Service Properties Trust Bets on 77 Hotels Before Selling Them to Cut Debt
Key Facts
Service Properties Trust said its board of trustees sent a formal response to Blackwells Capital regarding its public letter dated November 5, 2026, rejecting its requests after unanimously concluding they were not in shareholders’ best interests. The trust said the review included all six independent trustees, and the board chose to continue its hotel portfolio plan rather than implement Blackwells’ demands. The plan centers on growing the performance of 77 hotels the trust is retaining before selling them. Management says improving operating performance could generate higher proceeds than an immediate sale. The decision puts the hotel strategy and debt reduction at the forefront of the trust’s strategy.
The company aims to increase earnings before interest, taxes, depreciation and amortization at the retained hotels by about $109 million over 12 to 24 months from the date of the statement. The plan relies, according to the trust, on capital it has invested and operating initiatives identified by management. The company plans to begin selling the hotels in 2027, with the goal of selling most of them by the end of 2028. In its statement, it said it wants to “grow earnings before interest, taxes, depreciation and amortization in the retained hotel portfolio before selling it.” SVC thus ties the timing of its exit to achieving operating growth first, then directing the proceeds toward reducing debt.
The company said proceeds from hotel sales will be used to reduce leverage from net debt currently equivalent to nine times adjusted earnings before interest, taxes, depreciation and amortization to five times or less. The third-quarter earnings report showed net debt to adjusted earnings at 9.0 times at the end of September 2026, compared with 10.0 times in the same period of 2025. Total liquidity was $690.118 million on September 30, including $40.118 million in cash and $650 million available under a secured revolving credit facility. After reducing debt, the plan aims to complete the trust’s transformation into a pure-play triple-net lease company. That makes hotel sales part of a reshaping of the business structure, alongside debt reduction.
The plan comes as the trust holds a mix of hotels and retail properties leased under net leases. According to its third-quarter report, the company owned 87 hotels and 740 retail properties under net leases as of September 30, 2026. Occupancy at its net lease properties was 97.6% on that date. The hotels the company plans to retain temporarily recorded an 8.3% year-over-year increase in revenue per available room in the third quarter, while their adjusted hotel earnings rose 16.2%. The company said its revenue-per-available-room growth outperformed the U.S. hotel sector for the eighth consecutive quarter. This operating performance provides a numerical backdrop for the decision to grow the portfolio’s value before selling it.
Blackwells said in its letter that TKO LLC made a nonbinding all-cash offer of $2 billion on October 7 to buy SVC’s entire hotel portfolio. Blackwells added that the offer included a $50 million deposit into escrow, and that the confidentiality agreement signed by TKO was awaiting the trust’s countersignature. The investment firm called for a competitive, transparent sale process overseen by independent trustees and disclosure of written offers relating to the hotels or the trust during the previous 24 months. Blackwells also accused the board of conflicts of interest, noting that the board chairman runs RMR, the trust’s external manager, and chairs Sonesta, which operates most of its hotels. In its response, the board said Blackwells’ requests were not in shareholders’ best interests, without announcing any change to its phased exit plan.
Third-quarter results showed a net loss of $87.94 million, compared with a loss of $46.945 million in the same period of 2025. Total revenue was $399.52 million, versus $478.77 million a year earlier. The company said achieving its earnings-growth targets depends on market conditions, hotel-sector trends, and its ability to control costs and improve performance. The timing and terms of sales also depend on buyer demand and the availability of financing. These factors leave the plan’s course tied to hotel performance and the conditions facing divestitures in 2027 and beyond.