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What changed in Service Properties Trust's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Service Properties Trust's 2024 and 2025 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 2025 report.

+455 added−444 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-26)

Top changes in Service Properties Trust's 2025 10-K

455 paragraphs added · 444 removed · 370 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

114 edited+21 added−27 removed289 unchanged
Biggest changeTo 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.
Biggest changeTo 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. 22 Table of Contents As long as we qualify for taxation as a REIT, a distribution to our U.S. shareholders that we do not designate as a capital gain dividend generally will be treated as an ordinary income dividend to the extent of our available current or accumulated earnings and profits (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements).
Our principal internal growth strategy is to apply asset management strategies to aid our hotel operators in improving performance and operating income of our hotel properties. We actively manage our net lease portfolio by engaging in early lease renewal discussions to maintain occupancy and grow rental income while simultaneously monitoring the credit of our tenants and identifying asset recycling opportunities.
Our principal internal growth strategy is to actively manage our net lease portfolio by engaging in early lease renewal discussions to maintain occupancy and grow rental income while simultaneously monitoring the credit of our tenants and identifying asset recycling opportunities. We apply asset management strategies to aid our hotel operators in improving performance and operating income of our hotel properties.
While we have historically focused on the acquisition of upscale limited service, extended stay and full service hotel properties, full service travel centers and necessity based retail net lease properties, we consider acquisitions in all segments of the hospitality, necessity based retail industries and other net leased properties.
While we have historically focused on the acquisition of full service travel centers, necessity based retail net lease properties and upscale limited service, extended stay and full service hotel properties, we consider acquisitions in all segments of the necessity based retail industries and other net leased and hospitality properties.
For this additional exception to apply, a real property interest in a “qualified lodging facility” must be leased by the REIT to its TRS, and the facility must be operated on behalf of the TRS by a person who is an “eligible independent contractor,” all as described in Sections 856(d)(8)-(9) of the IRC.
For this additional exception to apply, a real property interest in a “qualified lodging facility” must be leased by the REIT to its TRS, and the property must be operated on behalf of the TRS by a person who is an “eligible independent contractor,” all as described in Sections 856(d)(8)-(9) of the IRC.
Additionally, while a REIT is generally limited in its ability to earn qualifying rental income from a TRS, a REIT can earn qualifying rental income from the lease of a qualified lodging facility to a TRS if an eligible independent contractor operates the facility, as discussed more fully below.
Additionally, while a REIT is generally limited in its ability to earn qualifying rental income from a TRS, a REIT can earn qualifying rental income from the lease of a qualified lodging facility to a TRS if an eligible independent contractor operates the property, as discussed more fully 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.
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.
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; 9 Table of Contents • 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, governmental organization or foreign person.
We currently make decisions to dispose of properties based on factors including, but not limited to, the following: • The property’s current and expected future performance; • The proposed or expected sale price; • The age and capital required to maintain the property; • The competition and demand generators near the property; • Our intended use of the proceeds we may realize from the sale of a property; • The strategic fit of the property with the rest of our portfolio and with our plans; • The manager’s or tenant’s desire to operate or cease operation of the property; • The remaining agreement term of the property, including the likelihood of a manager or tenant exercising any renewal options; • The existence of alternative sources, uses or needs for our capital and our debt leverage; and • The tax implications to us and our shareholders.
We currently make decisions to dispose of properties based on factors including, but not limited to, the following: • The property’s current and expected future performance; • The proposed or expected sale price; • The age and capital required to maintain the property; • The competition and demand generators near the property; • Our intended use of the proceeds we may realize from the sale of a property; • The strategic fit of the property with the rest of our portfolio and with our plans; • The tenant’s or manager’s desire to operate or cease operation of the property; 5 Table of Contents • The remaining agreement term of the property, including the likelihood of a tenant or manager exercising any renewal options; • The existence of alternative sources, uses or needs for our capital and our debt leverage; and • The tax implications to us and our shareholders.
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.
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.
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 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.
Generally, we prefer to purchase multiple properties in one transaction or individual properties that can be added to a pre-existing portfolio agreement because we believe a single management or lease agreement, cross default covenants and all or none renewal rights for multiple properties in diverse locations enhance the credit characteristics and the security of our investments.
Generally, we aim to purchase multiple properties in one transaction or individual properties that can be added to a pre-existing portfolio agreement because we believe a single management or lease agreement, cross default covenants and all or none renewal rights for multiple properties in diverse locations enhance the credit characteristics and the security of our investments.
If the relief provision were to apply to us, we would be subject to tax at a 100% rate upon the greater of the amount by which we failed the 75% gross income test or the amount by which we failed the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year; even though we have little or no nonqualifying income from other sources in a typical taxable year, imposition of this 100% tax in this circumstance would be material because to date most of the properties leased to our TRSs are managed for the TRSs by this contractor.
If the relief provision were to apply to us, we would be subject to tax at a 100% rate upon the greater of the amount by which we failed the 75% gross income test or the amount by which we failed the 95% gross income test, with adjustments, multiplied by a fraction intended to 19 Table of Contents reflect our profitability for the taxable year; even though we have little or no nonqualifying income from other sources in a typical taxable year, imposition of this 100% tax in this circumstance would be material because to date most of the properties leased to our TRSs are managed for the TRSs by this contractor.
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.
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 2025 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, 2024, 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, 2025, we owned no convertible mortgages or joint venture interests.
Foreclosure property is generally any real property, including interests in real property, and any personal property incident to such real property: • that is acquired by a REIT as a result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or when default was imminent on a lease of such property or on indebtedness that such property secured; • for which any related loan acquired by the REIT was acquired at a time when the default was not imminent or anticipated; and • for which the REIT makes a proper election to treat the property as foreclosure property.
Foreclosure property is generally any real property, including interests in real property, and any personal property incident to such real property: • that is acquired by a REIT as a result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or when default was imminent on a lease of such property or on indebtedness that such property secured; • for which any related loan acquired by the REIT was acquired at a time when the default was not imminent or anticipated; and 16 Table of Contents • for which the REIT makes a proper election to treat the property as foreclosure property.
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.
As of December 31, 2025, 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.
Among other requirements, a TRS of ours must: (1) not directly or indirectly operate or manage a lodging facility or a health care facility; and (2) not directly or indirectly provide to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated, except that in limited circumstances a subfranchise, sublicense or similar right can be granted to an independent contractor to operate or manage a lodging facility or a health care facility.
Among other requirements, a TRS of ours must: (1) not directly or indirectly operate or manage a health care facility or lodging facility; and (2) not directly or indirectly provide to any person, under a franchise, license or otherwise, rights to any brand name under which any health care facility or lodging facility is operated, except that in limited circumstances a subfranchise, 14 Table of Contents sublicense or similar right can be granted to an independent contractor to operate or manage a health care facility or lodging facility.
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.
As of December 31, 2025, 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.
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.
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.
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.
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.
Department of the Treasury requiring, among other things, that it undertake to identify accounts held by “specified United States persons” or “United States owned foreign entities” (each as defined in the IRC and administrative guidance thereunder), annually report information about such accounts, and withhold 30% on applicable payments to noncompliant foreign financial institutions and account holders.
Department of the Treasury requiring, among other things, that it undertake to identify accounts held 26 Table of Contents by “specified United States persons” or “United States owned foreign entities” (each as defined in the IRC and administrative guidance thereunder), annually report information about such accounts, and withhold 30% on applicable payments to noncompliant foreign financial institutions and account holders.
We have no employees. We rely on our managers, including RMR and Sonesta, to hire, train, and develop a workforce that meets the needs of our business, contributes positively to our society and helps reduce our impact on the natural environment. • Corporate Citizenship.
We have no employees. We rely on our managers, including RMR and Sonesta, to hire, train, and develop a workforce that meets the needs of our business, contributes positively to our society and helps reduce our impact on the natural environment.
To achieve these objectives, we seek to maintain a strong capital base of shareholders’ equity; invest in high quality properties operated by qualified operating companies; use moderate debt leverage to fund additional investments which increase cash flows from operations; structure investments which generate a return in excess of our capital costs and provide an opportunity to participate in operating growth at our properties; when market conditions permit, refinance maturing debt with additional equity or long term debt; and pursue diversification so that our cash flows from operations come from diverse properties.
To achieve these objectives, we seek to maintain a strong capital base of shareholders’ equity; invest in properties operated by qualified tenants and operating companies; use debt leverage to fund additional investments which increase cash flows from operations; structure investments which generate a return in excess of our capital costs and provide an opportunity to participate in operating growth at our properties; when market conditions permit, refinance maturing debt with additional equity or long term debt; and pursue diversification so that our cash flows from operations come from diverse properties.
In addition, any debt instrument issued by an entity classified as a partnership for federal income tax purposes, and not otherwise excepted from the definition of a security for purposes of the above safe harbor, will not be treated as a security for purposes of the 10% value test if at least 75% of the partnership’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test.
In addition, any debt instrument 18 Table of Contents issued by an entity classified as a partnership for federal income tax purposes, and not otherwise excepted from the definition of a security for purposes of the above safe harbor, will not be treated as a security for purposes of the 10% value test if at least 75% of the partnership’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test.
In this event, we could be subject to significant tax liabilities, and the amount of cash available for distribution to our shareholders could be reduced or eliminated. If we continue to qualify for taxation as a REIT and meet the tests described below, then we generally will not pay federal income tax on amounts that we distribute to our shareholders.
In this event, we could be subject to significant tax liabilities, and the amount of cash available for distribution to our shareholders could be reduced or eliminated. 11 Table of Contents If we continue to qualify for taxation as a REIT and meet the tests described below, then we generally will not pay federal income tax on amounts that we distribute to our shareholders.
Similarly, REIT shares held by a qualified pension plan or profit-sharing trust are treated as held directly by the individual beneficiaries in proportion to their actuarial interests in such plan or trust. Consequently, five or fewer such trusts could own more than 50% of the interests in an entity without jeopardizing that entity’s qualification for taxation as a REIT.
Similarly, REIT shares held by a qualified pension plan or profit-sharing trust are treated as held directly by the individual beneficiaries in proportion to their actuarial interests in such plan or trust. 13 Table of Contents Consequently, five or fewer such trusts could own more than 50% of the interests in an entity without jeopardizing that entity’s qualification for taxation as a REIT.
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.
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 • the investment is otherwise consistent with their fiduciary responsibilities.
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.
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.
