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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11527
SERVICE PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland04-3262075
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts, 02458-1634
(Address of Principal Executive Offices) (Zip Code)
617-964-8389
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of each Exchange on which Registered
Common Shares of Beneficial InterestSVCThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of registrant’s common shares of beneficial interest, $.01 par value per share, outstanding as of May 5, 2023: 165,445,995


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SERVICE PROPERTIES TRUST
FORM 10-Q
March 31, 2023

INDEX
Page
References in this Quarterly Report on Form 10-Q to the Company, SVC, we, us or our include Service Properties Trust and our consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.
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Part I Financial Information
Item 1. Financial Statements
SERVICE PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands, except share data)
 March 31,
2023
December 31,
2022
ASSETS  
Real estate properties:  
Land$1,902,587 $1,902,587 
Buildings, improvements and equipment7,637,054 7,658,282 
Total real estate properties, gross9,539,641 9,560,869 
Accumulated depreciation(3,023,263)(2,970,133)
Total real estate properties, net6,516,378 6,590,736 
Acquired real estate leases and other intangibles, net241,985 252,357 
Assets held for sale1,452 121,905 
Cash and cash equivalents180,616 38,369 
Restricted cash15,220 7,051 
Equity method investments108,182 112,617 
Investment in equity securities102,485 53,055 
Due from related persons48,681 35,033 
Other assets, net267,167 277,068 
Total assets$7,482,166 $7,488,191 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Senior unsecured notes, net$5,158,504 $5,655,530 
Mortgage notes payable, net551,789 — 
Accounts payable and other liabilities379,516 425,960 
Due to related persons10,452 17,909 
Total liabilities6,100,261 6,099,399 
Commitments and contingencies
Shareholders’ equity:  
Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 165,445,995 and 165,452,566, shares issued and outstanding, respectively1,655 1,655 
Additional paid in capital4,555,328 4,554,861 
Cumulative other comprehensive income2,169 2,383 
Cumulative net income available for common shareholders2,529,229 2,503,279 
Cumulative common distributions(5,706,476)(5,673,386)
Total shareholders’ equity1,381,905 1,388,792 
Total liabilities and shareholders’ equity$7,482,166 $7,488,191 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SERVICE PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(amounts in thousands, except per share data)
Three Months Ended March 31,
 20232022
Revenues:  
Hotel operating revenues$334,796 $297,406 
Rental income94,413 96,358 
Total revenues429,209 393,764 
Expenses: 
Hotel operating expenses299,566 290,343 
Other operating expenses3,905 2,269 
Depreciation and amortization100,039 104,113 
General and administrative10,911 11,989 
Transaction related costs887 1,177 
Loss on asset impairment, net— 5,500 
Total expenses415,308 415,391 
Other operating income:
Gain on sale of real estate, net41,898 5,548 
Unrealized gains (losses) on equity securities, net49,430 (10,260)
Interest income2,786 273 
Interest expense (including amortization of debt issuance costs and debt discounts and premiums of $5,232 and $5,913, respectively)(81,580)(92,344)
Loss on early extinguishment of debt(44)— 
Income (loss) before income taxes and equity in earnings of an investee26,391 (118,410)
Income tax benefit (expense)3,780 (695)
Equity in losses of an investee(4,221)(717)
Net income (loss)25,950 (119,822)
Other comprehensive income:
Equity interest in investee’s unrealized (losses) gains(214)
Other comprehensive (loss) income(214)
Comprehensive income (loss)$25,736 $(119,818)
Weighted average common shares outstanding (basic and diluted)164,867 164,667 
Net loss per common share (basic and diluted)$0.16 $(0.73)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SERVICE PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share data)
Common SharesAdditional
Paid in
Capital
Cumulative
Net Income
Available for
Common
Shareholders
Cumulative
Other
Comprehensive
Income (Loss)
Number of
Shares
Common
Shares
Cumulative
Common
Distributions
Total
Balance at December 31, 2022165,452,566 $1,655 $(5,673,386)$4,554,861 $2,503,279 $2,383 $1,388,792 
Net income— — — — 25,950 — 25,950 
Equity in unrealized losses of investees— — — — — (214)(214)
Common share grants— — — 514 — — 514 
Common share repurchases(4,971)— — (46)— — (46)
Common share forfeitures(1,600)— — (1)(1)
Distributions— — (33,090)— — — (33,090)
Balance at March 31, 2023165,445,995 $1,655 $(5,706,476)$4,555,328 $2,529,229 $2,169 $1,381,905 
Balance at December 31, 2021165,092,333 $1,651 $(5,635,342)$4,552,558 $2,635,660 $779 $1,555,306 
Net loss— — — — (119,822)— (119,822)
Equity in unrealized gains of investees— — — — — 
Common share grants— — — 462 — — 462 
Common share forfeitures(800)— — — — — — 
Distributions— — (1,651)— — — (1,651)
Balance at March 31, 2022165,091,533 $1,651 $(5,636,993)$4,553,020 $2,515,838 $783 $1,434,299 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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SERVICE PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
For the Three Months Ended March 31,
20232022
Cash flows from operating activities:
Net income (loss)$25,950 $(119,822)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization100,039 104,113 
Net amortization of debt issuance costs, discounts and premiums as interest5,232 5,913 
Straight line rental income2,448 1,973 
Loss on early extinguishment of debt44 — 
Loss on asset impairment, net— 5,500 
Unrealized (gains) losses on equity securities, net(49,430)10,260 
Equity in losses of an investee4,221 717 
Gain on sale of real estate(41,898)(5,548)
Other non-cash income, net(781)(836)
Changes in assets and liabilities:
Due from related persons(16,889)395 
Other assets4,254 6,729 
Accounts payable and other liabilities(18,492)(21,980)
Due to related persons(2,325)603 
Net cash provided by (used in) operating activities12,373 (11,983)
Cash flows from investing activities:
Real estate improvements(28,551)(26,561)
Hotel managers’ purchases with restricted cash(1,558)(787)
Net proceeds from sale of real estate144,361 66,218 
Net cash provided by investing activities114,252 38,870 
Cash flows from financing activities:
Proceeds from mortgage notes payable, net of discounts576,946 — 
Repayment of mortgage notes payable(163)— 
Repayment of senior unsecured notes(500,000)— 
Deferred financing costs(19,856)(82)
Repurchase of common shares(46)— 
Distributions to common shareholders(33,090)(1,651)
Net cash provided by (used in) financing activities23,791 (1,733)
Increase in cash and cash equivalents and restricted cash150,416 25,154 
Cash and cash equivalents and restricted cash at beginning of period45,420 947,418 
Cash and cash equivalents and restricted cash at end of period$195,836 $972,572 
Supplemental disclosure of cash and cash equivalents and restricted cash:
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amount shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents$180,616 $969,609 
Restricted cash15,220 2,963 
Total cash and cash equivalents and restricted cash$195,836 $972,572 
Supplemental cash flow information:
Cash paid for interest$91,614 $102,164 
Cash paid for income taxes$37 $581 
Non-cash investing activities:
Real estate improvements accrued, not paid$10,642 $7,901 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)




Note 1. Organization and Basis of Presentation
Service Properties Trust, or we, us or our, is a real estate investment trust, or REIT, organized on February 7, 1995 under the laws of the State of Maryland, which invests in hotels and service-focused retail net lease properties. At March 31, 2023, we owned, directly and through our subsidiaries, 220 hotels and 765 net lease properties.
Basis of Presentation
The accompanying condensed consolidated financial statements of us are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, or our 2022 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period, have been included. These condensed consolidated financial statements include our accounts and the accounts of our subsidiaries, all of which are 100% owned directly or indirectly by us. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods and those of our managers and tenants are not necessarily indicative of the results that may be expected for the full year.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include the allowance for credit losses, purchase price allocations, useful lives of fixed assets, impairment of real estate and related intangibles.
We have determined that each of our wholly owned taxable REIT subsidiaries, or TRSs, is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification. We have concluded that we must consolidate each of our wholly owned TRSs because we are the entity with the power to direct the activities that most significantly impact such VIEs’ performance and we have the obligation to absorb losses or the right to receive benefits from each VIE that could be significant to the VIE and are, therefore, the primary beneficiary of each VIE. The assets of our TRSs were 156,423 and $142,542 as of March 31, 2023 and December 31, 2022, respectively, and consist primarily of our TRSs’ investment in Sonesta Holdco Corporation’s common stock and amounts due from and working capital advances to certain of our hotel managers. The liabilities of our TRSs were 105,826 and $82,454 as of March 31, 2023 and December 31, 2022, respectively, and consist primarily of amounts payable to certain of our hotel managers. The assets of our TRSs are available to satisfy our TRSs’ obligations and we have guaranteed certain obligations of our TRSs.
Note 2. Revenue Recognition
We report hotel operating revenues for managed hotels in our condensed consolidated statements of comprehensive income (loss). We generally recognize hotel operating revenues, consisting primarily of room and food and beverage sales, when goods and services are provided.
We report rental income for leased properties in our condensed consolidated statements of comprehensive income (loss). We recognize rental income from operating leases on a straight line basis over the term of the lease agreements. We reduced rental income by $2,448 and $1,973 for the three months ended March 31, 2023 and 2022, respectively, to record scheduled rent changes under certain of our leases, the deferred rent obligations payable to us under our leases with TravelCenters of America Inc., or TA, and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks at our travel centers on a straight line basis. See Notes 5 and 10 for further information regarding our TA leases. Due from related persons includes $4,281 and $7,522 and other assets, net, includes $33,040 and $32,247 of straight line rent receivables at March 31, 2023 and December 31, 2022, respectively.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



Certain of our lease agreements require additional percentage rent if gross revenues of our properties exceed certain thresholds defined in our lease agreements. We may determine percentage rent due to us under our leases monthly, quarterly or annually, depending on the specific lease terms, and recognize it when all contingencies are met and the rent is earned. We recorded percentage rent of $343 and $756 for the three months ended March 31, 2023 and 2022, respectively. We had deferred estimated percentage rent of $2,385 and $2,499 for the three months ended March 31, 2023 and 2022, respectively. See Note 5 for further information on this deferred estimated percentage rent.
Note 3. Weighted Average Common Shares
We calculate basic earnings per common share under the two class method. We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method. Unvested share awards, and the related impact on earnings, are considered when calculating diluted earnings per share. For the three months ended March 31, 2023 and 2022, there were no dilutive common shares and certain unvested common shares were not included in the calculation of diluted earnings per share because to do so would have been antidilutive.
Note 4. Real Estate Properties
At March 31, 2023, we owned 220 hotels with an aggregate of 37,527 rooms or suites and 765 service-oriented retail properties with an aggregate of 13,319,743 square feet that are primarily subject to “triple net” leases, or net leases where the tenant is generally responsible for payment of operating expenses and capital expenditures of the property during the lease term. Our properties had an aggregate undepreciated carrying value of $9,541,018, including $1,377 related to properties classified as held for sale as of March 31, 2023.
We made capital expenditures at certain of our properties of $22,278 during the three months ended March 31, 2023.
Dispositions
During the three months ended March 31, 2023, we sold 18 properties for an aggregate sales price of $157,230, excluding closing costs, as presented in the table below. The sales of these properties do not represent significant dispositions, nor do they represent a strategic shift. As a result, the results of the operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).
Quarter SoldProperty TypeNumber of PropertiesRooms or SuitesGross Sales PriceGain on Sale
Properties sold during the three months ended March 31, 2023
Q1 2023Hotels182,526 $157,230 $41,898 
As of March 31, 2023, we had four net lease properties with 9,667 square feet and an aggregate carrying value of $1,377 classified as held for sale.
From April 1, 2023 through May 5, 2023, we sold two net lease properties with 2,384 square feet and a carrying value of $648 for a sales price of $620.
We continue to market two net lease properties with 7,283 square feet for sale. See Note 5 for further information on our property sales.
Note 5. Management Agreements and Leases
As of March 31, 2023, we owned 220 hotels which were included in four operating agreements and 765 service oriented retail properties net leased to 179 tenants. We do not operate any of our properties.
At March 31, 2023, all 220 of our hotels were operated by subsidiaries of the following companies: Sonesta Holdco Corporation, or Sonesta (194 hotels), Hyatt Hotels Corporation, or Hyatt (17 hotels), Radisson Hospitality, Inc., or Radisson (eight hotels), and InterContinental Hotels Group, plc, or IHG (one hotel). At March 31, 2023, we owned 765 net lease properties with 179 tenants, including 177 travel centers leased to TA, our largest tenant. Hereinafter, these companies are sometimes referred to as our managers and/or tenants, or collectively, operators.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



