10q10k10q10k.net

What changed in Service Properties Trust's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Service Properties Trust's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+398 added−394 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-28)

Top changes in Service Properties Trust's 2024 10-K

398 paragraphs added · 394 removed · 329 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

106 edited+9 added−15 removed315 unchanged
Biggest changeIn addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions.
Biggest changeThe restrictions on transfer enumerated in the regulation as not affecting that finding include any restriction on or prohibition against any transfer or assignment that would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order. 28 Table of Contents We believe the restrictions imposed under our declaration of trust and bylaws on the transfer of shares do not result in the failure of our shares to be “freely transferable.” In addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions in the regulation.
In implementing our acquisition strategy, we consider a range of factors relating to proposed property purchases including some or all of the following: • Historical and projected cash flows; • The estimated replacement cost, capital improvement requirements and proposed acquisition price of the property; • The proposed management agreement or lease terms; • The brand under which the property operates or is expected to operate; • The competitive market environment and the current or potential market position of each property; 4 Table of Contents • The availability of a qualified and reputable manager or tenant; • The financial strength of the proposed manager or tenant; • The property’s design, construction quality, physical condition and age and expected capital expenditures that may be needed to maintain the property or to enhance its operation; • The size of the property; • The location, type of property, market conditions and demographics of the area where it is located and surrounding demand generators; • Our weighted average long term cost of capital compared to projected returns we may realize by owning the property; • The tax and regulatory circumstances of the market area in which the property is located; • The amount and type of financial support available from the proposed manager or lessee; • The level of services and amenities offered at the property; • The strategic fit of the property or investment with the rest of our portfolio and our own plans; • The possibility that technological changes may affect the business operated at the property; • Other possible uses of the property if the current use is no longer viable; and • The existence of alternative sources, uses or needs for our capital and our debt leverage.
In implementing our acquisition strategy, we consider a range of factors relating to proposed property purchases including some or all of the following: • Historical and projected cash flows; • The estimated replacement cost, capital improvement requirements and proposed acquisition price of the property; • The proposed management agreement or lease terms; • The brand under which the property operates or is expected to operate; 4 Table of Contents • The competitive market environment and the current or potential market position of each property; • The availability of a qualified and reputable manager or tenant; • The financial strength of the proposed manager or tenant; • The property’s design, construction quality, physical condition and age and expected capital expenditures that may be needed to maintain the property or to enhance its operation; • The size of the property; • The location, type of property, market conditions and demographics of the area where it is located and surrounding demand generators; • Our weighted average long term cost of capital compared to projected returns we may realize by owning the property; • The tax and regulatory circumstances of the market area in which the property is located; • The amount and type of financial support available from the proposed manager or lessee; • The level of services and amenities offered at the property; • The strategic fit of the property or investment with the rest of our portfolio and our own plans; • The possibility that technological changes may affect the business operated at the property; • Other possible uses of the property if the current use is no longer viable; and • The existence of alternative sources, uses or needs for our capital and our debt leverage.
Fiduciaries of an ERISA Plan must consider whether: • their investment in our shares or other securities satisfies the diversification requirements of ERISA; 27 Table of Contents • the investment is prudent in light of possible limitations on the marketability of our shares; • they have authority to acquire our shares or other securities under the applicable governing instrument and Title I of ERISA; and • the investment is otherwise consistent with their fiduciary responsibilities.
Fiduciaries of an ERISA Plan must consider whether: • their investment in our shares or other securities satisfies the diversification requirements of ERISA; • the investment is prudent in light of possible limitations on the marketability of our shares; • they have authority to acquire our shares or other securities under the applicable governing instrument and Title I of ERISA; and 27 Table of Contents • the investment is otherwise consistent with their fiduciary responsibilities.
The summary does not discuss all of the particular tax considerations that might be relevant to you if you are subject to special rules under federal income tax law, for example if you are: • a bank, insurance company or other financial institution; • a regulated investment company or REIT; • a subchapter S corporation; • a broker, dealer or trader in securities or foreign currencies; • a person who marks-to-market our shares for U.S. federal income tax purposes; • a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar; • a person who acquires or owns our shares in connection with employment or other performance of services; • a person subject to alternative minimum tax; • a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction; • a person who owns 10% or more (by vote or value, directly or constructively under the IRC) of any class of our shares; • a U.S. expatriate; • a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States; • a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year; • a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC); • a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds; • a non-U.S. shareholder that is a passive foreign investment company or controlled foreign corporation; • a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or 10 Table of Contents • except as specifically described in the following summary, a trust, estate, tax-exempt entity or foreign person.
The summary does not discuss all of the particular tax considerations that might be relevant to you if you are subject to special rules under federal income tax law, for example if you are: • a bank, insurance company or other financial institution; • a regulated investment company or REIT; • a subchapter S corporation; • a broker, dealer or trader in securities or foreign currencies; • a person who marks-to-market our shares for U.S. federal income tax purposes; • a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar; • a person who acquires or owns our shares in connection with employment or other performance of services; • a person subject to alternative minimum tax; • a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction; • a person who owns 10% or more (by vote or value, directly or constructively under the IRC) of any class of our shares; • a U.S. expatriate; • a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States; • a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year; • a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC); • a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds; • a non-U.S. shareholder that is a passive foreign investment company or controlled foreign corporation; • a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or • except as specifically described in the following summary, a trust, estate, tax-exempt entity or foreign person.
Assuming that each class of our shares will be “widely held” and that no other facts and circumstances exist that restrict transferability of these shares, our counsel, Sullivan & Worcester LLP, is of the opinion that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of our shares in our declaration of trust and bylaws and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.
Assuming that each class of our shares will be “widely held” and that no facts and circumstances exist that restrict transferability of these shares, our counsel, Sullivan & Worcester LLP, is of the opinion that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of our shares in our declaration of trust and bylaws and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.
In order to qualify for taxation as a REIT under the IRC, we are required to make annual distributions other than capital gain dividends to our shareholders in an amount at least equal to the excess of: (1) the sum of 90% of our “real estate investment trust taxable income” and 90% of our net income after tax, if any, from property received in foreclosure, over (2) the amount by which our noncash income (e.g., imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges) exceeds 5% of our “real estate investment trust taxable income.” For these purposes, our “real estate investment trust taxable income” is as defined under Section 857 of the IRC and is computed without regard to the dividends paid deduction and our net capital gain and will generally be reduced by specified corporate-level income taxes that we pay (e.g., taxes on built-in gains or foreclosure property income).
In order to qualify for taxation as a REIT under the IRC, we are required to make annual distributions other than capital gain dividends to our shareholders in an amount at least equal to the excess of: (1) the sum of 90% of our “real estate investment trust taxable income” and 90% of our net income after tax, if any, from property received in foreclosure, over (2) the amount by which our noncash income (e.g., cancellation of indebtedness income, imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges) exceeds 5% of our “real estate investment trust taxable income.” For these purposes, our “real estate investment trust taxable income” is as defined under Section 857 of the IRC and is computed without regard to the dividends paid deduction and our net capital gain and will generally be reduced by specified corporate-level income taxes that we pay (e.g., taxes on built-in gains or foreclosure property income).
For more information regarding climate change and other environmental matters and their possible adverse impact on us, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities,” “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters,” included in Part I, Item 1A of this Annual Report on Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” included in Part II, Item 7 of this Annual Report on Form 10-K.
For further information regarding climate change and other environmental matters and their possible adverse impact on us, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities,” “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters,” included in Part I, Item 1A of this Annual Report on Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” included in Part II, Item 7 of this Annual Report on Form 10-K.
Section 856(a) of the IRC defines a REIT as a corporation, trust or association: (1) that is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest; (3) that would be taxable, but for Sections 856 through 859 of the IRC, as a domestic C corporation; (4) that is not a financial institution or an insurance company subject to special provisions of the IRC; 13 Table of Contents (5) the beneficial ownership of which is held by 100 or more persons; (6) that is not “closely held,” meaning that during the last half of each taxable year, not more than 50% in value of the outstanding shares are owned, directly or indirectly, by five or fewer “individuals” (as defined in the IRC to include specified tax-exempt entities); and (7) that meets other tests regarding the nature of its income and assets and the amount of its distributions, all as described below.
Section 856(a) of the IRC defines a REIT as a corporation, trust or association: (1) that is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest; (3) that would be taxable, but for Sections 856 through 859 of the IRC, as a domestic C corporation; (4) that is not a financial institution or an insurance company subject to special provisions of the IRC; (5) the beneficial ownership of which is held by 100 or more persons; (6) that is not “closely held,” meaning that during the last half of each taxable year, not more than 50% in value of the outstanding shares are owned, directly or indirectly, by five or fewer “individuals” (as defined in the IRC to include specified tax-exempt entities); and (7) that meets other tests regarding the nature of its income and assets and the amount of its distributions, all as described below.
To the extent that distributions in excess of our current and accumulated earnings and profits exceed the non-U.S. shareholder’s adjusted basis in our shares, the distributions will give rise to U.S. federal income tax liability only in the unlikely event that the non-U.S. shareholder would otherwise be subject to tax on any gain from the sale or exchange of these shares, as discussed below under the heading “—Dispositions of Our Shares.” A non-U.S. shareholder may seek a refund from the IRS of amounts withheld on distributions to it in excess of such shareholder’s allocable share of our current and accumulated earnings and profits.
To the extent that distributions in excess of our current and accumulated earnings and profits exceed the non-U.S. shareholder’s adjusted basis in our shares, the distributions will give rise to U.S. federal income tax liability only in the unlikely event that the non-U.S. shareholder would otherwise be subject to tax on any gain from the sale or exchange of these shares, as discussed below under the heading “Dispositions of Our Shares.” A non-U.S. shareholder may seek a refund from the IRS of amounts withheld on distributions to it in excess of such shareholder’s allocable share of our current and accumulated earnings and profits.
In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the tax we paid. • If we have net income from the disposition of “foreclosure property,” as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate. • If we have net income from “prohibited transactions”—that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors—we will be subject to tax on this income at a 100% rate. • If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year. • If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest 12 Table of Contents regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test. • If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure. • If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed. • If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset.
In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the federal corporate income tax we paid on our retained net capital gain. • If we have net income from the disposition of “foreclosure property,” as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate. • If we have net income from “prohibited transactions,” that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors—we will be subject to tax on this income at a 100% rate. • If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year. • If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test. • If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure. • If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed. • If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset.
To summarize, the preferential federal income tax rates for long-term capital gains and for qualified dividends generally apply to: (1) long-term capital gains, if any, recognized on the disposition of our shares; (2) our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a maximum 25% federal income tax rate); (3) our dividends attributable to dividend income, if any, received by us from C corporations such as TRSs; (4) our dividends attributable to earnings and profits that we inherit from C corporations; and (5) our dividends to the extent attributable to income upon which we have paid federal corporate income tax (such as taxes on foreclosure property income or on built-in gains), net of the corporate income taxes thereon.
To summarize, the preferential federal income tax rates for long-term capital gains and for qualified dividends generally apply to: 22 Table of Contents (1) long-term capital gains, if any, recognized on the disposition of our shares; (2) our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a maximum 25% federal income tax rate); (3) our dividends attributable to dividend income, if any, received by us from C corporations such as TRSs; (4) our dividends attributable to earnings and profits that we inherit from C corporations; and (5) our dividends to the extent attributable to income upon which we have paid federal corporate income tax (such as taxes on foreclosure property income or on built-in gains), net of the corporate income taxes thereon.
However, even if we continue to qualify for taxation as a REIT, we may still be subject to federal tax in the following circumstances, as described below: • We will be taxed at regular corporate income tax rates on any undistributed “real estate investment trust taxable income,” determined by including our undistributed ordinary income and net capital gains, if any.
However, even if we continue to qualify for taxation as a REIT, we may still be subject to federal tax in the following circumstances, as described below: • We will be taxed at regular corporate income tax rates on any undistributed “real estate investment trust taxable income,” including our undistributed ordinary income and net capital gains, if any.
The distribution of these C corporation earnings and profits is potentially eligible for taxation to noncorporate U.S. shareholders at the preferential tax rates for “qualified dividends” as described below under the heading “—Taxation of Taxable U.S. Shareholders”. Depreciation and Federal Income Tax Treatment of Leases Our initial tax bases in our assets will generally be our acquisition cost.
The distribution of these C corporation earnings and profits is potentially eligible for taxation to noncorporate U.S. shareholders at the preferential tax rates for “qualified dividends” as described below under the heading “Taxation of Taxable U.S. Shareholders”. Depreciation and Federal Income Tax Treatment of Leases Our initial tax bases in our assets will generally be our acquisition cost.
We generally do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements. • If we acquire a corporation in a transaction where we succeed to its tax attributes, to preserve our qualification for taxation as a REIT we must generally distribute all of the C corporation earnings and profits inherited in that acquisition, if any, no later than the end of our taxable year in which the acquisition occurs.
We generally do not expect to sell assets if doing so would result in the imposition of a 12 Table of Contents material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements. • If we acquire a corporation in a transaction where we succeed to its tax attributes, to preserve our qualification for taxation as a REIT we must generally distribute all of the C corporation earnings and profits inherited in that acquisition, if any, no later than the end of our taxable year in which the acquisition occurs.
We have made an election to be treated as a real property trade or business and accordingly do not expect the foregoing interest deduction limitations to apply to us or to the calculation of our “real estate investment trust taxable income.” 20 Table of Contents Distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our federal income tax return for the earlier taxable year and if paid on or before the first regular distribution payment after that declaration.
We have made an election to be treated as a real property trade or business and accordingly do not expect the foregoing interest deduction limitations to apply to us or to the calculation of our “real estate investment trust taxable income.” Distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our federal income tax return for the earlier taxable year and if paid on or before the first regular distribution payment after that declaration.
We seek to be a responsible corporate citizen and to strengthen the communities in which we own properties. Our managers regularly encourage their employees to engage in a variety of charitable and community programs, including participation in company-wide service days and charitable gift giving matching programs. • Diversity and Inclusion. We value a diversity of backgrounds, experience and perspectives.
We seek to be a responsible corporate citizen and to strengthen the communities in which we own properties. Our managers regularly encourage their employees to engage in a variety of charitable and community programs, including participation in company-wide service days and charitable gift giving matching programs. • Diversity and Inclusion. We value a diversity of backgrounds, experiences and perspectives.
Working with our operators, we have: • initiated programs to reduce energy and water use; • implemented various initiatives to encourage recycling of plastics, paper and metal or glass containers; • when renovating hotels, used energy efficient products, including lighting, windows, plumbing and heating, ventilation and air conditioning equipment, and many appliances in extended stay hotels are ENERGY STAR® rated; and • installed electric car charging stations at some of our hotels and travel centers. • Investments in Human Capital.
Working with our operators, we have: • initiated programs to reduce energy and water use; • implemented various initiatives to encourage recycling of plastics, paper and metal or glass containers; 8 Table of Contents • when renovating hotels, used energy efficient products, including lighting, windows, plumbing and heating, ventilation and air conditioning equipment, and many appliances in extended stay hotels are ENERGY STAR® rated; and • installed electric car charging stations at some of our hotels and travel centers. • Investments in Human Capital.
Our counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 1995 through 2023 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.
Our counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 1995 through 2024 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.
Convertible mortgages are similar to equity participation because they permit lenders to either participate in increasing revenues from the property or convert some or all of that mortgage into equity ownership interests. At December 31, 2023, we owned no convertible mortgages or joint venture interests.
Convertible mortgages are similar to equity participation because they permit lenders to either participate in increasing revenues from the property or convert some or all of that mortgage into equity ownership interests. At December 31, 2024, we owned no convertible mortgages or joint venture interests.
The portion of rental income treated as attributable to personal property is determined according to the ratio of the fair market value of the personal property to the total fair market value of the real and personal property that is rented. 16 Table of Contents • In addition, “rents from real property” includes both charges we receive for services customarily rendered in connection with the rental of comparable real property in the same geographic area, even if the charges are separately stated, as well as charges we receive for services provided by our TRSs when the charges are not separately stated.
The portion of rental income treated as attributable to personal property is determined according to the ratio of the fair market value of the personal property to the total fair market value of the real and personal property that is rented. • In addition, “rents from real property” includes both charges we receive for services customarily rendered in connection with the rental of comparable real property in the same geographic area, even if the charges are separately stated, as well as charges we receive for services provided by our TRSs when the charges are not separately stated.
As of December 31, 2023, all of our hotels were leased to our TRSs and managed by third parties. Any income realized by a TRS in excess of the rent paid to us by the subsidiary is subject to income tax at customary corporate rates.
As of December 31, 2024, all of our hotels were leased to our TRSs and managed by third parties. Any income realized by a TRS in excess of the rent paid to us by the subsidiary is subject to income tax at customary corporate rates.
In the case of a REIT that is a partner in a partnership, Treasury regulations under the IRC provide that, for purposes of the REIT qualification requirements regarding income and assets described below, the REIT is generally deemed to own its proportionate share, based on respective capital interests, of the income and assets of the partnership (except that for purposes of the 10% value test, described below, the REIT’s proportionate share of the partnership’s assets is based on its proportionate interest in the equity and specified debt securities issued by the partnership).
In the case of a REIT that is a partner in a partnership, Treasury regulations under the IRC provide that, for purposes of the REIT qualification requirements regarding income and assets described below, the REIT is generally deemed to own its proportionate share, based on respective capital interests (including any preferred equity interests in the partnership), of the income and assets of the partnership (except that for purposes of the 10% value test, described below, the REIT’s proportionate share of the partnership’s assets is based on its proportionate interest in the equity and specified debt securities issued by the partnership).
We expect to make protective TRS elections with respect to any subsidiary REIT that we form or acquire and may implement other protective arrangements intended to avoid a cascading REIT failure if any of our intended subsidiary REITs were not to qualify for taxation as a REIT, but we cannot be sure that such protective elections or other arrangements will be effective to avoid or mitigate the resulting adverse consequences to us.
We expect to make protective TRS elections with respect to any subsidiary REIT that we form or acquire and may implement other protective arrangements intended to avoid a cascading REIT failure if any of our intended subsidiary REITs were not to qualify for taxation as a REIT, 14 Table of Contents but we cannot be sure that such protective elections or other arrangements will be effective to avoid or mitigate the resulting adverse consequences to us.
For these purposes, a contractor qualifies as an “eligible independent contractor” if it is less than 35% affiliated with the REIT and, at the time the contractor enters into the agreement with the TRS to operate the qualified lodging facility, that contractor or any person related to that contractor is actively engaged in the trade or business of operating qualified lodging facilities for persons unrelated to the TRS or its affiliated REIT.
For these purposes, a contractor qualifies as an “eligible independent contractor” if it is less than 35% affiliated with the REIT and, at the time the contractor enters into the agreement with the TRS to operate the qualified lodging facility, that contractor or any person related to that contractor is actively engaged in the trade or business of operating qualified lodging 19 Table of Contents facilities for persons unrelated to the TRS or its affiliated REIT.
We make available, free of charge, through the “Investors” section of our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 9 Table of Contents 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after these forms are filed with, or furnished to, the SEC.
We make available, free of charge, through the “Investors” section of our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after these forms are filed with, or furnished to, the SEC.
However, because we are not generally subject to federal income tax on the portion of our “real estate investment trust taxable income” distributed to our shareholders, dividends on our shares generally are not eligible for these preferential tax rates, except that any distribution of C corporation 22 Table of Contents earnings and profits and taxed built-in gain items will potentially be eligible for these preferential tax rates.