Typically, such performance-based termination rights arise in the event the operator fails to achieve these specified performance thresholds over a consecutive two or three-year period and are subject to the manager’s ability to “cure” and avoid termination by payment to us of specified deficiency amounts, or are subject to force majeure provisions.
Typically, such performance-based termination rights arise in the event the operator fails to achieve these specified performance thresholds over a consecutive two or three-year period and are subject to the manager’s ability to “cure” and avoid termination 3 Table of Contents by payment to us of specified deficiency amounts, or are subject to force majeure provisions.
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.
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.
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.
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.
We may elect to retain, rather than distribute, some or all of our net capital gain and certain of our cancellation of indebtedness income, if any, and pay income tax on such retained amounts.
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.
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.
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.
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.
Notwithstanding this potential withholding on distributions in excess of our current and accumulated earnings and profits, these excess portions of distributions are a nontaxable return of capital to the extent that they do not exceed the non-U.S. shareholder’s adjusted basis in our shares, and the nontaxable return of capital will reduce the adjusted basis in these shares.
Notwithstanding this potential withholding on distributions in excess of our current and accumulated earnings and profits, these excess portions of distributions are a nontaxable return of capital to the extent that they do not exceed the non-U.S. 24 Table of Contents shareholder’s adjusted basis in our shares, and the nontaxable return of capital will reduce the adjusted basis in these shares.
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).
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).
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.
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.
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.
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 and Employee Engagement.
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 .
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 .
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.
However, we may seek to strategically sell properties or sell an interest in properties through joint venture arrangements as part of managing our leverage, repositioning of the portfolio, capital recycling, highest and best use analysis, or as part of long term financing of new acquisitions.
We may elect to retain and pay income tax on our net capital gain, as well as on certain amounts attributable to cancellation of indebtedness income.
We may elect to retain and pay income tax on our net capital gain, as well as on certain amounts attributable to cancellation of indebtedness income, if any.
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.
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.
If, contrary to our expectation, a gain on the sale of our shares is subject to U.S. federal income taxation (for example, because neither of the above exemptions were then available, i.e. , that class of our shares were not then listed on a U.S. national securities exchange and we were not a “domestically controlled” REIT), then (a) a non-U.S. shareholder would generally be subject to the same treatment as a U.S. shareholder with respect to its gain (subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals), (b) the non-U.S. shareholder would also be subject to fulsome U.S. federal income tax return reporting requirements, and (c) a purchaser of that class of our shares from the non-U.S. shareholder may be required to withhold 15% of the purchase price paid to the non-U.S. shareholder and to remit the withheld amount to the IRS.
Accordingly, we believe that we are and will remain a “domestically controlled” REIT. 25 Table of Contents If, contrary to our expectation, a gain on the sale of our shares is subject to U.S. federal income taxation (for example, because neither of the above exemptions were then available, i.e. , that class of our shares were not then listed on a U.S. national securities exchange and we were not a “domestically controlled” REIT), then (a) a non-U.S. shareholder would generally be subject to the same treatment as a U.S. shareholder with respect to its gain (subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals), (b) the non-U.S. shareholder would also be subject to fulsome U.S. federal income tax return reporting requirements, and (c) a purchaser of that class of our shares from the non-U.S. shareholder may be required to withhold 15% of the purchase price paid to the non-U.S. shareholder and to remit the withheld amount to the IRS.
These entities may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of property operators and the extent of leverage used in their capital structure.
These entities may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of property operators and the extent of 7 Table of Contents leverage used in their capital structure.
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.
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; 10 Table of Contents whose status as a U.S. shareholder is not overridden by an applicable tax treaty.
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. 25 Table of Contents 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. Dispositions of Our Shares .
Our hotel properties are typically located in urban or high density suburban locations in the vicinity of major demand generators such as urban centers, airports, medical or educational facilities, major tourist attractions or large suburban office parks.
Our hotel properties are typically located in urban or high density suburban locations in the vicinity of major demand generators such as urban centers, airports, medical or educational facilities, or major tourist attractions.
We expect most of our acquisition efforts will focus on hotel and net lease based properties; however, we may also consider acquiring other types of properties. An important part of our acquisition strategy is to identify and select or create qualified, experienced and financially stable operators.
We expect most of our acquisition efforts will focus on net lease based properties; however, we may also consider acquiring other types of properties. An important part of our acquisition strategy is to identify and select or create qualified, experienced and financially stable tenants or managers.
As a result, our ordinary dividends generally are taxed at the higher federal income tax rates applicable to ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements for taxable years before 2026).
As a result, our ordinary dividends generally are taxed at the higher federal income tax rates applicable to ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements).
Prior to BP Products North America Inc.’s acquisition of TA pursuant to a merger, or the TA Merger, we owned close to, but less than, 10% of the outstanding common shares of TA.
Prior to BP Products North America Inc.’s acquisition of TA pursuant to a merger, or the TA Merger, we owned close to, but less than, 10% of the outstanding 15 Table of Contents common shares of TA.
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.
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 lease term or management agreements; • The brand or industry under which the property operates or is expected to operate; • The availability of a qualified and reputable tenant or manager; • The financial strength of the proposed tenant or manager; • 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 credit quality, or reputation, of the tenant or manager; • The level of services and amenities offered at the property; 4 Table of Contents • 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 addition, for taxable years beginning before 2026 and pursuant to the deduction-without-outlay mechanism of Section 199A of the IRC, our noncorporate U.S. shareholders that meet specified holding period requirements are generally eligible for lower effective tax rates on our dividends that are not treated as capital gain dividends or as qualified dividend income.
In addition, pursuant to the deduction-without-outlay mechanism of Section 199A of the IRC, our noncorporate U.S. shareholders that meet specified holding period requirements are generally eligible for lower effective tax rates on our dividends that are not treated as capital gain dividends or as qualified dividend income.
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.
Our net lease portfolio is leased to tenants that include travel centers, quick service restaurants, health and fitness centers, casual dining restaurants, grocery stores, medical and dental offices, automotive parts and services, and other businesses in service-focused and necessity-based industries across 42 states.
As of December 31, 2024, we had two operating segments, hotel investments and net lease investments.
As of December 31, 2025, we had two operating segments, net lease investments and hotel investments.
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.
The following table summarizes the brand affiliation and industries under which our net lease properties operate as of December 31, 2025 (dollars in thousands): 1 Table of Contents Brand Industry No. of Properties Square Feet Annualized Minimum Rent (1) Investment (2) 1. TravelCenters of America Inc. Travel Centers 131 3,683,923 $ 180,329 $ 2,254,950 2.
Our travel centers offer a broad range of products and services, including diesel fuel and gasoline, as well as nonfuel products and services such as truck repair and maintenance services, diesel exhaust fluid, one full service restaurant, one or more quick service restaurants, travel stores and various customer amenities.
Our travel centers offer a broad range of products and services, including diesel fuel and gasoline, as well as nonfuel products and services such as truck repair and maintenance services, diesel exhaust fluid, one full service restaurant, one or more quick service restaurants, travel stores, EV charging stations and various customer amenities. Principal Management Agreements.
(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.
(2) Represents the historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any. (3) Consists of 115 distinct brands with an average investment of $2,833 per property and an average annual minimum rent of $187 per property.
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.
Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our debt agreements.
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.
Petro Stopping Centers Travel Centers 44 1,367,802 83,933 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 6,347 92,617 5. Buehler's Fresh Foods Grocery Stores 5 502,727 6,223 76,469 6. Heartland Dental Medical, Dental Office 59 234,274 5,159 61,120 7.
Our stock and other securities in a TRS are exempted from these 5% and 10% asset tests. • Not more than 20% of the value of our total assets may be represented by stock or other securities of our TRSs. • Not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC.
Our stock and other securities in a TRS are exempted from these 5% and 10% asset tests. • Not more than 20% (25% with respect to taxable years beginning after December 31, 2025) of the value of our total assets may be represented by stock or other securities of our TRSs. • Not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC.
For these purposes, we believe that the statutory ownership presumptions apply to validate our status as a “domestically controlled” REIT. Accordingly, we believe that we are and will remain a “domestically controlled” REIT.
For these purposes, we believe that the statutory ownership presumptions apply to validate our status as a “domestically controlled” REIT.
In addition to any right to terminate that may arise as a result of a default by the manager, most of our management agreements include rights for us to terminate on the basis of the manager’s failure to meet certain performance-based metrics, including the level of owner’s priority return generated over a period of time.
In addition to any right to terminate that may arise as a result of a default by the manager, most of our management agreements include rights for us to terminate on the basis of the manager’s failure to meet certain performance-based metrics.
Taxable REIT Subsidiaries. As a REIT, we are permitted to own any or all of the securities of a TRS, provided that no more than 20% of the total value of our assets, at the close of each quarter, is comprised of our investments in the stock or other securities of our TRSs.
As a REIT, we are permitted to own any or all of the securities of a TRS, provided that no more than 20% (25% with respect to taxable years beginning after December 31, 2025) of the total value of our assets, at the close of each quarter, is comprised of our investments in the stock or other securities of our TRSs.
These Treasury regulations are written quite broadly, and apply to many routine and simple transactions.
These Treasury regulations are written quite 23 Table of Contents broadly, and apply to many routine and simple transactions.
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.
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. 12 Table of Contents Other countries (and, for this purpose, Puerto Rico is best thought of as a separate country) may impose taxes on our and our subsidiaries’ assets and operations within their jurisdictions.
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.
Assuming that each class of our shares will be “widely held” and that no facts and circumstances exist that prevent shares owned by an ERISA Plan or Non-ERISA Plan from being “freely transferable” for purposes of the regulation, our counsel, Sullivan & Worcester LLP, is of the opinion 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.
As of December 31, 2024, we owned 206 hotels with an aggregate of 35,871 rooms or suites located in 35 states, the District of Columbia, Ontario, Canada and San Juan, Puerto Rico and 742 service-focused retail net lease properties with an aggregate of 13,292,519 square feet located in 42 states.
As of December 31, 2025, we owned 760 service-focused retail net lease properties with an aggregate of 13,601,902 square feet located in 42 states and 94 hotels with an aggregate of 21,243 rooms or suites located in 31 states, the District of Columbia, Ontario, Canada, and San Juan, Puerto Rico.
Our investment, financing and disposition policies and business strategies are established by our Board of Trustees and may be changed by our Board of Trustees at any time without shareholder approval.
Our external growth strategy is defined by our acquisition, disposition and financing policies as described below. Our investment, financing and disposition policies and business strategies are established by our Board of Trustees and may be changed by our Board of Trustees at any time without shareholder approval.
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.
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.
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.
