities in the 2023 period to cash flow used in financing activities in the 2024 period is primarily due to lower net borrowings in the 2024 period.
We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements. We lease 220 hotels to our wholly owned TRSs that are managed by hotel operating companies. As a REIT, we do not expect to pay federal income taxes on the majority of our income; however, the income realized by our TRSs in excess of the rent they pay to us is subject to U.S. federal income tax at corporate income tax rates. In addition, the income we receive from our hotels in Canada and Puerto Rico is subject to taxes in those jurisdictions and we are subject to taxes in certain states where we have properties despite our qualification for taxation as a REIT.
Our Investment and Financing Liquidity and Capital Resources
Our hotel operating agreements generally provide that, if necessary, we may provide our managers with funding for capital improvements to our hotels in excess of amounts otherwise available in escrowed FF&E reserves or when no FF&E reserves are available. During the three months ended March 31, 2024, we funded $67,656 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $232,000 for capital improvements to certain hotels during the last nine months of 2024 using cash on hand and borrowings under our revolving credit facility.
Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements. We own all the FF&E escrows for our hotels. During the three months ended March 31, 2024, certain of our hotel managers deposited $871 to these accounts and spent $1,002 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of March 31, 2024, there was $5,551 on deposit in these escrow accounts, which was held directly by us and is reflected in our condensed consolidated balance sheets as restricted cash.
Our net lease portfolio leases do not require FF&E escrow deposits and tenants under these leases are generally required to maintain the leased properties, including structural and non-structural components. We may provide tenant improvement allowances to tenants in certain cases or may develop sites with the intent to lease them. During the three months ended March 31, 2024, we funded $511 for capital improvements to our net lease properties. As of March 31, 2024, we had $2,696 of unspent leasing-related obligations related to certain net lease tenants.
During the three months ended March 31, 2024, we sold three net lease properties with an aggregate of 34,849 square feet for an aggregate sales price of $2,932, excluding closing costs, and one hotel with 84 rooms for a sales price of $3,315, excluding closing costs. As of May 3, 2024, we have entered into an agreement to sell one net lease property with 3,381 square feet for a sale price of $1,250, excluding closing costs. This pending sale is subject to conditions; accordingly, we cannot be sure that we will complete this sale, that this sale will not be delayed or that the terms will not change. We continue to market 12 net lease properties with an aggregate of 138,948 square feet for sale. We believe it is more likely than not that the sales of these properties will be completed within one year. In addition, we are also marketing 22 Sonesta hotels with an aggregate of 2,832 rooms for sale, including nine Sonesta ES Suites®, seven Sonesta Select®, five Sonesta Simply Suites® and one Sonesta Hotels & Resorts®. We cannot be sure we will sell any of these hotels or sell them for prices in excess of their carrying values. We expect to use the proceeds from these asset sales for general business purposes, which may include the repayment of debt.
During the three months ended March 31, 2024, we made a $3,392 pro rata capital contribution to Sonesta to support its growth initiatives, including its franchising efforts, and maintain our ownership percentage of Sonesta, using cash on hand.
During the three months ended March 31, 2024, we declared and paid regular quarterly distributions to our common shareholders using cash on hand as follows:
Declaration DateRecord DatePaid DateDividend Per Common ShareTotal Distributions
January 11, 2024January 22, 2024February 15, 2024$0.20 $33,154 
On April 11, 2024, we declared a regular quarterly distribution to common shareholders of record as of April 22, 2024 of $0.20 per common share, or approximately $33,152. We expect to pay this amount on or about May 16, 2024 using cash on hand.
25

In order to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses, we maintain a $650,000 secured revolving credit facility which is governed by a credit agreement. This revolving credit facility is available for general business purposes, including acquisitions. We can borrow, repay, and reborrow funds available under the revolving credit facility until maturity and no principal repayments are due until maturity. Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions. The maturity date of our revolving credit facility is June 29, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date by two additional six-month periods.
Interest payable on drawings under our revolving credit facility is based on SOFR plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of March 31, 2024. As collateral for all loans and other obligations under the facility, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 69 properties, including 66 hotels and three net lease properties, with an aggregate undepreciated carrying value of $1,612,216 as of March 31, 2024. In addition, in order to maintain compliance with the minimum collateral property availability covenant as defined in the credit agreement, in February 2024, we added three hotels with an aggregate undepreciated carrying value of $115,039 as of March 31, 2024 as collateral under the agreement. We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of March 31, 2024 and 2023, the annual interest rate payable on borrowings under our revolving credit facility was 7.84% and 7.36%, respectively. We had no borrowings outstanding under our revolving credit facility as of March 31, 2024.