However, because we are not generally subject to federal income tax on the portion of our “real estate investment trust taxable income” distributed to our shareholders, dividends on our shares generally are not eligible for these preferential tax rates, except that any distribution of C corporation earnings and profits and taxed built-in gain items will potentially be eligible for these preferential tax rates.
Under this approach, the non-U.S. shareholder would be able to offset as a credit against its resulting U.S. federal income tax liability its proportionate share of the tax paid by us on the undistributed capital 25 Table of Contents gain treated as distributed to the non-U.S. shareholder, and receive from the IRS a refund to the extent its proportionate share of the tax paid by us were to exceed the non-U.S. shareholder’s actual U.S. federal income tax liability on such deemed distribution.
Under this approach, the non-U.S. shareholder would be able to offset as a credit against its resulting U.S. federal income tax liability its proportionate share of the tax paid by us on the undistributed capital gain treated as distributed to the non-U.S. shareholder, and receive from the IRS a refund to the extent its proportionate share of the tax paid by us were to exceed the non-U.S. shareholder’s actual U.S. federal income tax liability on such deemed distribution.
The U.S. federal income tax treatment of our distributions will vary based on the status of the recipient shareholder as more fully described below under the headings “—Taxation of Taxable U.S. Shareholders,” “—Taxation of Tax-Exempt U.S. Shareholders,” and “—Taxation of Non-U.S.
The U.S. federal income tax treatment of our distributions will vary based on the status of the recipient shareholder as more fully described below under the headings “Taxation of Taxable U.S. Shareholders,” “Taxation of Tax-Exempt U.S. Shareholders,” and “Taxation of Non-U.S.
We or our tenants have entered into arrangements for the operation of our properties. Under the United States Internal Revenue Code of 1986, as amended, or the IRC, we may lease our hotels to one of our “taxable REIT subsidiaries”, as defined in Section 856(l) of the IRC, or TRSs, if the hotel is managed by a third party.
We or our tenants have entered into arrangements for the operation of our properties. Under the United States Internal Revenue Code of 1986, as amended, or the IRC, we may lease our hotels to one of our “taxable REIT subsidiaries,” as defined in Section 856(l) of the IRC, or TRSs, if the hotel is managed by a third party.
Under these agreements, neither the 7 Table of Contents operators nor their affiliates are usually restricted from operating other brands of hotels in the market areas of any of our hotels, and after such period of time, the operators and their affiliates may also compete with our hotels by opening, managing or franchising additional hotels under the same brand name in direct competition with our hotels.
Under these agreements, neither the operators nor their affiliates are usually restricted from operating other brands of hotels in the market areas of any of our hotels, and after such period of time, the operators and their affiliates may also compete with our hotels by opening, managing or franchising additional hotels under the same brand name in direct competition with our hotels.
No portion of any of our dividends is eligible for the dividends received deduction for corporate shareholders. Distributions in excess of our current or accumulated earnings and profits generally are treated for federal income 11 Table of Contents tax purposes as returns of capital to the extent of a recipient shareholder’s basis in our shares, and will reduce this basis.
No portion of any of our dividends is eligible for the dividends received deduction for corporate shareholders. Distributions in excess of our current or accumulated earnings and profits generally are treated for federal income tax purposes as returns of capital to the extent of a recipient shareholder’s basis in our shares, and will reduce this basis.
Information reporting and backup withholding will not apply to proceeds a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares, if the non-U.S. shareholder properly certifies to the applicable withholding agent its non-U.S. shareholder status on an applicable IRS Form W-8 or substantially similar form.
Information reporting and backup 26 Table of Contents withholding will not apply to proceeds a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares, if the non-U.S. shareholder properly certifies to the applicable withholding agent its non-U.S. shareholder status on an applicable IRS Form W-8 or substantially similar form.
Our hotel operating agreements have initial terms expiring between 2026 and 2037. Each of these agreements is for between one and 195 of our hotels. The principal features of our hotel agreements are as follows: • Owner’s Priority Returns.
Our hotel operating agreements have initial terms expiring between 2026 and 2037. Each of these agreements is for between one and 181 of our hotels. The principal features of our hotel agreements are as follows: • Owner’s Priority Returns.
Given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, neither Sullivan & Worcester LLP nor we can be sure that we will qualify as or be taxed as a REIT for any particular year.
Given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, neither Sullivan & Worcester 11 Table of Contents LLP nor we can be sure that we will qualify as or be taxed as a REIT for any particular year.
Also, to the extent of our current and accumulated earnings and profits, all distributions to our shareholders will generally be taxable as ordinary dividends potentially eligible for the preferential tax rates discussed below under the heading “—Taxation of Taxable U.S. Shareholders” and, subject to limitations in the IRC, will be potentially eligible for the dividends received deduction for corporate shareholders.
Also, to the extent of our current and accumulated earnings and profits, all distributions to our shareholders will generally be taxable as ordinary dividends potentially eligible for the preferential tax rates discussed below under the heading “Taxation of Taxable U.S. Shareholders” and, subject to limitations in the IRC, will be potentially eligible for the dividends received deduction for corporate shareholders.
Our tenants may also face competition from online retailers or service providers, which may in turn negatively impact their ability to pay rents due to us. We have a large concentration of net lease properties in the travel center industry which is highly competitive.
Our tenants may also face competition from online retailers or service providers, which may in turn negatively impact their ability to pay rents due to us. 7 Table of Contents We have a large concentration of net lease properties in the travel center industry which is highly competitive.
Gross income from our sale of property that we hold primarily for sale to customers in the ordinary course of business, income and gain from specified “hedging transactions” that are clearly and timely identified as such, and income from the repurchase or discharge of indebtedness is excluded from both the numerator and the denominator in both gross income tests.
Gross income from our sale of property that we hold primarily for sale to customers in the ordinary course of business, income and gain from specified “hedging transactions” that are clearly and timely identified as such, and income from the repurchase or discharge of indebtedness is excluded from both the numerator and the denominator in both 15 Table of Contents gross income tests.
See Note 4 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for more information on these leases.
See Note 4 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for further information on these leases.
If we comply with applicable Treasury regulations to ascertain the ownership of our outstanding shares and do not know, or by exercising reasonable diligence would not have known, that we failed condition (6), then we will be treated as having met condition (6).
If we comply with applicable Treasury regulations to 13 Table of Contents ascertain the ownership of our outstanding shares and do not know, or by exercising reasonable diligence would not have known, that we failed condition (6), then we will be treated as having met condition (6).
In contrast, for purposes of the distribution requirements discussed below, we must take into account as a partner our share of the 14 Table of Contents partnership’s income as determined under the general federal income tax rules governing partners and partnerships under Subchapter K of the IRC. Subsidiary REITs.
In contrast, for purposes of the distribution requirements discussed below, we must take into account as a partner our share of the partnership’s income as determined under the general federal income tax rules governing partners and partnerships under Subchapter K of the IRC. Subsidiary REITs.
In addition, any loss upon a sale or exchange of our shares held for six months or less will generally be treated as a long-term capital loss to the extent of any long-term capital gain dividends we paid on such shares during the holding period.
In addition, any loss upon a 23 Table of Contents sale or exchange of our shares held for six months or less will generally be treated as a long-term capital loss to the extent of any long-term capital gain dividends we paid on such shares during the holding period.
We may invest in the securities of other entities for the purpose of exercising control or otherwise, make loans 5 Table of Contents to other persons or entities, engage in the sale of investments, offer securities in exchange for property or repurchase our securities. We may not achieve some or all of our investment objectives. Disposition Policies.
We may invest in the securities of other entities for the purpose of exercising control or otherwise, make loans to other persons or entities, engage in the sale of investments, offer securities in exchange for property or repurchase our securities. We may not achieve some or all of our investment objectives. Disposition Policies.
In order for this to be the case, the manager operating the leased property on behalf of the applicable TRS must be an “eligible independent contractor” within the meaning of Section 856(d)(9)(A) of the IRC, and the hotels leased to the TRS must be “qualified lodging facilities” within the meaning of Section 19 Table of Contents 856(d)(9)(D) of the IRC.
In order for this to be the case, the manager operating the leased property on behalf of the applicable TRS must be an “eligible independent contractor” within the meaning of Section 856(d)(9)(A) of the IRC, and the hotels leased to the TRS must be “qualified lodging facilities” within the meaning of Section 856(d)(9)(D) of the IRC.
Each class of our shares has been listed on a U.S. national securities exchange; however, we cannot be sure that our shares will continue to be so listed in future taxable years or that any class of our shares that we may issue in the future will be so listed. Distributions .
Each class of our shares has been listed on a U.S. national securities exchange; however, we 24 Table of Contents cannot be sure that our shares will continue to be so listed in future taxable years or that any class of our shares that we may issue in the future will be so listed. Distributions .
Whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or 17 Table of Contents business is a question of fact that depends on all the facts and circumstances surrounding each particular transaction.
Whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances surrounding each particular transaction.
Shareholders”. We generally do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements. Earnings and Profits.
We generally do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements. 21 Table of Contents Earnings and Profits.
Owner’s priority returns under our Hyatt and Radisson hotel agreements are partially supported by limited guarantees. • Long Terms. The weighted average term remaining for our hotel agreements (weighted by owner’s priority as of December 31, 2023) is 12.9 years, without giving effect to any renewal options our managers may have. • Pooled Agreements.
Owner’s priority returns under our Hyatt and Radisson hotel agreements are partially supported by limited guarantees. • Long Terms. The weighted average term remaining for our hotel agreements (weighted by owner’s priority as of December 31, 2024) is 11.9 years, without giving effect to any renewal options our managers may have. • Pooled Agreements.
We may in the future acquire additional shares of common stock of Sonesta or securities of other entities, including entities engaged in real estate activities, or we may sell these shares of common stock.
We may in the future acquire shares of common stock or securities of other entities, including entities engaged in real estate activities, or we may sell these shares of common stock.
We cannot be sure that arrangements involving our TRSs will not result in the imposition of one or more of these restrictions or sanctions, but we do not believe that we or our TRSs are or will be subject to these impositions. 15 Table of Contents Income Tests.
We cannot be sure that arrangements involving our TRSs will not result in the imposition of one or more of these restrictions or sanctions, but we do not believe that we or our TRSs are or will be subject to these impositions. Income Tests.
RMR is an alternative asset management company that is focused on commercial real estate and related businesses. RMR or its subsidiaries also act as a manager to other publicly traded real estate companies, privately held real estate funds and real estate related operating businesses. As of February 22, 2024, the executive officers of RMR are: Adam D.
RMR is an alternative asset management company that is focused on commercial real estate and related businesses. RMR or its subsidiaries also act as a manager to other publicly traded real estate companies, privately held real estate funds and real estate related operating businesses. As of February 24, 2025, the executive officers of RMR are: Adam D.
In such a situation, the REIT parent’s own qualification and taxation as a REIT could be jeopardized on account of the subsidiary’s failure cascading up to the REIT parent, all as described below under the heading “—Asset Tests”.
In such a situation, the REIT parent’s own qualification and taxation as a REIT could be jeopardized on account of the subsidiary’s failure cascading up to the REIT parent, all as described below under the heading “Asset Tests”.
If we were to designate any portion of our net capital gain as undistributed capital gain, a non-U.S. shareholder should consult its tax advisors regarding taxation of such undistributed capital gain. Dispositions of Our Shares .
If we were to designate any portion of our net capital gain as undistributed capital gain, a non-U.S. shareholder should consult its tax advisors regarding taxation of such undistributed capital gain. 25 Table of Contents Dispositions of Our Shares .
For more information about our hotel agreements and net lease portfolio, see Note 4 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 2 Table of Contents Principal Management Agreement or Lease Features As of December 31, 2023, our 221 hotels were managed by subsidiaries of Sonesta, Hyatt Hotels Corporation, or Hyatt, Radisson Hospitality, Inc., or Radisson, and InterContinental Hotels Group, plc, or IHG.
For further information about our hotel agreements and net lease portfolio, see Note 4 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 2 Table of Contents Principal Management Agreement or Lease Features As of December 31, 2024, our 206 hotels were managed by subsidiaries of Sonesta, Hyatt Hotels Corporation, or Hyatt, Radisson Hospitality, Inc., or Radisson, and InterContinental Hotels Group, plc, or IHG.
To the extent of our 21 Table of Contents income and gains in a taxable year that are subject to the built-in gains tax, net of any taxes paid on such income and gains with respect to that taxable year, our taxable dividends paid in the following year will be potentially eligible for taxation to noncorporate U.S. shareholders at the preferential tax rates for “qualified dividends” as described below under the heading “—Taxation of Taxable U.S.
To the extent of our income and gains in a taxable year that are subject to the built-in gains tax, net of any taxes paid on such income and gains with respect to that taxable year, our taxable dividends paid in the following year will be potentially eligible for taxation to noncorporate U.S. shareholders at the preferential tax rates for “qualified dividends” as described below under the heading “Taxation of Taxable U.S.
The regulation further provides that, where a security is part of an offering in which the 28 Table of Contents minimum investment is $10,000 or less, some restrictions on transfer ordinarily will not, alone or in combination, affect a finding that these securities are freely transferable.
The regulation further provides that, where a security is part of an offering in which the minimum investment is $10,000 or less, some restrictions on transfer ordinarily will not, alone or in combination, affect a finding that the securities are freely transferable.
However, if we fail to do so, relief provisions would allow us to maintain our qualification for taxation as a REIT provided we distribute any subsequently discovered C corporation earnings and profits and pay an interest charge in respect of the period of delayed distribution. • Our subsidiaries that are C corporations, including our “taxable REIT subsidiaries”, as defined in Section 856(l) of the IRC, or TRSs, generally will be required to pay federal corporate income tax on their earnings, and a 100% tax may be imposed on any transaction between us and one of our TRSs that does not reflect arm’s length terms.
However, if we fail to do so, relief provisions would allow us to maintain our qualification for taxation as a REIT provided we distribute any subsequently discovered C corporation earnings and profits and pay an interest charge in respect of the period of delayed distribution. • Our subsidiaries that are C corporations, including our TRSs, generally will be required to pay federal corporate income tax on their earnings, and a 100% tax may be imposed on any transaction between us and one of our TRSs that does not reflect arm’s length terms.
The portfolio is leased to tenants that include travel centers, quick service and casual dining restaurants, health and fitness centers, movie theaters, grocery stores, automotive parts and services and other businesses in service-focused and necessity-based industries across 42 states.
Our net lease portfolio is leased to tenants that include travel centers, quick service and casual dining restaurants, health and fitness centers, movie theaters, grocery stores, automotive parts and services and other businesses in service-focused and necessity-based industries across 42 states.
As of December 31, 2023 , 195 of our hotels are operated by Sonesta. Sonesta faces competition from larger, well known hotel companies. Competitive pressures from these companies and others could negatively impact Sonesta’s ability to pay our owner’s priority returns.
As of December 31, 2024, 181 of our hotels are operated by Sonesta. Sonesta faces competition from larger, well known hotel companies. Competitive pressures from these companies and others could negatively impact Sonesta’s ability to pay our owner’s priority returns.
(2) Represents the historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any, and excludes capital improvements made from reserves established for the regular refurbishment of our hotels, or FF&E reserves, funded from hotel operations that do not result in increases in our owner’s priority returns or rents. 1 Table of Contents Net Lease Portfolio As of December 31, 2023, we owned 752 service-focused retail net lease properties with an aggregate of 13,341,172 square feet.
(2) Represents the historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any, and excludes capital improvements made from reserves established for the regular refurbishment of our hotels, or FF&E reserves, funded from hotel operations that do not result in increases in our owner’s priority returns or rents. 1 Table of Contents Net Lease Portfolio As of December 31, 2024, we owned 742 service-focused retail net lease properties with an aggregate of 13,292,519 square feet.
Your federal income tax consequences generally will differ depending on whether or not you are a “U.S. shareholder.” For purposes of this summary, a “U.S. shareholder” is a beneficial owner of our shares that is: • an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws; • an entity treated as a corporation for federal income tax purposes that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia; • an estate the income of which is subject to federal income taxation regardless of its source; or • a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or, to the extent provided in Treasury regulations, a trust in existence on August 20, 1996 that has elected to be treated as a domestic trust; whose status as a U.S. shareholder is not overridden by an applicable tax treaty.
If new laws or regulations are enacted which impact us directly or indirectly, we may change our intentions or beliefs. 10 Table of Contents Your federal income tax consequences generally will differ depending on whether or not you are a “U.S. shareholder.” For purposes of this summary, a “U.S. shareholder” is a beneficial owner of our shares that is: • an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws; • an entity treated as a corporation for federal income tax purposes that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia; • an estate the income of which is subject to federal income taxation regardless of its source; or • a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or, to the extent provided in Treasury regulations, a trust in existence on August 20, 1996 that has elected to be treated as a domestic trust; whose status as a U.S. shareholder is not overridden by an applicable tax treaty.
Unless the U.S. shareholder has established on a properly executed IRS Form W-9 or substantially similar form that it comes within an enumerated exempt category, distributions or proceeds on our shares paid to it during the calendar year, and the amount of tax withheld, if any, will be reported to it and to the IRS. 26 Table of Contents Distributions on our shares to a non-U.S. shareholder during each calendar year and the amount of tax withheld, if any, will generally be reported to the non-U.S. shareholder and to the IRS.
Unless the U.S. shareholder has established on a properly executed IRS Form W-9 or substantially similar form that it comes within an enumerated exempt category, distributions or proceeds on our shares paid to it during the calendar year, and the amount of tax withheld, if any, will be reported to it and to the IRS.
As of December 31, 2023, we had two operating segments, hotel investments and net lease investments.
As of December 31, 2024, we had two operating segments, hotel investments and net lease investments.
If a dividend is declared in October, November or December to shareholders of record during one of those months and is paid during the following January, then for federal income tax purposes such dividend will be treated as having been both paid and received on December 31 of the prior taxable year to the extent of any undistributed earnings and profits.
If a dividend is declared in October, November or December to shareholders of record during one of those months and is paid during the following January, then for federal income tax purposes the dividend will be treated as having been both paid and received on December 31 of the prior taxable year.
Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our debt agreements.
Our ability to incur additional debt is subject to meeting the required covenant 6 Table of Contents levels and subject to the provisions of our debt agreements.
Portnoy, president and chief executive officer; Christopher J. Bilotto, executive vice president; Jennifer B. Clark, executive vice president, general counsel and secretary; Matthew P. Jordan, executive vice president, chief financial officer and treasurer and John G. Murray, executive vice president. Our President and Chief Investment Officer, Todd W. Hargreaves, and our Chief Financial Officer and Treasurer, Brian E.
Portnoy, president and chief executive officer; Christopher J. Bilotto, executive vice president; Jennifer B. Clark, executive vice president, general counsel and secretary; Matthew P. Jordan, executive vice president, chief financial officer and treasurer; Jeffrey C. Leer, executive vice president; and John G. Murray, executive vice president. Our President and Chief Investment Officer, Todd W.
Hotel Portfolio As of December 31, 2023, we owned 221 hotels with 37,777 rooms or suites located in 36 states, the District of Columbia, Ontario, Canada and San Juan, Puerto Rico. We believe the scale, geographic diversity, strategic locations and the variety of service levels of our hotels gives us a competitive advantage.