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.
We are entitled to depreciation deductions from our properties only if we are treated for federal income tax purposes as the owner of the properties. This means that the leases of our properties must be classified for U.S. federal income tax purposes as true leases, rather than as sales or financing arrangements, and we believe this to be the case.
This means that the leases of our properties must be classified for U.S. federal income tax purposes as true leases, rather than as sales or financing arrangements, and we believe this to be the case. Distributions to our Shareholders As described above, we expect to make distributions to our shareholders from time to time.
Our asset management teams also work closely with our operators to ensure our hotels and net lease properties are well maintained and that capital investments are well planned, prudent and executed efficiently in order to maximize the long term value of our properties. Our external growth strategy is defined by our acquisition, disposition and financing policies as described below.
Our asset management teams also work closely with our tenants and managers to ensure our net lease properties and hotels are well maintained and that capital investments are well planned, prudent and executed efficiently in order to maximize the long term value of our properties.
The sale of our securities to an ERISA Plan or Non-ERISA Plan is in no respect a representation by us or any underwriter of the securities that the investment meets all relevant legal requirements with respect to investments by the arrangements generally or any particular arrangement, or that the investment is appropriate for arrangements generally or any particular arrangement.
The sale of our securities to an ERISA Plan or Non-ERISA Plan is in no respect a representation by us or any underwriter of the securities that the investment meets all relevant legal requirements with respect to investments by the arrangements generally or any particular arrangement, or that the investment is appropriate for arrangements generally or any particular arrangement. 27 Table of Contents Prohibited Transactions Fiduciaries of ERISA Plans and persons making the investment decision for Non-ERISA Plans should consider the application of the prohibited transaction provisions of ERISA and the IRC in making their investment decision.
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.
This opinion is conditioned upon certain assumptions and representations, as discussed above under the heading “Material United States Federal Income Tax 28 Table of Contents Considerations—Taxation as a REIT.” Also, the opinion of our counsel is not binding on either the Department of Labor or a court, and either could take a position different from that expressed by our counsel.
Accordingly, we believe that our revenues from TRS-provided services, whether the charges are separately stated or not, qualify as “rents from real property” because the services satisfy the geographically customary standard, because the services have been provided by a TRS, or for both reasons. 16 Table of Contents We believe that all or substantially all of our rents and related service charges have qualified and will continue to qualify as “rents from real property” for purposes of Section 856 of the IRC.
Accordingly, we believe that our revenues from TRS-provided services, whether the charges are separately stated or not, qualify as “rents from real property” because the services satisfy the geographically customary standard, because the services have been provided by a TRS, or for both reasons.
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. 20 Table of Contents The 90% distribution requirements may be waived by the IRS if a REIT establishes that it failed to meet them by reason of distributions previously made to meet the requirements of the 4% excise tax discussed below.
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.
Competitive pressure from Pilot Flying J Inc. and Love’s Travel Stops & Country Stores, especially for large trucking fleets and long haul trucking fleets, could negatively impact TA’s ability to pay rents due to us.
Competitive pressure from Pilot Flying J Inc. and Love’s Travel Stops & Country Stores, especially for large trucking fleets and long haul trucking fleets, could negatively impact TA’s ability to pay rents due to us. The hotel industry is also highly competitive. Generally, our hotels are located in areas that include other hotels.
John G. Murray, our other Managing Trustee and our former President and Chief Executive Officer, also serves as an officer and employee of RMR and is the chief executive officer of Sonesta. Our day to day operations are conducted by RMR.
Christopher J. Bilotto, our other Managing Trustee and our President and Chief Executive Officer, also serves as an executive vice president of RMR Inc. and an officer and employee of RMR. Our day to day operations are conducted by RMR.
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.
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. Our Board of Trustees is comprised of 29% women and 29% members of marginalized communities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor 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.
Biggest changeFor 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. 33 Table of Contents We may not succeed in selling properties we identify for sale and any proceeds we may receive from sales we do complete may be less than expected, and we may incur losses with respect to any such sales.
If any of the covenants in these debt agreements are breached and not cured within any applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default, or be prevented from refinancing maturing debt or issuing new debt.
If any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default, or be prevented from refinancing maturing debt or issuing new debt.
There is uncertainty in the legal and regulatory landscape for AI, which is not fully developed, and any laws, regulations or industry standards adopted in response to the emergence of AI may be burdensome, could entail significant costs, and may restrict or impede RMR’s ability to successfully develop, adopt and deploy AI technologies efficiently and effectively.
There is uncertainty in the legal and regulatory landscape for AI Technologies, which is not fully developed, and any laws, regulations or industry standards adopted in response to the emergence of AI Technologies may be burdensome, could entail significant costs, and may restrict or impede RMR’s ability to successfully develop, adopt and deploy AI Technologies efficiently and effectively.
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.
We are the sole obligor on our senior secured notes due 2027, or the 2027 Secured Notes, 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 Unsecured 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 2027 Secured Notes, 2031 Notes and our outstanding senior unsecured notes, the Notes.
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.
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; • 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.
As economic conditions in the United States may affect business and leisure travel, hotel occupancy, trucking volume and demand for diesel fuel, gasoline, real estate values, occupancy levels and returns and rents, current and future economic conditions in the United States, including slower growth or a possible recession and capital market volatility or disruptions, could have a material adverse impact on our earnings and financial condition.
As economic conditions in the United States may affect real estate values, occupancy levels and rents and returns, trucking volume and demand for diesel fuel, gasoline, business and leisure travel, current and future economic conditions in the United States, including slower growth or a possible recession and capital market volatility or disruptions, could have a material adverse impact on our earnings and financial condition.
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.
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; • 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.
Economic conditions may be affected by numerous factors, including, but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, uncertainty about government fiscal and tax policy, geopolitical events, the regulatory environment, the availability of credit and interest rates.
Economic conditions may be affected by numerous factors, including, but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, uncertainty about government fiscal, tax and trade policy, geopolitical events, the regulatory environment, the availability of credit and interest rates.
If the content, analyses or recommendations that AI applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected.
If the content, analyses or recommendations that AI Technologies applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI Technologies algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected.
We own 34% of Sonesta’s outstanding common stock. Risks that we have identified elsewhere in this Risk Factors section, particularly those relating to the hotel industry, are applicable to our ownership of Sonesta common stock. In addition, Sonesta is a private company that is controlled by Adam Portnoy, one of our Managing Trustees.
We own 34% of Sonesta’s outstanding common stock. Risks that we have identified elsewhere in this Risk Factors section, particularly those relating to the hotel industry, are applicable to our ownership of Sonesta common stock. In addition, Sonesta is a private company that is controlled by Adam D. Portnoy, one of our Managing Trustees.
In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG policies or third party expectations or demands. Market and government actions in response to concerns about global climate change and supply chain challenges may negatively impact our business.
In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG and anti-ESG policies or third party expectations or demands. Market and government actions in response to concerns about global climate change and supply chain challenges may negatively impact our business.
This ownership limitation in our bylaws is intended to help us preserve our ability to use our net operating losses and other tax benefits to reduce our future taxable income. We also believe these restrictions in our declaration of trust and bylaws promote good orderly governance.
This ownership limitation in our bylaws is intended to help us preserve our ability to use our net operating losses and other tax benefits to reduce our future taxable income. We also believe these restrictions in our declaration of trust and bylaws promote orderly governance.
Also, our competitors or other third parties may incorporate AI into their products and services more quickly or more successfully than RMR, which could impair our ability to compete effectively and adversely affect our results of operations.
Also, our competitors or other third parties may incorporate AI Technologies into their products and services more quickly or more successfully than RMR, which could impair our ability to compete effectively and adversely affect our results of operations.
We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest. We are party to transactions with related parties, including with entities controlled by Adam Portnoy or to which RMR or its subsidiaries provide management services.
We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest. We are party to transactions with related parties, including with entities controlled by Adam D. Portnoy or to which RMR or its subsidiaries provide management services.
Unless we otherwise consent in writing, the sole and exclusive forum for claims that arise under the Securities Act is the federal district courts of the United States of America, to the fullest extent permitted by law.
Unless we otherwise consent in writing, the sole and exclusive forum for claims that arise under the Securities Act is the federal district courts of the United States, to the fullest extent permitted by law.
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.
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.
Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, the Guarantees and the related liens, if applicable (or any future Notes that are guaranteed by our subsidiaries), could be voided, or claims in respect of a guarantee and the related lien, if applicable, could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the debt evidenced by its guarantee and related lien, if applicable: • received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee or granting of such lien, if applicable; • was insolvent or rendered insolvent by reason of such incurrence; • was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or • intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, the Guarantees and the related liens, if applicable (or any future Notes that are guaranteed by our subsidiaries), could be voided, or claims in respect of a guarantee and the related lien, if applicable, could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the debt evidenced by its guarantee and related lien, if applicable: 48 Table of Contents • received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee or granting of such lien, if applicable; • was insolvent or rendered insolvent by reason of such incurrence; • was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or • intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
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.
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 Secured Notes, the 2027 Unsecured 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.
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.
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, changing tariffs and trade policies and related uncertainty, 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.
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.
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 on less favorable terms.
The 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.
The 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, changing tariffs and trade policies and related uncertainty, supply chain disruptions, volatility in the public equity and debt markets and in the commercial real estate markets, generally, geopolitical instability and tensions, pandemics, any U.S. government shutdown, economic downturns or a possible recession, labor market conditions and other conditions beyond our control, have had and may continue to have a material adverse effect on our and our tenants’, hotel managers’ and other operators’ 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 have a high concentration of properties that are operated by TA and Sonesta, 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 TA or Sonesta; • we may not succeed in selling properties at prices we target; • we and our tenants and managers 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; • 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; 29 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.
As a result of market practices that arose or increased in recent years and the impacts they have had on travel and the broader economy throughout the United States, our hotels experienced significant declines in operating performance which have had a significant negative effect on our operating results and cash flow.
As a result of market practices that arose or increased in recent years and the impacts they have had on travel and the broader economy throughout the United States, our properties, particularly our hotels, experienced significant declines in operating performance which have had a significant negative effect on our operating results and cash flow.
Consumer confidence, customer demand, corporate travel and lodging demand have been and will continue to be affected by economic and market conditions, unemployment levels, perceptions of the safety of travel, the continued use of video conferencing technologies rather than in person meetings and broader macroeconomic trends and conditions.
