Service Properties Trust — Call Transcript 2026

Good morning, and welcome to the Service Properties Trust Q1 2026 earnings conference call. I would now like to turn the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead. Good morning. Thank you for joining us today. With me on the call are Chris Bilotto, President and Chief Executive Officer, Jesse Abair, Vice President, and Brian Donley, Treasurer and Chief Financial Officer. In just a moment, they will provide details about our business and our performance for the Q1 of 2026, followed by a question and answer session with sell side analysts. I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on SVC's beliefs and expectations as of today, May 7th, 2026, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, which can be accessed from our website at svcreit.com or the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, this call may contain non-GAAP financial measures, including normalized funds from operations or normalized FFO and Adjusted EBITDAre. A reconciliation of these non-GAAP figures to net income is available in SVC's earnings release presentation that we issued last night, which can be found on our website. Lastly, we will be providing guidance on this call, including estimated 2026 normalized FFO, hotel EBITDA, net operating income or NOI, and Adjusted EBITDAre. We are not providing a reconciliation of these non-GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all. I will now turn the call over to Chris. Thank you, Kevin. Good morning, everyone, and thank you for joining the call today. Last night, we reported Q1 2026 results, which reflect measurable progress advancing SVC strategic initiatives. We materially strengthened our financial position with roughly $1.5 billion in capital markets activity, enhancing our overall leverage profile and debt maturity schedule. We continue to advance our capital recycling program and remain focused on active asset management across both our hotel and net lease properties. These initiatives serve as a catalyst toward driving performance for the company and improving cash flow. I will begin today's call with an update on our strategic priorities, followed by highlights from our hotel portfolio performance during the Q1. Jesse Abair will then discuss our net lease business, and Brian Donley will conclude with a review of our financial results, balance sheet and financial outlook. Starting with our strategic priorities. Since the start of the year, we executed a capital plan that significantly strengthened our balance sheet and strategic positioning. In March, we closed $745 million of accretive ABS financing, secured in part by 34 of our travel centers leased to TA, reinforcing the attractiveness of these assets. In April, we completed a $575 million underwritten equity offering that was intentionally sized to de-lever and improve our credit metrics. Importantly, RMR Group, our manager, invested $50 million alongside shareholders, underscoring strong alignment and confidence in our strategy. Taken together, along with cash on hand, we retired $1.6 billion in debt, resulting in annualized cash interest savings of $59 million. We enter the remainder of 2026 with a stronger financial foundation and greater flexibility to execute our repositioning strategy and operational plans within our hotel portfolio, focused on driving EBITDA improvement and value creation. Turning to hotel performance. During the Q1, RevPAR across our 93 hotels increased 6.7% year-over-year, primarily driven by broad-based occupancy gains across all service levels, with notable strength in the full-service segment. Hotel EBITDA across the portfolio decreased 9.2% year-over-year to $18.4 million, though this reduction was partially impacted by a $2.4 million decrease tied to the 15 properties currently being marketed for sale. As a reminder, our full year guidance contemplates the expected losses related to these marketed hotels. More importantly, the underlying performance of our 78 hotel retained portfolio was even stronger. Excluding the assets marketed for sale, RevPAR grew 7.5% year-over-year. Hotel EBITDA increased 2.1% to $26.2 million. This was achieved despite the known revenue displacement from our ongoing redevelopment of The Nautilus in South Beach. This outperformance is driven by our strategic concentration and higher STR chain scales, our footprint in premier resort destinations, including Kauai, San Juan and Hilton Head, and the uplift we are seeing from completed renovations. Our focus remains squarely on capturing the margin flow we believe this portfolio is capable of generating as it ramps up over the next few years. Following several years of significant capital investment to reposition these assets, SVC is well-positioned to drive revenue uplifts and outsize EBITDA growth. Over the last four years, approximately half of our retained hotels completed or are currently undergoing major renovations. To ensure we capture the performance improvements and margin flow through anticipated over the coming years, our asset managers are actively engaging with our operators to refine operational synergies and streamline property-level execution. While we acknowledge the broader macro headwinds, including geopolitical uncertainty, elevated fuel costs, and lagging international and government travel, we remain confident that this active asset management approach will uncover varying opportunities to improve efficiencies and deliver stronger results. Turning to hotel dispositions. During the quarter, we advanced our capital recycling initiatives, selling a 133 key focused service hotel for $7.1 million, and progressed the marketing of 15 Sonesta managed hotels, totaling approximately 3,000 keys. We removed one Sonesta Select property from the process to reassess its positioning. Retain an active and engaged roster of buyers for the remaining properties. Across the broader marketed hotels, pricing has come in softer than our initial outlook. This dynamic only reinforces our strategic commitment to exit these hotels and reallocate capital. Buyer demand for the eight focused service properties was strong, resulting in nearly 30 bids from more than 12 unique buyers. Pricing was generally consistent with the average per key valuation we achieved on focused service hotels over the past year. Specific to these eight hotels, we have signed letters of intent with four buyers for total proceeds of approximately $61.2 million, which we intend to use to repay debt. For the seven full-service hotels, bids for this operationally challenged sub-portfolio have fallen below initial targets. Despite this, we are prioritizing the exit of these properties with six of the seven hotels awarded to buyers for expected proceeds of $55.3 million. We anticipate an update on the final property in the coming quarter, which will increase our total proceeds. From a strategic standpoint, holding these assets is not aligned with our long-term goals. Together, these marketed hotels represented $7.8 million of losses in the Q1 while carrying material future capital requirements. Exiting them now, regardless of the softer pricing environment, eliminates a significant drag on our earnings and preserves capital. More importantly, it allows us to pivot our full attention and resources toward our retained core portfolio, driving growth in markets and properties where we have the greatest opportunity for margin expansion. In summary, SVC's portfolio transformation is well underway. Supported by our recently improved capital structure and the operational upside within our hotel assets, we are focused on our initiative supporting SVC's continued shift towards an increasingly net lease-oriented portfolio. Ultimately, we believe this combination of selling assets and operational improvement will drive durable cash flow and create attractive long-term value for our shareholders. I will now turn it over to Jesse. Thanks, Chris, good morning. At quarter end, SVC's net lease portfolio contained 761 properties across 42 states with annual base rents of $392 million. The portfolio was approximately 97% leased with a weighted average lease term of 7.3 years. We have 185 tenants operating under 140 brands across 21 distinct industries. The aggregate coverage of our net lease portfolio's minimum rents was 2.01 times on a trailing 12-month basis as of March 31st, 2026, up slightly from last quarter. The improvement was driven in part by our TA travel centers, which reported coverage of 1.24 times, up from 1.2 times in Q4. During the quarter, our asset management team executed 20 leases totaling 219,000 square feet, averaging over six years of term and a cash rent roll up of 8.5%. Looking ahead, portfolio lease expirations remain well laddered with less than 5% of annualized rents expiring through the end of 2027. NOI from our net lease portfolio declined $2.2 million year-over-year, primarily driven by credit loss reserves recorded for certain leases and related operational expenditures, which was partially offset by a $2 million positive impact from our acquisition activity. As we entered 2026, we shifted to a more measured pace of net lease acquisitions, targeting approximately $25 million of annual volume funded through capital recycling. Since the beginning of the year, we've invested in four properties totaling $9 million, which were primarily funded with the proceeds from 13 net lease dispositions. Consistent with our investment focus