Hotel Portfolio As of December 31, 2024, we owned 206 hotels with 35,871 rooms or suites located in 35 states, the District of Columbia, Ontario, Canada and San Juan, Puerto Rico. We believe the scale, geographic diversity, strategic locations and the variety of service levels of our hotels gives us a competitive advantage.
Our Relationship with Sonesta . As of December 31, 2023, we owned (directly and indirectly through one of our TRSs) 34% of the outstanding common shares of Sonesta. We have not elected to treat Sonesta as a TRS, and it is not otherwise an automatic TRS because no TRS of ours owns more than 35% of Sonesta.
Our Relationship with Sonesta . We currently own (directly and indirectly through one of our TRSs) less than 35% of the outstanding common shares of Sonesta. We have not elected to treat Sonesta as a TRS, and it is not otherwise an automatic TRS because no TRS of ours owns more than 35% of Sonesta.
We may elect to retain, rather than distribute, some or all of our net capital gain and pay income tax on such gain.
We may elect to retain, rather than distribute, some or all of our net capital gain and certain of our cancellation of indebtedness income, and pay income tax on such retained amounts.
Our counsel, Sullivan & Worcester LLP, is of the opinion that, although the matter is not free from doubt, our investments in the equity or debt of a TRS of ours, to the extent that and during the period in which they qualify as temporary investments of new capital, will be treated as real estate assets, and not as securities, for purposes of the above REIT asset tests. 18 Table of Contents The above REIT asset tests must be satisfied at the close of each calendar quarter of each taxable year as a REIT.
Our counsel, Sullivan & Worcester LLP, is of the opinion that, although the matter is not free from doubt, our investments in the equity or debt of a TRS of ours, to the extent that and during the period in which they qualify as temporary investments of new capital, will be treated as real estate assets, and not as securities, for purposes of the above REIT asset tests.
As of December 31, 2023, we have invested approximately $2.3 billion in 132 TravelCenters of America branded properties with an aggregate of 3,697,503 square feet and approximately $1.0 billion in 44 Petro Stopping Centers branded properties with an aggregate of 1,367,802 square feet.
As of December 31, 2024, we have invested approximately $2.3 billion in 131 TravelCenters of America branded properties with an aggregate of 3,683,923 square feet and approximately $1.0 billion in 44 Petro Stopping Centers branded properties with an aggregate of 1,367,802 square feet.
(2) Represents the historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any. (3) Consists of 112 distinct brands with an average investment of $2,945 per property.
(2) Represents the historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any. (3) Consists of 111 distinct brands with an average investment of $2,903 per property and an average annual minimum rent of $194 per property.
Petro Stopping Centers Travel Centers 44 1,367,802 80,598 1,015,156 3. The Great Escape Home Leisure 14 542,666 7,711 98,242 4. Life Time Fitness Health and Fitness 3 420,335 5,770 92,617 5. Buehler's Fresh Foods Grocery Stores 5 502,727 5,657 76,469 6. Heartland Dental Medical, Dental Office 59 234,274 4,699 61,120 7. AMC Theatres Movie Theaters 6 297,166 4,438 67,023 8.
Petro Stopping Centers Travel Centers 44 1,367,802 82,287 1,015,156 3. The Great Escape Home Goods and Leisure 14 542,666 7,711 98,242 4. Life Time Fitness Health and Fitness 3 420,335 5,770 92,617 5. Buehler's Fresh Foods Grocery Stores 5 502,727 5,657 76,469 6. Heartland Dental Medical, Dental Office 59 234,274 4,769 61,120 7.
As of December 31, 2023, our net lease portfolio was occupied by 175 tenants with a weighted average (by annual minimum rent) lease term of 8.8 years, operating under 137 brands in 21 distinct industries.
As of December 31, 2024, our net lease portfolio was occupied by 177 tenants with a weighted average (by annual minimum rent) lease term of 8.0 years, operating under 136 brands in 22 distinct industries.
Instead, we expect to repay our debts, invest in our properties and fund acquisitions and development or redevelopment efforts with borrowings under our revolving credit facility, proceeds from equity or debt securities we may issue (domestically or in foreign markets), including in subsidiaries, proceeds from our asset sales, or retained cash from operations that may exceed distributions paid. 6 Table of Contents We believe our capital structure provides us with financial flexibility and we have historically had access to capital markets.
Instead, we expect to repay our debts, invest in our properties and fund acquisitions and development or redevelopment efforts with borrowings under our revolving credit facility, proceeds from equity or debt securities we may issue (domestically or in foreign markets), including in subsidiaries, proceeds from our asset sales, or retained cash from operations that may exceed distributions paid.
In addition, if we fail the 5% asset test, the 10% vote test or the 10% value test at the close of any quarter and we do not cure such failure within thirty days after the close of that quarter, that failure will nevertheless be excused if (a) the failure is de minimis and (b) within six months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy the 5% asset test, the 10% vote test and the 10% value test.
When a failure to satisfy the above asset tests results from an acquisition of securities or other property during a quarter, the failure can be cured by disposition of sufficient nonqualifying assets within thirty days after the close of that quarter. 18 Table of Contents In addition, if we fail the 5% asset test, the 10% vote test or the 10% value test at the close of any quarter and we do not cure such failure within thirty days after the close of that quarter, that failure will nevertheless be excused if (a) the failure is de minimis and (b) within six months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy the 5% asset test, the 10% vote test and the 10% value test.
The following table summarizes the brand affiliation and industries under which our net lease properties operate as of December 31, 2023 (dollars in thousands): Brand Industry No. of Properties Square Feet Annualized Minimum Rent (1) Investment (2) 1. TravelCenters of America Inc. Travel Centers 132 3,697,503 $ 173,402 $ 2,258,977 2.
The following table summarizes the brand affiliation and industries under which our net lease properties operate as of December 31, 2024 (dollars in thousands): Brand Industry No. of Properties Square Feet Annualized Minimum Rent (1) Investment (2) 1. TravelCenters of America Inc. Travel Centers 131 3,683,923 $ 176,793 $ 2,254,950 2.
We believe that any gain that we have recognized, or will recognize, in connection with our disposition of assets and other transactions, including through any partnerships, will generally qualify as income that satisfies the 75% and 95% gross income tests, and will not be dealer gains or subject to the 100% penalty tax.
Gains subject to the 100% penalty tax are excluded from the 75% and 95% gross income tests, whereas real property gains that are not dealer gains or that are exempted from the 100% penalty tax on account of the safe harbors are considered qualifying gross income for purposes of the 75% and 95% gross income tests. 17 Table of Contents We believe that any gain that we have recognized, or will recognize, in connection with our disposition of assets and other transactions, including through any partnerships, will generally qualify as income that satisfies the 75% and 95% gross income tests, and will not be dealer gains or subject to the 100% penalty tax.
This opinion is conditioned upon certain assumptions and representations, as discussed above under the heading “Material United States Federal Income Tax Considerations—Taxation as a REIT.” 29 Table of Contents
This opinion is conditioned upon certain assumptions and representations, as discussed above under the heading “Material United States Federal Income Tax Considerations-Taxation as a REIT.” Also, the opinion of our counsel is not binding on either the U.S.
However, we may seek to strategically sell assets from time to time as part of managing our leverage, capital recycling, highest and best use analysis, or as part of long term financing of acquisitions.
However, we may seek to strategically sell properties or sell an interest in properties through joint venture arrangements as part of managing our leverage, capital recycling, highest and best use analysis, or as part of long term financing of new acquisitions.
Generally, our hotels are located in areas that include other hotels. Our hotels compete for customers based on brand affiliation, reputation, location, pricing, amenities and the ability to earn reward program points and other competitive factors.
The hotel industry is highly competitive. Generally, our hotels are located in areas that include other hotels. Our hotels compete for customers based on brand affiliation, reputation, location, pricing, amenities, loyalty programs and other competitive factors.

… 50 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

91 edited+25 added−22 removed222 unchanged
Biggest changeThe following is a summary of the principal risk factors described in this section: • unfavorable market and commercial real estate industry conditions due to, among other things, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets and in the commercial real estate markets, generally, pandemics, geopolitical instability and tensions, economic downturns or a possible recession and other conditions beyond our control, may have a material adverse effect on our and our hotel managers’ and other operators’ and tenants’ results of operations and financial conditions and they may be unable to satisfy their obligations to us; • we have a substantial amount of debt and we are subject to risks related to our debt, including our ability to refinance maturing debt and the cost of any such refinanced debt and our ability to maintain or reduce our debt leverage levels, covenants and conditions contained in our debt agreements which may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders, potential downgrades to our credit ratings and other limitations on our ability to access capital at reasonable costs or at all; • we have a high concentration of properties that are operated by Sonesta and TA, and their failure to profitably operate our properties or perform their obligations under their agreements with us, could adversely impact our results of operations, and we could experience significant disruption to our operations if we were required to replace either Sonesta or TA; • we and our managers and tenants face significant competition; • we may be unable to renew our leases or lease our properties to new tenants when they expire without decreasing rents or incurring significant costs or at all; • our potential future sales or acquisitions may not be successful or may not be executed on the terms or within the timing we expect as a result of competition, ongoing market and economic conditions, including capital market disruptions, high interest rates, prolonged high inflation, or otherwise; • we are subject to risks related to our qualification for taxation as a REIT, including REIT distribution requirements; • ownership of real estate is subject to environmental risks and liabilities, as well as risks from adverse weather, natural disasters and adverse impacts from global climate change; • insurance may not adequately cover our losses, and insurance costs may continue to increase; • we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our day to day operations; • we are subject to risks related to the security of RMR’s or our hotel managers’ information technology; • our management structure and agreements with RMR and our relationships with our related parties, including our Managing Trustees, RMR and Sonesta and others affiliated with them, may create conflicts of interest; • sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks; • provisions in our declaration of trust, bylaws and other agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals, limit our rights and the rights of our shareholders to take action against our Trustees and officers or limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes; and • we may change our operational, financing and investment policies without shareholder approval, and we may reduce the rate of or eliminate our distributions to shareholders or the form of payment could change. 30 Table of Contents The risks described below may not be the only risks we face, but are risks we believe may be material at this time.
Biggest changeThe following is a summary of the principal risk factors described in this section: • unfavorable market and commercial real estate industry conditions due to, among other things, uncertainties surrounding interest rates and inflation, supply chain disruptions, volatility in the public equity and debt markets and in the commercial real estate markets, generally, pandemics, geopolitical instability and tensions, economic downturns or a possible recession, labor market conditions and other conditions beyond our control, may have a material adverse effect on our and our hotel managers’ and other operators’ and tenants’ results of operations and financial conditions and they may be unable to satisfy their obligations to us; • we have a substantial amount of debt and we are subject to risks related to our debt, including the inability to refinance maturing debt and the cost of any such refinanced debt and the inability to reduce our debt leverage levels, which may remain at or above current levels for an indefinite period, covenants and conditions contained in our debt agreements which may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders, potential downgrades to our credit ratings and other limitations on our ability to access capital at reasonable costs or at all; • we may not succeed in selling properties at prices we target; • we have a high concentration of properties that are operated by Sonesta and TA, and their failure to profitably operate our properties or perform their obligations under their agreements with us, could adversely impact our results of operations, and we could experience significant disruption to our operations if we were required to replace either Sonesta or TA; • we and our managers and tenants face significant competition; • we may be unable to renew our leases when they expire or lease our properties to new tenants without decreasing rents or incurring significant costs or at all; • our potential future sales or acquisitions may not be successful or may not be executed on the terms or within the timing we expect as a result of competition, ongoing market and economic conditions, including capital market disruptions, uncertainties surrounding interest rates and inflation, or otherwise; • we are subject to risks related to our qualification for taxation as a REIT, including REIT distribution requirements; • ownership of real estate is subject to environmental risks and liabilities, as well as risks from adverse weather, natural disasters and adverse impacts from global climate change; • insurance may not adequately cover our losses, and insurance costs may increase; • we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our day to day operations; • we are subject to risks related to the security of RMR’s or our hotel managers’ information technology and RMR’s use of artificial intelligence, or AI; • our management structure and agreements with RMR and our relationships with our related parties, including our Managing Trustees, RMR, Sonesta and others affiliated with them, may create conflicts of interest; • sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks; • provisions in our declaration of trust, bylaws and other agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals, limit our rights and the rights of our shareholders to take action against our Trustees and officers or limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes; 30 Table of Contents • we may change our operational, financing and investment policies without shareholder approval, and we may eliminate our distributions to shareholders or the form of payment could change; and • our distributions to shareholders may remain at $0.01 per common share per quarter for an indefinite period or be eliminated and the form of payment could change.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to: • limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees; • the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees; • shareholder voting standards which require a supermajority of shares for approval of certain actions; • the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting; • required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “Managing Trustees” and other Trustees be “Independent Trustees,” as defined in our governing documents; • limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders; • limitations on the ability of our shareholders to remove our Trustees; • requirements that shareholders comply with regulatory requirements (including Nevada and Louisiana gaming) affecting us which could effectively limit share ownership of us, including, in some cases, to 5% of our outstanding shares; • the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change in control) and issue additional common shares; 43 Table of Contents • restrictions on business combinations between us and an interested shareholder that have not first been approved by our Board of Trustees (including a majority of Trustees not related to the interested shareholder); and • the authority of our Board of Trustees, without shareholder approval, to implement certain takeover defenses.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to: • limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees; • the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees; • shareholder voting standards which require a supermajority of shares for approval of certain actions; • the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting; • required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “Managing Trustees” and other Trustees be “Independent Trustees,” as defined in our governing documents; • limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders; • limitations on the ability of our shareholders to remove our Trustees; • requirements that shareholders comply with regulatory requirements (including Nevada and Louisiana gaming) affecting us which could effectively limit share ownership of us, including, in some cases, to 5% of our outstanding shares; 44 Table of Contents • the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change in control) and issue additional common shares; • restrictions on business combinations between us and an interested shareholder that have not first been approved by our Board of Trustees (including a majority of Trustees not related to the interested shareholder); and • the authority of our Board of Trustees, without shareholder approval, to implement certain takeover defenses.
Our hotels are subject to operating risks common to the hotel industry, many of which are beyond our control and may impact Sonesta and our other managers, including risks associated with: • competition from other hotels in our markets, or an oversupply of hotels in our markets; • increased operating costs, including wages, benefits, insurance and utilities, due to prolonged high inflation, increased minimum wages and other factors, which may not be offset in the future by increased room rates; 33 Table of Contents • increased property taxes due to many state and local governments facing budget deficits, or seeking to expand services, that have led many of them, and may in the future lead others to, increase assessments and/or taxes; • changes in marketing and distribution for the industry including the ability of third party internet and other travel intermediaries to attract and retain customers; • competition from other hotel operators or others to attract and retain qualified employees; • competition from alternative lodging options such as home sharing services, timeshares, vacation rentals or cruise ships in our markets; • low unemployment in the U.S. and a lack of suitable employees for certain job classifications, especially those for less skilled positions, which may drive up costs or affect service levels; • labor strikes, disruptions or lockouts that may impact operating performance; • dependence on demand from business and leisure travelers, which may fluctuate and be seasonal and could experience prolonged declines as a result of economic downturns or recessions or otherwise and possible long term changes in business and consumer practices; • increases in energy costs, airline fares and other expenses related to travel, which may negatively affect traveling; • decreases in demand for business and leisure travel due to terrorism, terrorism alerts and warnings, military actions, natural disasters, concerns about climate change, pandemics or other public health safety concerns; • decreases in demand for business travel due to use of technologies that enhance interpersonal communication and interaction without the need to travel or meet in person; and • changes in customer preferences for various types of hotels or hotel locations.
Our hotels are subject to operating risks common to the hotel industry, many of which are beyond our control and may impact Sonesta and our other managers, including risks associated with: • competition from other hotels in our markets, or an oversupply of hotels in our markets; • increased operating costs, including wages, benefits, insurance and utilities, due to inflation, increased minimum wages and other factors, which may not be offset in the future by increased room rates; • increased property taxes due to many state and local governments facing budget deficits, or seeking to expand services, that have led many of them, and may in the future lead others to, increase assessments and/or taxes; 34 Table of Contents • changes in marketing and distribution for the industry including the ability of third party internet and other travel intermediaries to attract and retain customers; • competition from other hotel operators or others to attract and retain qualified employees; • competition from alternative lodging options such as home sharing services, timeshares, vacation rentals or cruise ships in our markets; • low unemployment in the U.S. and a lack of suitable employees for certain job classifications, especially those for less skilled positions, which may drive up costs or affect service levels; • labor strikes, disruptions or lockouts that may impact operating performance; • dependence on demand from business and leisure travelers, which may fluctuate and be seasonal and could experience prolonged declines as a result of economic downturns or recessions or otherwise and possible long-term changes in business and consumer practices; • increases in energy costs, airline fares and other expenses related to travel, which may negatively affect traveling; • decreases in demand for business and leisure travel due to terrorism, terrorism alerts and warnings, military actions, natural disasters, concerns about climate change, pandemics or other public health safety concerns; • decreases in demand for business travel due to use of technologies that enhance interpersonal communication and interaction without the need to travel or meet in person; and • changes in customer preferences for various types of hotels or hotel locations.
Donley is also the chief financial officer and treasurer of Office Properties Income Trust, or OPI, another REIT managed by RMR. Messrs. Portnoy, Murray, Hargreaves and Donley have duties to RMR, Mr. Murray has duties to Sonesta and Mr. Donley has duties to OPI, as well as to us, and we do not have their undivided attention.
Donley is also the chief financial officer and treasurer of Office Properties Income Trust, or OPI, another REIT managed by RMR. Messrs. Portnoy, Murray, Hargreaves, Donley and Abair have duties to RMR, Mr. Murray has duties to Sonesta and Mr. Donley has duties to OPI, as well as to us, and we do not have their undivided attention.
For example: 34 Table of Contents • notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or unknown liabilities, including those related to undisclosed environmental contamination, or our analyses and assumptions for the properties may prove to be incorrect; • an acquired property may be located in a new market where we may face risks associated with investing in an unfamiliar market; • the market in which an acquired property is located may experience unexpected changes that adversely affect the property’s value; and • property operating costs for our acquired properties may be higher than anticipated and our acquired properties may not yield expected returns.
For example: 35 Table of Contents • notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or unknown liabilities, including those related to undisclosed environmental contamination, or our analyses and assumptions for the properties may prove to be incorrect; • an acquired property may be located in a new market where we may face risks associated with investing in an unfamiliar market; • the market in which an acquired property is located may experience unexpected changes that adversely affect the property’s value; and • property operating costs for our acquired properties may be higher than anticipated and our acquired properties may not yield expected returns.
Our ability to comply with those covenants will depend upon the net rental income and hotel operating returns we receive from our properties, or in the case of our credit agreement, the value of properties securing the revolving credit facility.
Our ability to comply with those covenants will depend upon the net rental income and hotel operating returns we receive from our properties, or in the case of our credit agreement, the performance and value of properties securing our revolving credit facility.
For example, current market conditions have caused, and may continue to cause, increased capitalization rates which, together with high interest rates, have resulted in reduced commercial real estate transaction volume, and such conditions may continue or worsen.
For example, current market conditions have caused, and may continue to cause, increased capitalization rates which, together with increased interest rates, have resulted in reduced commercial real estate transaction volume, and such conditions may continue or worsen.
If our rents or returns decline, or the values of our properties decline, we may be unable to borrow under our revolving credit facility. If we are unable to borrow under our revolving credit facility, we may be unable to meet our obligations or grow our business by acquiring additional properties or otherwise.
