Service Properties Trust Q4 FY2025 earnings call

• Strategic priorities: Completed hotel sales, reduced leverage, sold Simply Suites, remarketed nine focused service hotels, initiated marketing of seven full-service Senesta managed hotels. Priced $745 million new five-year mortgage financing, contributed 158 retail properties to support it.
• Hotel performance: U.S. lodging industry soft, but SBC's portfolio delivered steady top-line growth. Invested in hotel renovations, renovated hotels capturing market shares. Senesta appointed new co-CEOs.
• Net lease portfolio: Successfully executed acquisition strategy, invested $101 million over past year, project $25 million net lease deal volume in 2026, tenant roster augmented by recent acquisitions

Hotel portfolio: Fourth quarter RevPAR increased 70 basis points year-over-year, outpacing broader industry by 180 basis points. Remaining 77 hotels had RevPAR up 170 basis points year-over-year, driven by occupancy gains of 140 basis points. Hotel EBITDA declined due to elevated labor costs and operational disruptions from dispositions. Net lease portfolio: At year end, consisted of 760 properties across 42 states with annual base rents of $390 million, ~97% leased, weighted average lease term 7.4 years. Annualized base rent increased 2.4% due to recent acquisition activity. Asset management team executed leases totaling 536,000 square feet with 15% cash rent roll-up. Portfolio lease expirations well-laddered.

• 2026 normalized FFO per share projected 65 to 77 cents.
• Hotel EBITDA projected 124 to $144 million.
• Adjusted EBITDA RE projected 500 to $520 million.
• Total CapEx for 2026 expected 120 million to $140 million.
• Assumes midpoint interest expense $378 million, G&A expense $40 million, weighted average share count 169 million shares.

Q: Share how REVPAR has trended in Q1 to date and what's driving the width of REVPAR growth guidance.

A: Tracking in line or exceeding projections, range due to portfolio volatility, displacement, citywide events impact.

Q: Walk through strategy shift in net lease acquisition guidance and capital deployment.

A: More holistic capital deployment, $25 million guidance supported by sales of net lease properties, net zero in that standpoint.

Q: Provide color on guidance assumes for expense growth at midpoint and components.

A: Top line ~4% growth, bottom line ~6% growth, big part labor, base labor/wages ~3-3.5%, benefit side pressure.

Q: Sense of how changes at Senesta with new management team may impact SVC.

A: Legacy track record of experience, viewed as positive, incrementally beneficial.

Q: Help think about hotel portfolio guidance, rep par growth apples to apples vs 2025.

A: Midpoint rep par ~110, 3% rep par growth, 4% on gross revenues, driven by higher quality portfolio, renovations, market factors like World Cup.

Q: Margin outlook, displacement and disruption in margin number.

A: Guidance noted ~$12 million displacement from renovations, varies year to year, larger renovations have outsized impact.

Q: CapEx in 2026 vs 2025, plans for Nautilus, normalized CapEx.

A: 120 to $140 million step down, pace of large renovations winding down, Nautilus has ~30-35 million CapEx in first half 2026, 120-ish for next years.

Q: Room for covenants and capacity in debt side after $745 million securitized notes.

A: Secured debt to total asset capacity down, covenant from 20-something% to 33% out of max 40%, focus on refinancing unsecured notes.

Q: Debt maturities in 2027 and 2028, how handling.

A: $100 million due Feb 2027 to be cleaned up with asset sales, zero coupons backed by TA assets, can be refinanced or extended, focus on Dec 2027 and Feb 2028 unsecured notes.

Q: Hotel dispositions in 2026, reflect of assets.

A: Nine focus service are carryover from 2025, seven full service launched in Jan 2026, reflect cash drag hotels.

Q: Nine remarketed hotels EBITDA positive and offset to EBITDA drag from seven larger hotels.

A: Nine are EBITDA positive, ended 2025 with ~$3 million positive EBITDA, net drag in 2025 ~$10 million.

Q: Pro forma for sales, run rate EBITDA mix.

A: Roughly high 60s to low 30s pro forma.

Q: Non-hotel assets unencumbered by debt post Feb transaction.

A: ~$27 million of rents, weighted average lease term under five years, work to do on leasing.

Q: Net lease coverage drop, cause.

A: Largely function of TA coverage dropping seven basis points, TA coverage remains well north of 3.5-3.6 times, BP investing in TA to increase free cash flow.