on resilient necessity-based brands with limited e-commerce exposure, our acquisitions this quarter included quick service restaurants and an automotive services retailer. The transactions had a weighted average lease term of over 15 years, average rent coverage of 3.8 times, and an average going-in cash cap rate of 7.9%, and an average GAAP cap rate of 8.8%. As we move through the year, we will continue to actively look for ways to recycle capital by leveraging our new and established brand relationships while pursuing growth opportunities in the form of sale leasebacks and off-market deals. Our proactive asset management efforts and disciplined capital recycling strategy should allow the net lease portfolio to continue to function as a stable foundation for SVC as it implements its broader transformation. With that, I'll turn the call over to Brian to discuss our financial results. Thank you, Jesse, and good morning. Starting with our consolidated financial results for the Q1 of 2026, Normalized FFO was $7.4 million or $0.04 per share, down $0.03 per share compared to the prior quarter. Normalized FFO this quarter as compared to the prior quarter, was primarily impacted by a $7.2 million, or $0.04 per share, decline in hotel results. Our hotel disposition activity accounted for $5.3 million of the decline and $1.9 million was a result of the performance of the 15 hotels we are selling, partially offset by earnings growth in our 78 retained hotels as of quarter end. NOI from our net lease portfolio declined $2.2 million, or $0.01 per share, over the prior year on credit losses reported during the quarter. Interest expense declined by $5 million, or $0.03 per share, during the period as a result of our capital markets activity. Turning to our hotel portfolio performance. For our 93 comparable hotels this quarter, RevPAR increased by 6.7% and gross operating profit margin percentage declined by 70 basis points to 20.4%. Below the GOP line, costs at our comparable hotels increased by $5.4 million from the prior year, driven by higher insurance expenses. Our comparable hotel portfolio generated adjusted hotel EBITDA of $18.4 million during the quarter, a decline of $1.9 million, or 9%, from the prior year. The 15 Sonesta exit hotels we're currently marketing for sale generated a RevPAR of $49, a decline of 3%, and produced losses of $7.8 million for the quarter, a decline of $2.4 million year-over-year. The 78 hotels in our retained portfolio generated a RevPAR of $113, an increase of 750 basis points year-over-year, and adjusted hotel EBITDA of $26.2 million during the quarter, an increase of 2% year-over-year. Hotel EBITDA declined $3.8 million for the seven hotels under renovation, including our South Beach hotel. The 86 hotels not under renovation improved hotel EBITDA by $1.5 million or 8% over the prior year. Turning to the balance sheet. We've been active in the capital markets and took steps to further strengthen our balance sheet, improve our debt maturity ladder, and our cash flows. During the Q1, we repaid $300 million of our February 2027, 4.95% unsecured senior notes with cash raised from asset sales. We completed our second ABS offering for $745 million at a blended interest rate of 5.96% and a maturity of March 2031. We securitized 158 net lease assets, including 34 travel centers, demonstrating the value of these assets and their attractiveness to investors. We used the proceeds from this offering to fully redeem all $700 million of our 8 and three-eighths senior unsecured guaranteed notes due June 2029, resulting in an annual cash interest savings of approximately $14 million. We also raised net proceeds of $542.3 million from our recent equity offering and redeemed all $450 million of our outstanding 5.5% senior guaranteed unsecured notes due 2027, and the remaining $100 million of outstanding 4.95% senior unsecured notes due in February 2027, resulting in additional annual cash savings of $29.7 million. Following these capital market transactions, we currently have $4.7 billion of debt outstanding with a weighted average interest rate of 5.65%. We have no unsecured debt maturities until 2028, and our 2027 and 2028 secured debt maturities have substantial refinance optionality, supported by strong net lease collateral. Further, SVC was recognized last week by Moody's, which upgraded its SVC corporate family rating, underscoring the clear progress we are making in strengthening our financial profile. Turning to our capital expenditure activity. During the Q1, we invested $21.5 million in capital improvements. Q1 activity was largely driven by the renovation of the Nautilus in Miami, as well as projects at the Royal Sonesta in Boston, Washington, D.C., and Austin, Texas. Turning to our annual guidance. We are reaffirming our full year outlook for hotel EBITDA, net lease NOI, and consolidated Adjusted EBITDA. Q1 Normalized FFO results were in line with our expectations and reflect the anticipated seasonality of our hotel portfolio and the planned renovation displacement embedded in our initial guidance. We are increasing our Normalized FFO range as a result of our debt repayments to $124 million-$144 million, or $0.24-$0.27 per share. The per share amounts assume the weighted average share count of 526 million shares. This full year guidance assumes midpoint interest expense of $360 million and G&A expense of $40 million. This guidance does not reflect the impact of completing any of the 15 Sonesta hotel dispositions and continues to assume $25 million of capital recycling in our net lease portfolio. We continue to expect total CapEx for the year of $120 million-$140 million. To conclude, our Q1 results demonstrate continued momentum repositioning SVC and strengthening the company's cash flows, supported by our strategic capital market transactions. As we move forward, we remain focused on growing EBITDA and further optimizing SVC's portfolio to drive sustained value for our shareholders. That concludes our prepared remarks. We are ready to open the line for questions. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Jack Armstrong with Wells Fargo. Please go ahead. Hey, good morning. Thanks for taking the question. First one for me on the net lease operating expenses, you know, up roughly $2 million, both sequentially and year-over-year, which by our math drove the majority of the miss versus our estimates. Can you talk a little bit about the moving pieces there and how we should be thinking about the run rate for the rest of the year? Sure, Jack. This is Jesse. I'll take it. As I mentioned, we, you know, we booked about $2 million in credit losses. A portion of that was expenditures related to those assets, and the bulk of that was property taxes. What happened there really is we have two franchisees that filed for bankruptcy. We're essentially covering their property taxes in the meantime. On a go-forward rate, this, in our opinion, is a one-time, a one-time hit. With respect to all these assets, they're all really good performers for us. The expectation would be ultimately that they would come out of bankruptcy and get transitioned either to new franchisees or back to corporate and get back to kind of a rent and OpEx paying state. Okay. Then just on rent coverage in the rest of the portfolio, can you talk a little bit about what drove the expansion in coverage for the TA portfolio? How do you expect that to develop over the remainder of the year? Then also walk us through any changes on your tenant watch list. We noticed you've got a couple that are well below one times coverage with both down significantly from Q4. With respect to TA, our perception of that is kind of twofold. On the one hand, TA has historically benefited from kind of a pricing volatility, which certainly we're seeing as a function of the geopolitical situation in the Middle East. You know, typically there's kind of a lag between wholesale and retail pricing, TA has been able to take advantage of that. That coupled with what we saw from our freight operators, nationally, which was actually an increase in freight demand, a function of some regulatory changes that removed some excess capacity off the roads, which helped freight pricing. Industrial demand was up, I think largely a function of data center construction and related activities. On the TA side, I think the expectation would be some of that is likely transitory, you know, related to the Middle East situation. Some of that from the freight demand side is hopefully gonna be more persistent. And in either event, you know, there's an opportunity there for that to provide something of a bridge for us, as TA themselves with the new leadership kind of enacts their business improvement plan and hopefully can put in some more structural changes to kind of drive a bit of growth going forward. On a tenant watch list, I mean, I would say that, you know, there are things We have a small exposure to drugstores and movie theaters. You know, we're watching those. Then the bulk of it would be with respect to those 2 franchise, those 2 franchises that I mentioned earlier. Other than that, it's been pretty consistent performance across the portfolio. Okay. Then jumping over to the hospitality side of things, you know, pretty strong RevPAR in the quarter and even stronger in the Sonesta portfolio, but margins are still down 10 basis points. Can you talk about what happened there on the expense side and any expectations you may have for improvement