If our rents or returns decline, or the performance or values of our properties decline, we may be unable to borrow under our revolving credit facility. If we are unable to borrow under our revolving credit facility, we may be unable to meet our obligations or grow our business by acquiring additional properties or otherwise.
If we default under any of our debt obligations, we may be in default under other debt agreements of ours that have cross default provisions, including our credit agreement and our senior unsecured notes indentures and their supplements.
If we default under any of our debt obligations, we may be in default under other debt agreements of ours that have cross default provisions, including our credit agreement and our senior notes indentures and their supplements.
In such case, our lenders or noteholders may demand immediate payment of any outstanding debt and could seek payment from the subsidiary guarantors under our credit agreement, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by certain pledged subsidiaries, or we could be forced to liquidate our assets for less than the values we would receive in a more orderly process.
In such case, our lenders or noteholders may demand immediate payment of any outstanding debt and could seek payment from the subsidiary guarantors under our credit agreement or certain of our senior notes, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by certain pledged subsidiaries, or we could be forced to liquidate our assets for less than the values we would receive in a more orderly process.
See “Material United States Federal Income Tax Considerations—REIT Qualification Requirements—Annual Distribution Requirements.” included in Part I, Item 1 of this Annual Report on Form 10-K. Accordingly, we may not be able to retain sufficient cash to fund our operations, repay our debts, invest in our properties or fund our acquisitions or development, redevelopment or repositioning efforts.
See “Material United States Federal Income Tax Considerations—REIT Qualification Requirements—Annual Distribution Requirements” included in Part I, Item 1 of this Annual Report on Form 10-K. Accordingly, we may not be able to retain sufficient cash to fund our operations, repay our debts, invest in our properties or fund our acquisitions or development, redevelopment or repositioning efforts.
If we and RMR fail to comply with ESG related regulations and to satisfy the expectations of investors 39 Table of Contents and our tenants and other stakeholders or our or RMR’s announced goals and other initiatives are not executed as planned, our and RMR’s reputation could be adversely affected, and our revenues, results of operations and ability to grow our business may be negatively impacted.
If we and RMR fail to comply with ESG related regulations and to satisfy the expectations of investors and our tenants and other stakeholders or our or RMR’s announced goals and other 40 Table of Contents initiatives are not executed as planned, our and RMR’s reputation could be adversely affected, and our revenues, results of operations and ability to grow our business may be negatively impacted.
For these reasons, among others, Sonesta may be unable to pay amounts due to us under the terms of our management agreements with Sonesta. For more information about our management agreements with Sonesta, see Notes 4, 5 and 9 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.
For these reasons, among others, Sonesta may be unable to pay amounts due to us under the terms of our management agreements with Sonesta. For further information about our management agreements with Sonesta, see Notes 4, 5 and 9 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.
The rights of holders of the 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.
The rights of holders of the Notes to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of our non-guarantor subsidiaries’ creditors.
The payment of the termination fee could have a material adverse effect on our financial condition, including our ability to pay distributions to our shareholders. 41 Table of Contents Our management arrangements with RMR may discourage a change of control of us. Our management agreements with RMR have continuing 20 year terms that renew annually.
The payment of the termination fee could have a material adverse effect on our financial condition, including our ability to pay distributions to our shareholders. 42 Table of Contents Our management arrangements with RMR may discourage a change of control of us. Our management agreements with RMR have continuing 20 year terms that renew annually.
These recommendations by proxy advisory firms have affected the outcomes of past Board of Trustees elections and votes on our say on pay and other shareholder votes, 42 Table of Contents and similar recommendations in the future would likely affect the outcome of future Board of Trustees elections and other shareholder votes, which may increase shareholder activism and litigation.
These recommendations by proxy advisory firms have affected the outcomes of past Board of Trustees elections and votes on our say on pay and other shareholder votes, 43 Table of Contents and similar recommendations in the future would likely affect the outcome of future Board of Trustees elections and other shareholder votes, which may increase shareholder activism and litigation.
In addition, if the 2025 Notes, the 2027 Notes and the 2031 Notes have a rating equal to or higher than Baa2 (or the equivalent) by Moody’s Investor Services, or Moody’s, and BBB (or the equivalent) by Standard & Poor’s Ratings Services, or S&P, and at such time no default or event of default under the indenture and related supplements governing the 2025 Notes, the 2027 Notes and the 2031 Notes has occurred and is continuing, the Guarantees and all other obligations of the subsidiary guarantors under the indenture will automatically terminate and be released.
In addition, if the 2027 Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes have a rating equal to or higher than Baa2 (or the equivalent) by Moody’s Investor Services, or Moody’s, and BBB (or the equivalent) by Standard & Poor’s Ratings Services, or S&P, and at such time no default or event of default under the indenture and related supplements governing the 2027 Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes has occurred and is continuing, the Guarantees and all other obligations of the subsidiary guarantors under the indenture will automatically terminate and be released.
These trends, together with increasing labor costs and shortages, high interest rates, tax rates, commodity and other price inflation and supply chain challenges, may continue to negatively impact our hotel operations, the operations of our tenants and our financial results and may have an impact on the results of operations and financial condition of our tenants and result in their defaulting their obligations under our leases, including failing to pay the rent due to us.
These trends, together with increasing labor costs and shortages, uncertainties surrounding interest rates, tax rates, commodity and other price inflation and supply chain challenges, may continue to negatively impact our hotel operations, the operations of our tenants and our financial results and may have an impact on the results of operations and financial condition of our tenants and result in their defaulting their obligations under our leases, including failing to pay the rent due to us.
This and other possible changing work practices have adversely impacted, and may in the future adversely impact, RMR’s, our hotel managers’ or other third parties’ abilities to maintain the security, proper function and availability of their respective information technology and systems since remote working by their employees could strain their respective technology resources and introduce operational risk, including heightened cybersecurity risk.
This and other possible changing work practices have adversely impacted, and may in the future adversely impact, RMR’s, our hotel managers’ or other third parties’ abilities to maintain the security, proper function and availability of their respective information technology and systems since remote working by their employees could strain their 39 Table of Contents respective technology resources and introduce operational risk, including heightened cybersecurity risk.
High interest rates have significantly increased our borrowing costs, which adversely affects our cost of refinancing our debts when they become due, our cash flows, our ability to pay principal and interest on our debt and our ability to pay distributions to our shareholders.
High interest rates have significantly increased our borrowing costs, which adversely affects our cost of refinancing our fixed rate debts when they become due, our cash flows, our ability to pay principal and interest on our debt and our ability to pay distributions to our shareholders.
We face significant competition for acquisition opportunities from other investors, including publicly traded and private REITs, numerous financial institutions, operating companies in the hospitality industry, individuals, foreign investors and other 35 Table of Contents public and private companies.
We face significant competition for acquisition opportunities from other investors, including publicly traded and private REITs, numerous financial institutions, operating companies in the hospitality industry, individuals, foreign investors and other 36 Table of Contents public and private companies.
As a result, the Notes and the Guarantees are, and, except to the extent that future Notes are guaranteed by our non-guarantor subsidiaries, will be, structurally subordinated to all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2025 Notes, the 2027 Notes and the 2031 Notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
As a result, the Notes and the Guarantees are, and, except to the extent that future Notes are guaranteed by our non-guarantor subsidiaries, will be, structurally subordinated to all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2027 Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
Such release may occur at any time upon a sale, disposition or transfer, in compliance with the provisions of the indentures and related supplements governing the 2025 Notes, the 2027 Notes and the 2031 Notes, of the capital stock of such subsidiary guarantor or of substantially all of the assets of such subsidiary guarantor, or if such subsidiary guarantor becomes an Excluded Subsidiary or a Foreign Subsidiary, as such terms are defined in the applicable indenture or supplemental indenture.
Such release may occur at any time upon a sale, disposition or transfer, in compliance with the provisions of the indentures and related supplements governing the 2027 Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes, of the capital stock of such subsidiary guarantor or of substantially all of the assets of such subsidiary guarantor, or if such subsidiary guarantor becomes an Excluded Subsidiary or a Foreign Subsidiary, as such terms are defined in the applicable indenture or supplemental indenture.
Additionally, if we terminate a management agreement for a performance reason, as defined in the agreement, we are obligated to pay RMR the termination fee calculated as described above, but assuming a remaining term of 10 years.
Additionally, if we terminate a management agreement for a performance reason, as defined in the agreement, we are obligated to pay RMR the termination fee calculated as described above, but assuming a remaining term of ten years.
A franchisor’s or licensor’s termination or refusal to renew a franchise or license agreement with our tenant would likely have a material adverse effect on 36 Table of Contents the ability of the tenant to pay rent to us.
A franchisor’s or licensor’s termination or refusal to renew a franchise or license agreement with our tenant would likely have a material adverse effect on 37 Table of Contents the ability of the tenant to pay rent to us.
Upon any distribution to our creditors in a bankruptcy, liquidation, reorganization or similar proceeding relating to us or our property, the holders of our secured debt, including debt under our credit agreement, the 2031 Notes and our $610.2 million in aggregate principal amount of net lease mortgage notes (to the extent such debt remains outstanding and is still then secured), will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to the instruments governing such debt and to be paid in full, from the assets securing that secured debt before any payment may be made with respect to the Notes that are not secured by those assets.
Upon any distribution to our creditors in a bankruptcy, liquidation, reorganization or similar proceeding relating to us or our property, the holders of our secured debt, including debt under our credit agreement, the 2031 Notes and our $606.6 million in aggregate principal amount of net lease mortgage notes (to the extent such debt remains outstanding and is still then secured), will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to the instruments governing such debt and to be paid in full, from the assets securing that secured debt before any payment may be made with respect to the Unsecured Notes that are not secured by those assets.
Risks Related to Our Business Unfavorable market and industry conditions may have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders.
Risks Related to Our Business Unfavorable market and industry conditions have had, and may continue to have, a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders.
If we default under our credit agreement, our lenders may demand immediate payment and could seek payment from the subsidiary guarantors under our credit agreement, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by such pledged subsidiaries, or may elect not to fund future borrowings.
If we default under our credit agreement, our lenders may demand immediate payment and could seek payment from the subsidiary guarantors under our credit agreement, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by such pledged subsidiaries, or may elect 32 Table of Contents not to fund future borrowings.
Pursuant to RMR’s zero emissions goal, RMR has pledged to reduce its Scope 1 and 2 emissions to net zero by 2050 with a 50% reduction commitment by 2030 from a 2019 baseline.
Pursuant to RMR’s zero emissions goal, RMR has pledged to reduce its Scope 1 and 2 emissions to net zero by 2050 with a 50% reduction commitment by 2029 from a 2019 baseline.
However, these provisions may also inhibit acquisitions of a significant stake in us and may deter, delay or prevent a change in control of us or unsolicited acquisition proposals that a shareholder may consider favorable.
However, these restrictions may also inhibit acquisitions of a significant stake in us and may deter, delay or prevent a change in control of us or unsolicited acquisition proposals that a shareholder may consider favorable.
We intend to pay distributions to our shareholders to comply with the REIT requirements of the IRC. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay to our shareholders in a calendar year is less than a minimum amount specified under federal tax laws.
We intend to pay distributions to our shareholders to comply with the REIT requirements of the 46 Table of Contents IRC. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay to our shareholders in a calendar year is less than a minimum amount specified under federal tax laws.
Our debt could increase our costs of capital, limit our ability to incur additional debt in the future, and increase our exposure to floating interest rates or expose us to potential events of default (if not cured or waived) under covenants contained in debt instruments that could have a material adverse effect on our business, financial condition and operating results.
Our existing and future debt could limit our ability to incur additional debt and increase our exposure to floating interest rates or expose us to potential events of default (if not cured or waived) under covenants contained in debt instruments that could have a material adverse effect on our business, financial condition and operating results.
In particular, these factors could arise from, among other things: • weaknesses in or a lack of established markets for the properties we may identify for sale; • the availability of financing to potential purchasers on reasonable terms; • changes in the financial condition of prospective purchasers for, and the tenants of, the properties; 37 Table of Contents • the terms of leases with tenants at certain of the properties; • the characteristics, quality and prospects of the properties; • the number of prospective purchasers; • the number of competing properties in the market; • unfavorable local, national or international economic conditions, such as high interest rates, labor market challenges, prolonged high inflation, supply chain challenges and economic downturns or a possible recession; and • changes in laws, regulations or fiscal policies of jurisdictions in which the properties are located.
In particular, these factors could arise from, among other things: • weaknesses in or a lack of established markets for the properties we may identify for sale; • the availability of financing to potential purchasers on reasonable terms; • changes in the financial condition of prospective purchasers for, and the tenants of, the properties; • the terms of leases with tenants at certain of the properties; • the characteristics, quality and prospects of the properties; • the number of prospective purchasers; • the number of competing properties in the market; • unfavorable local, national or international economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain challenges, economic downturns or a possible recession and labor market conditions; and • changes in laws, regulations or fiscal policies of jurisdictions in which the properties are located.
We intend to continue to pay regular quarterly distributions to our shareholders; however: • our ability to pay distributions to our shareholders or sustain the rate of distributions may continue to be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused 47 Table of Contents by current market and economic conditions, such as high interest rates, prolonged high inflation and economic downturns or a possible recession, on our business, results of operations and liquidity; • our payment of distributions is subject to restrictions contained in our debt agreements and may be subject to restrictions in future debt obligations we may incur; during the continuance of any event of default under our debt agreements, we may be limited or, in some cases, prohibited from paying distributions to our shareholders; and • the timing and amount of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to, our funds from operations, or FFO, and our normalized funds from operations, or Normalized FFO, requirements to maintain our qualification for taxation as a REIT, limitations in our debt agreements, 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 our dividend yield compared to the dividend yields 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.
We intend to continue to pay regular quarterly distributions to our shareholders at this rate for an indefinite period, subject to applicable REIT tax requirements; however: • our ability to pay distributions to our shareholders or sustain the rate of distributions may continue to be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused by current market and economic conditions, such as uncertainties surrounding interest rates and inflation and economic downturns or a possible recession, on our business, results of operations and liquidity; • our payment of distributions is subject to restrictions contained in our debt agreements and may be subject to restrictions in future debt obligations we may incur; during the continuance of any event of default under our debt agreements, we may be limited or, in some cases, prohibited from paying distributions to our shareholders; and • the timing and amount of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to, our funds from operations, or FFO, and our normalized funds from operations, or Normalized FFO, requirements to maintain our qualification for taxation as a REIT, limitations in our debt agreements, 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 our dividend yield compared to the dividend yields 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.
Accordingly, the 2025 Notes, the 2027 Notes and the 2031 Notes may not at all times be guaranteed by some or all of the subsidiaries which guaranteed the 2025 Notes, the 2027 Notes and the 2031 Notes on the date they were initially issued. Item 1B. Unresolved Staff Comments None.
Accordingly, the 2027 Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes may not at all times be guaranteed by some or all of the subsidiaries which guaranteed the 2027 Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes on the date they were initially issued. Item 1B. Unresolved Staff Comments None.
Unfavorable market and industry conditions, including high interest rates, prolonged high inflation, labor market challenges, supply chain challenges and economic downturns or a possible recession, may increase these risks. We may experience significant costs in connection with renewing, leasing or re-leasing our properties, which could materially and adversely affect us.
Unfavorable market and industry conditions, including uncertainties surrounding interest rates and inflation, supply chain challenges, economic downturns or a possible recession and labor market conditions, may increase these risks. We may experience significant costs in connection with renewing, leasing or re-leasing our properties, which could materially and adversely affect us.
John Murray, our other Managing Trustee, Todd Hargreaves, our President and Chief Investment Officer, and Brian Donley, our Chief Financial Officer and Treasurer, are also officers and employees of RMR. Mr. Murray is also a director and the president and chief executive officer of Sonesta, and Mr.
John Murray, our other Managing Trustee, Todd Hargreaves, our President and Chief Investment Officer, Brian Donley, our Chief Financial Officer and Treasurer, and Jesse Abair, our Vice President, are also officers and employees of RMR. Mr. Murray is also a director and the president and chief executive officer of Sonesta, and Mr.
Our business dealings with Sonesta comprise a significant part of our lodging portfolio and they may create conflicts of interest or the perception of such conflicts of interest. Sonesta managed 195 of our hotels as of December 31, 2023. Sonesta is controlled by Adam Portnoy. Mr. Portnoy, Mr. Murray and Jennifer Clark, our Secretary, are directors of Sonesta, and Mr.
Our business dealings with Sonesta comprise a significant part of our lodging portfolio and they may create conflicts of interest or the perception of such conflicts of interest. Sonesta managed 181 of our hotels as of December 31, 2024. Sonesta is controlled by Adam Portnoy. Mr. Portnoy, Mr. Murray and Jennifer Clark, our Secretary, are directors of Sonesta, and Mr.
Any decline in market prices, regardless of cause, may adversely affect the liquidity and trading markets for the Notes. 49 Table of Contents A downgrade in our credit ratings could materially adversely affect the market price of the Notes and may increase our cost of capital.
Any decline in market prices, regardless of cause, may adversely affect the liquidity and trading markets for the Notes. A downgrade in our credit ratings could materially adversely affect the market price of the Notes and may increase our cost of capital.
The arbitration and exclusive forum provisions of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, managers or other agents, which may discourage lawsuits against us and our Trustees, officers, managers or other agents.
The exclusive forum provisions of our 45 Table of Contents bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, managers or other agents, which may discourage lawsuits against us and our Trustees, officers, managers or other agents.
If we are unable to realize proceeds from the sale of assets sufficient to allow us to reduce our leverage to a level we believe appropriate or which ratings agencies and possible financing sources believe appropriate, we may be unable to fund capital investments or future acquisitions to grow our business.
If we are unable to realize proceeds from the sale of assets sufficient to allow us to reduce our leverage to a level we, or rating agencies or possible financing sources, believe appropriate, we may be unable to fund capital investments or future acquisitions to grow our business.
Any failure by RMR, our hotel managers or other third party vendors to maintain the security, proper function and availability of their respective information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
Any failure by RMR, our hotel managers or other third party vendors to maintain the security, proper function and availability of their respective information technology and systems, or any failure by RMR, our hotel managers or other third party vendors to provide the appropriate regulatory and other notifications in a timely manner could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase 32 Table of Contents price equal to the outstanding balance of the debt secured by the mortgage.
For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.
We depend on our tenants to operate the properties we lease to them in a manner that generates revenues sufficient to allow them to meet their obligations to us, including their obligations to pay rent, maintain certain insurance coverage and pay real estate taxes and maintain the properties.
We depend on our tenants to operate the properties we lease to them in a manner that generates revenues sufficient to allow them to meet their 31 Table of Contents obligations to us, including their obligations to pay rent, maintain certain insurance coverage and pay real estate taxes and maintain the properties.
Portnoy holds equity investments in other companies to 40 Table of Contents which RMR or its subsidiaries provide management services and some of these companies have significant cross ownership interests, including, for example: as of December 31, 2023, Mr. Portnoy beneficially owned, in aggregate, 1.1% of our outstanding common shares and Mr.
Portnoy holds equity investments in other companies to 41 Table of Contents which RMR or its subsidiaries provide management services and some of these companies have significant cross ownership interests, including, for example: as of December 31, 2024, Mr. Portnoy beneficially owned, in aggregate, 1.2% of our outstanding common shares and Mr.
If interest rates remain at elevated levels, investors may expect a higher distribution rate than we are able to pay, which may increase our cost of capital, or they may sell our common shares and seek alternative investments with higher distribution rates.
