Service Properties Trust Looks To Raise $1B By Shedding Half Its Hotel Portfolio
Hospitality REIT Service Properties Trust is looking to sell 123 hotels this year in an effort to pay down debt and boost the flagging stock.
SVC, which owns 206 hotels and 742 other hospitality properties, is hoping to raise $1.1B from the hotel sales, which will cover all of the REIT's 2026 loan maturities, according to an investor presentation this month.
The Massachusetts-based REIT said the sales were part of a shift towards full-service, urban and leisure-oriented properties in strong, growing markets. The remaining 83 hotels in its portfolio generated 70% of the company’s $1.5B in revenue from the segment last year.
Specific assets weren’t listed in the investor presentation, but executives have been trying to offload properties since at least the end of the third quarter, when they said the REIT was hoping to sell 114 Sonesta-branded hotels.
The properties up for sale total 16,426 rooms and come on the heels of eight hotel sales in Q4 that raised a total $49.1M. SVC sold one 149-key hotel so far this year for $4M, excluding closing costs, and has entered into agreements to sell five others for a combined $28.5M.
SVC also owns 742 net-lease retail assets spanning 136 brands from Burger King to AMC Theaters across the U.S. The REIT was battered during the pandemic and lackluster returns led to a roughly 60% drop in the stock’s value over the last 12 months. It was up roughly 8.5% in midday trading Wednesday at $2.60 per share, down 40% from August.
The REIT posted a $76.4M loss in the fourth quarter with $28.6M in funds from operations. Its revenue per available room averaged $84.13, lagging the industry average RevPAR of $99.94 last year.
It is planning to invest in improvements in its remaining hotels to boost performance and told investors that the REIT isn’t facing any near-term debt maturities.
SVC also said it was looking to refinance some loans with unsecured corporate debt and highlighted to investors that the REIT had $7B in unencumbered assets to leverage as collateral if needed.
SVC is managed by The RMR Group, a Massachusetts-based alternative asset manager that first went public in 2015 and also manages Diversified Healthcare Trust, Office Properties Income Trust, Industrial Logistics Properties Trust and Seven Hills Realty Trust.
CORRECTION, MARCH 17, 1 P.M. ET: A previous version of this story mischaracterized RMR Group's corporate structure. It is an alternative asset manager.