Consumer confidence, changing customer preferences, customer demand, corporate travel and lodging demand have been and will continue to be affected by economic and market conditions, unemployment levels, perceptions of the safety of travel, the continued use of video conferencing technologies rather than in person meetings and broader macroeconomic trends and conditions.
The cybersecurity risks to us or our third party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR’s, our hotel managers’ or other third parties’ information technology networks and systems or operations.
The cybersecurity risks to us or our third party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new 38 Table of Contents discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR’s, our hotel managers’ or other third parties’ information technology networks and systems or operations.
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.
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 30 Table of Contents coverage and pay real estate taxes and maintain the properties.
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.
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 debts for which we are in default.
Our travel center properties compete with other large, national operators of travel centers, and certain of their competitors have significantly increased the number of travel centers they operate, including as a result of new construction of travel centers. Some of our retail tenants compete with online retailers or service providers.
For example, our travel center properties compete with other large, national operators of travel centers, and certain of their competitors have significantly increased the number of travel centers they operate, including as a result of new construction of travel centers. Some of our retail tenants compete with online retailers or service providers.
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.
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 changing interest rates.
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.
For example: • 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.
If RMR’s use of AI becomes controversial, it may experience brand or reputational harm, competitive harm, or legal liability.
If RMR’s use of AI Technologies becomes controversial, it may experience brand or reputational harm, competitive harm, or legal liability.
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.
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.
As a result of these limitations on liability and indemnification obligations, we and our shareholders may have more limited rights against our present and former Trustees and officers than might exist with other companies, which could limit shareholder recourse in the event of actions which some shareholders may believe are not in our best interest.
As a result of these limitations on liability and indemnification obligations, we and our shareholders may have more limited rights against our present and former Trustees and officers than might exist with other 44 Table of Contents companies, which could limit shareholder recourse in the event of actions which some shareholders may believe are not in our best interest.
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.
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 to adequately protect personal data, 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.
We may fail to comply with the terms of our debt agreements, which could adversely affect our business and prohibit us from paying distributions to our shareholders. Our debt agreements include various conditions, covenants and events of default.
We may fail to comply with the terms of our debt agreements, which could adversely affect our business and prohibit us from paying distributions to our shareholders. Our debt agreements contain various conditions, covenants and events of default.
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.
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 2027 Secured Notes, the 2031 Notes and our $604.7 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.
In addition, we are obligated under our management agreements to reimburse RMR for employment and related expenses of RMR’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR’s centralized accounting personnel, our share of RMR’s costs for providing our internal audit function and as otherwise agreed.
In addition, we are obligated under our management agreements to reimburse RMR for employment and related expenses of RMR’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR’s 41 Table of Contents centralized accounting personnel, our share of RMR’s costs for providing our internal audit function and as otherwise agreed.
The use of AI applications to support business processes carries inherent risks related to data privacy and security, such as unintended or inadvertent transmission of proprietary or sensitive information, including personal data. AI presents emerging ethical issues, and RMR may be unsuccessful in identifying and resolving these issues before they arise.
The use of AI Technologies applications to support business processes carries inherent risks related to data privacy and security, such as unintended or inadvertent transmission of proprietary or sensitive information, including personal data. AI Technologies present emerging ethical issues, and RMR may be unsuccessful in identifying and resolving these issues before they arise.
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.
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.
RMR may exercise its discretion in a manner that results in investment returns that are substantially below expectations or that results in losses. Our management structure and agreements and relationships with RMR and RMR’s and its controlling shareholder’s relationships with others may create conflicts of interest, or the perception of such conflicts, and may restrict our investment activities.
RMR may exercise its discretion in a manner that results in investment returns that are substantially below expectations or that results in losses. 40 Table of Contents Our management structure and agreements and relationships with RMR and RMR’s and its controlling shareholder’s relationships with others may create conflicts of interest, or the perception of such conflicts, and may restrict our investment activities.
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.
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.
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.
The 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.
Although much of RMR’s and Sonesta’s staff work from their respective offices for a majority of the work week, flexible working arrangements have resulted in increased remote working.
Although most of RMR’s and Sonesta’s staff work from their respective offices for a majority of the work week, flexible working arrangements have resulted in increased remote working.
As a result of the foregoing, and for other possible reasons, we may not realize any of the benefits we currently expect from our ownership of Sonesta common stock, we may be prevented from selling our Sonesta common stock and we could incur losses from our ownership of Sonesta common stock, including our proportion of any operating or other losses that Sonesta may incur.
As a result of the foregoing, and for other possible reasons, we may not realize any of the benefits we currently expect from our ownership of 42 Table of Contents Sonesta common stock, we may be prevented from selling our Sonesta common stock and we could incur losses from our ownership of Sonesta common stock, including our proportion of any operating or other losses that Sonesta may incur.
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.
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 Secured Notes, the 2027 Unsecured Notes, the 2029 Notes, the 2031 Notes and the 2032 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.
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 Secured Notes, the 2027 Unsecured Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes do not currently guarantee any of our other Notes.
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.
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, 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.
We also intend that our transactions with our TRSs be conducted on arm’s length bases so that we and our TRSs will not be subject to penalty taxes under the IRC applicable to mispriced transactions. While relief provisions can sometimes excuse REIT gross income test failures, significant penalty taxes may still be imposed.
We also intend that our transactions with our TRSs be conducted on arm’s length bases so that we and our TRSs will not be subject to penalty taxes under the IRC 46 Table of Contents applicable to mispriced transactions. While relief provisions can sometimes excuse REIT gross income test failures, significant penalty taxes may still be imposed.
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.
The outstanding Notes and Guarantees, other than the 2027 Secured Notes and the 2031 Notes and the related Guarantees, or the Unsecured Notes and Guarantees, are not secured and any Notes we may issue in the future may not be secured.
Additionally, AI technology is continuously evolving, and RMR may adopt and deploy AI technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI.
Additionally, AI Technologies are continuously evolving, and RMR may adopt and deploy AI Technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI Technologies.
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.
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 Secured Notes, the 2027 Unsecured 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 49 Table of Contents becomes an Excluded Subsidiary or a Foreign Subsidiary, as such terms are defined in the applicable indenture or supplemental indenture.
Because the earnings we are permitted to retain are limited by the rules governing REIT qualification and taxation, if we are unable to raise reasonably priced capital, we may not be able to carry out our business plan. We face significant competition. The businesses conducted at our properties face significant competition.
Because the earnings we 35 Table of Contents are permitted to retain are limited by the rules governing REIT qualification and taxation, if we are unable to raise reasonably priced capital, we may not be able to carry out our business plan. We face significant competition. The businesses conducted at our properties face significant competition.
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.
In addition, if the 2027 Secured Notes, the 2027 Unsecured 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, BBB (or the equivalent) by Standard & Poor’s Ratings Services, or S&P, or, additionally in the case of the 2027 Secured Notes, BBB (or the equivalent) by Fitch Ratings, Inc., and at such time no default or event of default under the indenture and related supplements governing the 2027 Secured Notes, the 2027 Unsecured 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.
The impacts of economic and market conditions, inflationary pressures, including high interest rates, unemployment levels, work from home policies, use of technologies and broader economic trends, among other things, may result in our managed hotels experiencing operating losses that we will need to fund. Further, we own 34% of Sonesta.
The impacts of economic and market conditions, including inflationary pressures, high interest rates, unemployment levels, changing tariffs and trade policies and related uncertainty, work from home policies, use of technologies and broader economic trends, among other things, may result in our managed hotels experiencing operating losses that we will need to fund. Further, we own 34% of Sonesta.
When interest rates are high, such as they are currently, real estate transaction volumes slow due to increased borrowing costs and property investors often demand higher capitalization rates, which causes property values to decline. High interest rates could therefore lower the value of our properties and cause the value of our securities to decline.
When interest rates are high, real estate transaction volumes slow due to increased borrowing costs and property investors often demand higher capitalization rates, which causes property values to decline. High interest rates could therefore lower the value of our properties and cause the value of our securities to decline.
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.
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 the ability of the tenant to pay rent to us.
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.
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 43 Table of Contents acquisition proposals that a shareholder may consider favorable.
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.
Any decline in market prices, regardless of cause, may adversely affect the liquidity and trading markets for the Notes. Downgrades in our credit ratings could materially adversely affect the market price of the Notes and may increase our cost of capital.
However, for tax years beginning before 2026, REIT dividends paid to noncorporate shareholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the IRC for specified forms of income from passthrough entities.
However, REIT dividends paid to noncorporate shareholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the IRC for specified forms of income from passthrough entities.
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.
Increases in interest rates and sustained 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.
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.
Portnoy holds equity investments in other companies to 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, 2025, Mr. Portnoy beneficially owned, in aggregate, 1.2% of our outstanding common shares and Mr.
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.
If market interest rate levels increase, 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.
Our business and operations may be adversely affected by market and economic volatility experienced by the U.S. and global economies, the commercial real estate industry and/or the local economies in the markets in which our properties are located.
Our business and operations have been and may continue to be adversely affected by market and economic volatility experienced by the U.S. and global economies, the commercial real estate industry and/or the local economies in the markets in which our properties are located.
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.
These trends, together with increasing labor costs and shortages, uncertainties surrounding interest rates, tax rates, commodity and other price inflation, changing tariffs and trade policies and related uncertainty, and supply chain challenges, may continue to negatively impact our operations, particularly 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.
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.
Unfavorable market and industry conditions, including uncertainties surrounding interest rates and inflation, changing tariffs and trade policies and related uncertainty, 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.
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.
If we, RMR and our operators fail to comply with ESG and anti-ESG related regulations and to satisfy the expectations of investors and our operators 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.
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.
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, changing tariffs and trade policies and related uncertainty, 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.
In addition, if we lose or revoke our qualification for taxation as a REIT under the IRC for a taxable year, we will generally be prevented from requalifying for taxation as a REIT for the next four taxable years.
In 45 Table of Contents addition, if we lose or revoke our qualification for taxation as a REIT under the IRC for a taxable year, we will generally be prevented from requalifying for taxation as a REIT for the next four taxable years.
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.
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 historical financial performance of the property or tenant; • 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 or agreements with tenants or managers 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, changing tariffs and trade policies and related uncertainty, 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.
If a tenant files for bankruptcy, federal law may prohibit us from evicting that tenant based solely upon its bankruptcy, and a bankrupt tenant may be authorized to reject and terminate its lease with us.
If a tenant files for bankruptcy, federal law may prohibit us from 37 Table of Contents evicting that tenant based solely upon its bankruptcy, and a bankrupt tenant may be authorized to reject and terminate its lease with us.