Hotel agreements
Sonesta agreement. As of March 31, 2023, Sonesta managed 39 of our full-service hotels, 111 of our extended stay hotels and 44 of our select service hotels pursuant to management agreements for all of the hotels. The hotels Sonesta managed for us comprised approximately 48.4% of our total historical real estate investments.
We sold 65 Sonesta branded hotels during the calendar year ended December 31, 2022, and we sold an additional two Sonesta branded hotels during the three months ended March 31, 2023. See Note 4 for further information regarding our disposition activity.
Our Sonesta agreement provides that we are paid an annual owner’s priority return if gross revenues of the hotels, after payment of hotel operating expenses and management and related fees (other than Sonesta’s incentive fee, if applicable), are sufficient to do so. The Sonesta agreement further provides that we are paid an additional return equal to 80% of the operating profits, as defined therein, after reimbursement of owner or manager advances, reserve established for the regular refurbishment of our hotels, or FF&E reserve, escrows and Sonesta’s incentive fee, if applicable. We realized returns of $30,237 and $3,029 during the three months ended March 31, 2023 and 2022, respectively, under our Sonesta agreement.
Pursuant to our Sonesta agreement, we incurred management, reservation and system fees and reimbursement costs for certain guest loyalty, marketing program and third-party reservation transmission fees of $26,136 and $23,797 for the three months ended March 31, 2023 and 2022, respectively. These fees and costs are included in hotel operating expenses in our condensed consolidated statements of comprehensive income (loss). In addition, we incurred procurement and construction supervision fees payable to Sonesta of $207 and $285 for the three months ended March 31, 2023 and 2022, respectively, which amounts have been capitalized in our condensed consolidated balance sheets and are depreciated over the estimated useful lives of the related capital assets.
Our Sonesta agreement requires us to fund capital expenditures that we approve at the hotels. We incurred capital expenditures for hotels included in our Sonesta agreement in an aggregate amount of $17,643 and $19,067 during the three months ended March 31, 2023 and 2022, respectively, which resulted in increases in our contractual annual owner’s priority returns of $1,059 and $1,144, respectively. Our annual priority return under our Sonesta agreement as of March 31, 2023 was $331,469. We owed Sonesta $5,555 and $4,633 for capital expenditures and other reimbursements at March 31, 2023 and December 31, 2022, respectively. Sonesta owed us $21,403 and $2,975 in owner’s priority returns and other amounts as of March 31, 2023 and December 31, 2022, respectively. Amounts due from Sonesta are included in due from related persons and amounts owed to Sonesta are included in due to related persons in our condensed consolidated balance sheets. Our agreement with Sonesta requires that 5% of the hotel gross revenues be escrowed for future capital expenditures as FF&E reserves, subject to available cash flows after payment of the owner’s priority returns due to us. No FF&E escrow deposits were required during the three months ended March 31, 2023 or 2022.
We are required to maintain working capital for each of our hotels managed by Sonesta and have advanced a fixed amount based on the number of rooms in each hotel to meet the cash needs for hotel operations. As of March 31, 2023 and December 31, 2022, we had advanced $47,990 and $48,580, respectively, of initial working capital to Sonesta net of any working capital returned to us on termination of the applicable management agreements in connection with hotels we have sold. These amounts are included in other assets in our condensed consolidated balance sheets. Any remaining working capital would be returned to us upon termination in accordance with the terms of our Sonesta agreement.
See Notes 6 and 10 for further information regarding our relationship, agreements and transactions with Sonesta.
Hyatt agreement. As of March 31, 2023, Hyatt managed 17 of our select service hotels pursuant to a portfolio management agreement that expires on March 31, 2031, or our Hyatt agreement, and provides that, as of March 31, 2023, we are to be paid an annual owner’s priority return of $12,773. Any returns we receive from Hyatt are currently limited to the hotels’ available cash flows, if any, after payment of operating expenses. Hyatt has provided us with a $30,000 limited guarantee for 75% of the aggregate annual owner's priority returns due to us that will become effective upon substantial completion of planned renovations of the hotels which we currently expect to occur by the end of 2023. We realized returns of $2,323 and $1,863 during the three months ended March 31, 2023 and 2022, respectively, under our Hyatt agreement. We did not incur capital expenditures for any of the hotels included in our Hyatt agreement during the three months ended March 31, 2023. We incurred capital expenditures for certain hotels included in our Hyatt agreement of $10,843 during the three months ended March 31, 2022, which resulted in an aggregate increase in our contractual annual owner’s priority returns of $651.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



Radisson agreement. As of March 31, 2023, Radisson managed eight of our full service hotels pursuant to a portfolio management agreement that expires on July 31, 2031, or our Radisson agreement, and provides that we are to be paid an annual owner’s priority return of $10,200. Radisson has provided us with a $22,000 limited guarantee for 75% of the aggregate annual owner's priority returns due to us that became effective on January 1, 2023, subject to adjustment for planned renovations of certain of the hotels we currently expect to occur by the end of 2023. We realized returns of $1,565 and $454 during the three months ended March 31, 2023 and 2022, respectively, under our Radisson agreement. During the three months ended March 31, 2023, the hotels under this agreement generated cash flows that were less than the guaranteed owner’s priority level due to us for the period, and we reduced hotel operating expenses by $335 to record the guaranteed amount of the shortfall due from Radisson. The available balance of the guaranty was $21,665 as of March 31, 2023. We incurred capital expenditures of $2,375 for the hotels included in our Radisson agreement for the three months ended March 31, 2023 which resulted in an aggregate increase in our contractual owner’s priority returns of $143. We did not incur capital expenditures for any of the hotels included in our Radisson agreement during the three months ended March 31, 2022.
Marriott agreement. As of March 31, 2023, we have sold all 16 hotels previously managed by Marriott. We realized net operating losses of $2,762 and realized returns of $323 during the three months ended March 31, 2023 and 2022, respectively, under our Marriott agreement. We did not incur capital expenditures for any of the hotels included in our Marriott agreement during the three months ended March 31, 2023 or 2022.
Other. Our management agreement with IHG for one hotel expires on January 31, 2026. We realized returns of $763 and $130 during the three months ended March 31, 2023 and 2022, respectively under our IHG agreement. Any returns we receive from IHG are limited to the hotel’s available cash flows, if any, after payment of operating expenses.
Net lease portfolio
As of March 31, 2023, we owned 765 service-oriented retail net lease properties with 13,319,743 square feet with leases requiring annual minimum rents of $369,756 with a weighted (by annual minimum rents) average remaining lease term of 9.4 years. The portfolio was 97.4% leased by 179 tenants operating under 139 brands in 21 distinct industries.
TA leases. TA is our largest tenant, leasing 30.0% of our total historical real estate investments as of March 31, 2023. We lease to TA a total of 177 travel centers under five leases that expire between 2029 and 2035, subject to TA’s right to extend those leases, and require annual minimum rents of $246,110 as of March 31, 2023. In addition, TA was required to pay us previously deferred rent obligations in quarterly installments of $4,404 through January 31, 2023. TA paid us the final quarterly installment owed to us in January 2023.
We recognized rental income from our TA leases of $62,141 and $62,038 for the three months ended March 31, 2023 and 2022, respectively. Rental income was reduced by $3,241 and $3,344 for the three months ended March 31, 2023 and 2022, respectively, to record the deferred rent obligations under our TA leases and the estimated future payments to us by TA for the cost of removing underground storage tanks on a straight line basis. As of March 31, 2023 and December 31, 2022, we had receivables for current rent amounts owed to us by TA and straight line rent adjustments of $27,492 and $30,764, respectively. These amounts are included in due from related persons in our condensed consolidated balance sheets.
Our TA leases require TA to pay us percentage rent based upon increases in certain sales. We recognize percentage rent due under our TA leases as rental income when all contingencies are met. We did not recognize any percentage rent during the three months ended March 31, 2023 or 2022 under our TA leases. We had aggregate deferred percentage rent under our TA leases of $2,385 and $2,391 for the three months ended March 31, 2023 and 2022, respectively.
Our TA leases do not require FF&E escrow deposits. However, TA is required to maintain the leased travel centers, including structural and non-structural components. Under our TA leases, TA may request that we fund capital improvements in return for increases in TA’s annual minimum rent equal to 8.5% of the amounts funded. We did not fund any capital improvements to our properties that we leased to TA during either of the three months ended March 31, 2023 or 2022.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



On February 15, 2023, we and certain of our subsidiaries entered into a consent and amendment agreement, or the Consent Agreement, with TA and its subsidiary, TA Operating LLC, or together, the TCA Parties, and BP Products North America Inc., or BP, pursuant to which we and our applicable subsidiaries: (1) consented to TA’s entering into an agreement and plan of merger, or the TA Merger Agreement, with BP and its merger subsidiary, pursuant to which BP will acquire TA in a merger transaction, or the TA Merger, for cash consideration of $86.00 per share of the outstanding shares of common stock, par value $0.001 per share, of TA, or the TA common shares, and to the consummation of the TA Merger and the other transactions contemplated by the TA Merger Agreement; (2) agreed to amend and restate our subsidiaries’ existing lease and guaranty agreements with the applicable TCA Parties, effective at the time of the TA Merger; and (3) agreed to sell to TA certain tradenames and trademarks associated with TA’s business that we or our applicable subsidiaries own at their current book value of $89,400, effective at the time of the TA Merger. The TA Merger is subject to various customary conditions to closing, including the approval of TA stockholders owning a majority of the TA common shares outstanding, as well as regulatory approvals. The parties currently expect that the TA Merger will be completed during the second quarter of 2023.
Pursuant to the amended and restated lease agreements to be entered into at the effective time of the TA Merger, or the A&R Leases, for 176 of our travel center properties, the aggregate annual minimum rent due to our applicable subsidiaries will be $254,000, with annual 2% increases throughout the initial term and any renewal terms of the A&R Leases, and there will be no percentage rent requirement. The A&R Leases will each have an initial term of 10 years, with five 10-year extension options, and TA will prepay $188,000 of rent under the A&R Leases at the effective time of the TA Merger and will receive monthly rent credits totaling $25,000 per year over the 10-year initial term of the A&R Leases. In addition, TA will have a right of first offer with respect to certain potential sales of travel center properties included in the A&R Leases.
Pursuant to the amended and restated guaranty amendments to be entered into at the effective time of the TA Merger, or the A&R Guarantees, BP Corporation North America Inc. will guarantee payment under each of the A&R Leases. BP Corporation North America Inc.’s obligations under the A&R Guarantees will be limited by an initial aggregate cap of approximately $3,040,000.
For more information regarding our relationship with TA, including the TA Merger and related transactions, see Notes 6 and 10.
Our other net lease agreements generally provide for minimum rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. We recognized rental income from our net lease properties (excluding TA) of $32,272 and $34,320 for the three months ended March 31, 2023 and 2022, respectively, which included $793 and $1,371, respectively, of adjustments to record scheduled rent changes under certain of our leases on a straight line basis.
We continually review receivables related to rent, straight line rent and property operating expense reimbursements and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. The review includes an assessment of whether substantially all of the amounts due under a tenant’s lease are probable of collection. For leases that are deemed probable of collection, revenue continues to be recorded on a straight line basis over the lease term. For leases that are deemed not probable of collection, revenue is recorded as cash is received. We recognize all changes in the collectability assessment for an operating lease as an adjustment to rental income. We recorded reserves for uncollectable amounts of $3,540 for the three months ended March 31, 2023 and reduced our reserves for uncollectable amounts and increased rental income by $507 for the three months ended March 31, 2022 based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $11,209 and $7,697 as of March 31, 2023 and December 31, 2022, respectively, included in other assets in our condensed consolidated balance sheets.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