over the course of the year? Sure, Jack Armstrong. Good morning. This is Brian. One of the big impacts we had this quarter was rising insurance costs. We had some premium increases on the liability side that hurt margins. We had some deductibles that recorded for different incidents across the portfolio, which is more, you know, some of those recur here and there, but the premiums were the bigger driver. You know, labor wasn't really an outsized impact. I think overall labor costs were up 3% year-over-year. It's still something we're trying to, you know, monitor closely and work with our operators on the, core, staffing models of the hotels. You know, I think as we move forward, I mean, you know, Q1 is typically seasonally weaker. You know, Q2 will as we go into, you know, the stronger summer season, you know, will hopefully drive more margin through the portfolio and, you know, expense management and labor modeling is on the forefront to try to mitigate and improve our flow through. Okay. kind of with that in mind, you know, what's giving you confidence in the unchanged hotel EBITDA, you know, annual guidance there with, you know, booking trends into the rest of Q2? Yeah, a lot of the things we talked about what impacted Q1, you know, we had factored in our guidance range. You know, there's still more to play out in the broader economy, you know, impacts from, you know, citywide events, including World Cup and things of that nature that, you know, I don't think anybody has clear visibility on what the total impact's going to be. You know, we, you know, we feel like there's, you know, pretty good trends continuing into the spring and into early summer. You know, our RevPAR growth into April was comparable to what we saw on Q1. I think, you know, those patterns have continued. We haven't seen any signs of sort of slowdown and, you know, there's still some things to play out as the summer rolls through across our portfolio. You know, we're gonna continue to see uplift from hotels that we completed last year. We're still building back group business and contract business from those hotels that were displaced last year. There's still more opportunities hopefully ahead. No, really helpful. Last one for me, just at the corporate level. Could you maybe provide an update on the changes you're planning to make to the board as well as the new leadership at Sonesta, and how you expect both of those to impact your strategy as we go to the back half of the year? Also, if you're considering waiving your bylaw limiting individual holders to 5%. Yeah, I guess I'll take it in a couple parts. With respect to the question on the board, I think as communicated, in kind of some of our public announcements, you know, we will be working towards bringing on a new board member, more specifically, with lodging experience and kind of that process will continue to play out. Nothing to report, you know, with respect to that today, but something that continues to kind of advance. We think that'll be generally constructive, and kind of a positive for kind of the company and governance, accordingly. I think, more specifically, on the Sonesta piece with respect to the new management team, as we talked about historically, you had a new management team that came on board effective in April. I mean, we're, you know, just over 30 days into that now, and the team is, you know, off to a strong start, really kind of trying to identify and unpack changes at Holdco and then ultimately kind of how that'll inform the hotel performance. Look, I think generally speaking, I mean, we feel pretty optimistic about, you know, a lot of the things that we're collectively talking about, you know, between our company and theirs and some of the changes they're making. I mean, some of it is not new. You know, we've continued to target kind of revenue mix being a top priority in how we drive additional business through group and contracts. Some of that's gonna be changes that they make on their end, and some of that's gonna be deployment of new tools across all the operators, such as utilizing AI for better lead generation or better competitive set insights. There's just a mix of fundamentals that we would expect to occur on that side of the business. I think more specifically for Sonesta, as we think about the expense load and margins, you know, we're having a lot of dialogue about reevaluating the offerings across the properties and then kind of how that impacts the overall labor component, including contract labor, which we anticipate to see continued reductions. You know, one of the other things is, you know, with respect to kind of the global sales teams, there's an effort to expand that group to kind of provide more benefits for a lot of the work we've been doing on the renovations and kind of having being better positioned in the markets, and we think that'll ultimately continue to drive group and contract business. Then, you know, naturally, I think the last thing with respect to Sonesta is continuing to kind of give credence and time to the loyalty program and expanding that business. You know, certainly with all of these operators, you know, the benefit of the loyalty programs or kind of direct business through brand.com and other initiatives, of, you know, kind of reducing kind of more expensive acquisitions costs, tied to the OTA. Your last question on the 5%, for ownership stake in the shares. You know, I think, you know, if you look closely at the equity offering we did in April, we did provide waivers to certain groups that own more than 5%. You know, it's not something we're gonna change formally because it's put in place to protect certain tax attributes of the company as a REIT, but it's something that, you know, we consider on one-off cases. Really helpful all around. Thanks for the time. Again, if you have a question, please press star then one. Your next question comes from Tyler Batory with Oppenheimer. Please go ahead. Hey, good morning. Thanks for taking my questions. A couple from me here. First, wanted to follow up on the asset sales on the hotel side of things and that process, the 15 you have in the market right now. Any help on the timeline for those? Then the seven full service hotels, can you give us some more, maybe some guideposts on potential pricing for those assets? I'm also just curious why the performance at those properties has been so challenged. Yeah. I think on the first question, look, given where we are, you know, other than one hotel, you know, we've kind of identified or have signed term sheets with buyers in support of that, and kind of there's a range. Some are groups we've worked with historically and others are kind of new relationships. The process varies. I would say more than half the portfolio, deposits will go hard with no real diligence. Then there's kind of a, on the low end, a 90-day period to close. Then kind of the balance is more traditional, you know, process whereby there's a diligence piece and then a period for close. We've talked about, you know, these sales transacting in the back half of the year, and I think that's still kind of the right bogey. I think hopefully over time, maybe we'll take down incremental pieces of them, you know, over the course of Q3 and Q4 versus necessarily being all backloaded at the end of the year. That's how I would think about it from a respective timing. I think for performance on the hotels, I mean, look, we're selling these hotels, you know, just because, you know, around conviction in the markets, and the capital that is needed. I think that the performance decrease is just a byproduct of where those sit in certain markets. Our performance is not inconsistent with the broader trends that are occurring in those markets. You're also gonna have some level of disruption as you go through a sale process. Again, all the reasons why we have more conviction on wanting to exit these and kind of reduce cash drag for the company. Okay. Appreciate that. Post equity raise, where are you in terms of your covenants? Just talk about some of the additional flexibility that you have post doing that equity transaction. Sure. As of Q1, Tyler, you know, we were able to pay down the debt with the equity offering, the $550 million of '27 notes, which gave us significant cushion on both our leverage ratio and our interest coverage. You know, we took down, you know, debt to assets, you know, the 60% test from 59% down to 53%. The interest coverage, you know, was at 1.75 times. There's a good amount of cushion there. You know, we were very strategic as far as the sizing of that equity offering to get us, you know, through the maturities, also make sure we have enough operating flexibility within these covenants to, you know, refinance future debt maturities. You know, the way we're looking at the next debt maturity, which is the zero coupons, you know, we'll have different options. You know, we'll, we'll potentially pay down some of the balance with asset proceeds that, you know, Chris talked about. Those, those notes are also backed by one of the travel center leases, giving us, you know, increased flexibility as far as what we might do with those. The covenant shouldn't necessarily be an issue going forward in the near future. Okay. Last question for me, maybe a little bit of a clarification too. In terms of the debt that you have upcoming, the 2027 senior secured notes, obviously there's an extension option there. Just talk about the conditions that allow