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Service Properties Trust Amends Management Agreement with Radisson

Published: 2021-11-01 12:00:00 ET
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Amended Agreement Supported by $22.0 Million Guaranty

NEWTON, Mass.--(BUSINESS WIRE)-- Service Properties Trust (Nasdaq: SVC), or SVC, today announced that it reached an agreement with a subsidiary of Radisson Hospitality, Inc., or Radisson, to amend their previous management agreement for nine hotels owned by subsidiaries of SVC.

Under the amended agreement, Radisson will continue to manage eight of the hotels, including five Radisson Hotels and Resorts and three Country Inn & Suites by Radisson, for a 10-year term effective as of August 1, 2021. Among other terms, the new agreement with Radisson provides as follows:

  • SVC’s owner’s priority return is set at $10.2 million annually, supported by a $22.0 million guaranty for 75% of the aggregate annual owner’s priority return beginning in 2023.
  • A management fee equal to 3% of gross revenue for Radisson branded hotels and 5% of gross revenue for Country Inn & Suites hotels payable to Radisson will be an operating cost paid senior to SVC’s owner’s priority return.
  • Following payment of SVC’s owner’s priority return and reimbursement of certain advances, if any, Radisson may earn a 20% incentive management fee and SVC will receive the remaining cash flow.
  • SVC will fund approximately $12 million for renovations expected to be completed by the end of 2022. As such funding is advanced by SVC, the aggregate annual owner's priority return due to SVC under the amended agreement will increase by 6% of the amounts funded.

John Murray, President and Chief Executive Officer of SVC, made the following statement:

“SVC and Radisson have had a productive business relationship since 2005. The amended agreement extends that relationship at least through 2031, maintains credit support for SVC’s owner’s priority return and provides for renovation activity, which will enhance the portfolio and is expected to result in improved coverage of SVC’s owner’s priority return for the portfolio.”

SVC and Radisson transitioned management of one hotel to Sonesta International Hotels Corporation, or Sonesta, under the Royal Sonesta brand on October 31, 2021. SVC also owns approximately 34% of Sonesta.

About Service Properties Trust

Service Properties Trust (Nasdaq: SVC) is a real estate investment trust, or REIT, with more than $12 billion invested in two asset categories: hotels and service-focused retail net lease properties. SVC owns more than 300 hotels with over 48,000 guest rooms throughout the United States and in Puerto Rico and Canada, the majority of which are extended stay and select service. SVC owns nearly 800 retail service focused net lease properties totaling over 13 million square feet throughout United States. SVC is managed by an operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative asset management company with more than $32 billion in assets under management and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. SVC is headquartered in Newton, MA. For more information, visit svcreit.com.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever SVC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, SVC is making forward-looking statements. These forward-looking statements are based upon SVC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by SVC’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond SVC’s control. For example:

  • This press release states that SVC will fund approximately $12 million for renovations and that such renovations are expected to be completed by the end of 2022. These renovations may be delayed or may not occur.
  • This press release states that the amended agreement will enhance the portfolio of hotels managed by Radisson and is expected to result in improved coverage of SVC’s owner’s priority return for the portfolio. SVC cannot provide any assurance that coverage of SVC’s owner’s priority return for this portfolio will improve.

The information contained in SVC’s filings with the Securities and Exchange Commission, or SEC, including under the caption “Risk Factors” in SVC’s periodic reports, or incorporated therein, identifies other important factors that could cause differences from SVC’s forward-looking statements. SVC’s filings with the SEC are available on the SEC's website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, SVC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

Kristin Brown, Director, Investor Relations (617) 796-8232

Source: Service Properties Trust