Note 6. Other Investments
Equity method investment
As of both March 31, 2023 and December 31, 2022, we owned approximately 34% of Sonesta’s outstanding common stock. We account for our 34% non-controlling interest in Sonesta under the equity method of accounting.
As of both March 31, 2023 and December 31, 2022, our investment in Sonesta had a carrying value of $108,182 and $112,617, respectively. The cost basis of our investment in Sonesta exceeded our proportionate share of Sonesta’s total stockholders’ equity book value on the date of acquisition of our initial equity interest in Sonesta, February 27, 2020, by an aggregate of $8,000. As required under GAAP, we are amortizing this difference to equity in earnings of an investee over 31 years, the weighted average remaining useful life of the real estate assets and intangible assets and liabilities owned by Sonesta as of the date of our acquisition. We recorded amortization of the basis difference of $65 in each of the three months ended March 31, 2023 and 2022. We recognized losses of $4,156 and $652 related to our investment in Sonesta for the three months ended March 31, 2023 and 2022, respectively. These amounts are included in equity in losses of an investee in our condensed consolidated statements of comprehensive income (loss).
We recorded a liability for the fair value of our initial investment in Sonesta, as no cash consideration was exchanged related to the modification of our management agreement with, and investment in, Sonesta. This liability for our investment in Sonesta is included in accounts payable and other liabilities in our condensed consolidated balance sheet and is being amortized on a straight line basis through January 31, 2037, as a reduction to hotel operating expenses in our condensed consolidated statements of comprehensive income (loss). We reduced hotel operating expenses by $621 for each of the three months ended March 31, 2023 and 2022, respectively, for amortization of this liability. As of March 31, 2023 and December 31, 2022, the unamortized balance of this liability was $34,342 and $34,963, respectively.
In 2022, we funded an aggregate of $45,470 of capital contributions to Sonesta related to Sonesta’s acquisition of a portfolio of four hotels located in New York, New York. We continue to maintain our 34% ownership in Sonesta after giving effect to this funding.
Investment in equity securities
As of both March 31, 2023 and December 31, 2022, we owned 1,184,797 shares of TA common stock, representing approximately 7.8% of TA’s outstanding shares of common stock, and reported them at fair value based on quoted market prices (Level 1 inputs). Our TA shares had a carrying value of $102,485 and $53,055 as of March 31, 2023 and December 31, 2022, respectively. Our historical cost basis for these shares was $24,418 as of both March 31, 2023 and December 31, 2022. We recorded an unrealized gain of $49,430 and an unrealized loss of $10,260 for the three months ended March 31, 2023 and March 31, 2022, respectively, to adjust the carrying value of our investment in shares of TA common stock to its fair value.
In connection with the TA Merger Agreement, we entered into a voting agreement, or the Voting Agreement, with BP, pursuant to which, among other things, we agreed to vote all of our TA common shares in favor of the TA Merger and against any alternative acquisition proposal, including any superior proposal, as defined. We also agreed not to sell or transfer our TA common shares while the Voting Agreement remains in effect. Our obligations under the Voting Agreement terminate upon the earliest to occur of the effective time of the TA Merger, the valid termination of the TA Merger Agreement or the effective date of a written agreement by us and BP to terminate the Voting Agreement.
See Notes 5 and 10 for further information regarding our relationships, agreements and transactions with TA, including the TA Merger Agreement and related transactions, and Note 13 for further information regarding our investment in TA.
Note 7. Indebtedness
Our principal debt obligations at March 31, 2023 were: (1) $5,200,000 aggregate outstanding principal amount of senior unsecured notes; and (2) $610,037 aggregate outstanding principal amount of net lease mortgage notes. We had no amounts outstanding under our revolving credit facility as of March 31, 2023.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



Our revolving credit facility is governed by a credit agreement, or our credit agreement, with a syndicate of institutional lenders and has a maturity date of July 15, 2023. We can borrow, repay and re-borrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity. We are required to pay interest on borrowings under our revolving credit facility at the rate of LIBOR plus a premium, which was 250 basis points per annum, subject to a LIBOR floor of 0.50%, as of March 31, 2023. We also pay a facility fee, which was 30 basis points per annum at March 31, 2023, on the total amount of lending commitments under our revolving credit facility. Both the interest rate premium and the facility fee are subject to adjustment based upon, among other things, changes to our credit ratings. As of March 31, 2023, the annual interest rate payable on borrowings under our revolving credit facility was 7.36%. We had no borrowings outstanding under our revolving credit facility for the three months ended March 31, 2023. The weighted average annual interest rate for borrowings under our revolving credit facility was 2.85% for the three months ended March 31, 2022.
Our revolving credit facility is secured by 73 properties with an undepreciated book value of $1,560,880 as of March 31, 2023 to secure our obligations under the credit agreement.
Our debt agreements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes The RMR Group LLC, or RMR, ceasing to act as our business manager. Our debt agreements also contain covenants, including those that restrict our ability to incur debts or to make distributions under certain circumstances and generally require us to maintain certain financial ratios. We believe we were in compliance with the terms and conditions of our debt agreements as of March 31, 2023.
On February 10, 2023, our wholly owned, special purpose bankruptcy remote, indirect subsidiary, SVC ABS LLC, or the Issuer, issued $610,200 in aggregate principal amount of net lease mortgage notes. Net proceeds from this issuance were $550,564 after initial purchaser discounts and offering costs. The Issuer is a separate legal entity and is the sole owner of its assets and liabilities. The assets of the Issuer are not available to pay or otherwise satisfy obligations to the creditors of any owners or affiliates of the Issuer.
The Class A notes and the Class B notes require monthly principal repayments at an annualized rate of 0.50% and 0.25% of the balance outstanding, respectively, and the Class C notes require interest payments only, with balloon payments due at maturity. The notes mature in February 2028 and may be redeemed without penalty 24 months prior to the scheduled maturity date beginning in February 2026. The notes are non-recourse and are secured by 308 net lease retail properties owned by the Issuer which require annual minimum rents of $65,381 and had a gross book value of $754,913, as of March 31, 2023.
Our net lease mortgage notes are summarized below:
Note ClassPrincipal Outstanding as of March 31, 2023Coupon RateTerm (in years)Maturity
Class A$304,873 5.15%5February 2028
Class B172,964 5.55%5February 2028
Class C132,200 6.70%5February 2028
Total / weighted average$610,037 5.60%
On March 8, 2023, we redeemed at par all of our outstanding 4.50% senior notes due in 2023 for a redemption price equal to the principal amount of $500,000, plus accrued and unpaid interest. As a result of the redemption, we recorded a loss on early extinguishment of debt of $44 in the three months ended March 31, 2023, which represented the unamortized issuance costs related to these notes.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



Note 8. Shareholders' Equity
Distributions
During the three months ended March 31, 2023, we declared and paid regular quarterly distributions to common shareholders as follows:
Declaration DateRecord DatePaid DateDividend Per Common ShareTotal Distributions
January 12, 2023January 23, 2023February 16, 2023$0.20 $33,090 
On April 13, 2023, we declared a regular quarterly distribution to common shareholders of record as of April 24, 2023 of $0.20 per share, or approximately $33,090. We expect to pay this amount on or about May 18, 2023.
Share Purchases
During the three months ended March 31, 2023, we purchased an aggregate of 4,971 of our common shares valued at a weighted average price of $9.28 per share, from certain former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares. We withheld and purchased these shares at their fair market values based upon the trading price of our common shares at the close of trading on the Nasdaq Stock Market LLC, or Nasdaq, on the purchase dates.
Note 9. Business and Property Management Agreements with RMR
We have no employees. The personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR to provide management services to us: (1) a business management agreement, which relates to our business generally, and (2) a property management agreement, which relates to our property level operations of our net lease portfolio, excluding properties leased to TA, the office building component of one of our hotels and major renovation or repositioning activities at our hotels that we may request RMR to manage from time to time.
We recognized net business management fees payable to RMR of $8,385 and $9,878 for the three months ended March 31, 2023 and 2022, respectively. Based on our common share total return, as defined in our business management agreement, as of each of March 31, 2023 and 2022, no incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2023 or 2022. The actual amount of annual incentive fees for 2023, if any, will be based on our common share total return, as defined in our business management agreement, for the three-year period ending December 31, 2023, and will be payable in January 2024. We did not incur an incentive fee payable to RMR for the year ended December 31, 2022. We include business management fee amounts in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).
We recognized property management and construction supervision fees payable to RMR of $1,412 and $1,663 for the three months ended March 31, 2023 and 2022, respectively. Of those amounts, for the three months ended March 31, 2023 and 2022, $945 and $1,018, respectively, of property management fees were expensed to other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $467 and $645, respectively, of construction and supervision fees were capitalized for the three months ended March 31, 2023 and 2022. The amounts capitalized are included in building, improvements and equipment in our condensed consolidated balance sheets and are being depreciated over the estimated useful lives of the related capital assets.
We are generally responsible for all our operating expenses, including certain expenses incurred or arranged by RMR on our behalf. We are generally not responsible for payment of RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR employees assigned to work exclusively or partly at our net lease properties, our share of the wages, benefits and other related costs of RMR's centralized accounting personnel, our share of RMR’s costs for providing our internal audit function, and as otherwise agreed. We reimbursed RMR $1,003 and $764 for these expenses and costs for the three months ended March 31, 2023 and 2022, respectively. We included these amounts in other operating expenses and selling, general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss).
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



Note 10. Related Person Transactions
We have relationships and historical and continuing transactions with TA, Sonesta, RMR, The RMR Group, Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. RMR is a majority owned operating subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam D. Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR. John G. Murray, our other Managing Trustee and our President and Chief Executive Officer until March 31, 2022, also serves as an officer and employee of RMR, and each of our other officers serves as an officer of RMR. Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR or its subsidiaries provide management services. Adam Portnoy serves as chair of the boards and as a managing trustee or managing director of those companies. Other officers of RMR, including Mr. Murray and certain of our other officers, serve as managing trustees, managing directors or officers of certain of these companies.
TA. We lease 177 of our travel centers to TA under our TA leases. As of March 31, 2023, we owned approximately 7.8% of TA’s outstanding shares of common stock. RMR provides management services to both us and TA, and Adam D. Portnoy also serves as the chair of the board of directors and as a managing director of TA and, as of March 31, 2023, beneficially owned 661,505 shares of TA common stock (including through RMR), representing approximately 4.4% of TA’s outstanding shares of common stock.
See Notes 5, 6 and 13 for further information regarding our relationships, agreements, transactions and investments with TA.
Sonesta.Sonesta is a private company. Mr. Portnoy is the largest owner and controlling shareholder and a director of Sonesta. One of Sonesta’s other directors is our other Managing Trustee and former President and Chief Executive Officer, is Sonesta’s president and chief executive officer, and is an officer and employee of RMR. Sonesta’s other director serves as RMR’s and RMR Inc.’s executive vice president, general counsel and secretary, as a managing director of RMR Inc. and as our Secretary. RMR also provides certain services to Sonesta. As of March 31, 2023, we owned approximately 34% of Sonesta and Sonesta managed 194 of our hotels. See Notes 4, 5 and 6 for further information regarding our relationships, agreements and transactions with Sonesta.
Our Manager, RMR. We have two agreements with RMR to provide management services to us. See Note 9 for further information regarding our management agreements with RMR.
In connection with the TA Merger Agreement, on February 15, 2023, RMR entered into a voting agreement with BP pursuant to which RMR agreed to vote all of its shares of TA common stock in favor of the TA Merger and against any alternative acquisition proposal, including any superior proposal, as defined in the TA Merger Agreement.
For further information about these and certain other such relationships and certain other related person transactions, refer to our 2022 Annual Report.
Note 11. Income Taxes
We have elected to be taxed as a REIT under the United States Internal Revenue Code of 1986, as amended, or the IRC, and, as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. We are subject to income tax in Canada, Puerto Rico and certain states despite our qualification for taxation as a REIT. Further, we lease our managed hotels to our wholly owned TRSs that, unlike most of our subsidiaries, file a separate consolidated tax return and are subject to federal, state and foreign income taxes. Our consolidated income tax provision includes the income tax provision related to the operations of our TRSs and certain state and foreign income taxes incurred by us despite our qualification for taxation as a REIT.
During the three months ended March 31, 2023, we recognized an income tax benefit of $3,780, which includes $2,297 of state tax benefit and $1,483 of foreign tax benefit. During the three months ended March 31, 2022, we recognized an income tax expense of $695, which includes $581 of state tax expense and $114 of foreign tax expense.
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)