you to extend that, and sounds like the base case, we should just assume that that's just gonna get pushed to 2028. Yeah, that's to be determined. I mean, we do have a one-year option. It becomes a cash pay instrument at that point if we do, and it has a increasing scale of coupon the longer those notes are out for that extension period. I think the more likely scenarios, we'll refi those out in some fashion. It's just a little early to talk about it, you know, given when, you know, September of 2027. Okay. That's all for me. Thank you. Thank you. Your next question comes from John Massocca with B. Riley Securities. Please go ahead. Good morning. Maybe sticking with Tyler's line of questioning. If you think about the proceeds from upcoming hotel sales, would those have to be used towards paying down the zero coupon? Is that, you know, when you talk about using asset sale proceeds to pay down the zero coupon, would it be assets that are currently collateralizing that piece of debt? I think, you know, we're gonna be thoughtful around that. The way those zero coupons work, we took discounted proceeds and essentially, you know, are paying the interest or amortizing it over time. If we pay them off early, you know, we're extinguishing that early. We're taking a hit on the discounted value. We have some options. We have a small variable funding note of $45 million. We could also pay out. That matures in early '27. We could sit on the cash and wait for, you know, closer maturities and figure out where we're at from a strategic standpoint and what we do in the refinancing market. You know, there's some pieces to be determined as we move through these asset sales and what we do with the cash. Yeah. It's not required, John. Yeah. We have that flexibility. Yeah. Okay. I guess of the kind of pool of full-service assets you're looking to sell this year, how much of kind of the original estimate you put out was in the one asset that you pulled out of the selling bucket? You know, just kind of curious, right? You're going from $90 million-$110 million estimated at the end of last year to $55 million, and I'm just wondering how much of that is the removal of that one asset and how much of that is just a decline in what you're seeing in the market for the remaining assets. I think the combined awarded bids that we talked about was about $116 million. The removal of the one asset was give or take $5 million. We have another property where it's still in the market and we're expecting pricing kind of in Q2 in the near term, which will be another catalyst to increase overall proceeds. Okay. There's still one additional asset that is not in that $55 million bucket. Correct. There's one large full service asset that's not in those numbers. Okay. In terms of the extended stay and kind of, select service assets you're selling, are those under contract right now? I guess what is timing for those dispositions in your mind today? Yeah. Everything is been awarded or under LOI. Most of those, you know, I think the earliest they could close would be over a 90-day period. You know, I think kind of a good bogey is, you know, kind of mid-Q2, mid-Q3 is kind of a fair timeline on the, on the early end. We'll just kinda see how it plays out, you know, between now and then. Just to clarify, is pricing on those kind of going as expected? Yeah. We know pricing came in light on those as well, but I think generally speaking, consistent with where we saw kind of the per key valuations for last year. You know, that's kind of where it stands. Yeah. Then switching over to the net lease portfolio. I guess, how should we think about the near-term impact of the tenant credit issues on the financials, like next couple quarters as the bankruptcy process plays out? I mean, was there anything in 1 Q that was particularly one time in nature, either for accounting reasons or something else and could kind of bounce back immediately? When we talk about this, you know, not being typical of run rate, is that more so that'll play out as you get those assets kind of re-tenanted and back to fully paying rent? Yeah. These are two franchisees that we've been kind of in talks with and in front of for a while. We knew this was gonna hit. It just so happened that the bankruptcy filings happened this quarter, we don't think this is thematic in any real sense. I think the way we anticipate playing out is they'll go through the process, they'll negotiate some kind of outcome. Like I said, these are all strong assets for us. These assets themselves got wrapped up into much broader portfolio bankruptcies. We expect that at the end of the day, we'll probably emerge with a better credit profile, you know, either with respect to the new franchisee or going back to corporate. We'll get back to a rent-paying status and there's even the potential for some recovery of back rent and back OpEx. You know, that remains to be seen. Again, the point here is it just is a timing function. We don't think this is anything that will be persistent on a go-forward basis. Certainly nothing thematic in terms of the portfolio. I mean, these are both just so happen to be in our QSR space, which actually otherwise is performing really well for us. I guess just given the nature of bankruptcy declaration, I mean, would you expect some of the metrics, either on the operating expense side or the top line re-rent side to bounce back as soon as 2Q? Or is that something that will bounce back once the bankruptcy process or re-tenanting process kind of plays out? Yeah. I think it's just gonna depend on the vagaries of those bankruptcy proceedings, which are a little bit can be inconsistent from a timing standpoint. You know, could be Q2, could be Q3, but somewhere within that timeframe. Okay. All right. Just maybe one last one. It seems like there's in guidance from the equity raise, there was about $17 million of interest expense savings, but only $14 million of kind of additional uplift on Normalized FFO. Just curious what was kind of driving the delta there. Yeah. It really comes down to the net lease credit losses we just talked about, Jack. That's really the delta. You know, I'm not gonna try to say we're gonna pick back up on the net lease piece. You know, we're turning towards, you know, the lower end on the net lease guidance, which offsets some of that interest expense. You know, that's really the driver. Great. That makes sense. That's it for me. Thank you very much. This concludes our question and answer session. I would like to turn the conference back over to Chris Bilotto, President and Chief Executive Officer, for any closing remarks. Thank you for joining our call today. We look forward to meeting and seeing many of you at the upcoming industry conferences, including Nareit, in June. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker 7: Good morning, and welcome to the Service Properties Trust Q1 2026 earnings conference call. I would now like to turn the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead. Good morning, and welcome to the Service Properties Trust Q1 2026 earnings conference call. good morning and welcome to the service properties trust q1 2026 earnings conference call I would now like to turn the call over to Kevin Barry, Senior Director of Investor Relations. i would now like to turn the call over to kevin barry senior director of investor relations Please go ahead. please go ahead

Speaker 6: Good morning. Thank you for joining us today. With me on the call are Chris Bilotto, President and Chief Executive Officer, Jesse Abair, Vice President, and Brian Donley, Treasurer and Chief Financial Officer. In just a moment, they will provide details about our business and our performance for the Q1 of 2026, followed by a question and answer session with sell side analysts. I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on SVC's beliefs and expectations as of today, May 7th, 2026, and actual results may differ materially from those that we project. Good morning. good morning Thank you for joining us today. thank you for joining us today With me on the call are Chris Bilotto, President and Chief Executive Officer, Jesse Abair, Vice President, and Brian Donley, Treasurer and Chief Financial Officer. with me on the call are chris bilotto president and chief executive officer jesse abair vice president and brian donley treasurer and chief financial officer In just a moment, they will provide details about our business and our performance for the Q1 of 2026, followed by a question and answer session with sell side analysts. in just a moment they will provide details about our business and our performance for the q1 of 2026 followed by a question and answer session with sell side analysts I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. i would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. also note that today's conference call contains forward-looking statements within the meaning of the private securities litigation reform act of 1995 and other securities laws These forward-looking statements are based on SVC's beliefs and expectations as of today, May 7th, 2026, and actual results may differ materially from those that we project. these forward-looking statements are based on svc's beliefs and expectations as of today may 7th 2026 and actual results may differ materially from those that we project The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, which can be accessed from our website at svcreit.com or the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, this call may contain non-GAAP financial measures, including normalized funds from operations or normalized FFO and Adjusted EBITDAre. A reconciliation of these non-GAAP figures to net income is available in SVC's earnings release presentation that we issued last night, which can be found on our website. Lastly, we will be providing guidance on this call, including estimated 2026 normalized FFO, hotel EBITDA, net operating income or NOI, and Adjusted EBITDAre. