- Oops!Something went wrong.Please try again later.
Amended Agreement Supported by $30.0 Million Guaranty
Service Properties Trust (Nasdaq: SVC), or SVC, today announced that it reached an agreement with a subsidiary of Hyatt Hotels Corporation, or Hyatt, to amend their previous management agreement for 22 Hyatt Place hotels owned by subsidiaries of SVC.
Under the amended agreement, Hyatt will continue to manage 17 of the hotels for a 10-year term effective as of April 1, 2021. Among other terms, the new agreement with Hyatt provides as follows:
SVC’s owner’s priority return is set at $12.0 million annually, supported by a $30.0 million guaranty for 75% of the aggregate annual owner’s priority return beginning in 2023.
A management fee equal to 5% of gross room revenues payable to Hyatt will be an operating cost paid senior to SVC’s owner’s priority return.
Following payment of SVC’s owner’s priority return and reimbursement of certain advances, if any, Hyatt may earn a 20% incentive management fee and SVC will receive the remaining cash flow.
SVC will fund approximately $50 million for renovations expected to be completed by the end of 2022. As such funding is advanced by SVC, the aggregate annual owner's priority return due to SVC under the amended agreement will increase by 6% of the amounts funded.
John Murray, President and Chief Executive Officer of SVC, made the following statement:
"SVC and Hyatt have had a productive business relationship since 2005. The amended agreement extends that relationship at least through 2031, maintains credit support for SVC’s owner’s priority return and provides for renovation activity, which will enhance the portfolio and is expected to result in improved coverage of SVC’s owner’s priority return for the portfolio."
SVC and Hyatt have transitioned management of five hotels to Sonesta International Hotels Corporation, or Sonesta, under the Sonesta Select brand. SVC also owns approximately 34% of Sonesta.
About Service Properties Trust
Service Properties Trust is a real estate investment trust which owns a diverse portfolio of hotels and net lease service and necessity-based retail properties across the United States and in Puerto Rico and Canada. SVC is managed by the majority owned operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative asset management company that is headquartered in Newton, Massachusetts.
Warning Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever SVC uses words such as "believe", "expect", "anticipate", "intend", "plan", "estimate", "will", "may" and negatives or derivatives of these or similar expressions, SVC is making forward-looking statements. These forward-looking statements are based upon SVC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by SVC’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond SVC’s control. For example:
This press release states that SVC will fund approximately $50 million for renovations to the 17 hotels managed by Hyatt and that such renovations are expected to be completed by the end of 2022. These renovations may be delayed or may not occur.
This press release states that the amended agreement will enhance the portfolio of hotels managed by Hyatt and is expected to result in improved coverage of SVC’s owner’s priority return for the portfolio. SVC cannot provide any assurance that coverage of SVC’s owner’s priority return for this portfolio will improve.
The information contained in SVC’s filings with the Securities and Exchange Commission, or SEC, including under the caption "Risk Factors" in SVC’s periodic reports, or incorporated therein, identifies other important factors that could cause differences from SVC’s forward-looking statements. SVC’s filings with the SEC are available on the SEC's website at www.sec.gov.
You should not place undue reliance upon forward-looking statements.
Except as required by law, SVC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210607005210/en/
Kristin Brown, Director, Investor Relations