Note 12. Segment Information
We aggregate our hotels and net lease portfolio into two reportable segments, hotel investments and net lease investments, based on their similar operating and economic characteristics.
For the Three Months Ended March 31, 2023
HotelsNet LeaseCorporateConsolidated
Revenues:    
Hotel operating revenues$334,796 $— $— $334,796 
Rental income— 94,413 — 94,413 
Total revenues334,796 94,413 — 429,209 
Expenses:    
Hotel operating expenses 299,566 — — 299,566 
Other operating expenses— 3,905 — 3,905 
Depreciation and amortization 53,385 46,654 — 100,039 
General and administrative — — 10,911 10,911 
Transaction related costs— — 887 887 
Total expenses 352,951 50,559 11,798 415,308 
Gain on sale of real estate, net41,898 — — 41,898 
Unrealized gains on equity securities, net— — 49,430 49,430 
Interest income 30 2,754 2,786 
Interest expense — (6,322)(75,258)(81,580)
Loss on early extinguishment of debt— — (44)(44)
Income (loss) before income taxes and equity in earnings of an investee23,773 37,534 (34,916)26,391 
Income tax benefit— — 3,780 3,780 
Equity in losses of an investee — — (4,221)(4,221)
Net income (loss)$23,773 $37,534 $(35,357)$25,950 
 As of March 31, 2023
HotelsNet LeaseCorporateConsolidated
Total assets$3,833,782 $3,229,292 $419,092 $7,482,166 
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



 For the Three Months Ended March 31, 2022
HotelsNet LeaseCorporateConsolidated
Revenues:    
Hotel operating revenues $297,406 $— $— $297,406 
Rental income— 96,358 — 96,358 
Total revenues 297,406 96,358 — 393,764 
Expenses:    
Hotel operating expenses 290,343 — — 290,343 
Other operating expenses— 2,269 — 2,269 
Depreciation and amortization 56,162 47,951 — 104,113 
General and administrative — — 11,989 11,989 
Transaction related costs— — 1,177 1,177 
Loss on asset impairment5,568 (68)— 5,500 
Total expenses 352,073 50,152 13,166 415,391 
Gain on sale of real estate, net4,990 558 — 5,548 
Unrealized loss on equity securities, net— — (10,260)(10,260)
Interest income — — 273 273 
Interest expense — — (92,344)(92,344)
Income (loss) before income taxes and equity in earnings of an investee(49,677)46,764 (115,497)(118,410)
Income tax expense— — (695)(695)
Equity in losses of an investee — — (717)(717)
Net income (loss)$(49,677)$46,764 $(116,909)$(119,822)
 As of December 31, 2022
HotelsNet LeaseCorporateConsolidated
Total assets$3,882,701 $3,376,295 $229,195 $7,488,191 
Note 13. Fair Value of Assets and Liabilities
The table below presents certain of our assets carried at fair value at March 31, 2023, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.
Fair Value at Reporting Date Using
DescriptionTotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Recurring Fair Value Measurement Assets:
Investment in TA (1)
$102,485 $102,485 $— $— 
(1)See Note 6 for further information regarding our investment in TA.
In addition to the assets included in the table above, our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, revolving credit facility, net lease mortgage notes payable and senior notes. At March 31, 2023 and December 31, 2022, the fair values of these additional financial instruments approximated their carrying values in our condensed consolidated balance sheets due to their short-term nature or floating interest rates, except as follows:
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SERVICE PROPERTIES TRUST
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share data)
(Unaudited)



March 31, 2023December 31, 2022
Carrying Value (1)
Fair Value
Carrying Value (1)
Fair Value
Senior Unsecured Notes, due 2023 at 4.50%$— $— $499,925 $491,345 
Senior Unsecured Notes, due 2024 at 4.65%349,612 341,250 349,510 334,292 
Senior Unsecured Notes, due 2024 at 4.35%822,855 789,121 822,487 749,983 
Senior Unsecured Notes, due 2025 at 4.50%348,665 321,615 348,493 301,893 
Senior Unsecured Notes, due 2025 at 7.50%794,257 789,400 793,673 762,344 
Senior Unsecured Notes, due 2026 at 5.25%346,754 306,250 346,472 292,282 
Senior Unsecured Notes, due 2026 at 4.75%447,889 375,597 447,736 354,128 
Senior Unsecured Notes, due 2027 at 4.95%397,105 338,604 396,916 315,040 
Senior Unsecured Notes, due 2027 at 5.50%444,786 402,057 444,505 387,522 
Net Lease Mortgage Notes, due 2028 at 5.60%551,789 589,961 — — 
Senior Unsecured Notes, due 2028 at 3.95%394,493 312,148 394,206 283,996 
Senior Unsecured Notes, due 2029 at 4.95%419,882 325,686 419,684 293,718 
Senior Unsecured Notes, due 2030 at 4.375%392,206 298,476 391,923 264,280 
Total financial liabilities$5,710,293 $5,190,165 $5,655,530 $4,830,823 
(1)Carrying value includes unamortized discounts and premiums and issuance costs.
At March 31, 2023 and December 31, 2022, we estimated the fair values of our senior notes using an average of the bid and ask price of our then outstanding issuances of senior notes (Level 2 inputs). At March 31, 2023, we estimated the fair value of our net lease mortgage notes using discounted cash flow analyses and current prevailing market rates as of the measurement date (Level 3 inputs). As Level 3 inputs are unobservable, our estimated value may differ materially from the actual fair value.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2022 Annual Report.
Overview (dollar amounts in thousands, except share amounts and per-room hotel data)
We are a REIT organized under the laws of the State of Maryland. As of March 31, 2023, we owned 985 properties in 46 states, the District of Columbia, Canada and Puerto Rico.
In response to inflationary pressures, the U.S. Federal Reserve has increased the federal funds rate multiple times since the beginning of 2022 and has signaled that further increases are likely to occur. These inflationary pressures and rising interest rates in the United States and globally have given rise to increasing concerns that the U.S. economy may soon enter an economic recession and they have caused disruptions in the financial markets. Consumer confidence, corporate travel and lodging demand will continue to be affected by economic and market conditions, unemployment levels, work from home policies, use of technologies and broader economic trends. Increased labor costs and other price inflation may continue to negatively impact our hotel operations and the operations of our tenants. An economic recession or continued or intensified disruptions in the financial markets could adversely affect our financial condition, operations at our hotels, our tenants, and their ability or willingness to renew our leases or pay rent to us, may restrict our ability to obtain new or replacement financing, would likely increase our cost of capital, and may cause the values of our properties and of our securities to decline.
Management Agreements and Leases. At March 31, 2023, we owned 220 hotels operated under four agreements. We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At March 31, 2023, we owned 765 service-oriented properties with 179 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. Our condensed consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and other operating expenses from our net lease properties.
Hotel Portfolio. As of March 31, 2023, we owned 220 hotels. In the three months ended March 31, 2023, the U.S. hotel industry generally realized increases in average daily rate, or ADR, revenue per available room, or RevPAR, and occupancy compared to the corresponding 2022 periods. The following table provides a summary for all our hotels of these revenue metrics for the periods presented, which we believe are key indicators of performance at our hotels.
Three Months Ended March 31,
20232022Change
All Hotels
No. of hotels220 298 (78)
No. of rooms or suites37,527 47,285 (9,758)
Occupancy57.6 %53.3 %4.3  pts
ADR$138.73 $115.24 20.4 %
RevPAR$79.91 $61.42 30.1 %
Comparable Hotels Data. We present RevPAR, ADR and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods. We generally define comparable hotels as those that were owned by us and were open and operating for the entire periods being compared. For the three months ended March 31, 2023 and 2022, our comparable results exclude one hotel that had suspended operations during part of the periods presented. The following table provides a summary of these revenue metrics for the periods presented.
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Three Months Ended March 31,
20232022Change
Comparable Hotels
No. of hotels219 219 — 
No. of rooms or suites37,429 37,429 — 
Occupancy57.7 %53.9 %3.8  pts
ADR$138.73 $121.77 13.9 %
RevPAR$80.05 $65.63 22.0 %
Net Lease Portfolio. As of March 31, 2023, we owned 765 service-oriented retail properties with 13,319,743 square feet leased to 179 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rent of $369,756. Our net lease portfolio was 97.4% occupied as of March 31, 2023 with a weighted (by annual minimum rent) lease term of 9.4 years, operating under 139 brands in 21 distinct industries. TA is our largest tenant. As of March 31, 2023, we leased 177 of our travel centers to TA under five leases that expire between 2029 and 2035 and require annual minimum rents of $246,110.
As disclosed elsewhere in this Quarterly Report on Form 10-Q, in connection with the TA Merger, we entered into the Consent Agreement, pursuant to which, among other things, we agreed to amend and restate our existing TA lease and guaranty agreements, effective as of the time of the TA Merger.
Additional details of our hotel operating agreements and our net lease agreements are set forth in Notes 5 and 10 to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q and in the tables and notes thereto below.

