NEWTON, Mass.--(BUSINESS WIRE)--Service Properties Trust (Nasdaq: SVC), or SVC, today sent a letter to Marriott International, Inc. (NYSE: MAR), or MAR, requesting MAR advance $11.0 million to cover the shortfall between the payments SVC has received to date from MAR and 80% of the priority returns due to SVC for the eight months ended August 2020. MAR has 10 days from receipt of the letter to make the payment, or SVC will have the right to terminate its agreement with MAR.
SVC’s agreement with MAR covering 122 hotels (2 Marriott®, 2 Springhill Suites®, 12 TownePlace Suites®, 35 Residence Inns®, 71 Courtyards®) in 31 states currently requires annual minimum returns of $194.6 million and currently expires in 2035. Both the security deposit that SVC previously held to secure the minimum return payments under this agreement and the $30 million guarantee provided by MAR have been fully utilized.
If MAR does not make the requested payment and SVC terminates the agreement, SVC currently plans to transition management and branding of these 122 hotels from MAR to Sonesta International Hotels Corporation, or Sonesta. SVC owns approximately 34% of Sonesta and would share in the benefit of this new management agreement and in the hotels’ performance to the extent they ramp up in the post-pandemic recovery.
About Service Properties Trust
Service Properties Trust is a real estate investment trust which owns a diverse portfolio of hotels and net lease service and necessity-based retail properties across the United States and in Puerto Rico and Canada with 149 distinct brands across 23 industries. SVC’s properties are primarily operated under long-term management or lease agreements. SVC is managed by the operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), or RMR Inc., an alternative asset management company that is headquartered in Newton, Massachusetts.
Warning Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever SVC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, SVC is making forward-looking statements. These forward-looking statements are based upon SVC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by SVC’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond SVC’s control. For example:
- This press release states that SVC has the right to terminate its agreement with MAR if MAR does not make the payment shortfall to cover 80% of the minimum returns due to SVC. There can be no assurance MAR will make this payment or what actions SVC will take if it does not.
- This press release also states that, absent the requested payment from MAR, SVC plans to transition management and branding of 122 hotels from MAR to Sonesta. In addition, this press release states that SVC has an approximate 34% ownership interest in Sonesta and that SVC would share in the benefit from this new management agreement and in the hotels’ performance to the extent they ramp up in the post- pandemic recovery. However, Sonesta may not operate these hotels profitably and SVC may not receive the benefit it would expect to receive. Further, it is not known how long the pandemic will last or how severe it will be, including its continued impact on the hotel industry. Moreover, it is not known how long it will take the economy to recover following the pandemic or what adverse changes on the hotel industry may be realized, such as if business and leisure travel are significantly reduced on a long-term or permanent basis. These and other factors may adversely affect the performance of these hotels, regardless of which operator is operating them.
The information contained in SVC’s filings with the Securities and Exchange Commission, or SEC, including under the caption “Risk Factors” in SVC’s periodic reports, or incorporated therein, identifies other important factors that could cause differences from SVC’s forward-looking statements. SVC’s filings with the SEC are available on the SEC's website at www.sec.gov.
You should not place undue reliance upon forward-looking statements.
Except as required by law, SVC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.