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. the company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, which can be accessed from our website at svcreit.com or the SEC's website. additional information concerning factors that could cause those differences is contained in our filings with the securities and exchange commission which can be accessed from our website at svcreit.com or the sec's website Investors are cautioned not to place undue reliance upon any forward-looking statements. investors are cautioned not to place undue reliance upon any forward-looking statements In addition, this call may contain non-GAAP financial measures, including normalized funds from operations or normalized FFO and Adjusted EBITDAre. in addition this call may contain non-gaap financial measures including normalized funds from operations or normalized ffo and adjusted ebitdare A reconciliation of these non-GAAP figures to net income is available in SVC's earnings release presentation that we issued last night, which can be found on our website. a reconciliation of these non-gaap figures to net income is available in svc's earnings release presentation that we issued last night which can be found on our website Lastly, we will be providing guidance on this call, including estimated 2026 normalized FFO, hotel EBITDA, net operating income or NOI, and Adjusted EBITDAre. lastly we will be providing guidance on this call including estimated 2026 normalized ffo hotel ebitda net operating income or noi and adjusted ebitdare We are not providing a reconciliation of these non-GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all. I will now turn the call over to Chris. We are not providing a reconciliation of these non-GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all. we are not providing a reconciliation of these non-gaap measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all I will now turn the call over to Chris. i will now turn the call over to chris

Speaker 2: Thank you, Kevin. Good morning, everyone, and thank you for joining the call today. Last night, we reported Q1 2026 results, which reflect measurable progress advancing SVC strategic initiatives. We materially strengthened our financial position with roughly $1.5 billion in capital markets activity, enhancing our overall leverage profile and debt maturity schedule. We continue to advance our capital recycling program and remain focused on active asset management across both our hotel and net lease properties. These initiatives serve as a catalyst toward driving performance for the company and improving cash flow. I will begin today's call with an update on our strategic priorities, followed by highlights from our hotel portfolio performance during the Q1. Jesse Abair will then discuss our net lease business, and Brian Donley will conclude with a review of our financial results, balance sheet and financial outlook. Thank you, Kevin. thank you kevin Good morning, everyone, and thank you for joining the call today. good morning everyone and thank you for joining the call today Last night, we reported Q1 2026 results, which reflect measurable progress advancing SVC strategic initiatives. last night we reported q1 2026 results which reflect measurable progress advancing svc strategic initiatives We materially strengthened our financial position with roughly $1.5 billion in capital markets activity, enhancing our overall leverage profile and debt maturity schedule. we materially strengthened our financial position with roughly $1.5 billion in capital markets activity enhancing our overall leverage profile and debt maturity schedule We continue to advance our capital recycling program and remain focused on active asset management across both our hotel and net lease properties. we continue to advance our capital recycling program and remain focused on active asset management across both our hotel and net lease properties These initiatives serve as a catalyst toward driving performance for the company and improving cash flow. these initiatives serve as a catalyst toward driving performance for the company and improving cash flow I will begin today's call with an update on our strategic priorities, followed by highlights from our hotel portfolio performance during the Q1. i will begin today's call with an update on our strategic priorities followed by highlights from our hotel portfolio performance during the q1 Jesse Abair will then discuss our net lease business, and Brian Donley will conclude with a review of our financial results, balance sheet and financial outlook. jesse abair will then discuss our net lease business and brian donley will conclude with a review of our financial results balance sheet and financial outlook Starting with our strategic priorities. Since the start of the year, we executed a capital plan that significantly strengthened our balance sheet and strategic positioning. In March, we closed $745 million of accretive ABS financing, secured in part by 34 of our travel centers leased to TA, reinforcing the attractiveness of these assets. In April, we completed a $575 million underwritten equity offering that was intentionally sized to de-lever and improve our credit metrics. Importantly, RMR Group, our manager, invested $50 million alongside shareholders, underscoring strong alignment and confidence in our strategy. Taken together, along with cash on hand, we retired $1.6 billion in debt, resulting in annualized cash interest savings of $59 million. Starting with our strategic priorities. starting with our strategic priorities Since the start of the year, we executed a capital plan that significantly strengthened our balance sheet and strategic positioning. since the start of the year we executed a capital plan that significantly strengthened our balance sheet and strategic positioning In March, we closed $745 million of accretive ABS financing, secured in part by 34 of our travel centers leased to TA, reinforcing the attractiveness of these assets. in march we closed $745 million of accretive abs financing secured in part by 34 of our travel centers leased to ta reinforcing the attractiveness of these assets In April, we completed a $575 million underwritten equity offering that was intentionally sized to de-lever and improve our credit metrics. in april we completed a $575 million underwritten equity offering that was intentionally sized to de-lever and improve our credit metrics Importantly, RMR Group, our manager, invested $50 million alongside shareholders, underscoring strong alignment and confidence in our strategy. importantly rmr group our manager invested $50 million alongside shareholders underscoring strong alignment and confidence in our strategy Taken together, along with cash on hand, we retired $1.6 billion in debt, resulting in annualized cash interest savings of $59 million. taken together along with cash on hand we retired $1.6 billion in debt resulting in annualized cash interest savings of $59 million We enter the remainder of 2026 with a stronger financial foundation and greater flexibility to execute our repositioning strategy and operational plans within our hotel portfolio, focused on driving EBITDA improvement and value creation. Turning to hotel performance. During the Q1, RevPAR across our 93 hotels increased 6.7% year-over-year, primarily driven by broad-based occupancy gains across all service levels, with notable strength in the full-service segment. Hotel EBITDA across the portfolio decreased 9.2% year-over-year to $18.4 million, though this reduction was partially impacted by a $2.4 million decrease tied to the 15 properties currently being marketed for sale. As a reminder, our full year guidance contemplates the expected losses related to these marketed hotels. More importantly, the underlying performance of our 78 hotel retained portfolio was even stronger. We enter the remainder of 2026 with a stronger financial foundation and greater flexibility to execute our repositioning strategy and operational plans within our hotel portfolio, focused on driving EBITDA improvement and value creation. we enter the remainder of 2026 with a stronger financial foundation and greater flexibility to execute our repositioning strategy and operational plans within our hotel portfolio focused on driving ebitda improvement and value creation Turning to hotel performance. turning to hotel performance During the Q1, RevPAR across our 93 hotels increased 6.7% year-over-year, primarily driven by broad-based occupancy gains across all service levels, with notable strength in the full-service segment. during the q1 revpar across our 93 hotels increased 6.7% year-over-year primarily driven by broad-based occupancy gains across all service levels with notable strength in the full-service segment Hotel EBITDA across the portfolio decreased 9.2% year-over-year to $18.4 million, though this reduction was partially impacted by a $2.4 million decrease tied to the 15 properties currently