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Results of Operations (dollar amounts in thousands, except share amounts)
Three Months Ended March 31, 2023 compared to the Three Months Ended March 31, 2022
For the Three Months Ended March 31,
  Increase% Increase
20232022(Decrease)(Decrease)
Revenues:    
Hotel operating revenues$334,796 $297,406 $37,390 12.6 %
Rental income94,413 96,358 (1,945)(2.0)%
Total revenues429,209 393,764 35,445 9.0 %
Expenses:    
Hotel operating expenses299,566 290,343 9,223 3.2 %
Other operating expenses3,905 2,269 1,636 72.1 %
Depreciation and amortization - hotels53,385 56,162 (2,777)(4.9)%
Depreciation and amortization - net lease properties46,654 47,951 (1,297)(2.7)%
Total depreciation and amortization100,039 104,113 (4,074)(3.9)%
General and administrative10,911 11,989 (1,078)(9.0)%
Transaction related costs887 1,177 (290)(24.6)%
Loss on asset impairment, net— 5,500 (5,500)(100.0)%
Total expenses415,308 415,391 (83)— %
Other operating income:
Gain on sale of real estate, net41,898 5,548 36,350 n/m
Unrealized gains (losses) on equity securities, net49,430 (10,260)59,690 n/m
Interest income2,786 273 2,513 n/m
Interest expense(81,580)(92,344)10,764 11.7 %
Loss on early extinguishment of debt(44)— (44)n/m
Income (loss) before income taxes and equity in losses of an investee26,391 (118,410)144,801 (122.3)%
Income tax benefit (expense)3,780 (695)4,475 n/m
Equity in losses of an investee(4,221)(717)(3,504)n/m
Net income (loss)$25,950 $(119,822)$145,772 121.7 %
Weighted average shares outstanding (basic and diluted)164,867 164,667 200 0.1 %
Net income (loss) per common share (basic and diluted)$0.16 $(0.73)$0.89 (121.9)%
References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.
Hotel operating revenues. The increase in hotel operating revenues is primarily a result of higher occupancies and average rates at certain of our hotels in the 2023 period ($72,500), partially offset by the sale of certain hotels since January 1, 2022 ($35,110). Additional operating statistics of our hotels are included in the table on page 28.
Rental income. The decrease in rental income is primarily a result of an increase in reserves for uncollectable amounts in the 2023 period.
Hotel operating expenses. The increase in hotel operating expenses is primarily a result of an increase in occupancy at certain managed hotels resulting in an increase in wages and benefits ($28,664), an increase in rooms, food and beverage, marketing and sales expenses, management fees and other operating expenses ($16,892), partially offset by a decrease in real estate taxes and the sale of certain hotels since January 1, 2022 ($36,333).
Other operating expenses. The increase in other operating expenses is primarily the result of higher operating expenses at certain net lease properties, partially offset by the sale of certain net lease properties since January 1, 2022.
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Depreciation and amortization - hotels. The decrease in depreciation and amortization - hotels is primarily a result of the sale of certain hotels and certain of our depreciable assets becoming fully depreciated ($4,473), partially offset by depreciation and amortization related to capital additions since January 1, 2022 ($1,696).
Depreciation and amortization - net lease properties. The decrease in depreciation and amortization - net lease properties is primarily a result of certain of our depreciable assets being fully depreciated ($1,362) and the sale of certain net lease properties since January 1, 2022 ($90), partially offset by depreciation and amortization related to capital additions since January 1, 2022 ($155).
General and administrative. The decrease in general and administrative costs is primarily due to a decrease in business management fees ($1,494), partially offset by an increase in legal and accounting fees ($560).
Transaction related costs. Transaction related costs for the three months ended March 31, 2023 primarily consisted of costs related to potential acquisitions. Transaction related costs for the three months ended March 31, 2022 are primarily expenses incurred related to our hotel rebranding activities.
Loss on asset impairment, net. We recorded a $5,500 loss on asset impairment during the three months ended March 31, 2022 to reduce the carrying value of 25 hotels to their estimated fair value less costs to sell.
Gain on sale of real estate, net. We recorded a $41,898 net gain on sale of real estate during the three months ended March 31, 2023 in connection with the sale of 18 hotels. We recorded a $5,548 net gain on sale of real estate during the three months ended March 31, 2022 in connection with the sale of five hotels and two net lease properties.
Unrealized gains (losses) on equity securities, net. Unrealized gains (losses) on equity securities, net represents the adjustment required to adjust the carrying value of our investment in shares of TA common stock to its fair value as of March 31, 2023 and 2022.
Interest income. The increase in interest income is primarily due to higher interest rates during the 2023 period.
Interest expense. The decrease in interest expense is primarily due to lower average outstanding borrowings in the 2023 period.
Loss on early extinguishment of debt. We recorded a loss on early extinguishment of debt in connection with our redemption of certain senior unsecured notes.

Income tax benefit (expense). The change from income tax expense to an income tax benefit in 2023 is primarily due to a decrease in our state and foreign taxes in the 2023 period.
Equity in losses of an investee. Equity in losses of an investee represents our proportionate share of the earnings of Sonesta.
Net income. Our net income and net income per common share (basic and diluted) each increased in the 2023 period compared to the 2022 period primarily due to the revenue and expense changes discussed above.
Liquidity and Capital Resources (dollar amounts in thousands, except share amounts)
Our Managers and Tenants
As of March 31, 2023, all 220 of our hotels were managed by four hotel operating companies. Our 765 net lease properties were leased to 179 tenants as of March 31, 2023. The costs of operating and maintaining our properties are generally paid by the hotel managers as agents for us or by our tenants for their own account. Our hotel managers and tenants derive their funding for property operating expenses and for returns and rents due to us generally from property operating revenues and, to the extent that these parties themselves fund our owner’s priority returns and rents, from their separate resources. As of March 31, 2023, our hotel managers included Sonesta (194 hotels), Hyatt (17 hotels), Radisson (eight hotels), and IHG (one hotel). TA is our largest tenant (177 travel centers).
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We recorded reserves for uncollectable amounts of $3,540 for the three months ended March 31, 2023 and reduced our reserves for uncollectable amounts by $507 for the three months ended March 31, 2022 based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $11,209 and $7,697 as of March 31, 2023 and December 31, 2022, respectively, included in other assets in our condensed consolidated balance sheets.
We define net lease coverage as earnings before interest, taxes, depreciation, amortization and rent, or EBITDAR, divided by the annual minimum rent due to us weighted by the minimum rent of the property to total minimum rents of the net lease portfolio. EBITDAR amounts used to determine rent coverage are generally for the latest twelve month period, based on the most recent operating information, if any, furnished by the tenant. Operating statements furnished by the tenant often are unaudited and, in certain cases, may not have been prepared in accordance with GAAP and are not independently verified by us. In instances where we do not have tenant financial information, we calculate an implied coverage ratio for the period based on other tenants with available financial statements operating the same brand or within the same industry. As a result, we believe using this implied coverage metric provides a more reasonable estimated representation of recent operating results and financial condition for those tenants. Our net lease properties generated coverage of 2.98x and 2.67x as of March 31, 2023 and 2022, respectively.
Our Operating Liquidity and Capital Resources
Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are owner’s priority returns from our hotels, rents from our net lease portfolio and borrowings under our revolving credit facility. We receive owner’s priority returns and rents from our managers and tenants monthly. We may receive additional returns, percentage rents and our share of the operating profits of our managed hotels after payment of management fees and other deductions, if any, either monthly or quarterly, and these amounts are usually subject to annual reconciliations. We believe that these sources of funds will be sufficient to meet our operating expenses and capital expenditures, pay debt service obligations and make distributions to our shareholders for the next twelve months and for the foreseeable future thereafter. However, as a result of economic conditions, including if the U.S. enters an economic recession, or otherwise, our managers and tenants may become unable or unwilling to pay owner’s priority returns and rents to us when due, and, as a result, our cash flows and net income would decline and we may need to reduce the amount of, or even eliminate, our distributions to common shareholders. Also, our revolving credit facility matures on July 15, 2023 and we have no remaining extension options. Although we currently expect to enter into a new facility prior to its maturity or obtain alternative financing, there can be no assurance we will be successful in doing so.
The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands):
Three Months Ended March 31,
20232022
Cash and cash equivalents and restricted cash at the beginning of the period$45,420 $947,418 
Net cash provided by (used in):
Operating activities12,373 (11,983)
Investing activities114,252 38,870 
Financing activities23,791 (1,733)
Cash and cash equivalents and restricted cash at the end of the period$195,836 $972,572 
The change in cash provided by operating activities for the 2023 period compared to the cash used in operating activities for the 2022 period is primarily due to higher returns earned from our hotel portfolio and lower interest expense in the 2023 period. The increase in cash flows provided by investing activities in the 2023 period compared to the 2022 period is primarily due to an increase in proceeds from the sale of real estate. The change from cash flows used in financing activities in the 2022 period to cash flows provided by financing activities for the 2023 period is primarily due to the issuance of net lease mortgage notes, partially offset by repayment of senior unsecured notes and an increase in distributions to common shareholders in the 2023 period.
We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements. We lease 220 hotels to our wholly owned TRSs that are managed by hotel operating companies. As a REIT, we do not expect to pay federal income taxes on the majority of our income; however, the income realized by our TRSs in excess of the rent they pay to us is subject to U.S. federal income tax at corporate income tax rates. In addition, the income we receive from our hotels in Canada and Puerto Rico is subject to taxes in those jurisdictions and we are subject to taxes in certain states where we have properties despite our qualification for taxation as a REIT.
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Our Investment and Financing Liquidity and Capital Resources
Our hotel operating agreements generally provide that, if necessary, we may provide our managers and tenants with funding for capital improvements to our hotels in excess of amounts otherwise available in escrowed FF&E reserves or when no FF&E reserves are available. During the three months ended March 31, 2023, we funded $19,993 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $200,000 for capital improvements to certain hotels during the last nine months of 2023 using cash on hand.
Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements. We own all the FF&E escrows for our hotels. During the three months ended March 31, 2023, certain of our hotel managers deposited $1,923 to these accounts and spent $1,558 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of March 31, 2023, there was $7,479 on deposit in these escrow accounts, which was held directly by us and is reflected in our condensed consolidated balance sheets as restricted cash.
Our net lease portfolio leases do not require FF&E escrow deposits. However, tenants under these leases are required to maintain the leased properties, including structural and non-structural components. Tenants under certain of our net lease portfolio leases, including TA, may request that we purchase qualifying capital improvements to the leased facilities in return for minimum rent increases or we may agree to provide allowances for tenant improvements upon execution of new leases or when renewing our existing leases. We did not fund any capital improvements to our properties that we leased to TA during the three months ended March 31, 2023. Tenants are not obligated to request and we are not obligated to purchase any such improvements. During the three months ended March 31, 2023, we funded $219 for capital improvements to our other net lease properties. As disclosed elsewhere in this Quarterly Report on Form 10-Q, in connection with the TA Merger we entered into the Consent Agreement, pursuant to which, among other things, we agreed to amend and restate our existing TA lease and guaranty agreements, effective as of the time of the TA Merger. As of March 31, 2023, we had $2,515 of unspent leasing-related obligations related to certain net lease tenants.
During the three months ended March 31, 2023, we sold 18 hotels with 2,526 rooms for an aggregate sales price of $157,230, excluding closing costs. From April 1, 2023 through May 5, 2023, we sold two net lease properties with 2,384 square feet for an aggregate sales price of $620, excluding closing costs, and continue to market two additional net lease properties with 7,283 square feet for sale. We expect to use the proceeds from the asset sales for general business purposes, which may include the repayment of debt.
During the three months ended March 31, 2023, we declared and paid regular quarterly distributions to common shareholders using cash on hand as follows:
Declaration DateRecord DatePaid DateDividend Per Common ShareTotal Distributions
January 12, 2023January 23, 2023February 16, 2023$0.20 $33,090 
On April 13, 2023, we declared a regular quarterly distribution to common shareholders of record as of April 24, 2023 of $0.20 per share, or $33,090. We expect to pay this amount on or about May 18, 2023.
In order to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses, we maintain an $800,000 revolving credit facility which is governed by our credit agreement. The maturity date of our revolving credit facility is July 15, 2023. We are required to pay interest at the rate of LIBOR plus a premium, which was 250 basis points per annum, subject to a LIBOR floor of 0.50% at March 31, 2023, on the amount outstanding under our revolving credit facility. We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 30 basis points per annum at March 31, 2023. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. We can borrow, subject to meeting certain financial covenants, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity. As of March 31, 2023, the annual interest rate payable on borrowings under our revolving credit facility was 7.36%.
Our revolving credit facility is secured by 73 properties with an undepreciated book value of $1,560,880 as of March 31, 2023 to secure our obligations under the credit agreement.
As of March 31, 2023, we had no borrowings outstanding under our revolving credit facility.
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Our term debt maturities (other than our revolving credit facility) as of March 31, 2023 were as follows:
TypeYearMaturity
Senior unsecured notes2024$1,175,000 
Senior unsecured notes20251,150,000 
Senior unsecured notes2026800,000 
Senior unsecured notes2027850,000 
Senior unsecured notes2028400,000 
Net lease mortgage notes2028610,037 
Senior unsecured notes2029425,000 
Senior unsecured notes2030400,000 
$5,810,037 
None of our unsecured debt obligations require principal or sinking fund payments prior to their maturity dates. Our mortgage notes require monthly principal payments as described in Part I, Item 3 of this Quarterly Report on Form 10-Q.
On February 10, 2023, the Issuer issued $610,200 in aggregate principal amount of net lease mortgage notes. The notes are non-recourse and secured by the assets of the Issuer, which includes 308 net lease properties with annual minimum rents of $65,381 and a gross book carrying value of $754,913 as of March 31, 2023. The net proceeds from this issuance were $550,564 after initial purchaser discounts and offering costs. We simultaneously announced the early redemption of our outstanding 4.50% Senior Notes due in 2023 at a redemption price equal to the principal amount of $500,000, plus accrued and unpaid interest to, but excluding the date of redemption. This redemption occurred March 8, 2023 using the proceeds from the net lease mortgage notes described.
The net lease mortgage notes are summarized as follows:
Note ClassS&P RatingPrincipal Outstanding as of March 31, 2023Coupon RateTermMaturity
Class AAAA$304,873 5.15%5 yearsFebruary 2028
Class BAA172,964 5.55%5 yearsFebruary 2028
Class CA132,200 6.70%5 yearsFebruary 2028
Total / weighted average$610,037 5.60%