The Chair of our Board of Trustees and one of our Managing Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR.
Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR.
Complying with these covenants may limit our ability to take actions that may be beneficial to us and our security holders. Our credit agreement and our senior notes indentures and their supplements require us to comply with certain financial and other covenants. These covenants may limit our operational flexibility and acquisition and disposition activity.
Complying with these covenants may limit our ability to take actions that may be beneficial to us and our security holders. Our credit agreement and our senior notes indentures and their supplements require us to comply with certain financial and other covenants.
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.
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.
RMR is incorporating AI into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and could adversely affect our results of operations.
RMR incorporates artificial intelligence into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and could adversely affect our results of operations.
Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us, if they believe our or RMR’s policies relating to corporate sustainability are inadequate.
Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us, if they believe our or RMR’s policies relating to corporate 39 Table of Contents sustainability are not aligned with their own policies.
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.
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.
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.
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 Unsecured Notes and Guarantees will be effectively subordinated to any such additional secured debt. As of February 24, 2025, our secured debt included our $651.3 million in aggregate principal amount of net lease mortgage notes, $1.0 billion in principal amount of senior secured notes and $50.0 million of outstanding borrowings under our revolving credit facility.
The Unsecured Notes and Guarantees will be effectively subordinated to any such additional secured debt. As of February 23, 2026, our secured debt included our $649.3 million in aggregate principal amount of net lease mortgage notes, $1.6 billion in principal amount of senior secured notes and no borrowings outstanding under our revolving credit facility.
Alternatively, if we or RMR elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third party provider, some investors may conclude that our or RMR’s policies with respect to corporate sustainability are inadequate.
If we or RMR elect not to or are unable to satisfy the criteria by which companies’ corporate responsibility practices are assessed or do not meet the criteria of a specific third party provider, some investors may conclude that our or RMR’s policies with respect to corporate sustainability are inadequate.
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.
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 tenants may be unable to satisfy their obligations to us, and our hotel operators may not be able to improve their operating results.
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.
Accordingly, the 2027 Secured Notes, the 2027 Unsecured 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 Secured Notes, the 2027 Unsecured Notes, the 2029 Notes, the 2031 Notes and the 2032 Notes on the date they were initially issued.

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Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeThe following tables summarize certain information about our properties as of December 31, 2025 (dollars in thousands): Net Lease Hotels 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 33 $ 103,595 $ 74,208 — $ — $ — 33 $ 103,595 $ 74,208 Alaska 1 4,209 2,124 — — — 1 4,209 2,124 Arizona 25 178,282 124,943 4 78,836 54,741 29 257,118 179,684 Arkansas 21 89,090 62,327 — — — 21 89,090 62,327 California 22 206,531 163,450 19 783,908 524,851 41 990,439 688,301 Colorado 9 89,154 69,604 2 113,626 81,193 11 202,780 150,797 Connecticut 3 16,774 8,645 — — — 3 16,774 8,645 Delaware — — — — — — — — — Florida 48 196,608 148,510 7 404,134 324,265 55 600,742 472,775 Georgia 70 201,010 146,591 6 249,492 173,735 76 450,502 320,326 Hawaii — — — 1 126,098 62,589 1 126,098 62,589 Idaho 2 16,585 12,442 — — — 2 16,585 12,442 Illinois 54 216,082 159,878 4 303,173 222,983 58 519,255 382,861 Indiana 40 177,162 125,089 1 16,825 11,053 41 193,987 136,142 Iowa 7 21,388 16,352 — — — 7 21,388 16,352 Kansas 5 34,301 26,943 1 16,547 10,435 6 50,848 37,378 Kentucky 13 54,193 36,208 — — — 13 54,193 36,208 Louisiana 12 88,160 59,155 1 194,484 136,690 13 282,644 195,845 Maryland 8 49,447 31,857 1 57,763 35,697 9 107,210 67,554 Massachusetts — — — 2 179,411 132,315 2 179,411 132,315 Michigan 51 95,372 61,569 1 15,473 10,101 52 110,845 71,670 Minnesota 10 62,990 46,361 1 77,486 63,248 11 140,476 109,609 Mississippi 9 29,072 21,065 — — — 9 29,072 21,065 Missouri 24 87,088 57,432 1 117,240 89,153 25 204,328 146,585 Nebraska 5 23,277 12,428 — — — 5 23,277 12,428 Nevada 6 137,591 94,274 1 30,495 19,707 7 168,086 113,981 New Hampshire 1 4,772 2,725 — — — 1 4,772 2,725 New Jersey 3 72,074 47,758 2 52,690 31,454 5 124,764 79,212 New Mexico 17 94,610 57,968 — — — 17 94,610 57,968 New York 8 42,095 24,880 1 91,768 62,612 9 133,863 87,492 North Carolina 15 49,948 35,811 2 64,792 48,736 17 114,740 84,547 North Dakota 1 3,476 2,487 — — — 1 3,476 2,487 Ohio 38 228,158 155,737 2 92,113 66,698 40 320,271 222,435 Oklahoma 12 65,001 49,596 — — — 12 65,001 49,596 Oregon 7 71,052 56,746 1 110,850 84,625 8 181,902 141,371 Pennsylvania 27 138,938 94,553 1 68,783 38,825 28 207,721 133,378 Rhode Island — — — 1 15,918 5,687 1 15,918 5,687 South Carolina 16 82,156 56,935 1 77,335 54,807 17 159,491 111,742 Tennessee 35 104,786 74,664 3 98,019 37,902 38 202,805 112,566 Texas 57 354,396 245,600 5 144,178 83,297 62 498,574 328,897 Utah 3 12,122 7,116 1 68,346 32,025 4 80,468 39,141 Virginia 18 67,416 46,823 4 74,784 40,067 22 142,200 86,890 Washington 4 19,740 15,446 3 132,508 91,748 7 152,248 107,194 West Virginia 5 12,778 8,734 — — — 5 12,778 8,734 Wisconsin 8 15,960 11,906 — — — 8 15,960 11,906 Wyoming 6 53,183 31,033 — — — 6 53,183 31,033 759 3,670,622 2,587,973 80 3,857,075 2,631,239 839 7,527,697 5,219,212 Washington, DC — — — 1 152,617 130,488 1 152,617 130,488 Ontario, Canada — — — 2 57,867 30,707 2 57,867 30,707 Puerto Rico — — — 1 210,851 125,659 1 210,851 125,659 — — — 4 421,335 286,854 4 421,335 286,854 Total 759 $ 3,670,622 $ 2,587,973 84 $ 4,278,410 $ 2,918,093 843 $ 7,949,032 $ 5,506,066 51 Table of Contents Net Lease Hotels 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: Arizona — — — 1 13,322 3,677 1 13,322 3,677 Delaware — — — 1 15,064 11,660 1 15,064 11,660 Georgia — — — 1 8,256 4,906 1 8,256 4,906 Massachusetts — — — 2 39,104 22,896 2 39,104 22,896 Michigan — — — 1 14,383 7,607 1 14,383 7,607 New Jersey — — — 2 34,935 16,771 2 34,935 16,771 Ohio — — — 1 16,906 14,076 1 16,906 14,076 Tennessee 1 1,067 573 — — — 1 1,067 573 West Virginia — — — 1 10,714 5,026 1 10,714 5,026 Total 1 $ 1,067 $ 573 10 $ 152,684 $ 86,619 11 $ 153,751 $ 87,192 760 $ 3,671,689 $ 2,588,546 94 $ 4,431,094 $ 3,004,712 854 $ 8,102,783 $ 5,593,258 As of December 31, 2025, 314 of our net lease properties with an aggregate undepreciated carrying value of $751.5 million were encumbered by mortgage notes with an aggregate principal balance of $649.7 million, 70 of our net lease travel center properties with an aggregate undepreciated carrying value of $739.2 million secured our $1.0 billion senior secured notes, and 36 of our travel center properties with an aggregate undepreciated carrying value of $413.9 million secured our $580.2 million in aggregate principal amount at maturity of zero coupon senior secured notes.
However, if a hotel manager or a tenant does not perform obligations under a ground lease or elects not to renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected property.
However, if a tenant or a hotel manager does not perform obligations under a ground lease or elects not to renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected property.
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.
At December 31, 2025, 13 of our net lease properties and eight of our hotels were on land we leased partially or entirely 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.
(2) Two of these hotels with a depreciated carrying value totaling $54,056 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.
Item 2. Properties At December 31, 2024, we owned 206 hotels and 742 service-focused retail net lease properties.
Item 2. Properties At December 31, 2025, we owned 760 service-focused retail net lease properties and 94 hotels.
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.
At December 31, 2025, the aggregate depreciated carrying value of our properties subject to ground leases was as follows (dollars in thousands): 13 net lease (1) $ 43,522 Eight hotels (2) 143,565 Total $ 187,087 (1) Three of these net lease properties with a depreciated carrying value totaling $21,247 are partially on land we lease from unrelated third parties.
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.
In addition, 55 properties, including 38 net lease properties and 17 hotels, with an aggregate undepreciated carrying value of $890.4 million secured our revolving credit facility.
Pursuant to the terms of our management agreements and leases, payments of ground lease obligations are generally made by our hotel managers and tenants.
Seven of the eight hotel ground leases require annual minimum rents averaging $365 thousand per year; future rent under one ground lease has been prepaid. Pursuant to the terms of our leases and management agreements, payments of ground lease obligations are generally made by our tenants and hotel managers.
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.
Ground rent payable under the ground leases for our net lease properties is generally a fixed amount, averaging $519 thousand per year. 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.
The average remaining term of the ground leases (including renewal options) for these net lease and hotel properties is approximately 18 years (range of six years to 39 years) and 37 years (range of nine years to 62 years), respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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
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.
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Item 3. Legal Proceedings From time to time, we may become involved in litigation matters incidental to the ordinary course of our business.
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Mine Safety Disclosures Not applicable. 52 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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.
Biggest changeThe following table provides information about our purchases of our equity securities during the quarter ended December 31, 2025: 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, 2025 - December 31, 2025 12,727 $ 1.88 — $ — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain former employees of RMR and Sonesta in connection with the vesting of prior awards of our common shares.
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.
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 23, 2026, there were 382 shareholders of record of our common shares, although there is a larger number of beneficial owners. Issuer purchases of equity securities.
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.
We withheld and purchased these common shares at their fair market values based upon the trading prices of our common shares at the close of trading on Nasdaq on the applicable purchase dates. Our current cash distribution rate to common shareholders is $0.01 per share per quarter, or $0.04 per share per year.