At current interest rate levels, investors may expect a higher distribution rate than we are able to pay, which may increase our cost of capital, or they may sell our common shares and seek alternative investments with higher distribution rates.
The occurrence of a tenant bankruptcy could reduce the rent we receive from that tenant, and the current economic conditions, such as high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions and economic downturns or a possible recession, may increase the risk of our tenants or hotel managers filing for bankruptcy.
The occurrence of a tenant bankruptcy could reduce the rent we receive from that tenant, and the current economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain disruptions, economic downturns or a possible recession and labor market conditions, may increase the risk of our tenants or hotel managers filing for bankruptcy.
Unfavorable economic and industry conditions may be due to, among other things, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions, economic downturns or a possible recession and other conditions beyond our control.
Unfavorable economic and industry conditions may be due to, among other things, uncertainties surrounding interest rates and inflation, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions, economic downturns or a possible recession, labor market conditions and other conditions beyond our control.
We plan to selectively sell certain properties from time to time to reduce our leverage, fund capital expenditures and future acquisitions and strategically update, rebalance and reposition our investment portfolio. Our ability to sell properties and the prices we may receive in any such sales, may be affected by various factors.
We also plan to selectively sell certain properties from time to time to reduce our leverage, fund capital expenditures and future acquisitions and strategically update, rebalance and reposition our 33 Table of Contents investment portfolio. Our ability to sell properties and the prices we may receive in any such sales, may be affected by various factors.
The Notes and the Guarantees are structurally subordinated to the payment of all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2025 Notes, the 2027 Notes and the 2031 Notes.
The Notes and the Guarantees are structurally subordinated to the payment of all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2027 Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes.
Secured debt, including mortgage and asset backed debt, increases our risk of asset and property losses because defaults on debt secured by our assets may result in foreclosure actions initiated by lenders and ultimately our loss of the property or other assets securing any loans if we are in default under such loans.
Secured debt, including mortgage and asset backed debt, increases our risk of asset and property losses because defaults on debt secured by our assets may result in foreclosure actions initiated by lenders and ultimately our loss of the property or other assets securing any loans for which we are in default.
We are subject to numerous risks associated with our debt, including our ability to refinance maturing debt and the cost of any refinancing, the risk that our cash flows could be insufficient for us to make required payments and risks associated with interest rates remaining high for an extended period of time.
We are subject to numerous risks associated with our debt, including our ability to refinance maturing debt and the cost of any refinancing, the risk that our cash flows could be insufficient for us to make required payments and risks associated with high interest rates.
High interest rates have significantly increased our borrowing costs. Although we have an option to extend the maturity date of certain of our debt upon payment of a fee and meeting other conditions, the applicable conditions may not be met, and we may be required to repay or refinance our existing debt with new debt on less favorable terms.
High interest rates have significantly increased our cost of capital. Although we have an option to extend the maturity date of certain of our debt upon payment of a fee and meeting other conditions, the applicable conditions may not be met, and we may be required to repay or refinance our existing debt with new debt at less favorable terms.
Our hotel managers may be unable to adequately staff our hotels as a result of these or other reasons, which may limit the business activity at our hotels, decrease the quality of services provided at our hotels and damage our and our applicable hotel managers’ reputations in the marketplace.
Our hotel managers may be unable to adequately staff our hotels as a result of these or other reasons, which may limit the business activity at our hotels, decrease the quality of services provided at our hotels and damage our and our applicable hotel managers’ reputations in the marketplace. Bankruptcy law may adversely impact us.
The outstanding Notes and Guarantees, other than the 2031 Notes and the Guarantee by the Pledgor, or the Unsecured Notes and Guarantees, are not secured and any Notes we may issue in the future may not be secured.
The outstanding Notes and Guarantees, other than the 2031 Notes and the related Guarantee, or the Unsecured Notes and Guarantees, are not secured and any Notes we may issue in the future may not be secured.
Changes to the tax laws, with or without retroactive application, could materially and adversely affect us and our shareholders. We cannot predict how changes in the tax laws might affect us or our shareholders.
Changes to the tax laws, with or without retroactive application, could materially and adversely affect us and our shareholders. We cannot predict how 47 Table of Contents changes in the tax laws might affect us or our shareholders.
As of December 31, 2023, leases representing approximately 2.1% of our annualized minimum net lease rents will expire during 2024. As of December 31, 2023, 3.7% of the leasable square footage of our net lease properties was vacant.
As of December 31, 2024, leases representing approximately 2.2% of our annualized minimum net lease rents will expire during 2025. As of December 31, 2024, 3.9% of the leasable square footage of our net lease properties was vacant.
Our business plan includes the acquisition of additional properties. Our ability to make profitable acquisitions is subject to risks, including, but not limited to, risks associated with: • the extent of our debt leverage; • the availability, terms and cost of debt and equity capital; • competition from other investors; and • contingencies in our acquisition agreements.
Our ability to make profitable acquisitions is subject to risks, including, but not limited to, risks associated with: • the extent of our debt leverage; • the availability, terms and cost of debt and equity capital; • our liquidity position; • competition from other investors; and • contingencies in our acquisition agreements.
We are the sole obligor on our 8.625% senior secured notes due 2031, or the 2031 Notes, our outstanding senior unsecured notes, including our 7.50% senior notes due 2025, or the 2025 Notes, and our 5.50% senior notes due 2027, or the 2027 Notes, and any notes or other debt securities we may issue in the future, or, together with the 2031 Notes and our outstanding senior unsecured notes, the Notes.
We are the sole obligor on our 8.625% senior secured notes due 2031, or the 2031 Notes, our outstanding senior unsecured notes, including our 5.50% senior notes due 2027, or the 2027 Notes, our 8.375% senior guaranteed unsecured notes due 2029, or the 2029 Notes, or our 8.875% senior guaranteed unsecured notes due 2032, or the 2032 Notes, and any notes or other debt securities we may issue in the future, or, together with the 2031 Notes and our outstanding senior unsecured notes, the Notes.
Our bylaws currently provide that, unless the dispute has been referred to binding arbitration, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, managers or other agents to us or our shareholders; (3) any action asserting a claim against us or any of our Trustees, officers, managers or other agents arising pursuant to Maryland law, our declaration of trust or bylaws brought by or on behalf of a shareholder, either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any of our Trustees, officers, managers or other agents, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws; or (4) any action asserting a claim against us or any of our Trustees, officers, managers or other agents that is governed by the internal affairs doctrine of the State of Maryland.
Our bylaws currently provide that other than any action arising under the Securities Act, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for: (1) any Internal Corporate Claim, as such term is defined under the Maryland General Corporation Law; (2) any derivative action or proceeding brought on our behalf; (3) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, managers or other agents to us or our shareholders; (4) any action asserting a claim against us or any of our Trustees, officers, managers or other agents arising pursuant to Maryland law, our declaration of trust or bylaws, including any disputes, claims or controversies brought by or on behalf of a shareholder, either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any of our Trustees, officers, managers or other agents, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws; and (5) any action asserting a claim against us or any of our Trustees, officers, managers or other agents that is governed by the internal affairs doctrine of the State of Maryland.
Such events could also adversely impact us or the tenants of our properties if we or they are unable to operate our or their businesses due to damage resulting from such events. Insurance 38 Table of Contents may not adequately cover all losses sustained by us or the tenants of our properties.
Severe weather events and climatic conditions could also adversely impact us and the tenants of our properties if we or they are unable to operate our or their businesses due to damage resulting from such events. Insurance may not adequately cover all losses sustained by us or the tenants of our properties.
Our subsidiaries that guarantee the Notes are the sole obligor on the guarantees of such notes, or the Guarantees. The subsidiaries that guarantee the 2025 Notes, the 2027 Notes and the 2031 Notes do not currently guarantee any of our other Notes.
Our subsidiaries that guarantee the Notes are the sole obligors on the guarantees of such notes, or the Guarantees. The subsidiaries that guarantee the 2027 Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes do not currently guarantee any of our other Notes.
If any of our tenants or hotel managers files for bankruptcy, we may experience delays in enforcing our rights, we may be limited in our ability to replace the tenant or hotel manager and we may incur substantial costs in protecting our investment and re-leasing or finding a replacement tenant or hotel manager.
If any of our tenants or hotel managers files for bankruptcy, we may experience delays in enforcing our rights, we may be limited in our ability to replace the tenant or hotel manager and we may incur substantial costs in protecting our investment and re-leasing or finding a replacement tenant or hotel manager. 38 Table of Contents Insurance may not adequately cover our losses, and insurance costs may increase.
Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could cause the market price of our common shares to decline. 46 Table of Contents Even if we remain qualified for taxation as a REIT under the IRC, we may face other tax liabilities that reduce our cash flow.
These alternatives could increase our costs or reduce our shareholders’ equity. Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could cause the market price of our common shares to decline. Even if we remain qualified for taxation as a REIT under the IRC, we may face other tax liabilities that reduce our cash flow.
Increased insurance costs may adversely affect our operators’ abilities to operate our properties profitably and provide us with desirable returns and our operators’ abilities to pay us rent or result in downward pressure on rents we can charge under new or renewed leases.
The costs of insurance may increase, which may have an adverse effect on us and our operators. Increased insurance costs may adversely affect our operators’ abilities to operate our properties profitably and provide us with desirable returns and our operators’ abilities to pay us rent or result in downward pressure on rents we can charge under new or renewed leases.
Approximately 55.5% of our historical real estate investments as of December 31, 2023, are in our hotel properties.
Approximately 55.8% of our historical real estate investments as of December 31, 2024, are in our hotel properties.
If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could materially and adversely affect us. High interest rates have significantly increased our interest expense and may otherwise materially and negatively affect us.
If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could materially and adversely affect us.
New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to remain qualified for taxation as a REIT or the tax consequences of such qualification to us and our shareholders. Risks Related to Our Securities Our distributions to our shareholders may be reduced or eliminated and the form of payment could change.
New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to remain qualified for taxation as a REIT or the tax consequences of such qualification to us and our shareholders.
These provisions of our declaration of trust and bylaws are intended to, among other purposes, assist with our REIT compliance under the IRC and otherwise promote our orderly governance.
These restrictions in our declaration of trust and bylaws are intended to, among other purposes, assist with our REIT compliance under the IRC.
For these reasons, among others, our distribution rate may decline or we may cease paying distributions to our shareholders. Further, in order to preserve liquidity, we may elect to, in part, pay distributions to our shareholders in a form other than cash, such as issuing additional common shares to our shareholders, as permitted by the applicable tax rules.
Further, in order to preserve liquidity, we may elect to, in part, pay distributions to our shareholders in a form other than cash, such as issuing additional common shares to our shareholders, as permitted by the applicable tax rules.
Insurance may not adequately cover our losses, and insurance costs may continue to increase. We or our operators are generally responsible for the costs of insurance coverage for our properties and the operations conducted on them, including for casualty, liability, malpractice, fire, extended coverage and rental or business interruption loss insurance.
We or our operators are generally responsible for the costs of insurance coverage for our properties and the operations conducted on them, including for casualty, liability, malpractice, fire, extended coverage and rental or business interruption loss insurance. In the future, we may acquire properties for which we are responsible for the costs of insurance.
Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results.
The risks described below may not be the only risks we face, but are risks we believe may be material at this time. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results.
We have not applied for listing of the Notes on any securities exchange or for quotation on any automatic dealer quotation system, and we may not do so for Notes issued in the future.
There is no public market for the Notes, and one may not develop, be maintained or be liquid. We have not applied for listing of the Notes on any securities exchange or for quotation on any automatic dealer quotation system, and we may not do so for Notes issued in the future.
We believe that we have operated, and are operating, in compliance with the requirements of these laws and tax concessions. However, we cannot be sure that, upon review or audit, the local tax authority will agree.
Similarly, under existing law and through available tax concessions, we have minimized the Canadian and Puerto Rican income taxes that we must pay. We believe that we have operated, and are operating, in compliance with the requirements of these laws and tax concessions. However, we cannot be sure that, upon review or audit, the local tax authority will agree.
Current conditions may negatively impact our ability to pay distributions to our shareholders and these or other conditions may have similar impacts in the future and on our results of operations and financial condition.
Current conditions may negatively impact our ability to pay distributions to our shareholders and these or other conditions may have similar impacts in the future and on our results of operations and financial condition. Our and our managers’ and other operators’ and tenants’ businesses may not improve, and they may be unable to satisfy their obligations to us.
High interest rates may materially and negatively affect us in several ways, including: • one of the factors that investors typically consider important in deciding whether to buy or sell our common shares is the distribution rate on our common shares relative to prevailing interest rates.
Interest rates remain high compared to historical levels, and high interest rates may materially and negatively affect us in several ways, including: • one of the factors that investors typically consider important in deciding whether to buy or sell our common shares is the distribution rate on our common shares relative to prevailing interest rates, and our quarterly cash distribution rate on our common shares is currently $0.01 per common share in order to enhance our liquidity until our leverage profile otherwise improves.
This provision may not be effective to protect the Guarantees or any future guarantees from being voided under fraudulent transfer laws, or may eliminate the guarantor’s obligations or reduce the guarantor’s obligations to an amount that effectively makes the guarantee worthless. There is no public market for the Notes, and one may not develop, be maintained or be liquid.
This provision 49 Table of Contents may not be effective to protect the Guarantees or any future guarantees from being voided under fraudulent transfer laws, or may eliminate the guarantor’s obligations or reduce the guarantor’s obligations to an amount that effectively makes the guarantee worthless.
We may not be able to satisfy all of these conditions or may default on some of these covenants for various reasons, including for reasons beyond our control. Complying with these covenants may limit our ability to take actions that may be beneficial to us and our security holders.
We may not be able to satisfy all of these conditions or may default on some of these covenants for various reasons, including for reasons beyond our control.
The exclusive forum provision of our bylaws does not apply to any action for which the Circuit Court for Baltimore City, Maryland does not have jurisdiction or to a dispute that has been referred to binding arbitration in accordance with our bylaws.
The exclusive forum provision of our bylaws does not apply to any action for which the Circuit Court for Baltimore City, Maryland does not have jurisdiction.
Furthermore, we cannot be sure that the federal government, or any state or other taxation authority, will continue to afford favorable income tax treatment to REITs and their shareholders. Similarly, under existing law and through available tax concessions, we have minimized the Canadian and Puerto Rican income taxes that we must pay.
Furthermore, we cannot be sure that the federal government, or any state or other taxation authority, will continue to afford favorable income tax treatment to REITs and their shareholders.

… 58 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

8 edited+0 added−0 removed6 unchanged
Biggest changeThe following tables summarize certain information about our properties as of December 31, 2023 (dollars in thousands): Hotels Net Lease All Properties Location of Properties Number of Properties Undepreciated Carrying Value Depreciated Carrying Value Number of Properties Undepreciated Carrying Value Depreciated Carrying Value Total Number of Properties Total Undepreciated Carrying Value Total Depreciated Carrying Value Held and Used: United States: Alabama 3 $ 30,634 $ 18,396 32 $ 108,369 $ 79,837 35 $ 139,003 $ 98,233 Alaska — — — 1 3,716 2,347 1 3,716 2,347 Arizona 14 209,503 117,328 25 182,689 135,687 39 392,192 253,015 Arkansas — — — 16 85,917 53,711 16 85,917 53,711 California 36 1,047,343 660,117 22 217,686 173,074 58 1,265,029 833,191 Colorado 5 137,753 98,736 8 87,748 70,890 13 225,501 169,626 Connecticut — — — 3 17,339 9,847 3 17,339 9,847 Delaware 1 16,614 12,135 — — — 1 16,614 12,135 Florida 12 423,028 325,131 46 190,886 148,858 58 613,914 473,989 Georgia 16 387,841 241,117 73 212,367 164,150 89 600,208 405,267 Hawaii 1 132,945 77,224 — — — 1 132,945 77,224 Idaho — — — 2 16,969 13,163 2 16,969 13,163 Illinois 10 404,971 282,591 53 228,530 177,202 63 633,501 459,793 Indiana 2 29,738 15,068 39 187,001 140,763 41 216,739 155,831 Iowa 1 6,656 2,865 9 27,954 22,560 10 34,610 25,425 Kansas 1 14,575 8,546 5 38,088 29,068 6 52,663 37,614 Kentucky — — — 12 52,894 37,478 12 52,894 37,478 Louisiana 3 241,828 167,895 12 95,224 64,498 15 337,052 232,393 Maryland 5 115,201 64,637 8 51,038 34,781 13 166,239 99,418 Massachusetts 8 248,808 165,844 — — — 8 248,808 165,844 Michigan 8 70,656 38,416 49 94,743 67,598 57 165,399 106,014 Minnesota 3 105,144 75,500 11 66,370 54,119 14 171,514 129,619 Mississippi — — — 5 23,155 15,786 5 23,155 15,786 Missouri 4 152,975 106,939 24 89,429 64,465 28 242,404 171,404 Nebraska — — — 5 24,144 13,965 5 24,144 13,965 Nevada 3 53,787 27,859 6 142,211 100,690 9 195,998 128,549 New Hampshire — — — 1 5,847 3,093 1 5,847 3,093 New Jersey 8 146,395 83,112 3 75,529 51,504 11 221,924 134,616 New Mexico 2 26,306 10,965 16 96,115 62,518 18 122,421 73,483 New York 1 68,635 43,726 9 44,426 28,481 10 113,061 72,207 North Carolina 8 145,285 86,825 15 52,643 39,094 23 197,928 125,919 North Dakota — — — 1 3,476 2,802 1 3,476 2,802 Ohio 5 117,015 82,592 37 238,118 172,175 42 355,133 254,767 Oklahoma 1 7,212 3,637 12 66,320 53,746 13 73,532 57,383 Oregon 1 109,682 88,780 7 72,491 60,502 8 182,173 149,282 Pennsylvania 5 116,687 66,997 28 147,052 105,260 33 263,739 172,257 Rhode Island 1 16,681 6,600 — — — 1 16,681 6,600 South Carolina 1 54,942 35,373 16 88,520 63,031 17 143,462 98,404 Tennessee 7 149,879 68,097 37 107,733 81,682 44 257,612 149,779 Texas 20 331,090 170,190 55 368,882 260,169 75 699,972 430,359 Utah 2 76,427 38,902 3 12,827 8,015 5 89,254 46,917 Virginia 8 121,017 61,126 18 73,354 54,200 26 194,371 115,326 Washington 7 194,398 126,966 4 20,480 16,600 11 214,878 143,566 West Virginia 1 10,600 5,242 5 14,284 10,001 6 24,884 15,243 Wisconsin 2 45,755 33,491 4 10,897 7,035 6 56,652 40,526 Wyoming — — — 6 56,885 35,198 6 56,885 35,198 216 5,568,006 3,518,965 743 3,800,346 2,789,643 959 9,368,352 6,308,608 Washington, DC 1 146,147 130,722 — — — 1 146,147 130,722 Ontario, Canada 2 55,082 29,337 — — — 2 55,082 29,337 Puerto Rico 1 216,756 135,873 — — — 1 216,756 135,873 4 417,985 295,932 — — — 4 417,985 295,932 Total 220 $ 5,985,991 $ 3,814,897 743 $ 3,800,346 $ 2,789,643 963 $ 9,786,337 $ 6,604,540 51 Table of Contents Hotels Net Lease All Properties Location of Properties Number of Properties Undepreciated Carrying Value Depreciated Carrying Value Number of Properties Undepreciated Carrying Value Depreciated Carrying Value Total Number of Properties Total Undepreciated Carrying Value Total Depreciated Carrying Value Held For Sale: Illinois — $ — $ — 3 $ 777 $ 777 3 $ 777 $ 777 Indiana — — — 1 73 73 1 73 73 Michigan — — — 2 239 239 2 239 239 Minnesota 1 6,919 4,060 — — — 1 6,919 4,060 Missouri — — — 1 5,044 5,044 1 5,044 5,044 Ohio — — — 2 253 253 2 253 253 Total 1 $ 6,919 $ 4,060 9 $ 6,386 $ 6,386 10 $ 13,305 $ 10,446 221 $ 5,992,910 $ 3,818,957 752 $ 3,806,732 $ 2,796,029 973 $ 9,799,642 $ 6,614,986 As of December 31, 2023, 308 of our net lease properties with an aggregate undepreciated carrying value of $755.1 million were encumbered by mortgage notes with an aggregate principal balance of $608.6 million, and 70 of our net lease travel center properties with an aggregate undepreciated carrying value of $785.9 million secured our $1.0 billion senior secured notes.