We currently expect to use cash on hand, the cash flows from our operations, borrowings under our revolving credit facility, net proceeds from any asset sales and net proceeds of offerings of equity or debt securities to fund our operations, capital expenditures, investments, future debt maturities, distributions to our shareholders and other general business purposes.
When significant amounts are outstanding for an extended period of time under our revolving credit facility, or the maturities of our indebtedness approach, we currently expect to explore refinancing alternatives. Such alternatives may include incurring additional debt, issuing new equity securities and the sale of properties. We have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. We may also seek to participate in joint ventures or other arrangements that may provide us additional sources of financing. We may also assume mortgage debt on properties we may acquire or obtain mortgage financing on our existing properties.
While we believe we will generally have access to various types of financings, including debt or equity, to fund our future acquisitions and to pay our debts and other obligations, we cannot be sure that we will be able to complete any debt or equity offerings or other types of financings or that our cost of any future public or private financings will not increase.
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Our ability to complete, and the costs associated with, future debt transactions depends primarily upon credit market conditions and our then perceived creditworthiness. We have no control over market conditions. Our credit ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities. However, as discussed elsewhere in this Quarterly Report on Form 10-Q, the impacts of the current, and possibly future, inflationary conditions, increasing or sustained high interest rates and a possible recession are uncertain and may have various negative consequences on us and our operations, including a decline in financing availability and increased costs for financing. Further, such conditions could also disrupt the capital markets generally and limit our access to financing from public sources or on favorable terms, particularly if the global financial markets experience significant disruptions.
Debt Covenants
Our debt obligations at March 31, 2023 consisted of $5,200,000 of publicly issued term debt and $610,037 aggregate principal amounts of mortgage notes secured by 308 net lease properties. For further information regarding our indebtedness, see Note 7 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Our publicly issued term debt is governed by our indentures and related supplements. These indentures and related supplements and our credit agreement contain covenants that generally restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios. Our credit agreement, net lease mortgage notes and our unsecured senior notes, indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes RMR ceasing to act as our business manager. As of March 31, 2023, we believe we were in compliance with all of the covenants under our indentures and their supplements, net lease mortgage notes and our credit agreement.
Senior Notes Indenture Covenants
The following table summarizes the results of the financial tests required by the indentures and related supplements for our senior unsecured notes as of March 31, 2023:
Actual ResultsCovenant Requirement
Total debt / adjusted total assets54.8%Maximum of 60%
Secured debt / adjusted total assets5.8%Maximum of 40%
Consolidated income available for debt service / debt service1.90xMinimum of 1.50x
Total unencumbered assets / unsecured debt157.1%Minimum 150%
Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our credit agreement and senior notes indentures.
Acceleration and Cross-Default
Neither our indentures and their supplements nor our credit agreement contain provisions for acceleration, which could be triggered by a change in our debt ratings. However, under our credit agreement, our highest senior debt rating is used to determine the fees and interest rates we pay. Accordingly, if that debt rating is downgraded, our interest expense and related costs under our revolving credit facility would increase.
Our public debt indentures and their supplements contain cross default provisions to any other debt of $20,000 or more ($50,000 or more in the case of our indenture entered into in February 2016 and its supplements). Similarly, our credit agreement has cross default provisions to other indebtedness that is recourse of $25,000 or more and indebtedness that is non-recourse of $75,000 or more.
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Supplemental Guarantor Information
Our $800,000 of 7.50% unsecured senior notes due 2025, or the 2025 Notes, and our $450,000 of 5.50% unsecured senior notes due 2027, or the 2027 Notes, are fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including our foreign subsidiaries and our subsidiaries pledged under our credit agreement. The notes and the guarantees will be effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and will be structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $3,950,000 of senior unsecured notes do not have the benefit of any guarantees.
A subsidiary guarantor's guarantee of the 2025 Notes and 2027 Notes and all other obligations of such subsidiary guarantor under the indentures governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and such indenture under certain circumstances, including on or after the date on which (a) the notes have received a rating equal to or higher than Baa2 (or the equivalent) by Moody’s Investor Services, or Moody’s, or BBB (or the equivalent) by Standard & Poor’s Ratings Services, or S&P, or if Moody’s or S&P ceases to rate the notes for reasons outside of our control, the equivalent investment grade rating from any other rating agency and (b) no default or event of default has occurred and is continuing under the indenture. Our non-guarantor subsidiaries are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any amounts due on these notes or the guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments. The rights of holders of these notes to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries' creditors and any preferred equity holders. As a result, these notes and the related guarantees will be structurally subordinated to all indebtedness, guarantees and other liabilities of our subsidiaries that do not guarantee these notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
The following table presents summarized financial information for us and the subsidiary guarantors, on a combined basis after elimination of (i) intercompany transactions and balances among us and the subsidiary guarantors and (ii) equity in earnings from, and any investments in, any of our non-guarantor subsidiaries:
As of March 31, 2023As of December 31, 2022
Real estate properties, net (1)
$4,610,288 $5,316,318 
Intercompany balances (2)
756,902 580,684 
Other assets, net717,011 723,092 
Indebtedness, net$5,158,504 $5,655,530 
Other liabilities349,498 366,936 
Three Months Ended
March 31, 2023
Revenues$373,850 
Expenses489,267 
Net loss(115,417)
(1)Real estate properties, net as of March 31, 2023 includes $189,891 of properties owned directly by us and not included in the assets of the subsidiary guarantors.
(2)Intercompany balances represent receivables from non-guarantor subsidiaries.
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Property and Operating Statistics (dollar amounts in thousands, except hotel statistics)
As of March 31, 2023, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 148 distinct brands across 22 industries.
Hotel Portfolio
The following tables summarize the operating statistics, including ADR, occupancy and RevPAR reported to us by our hotel managers by hotel brand for the periods indicated. All operating data presented are based upon the operating results provided by our hotel managers for the indicated periods. We have not independently verified our managers’ operating data.
Comparable Hotels*No. of Rooms or SuitesOccupancyADRRevPAR
Service LevelNo. of HotelsThree Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
Brand20232022Change20232022Change20232022Change
Sonesta Hotels & ResortsFull Service22 7,149 56.9 %51.9 %5.0  pts$152.38 $144.09 5.8 %$86.70 $74.78 15.9 %
Royal SonestaFull Service17 5,663 47.3 %36.8 %10.5  pts238.96 210.61 13.5 %113.03 77.50 45.8 %
Radisson HotelFull Service1,149 65.4 %57.5 %7.9  pts152.87 126.88 20.5 %99.98 72.96 37.0 %
Crowne PlazaFull Service495 58.4 %43.4 %15.0  pts139.80 121.33 15.2 %81.64 52.66 55.0 %
Country Inn and SuitesFull Service430 56.0 %52.2 %3.8  pts123.16 107.10 15.0 %68.97 55.91 23.4 %
Full Service Total/Average48 14,886 53.9 %46.3 %7.6  pts180.26 160.71 12.2 %97.16 74.41 30.6 %
Sonesta SelectSelect Service44 6,427 51.1 %43.0 %8.1  pts118.88 108.16 9.9 %60.75 46.51 30.6 %
Hyatt PlaceSelect Service17 2,107 63.9 %58.6 %5.3  pts124.44 113.09 10.0 %79.52 66.27 20.0 %
Select Service Total/Average61 8,534 54.3 %46.9 %7.4  pts120.50 109.69 9.9 %65.43 51.44 27.2 %
Sonesta ES SuitesExtended Stay60 7,643 63.5 %65.9 %(2.4) pts128.10 114.54 11.8 %81.34 75.48 7.8 %
Sonesta Simply SuitesExtended Stay50 6,366 64.4 %66.1 %(1.7) pts90.85 79.55 14.2 %58.51 52.58 11.3 %
Extended Stay Total/Average110 14,009 63.9 %66.0 %(2.1) pts111.16 98.76 12.6 %71.03 65.18 9.0 %
Comparable Hotels Total/Average219 37,429 57.7 %53.9 %3.8  pts$138.73 $121.77 13.9 %$80.05 $65.63 22.0 %
*We generally define comparable hotels as those that were owned by us and were open and operating for the entire periods being compared. For the three months ended March 31, 2023 and 2022, our comparable results excluded one hotel that had suspended operations during part of the periods presented.
All Hotels*No. of Rooms or SuitesOccupancyADRRevPAR
Service LevelNo. of HotelsThree Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
Brand20232022Change20232022Change20232022Change
Sonesta Hotels & ResortsFull Service22 7,149 56.9 %51.9 %5.0  pts$152.38$144.095.8 %$86.70 $74.78 15.9 %
Royal SonestaFull Service17 5,663 47.3 %36.8 %10.5 pts238.96210.6113.5 %113.03 77.50 45.8 %
Radisson HotelFull Service1,149 65.4 %57.5 %7.9 pts152.87126.8820.5 %99.98 72.96 37.0 %
Crowne PlazaFull Service495 58.4 %43.4 %15.0 pts139.80121.3315.2 %81.64 52.66 55.0 %
Country Inn and SuitesFull Service430 56.0 %52.2 %3.8 pts123.16107.1015.0 %68.97 55.91 23.4 %
Full Service Total/Average48 14,886 53.9 %46.3 %7.6 pts180.26160.7112.2 %97.16 74.41 30.6 %
Sonesta SelectSelect Service44 6,427 51.1 %43.0 %8.1 pts118.88108.169.9 %60.75 46.51 30.6 %
Hyatt PlaceSelect Service17 2,107 63.9 %58.6 %5.3 pts124.44113.0910.0 %79.52 66.27 20.0 %
Select Service Total/Average61 8,534 54.3 %46.9 %7.4 pts120.50109.699.9 %65.43 51.44 27.2 %
Simply ES SuitesExtended Stay60 7,643 63.5 %65.9 %(2.4) pts128.10114.5411.8 %81.34 75.48 7.8 %
Sonesta Simply SuitesExtended Stay51 6,464 63.7 %65.1 %(1.4) pts90.8579.5514.2 %57.87 51.79 11.7 %
Extended Stay Total/Average111 14,107 63.6 %65.5 %(1.9) pts111.1698.7612.6 %70.70 64.69 9.3 %
All Hotels Total/Average220 37,527 57.6 %53.7 %3.9 pts$138.73$121.7713.9 %$79.91 $65.39 22.2 %
*Results of all hotels owned as of March 31, 2023. Excludes the results of hotels sold during the periods presented.
Net Lease Portfolio
As of March 31, 2023, our net lease properties were 97.4% occupied and we had 27 properties available for lease. During the three months ended March 31, 2023, we entered into lease renewals for 11,577 rentable square feet (two properties) at weighted (by rentable square feet) average rents that were 3.1% above the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 5.1 years. We also entered into a new lease for 3,671 rentable square feet for rent that was 38.8% above the prior rent for the same space. The lease term for this lease was 10.2 years.
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As of March 31, 2023, our net lease tenants operated across more than 139 brands. The following table identifies the top ten brands based on annualized minimum rent.
BrandNo. of Buildings
Investment (1)
Percent of Total Investment
Annualized
Minimum Rent (2)
Percent of Total Annualized
Minimum Rent
Coverage (3)
1.TravelCenters of America133$2,289,189 44.8 %$169,067 45.7 %2.81 x
2.Petro Stopping Centers441,021,226 20.0 %77,043 20.8 %2.36 x
3.The Great Escape1498,242 1.9 %7,711 2.1 %7.19 x
4.Life Time Fitness392,617 1.8 %5,770 1.6 %2.35 x
5.AMC Theatres877,722 1.5 %5,248 1.4 %1.36 x
6.Buehler's Fresh Foods576,469 1.5 %5,657 1.5 %3.48 x
7.Heartland Dental5961,120 1.2 %4,629 1.3 %4.09 x
8.Norms1053,673 1.1 %3,693 1.0 %2.07 x
9.Express Oil Change2349,724 1.0 %3,717 1.0 %4.32 x
10.Pizza Hut4045,285 0.9 %3,401 0.9 %1.94 x
Other (4)
4261,242,703 24.3 %83,820 22.7 %3.60 x
Total765$5,107,970 100.0 %$369,756 100.0 %2.98 x
(1)Represents historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any.
(2)Each of the leases in our net lease portfolio provides for payment to us of minimum rent. Certain of these minimum payment amounts are secured by full or limited guarantees. Annualized minimum rent amounts represent cash rent amounts due to us and exclude adjustments, if any, to record scheduled rent changes under certain of our leases, the deferred rent obligations payable to us under our leases with TA, and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks at our travel centers on a straight line basis, or any reimbursement of expenses paid by us.
(3)See page 23 for our definition of coverage.
(4)Consists of 129 distinct brands with an average investment of $2,917 and average annual minimum rent of $197 per property.
As of March 31, 2023, our top ten net lease tenants based on annualized minimum rent are listed below.
TenantBrand AffiliationNo. of Buildings
Investment (1)
Percent of Total Investment
Annualized
Minimum Rent(2)
Percent of Total Annualized
Minimum Rent
Coverage (3)
1.TravelCenters of America Inc.TravelCenters of America / Petro Stopping Centers177$3,310,415 64.8 %$246,110 66.6 %2.67x(4)
2.Universal Pool Co., Inc.The Great Escape1498,242 1.9 %7,711 2.1 %7.19x
3.Healthy Way of Life II, LLCLife Time Fitness392,617 1.8 %5,770 1.6 %2.35x
4.American Multi-Cinema, Inc.AMC Theatres877,722 1.5 %5,248 1.4 %1.36x
5.Styx Acquisition, LLCBuehler's Fresh Foods576,469 1.5 %5,657 1.5 %3.48x