Our debt maturities (other than our revolving credit facility) as of March 31, 2024 were as follows:
YearMaturity
2024$1,468 
20251,151,958 
2026801,958 
2027851,958 
20281,000,737 
2029425,000 
2030400,000 
20311,000,000 
$5,633,079 
None of our senior note debt obligations require principal or sinking fund payments prior to their maturity dates. Our mortgage notes require monthly principal payments as described in Part I, Item 3 of this Quarterly Report on Form 10-Q.
We currently expect to use cash on hand, the cash flows from our operations, borrowings under our revolving credit facility, net proceeds from any asset sales and net proceeds of offerings of equity or the incurrence of debt to fund our operations, capital expenditures, investments, future debt maturities, distributions to our shareholders and other general business purposes.
When significant amounts are outstanding for an extended period of time under our revolving credit facility, or the maturities of our indebtedness approach, we currently expect to explore refinancing alternatives. Such alternatives may include incurring additional debt, issuing new equity securities and the sale of properties. We have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. We may also seek to participate in joint ventures or other arrangements that may provide us additional sources of financing. We may also assume mortgage debt on properties we may acquire or obtain mortgage financing on our existing properties.
While we believe we will generally have access to various types of financings, including debt or equity, to fund our future acquisitions and to pay our debts and other obligations, we cannot be sure that we will be able to complete any debt or equity offerings or other types of financings or that our cost of any future public or private financings will not increase.
26

Our ability to complete, and the costs associated with, future debt transactions depend primarily upon credit market conditions and our then perceived creditworthiness. We have no control over market conditions. Our credit ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities. However, as discussed elsewhere in this Quarterly Report on Form 10-Q, the impacts of the current, and possibly future, inflationary conditions, increasing or sustained high interest rates and a possible economic recession are uncertain and may have various negative consequences on us and our operations, including a decline in financing availability and increased costs for financing. Further, such conditions could also disrupt the capital markets generally and limit our access to financing from public sources or on favorable terms, particularly if the global financial markets experience significant disruptions.
Debt Covenants
Our debt obligations at March 31, 2024 consisted of $5,025,000 aggregate principal amounts of senior notes and $608,079 aggregate principal amounts of mortgage notes secured by 308 net lease retail properties. For further information regarding our indebtedness, see Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Our publicly and privately issued senior notes are governed by our indentures and related supplements. These indentures and related supplements and our credit agreement contain covenants that generally restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios. Our credit agreement, net lease mortgage notes, secured senior notes and unsecured senior notes, indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes RMR ceasing to act as our business manager. As of March 31, 2024, we believe we were in compliance with all of the covenants under our indentures and their supplements, net lease mortgage notes and our credit agreement.
Senior Notes Indenture Covenants
The following table summarizes the results of the financial tests required by the indentures and related supplements for our senior secured and unsecured notes as of March 31, 2024:
Actual ResultsCovenant Requirement
Total debt / adjusted total assets52.9%Maximum of 60%
Secured debt / adjusted total assets15.1%Maximum of 40%
Consolidated income available for debt service / debt service 1.78xMinimum of 1.50x
Total unencumbered assets / unsecured debt177.5%Minimum 150%
As of March 31, 2024, adjusted total assets for covenant purposes as defined in our senior notes indentures were $10,650,576 and assets encumbered under our revolving credit facility, serving as collateral for our net lease mortgage notes or secured senior notes represented $3,508,130 of adjusted total assets, as defined in our senior notes indentures. Our unencumbered hotels, travel centers, other net lease properties and other corporate assets represent $4,478,040, $1,623,324, $829,546 and $211,536 of adjusted total assets, respectively.
The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP:
Total assets$7,231,519 
Plus: accumulated depreciation3,237,999 
Plus: impairment and other adjustments to reflect original cost of real estate assets406,582 
Less: accounts receivable and intangibles(225,524)
Adjusted total assets$10,650,576 
Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our credit agreement and senior notes indentures.