being marketed for sale. hotel ebitda across the portfolio decreased 9.2% year-over-year to $18.4 million though this reduction was partially impacted by a $2.4 million decrease tied to the 15 properties currently being marketed for sale As a reminder, our full year guidance contemplates the expected losses related to these marketed hotels. as a reminder our full year guidance contemplates the expected losses related to these marketed hotels More importantly, the underlying performance of our 78 hotel retained portfolio was even stronger. more importantly the underlying performance of our 78 hotel retained portfolio was even stronger Excluding the assets marketed for sale, RevPAR grew 7.5% year-over-year. Hotel EBITDA increased 2.1% to $26.2 million. This was achieved despite the known revenue displacement from our ongoing redevelopment of The Nautilus in South Beach. This outperformance is driven by our strategic concentration and higher STR chain scales, our footprint in premier resort destinations, including Kauai, San Juan and Hilton Head, and the uplift we are seeing from completed renovations. Our focus remains squarely on capturing the margin flow we believe this portfolio is capable of generating as it ramps up over the next few years. Following several years of significant capital investment to reposition these assets, SVC is well-positioned to drive revenue uplifts and outsize EBITDA growth. Over the last four years, approximately half of our retained hotels completed or are currently undergoing major renovations. Excluding the assets marketed for sale, RevPAR grew 7.5% year-over-year. excluding the assets marketed for sale revpar grew 7.5% year-over-year Hotel EBITDA increased 2.1% to $26.2 million. hotel ebitda increased 2.1% to $26.2 million This was achieved despite the known revenue displacement from our ongoing redevelopment of The Nautilus in South Beach. this was achieved despite the known revenue displacement from our ongoing redevelopment of the nautilus in south beach This outperformance is driven by our strategic concentration and higher STR chain scales, our footprint in premier resort destinations, including Kauai, San Juan and Hilton Head, and the uplift we are seeing from completed renovations. this outperformance is driven by our strategic concentration and higher str chain scales our footprint in premier resort destinations including kauai san juan and hilton head and the uplift we are seeing from completed renovations Our focus remains squarely on capturing the margin flow we believe this portfolio is capable of generating as it ramps up over the next few years. Following several years of significant capital investment to reposition these assets, SVC is well-positioned to drive revenue uplifts and outsize EBITDA growth. our focus remains squarely on capturing the margin flow we believe this portfolio is capable of generating as it ramps up over the next few years. following several years of significant capital investment to reposition these assets svc is well-positioned to drive revenue uplifts and outsize ebitda growth Over the last four years, approximately half of our retained hotels completed or are currently undergoing major renovations. over the last four years approximately half of our retained hotels completed or are currently undergoing major renovations To ensure we capture the performance improvements and margin flow through anticipated over the coming years, our asset managers are actively engaging with our operators to refine operational synergies and streamline property-level execution. While we acknowledge the broader macro headwinds, including geopolitical uncertainty, elevated fuel costs, and lagging international and government travel, we remain confident that this active asset management approach will uncover varying opportunities to improve efficiencies and deliver stronger results. Turning to hotel dispositions. During the quarter, we advanced our capital recycling initiatives, selling a 133 key focused service hotel for $7.1 million, and progressed the marketing of 15 Sonesta managed hotels, totaling approximately 3,000 keys. We removed one Sonesta Select property from the process to reassess its positioning. Retain an active and engaged roster of buyers for the remaining properties. To ensure we capture the performance improvements and margin flow through anticipated over the coming years, our asset managers are actively engaging with our operators to refine operational synergies and streamline property-level execution. to ensure we capture the performance improvements and margin flow through anticipated over the coming years our asset managers are actively engaging with our operators to refine operational synergies and streamline property-level execution While we acknowledge the broader macro headwinds, including geopolitical uncertainty, elevated fuel costs, and lagging international and government travel, we remain confident that this active asset management approach will uncover varying opportunities to improve efficiencies and deliver stronger results. while we acknowledge the broader macro headwinds including geopolitical uncertainty elevated fuel costs and lagging international and government travel we remain confident that this active asset management approach will uncover varying opportunities to improve efficiencies and deliver stronger results Turning to hotel dispositions. turning to hotel dispositions During the quarter, we advanced our capital recycling initiatives, selling a 133 key focused service hotel for $7.1 million, and progressed the marketing of 15 Sonesta managed hotels, totaling approximately 3,000 keys. during the quarter we advanced our capital recycling initiatives selling a 133 key focused service hotel for $7.1 million and progressed the marketing of 15 sonesta managed hotels totaling approximately 3,000 keys We removed one Sonesta Select property from the process to reassess its positioning. we removed one sonesta select property from the process to reassess its positioning Retain an active and engaged roster of buyers for the remaining properties. retain an active and engaged roster of buyers for the remaining properties Across the broader marketed hotels, pricing has come in softer than our initial outlook. This dynamic only reinforces our strategic commitment to exit these hotels and reallocate capital. Buyer demand for the eight focused service properties was strong, resulting in nearly 30 bids from more than 12 unique buyers. Pricing was generally consistent with the average per key valuation we achieved on focused service hotels over the past year. Specific to these eight hotels, we have signed letters of intent with four buyers for total proceeds of approximately $61.2 million, which we intend to use to repay debt. For the seven full-service hotels, bids for this operationally challenged sub-portfolio have fallen below initial targets. Despite this, we are prioritizing the exit of these properties with six of the seven hotels awarded to buyers for expected proceeds of $55.3 million. Across the broader marketed hotels, pricing has come in softer than our initial outlook. across the broader marketed hotels pricing has come in softer than our initial outlook This dynamic only reinforces our strategic commitment to exit these hotels and reallocate capital. this dynamic only reinforces our strategic commitment to exit these hotels and reallocate capital Buyer demand for the eight focused service properties was strong, resulting in nearly 30 bids from more than 12 unique buyers. buyer demand for the eight focused service properties was strong resulting in nearly 30 bids from more than 12 unique buyers Pricing was generally consistent with the average per key valuation we achieved on focused service hotels over the past year. pricing was generally consistent with the average per key valuation we achieved on focused service hotels over the past year Specific to these eight hotels, we have signed letters of intent with four buyers for total proceeds of approximately $61.2 million, which we intend to use to repay debt. specific to these eight hotels we have signed letters of intent with four buyers for total proceeds of approximately $61.2 million which we intend to use to repay debt For the seven full-service hotels, bids for this operationally challenged sub-portfolio have fallen below initial targets. for the seven full-service hotels bids for this operationally challenged sub-portfolio have fallen below initial targets Despite this, we are prioritizing the exit of these properties with six of the seven hotels awarded to buyers for expected proceeds of $55.3 million. despite this we are prioritizing the exit of these properties with six of the seven hotels awarded to buyers for expected proceeds of $55.3 million We anticipate an update on the final property in the coming quarter, which will increase our total proceeds. From a strategic standpoint, holding these assets is not aligned with our long-term goals. Together, these marketed hotels represented $7.8 million of losses in the Q1 while carrying material future capital requirements. Exiting them now, regardless of the softer pricing environment, eliminates a significant drag on our earnings and preserves capital. More importantly, it allows us to pivot our full attention and resources toward our retained core portfolio, driving growth in markets and properties where we have the greatest opportunity for margin expansion. In summary, SVC's