Item 7. Management's Discussion & Analysis

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

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Biggest changeAll 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 22 7,205 59.2 % 63.2 % (4.0) pts $ 160.51 $ 158.43 1.3 % $ 94.96 $ 100.21 (5.2) % 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 47 14,858 60.9 % 60.6 % 0.3 pts 186.34 184.95 0.8 % 113.41 112.08 1.2 % 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 48 6,086 68.3 % 67.9 % 0.4 pts 92.17 92.06 0.1 % 62.97 62.49 0.8 % Extended Stay Total/Average 100 12,775 68.8 % 68.4 % 0.4 pts 110.67 113.15 (2.2) % 76.15 77.40 (1.6) % All Hotels Total/Average 206 35,871 63.3 % 62.8 % 0.5 pts $ 142.12 $ 143.26 (0.8) % $ 90.01 $ 90.01 — % * Includes results of all hotels owned as of December 31, 2024.
Biggest changeAll 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 2025 2024 Change 2025 2024 Change 2025 2024 Change Retained Hotels: Royal Sonesta Hotels® Full Service 14 4,821 64.1 % 63.9 % 0.2 pts $242.18 $240.63 0.6 % $ 155.22 $ 153.81 0.9 % Sonesta Hotels & Resorts® Full Service 18 6,040 62.9 % 59.8 % 3.1 pts 171.97 171.92 — % 108.11 102.87 5.1 % Radisson® Hotels & Resorts Full Service 5 1,149 61.4 % 65.4 % (4.0) pts 150.94 147.07 2.6 % 92.60 96.14 (3.7) % Country Inn & Suites® by Radisson Full Service 2 346 68.3 % 70.2 % (1.9) pts 139.96 148.28 (5.6) % 95.54 104.14 (8.3) % Crowne Plaza® Full Service 1 495 66.6 % 63.3 % 3.3 pts 141.18 142.09 (0.6) % 94.03 90.01 4.5 % Full Service Total/Average 40 12,851 63.5 % 62.3 % 1.2 pts 194.56 194.15 0.2 % 123.51 120.91 2.1 % Sonesta ES Suites® Extended Stay 7 958 74.7 % 71.0 % 3.7 pts 149.65 152.75 (2.0) % 111.77 108.44 3.1 % Sonesta Select® Select Service 6 873 65.2 % 64.2 % 1.0 pts 134.65 139.44 (3.4) % 87.74 89.50 (2.0) % Sonesta Simply Suites® Extended Stay 7 1,144 72.6 % 74.1 % (1.5) pts 124.41 123.47 0.8 % 90.37 91.47 (1.2) % Hyatt Place® Select Service 17 2,107 68.2 % 63.4 % 4.8 pts 120.63 120.48 0.1 % 82.23 76.35 7.7 % Focused Service Total/Average 37 5,082 69.9 % 67.4 % 2.5 pts 129.61 130.74 (0.9) % 90.58 88.06 2.9 % Retained Hotels Total/Average 77 17,933 65.3 % 63.7 % 1.6 pts $174.86 $175.14 (0.2) % $ 114.17 $ 111.60 2.3 % Exit Hotels: Royal Sonesta Hotels® Full Service 3 842 47.2 % 46.4 % 0.8 pts $ 166.91 $ 175.04 (4.6) % $ 78.77 $ 81.27 (3.1) % Sonesta Hotels & Resorts® Full Service 4 1,168 51.7 % 55.7 % (4.0) pts 93.14 97.14 (4.1) % 48.14 54.07 (11.0) % Full Service Total/Average 7 2,010 49.8 % 51.8 % (2.0) pts 122.42 126.39 (3.1) % 60.97 65.47 (6.9) % Sonesta ES Suites® Extended Stay 6 768 68.9 % 70.2 % (1.3) pts 114.68 116.86 (1.9) % 79.02 82.06 (3.7) % Sonesta Select® Select Service 1 155 65.2 % 71.9 % (6.7) pts 125.30 125.38 (0.1) % 81.75 90.09 (9.3) % Sonesta Simply Suites® Extended Stay 3 377 73.5 % 73.4 % 0.1 pts 89.72 92.26 (2.8) % 65.91 67.76 (2.7) % Focused Service Total/Average 10 1,300 69.8 % 71.4 % (1.6) pts 108.24 110.54 (2.1) % 75.54 78.87 (4.2) % Exit Hotels Total/Average 17 3,310 57.7 % 59.5 % (1.8) pts 115.68 118.92 (2.7) % 66.69 70.73 (5.7) % All Hotels Total/Average 94 21,243 64.1 % 63.1 % 1.0 pts $166.56 $166.88 (0.2) % $ 106.77 $ 105.23 1.5 % * Includes results of all hotels owned as of December 31, 2025.
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 our tenants for their own account or by the hotel managers as agents for us.
Our hotel managers and tenants derive their funding for property operating expenses and for returns and rents due to us generally from property operating revenues and, to the extent these parties themselves fund our owner’s priority returns and rents, from their separate resources.
Our tenants and hotel managers derive their funding for property operating expenses and for rents and returns due to us generally from property operating revenues and, to the extent these parties themselves fund rents and our owner’s priority returns, from their separate resources.
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.
Supplemental Guarantor Information Our 2027 Unsecured Notes, our 2029 Notes and our 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.
The VFN permits borrowings on a revolving basis up to $45,000 and the Issuer can borrow, repay and reborrow funds available until maturity. The maturity date of the VFN is January 27, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, can be extended by one year at the Issuer’s option.
The VFN permits borrowings on a revolving basis up to $45,000 and the Initial Issuer can borrow, repay and reborrow funds available until maturity. The maturity date of the VFN is January 27, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, can be extended by one year at the Initial Issuer’s option.
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.
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 2026 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, 2025.
The return payments to us under certain of our management agreements depend exclusively upon earnings at these properties and, accordingly, our income and cash flows from these properties reflect the seasonality of the hotel industry. 70 Table of Contents Impact of Climate Change Concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns.
The return payments to us under certain of our management agreements depend exclusively upon earnings at these properties and, accordingly, our income and cash flows from these properties reflect the seasonality of the hotel industry. 69 Table of Contents Impact of Climate Change Concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns.
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.
We currently expect to use cash on hand, the cash flows from our operations, borrowings available under our revolving credit facility, if any, 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 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.
For a comparison of consolidated results for the year ended December 31, 2024, compared to the year ended December 31, 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024. Hotel operating revenues.
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.
However, as a result of economic conditions, including if the U.S. enters an economic recession, or otherwise, our tenants and managers may become unable or unwilling to pay returns and rents to us when due, and, as a result, our cash flows and net income would decline.
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.
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, 2025, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 149 distinct brands across 22 industries.
These indentures and related supplements and our credit agreement contain covenants that generally restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios.
These indentures and related supplements and our credit agreement contain covenants that generally restrict our ability to incur debt, including debt secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios.
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.
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 12 months and for the foreseeable future thereafter.
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.
As of December 31, 2025, 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, 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, 2025, 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.
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).
Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do. 70 Table of Contents Our calculations of FFO and Normalized FFO for the years ended December 31, 2025 and 2024 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).
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.
A subsidiary guarantor’s guarantee of the 2027 Unsecured 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, and BBB (or the equivalent) 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.
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.
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 2022 through 2025 tax years are subject to examination by taxing authorities.
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.
We paid this distribution on February 19, 2026, 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.
FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, excluding any gain or loss on sale of real estate and loss on impairment of real estate assets, if any, plus real estate depreciation and amortization, less any gains and losses on equity securities, as well as adjustments to reflect our share of FFO attributable to an investee and certain other adjustments currently not applicable to us.
FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, excluding any gain or loss on sale of real estate and loss on impairment of real estate assets, if any, plus real estate depreciation and amortization, as well as adjustments to reflect our share of FFO attributable to an investee and certain other adjustments currently not applicable to us.
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.
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, 2025, we owned 854 properties in 46 states, the District of Columbia, Canada and Puerto Rico.
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.
We have determined that each of our wholly owned TRSs is a VIE as defined under the Consolidation Topic of the Financial Accounting Standards Board Accounting Standards Codification™, or ASC.
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.
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, 2025 and 2024, the annual interest rate payable on borrowings under our revolving credit facility was 6.37% and 6.99%, respectively.
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.
As of December 31, 2025, there was $6,763 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 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.
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 1.98x and 2.10x as of December 31, 2025 and 2024, respectively.
We recorded a $56,212 loss on asset impairment, net in 2024 to reduce the carrying value of ten hotels and ten net lease properties to their estimated fair value or estimated fair value less costs to sell.
We recorded a $56,212 loss on asset impairment in 2024 to reduce the carrying value of ten hotels and ten net lease properties to their estimated fair value or estimated fair value less costs to sell. Gain on sale of real estate, net.
We lease 206 hotels to our wholly owned TRSs that are managed by hotel operating companies.
We lease 94 hotels to our wholly owned TRSs that are managed by hotel operating companies.
Our Operating Liquidity and Capital Resources Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are owner’s priority returns from our hotels, rents from our net lease portfolio and borrowings under our revolving credit facility. We receive owner’s priority returns and rents from our managers and tenants monthly.
Our Operating Liquidity and Capital Resources Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are rents from our net lease portfolio, returns generated from our hotels and borrowings under our revolving credit facility and VFN. We receive rents and hotel returns from our tenants and managers monthly.
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.
We had reserves for uncollectable rents of $3,115 and $5,058 as of December 31, 2025 and 2024, respectively, included in other assets, net in our consolidated balance sheets.
(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.
(2) Intercompany balances represent payables to non-guarantor subsidiaries. Related Person Transactions We have relationships and historical and continuing transactions with RMR, RMR Inc. and Sonesta and others affiliated with them.
TA is our largest tenant and as of December 31, 2024, leased 175 of our travel centers under five master leases that expire in 2033 and require annual minimum rents of $259,080. In addition, TA receives an annual credit of $25,000 as a result of prepaid rent.
TA is our largest tenant and as of December 31, 2025, leased 175 of our travel centers under five master leases that expire in 2033 and require annual minimum rents of $264,262. In addition, TA receives an annual credit of $25,000 as a result of prepaid rent.
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.
Comparable Hotels Data. We present occupancy, ADR and RevPAR 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. The following table provides a summary of these revenue metrics for the periods presented.
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.
Other factors include, but are not limited to, requirements to maintain our REIT distribution requirements, 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 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.
