TKO offers $2.0 billion for Service Properties Trust's hotels
Key Facts
TKO Hotels announced a $2.0 billion cash offer to acquire Service Properties Trust's entire hotel portfolio on October 9, 2026. The bidder said in its statement that proceeds from the proposed sale would allow the company to repay more than 40% of its outstanding debt. Service Properties Trust confirmed in a separate statement that it had received the proposal, which it described as unsolicited. The company added that it had received no communication from TKO before the offer arrived. The proposal targets the hotel portfolio, while the company also owns a net-lease retail property business.
TKO is pitching the sale as a path to turning Service Properties Trust into a real estate investment trust focused entirely on net-lease retail properties. The company owned 745 service-oriented retail properties of this type at the end of June, according to second-quarter information filed with the U.S. Securities and Exchange Commission. The bidder's case for exiting hotels rests on their substantial capital requirements, including spending on the assets. Its statement also cited the complexity of hotel operations and the business's exposure to economic cycles. TKO summarized the hotel business as "capital-intensive, operationally complex and subject to cyclical volatility."
The company's hotel portfolio comprised 93 hotels at the end of June 2026, according to its second-quarter results filing. Those hotels had more than 21,000 rooms, while Service Properties Trust is managed by The RMR Group. The company reported a second-quarter net loss of $223.8 million, including an asset impairment related to hotels held for sale. The impairment loss on those assets totaled $189.1 million, according to the SEC filing. Meanwhile, revenue per available room at retained hotels rose 6.6% compared with the second quarter of 2025.
Management attributed the improved operating performance of retained hotels to increasing benefits from recently completed renovations. It said in the earnings filing that performance reflected "increasing benefits from recently completed renovations." On financing, the acquisition offer followed an equity offering completed in April 2026, according to the company's first-quarter financial information. The offering generated net proceeds of approximately $542.3 million after underwriting commissions and other offering expenses. In October, the company declared a regular quarterly cash distribution on its common shares of $0.05 per share.
In a subsequent update to its offer announcement, TKO said it was prepared to provide proof of funds to complete the proposed transaction. It added that it was prepared to deposit $50 million into escrow, conditional on signing a nondisclosure agreement. The follow-up statement said: "Upon execution of a nondisclosure agreement, TKO is prepared to deposit $50 million into escrow." Service Properties Trust shares, listed under the ticker SVC, closed at $7.15 on the day of the announcement, according to EL7 data. The stock had ended the previous session, on October 8, 2026, at $6.22.
Service Properties Trust's board of trustees said it would carefully review the offer to determine the course it considers to be in the best interests of the company and its shareholders. Completion of the proposal remains subject to negotiations, board approval and the signing of definitive transaction documents, as well as the satisfaction or waiver of closing conditions, according to TKO. In its announced distribution schedule, the company set the close of business on October 19, 2026, as the record date for shareholders eligible for the cash distribution. Payment is scheduled for on or about November 12, 2026, according to the company's distribution announcement. Before then, Service Properties Trust plans to release third-quarter results after the Nasdaq market closes on November 4, 2026, according to a subsequent earnings date announcement.