Service Properties Trust Q3 FY2025 earnings call

• Strategic priorities: Completed hotel sales, raised over $850 million in proceeds, repaid revolving credit facility and 2026 senior notes. - Hotel business: Continued momentum on strategic objectives, had productive quarter, ongoing with hotel dispositions, renovations in 45% of retained portfolio, some hotels had EBITDA loss but renovations expected to drive growth. - Net lease business: Focus on portfolio growth and curation, acquired 13 net lease properties in third quarter, year-to-date investments $70.6 million, net lease portfolio had strong metrics. - Financial performance: Consolidated results impacted by decline in adjusted hotel EBITDA and increase in interest expense.

Hotel Segment: Third quarter normalized FFO was $33.9 million or $0.20 per share versus $0.32 per share in prior year quarter. Adjusted EBITDAre decreased $10 million year-over-year to $145 million. Hotel EBITDA declined due to elevated labor costs, insurance deductibles and operational disruption from dispositions. Retained hotel portfolio had RevPAR increase of 60 basis points and adjusted hotel EBITDA of $36 million. Triple Net Lease Segment: Portfolio delivered steady performance with rent growth over 2%, stable rent coverage and occupancy over 97%. Net lease portfolio had 752 properties with annual minimum rents of $389 million, more than 97% leased, weighted average lease term of 7.5 years.

• Q4 RevPAR projected $86 to $89, adjusted hotel EBITDA $20 million to $25 million. - Balance sheet: $5.5 billion debt outstanding with weighted average interest rate 5.9%, repaid revolving credit facility and 2026 senior notes, next debt maturity $400 million unsecured senior notes due February 2027. - CapEx: Full year 2025 CapEx projection lowered from $250 million to $200 million, Nautilus project deferred to 2026, 2026 CapEx expected to have $20 million to $30 million shift from Nautilus project deferral.

• Uncertainty around hotel dispositions closing by year-end, potential issues with contractually obligated closings. - Possible further impairments related to purchase price allocations among portfolios. - Decline in rent coverage in travel center portfolio, although backed by investment-grade rated BP, still something to watch.

Q: How realistic is it that all 69 remaining hotels will close by year-end?

A: Chris Bilotto said they're tracking to close 40%-50% in November and the rest in December.

Q: Can you talk about the $27 million impairment in the quarter?

A: Brian Donley said it was more shifting of purchase price allocations, not much to read into.

Q: Rent coverage continues to decline in travel center portfolio, any expectation of improvement?

A: Jesse Abair said they're watching it, but with BT credit backing, not particularly concerned.

Q: Talk about EBITDA coming in versus expectations in Q3.

A: Brian Donley said timing of asset sales and other moving pieces were drivers.

Q: Rationale behind zero-coupon bonds?

A: Brian Donley said to give headroom with covenants.

Q: Does Q4 guidance include host health sales closed quarter-to-date?

A: Brian Donley said no, based on portfolio as of September 30.

Q: Outlook for further dispositions in 2026?

A: Chris Bilotto said it will be incremental.

Q: Margin decline in hotel front, what factors?

A: Brian Donley said labor, insurance issues, etc.

Q: CapEx guidance and Nautilus renovations?

A: Brian Donley said Nautilus renovations moved to 2026 but there's still significant CapEx in 2025 Q4.

Q: Leverage target post hotel dispositions?

A: Brian Donley said one full turn off of leverage expected when dust settles