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, 2025, we funded $2,451 for capital improvements to our net lease properties. As of December 31, 2025, we had $6,790 of unspent leasing-related obligations related to certain of our net lease tenants.
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.
During the year ended December 31, 2025, certain of our hotel managers deposited $6,138 to these accounts and spent $4,818 from the FF&E reserve escrow accounts to renovate and refurbish our hotels.
Our remaining $2,425,000 of senior unsecured notes do not have the benefit of any guarantees.
Our remaining $1,325,000 of senior unsecured notes do not have the benefit of any guarantees.
(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.
Rent coverage is as of December 31, 2025. 67 Table of Contents (4) Consists of 171 tenants with an average investment of $2,688 per property and an average annual minimum rent of $178 per property. As of December 31, 2025, our net lease tenants operated across 21 distinct industries within the service-focused retail sector of the U.S. economy.
We also agreed to change the required collateral property debt yield to 10% effective with respect to the first quarter of 2025 and continuing through the end of the loan term and to swap collateral properties as follows: 49 hotels with an aggregate of 8,197 keys and an aggregate undepreciated carrying value of $1,402,307 will be released from the collateral pool and 35 travel centers leased to TA, which travel centers we refer to as our TA No. 5 lease, with an aggregate undepreciated carrying value of $601,684, will be added as collateral to our revolving credit facility.
We also agreed to change the required collateral property debt yield to 10% effective with respect to the first quarter of 2025 and continuing through the end of the loan term and to swap collateral properties as follows: 47 hotels with an aggregate of 7,981 keys were released from the collateral pool and 35 travel centers leased to TA, which we refer to as TA Lease No. 5, were added as collateral to our revolving credit facility.
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.
As of December 31, 2025, we owned 760 service-focused retail net lease properties with an aggregate of 13,601,902 square feet leased to 181 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $390,051.
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.
Our net lease properties were 96.6% occupied as of December 31, 2025 with a weighted (by annual minimum rent) average lease term of 7.4 years, operating under 140 brands in 21 distinct industries.
(3) Rent coverage information provided by tenant is for all 175 sites on a consolidated basis and is as of December 31, 2024.
(2) See page 58 for our definition of rent coverage. (3) Rent coverage information provided by tenant is for all 175 sites on a consolidated basis and is as of December 31, 2025.
If indicators of impairment are present, we evaluate the carrying value of the related investment by comparing it to the expected future undiscounted cash flows to be generated from that investment.
If indicators of impairment are present, we evaluate the carrying value of the related investment by comparing it to the expected future undiscounted cash flows to be generated from that investment. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.
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.
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, 2025 was approximately $3,022,867.
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.
The change from income tax expense in 2024 to income tax benefit in 2025 is primarily due to increases in our foreign tax benefit ($11,808) and decreases in our state income tax expense ($311). 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.
In February 2025, we and our lenders further amended our revolving credit facility to reduce the required debt service coverage ratio covenant from 1.50 times to 1.30 times effective with respect to the fourth quarter of 2024 and continuing through the end of the loan term.
In February 2025, we and our lenders amended the agreement governing our revolving credit facility to reduce the minimum fixed charge coverage ratio covenant from 1.50x to 1.30x effective with respect to the fourth quarter of 2024 and continuing through the end of the loan term.
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.
The change from cash flow used in investing activities in 2024 to cash flow provided by investing activities in 2025 is primarily due to higher proceeds from the sale of real estate and decreased real estate improvements during 2025, partially offset by real estate acquisitions and deposits during 2025.
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.
During the year ended December 31, 2025, we entered into lease renewals for 977,089 rentable square feet (32 properties) at weighted (by rentable square feet) average rents that were 4.6% above the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 10.5 years.
During the year ended December 31, 2024, we declared and paid regular quarterly distributions to our common shareholders using cash on hand as follows: Declaration Date Record Date Paid Date Distribution Per Common Share Total Distributions January 11, 2024 January 22, 2024 February 15, 2024 $ 0.20 $ 33,154 April 11, 2024 April 22, 2024 May 16, 2024 0.20 33,152 July 11, 2024 July 22, 2024 August 15, 2024 0.20 33,178 October 16, 2024 October 28, 2024 November 14, 2024 0.01 1,666 $ 0.61 $ 101,150 59 Table of Contents On January 16, 2025, we declared a regular quarterly distribution to common shareholders of record on January 27, 2025 of $0.01 per share, or $1,666.
During the year ended December 31, 2025, we declared and paid regular quarterly distributions to our common shareholders using cash on hand as follows: Declaration Date Record Date Paid Date Distribution Per Common Share Total Distributions January 16, 2025 January 27, 2025 February 20, 2025 $ 0.01 $ 1,666 April 10, 2025 April 22, 2025 May 15, 2025 0.01 1,667 July 10, 2025 July 21, 2025 August 14, 2025 0.01 1,669 October 9, 2025 October 27, 2025 November 13, 2025 0.01 1,681 $ 0.04 $ 6,683 On January 15, 2026, we declared a regular quarterly distribution to common shareholders of record on January 26, 2026 of $0.01 per share, or $1,681.
The change from cash flow used in financing activities in the 2023 period to cash flow provided by financing activities in the 2024 period is primarily due to higher net borrowings in the 2024 period. 58 Table of Contents We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements.
The change from cash flow provided by financing activities in 2024 to cash flow used in financing activities during 2025 is primarily due to higher net repayments, partially offset by lower distributions to common shareholders during 2025. We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements.
We base purchase price allocations and the determination of useful lives on our estimates and, under some circumstances, studies from independent real estate appraisers to provide market information and evaluations that are relevant to our purchase price allocations and determinations of useful lives; however, our management is ultimately responsible for the purchase price allocations and determination of useful lives.
We base purchase price allocations and the determination of useful lives on our estimates and, under some circumstances, studies from independent real estate appraisers to provide market information and evaluations that are relevant to our purchase price allocations and determinations of useful lives; however, our management is ultimately responsible for the purchase price allocations and determination of useful lives. 64 Table of Contents We compute depreciation expense using the straight line method over estimated useful lives of up to 40 years for buildings and improvements, and up to 12 years for personal property.
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.
During the year ended December 31, 2025, we funded $229,389 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund between approximately $120,000 to $140,000 during 2026 for capital improvements to certain hotels using cash on hand.
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.
The following is a summary of our sources and uses of cash flows for the periods presented: Year Ended December 31, 2025 2024 Cash and cash equivalents and restricted cash at the beginning of the period $ 157,386 $ 197,830 Net cash provided by (used in): Operating activities 117,808 139,391 Investing activities 528,712 (222,859) Financing activities (431,818) 43,024 Cash and cash equivalents and restricted cash at the end of the period $ 372,088 $ 157,386 The decrease in cash flow provided by operating activities in the 2025 period is primarily due to the sale of certain hotels and lower returns from our hotel portfolio in the 2025 period.
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.
At December 31, 2025, we owned 760 service-focused retail properties leased to 181 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. At December 31, 2025, we also owned 94 hotels managed by four operators.
Our mortgage notes require monthly principal payments as described in Part II, Item 7A of this Annual Report on Form 10-K.
None of our senior note debt obligations require principal or sinking fund payments prior to their maturity dates. Our mortgage notes require monthly principal payments as described in Part II, Item 7A of this Annual Report on Form 10-K.
Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions.
We can borrow, subject to meeting certain financial covenants, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayments are due until maturity. Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions.
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.
We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. Our consolidated statements of comprehensive income (loss) include rental income and net lease operating expenses from our net lease properties and hotel operating revenues and hotel operating expenses of our managed hotels. Net Lease Portfolio .
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.
We recorded an $84,218 net gain on sale of real estate in 2025 in connection with the sales of 112 hotels and 11 net lease properties, and 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. Interest income.
(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.
(4) Consists of miscellaneous businesses with an average investment of $6,006 per property. 68 Table of Contents As of December 31, 2025, lease expirations at our net lease properties by year are as follows.
The increase in net lease operating expenses is primarily the result of increased property management fees ($2,335) and other operating expenses ($2,019) in 2024, partially offset by our sale of certain net lease properties since January 1, 2023 ($2,200). Depreciation and amortization - hotels.
The increase in net lease operating expenses is primarily the result of increased property management fees ($2,496) and increases at certain net lease properties in 2025 ($758), partially offset by decreases resulting from our sales of certain net lease properties since January 1, 2024 ($1,474). 56 Table of Contents Depreciation and amortization - hotels.
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 decrease in hotel operating revenues is primarily a result of our sales of certain hotels since January 1, 2024 ($99,857), partially offset by increases in occupancy and average rates at certain hotels in 2025 ($16,555). Additional operating statistics of our hotels are included in the tables beginning on page 66. Rental income.
In order to exercise the first extension option, we would be required to maintain the 1.50 times debt service coverage level as of and for the duration of the extension period.
In order to exercise the first extension option, we are required to maintain a 1.50x minimum fixed charge coverage ratio level as of and for the duration of the extension period.
Net Lease Mortgage Notes On January 27, 2025, our wholly owned, special purpose bankruptcy remote, indirect subsidiary, SVC ABS LLC, or the Issuer, issued a variable funding note, or VFN, secured by the 315 net lease properties that also secure our existing $606,611 of net lease mortgage notes.
The redemption was funded using cash on hand. 60 Table of Contents Net Lease Mortgage Notes On January 27, 2025, our wholly owned, special purpose bankruptcy remote, indirect subsidiary, SVC ABS LLC, or the Initial Issuer, issued the VFN secured by the 314 net lease properties that secure our existing $604,654 of net lease mortgage notes.
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 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, 2025 Real estate properties, net (1) $ 3,514,819 Other assets, net 679,235 Indebtedness, net $ 4,711,060 Intercompany balances (2) 1,630,868 Other liabilities 255,069 63 Table of Contents Year Ended December 31, 2025 Revenues $ 1,438,240 Expenses 1,793,261 Net loss $ (355,021) (1) Real estate properties, net as of December 31, 2025 includes $17,440 of properties owned directly by us and not included in the assets of the subsidiary guarantors.
If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value. 64 Table of Contents We periodically evaluate our equity method investment for possible indicators of other than temporary impairment whenever events or changes in circumstances indicate the carrying amount of the investment might not be recoverable.
We periodically evaluate our equity method investment for possible indicators of other than temporary impairment whenever events or changes in circumstances indicate the carrying amount of the investment might not be recoverable.
We do not depreciate the allocated cost of land. Purchase price allocations and estimates of useful lives require us to make certain assumptions and estimates. Incorrect assumptions and estimates may result in inaccurate depreciation and amortization charges over future periods. We periodically evaluate our real estate and other assets for possible impairment indicators.