Biggest changeThe following tables summarize certain information about our properties as of December 31, 2024 (dollars in thousands): Hotels Net Lease All Properties Location of Properties Number of Properties Undepreciated Carrying Value Depreciated Carrying Value Number of Properties Undepreciated Carrying Value Depreciated Carrying Value Total Number of Properties Total Undepreciated Carrying Value Total Depreciated Carrying Value Held and Used: United States: Alabama 2 $ 17,901 $ 9,297 32 $ 108,064 $ 76,199 34 $ 125,965 $ 85,496 Alaska — — — 1 4,209 2,491 1 4,209 2,491 Arizona 14 212,879 115,287 25 180,945 130,227 39 393,824 245,514 Arkansas — — — 16 84,654 50,806 16 84,654 50,806 California 36 1,102,377 689,060 22 212,801 167,988 58 1,315,178 857,048 Colorado 4 132,547 92,696 8 86,320 68,664 12 218,867 161,360 Connecticut — — — 3 17,206 9,226 3 17,206 9,226 Delaware 1 15,158 11,660 — — — 1 15,158 11,660 Florida 12 450,066 341,218 46 189,335 143,631 58 639,401 484,849 Georgia 15 379,977 230,916 70 205,539 153,528 85 585,516 384,444 Hawaii 1 129,254 66,809 — — — 1 129,254 66,809 Idaho — — — 2 16,925 12,771 2 16,925 12,771 Illinois 9 392,864 279,001 51 217,256 164,301 60 610,120 443,302 Indiana 2 31,408 16,038 39 177,828 130,086 41 209,236 146,124 Iowa 1 7,013 3,025 7 21,422 16,927 8 28,435 19,952 Kansas 1 17,203 10,799 5 34,354 27,913 6 51,557 38,712 Kentucky — — — 12 52,600 35,826 12 52,600 35,826 Louisiana 3 241,667 163,512 12 90,502 61,647 15 332,169 225,159 Maryland 5 118,162 64,611 8 50,649 33,317 13 168,811 97,928 Massachusetts 8 253,011 163,821 — — — 8 253,011 163,821 Michigan 5 47,161 27,405 49 93,945 63,129 54 141,106 90,534 Minnesota 1 80,615 63,839 11 66,521 51,387 12 147,136 115,226 Mississippi — — — 5 22,879 15,159 5 22,879 15,159 Missouri 3 141,972 98,148 24 88,278 60,838 27 230,250 158,986 Nebraska — — — 5 23,985 13,174 5 23,985 13,174 Nevada 3 54,255 26,787 6 141,023 97,342 9 195,278 124,129 New Hampshire — — — 1 4,818 2,876 1 4,818 2,876 New Jersey 8 151,811 83,990 3 74,976 49,573 11 226,787 133,563 New Mexico 2 26,528 10,304 16 94,948 59,184 18 121,476 69,488 New York 1 91,197 64,222 8 42,556 26,626 9 133,753 90,848 North Carolina 7 132,419 79,423 15 52,480 37,890 22 184,899 117,313 North Dakota — — — 1 3,476 2,645 1 3,476 2,645 Ohio 5 121,140 86,558 35 228,515 156,991 40 349,655 243,549 Oklahoma 1 7,526 3,705 12 66,128 51,647 13 73,654 55,352 Oregon 1 110,318 86,891 7 71,988 58,592 8 182,306 145,483 Pennsylvania 3 97,070 53,744 28 146,085 101,922 31 243,155 155,666 Rhode Island 1 16,744 6,156 — — — 1 16,744 6,156 South Carolina 1 69,907 48,689 16 88,415 59,811 17 158,322 108,500 Tennessee 7 154,015 66,460 37 108,098 78,963 44 262,113 145,423 Texas 13 261,631 140,994 55 355,252 248,845 68 616,883 389,839 Utah 2 78,300 38,497 3 12,652 7,550 5 90,952 46,047 Virginia 8 131,186 67,656 18 67,696 48,695 26 198,882 116,351 Washington 7 198,244 125,971 4 19,900 16,002 11 218,144 141,973 West Virginia 1 10,649 5,055 5 13,847 9,322 6 24,496 14,377 Wisconsin — — — 4 10,701 6,547 4 10,701 6,547 Wyoming — — — 6 55,948 33,032 6 55,948 33,032 194 5,484,175 3,442,244 733 3,705,719 2,643,290 927 9,189,894 6,085,534 Washington, DC 1 147,804 128,975 — — — 1 147,804 128,975 Ontario, Canada 2 58,179 30,123 — — — 2 58,179 30,123 Puerto Rico 1 217,467 130,076 — — — 1 217,467 130,076 4 423,450 289,174 — — — 4 423,450 289,174 Total 198 $ 5,907,625 $ 3,731,418 733 $ 3,705,719 $ 2,643,290 931 $ 9,613,344 $ 6,374,708 51 Table of Contents Hotels Net Lease All Properties Location of Properties Number of Properties Undepreciated Carrying Value Depreciated Carrying Value Number of Properties Undepreciated Carrying Value Depreciated Carrying Value Total Number of Properties Total Undepreciated Carrying Value Total Depreciated Carrying Value Held For Sale: Alabama 1 $ 8,250 $ 3,775 — $ — $ — 1 $ 8,250 $ 3,775 Georgia — — — 1 804 518 1 804 518 Illinois — — — 2 374 374 2 374 374 Indiana — — — 1 73 73 1 73 73 Iowa — — — 1 1,653 701 1 1,653 701 Michigan 2 15,245 8,676 1 77 77 3 15,322 8,753 Minnesota 1 13,620 3,761 — — — 1 13,620 3,761 Missouri 1 13,097 5,380 — — — 1 13,097 5,380 Ohio — — — 3 2,635 1,535 3 2,635 1,535 Pennsylvania 2 20,862 10,230 — — — 2 20,862 10,230 Texas 1 14,066 6,715 — — — 1 14,066 6,715 Total 8 $ 85,140 $ 38,537 9 $ 5,616 $ 3,278 17 $ 90,756 $ 41,815 206 $ 5,992,765 $ 3,769,955 742 $ 3,711,335 $ 2,646,568 948 $ 9,704,100 $ 6,416,523 As of December 31, 2024, 315 of our net lease properties with an aggregate undepreciated carrying value of $760.0 million were encumbered by mortgage notes with an aggregate principal balance of $606.6 million, and 70 of our net lease travel center properties with an aggregate undepreciated carrying value of $761.1 million secured our $1.0 billion senior secured notes.
Seven of the eight hotel ground leases require annual minimum rents averaging $337 thousand per year; future rent under one ground lease has been prepaid. Ground rent payable under the ground leases for our net lease properties is generally a fixed amount, averaging $420 thousand per year.
Seven of the eight hotel ground leases require annual minimum rents averaging $337 thousand per year; future rent under one ground lease has been prepaid. Ground rent payable under the ground leases for our net lease properties is generally a fixed amount, averaging $505 thousand per year.
In addition, 69 properties, including 66 hotels and three net lease properties, with an aggregate undepreciated carrying value of $1,594.3 million secured our revolving credit facility.
In addition, 69 properties, including 66 hotels and three net lease properties, with an aggregate undepreciated carrying value of $1,717.3 million secured our revolving credit facility.
The leased land is generally used for parking. We believe these two hotels would be operable without the leased land. (2) Three of these net lease properties with a depreciated carrying value totaling $23,651 are partially on land we lease from unrelated third parties.
The leased land is generally used for parking. We believe these two hotels would be operable without the leased land. (2) Three of these net lease properties with a depreciated carrying value totaling $22,266 are partially on land we lease from unrelated third parties.
At December 31, 2023, eight of our hotels and 14 of our net lease properties were on land we leased partially or entirely from unrelated third parties.
At December 31, 2024, eight of our hotels and 13 of our net lease properties were on land we leased partially or entirely from unrelated third parties.
The average remaining term of the ground leases (including renewal options) for our hotels and our net lease properties is approximately 39 years (range of 11 to 64 years) and 16 years (range of three months to 41 years), respectively. Ground rent payable under three of the hotel ground leases is generally calculated as a percentage of hotel revenues.
The average remaining term of the ground leases (including renewal options) for our hotels and our net lease properties is approximately 38 years (range of ten to 63 years) and 18 years (range of four months to 40 years), respectively. Ground rent payable under three of the hotel ground leases is generally calculated as a percentage of hotel revenues.
Item 2. Properties At December 31, 2023, we owned 221 hotels and 752 service-focused retail net lease properties.
Item 2. Properties At December 31, 2024, we owned 206 hotels and 742 service-focused retail net lease properties.
At December 31, 2023, the aggregate depreciated carrying value of our properties subject to ground leases was as follows (dollars in thousands): 8 hotels (1) $ 133,155 14 net lease (2) 50,275 Total $ 183,430 (1) Two of these hotels with a depreciated carrying value totaling $53,401 are partially on land we lease from unrelated third parties.
At December 31, 2024, the aggregate depreciated carrying value of our properties subject to ground leases was as follows (dollars in thousands): Eight hotels (1) $ 146,013 13 net lease (2) 46,549 Total $ 192,562 (1) Two of these hotels with a depreciated carrying value totaling $52,697 are partially on land we lease from unrelated third parties.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−1 removed0 unchanged
Biggest changeItem 3. Legal Proceedings From time to time, we may become involved in litigation matters incidental to the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, we are currently not a party to any litigation which we expect to have a material adverse effect on our business. Item 4.
Biggest changeAlthough we are unable to predict with certainty the eventual outcome of any litigation, we are currently not a party to any litigation which we expect to have a material adverse effect on our business. 52 Table of Contents Item 4. Mine Safety Disclosures Not applicable. PART II
Removed
Mine Safety Disclosures Not applicable. 52 Table of Contents PART II
Added
Item 3. Legal Proceedings From time to time, we may become involved in litigation matters incidental to the ordinary course of our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed0 unchanged
Biggest changeTherefore, we cannot be sure that we will continue to pay distributions in the future or that the amount of any distributions we do pay will not decrease. Item 6. [Reserved] 53 Table of Contents
Biggest changeTherefore, we cannot be sure that we will continue to pay distributions in the future. Item 6. [Reserved] 53 Table of Contents
However, the timing, amount and form of future distributions will be determined at the discretion of our Board of Trustees and will depend upon various factors that our Board of Trustees deems relevant, including, but not limited to, our FFO and our Normalized FFO, requirements to maintain our qualification for taxation as a REIT, limitations in our debt agreements, the availability to us of debt and equity capital, our dividend yield and our dividend yield compared to the dividend yields 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 distributions.
However, the timing, amount and form of future distributions will be determined at the discretion of our Board of Trustees and will depend upon various factors that our Board of Trustees deems relevant, including, but not limited to, our FFO and our Normalized FFO, requirements to maintain our qualification for taxation as a REIT, limitations in our debt agreements, the availability to us of debt and equity capital, our dividend yield and our dividend yield compared to the dividend yields 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.
We withheld and purchased these common shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date. Our current cash distribution rate to common shareholders is $0.20 per share per quarter, or $0.80 per share per year.
We withheld and purchased these common shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date. Our current cash distribution rate to common shareholders is $0.01 per share per quarter, or $0.04 per share per year.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares are traded on Nasdaq (symbol: SVC). As of February 22, 2024, there were 408 shareholders of record of our common shares, although there is a larger number of beneficial owners. Issuer purchases of equity securities.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares are traded on Nasdaq (symbol: SVC). As of February 24, 2025, there were 399 shareholders of record of our common shares, although there is a larger number of beneficial owners. Issuer purchases of equity securities.
The following table provides information about our purchases of our equity securities during the quarter ended December 31, 2023: Calendar Month Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs December 1, 2023 - December 31, 2023 645 $ 7.76 — $ — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of a former employee of RMR in connection with the vesting of awards of our common shares.
The following table provides information about our purchases of our equity securities during the quarter ended December 31, 2024: Calendar Month Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs December 1, 2024 - December 31, 2024 11,915 $ 2.56 — $ — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain former employees of RMR in connection with the vesting of prior awards of our common shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

109 edited+29 added−27 removed71 unchanged
Biggest changeComparable Hotels* No. of Hotels No. of Rooms or Suites Occupancy ADR RevPAR Year Ended December 31, Year Ended December 31, Year Ended December 31, Brand Service Level 2023 2022 Change 2023 2022 Change 2023 2022 Change Sonesta Hotels & Resorts® Full Service 22 7,149 62.4 % 60.4 % 2.0 pts $ 152.48 $ 150.40 1.4 % $ 95.15 $ 90.84 4.7 % Royal Sonesta Hotels® Full Service 17 5,663 56.5 % 52.2 % 4.3 pts 237.63 236.07 0.7 % 134.26 123.23 9.0 % Radisson® Hotels & Resorts Full Service 5 1,149 62.5 % 64.1 % (1.6) pts 146.45 133.59 9.6 % 91.53 85.63 6.9 % Crowne Plaza® Full Service 1 495 60.6 % 54.4 % 6.2 pts 141.30 132.27 6.8 % 85.63 71.95 19.0 % Country Inn & Suites® by Radisson Full Service 3 430 65.9 % 62.8 % 3.1 pts 137.17 136.92 0.2 % 90.40 85.99 5.1 % Full Service Total/Average 48 14,886 60.2 % 57.4 % 2.8 pts 181.71 177.85 2.2 % 109.39 102.09 7.2 % Sonesta Select® Select Service 44 6,427 54.9 % 51.6 % 3.3 pts 118.45 117.76 0.6 % 65.03 60.76 7.0 % Hyatt Place® Select Service 17 2,107 65.3 % 67.4 % (2.1) pts 122.23 119.00 2.7 % 79.82 80.21 (0.5) % Select Service Total/Average 61 8,534 57.5 % 55.5 % 2.0 pts 119.51 118.13 1.2 % 68.72 65.56 4.8 % Sonesta ES Suites® Extended Stay 60 7,643 67.8 % 69.3 % (1.5) pts 128.33 124.90 2.7 % 87.01 86.56 0.5 % Sonesta Simply Suites® Extended Stay 50 6,366 68.5 % 71.2 % (2.7) pts 90.63 86.18 5.2 % 62.08 61.36 1.2 % Extended Stay Total/Average 110 14,009 68.1 % 70.2 % (2.1) pts 111.17 107.21 3.7 % 75.71 75.26 0.6 % Comparable Hotels Total/Average 219 37,429 62.6 % 61.7 % 0.9 pts $ 139.86 $ 135.36 3.3 % $ 87.55 $ 83.52 4.8 % * We define comparable hotels as those that were owned by us and were open and operating for the entire periods being compared.
Biggest changeComparable Hotels* No. of Hotels No. of Rooms or Suites Occupancy ADR RevPAR Year Ended December 31, Year Ended December 31, Year Ended December 31, Brand Service Level 2024 2023 Change 2024 2023 Change 2024 2023 Change Sonesta Hotels & Resorts® Full Service 21 6,955 58.6 % 63.2 % (4.6) pts $ 154.95 $ 153.25 1.1 % $ 90.81 $ 96.84 (6.2) % Royal Sonesta Hotels® Full Service 17 5,663 61.3 % 56.5 % 4.8 pts 233.24 237.63 (1.8) % 143.02 134.35 6.5 % Radisson® Hotels & Resorts Full Service 5 1,149 65.4 % 62.2 % 3.2 pts 147.07 147.06 — % 96.14 91.50 5.1 % Crowne Plaza® Full Service 1 495 63.3 % 60.6 % 2.7 pts 142.09 141.30 0.6 % 90.01 85.65 5.1 % Country Inn & Suites® by Radisson Full Service 2 346 70.2 % 67.2 % 3.0 pts 148.28 145.96 1.6 % 104.14 98.08 6.2 % Full Service Total/Average 46 14,608 60.6 % 60.5 % 0.1 pts 184.33 182.89 0.8 % 111.75 110.69 1.0 % Sonesta Select® Select Service 42 6,131 57.9 % 55.8 % 2.1 pts 115.31 119.14 (3.2) % 66.80 66.48 0.5 % Hyatt Place® Select Service 17 2,107 63.4 % 65.3 % (1.9) pts 120.48 122.23 (1.4) % 76.35 79.87 (4.4) % Select Service Total/Average 59 8,238 59.3 % 58.2 % 1.1 pts 116.73 120.02 (2.7) % 69.24 69.91 (1.0) % Sonesta ES Suites® Extended Stay 52 6,689 69.3 % 68.9 % 0.4 pts 127.17 131.81 (3.5) % 88.08 90.79 (3.0) % Sonesta Simply Suites® Extended Stay 47 5,988 69.0 % 68.6 % 0.4 pts 92.17 92.06 0.1 % 63.62 63.14 0.8 % Extended Stay Total/Average 99 12,677 69.1 % 68.7 % 0.4 pts 110.67 113.15 (2.2) % 76.52 77.78 (1.6) % Comparable Hotels Total/Average 204 35,523 63.4 % 62.9 % 0.5 pts $ 140.96 $ 142.14 (0.8) % $ 89.32 $ 89.44 (0.1) % * We define comparable hotels as those that were owned by us and were open and operating for the entirety of the periods being compared.
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. Tenants with no minimum rent required under the lease are excluded.
We define net lease rent 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. Tenants with no minimum rent required under the lease are excluded.
Hotel Portfolio The following tables summarize the operating statistics, including ADR, RevPAR and occupancy 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.
Hotel Portfolio The following tables summarize the operating statistics, including occupancy, ADR 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.
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 the incurrence of debt to fund our operations, capital expenditures, investments, future debt maturities, distributions to our shareholders and other general business purposes.
We currently expect to use cash on hand, the cash flows from our operations, borrowings under our revolving credit facility or VFN, net proceeds from any asset sales and net proceeds of offerings of equity or the incurrence of debt to fund our operations, capital expenditures, investments, future debt maturities, distributions to our shareholders and other general business purposes.
For further information about these and other such relationships and related person transactions, see Notes 4, 5, 8 and 9 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference and our other filings with the SEC, including our definitive Proxy Statement for our 2024 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2023.
For further information about these and other such relationships and related person transactions, see Notes 4, 5, 8 and 9 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference and our other filings with the SEC, including our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2024.
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.
We believe 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.
(2) Intercompany balances represent payables to non-guarantor subsidiaries. 63 Table of Contents Related Person Transactions We have relationships and historical and continuing transactions with RMR, RMR Inc., TA and Sonesta and others affiliated with them.