6.Professional Resource Development, Inc.Heartland Dental5961,120 1.2 %4,629 1.3 %4.09x
7.Norms Restaurants, LLCNorms1053,673 1.1 %3,693 1.0 %2.07x
8.Express Oil Change, L.L.C.Express Oil Change2349,724 1.0 %3,717 1.0 %4.32x
9.Pilot Travel Centers LLCFlying J Travel Plaza341,681 0.8 %3,247 0.9 %5.75x
10.Capitol Racquet Sports, Inc.Courthouse Athletic Club439,688 0.8 %1,878 0.5 %1.35x
Subtotal, top 103063,901,351 76.4 %287,660 77.9 %2.84x
11.
Other (5)
Various4591,206,619 23.6 %82,096 22.1 %3.50x
Total765$5,107,970 100.0 %$369,756 100.0 %2.98x
(1)Represents historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.
(2)Each of the leases in our net lease portfolio provides for payment to us of minimum rent. Certain of these minimum payment amounts are secured by full or limited guarantees. Annualized minimum rent amounts represent cash rent amounts due to us and exclude adjustments, if any, to record scheduled rent changes under certain of our leases, the deferred rent obligations payable to us under our leases with TA, and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks at our travel centers on a straight line basis, or any reimbursement of expenses paid by us.
(3)See page 23 for our definition of coverage.
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(4)TA is our largest tenant. We lease 177 travel centers (133 under the TravelCenters of America brand and 44 under the Petro Stopping Centers brand) to a subsidiary of TA under five master leases that expire in 2029, 2031, 2032, 2033 and 2035, respectively. TA has two renewal options for 15 years each for all of the travel centers. In addition to the payment of our minimum rent, the TA leases provide for payment to us of percentage rent based on increases in total non-fuel revenues over base levels (3.5% of non-fuel revenues above applicable base years). TA’s remaining deferred rent obligation of $4,404 was paid in January 2023. As disclosed elsewhere in this Quarterly Report on Form 10-Q, in connection with the TA Merger we entered into the Consent Agreement, pursuant to which, among other things, we agreed to amend and restate our existing TA lease and guaranty agreements, effective at the time of the TA Merger.
(5)Consists of 169 tenants with an average investment of $2,629 and average annual minimum rent of $179 per property.
As of March 31, 2023, our net lease tenants operated across 21 distinct industries within the service-oriented retail sector of the U.S. economy.
IndustryNo. of Properties
Investment (1)
Percent of Total Investment
Annualized
Minimum Rent (2)
Percent of Total Annualized
Minimum Rent
Coverage (3)
Travel Centers180$3,352,096 65.6%$249,357 67.4 %2.71 x
Restaurants-Quick Service214290,901 5.7%19,735 5.3 %3.19 x
Restaurants-Casual Dining53192,320 3.8%11,940 3.2 %2.43 x
Health and Fitness13186,368 3.6%11,011 3.0 %1.95 x
Movie Theaters18160,044 3.1%11,696 3.2 %1.48 x
Grocery Stores19129,152 2.5%9,223 2.5 %4.05 x
Home Goods and Leisure20120,702 2.4%9,838 2.7 %6.01 x
Automotive Equipment & Services64107,054 2.1%7,665 2.1 %4.36 x
Medical, Dental Office70102,494 2.0%8,268 2.2 %2.41 x
Automotive Dealers862,550 1.2%4,956 1.3 %5.73 x
Entertainment461,436 1.2%4,319 1.2 %3.12 x
Educational Services955,319 1.1%4,451 1.2 %1.79 x
General Merchandise Stores455,112 1.1%3,874 1.0 %2.86 x
Building Materials2933,280 0.7%2,829 0.8 %7.39 x
Car Washes528,658 0.6%2,170 0.6 %3.45 x
Miscellaneous Manufacturing524,148 0.5%1,691 0.5 %18.01 x
Drug Stores and Pharmacies719,251 0.4%1,258 0.3 %0.59 x
Sporting Goods317,742 0.3%1,090 0.3 %5.15 x
Legal Services511,362 0.2%1,054 0.3 %1.89 x
Dollar Stores32,971 0.1%189 0.1 %2.69 x
Other527,245 0.5%3,142 0.8 %5.97 x
Vacant2767,765 1.3%— — %— x
Total765$5,107,970 100.0%$369,756 100.0%2.98 x
(1)Represents historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.
(2)Each of the leases in our net lease portfolio provides for payment to us of minimum rent, respectively. Certain of these minimum payment amounts are secured by full or limited guarantees. Annualized minimum rent amounts represent cash rent amounts due to us and exclude adjustments, if any, to record scheduled rent changes under certain of our leases, the deferred rent obligations payable to us under our leases with TA, and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks at our travel centers on a straight line basis, or any reimbursement of expenses paid by us.
(3)See page 23 for our definition of coverage.
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As of March 31, 2023, lease expirations at our net lease properties by year are as follows:
Year (1)
Square FeetAnnualized Minimum Rent ExpiringPercent of Total Annualized Minimum Rent ExpiringCumulative % of Total Minimum Rent Expiring
2023209,044 $1,560 0.4%0.4%
2024769,082 9,902 2.7%3.1%
2025436,524 8,977 2.4%5.5%
20261,050,697 11,669 3.2%8.7%
20271,071,904 14,075 3.8%12.5%
2028566,378 9,793 2.6%15.1%
20291,266,197 48,502 13.1%28.2%
2030138,590 4,175 1.1%29.3%
20311,321,577 48,862 13.2%42.5%
20321,267,177 53,793 14.6%57.1%
20331,157,031 52,638 14.2%71.3%
2034144,247 3,817 1.0%72.3%
20352,237,712 80,365 21.8%94.1%
2036558,374 8,095 2.2%96.3%
203735,103 465 0.1%96.4%
203866,700 1,184 0.3%96.7%
2039134,901 3,214 0.9%97.6%
2040115,142 2,406 0.7%98.3%
2041223,043 2,291 0.6%98.9%
2042— — 0.0%98.9%
2043141,134 280 0.1%99.0%
2044— — 0.0%99.0%
204563,490 3,693 1.0%100.0%
Total12,974,047 $369,756 100%
(1)The year of lease expiration is pursuant to contract terms.
As of March 31, 2023, shown below is the list of our top ten states where our net lease properties are located. No other state represents more than 3% of our net lease annual minimum rents.
StateSquare FeetAnnualized Minimum RentPercent of Total Annualized Minimum Rent
Texas1,176,854 $32,538 8.8%
Illinois1,010,047 26,231 7.1%
Ohio1,302,273 26,146 7.1%
California399,045 24,351 6.6%
Georgia597,248 20,476 5.5%
Arizona476,651 16,575 4.5%
Florida529,040 16,142 4.4%
Pennsylvania543,959 15,758 4.3%
Indiana612,239 15,239 4.1%
New Mexico246,478 11,184 3.0%
Other6,425,909 165,116 44.6%
Total13,319,743 $369,756 100.0%
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Related Person Transactions
We have relationships and historical and continuing transactions with RMR, RMR Inc., TA and Sonesta and others related to them. For further information about these and other such relationships and related person transactions, see Notes 5, 6 and 10 to our Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2022 Annual Report, our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders and our other filings with the Securities and Exchange Commission, or SEC. In addition, see the section captioned “Risk Factors” in our 2022 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.
Critical Accounting Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include consolidation of VIEs, purchase price allocations, the determination of useful lives of fixed assets, classification of leases, and the assessment of the carrying values and impairment of real estate intangible assets and equity investments.
A discussion of our critical accounting estimates is included in our 2022 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2022.
Non-GAAP Financial Measures
We present certain “non-GAAP financial measures” within the meaning of the applicable SEC rules, including funds from operations, or FFO, and normalized funds from operations, or Normalized FFO. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs.
Funds From Operations and Normalized Funds From Operations
We calculate FFO and Normalized FFO as shown below. FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, excluding any gain or loss on sale of properties and loss on impairment of real estate assets, if any, plus real estate depreciation and amortization, less any unrealized gains and losses on equity securities, as well as adjustments to reflect our share of FFO attributable to an investee and certain other adjustments currently not applicable to us. In calculating Normalized FFO, we adjust for the items shown below. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to satisfy our REIT distribution requirements, the availability to us of debt and equity capital, our distribution rate as a percentage of the trading price of our common shares, or dividend yield, and to the dividend yield of other REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.
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Our calculations of FFO and Normalized FFO for the three months ended March 31, 2023 and 2022 and reconciliations of net income, the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to those amounts appear in the following table (amounts in thousands, except per share amounts).
For the Three Months Ended March 31,
20232022
Net income (loss)$25,950 $(119,822)
Add (Less):Depreciation and amortization expense100,039 104,113 
Loss on asset impairment (1)
— 5,500 
Gain on sale of real estate, net (2)
(41,898)(5,548)
Unrealized (gains) losses on equity securities, net (3)
(49,430)10,260 
Adjustments to reflect our share of FFO attributable to an investee (4)
1,233 666 
FFO35,894 (4,831)
Add (less):
Transaction related costs (5)
887 1,177 
Loss on early extinguishment of debt (6)
44 — 
Adjustments to reflect our share of Normalized FFO attributable to an investee (4)
321 245 
Normalized FFO$37,146 $(3,409)
Weighted average shares outstanding (basic and diluted) (7)
164,867 164,667 
Basic and diluted per common share amounts:
Net income (loss)$0.16 $(0.73)
FFO$0.22 $(0.03)
Normalized FFO$0.23 $(0.02)
Distributions declared per share$0.20 $0.01 
(1)We recorded a loss on asset impairment of $5,500 during the three months ended March 31, 2022 to reduce the carrying value of 25 hotels to their estimated fair value less costs to sell.
(2)We recorded a $41,898 net gain on sale of real estate during the three months ended March 31, 2023 in connection with the sale of 18 hotels. We recorded a $5,548 gain on sale of real estate during the three months ended March 31, 2022 in connection with the sale of five hotels and two net lease properties.
(3)Unrealized gains on equity securities, net represents the adjustment required to adjust the carrying value of our investment in shares of TA common stock to its fair value.
(4)Represents adjustments to reflect our proportionate share of FFO and normalized FFO related to our equity investment in Sonesta.
(5)Transaction related costs for the three months ended March 31, 2023 of $887 primarily consisted of costs related to potential acquisitions. Transaction related costs for the three months ended March 31, 2022 of $1,177 primarily consisted of expenses incurred related to our hotel rebranding activities.
(6)We recorded a $44 loss on extinguishment of debt during the three months ended March 31, 2023 related to the write off of deferred financing costs relating to our repayment of $500,000 of unsecured senior notes due in June 2023.
(7)Represents weighted average common shares adjusted to reflect the potential dilution of unvested share awards, if any.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk (dollar amounts in thousands, except per share amounts)
We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates has not materially changed since December 31, 2022. Other than as described below, we do not currently foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.
Fixed Rate Debt
At March 31, 2023, our outstanding publicly tradable debt consisted of eleven issues of unsecured fixed rate senior notes and secured fixed rate net lease mortgage notes:
DebtPrincipal BalanceAnnual Interest
Rate
Annual Interest
Expense
MaturityInterest Payments Due
Unsecured Senior Notes$350,000 4.650 %$16,275 2024Semi-Annually
Unsecured Senior Notes825,000 4.350 %35,888 2024Semi-Annually
Unsecured Senior Notes350,000 4.500 %15,750 2025Semi-Annually
Unsecured Senior Notes800,000 7.500 %60,000 2025Semi-Annually
Unsecured Senior Notes350,000 5.250 %18,375 2026Semi-Annually
Unsecured Senior Notes450,000 4.750 %21,375 2026Semi-Annually
Unsecured Senior Notes400,000 4.950 %19,800 2027Semi-Annually
Unsecured Senior Notes450,000 5.500 %24,750 2027Semi-Annually
Unsecured Senior Notes400,000 3.950 %15,800 2028Semi-Annually
Net Lease Mortgage Notes610,037 5.600 %34,680 2028Monthly
Unsecured Senior Notes425,000 4.950 %21,038 2029Semi-Annually
Unsecured Senior Notes400,000 4.375 %17,500 2030Semi-Annually
$5,810,037 $301,231 