Incorrect assumptions and estimates may result in inaccurate depreciation and amortization charges over future periods. We periodically evaluate our real estate and other assets for possible impairment indicators.
The VFN requires interest payments only on drawings under the VFN based on SOFR plus a margin of 1.75%, and an unused commitment fee of 50 basis points per annum paid on undrawn amounts. We borrowed $45,000 for general business purposes under the VFN upon closing.
The VFN requires interest payments only on drawings under the VFN based on SOFR plus a margin of 1.75%, and an unused commitment fee of 50 basis points per annum paid on undrawn amounts. As of December 31, 2025, the annual interest rate payable on borrowings under the VFN was 5.62%.
Our Investment and Financing Liquidity and Capital Resources Our hotel operating agreements generally provide that, if necessary, we may provide our managers with funding for capital improvements to our hotels in excess of amounts otherwise available in escrowed FF&E reserves or when no FF&E reserves are available.
In addition, the income we receive from our hotels in Canada and Puerto Rico is subject to taxes in those jurisdictions and we are subject to taxes in certain states where we have properties despite our qualification for taxation as a REIT. 58 Table of Contents Our Investment and Financing Liquidity and Capital Resources Our hotel operating agreements generally provide that, if necessary, we may provide our managers with funding for capital improvements to our hotels in excess of amounts otherwise available in escrowed FF&E reserves or when no FF&E reserves are available.
Pilot Travel Centers LLC Flying J Travel Plaza 3 41,681 0.8 % 3,279 0.9 % 4.24 x 9. Automotive Remarketing Group, Inc. America's Auto Auction 6 38,314 0.8 % 3,216 0.8 % 8.03 x 10. American Multi-Cinema, Inc.
Pilot Travel Centers LLC Flying J Travel Plaza 3 41,681 0.8 % 3,312 0.8 % 3.14 x 8. Automotive Remarketing Group, Inc. America's Auto Auction 6 38,314 0.8 % 3,216 0.8 % 10.27 x 9. Fleet Farm Group LLC Fleet Farm 1 37,802 0.7 % 2,894 0.7 % 2.11 x 10.
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).
The decrease in depreciation and amortization—hotels is primarily a result of our sale of certain hotels since January 1, 2024 ($56,698) and certain of our depreciable assets becoming fully depreciated since January 1, 2024 ($12,665), partially offset by depreciation and amortization related to capital expenditures made since January 1, 2024 ($22,327). Depreciation and amortization - net lease properties.
The decrease in general and administrative costs in 2024 is primarily due to decreases in business management fees ($3,699) and other professional fees ($1,459). Transaction related costs. Transaction related costs in 2024 primarily consist of costs related to various labor litigation matters, re-opening costs and other professional fees related to major renovation projects at certain of our hotels.
Transaction related costs in 2024 primarily consisted of costs related to various labor litigation matters, re-opening costs and other professional fees related to major renovation projects at certain of our hotels. Loss on asset impairment.
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.
We recorded an $81,889 loss on asset impairment in 2025 to reduce the carrying value of 28 hotels and four net lease properties to their estimated fair value less costs to sell.
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.
As of December 31, 2025, TA is our largest tenant (175 travel centers) and Sonesta (69 hotels) is our largest hotel manager. 57 Table of Contents We recorded reserves for uncollectable amounts and reduced rental income by $1,858 and $2,158 during the years ended December 31, 2025 and 2024, respectively, based on our assessment of the collectability of rents.
The increase in interest expense is primarily due to higher weighted average interest rates during 2024 compared to 2023. Loss on early extinguishment of debt, net . We recorded a $16,181 loss on early extinguishment of debt, net in 2024 as a result of the redemption and purchase of certain senior notes.
We recorded a $2,897 loss on early extinguishment of debt, net in 2025 as a result of the redemption of certain senior notes. We recorded a $16,181 loss on early extinguishment of debt in 2024 as a result of the redemption and purchase of certain senior notes. Income tax benefit (expense).
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.
Liquidity and Capital Resources (dollars in thousands, except per share amounts) Our Managers and Tenants As of December 31, 2025, our 760 service-focused retail net lease properties were leased to 181 tenants and our 94 hotels were managed and operated by four hotel operating companies.
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.
As collateral for all loans and other obligations under our revolving credit 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 certain properties, as discussed below.
Generally, lease agreements with our net lease tenants require payment of minimum rent to us. Certain of these minimum rent payment amounts are secured by full or limited guarantees. Annualized minimum rent represents cash amounts and excludes adjustments, if any, necessary to record scheduled rent changes on a straight line basis or any expense reimbursement.
Annualized minimum rent represents cash amounts and excludes adjustments, if any, necessary to record scheduled rent changes on a straight line basis or any expense reimbursement. Annualized minimum rent excludes the impact of rents prepaid by TA. As of December 31, 2025, our net lease tenants operated across 140 brands.
From January 1, 2025 through February 24, 2025, we sold one hotel with 149 keys for a sales price of $4,000, excluding closing costs, and two net lease properties with an aggregate of 49,081 square feet for an aggregate sales price of $1,300, excluding closing costs.
From January 1, 2026 through February 23, 2026, we sold one hotel with 133 keys for a sales price of $7,100, excluding closing costs, and one net lease property with 2,510 square feet for a sales price of $610, excluding closing costs.
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.
We also entered into new leases for 137,774 rentable square feet (40 properties) at weighted (by rentable square feet) average rents that were 19.9% above the prior rent for the same space.
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.
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. 59 Table of Contents 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 2.75% as of December 31, 2025.
Industry No. of Properties Investment (1) Percent of Total Investment Annualized Minimum Rent Percent of Total Annualized Minimum Rent Rent Coverage (2) 1. Travel Centers 178 $ 3,311,787 65.7 % $ 262,359 68.9 % 1.42x (3) 2. Restaurants - Quick Service 206 281,260 5.5 % 19,266 5.1 % 3.12x 3.
Industry No. of Properties Investment (1) Percent of Total Investment Annualized Minimum Rent Percent of Total Annualized Minimum Rent Rent Coverage (2) 1. Travel Centers 178 $ 3,311,787 65.0 % $ 267,574 68.6 % 1.22x (3) 2. Restaurants - Quick Service 211 293,030 5.8 % 20,783 5.3 % 2.87x 3.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+3 added−2 removed9 unchanged
Biggest change(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.
Biggest changeInterest Rate is weighted based on amounts outstanding. (2) Represents the maximum amount available under our revolving credit facility and the VFN. (3) Based on diluted weighted average common shares outstanding for the year ended December 31, 2025. The foregoing tables show the impact of an immediate change in floating interest rates as of December 31, 2025.
Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically SOFR. In addition, upon renewal or refinancing of our revolving credit facility, we are vulnerable to increases in interest rate premiums due to market conditions or our perceived credit characteristics.
Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically SOFR. In addition, upon renewal or refinancing of our revolving credit facility and the VFN, we are vulnerable to increases in interest rate premiums due to market conditions or our perceived credit characteristics.
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.
No principal repayments are required under our revolving credit facility or the VFN prior to maturity and repayments may be made and redrawn subject to conditions at any time without penalty. 72 Table of Contents Borrowings under our revolving credit facility and the VFN are in U.S. dollars and require interest to be paid at a rate of SOFR plus premiums.
(2) Based on diluted weighted average common shares outstanding for the year ended December 31, 2024.
(2) Based on diluted weighted average common shares outstanding for the year ended December 31, 2025.
Fixed 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.
Fixed Rate Debt At December 31, 2025, 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 $ 400,000 4.950 % $ 19,800 2027 Semi-Annually Senior secured notes 580,155 — % — 2027 At Maturity 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 604,654 5.600 % 33,861 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 $ 5,459,809 $ 321,999 No principal repayments are due under our unsecured or secured senior notes until maturity.
Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts under our revolving credit facility or other floating rate debt, if any.
If interest rates were to change gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts under our revolving credit facility, the VFN or other floating rate debt, if any.
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.
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, 2025 if we were fully drawn on our revolving credit facility and the VFN: Impact of Increase in Interest Rates Interest Rate Per Year (1) Outstanding Debt (2) Total Interest Expense Per Year Annual Per Share Impact (3) At December 31, 2025 6.32 % $ 695,000 $ 43,924 $ 0.26 One percentage point increase 7.32 % $ 695,000 $ 50,874 $ 0.31 (1) Based on SOFR plus a premium, which was 250 basis points per annum for our revolving credit facility and 175 basis points per annum for the VFN, as of at December 31, 2025.
Changes in market interest rates would affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt while decreases in market interest rates increase the fair value of our fixed rate debt. In response to significant and prolonged increases in inflation, the U.S.
Changes in market interest rates would affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt while decreases in market interest rates increase the fair value of our fixed rate debt.
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.
Based on the balances outstanding at December 31, 2025 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 $145,822, which amount excludes $580,155 of our senior secured notes due 2027 as no interest is due until maturity.
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.
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, 2025: 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, 2025 5.62 % $ 45,000 $ 2,529 $ 0.02 One percentage point increase 6.62 % $ 45,000 $ 2,979 $ 0.02 (1) Based on SOFR plus a premium, which was 175 basis points per annum for the VFN at December 31, 2025.
Our net lease mortgage notes require principal and interest payments through maturity pursuant to amortization schedules. Because these notes require interest at fixed rates, changes in market interest rates during the term of these debts will not affect our interest obligations.
Because certain notes require interest at fixed rates, changes in market interest rates during the term of these debts will not affect our interest obligations.
If these notes were refinanced at interest rates which are one percentage point higher than the rates shown above, our per annum interest cost would increase by approximately $56,816.
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 $48,797, which amount excludes $580,155 of our senior secured notes due 2027 as no interest is due until maturity.
Floating Rate Debt At December 31, 2024, our floating rate debt consisted of $150,000 outstanding under our $650,000 revolving credit facility.
Floating Rate Debt As of December 31, 2025, we had no amounts outstanding under our revolving credit facility and $45,000 outstanding under the VFN.
Removed
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
Our net lease mortgage notes require principal and interest payments through maturity pursuant to amortization schedules.
Removed
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
Our $580,155 senior secured notes due 2027 require no cash interest to accrue prior to maturity and will accrete at a rate of 7.50% per annum compounded semi-annually on March 30 and September 30 of each year, such that the accreted value will equal the principal amount at maturity.
Added
The maturity date of the VFN is January 27, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, can be extended by one year.

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