27

Acceleration and Cross-Default
Our indentures and their supplements contain cross default provisions to any other debt of $20,000 or more ($50,000 or more in the case of our indenture entered into in February 2016 and its supplements, and our indenture entered into in November 2023 and its supplement). Similarly, our credit agreement has cross default provisions to other indebtedness that is recourse of $25,000 or more and indebtedness that is non-recourse of $75,000 or more. Neither our indentures and their supplements nor our credit agreement contain provisions for acceleration which could be triggered by a change in our debt ratings.
Supplemental Guarantor Information
Our 7.50% senior notes due 2025, or the 2025 Notes, and our 5.50% senior notes due 2027, or the 2027 Notes, are fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including our foreign subsidiaries and our subsidiaries pledged under our credit agreement and our net lease mortgage notes. The notes and the guarantees will be effectively subordinated to all of our and the subsidiary guarantors’ secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and will be structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $2,775,000 of senior unsecured notes do not have the benefit of any guarantees.
A subsidiary guarantor’s guarantee of the 2025 Notes and 2027 Notes and all other obligations of such subsidiary guarantor under the indentures governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and such indenture under certain circumstances, including on or after the date on which (a) the notes have received a rating equal to or higher than Baa2 (or the equivalent) by Moody’s Investor Services, or Moody’s, or BBB (or the equivalent) by Standard & Poor’s Ratings Services, or S&P, or if Moody’s or S&P ceases to rate the notes for reasons outside of our control, the equivalent investment grade rating from any other rating agency and (b) no default or event of default has occurred and is continuing under the indenture. Our non-guarantor subsidiaries are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any amounts due on these notes or the guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments. The rights of holders of these notes to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries’ creditors and any preferred equity holders. As a result, these notes and the related guarantees will be structurally subordinated to all indebtedness, guarantees and other liabilities of our subsidiaries that do not guarantee these notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
The following table presents summarized financial information for us and the subsidiary guarantors, on a combined basis, after elimination of (i) intercompany transactions and balances among us and the subsidiary guarantors, and (ii) equity in earnings from, and any investments in, any of our non-guarantor subsidiaries:
As of March 31, 2024As of December 31, 2023
Real estate properties, net (1)
$4,286,630 $4,372,682 
Other assets, net446,628 552,196 
Indebtedness, net$4,964,796 $4,961,344 
Intercompany balances (2)
729,097 752,146 
Other liabilities386,804 395,433 
Three Months Ended March 31, 2024
Revenues
$372,287 
Expenses
448,451 
Net loss
(76,164)
(1)Real estate properties, net as of March 31, 2024 includes $168,727 of properties owned directly by us and not included in the assets of the subsidiary guarantors.
(2)Intercompany balances represent payables to non-guarantor subsidiaries.
28

Related Person Transactions
We have relationships and historical and continuing transactions with RMR, RMR Inc., TA and Sonesta and others related to them. For further information about these and other such relationships and related person transactions, see Notes 6, 10 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2023 Annual Report, our definitive Proxy Statement for our 2024 Annual Meeting of Shareholders and our other filings with the Securities and Exchange Commission, or SEC. In addition, see the section captioned “Risk Factors” in our 2023 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.
Critical Accounting Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include consolidation of VIEs, purchase price allocations, the determination of useful lives of fixed assets, classification of leases, and the assessment of the carrying values and impairment of real estate intangible assets and equity investments.
A discussion of our critical accounting estimates is included in our 2023 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2023.
Property and Operating Statistics (dollars in thousands, except hotel statistics)
As of March 31, 2024, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 146 distinct brands across 22 industries.
Hotel Portfolio
The following tables summarize the operating statistics, including occupancy, ADR, and RevPAR reported to us by our hotel managers by hotel brand for the periods indicated. All operating data presented are based upon the operating results provided by our hotel managers for the indicated periods. We have not independently verified our managers’ operating data.
Comparable Hotels*No. of Rooms or SuitesOccupancy ADRRevPAR
Service LevelNo. of HotelsThree Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
Brand20242023Change20242023Change20242023Change
Sonesta Hotels & Resorts®Full Service22 7,153 54.5 %56.9 %(2.4) pts$152.67 $152.38 0.2 %$83.16 $86.72 (4.1)%
Royal Sonesta Hotels®Full Service17 5,663 50.7 %47.3 %3.4  pts236.71 238.96 (0.9)%120.10 112.96 6.3 %
Radisson® Hotels & ResortsFull Service1,149