portfolio transformation is well underway. Supported by our recently improved capital structure and the operational upside within our hotel assets, we are focused on our initiative supporting SVC's continued shift towards an increasingly net lease-oriented portfolio. We anticipate an update on the final property in the coming quarter, which will increase our total proceeds. we anticipate an update on the final property in the coming quarter which will increase our total proceeds From a strategic standpoint, holding these assets is not aligned with our long-term goals. from a strategic standpoint holding these assets is not aligned with our long-term goals Together, these marketed hotels represented $7.8 million of losses in the Q1 while carrying material future capital requirements. together these marketed hotels represented $7.8 million of losses in the q1 while carrying material future capital requirements Exiting them now, regardless of the softer pricing environment, eliminates a significant drag on our earnings and preserves capital. exiting them now regardless of the softer pricing environment eliminates a significant drag on our earnings and preserves capital More importantly, it allows us to pivot our full attention and resources toward our retained core portfolio, driving growth in markets and properties where we have the greatest opportunity for margin expansion. more importantly it allows us to pivot our full attention and resources toward our retained core portfolio driving growth in markets and properties where we have the greatest opportunity for margin expansion In summary, SVC's portfolio transformation is well underway. in summary svc's portfolio transformation is well underway Supported by our recently improved capital structure and the operational upside within our hotel assets, we are focused on our initiative supporting SVC's continued shift towards an increasingly net lease-oriented portfolio. supported by our recently improved capital structure and the operational upside within our hotel assets we are focused on our initiative supporting svc's continued shift towards an increasingly net lease-oriented portfolio Ultimately, we believe this combination of selling assets and operational improvement will drive durable cash flow and create attractive long-term value for our shareholders. I will now turn it over to Jesse. Ultimately, we believe this combination of selling assets and operational improvement will drive durable cash flow and create attractive long-term value for our shareholders. ultimately we believe this combination of selling assets and operational improvement will drive durable cash flow and create attractive long-term value for our shareholders I will now turn it over to Jesse. i will now turn it over to jesse

Speaker 4: Thanks, Chris, good morning. At quarter end, SVC's net lease portfolio contained 761 properties across 42 states with annual base rents of $392 million. The portfolio was approximately 97% leased with a weighted average lease term of 7.3 years. We have 185 tenants operating under 140 brands across 21 distinct industries. The aggregate coverage of our net lease portfolio's minimum rents was 2.01 times on a trailing 12-month basis as of March 31st, 2026, up slightly from last quarter. The improvement was driven in part by our TA travel centers, which reported coverage of 1.24 times, up from 1.2 times in Q4. Thanks, Chris, good morning. thanks chris good morning At quarter end, SVC's net lease portfolio contained 761 properties across 42 states with annual base rents of $392 million. at quarter end svc's net lease portfolio contained 761 properties across 42 states with annual base rents of $392 million The portfolio was approximately 97% leased with a weighted average lease term of 7.3 years. the portfolio was approximately 97% leased with a weighted average lease term of 7.3 years We have 185 tenants operating under 140 brands across 21 distinct industries. we have 185 tenants operating under 140 brands across 21 distinct industries The aggregate coverage of our net lease portfolio's minimum rents was 2.01 times on a trailing 12-month basis as of March 31st, 2026, up slightly from last quarter. the aggregate coverage of our net lease portfolio's minimum rents was 2.01 times on a trailing 12-month basis as of march 31st 2026 up slightly from last quarter The improvement was driven in part by our TA travel centers, which reported coverage of 1.24 times, up from 1.2 times in Q4. the improvement was driven in part by our ta travel centers which reported coverage of 1.24 times up from 1.2 times in q4 During the quarter, our asset management team executed 20 leases totaling 219,000 square feet, averaging over six years of term and a cash rent roll up of 8.5%. Looking ahead, portfolio lease expirations remain well laddered with less than 5% of annualized rents expiring through the end of 2027. NOI from our net lease portfolio declined $2.2 million year-over-year, primarily driven by credit loss reserves recorded for certain leases and related operational expenditures, which was partially offset by a $2 million positive impact from our acquisition activity. As we entered 2026, we shifted to a more measured pace of net lease acquisitions, targeting approximately $25 million of annual volume funded through capital recycling. During the quarter, our asset management team executed 20 leases totaling 219,000 square feet, averaging over six years of term and a cash rent roll up of 8.5%. during the quarter our asset management team executed 20 leases totaling 219,000 square feet averaging over six years of term and a cash rent roll up of 8.5% Looking ahead, portfolio lease expirations remain well laddered with less than 5% of annualized rents expiring through the end of 2027. looking ahead portfolio lease expirations remain well laddered with less than 5% of annualized rents expiring through the end of 2027 NOI from our net lease portfolio declined $2.2 million year-over-year, primarily driven by credit loss reserves recorded for certain leases and related operational expenditures, which was partially offset by a $2 million positive impact from our acquisition activity. noi from our net lease portfolio declined $2.2 million year-over-year primarily driven by credit loss reserves recorded for certain leases and related operational expenditures which was partially offset by a $2 million positive impact from our acquisition activity As we entered 2026, we shifted to a more measured pace of net lease acquisitions, targeting approximately $25 million of annual volume funded through capital recycling. as we entered 2026 we shifted to a more measured pace of net lease acquisitions targeting approximately $25 million of annual volume funded through capital recycling Since the beginning of the year, we've invested in four properties totaling $9 million, which were primarily funded with the proceeds from 13 net lease dispositions. Consistent with our investment focus on resilient necessity-based brands with limited e-commerce exposure, our acquisitions this quarter included quick service restaurants and an automotive services retailer. The transactions had a weighted average lease term of over 15 years, average rent coverage of 3.8 times, and an average going-in cash cap rate of 7.9%, and an average GAAP cap rate of 8.8%. As we move through the year, we will continue to actively look for ways to recycle capital by leveraging our new and established brand relationships while pursuing growth opportunities in the form of sale leasebacks and off-market deals. Since the beginning of the year, we've invested in four properties totaling $9 million, which were primarily funded with the proceeds from 13 net lease dispositions. since the beginning of the year we've invested in four properties totaling $9 million which were primarily funded with the proceeds from 13 net lease dispositions Consistent with our investment focus on resilient necessity-based brands with limited e-commerce exposure, our acquisitions this quarter included quick service restaurants and an automotive services retailer. consistent with our investment focus on resilient necessity-based brands with limited e-commerce exposure our acquisitions this quarter included quick service restaurants and an automotive services retailer The transactions had a weighted average lease term of over 15 years, average rent coverage of 3.8 times, and an average going-in cash cap rate of 7.9%, and an average GAAP cap rate of 8.8%. the transactions had a weighted average lease term of over 15 years average rent coverage of 3.8 times and an average going-in cash cap rate of 7.9% and an average gaap cap rate of 8.8% As we move through the year, we will continue to actively look for ways to recycle capital by leveraging our new and established brand relationships while pursuing growth opportunities in the form of sale leasebacks and off-market deals. as we move through the year we will continue to actively look for ways to recycle capital by leveraging our new and established brand relationships while pursuing growth opportunities in the form of sale leasebacks and off-market deals Our proactive asset management efforts and disciplined capital recycling strategy should allow the net lease portfolio to continue to function as a stable foundation for SVC as it implements its broader transformation. With that, I'll turn the call over to Brian to discuss our financial results. Our proactive asset management efforts and disciplined capital recycling strategy should allow the net lease portfolio to continue to function as a stable foundation for SVC as it implements its broader transformation. our proactive asset management efforts and disciplined capital recycling strategy should allow the net lease portfolio to continue to function as a stable foundation for svc as it implements its broader transformation With that, I'll turn the call over to Brian to discuss our financial results. with that i'll turn the call over to brian to discuss our financial results