(2) Intercompany balances represent payables to non-guarantor subsidiaries. 63 Table of Contents Related Person Transactions We have relationships and historical and continuing transactions with RMR, RMR Inc. and Sonesta and others affiliated with them.
We have determined that each of our wholly owned TRSs is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board Accounting Standards Codification™, or the Codification.
We have determined that each of our wholly owned TRSs is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board Accounting Standards Codification™, or ASC.
Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do. 71 Table of Contents Our calculations of FFO and Normalized FFO for the years ended December 31, 2023 and 2022 and reconciliations of net loss, the most directly comparable financial measure under GAAP reported in our consolidated financial statements, to those amounts appear in the following table (amounts in thousands, except per share amounts).
Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do. 71 Table of Contents Our calculations of FFO and Normalized FFO for the years ended December 31, 2024 and 2023 and reconciliations of net loss, the most directly comparable financial measure under GAAP reported in our consolidated financial statements, to those amounts appear in the following table (amounts in thousands, except per share amounts).
For a comparison of consolidated results for the year ended December 31, 2022 compared to the year ended December 31, 2021, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2022. Hotel operating revenues.
For a comparison of consolidated results for the year ended December 31, 2023 compared to the year ended December 31, 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2023. Hotel operating revenues.
In the future, we may need to revise our carrying value assessments to incorporate information which is not now known, and such revisions could increase or decrease our depreciation expense related to properties we own, result in the classification of our leases as other than operating leases or decrease the carrying values of our assets. 65 Table of Contents Property and Operating Statistics (dollars in thousands, except hotel statistics) As of December 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 146 distinct brands across 22 industries.
In the future, we may need to revise our carrying value assessments to incorporate information which is not now known, and such revisions could increase or decrease our depreciation expense related to properties we own, result in the classification of our leases as other than operating leases or decrease the carrying values of our assets. 65 Table of Contents Property and Operating Statistics (dollars in thousands, except hotel statistics) As of December 31, 2024, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 145 distinct brands across 22 industries.
Equity in (losses) earnings of an investee represents our proportionate share of the (losses) earnings of Sonesta. Net loss.
Equity in losses of an investee represents our proportionate share of the losses of Sonesta. Net loss.
As of December 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.
As of December 31, 2024, 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.
Supplemental Guarantor Information Our 2025 Notes and our 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 and our net lease mortgage notes.
Supplemental Guarantor Information Our 2027 Notes, 2029 Notes and 2032 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 and our net lease mortgage notes.
To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that has a greater than 50% likelihood of being realized upon settlement. Tax returns filed for the 2020 through 2023 tax years are subject to examination by taxing authorities.
To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that has a greater than 50% likelihood of being realized upon settlement. Tax returns filed for the 2021 through 2024 tax years are subject to examination by taxing authorities.
TA has five renewal options for 10 years each for all of the travel centers under each lease. BP Corporation North America Inc. guarantees payments under each of the five master leases. The aggregate guaranty as of December 31, 2023 was approximately $3,037,475. Annualized minimum rent excludes the impact of rents prepaid by TA.
TA has five renewal options for ten years each for all of the travel centers under each lease. BP Corporation North America Inc. guarantees payments under each of the five master leases. The aggregate guaranty as of December 31, 2024 was approximately $3,037,475. Annualized minimum rent excludes the impact of rents prepaid by TA.
Incorrect assumptions or estimates may result in misclassification of our leases. We account for income taxes in accordance with the Income Taxes Topic of the Codification.
Incorrect assumptions or estimates may result in misclassification of our leases. We account for income taxes in accordance with the Income Taxes Topic of the ASC.
A subsidiary guarantor’s guarantee of the 2025 Notes, 2027 Notes and 2031 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, in the case of the 2031 Notes, both agencies, 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.
A subsidiary guarantor’s guarantee of the 2027 Notes, the 2029 Notes and the 2032 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, and 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.
For the years ended December 31, 2023 and 2022, our comparable results exclude two hotels; one of the hotels was not owned for the entirety of the periods presented and the other hotel suspended operations during part of the periods presented.
For the years ended December 31, 2024 and 2023, our comparable results exclude two hotels; one of the hotels was not owned for the entirety of the periods presented and the other hotel suspended operations during the periods presented.
As of December 31, 2023, there was $8,437 on deposit in these escrow accounts, which was held directly by us and is reflected in our consolidated balance sheets as restricted cash. Our net lease portfolio leases do not require FF&E escrow deposits and tenants under these leases are generally required to maintain the leased properties, including structural and non-structural components.
As of December 31, 2024, there was $5,443 on deposit in these escrow accounts, which was held directly by us and is reflected in our consolidated balance sheets as restricted cash. Our net lease portfolio leases do not require FF&E escrow deposits and tenants under these leases are generally required to maintain the leased properties, including structural and non-structural components.
The maturity date of the new facility is June 29, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date of the new facility by two additional six-month periods.
The maturity date of our revolving credit facility is June 29, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date of the facility by two additional six-month periods.
We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of December 31, 2023, the annual interest rate payable on borrowings under our revolving credit facility was 7.88%.
We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of December 31, 2024 and 2023, the annual interest rate payable on borrowings under our revolving credit facility was 6.99% and 7.88%, respectively.
Our remaining $2,775,000 of senior unsecured notes do not have the benefit of any guarantees.
Our remaining $2,425,000 of senior unsecured notes do not have the benefit of any guarantees.
We recorded a $1,524 loss on early extinguishment of debt in the 2023 period related to the write-off of deferred financing costs and unamortized discounts in connection with the repayment of certain senior unsecured notes and the write-off of certain deferred financing costs relating to the amendment of our revolving credit facility.
We recorded a $1,524 loss on early extinguishment of debt in 2023 related to the write-off of deferred financing costs and unamortized discounts in connection with the repayment of certain senior unsecured notes and the write-off of certain deferred financing costs relating to the amendment of our revolving credit facility. Income tax (expense) benefit.
However, as discussed elsewhere in this Annual Report on Form 10-K, the impacts of the current, and possibly future, inflationary conditions, increasing or sustained high interest rates and a possible economic 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.
However, as discussed elsewhere in this Annual Report on Form 10-K, the impacts of the current, and possibly future, inflationary conditions, uncertainties surrounding interest rates and a possible economic 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.
Our consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and net lease operating expenses from our net lease properties. Hotel Portfolio. As of December 31, 2023, we owned 221 hotels.
Our consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and net lease operating expenses from our net lease properties. Hotel Portfolio. As of December 31, 2024, we owned 206 hotels.
During the year ended December 31, 2023, we funded $226,590 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $250,000 during 2024 for capital improvements to certain hotels using cash on hand and borrowings under our revolving credit facility.
During the year ended December 31, 2024, we funded $291,192 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $250,000 during 2025 for capital improvements to certain hotels using cash on hand and borrowings under our revolving credit facility.
As a result, we believe using this implied coverage metric provides a more reasonable estimated representation of recent operating results and the financial condition for those tenants. Our net lease properties generated coverage of 2.46x and 3.00x as of December 31, 2023 and 2022, respectively.
As a result, we believe using this implied coverage metric provides a more reasonable estimated representation of recent operating results and the financial condition for those tenants. Our net lease properties generated rent coverage of 2.10x and 2.46x as of December 31, 2024 and 2023, respectively.
Excludes the results of hotels sold during the periods presented and includes data for one hotel for periods prior to when we acquired it. 66 Table of Contents Net Lease Portfolio As of December 31, 2023, our net lease properties were 97.1% occupied and we had 22 properties available for lease.
Excludes the results of hotels sold during the periods presented and includes data for one hotel for periods prior to when we acquired it. 66 Table of Contents Net Lease Portfolio As of December 31, 2024, our net lease properties were 97.6% occupied and we had 18 properties available for lease.
As collateral for all loans and other obligations under the new facility, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 69 properties, including 66 hotels and three net lease properties, with an undepreciated carrying value of $1,594,253 as of December 31, 2023.
As collateral for all loans and other obligations under the facility, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 69 properties, including 66 hotels and three net lease properties, with an aggregate undepreciated carrying value of $1,717,254 as of December 31, 2024.
(3) See page 58 for our definition of coverage. (4) TA is our largest tenant. We lease 176 travel centers (132 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 2033.
(2) See page 58 for our definition of rent coverage. (3) TA is our largest tenant. We lease 175 travel centers (131 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 2033.
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.
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.
The Great Escape 14 98,242 1.9 % 7,711 2.1 % 6.20 x 3. Healthy Way of Life II, LLC Life Time Fitness 3 92,617 1.8 % 5,770 1.5 % 2.35 x 4. Styx Acquisition, LLC Buehler's Fresh Foods 5 76,469 1.5 % 5,657 1.5 % 3.08 x 5. Professional Resource Development, Inc.
The Great Escape 14 98,242 2.0 % 7,711 2.0 % 4.75 x 3. Healthy Way of Life II, LLC Life Time Fitness 3 92,617 1.8 % 5,770 1.5 % 2.55 x 4. Styx Acquisition, LLC Buehler's Fresh Foods 5 76,469 1.5 % 5,657 1.5 % 2.54 x 5. Professional Resource Development, Inc.
Transaction related costs for the 2023 period primarily consist of the partial recovery of a working capital reserve related to the IHG portfolio previously deemed uncollectable and expensed during 2021 ($5,797), partially offset by costs related to hotel rebranding activity, demolition of certain vacant properties and potential acquisitions ($4,174).
Transaction related costs in 2023 primarily consisted of the partial recovery of a working capital reserve related to the IHG portfolio previously deemed uncollectable and expensed during 2021 ($5,797), partially offset by costs related to hotel rebranding activity, demolition of certain vacant properties and potential acquisitions ($4,174). Loss on asset impairment, net.
We recorded reserves for uncollectable amounts and reduced rental income by $4,927 and reduced our reserves for uncollectable amounts and increased rental income by $320 for the years ended December 31, 2023 and 2022, respectively, based on our assessment of the collectability of rents.
We recorded reserves for uncollectable amounts and reduced rental income by $2,158 and $4,927 during the years ended December 31, 2024 and 2023, respectively, based on our assessment of the collectability of rents.
We may provide tenant improvement allowances to tenants in certain cases or may develop sites with the intent to lease them. During the year ended December 31, 2023, we funded $4,060 for capital improvements to our net lease properties. As of December 31, 2023, we had $2,546 of unspent leasing-related obligations related to certain net lease tenants.
We may provide tenant improvement allowances to tenants in certain cases or may develop sites with the intent to lease them. During the year ended December 31, 2024, we funded $5,494 for capital improvements to our net lease properties. As of December 31, 2024, we had $1,534 of unspent leasing-related obligations related to certain of our net lease tenants.
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.
As a result, these notes and the related 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 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.
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, including due to supply chain challenges, may continue to negatively impact our hotel operations and the operations of our tenants.
Consumer confidence, corporate travel and lodging demand will continue to be affected by economic and market conditions, inflationary pressures, uncertainties surrounding interest rates, 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.
During the year ended December 31, 2023, certain of our hotel managers deposited $6,855 to these accounts and spent $5,406 from the FF&E reserve escrow accounts to renovate and refurbish our hotels.
During the year ended December 31, 2024, certain of our hotel managers deposited $6,135 to these accounts and spent $6,375 from the FF&E reserve escrow accounts to renovate and refurbish our hotels.
(5) Consists of 165 tenants with an average investment of $2,706 and an average annual minimum rent of $170 per property. 68 Table of Contents As of December 31, 2023, our net lease tenants operated across 21 distinct industries within the service-focused retail sector of the U.S. economy.
(4) Consists of 167 tenants with an average investment of $2,740 and an average annual minimum rent of $184 per property. 68 Table of Contents As of December 31, 2024, our net lease tenants operated across 21 distinct industries within the service-focused retail sector of the U.S. economy.
Our debt maturities (other than our revolving credit facility) as of December 31, 2023 were as follows: Year Maturity 2024 $ 1,958 2025 1,151,958 2026 801,958 2027 851,958 2028 1,000,737 2029 425,000 2030 400,000 2031 1,000,000 $ 5,633,569 None of our senior note debt obligations require principal or sinking fund payments prior to their maturity dates.
Our debt maturities (other than our revolving credit facility) as of December 31, 2024 were as follows: Year Debt Maturities 2025 $ 1,958 2026 801,958 2027 851,958 2028 1,000,737 2029 1,125,000 Thereafter 1,900,000 $ 5,681,611 None of our senior note debt obligations require principal or sinking fund payments prior to their maturity dates.
Interest payable on drawings under the new facility is based on the secured overnight financing rate, or SOFR, plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of December 31, 2023.
Interest payable on drawings under our revolving credit facility is based on SOFR plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of December 31, 2024.
We had reserves for uncollectable rents of $3,436 and $7,697 as of December 31, 2023 and 2022, respectively, included in other assets in our consolidated balance sheets.
We had reserves for uncollectable rents of $5,058 and $3,436 as of December 31, 2024 and 2023, respectively, included in other assets, net in our consolidated balance sheets.
(2) See page 67 for our definition of annualized minimum rent. As of December 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 annualized minimum rents.
As of December 31, 2024, 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 annualized minimum rents.
Our net loss and our net loss per common share (basic and diluted) each decreased in the 2023 period compared to the 2022 period primarily due to the revenue and expense changes discussed above. 57 Table of Contents Liquidity and Capital Resources (dollars in thousands, except share amounts) Our Managers and Tenants As of December 31, 2023, all 221 of our hotels were managed and operated by four hotel operating companies.
Our net loss and our net loss per common share (basic and diluted) each increased in 2024 compared to 2023 primarily due to the revenue and expense changes discussed above. 57 Table of Contents Liquidity and Capital Resources (dollars in thousands, except per share amounts) Our Managers and Tenants As of December 31, 2024, all 206 of our hotels were managed and operated by four hotel operating companies and our 742 service-focused retail net lease properties were leased to 177 tenants.
Overview (dollars in thousands, except per share amounts and per room hotel data) We are a REIT organized under the laws of the State of Maryland. As of December 31, 2023, we owned 973 properties in 46 states, the District of Columbia, Canada and Puerto Rico. In response to significant and prolonged increases in inflation, the U.S.
Overview (dollars in thousands, except per share amounts and per room hotel data) We are a REIT organized under the laws of the State of Maryland. As of December 31, 2024, we owned 948 properties in 46 states, the District of Columbia, Canada and Puerto Rico.
As of December 31, 2023, we owned 752 service-focused retail net lease properties with an aggregate of 13,341,172 square feet leased to 175 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $372,319.
As of December 31, 2024, we owned 742 service-focused retail net lease properties with an aggregate of 13,292,519 square feet leased to 177 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $380,863.
Gain (loss) on equity securities, net. G ain (loss) on equity securities, net represents the adjustment to the carrying value of our former investment in shares of TA common stock to its fair value. Interest income. The increase in interest income is primarily due to higher interest rates and higher average cash balances invested during the 2023 period. Interest expense.
G ain on equity securities, net represents the adjustment to the carrying value of our former investment in shares of TA common stock to its fair value. Interest income. The decrease in interest income is due to lower average cash balances invested during 2024 compared to 2023. Interest expense.
As of December 31, 2023, our hotel managers included Sonesta (195 hotels), Hyatt (17 hotels), Radisson (eight hotels), and IHG (one hotel). TA is our largest tenant (176 travel centers).
As of December 31, 2024, our hotel managers included Sonesta (181 hotels), Hyatt (17 hotels), Radisson (seven hotels) and IHG (one hotel). TA is our largest tenant (175 travel centers).
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 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 factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our debt agreements, the availability to us of debt and equity capital, our dividend yield, and our dividend yield compared to the dividend yields 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.
Senior Notes Indenture Covenants The following table summarizes the results of the financial tests required by the indentures and related supplements for our senior secured and unsecured notes as of December 31, 2023: Actual Results Covenant Requirement Total debt / adjusted total assets 52.4% Maximum of 60% Secured debt / adjusted total assets 15.0% Maximum of 40% Consolidated income available for debt service / debt service 1.79x Minimum of 1.50x Total unencumbered assets / unsecured debt 183.2% Minimum 150% As of December 31, 2023, adjusted total assets for covenant purposes as defined in our senior notes indentures were $10,742,687 and assets encumbered under our revolving credit facility, serving as collateral for our net lease mortgage notes or secured senior notes represented $3,367,550 of adjusted total assets, as defined in our senior notes indentures.
Senior Notes Indenture Covenants The following table summarizes the results of the financial tests required by the indentures and related supplements for our senior secured and unsecured notes as of December 31, 2024: Actual Results Covenant Requirement Total debt / adjusted total assets 54.9% Maximum of 60% Secured debt / adjusted total assets 16.5% Maximum of 40% Consolidated income available for debt service / debt service 1.52x Minimum of 1.50x Total unencumbered assets / unsecured debt 175.3% Minimum 150% Total unencumbered assets in guarantor subsidiaries / senior guaranteed unsecured debt 4.14x Minimum of 2.20x As of December 31, 2024, adjusted total assets for covenant purposes as defined in our senior notes indentures were $10,625,259 and assets encumbered under our revolving credit facility, serving as collateral for our net lease mortgage notes or secured senior notes represented $3,482,758 of adjusted total assets, as defined in our senior notes indentures.
We present RevPAR, ADR and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods. We define comparable hotels as those that were owned by us and were open and operating for the entire periods being compared. For the years ended December 31, 2023 and 2022, our comparable results exclude two hotels.
We present RevPAR, ADR and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods. We define comparable hotels as those that were owned by us and were open and operating for the entirety of the periods being compared.
Annualized minimum rent excludes the impact of rents prepaid by TA. As of December 31, 2023, our net lease tenants operated across 137 brands. The following table identifies the top ten brands based on annualized minimum rent.
Annualized minimum rent excludes the impact of rents prepaid by TA. As of December 31, 2024, our net lease tenants operated across 136 brands. The following table identifies the top ten brands based on annualized minimum rent. Brand No. of Properties Investment (1) Percent of Total Investment Annualized Minimum Rent Percent of Total Annualized Minimum Rent Rent Coverage (2) 1.
The change from cash flow from investing activities in the 2022 period to cash flow used in investing activities in the 2023 period is primarily due to lower proceeds from the sale of real estate, our hotel acquisition and increased real estate improvements during the 2023 period, partially offset by proceeds from the TA Merger.
The increase in cash flow used in investing activities in the 2024 period is primarily due to proceeds from the sale of TA common shares and higher proceeds from the sale of real estate in the 2023 period and increased real estate improvements during the 2024 period, partially offset by acquisitions in the 2023 period.
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 a $650,000 secured revolving credit facility which is governed by the amended and restated credit agreement that we entered into on June 29, 2023.
We paid this distribution on February 20, 2025 using cash on hand. 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 a $650,000 secured revolving credit facility which is governed by a credit agreement.
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 ($123,238), partially offset by the sale of certain of our hotels since January 1, 2022 ($112,548). Additional operating statistics of our hotels are included in the tables on page 66. Rental income.
The increase in hotel operating revenues is primarily a result of higher occupancies and average rates at certain of our hotels in 2024 ($21,096) and a hotel acquisition in June 2023 ($16,396), partially offset by the sale of certain hotels since January 1, 2023 ($18,821). Additional operating statistics of our hotels are included in the tables beginning on page 66.
The increase in income tax benefit is primarily related to a change in deferred tax liabilities related to our Puerto Rico hotel. See Note 10 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for further information. Equity in (losses) earnings of an investee.
