TKO LLC wants to knock the hotels out of Service Properties Trust’s portfolio, offering $2B for 93 of the REIT's assets in an unsolicited offer Friday.
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TKO, a hotel investment firm run by Jim Koehler, made the offer to acquire all of the hotels in the mixed-asset, managed REIT’s portfolio for $2B in cash on Oct. 7, according to a letter released Friday along with an acknowledgment from the REIT that it had received the offer.
Service Properties Trust, which is managed by The RMR Group and trades under the ticker SVC, has been shedding hotels over the past two years, part of a pivot to a net-leased-focused REIT as it manages a significant debt load.
The $2B price tag for the hotels, roughly 12% of SVC’s 838-property portfolio, exceeds SVC's entire market capitalization of less than $1B.
Shares in the REIT have slid more than 40% in the last 12 months. Its share price spiked on the news of the purchase proposal Friday, but those gains were all given back in early trading Monday.
The REIT has been shedding assets since 2025 to pay down debts and posted a net loss of $223.8M in the second quarter. It sold one 133-key hotel in July for $18.4M and was under contract to sell 13 more hotels for $98.4M, the company disclosed in second-quarter filings on Aug. 5.
SVC’s portfolio was 52.1% net-leased assets, with the remainder being hotels, at the end of the second quarter. The deal would allow SVC to complete its pivot to a purely net-leased platform.
SVC said Friday it would carefully review the offer and do what's in the best interest of shareholders. A spokesperson declined Bisnow’s request to comment further Monday.
The unsolicited bid was the first time that TKO had any contact with SVC, and analysts who looked at the letter of intent were incredulous that the deal would close. TKO is attempting to buy the properties free of any management agreements with hotel brands and franchise obligations.
Lucid Capital Markets’ Craig Kucera estimated that it would cost SVC $535M to exit its agreement with Sonesta, its largest operator. But SVC also has properties operated by Hyatt, Radisson and IHG.
Management has also poured some $765M in capital expenditures into the hotels remaining in its portfolio and is likely looking to secure more value through multiple sales, Kucera wrote in a note to investors Sunday.
Analysts at B. Riley Securities flagged the lack of publicly available data on TKO LLC, or any track record of its execution of a large hotel deal, as another potential flag.
“Our initial takeaway is that there is a limited chance that this transaction will be completed,” the analysts wrote.
SVC has until Friday to respond to the offer.
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