No principal repayments are due under our unsecured senior notes until maturity. Our net lease mortgage notes require principal and interest payments through maturity pursuant to amortization schedules. Because these notes require interest at fixed rates, changes in market interest rates during the term of these debts will not affect our interest obligations. If these notes were refinanced at interest rates which are one percentage point higher than the rates shown above, our per annum interest cost would increase by approximately $58,100. Changes in market interest rates would affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt while decreases in market interest rates increase the fair value of our fixed rate debt. The U.S. Federal Reserve has raised the federal funds rate multiple times since the beginning of 2022 and has signaled that further increases are likely to occur. Based on the balances outstanding at March 31, 2023 and discounted cash flows analyses through the respective maturity dates, and assuming no other changes in factors that may affect the fair value of our fixed rate debt obligations, a hypothetical immediate one percentage point change in interest rates would change the fair value of those debt obligations by approximately $157,184.
Each of these fixed rate debt arrangements allows us to make repayments earlier than the stated maturity date. We are generally allowed to make prepayments only at a premium equal to a make whole amount, as defined, which is generally designed to preserve a stated yield to the noteholder. Also, we have in the past repurchased and retired some of our outstanding debts and we may do so again in the future. These prepayment rights and our ability to repurchase and retire outstanding debt may afford us opportunities to mitigate the risks of refinancing our debts at their maturities at higher rates by refinancing prior to maturity.
Floating Rate Debt
At March 31, 2023, we had no amounts outstanding under our revolving credit facility. The maturity date of our revolving credit facility is July 15, 2023. No principal repayments are required under our revolving credit facility prior to maturity and repayments may be made and redrawn subject to conditions at any time without penalty.
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Borrowings under our revolving credit facility are in U.S. dollars and require annual interest to be paid at the rate of LIBOR plus premiums that are subject to adjustment based upon changes to our credit ratings. Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically LIBOR and to changes in our credit ratings. In addition, upon renewal or refinancing of our revolving credit facility, we are vulnerable to increases in interest rate premiums due to market conditions or our perceived credit characteristics. Generally, a change in interest rates would not affect the value of this floating rate debt but would affect our operating results.
The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at March 31, 2023 if we were fully drawn on our revolving credit facility.
Impact of Increase in Interest Rates
Interest Rate
Per Year
Outstanding
Debt
Total Interest
Expense Per Year
Annual Per
Share Impact (1)
At March 31, 20237.36 %$800,000 $58,880 $0.36 
One percentage point increase8.36 %$800,000 $66,880 $0.41 
(1)Based on diluted weighted average common shares outstanding for the three months ended March 31, 2023.
The foregoing table shows the impact of an immediate change in floating interest rates as of March 31, 2023. If interest rates were to change gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts under our revolving credit facility or other floating rate debt, if any. Although we have no present plans to do so, we may in the future enter into hedge arrangements from time to time to mitigate our exposure to changes in interest rates.
LIBOR Phase Out
We are required to pay interest on borrowings under our revolving credit facility at floating rates based on LIBOR. LIBOR has been phased out for new contracts and is expected to be phased out for pre-existing contracts by June 30, 2023. We currently expect to enter into a new facility prior to the maturity of our existing facility; however, we currently expect that the determination of interest under our existing revolving credit facility will be revised as provided under our credit agreement or amended as necessary to provide for an alternative interest rate index. We expect that the alternative interest rate index would likely be the secured overnight financing rate, or SOFR, because interest rates based on SOFR have gained significant market adoption as the replacement to LIBOR for debt facilities similar to ours. Any alternative interest rate index that may replace LIBOR may result in changes to the amount of interest we are required to pay and could result in our paying increased interest amounts.
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Item 4. Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our Managing Trustees, our President and Chief Investment Officer and our Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Managing Trustees, our President and Chief Investment Officer and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Warning Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws that are subject to risks and uncertainties. These statements may include words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions. These forward-looking statements include, among others, statements about: the pending TA Merger and related transactions, including our expected lease amendments, cash proceeds and credit quality of TA following the TA Merger; economic and market conditions and their potential impacts on us, our hotel managers and our tenants; expectations regarding demand for corporate travel and lodging; the sufficiency of our liquidity; our liquidity needs, sources and expected uses; our capital expenditure plans and commitments; our property dispositions and expected use of proceeds; and the amount and timing of future distributions.
Forward-looking statements reflect our current expectations, are based on judgments and assumptions, are inherently uncertain and are subject to risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from expected future results, performance or achievements expressed or implied in those forward-looking statements. Some of the risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:
•    Sonesta’s ability to successfully operate the hotels it manages for us,
•    Our ability and the ability of our managers and tenants to operate under unfavorable market and economic conditions, rising or sustained high interest rates, high inflation, labor market challenges, dislocation and volatility in the public equity and debt markets, geopolitical instability and economic recessions or downturns,
•    If and when business transient hotel business will return to historical pre-COVID-19 pandemic levels and whether any improved hotel industry conditions will continue, increase or be sustained,
•    Whether and the extent to which our managers and tenants will pay the contractual amounts of returns, rents or other obligations due to us,
•    Competition within the commercial real estate, hotel, transportation and travel center and other industries in which our managers and tenants operate, particularly in those markets in which our properties are located,
•    Our ability to repay or refinance our debts as they mature or otherwise become due,
•    Our ability to maintain sufficient liquidity, including the availability of borrowings under our revolving credit facility,
•    Our ability to pay interest on and principal of our debt,
•    Risks and conditions to the consummation of BP’s acquisition of TA and the amendments of our lease and guaranty arrangements with TA,
•    Our ability to acquire properties that realize our targeted returns,
•    Our ability to sell properties at prices we target,
•    Our ability to raise or appropriately balance the use of debt or equity capital,
•    Potential defaults under our management agreements and leases by our managers and tenants,
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•    Our ability to increase hotel room rates and rents at our net leased properties as our leases expire in excess of our operating expenses and to grow our business,
•    Our ability to increase and maintain hotel room and net lease property occupancy at our properties,
•    Our ability to pay distributions to our shareholders and to increase or sustain the amount of such distributions,
•    The impact of increasing labor costs and shortages and commodity and other price inflation due to supply chain challenges or other market conditions,
•    Our ability to make cost-effective improvements to our properties that enhance their appeal to hotel guests and net lease tenants,
•    Our ability to engage and retain qualified managers and tenants for our hotels and net lease properties on satisfactory terms,
•    Our ability to diversify our sources of rents and returns that improve the security of our cash flows,
•    Our credit ratings,
•    The ability of our manager, RMR, to successfully manage us,
•    Actual and potential conflicts of interest with our related parties, including our Managing Trustees, TA, Sonesta, RMR and others affiliated with them,
•    Our qualification for taxation as a REIT under the IRC,
•    Our ability to realize benefits from the scale, geographic diversity, strategic locations and variety of service levels of our hotels,
•    Changes in federal or state tax laws,
•    Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes,
•    Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters,
•    Acts of terrorism, outbreaks or continuation of pandemics or other significant adverse public health safety events or conditions, war or other hostilities, supply chain disruptions, climate change or other man-made or natural disasters beyond our control, and
•    Other matters.
These risks, uncertainties and other factors are not exhaustive and should be read in conjunction with other cautionary statements that are included in our periodic filings. The information contained in our filings with the SEC, including under the caption “Risk Factors” in our periodic reports, or incorporated therein, identifies important factors that could cause differences from the forward-looking statements in this Quarterly Report on Form 10-Q. Our filings with the SEC are available on the SEC’s website and at www.sec.gov.
You should not place undue reliance upon our forward-looking statements.
Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
Statement Concerning Limited Liability
The Amended and Restated Declaration of Trust establishing Service Properties Trust dated August 21, 1995, as amended and supplemented, as filed with the State Department of Assessments and Taxation of Maryland, provides that no trustee, officer, shareholder, employee or agent of Service Properties Trust shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Service Properties Trust. All persons dealing with Service Properties Trust in any way shall look only to the assets of Service Properties Trust for the payment of any sum or the performance of any obligation.
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Part IIOther Information
Item 1A. Risk Factors
There have been no material changes to risk factors from those we previously disclosed in our 2022 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer purchases of equity securities. The following table provides information about our purchases of our equity securities during the quarter ended March 31, 2023:
Calendar Month
Number of Shares Purchased (1)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2023 - January 31, 20231,199$7.15$$
March 1, 2023 - March 31, 20233,7729.96
Total4,971$9.28$$
(1)These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain former officers and employees of RMR in connection with the vesting of awards of common shares. We withheld and purchased these shares at their fair market values based upon the trading prices of our common shares at the close of trading on Nasdaq on the purchase dates.

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Item 6. Exhibits
Exhibit
Number
Description
3.1 
3.2 
3.3 
4.1 
4.2 
4.3 
4.4 
4.5 
4.6 
4.7 
4.8 
4.9 
4.10 
4.11 
4.12 
4.13 
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Exhibit
Number
Description
4.14 
4.15 
4.16 
4.17 
4.18 
4.19 
4.20 
4.21 
4.22 
4.23 
4.24 
4.25 
22.1 
31.1 
31.2 
31.3 
31.4 
32.1 
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document. (Filed herewith.)
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Exhibit
Number
Description
101.CALXBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
101.LABXBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SERVICE PROPERTIES TRUST
/s/ Todd W. Hargreaves
Todd W. Hargreaves
President and Chief Investment Officer
Dated: May 8, 2023
/s/ Brian E. Donley
Brian E. Donley
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Dated: May 8, 2023

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