The change in income tax (expense) benefit is primarily a result of increases in our foreign tax expense ($1,863) and state tax expense ($1,037) in 2024. See Note 10 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for further information. Equity in losses of an investee.
During the year ended December 31, 2023, we entered into lease renewals for 5,774,455 rentable square feet (214 properties) at weighted (by rentable square feet) average rents that were 9.4% above the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 10.0 years.
During the year ended December 31, 2024, we entered into lease renewals for 613,543 rentable square feet (56 properties) at weighted (by rentable square feet) average rents that were 3.8% below the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 5.3 years.
We also entered into new leases for 161,875 rentable square feet (seven properties) at weighted (by rentable square feet) average rents that were 21.9% above the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 13.0 years.
We also entered into new leases for 109,591 rentable square feet (four properties) at weighted (by rentable square feet) average rents that were 13.5% below the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 18.4 years.
The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands): Year Ended December 31, 2023 2022 Cash and cash equivalents and restricted cash at the beginning of the period $ 45,420 $ 947,418 Net cash provided by (used in): Operating activities 485,549 243,127 Investing activities (29,577) 397,253 Financing activities (303,562) (1,542,378) Cash and cash equivalents and restricted cash at the end of the period $ 197,830 $ 45,420 58 Table of Contents The increase in cash provided by operating activities for the 2023 period compared to the prior year period is primarily due to $188,000 of prepaid rent received from TA, higher returns earned from our hotel portfolio and lower interest expense in the 2023 period.
The following is a summary of our sources and uses of cash flows for the periods presented: Year Ended December 31, 2024 2023 Cash and cash equivalents and restricted cash at the beginning of the period $ 197,830 $ 45,420 Net cash provided by (used in): Operating activities 139,391 485,549 Investing activities (222,859) (29,577) Financing activities 43,024 (303,562) Cash and cash equivalents and restricted cash at the end of the period $ 157,386 $ 197,830 The decrease in cash flow provided by operating activities in the 2024 period is primarily due to $188,000 of prepaid rent received from TA in the 2023 period, higher interest expense and lower hotel returns in the 2024 period.
This new facility replaced our prior $800,000 secured revolving credit facility, which had a maturity date of July 15, 2023, and is available for general business purposes, including acquisitions. We can borrow, repay, and reborrow funds available under the new facility until maturity and no principal repayments are due until maturity.
This revolving credit facility is available for general business purposes, including acquisitions. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayments are due until maturity.
Rent coverage was 1.83x, 1.92x, 1.97x, 2.07x and 1.79x, for our TA leases no. 1, no. 2, no. 3, no. 4 and no. 5, respectively. Rent coverage is as of December 31, 2023.
Rent coverage was 1.44x, 1.43x, 1.43x, 1.51x and 1.18x, for our TA leases no. 1, no. 2, no. 3, no. 4 and no. 5, respectively. Rent coverage is as of December 31, 2024.
We recorded a $10,989 loss on asset impairment during the 2022 period to reduce the carrying value of 26 hotels and five net lease properties to their estimated fair value less costs to sell. Gain on sale of real estate, net.
We recorded a $9,544 loss on asset impairment, net in 2023 to reduce the carrying value of one hotel and 16 net lease properties to their estimated fair value less costs to sell. Gain on sale of real estate, net.
Our 752 service-focused retail net lease properties were leased to 175 tenants as of December 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.
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.
Tenant Brand Affiliation No. of Properties Investment (1) Percent of Total Investment Annualized Minimum Rent (2) Percent of Total Annualized Minimum Rent (2) Coverage (3) 1. TravelCenters of America Inc. TravelCenters of America / Petro Stopping Centers 176 $ 3,274,133 64.7 % $ 254,000 68.2 % 1.91 x (4) 2. Universal Pool Co., Inc.
Tenant Brand Affiliation No. of Properties Investment (1) Percent of Total Investment Annualized Minimum Rent Percent of Total Annualized Minimum Rent Rent Coverage (2) 1. TravelCenters of America Inc. (3) TravelCenters of America / Petro Stopping Centers 175 $ 3,270,106 64.9 % $ 259,080 68.0 % 1.38 x 2. Universal Pool Co., Inc.
The decrease in depreciation and amortization - hotels is primarily the result of certain of our depreciable assets becoming fully depreciated since January 1, 2022 ($8,523) and our sale of certain hotels since January 1, 2022 ($6,342), partially offset by depreciation and amortization related to capital expenditures made since January 1, 2022 ($7,484) and our acquisition of a hotel in the 2023 period ($2,200).
The increase in depreciation and amortization - hotels is primarily a result of depreciation and amortization related to capital expenditures made since January 1, 2023 and our acquisition of a hotel in June 2023 ($14,207), partially offset by certain of our depreciable assets becoming fully depreciated since January 1, 2023 ($5,283) and the sale of certain hotels since January 1, 2023 ($3,860).
We recorded a $43,239 net gain on sale of real estate during the 2023 period in connection with the sales of 18 hotels and 13 net lease properties, and a $47,818 net gain on sale of real estate in the 2022 period in connection with the sales of 65 hotels and 21 net lease properties.
We recorded a $6,269 net gain on sale of real estate in 2024 in connection with the sales of 15 hotels and ten net lease properties, and a $43,239 net gain on sale of real estate in 2023 in connection with the sales of 18 hotels and 13 net lease properties. Gain on equity securities, net.
The increase in rental income is primarily the result of the amended TA leases in the 2023 period ($7,170), partially offset by our sale of certain net lease properties ($5,815) and lease expirations at certain net lease properties ($1,193) since January 1, 2022. Hotel operating expenses.
Rental income. The increase in rental income is primarily a result of the TA leases that were amended in May 2023 ($5,071) and higher rental income recognized at certain net lease properties in 2024 ($302), partially offset by the sale of certain net lease properties since January 1, 2023 ($979). Hotel operating expenses.
Year Ended December 31, 2023 2022 Net loss $ (32,779) $ (132,381) Add (Less): Depreciation and amortization expense 384,060 401,108 Gain on sale of real estate, net (43,239) (47,818) Loss on asset impairment, net 9,544 10,989 (Gain) loss on equity securities, net (48,837) 8,104 Adjustments to reflect our share of FFO attributable to an investee 3,943 3,723 FFO 272,692 243,725 Add (Less): Transaction related costs (1,623) 1,920 Loss on early extinguishment of debt 1,524 791 Adjustments to reflect our share of Normalized FFO attributable to an investee 1,825 1,037 Normalized FFO $ 274,418 $ 247,473 Weighted average shares outstanding (basic and diluted) 164,988 164,738 Basic and diluted per common share amounts: Net loss $ (0.20) $ (0.80) FFO $ 1.65 $ 1.48 Normalized FFO $ 1.66 $ 1.50 Distributions declared per share $ 0.80 $ 0.23 72 Table of Contents
Year Ended December 31, 2024 2023 Net loss $ (275,526) $ (32,779) Add (Less): Depreciation and amortization expense 371,786 384,060 Loss on asset impairment, net 56,212 9,544 Gain on sale of real estate, net (6,269) (43,239) Gain on equity securities, net — (48,837) Adjustments to reflect our share of FFO attributable to an investee 4,347 3,943 FFO 150,550 272,692 Add (Less): Loss on early extinguishment of debt, net 16,181 1,524 Adjustments to reflect our share of Normalized FFO attributable to an investee 2,777 1,825 Transaction related costs 6,894 (1,623) Normalized FFO $ 176,402 $ 274,418 Weighted average shares outstanding (basic and diluted) 165,338 164,988 Basic and diluted per common share amounts: Net loss $ (1.67) $ (0.20) FFO $ 0.91 $ 1.65 Normalized FFO $ 1.07 $ 1.66 Distributions declared per share $ 0.61 $ 0.80 72 Table of Contents
One of the hotels was not owned for the entirety of the periods and the other suspended operations during part of the periods presented. The following table provides a summary of these revenue metrics for the periods presented.
For the years ended December 31, 2024 and 2023, our comparable results exclude one hotel that was not owned for the entirety of the periods presented and one other hotel that suspended operations during the periods presented. The following table provides a summary of these revenue metrics for the periods presented.
We may also assume mortgage debt on properties we may acquire or obtain mortgage financing on our existing properties. 61 Table of Contents 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.
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. 61 Table of Contents Our ability to complete, and the costs associated with, future debt transactions depend primarily upon credit market conditions and our then perceived creditworthiness.
The decrease in depreciation and amortization - net lease properties is primarily a result of certain of our depreciable assets becoming fully depreciated since January 1, 2022 and our sale of certain net lease properties since January 1, 2022 ($15,396), partially offset by depreciation and amortization related to capital expenditures since January 1, 2022 ($3,529). General and administrative.
Depreciation and amortization - net lease properties. The decrease in depreciation and amortization - net lease properties is primarily a result of our sale of certain net lease properties since January 1, 2023 ($7,727) and certain of our depreciable assets becoming fully depreciated since January 1, 2023 ($9,611). General and administrative.
At December 31, 2023, we also owned 752 service-focused retail properties leased to 175 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures.
We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At December 31, 2024, we also owned 742 service-focused retail properties leased to 177 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures.
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 December 31, 2023 Real estate properties, net (1) $ 4,372,682 Other assets, net 552,196 Indebtedness, net $ 4,961,344 Intercompany balances (2) 752,146 Other liabilities 395,433 Year Ended December 31, 2023 Revenues $ 1,629,129 Expenses 1,767,742 Net loss $ (138,613) (1) Real estate properties, net as of December 31, 2023 includes $169,158 of properties owned directly by us and not included in the assets of the subsidiary guarantors.
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 December 31, 2024 Real estate properties, net (1) $ 4,167,260 Other assets, net 507,507 Indebtedness, net $ 5,142,420 Intercompany balances (2) 751,637 Other liabilities 358,778 Year Ended December 31, 2024 Revenues $ 1,643,822 Expenses 1,859,977 Net loss $ (216,155) (1) Real estate properties, net as of December 31, 2024 includes $150,271 of properties owned directly by us and not included in the assets of the subsidiary guarantors.
The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP: Total assets $ 7,356,116 Plus: accumulated depreciation 3,181,797 Plus: impairment and other adjustments to reflect original cost of real estate assets 408,697 Less: accounts receivable and intangibles (203,923) Adjusted total assets $ 10,742,687 62 Table of Contents Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our credit facility and senior notes indentures.
The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP: Total assets $ 7,119,558 Plus: accumulated depreciation 3,238,636 Plus: impairment and other adjustments to reflect original cost of real estate assets 476,664 Less: accounts receivable and intangibles (209,599) Adjusted total assets $ 10,625,259 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. 62 Table of Contents Acceleration and Cross-Default Our indentures and their supplements contain cross default provisions to any other debt of $50,000 or more.
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 December 31, 2023 consisted of $5,025,000 aggregate principal amounts of senior notes and $608,569 aggregate principal amounts of mortgage notes.
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.
(5) Consists of miscellaneous businesses with an average investment of $5,449 per property. 69 Table of Contents As of December 31, 2023, lease expirations at our net lease properties by year are as follows.
(2) See page 58 for our definition of rent coverage. (3) Rent coverage for TA is as of December 31, 2024. (4) Consists of miscellaneous businesses with an average investment of $6,424 per property. 69 Table of Contents As of December 31, 2024, lease expirations at our net lease properties by year are as follows.
Heartland Dental 59 61,120 1.2 % 4,699 1.3 % 4.41 x 6. American Multi-Cinema, Inc. AMC Theatres 6 67,023 1.3 % 4,438 1.2 % 1.61 x 7. Express Oil Change, L.L.C. Express Oil Change 23 49,724 1.0 % 3,717 1.0 % 4.32 x 8. Norms Restaurants, LLC Norms 10 53,673 1.1 % 3,693 1.0 % 3.35 x 9.
Heartland Dental 59 61,120 1.2 % 4,769 1.3 % 4.90 x 6. Norms Restaurants, LLC Norms 10 53,673 1.1 % 3,759 1.0 % 3.42 x 7. Express Oil Change, L.L.C. Express Oil Change 23 49,724 1.0 % 3,717 1.0 % 5.88 x 8.
Other (5) 5 27,244 0.5 % 3,208 0.9 % 5.60x Vacant 22 78,558 1.6 % — — % —x Total 752 $ 5,062,695 100.0 % $ 372,319 100.0 % 2.46x (1) Represents the historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.
Other (4) 4 25,695 0.5 % 3,137 0.9 % 6.54x Vacant 18 58,776 1.2 % — — % —x Total 742 $ 5,037,413 100.0 % $ 380,863 100.0 % 2.10x (1) Represents the historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.
Our net lease properties were 97.1% occupied as of December 31, 2023 with a weighted (by annual minimum rent) average lease term of 8.8 years, operating under 137 brands in 21 distinct industries. TA is our largest tenant. On May 15, 2023, BP completed the TA Merger and we amended our leases with TA.
Our net lease properties were 97.6% occupied as of December 31, 2024 with a weighted (by annual minimum rent) average lease term of 8.0 years, operating under 136 brands in 21 distinct industries.

… 85 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+5 added−0 removed10 unchanged
Biggest changeFixed Rate Debt At December 31, 2023, our outstanding fixed rate debt consisted of the following: Debt Principal Balance Annual Interest Rate Annual Interest Expense Maturity Interest Payments Due Senior unsecured notes $ 350,000 4.500 % $ 15,750 2025 Semi-Annually Senior unsecured notes 800,000 7.500 % 60,000 2025 Semi-Annually Senior unsecured notes 350,000 5.250 % 18,375 2026 Semi-Annually Senior unsecured notes 450,000 4.750 % 21,375 2026 Semi-Annually Senior unsecured notes 400,000 4.950 % 19,800 2027 Semi-Annually Senior unsecured notes 450,000 5.500 % 24,750 2027 Semi-Annually Senior unsecured notes 400,000 3.950 % 15,800 2028 Semi-Annually Net lease mortgage notes 608,569 5.600 % 34,080 2028 Monthly Senior unsecured notes 425,000 4.950 % 21,038 2029 Semi-Annually Senior unsecured notes 400,000 4.375 % 17,500 2030 Semi-Annually Senior secured notes 1,000,000 8.625 % 86,250 2031 Semi-Annually $ 5,633,569 $ 334,718 No principal repayments are due under our unsecured or secured senior notes until maturity.
Biggest changeFixed Rate Debt At December 31, 2024, our outstanding fixed rate debt consisted of the following: Debt Principal Balance Annual Interest Rate Annual Interest Expense Maturity Interest Payments Due Senior unsecured notes $ 350,000 5.250 % $ 18,375 2026 Semi-Annually Senior unsecured notes 450,000 4.750 % 21,375 2026 Semi-Annually Senior unsecured notes 400,000 4.950 % 19,800 2027 Semi-Annually Senior guaranteed unsecured notes 450,000 5.500 % 24,750 2027 Semi-Annually Senior unsecured notes 400,000 3.950 % 15,800 2028 Semi-Annually Net lease mortgage notes 606,611 5.600 % 33,970 2028 Monthly Senior guaranteed unsecured notes 700,000 8.375 % 58,625 2029 Semi-Annually Senior unsecured notes 425,000 4.950 % 21,038 2029 Semi-Annually Senior unsecured notes 400,000 4.375 % 17,500 2030 Semi-Annually Senior secured notes 1,000,000 8.625 % 86,250 2031 Semi-Annually Senior guaranteed unsecured notes 500,000 8.875 % 44,375 2032 Semi-Annually $ 5,681,611 $ 361,858 No principal repayments are due under our unsecured or secured senior notes until maturity.
(2) Based on diluted weighted average common shares outstanding for the year ended December 31, 2023. The foregoing table shows the impact of an immediate change in floating interest rates as of December 31, 2023. If interest rates were to change gradually over time, the impact would be spread over time.
(2) Based on diluted weighted average common shares outstanding for the year ended December 31, 2024. The foregoing table shows the impact of an immediate change in floating interest rates as of December 31, 2024. If interest rates were to change gradually over time, the impact would be spread over time.
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 $56,336.
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 $56,816.
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. Borrowings under our revolving credit facility are in U.S. dollars and require interest to be paid at a rate of SOFR plus premiums.
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. 73 Table of Contents Borrowings under our revolving credit facility are in U.S. dollars and require interest to be paid at a rate of SOFR plus premiums.
Based on the balances outstanding at December 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 $174,526.
Based on the balances outstanding at December 31, 2024 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 $198,197.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (dollars in thousands) 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (dollars 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.
Floating Rate Debt At December 31, 2023, we had no amounts outstanding under our revolving credit facility. The maturity date of our revolving credit facility is June 29, 2027, and, subject to our meeting certain conditions, including our payment of an extension fee, we have an option to extend the stated maturity date of the facility by two six-month periods.
The maturity date of our revolving credit facility is June 29, 2027, and, subject to our meeting certain conditions, including our payment of an extension fee, we have an option to extend the stated maturity date of the facility by two six-month periods.
Generally, a change in interest rates would not affect the value of this floating rate debt but would affect our operating results. 73 Table of Contents The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense as of December 31, 2023 if we were fully drawn on our revolving credit facility: Impact of Increase in Interest Rates Interest Rate Per Year (1) Outstanding Debt Total Interest Expense Per Year Annual Per Share Impact (2) At December 31, 2023 7.88 % $ 650,000 $ 51,220 $ 0.31 One percentage point increase 8.88 % $ 650,000 $ 57,720 $ 0.35 (1) Based on SOFR plus a premium, which was 250 basis points per annum at December 31, 2023.
The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense as of December 31, 2024 if we were fully drawn on our revolving credit facility: Impact of Increase in Interest Rates Interest Rate Per Year (1) Outstanding Debt Total Interest Expense Per Year Annual Per Share Impact (2) At December 31, 2024 6.99 % $ 650,000 $ 45,435 $ 0.27 One percentage point increase 7.99 % $ 650,000 $ 51,935 $ 0.31 (1) Based on SOFR plus a premium, which was 250 basis points per annum at December 31, 2024.
Federal Reserve has raised interest rates multiple times since the beginning of 2022. Although the U.S. Federal Reserve has indicated that it may lower interest rates in 2024, we cannot be sure that it will do so, and interest rates may remain at the current high levels or continue to increase.
Federal Reserve cut interest rates three times in late 2024 and may seek to further reduce interest rates, we cannot be sure that it will do so, and interest rates may remain at the current levels or increase.
Added
Federal Reserve has raised interest rates eleven times during 2022 and 2023 and then paused rate increases in the fourth quarter of 2023 following the deceleration of inflationary growth. Although the U.S.
Added
Floating Rate Debt At December 31, 2024, our floating rate debt consisted of $150,000 outstanding under our $650,000 revolving credit facility.
Added
Generally, a change in interest rates would not affect the value of this floating rate debt but would affect our operating results.
Added
The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense as of December 31, 2024: Impact of Increase in Interest Rates Interest Rate Per Year (1) Outstanding Debt Total Interest Expense Per Year Annual Per Share Impact (2) At December 31, 2024 6.99 % $ 150,000 $ 10,485 $ 0.06 One percentage point increase 7.99 % $ 150,000 $ 11,985 $ 0.07 (1) Based on SOFR plus a premium, which was 250 basis points per annum at December 31, 2024.
Added
(2) Based on diluted weighted average common shares outstanding for the year ended December 31, 2024.

Other SVC 10-K year-over-year comparisons