Speaker 1: Thank you, Jesse, and good morning. Starting with our consolidated financial results for the Q1 of 2026, Normalized FFO was $7.4 million or $0.04 per share, down $0.03 per share compared to the prior quarter. Thank you, Jesse, and good morning. thank you jesse and good morning Starting with our consolidated financial results for the Q1 of 2026, Normalized FFO was $7.4 million or $0.04 per share, down $0.03 per share compared to the prior quarter. starting with our consolidated financial results for the q1 of 2026 normalized ffo was $7.4 million or $0.04 per share down $0.03 per share compared to the prior quarter Normalized FFO this quarter as compared to the prior quarter, was primarily impacted by a $7.2 million, or $0.04 per share, decline in hotel results. Our hotel disposition activity accounted for $5.3 million of the decline and $1.9 million was a result of the performance of the 15 hotels we are selling, partially offset by earnings growth in our 78 retained hotels as of quarter end. NOI from our net lease portfolio declined $2.2 million, or $0.01 per share, over the prior year on credit losses reported during the quarter. Interest expense declined by $5 million, or $0.03 per share, during the period as a result of our capital markets activity. Turning to our hotel portfolio performance. Normalized FFO this quarter as compared to the prior quarter, was primarily impacted by a $7.2 million, or $0.04 per share, decline in hotel results. normalized ffo this quarter as compared to the prior quarter was primarily impacted by a $7.2 million or $0.04 per share decline in hotel results Our hotel disposition activity accounted for $5.3 million of the decline and $1.9 million was a result of the performance of the 15 hotels we are selling, partially offset by earnings growth in our 78 retained hotels as of quarter end. our hotel disposition activity accounted for $5.3 million of the decline and $1.9 million was a result of the performance of the 15 hotels we are selling partially offset by earnings growth in our 78 retained hotels as of quarter end NOI from our net lease portfolio declined $2.2 million, or $0.01 per share, over the prior year on credit losses reported during the quarter. noi from our net lease portfolio declined $2.2 million or $0.01 per share over the prior year on credit losses reported during the quarter Interest expense declined by $5 million, or $0.03 per share, during the period as a result of our capital markets activity. interest expense declined by $5 million or $0.03 per share during the period as a result of our capital markets activity Turning to our hotel portfolio performance. turning to our hotel portfolio performance For our 93 comparable hotels this quarter, RevPAR increased by 6.7% and gross operating profit margin percentage declined by 70 basis points to 20.4%. Below the GOP line, costs at our comparable hotels increased by $5.4 million from the prior year, driven by higher insurance expenses. Our comparable hotel portfolio generated adjusted hotel EBITDA of $18.4 million during the quarter, a decline of $1.9 million, or 9%, from the prior year. The 15 Sonesta exit hotels we're currently marketing for sale generated a RevPAR of $49, a decline of 3%, and produced losses of $7.8 million for the quarter, a decline of $2.4 million year-over-year. For our 93 comparable hotels this quarter, RevPAR increased by 6.7% and gross operating profit margin percentage declined by 70 basis points to 20.4%. for our 93 comparable hotels this quarter revpar increased by 6.7% and gross operating profit margin percentage declined by 70 basis points to 20.4% Below the GOP line, costs at our comparable hotels increased by $5.4 million from the prior year, driven by higher insurance expenses. below the gop line costs at our comparable hotels increased by $5.4 million from the prior year driven by higher insurance expenses Our comparable hotel portfolio generated adjusted hotel EBITDA of $18.4 million during the quarter, a decline of $1.9 million, or 9%, from the prior year. our comparable hotel portfolio generated adjusted hotel ebitda of $18.4 million during the quarter a decline of $1.9 million or 9% from the prior year The 15 Sonesta exit hotels we're currently marketing for sale generated a RevPAR of $49, a decline of 3%, and produced losses of $7.8 million for the quarter, a decline of $2.4 million year-over-year. the 15 sonesta exit hotels we're currently marketing for sale generated a revpar of $49 a decline of 3% and produced losses of $7.8 million for the quarter a decline of $2.4 million year-over-year The 78 hotels in our retained portfolio generated a RevPAR of $113, an increase of 750 basis points year-over-year, and adjusted hotel EBITDA of $26.2 million during the quarter, an increase of 2% year-over-year. Hotel EBITDA declined $3.8 million for the seven hotels under renovation, including our South Beach hotel. The 86 hotels not under renovation improved hotel EBITDA by $1.5 million or 8% over the prior year. Turning to the balance sheet. We've been active in the capital markets and took steps to further strengthen our balance sheet, improve our debt maturity ladder, and our cash flows. The 78 hotels in our retained portfolio generated a RevPAR of $113, an increase of 750 basis points year-over-year, and adjusted hotel EBITDA of $26.2 million during the quarter, an increase of 2% year-over-year. the 78 hotels in our retained portfolio generated a revpar of $113 an increase of 750 basis points year-over-year and adjusted hotel ebitda of $26.2 million during the quarter an increase of 2% year-over-year Hotel EBITDA declined $3.8 million for the seven hotels under renovation, including our South Beach hotel. hotel ebitda declined $3.8 million for the seven hotels under renovation including our south beach hotel The 86 hotels not under renovation improved hotel EBITDA by $1.5 million or 8% over the prior year. the 86 hotels not under renovation improved hotel ebitda by $1.5 million or 8% over the prior year Turning to the balance sheet. turning to the balance sheet We've been active in the capital markets and took steps to further strengthen our balance sheet, improve our debt maturity ladder, and our cash flows. we've been active in the capital markets and took steps to further strengthen our balance sheet improve our debt maturity ladder and our cash flows During the Q1, we repaid $300 million of our February 2027, 4.95% unsecured senior notes with cash raised from asset sales. We completed our second ABS offering for $745 million at a blended interest rate of 5.96% and a maturity of March 2031. We securitized 158 net lease assets, including 34 travel centers, demonstrating the value of these assets and their attractiveness to investors. We used the proceeds from this offering to fully redeem all $700 million of our 8 and three-eighths senior unsecured guaranteed notes due June 2029, resulting in an annual cash interest savings of approximately $14 million. During the Q1, we repaid $300 million of our February 2027, 4.95% unsecured senior notes with cash raised from asset sales. during the q1 we repaid $300 million of our february 2027 4.95% unsecured senior notes with cash raised from asset sales We completed our second ABS offering for $745 million at a blended interest rate of 5.96% and a maturity of March 2031. we completed our second abs offering for $745 million at a blended interest rate of 5.96% and a maturity of march 2031 We securitized 158 net lease assets, including 34 travel centers, demonstrating the value of these assets and their attractiveness to investors. we securitized 158 net lease assets including 34 travel centers demonstrating the value of these assets and their attractiveness to investors We used the proceeds from this offering to fully redeem all $700 million of our 8 and three-eighths senior unsecured guaranteed notes due June 2029, resulting in an annual cash interest savings of approximately $14 million. we used the proceeds from this offering to fully redeem all $700 million of our 8 and three-eighths senior unsecured guaranteed notes due june 2029 resulting in an annual cash interest savings of approximately $14 million We also raised net proceeds of $542.3 million from our recent equity offering and redeemed all $450 million of our outstanding 5.5% senior guaranteed unsecured notes due 2027, and the remaining $100 million of outstanding 4.95% senior unsecured notes due in February 2027, resulting in additional annual cash savings of $29.7 million. Following these capital market transactions, we currently have $4.7 billion of debt outstanding with a weighted average interest rate of 5.65%. We have no unsecured debt maturities until 2028, and our 2027 and 2028 secured debt maturities have substantial refinance optionality, supported by strong net lease collateral. We also raised net proceeds of $542.3 million from our recent equity offering and redeemed all $450 million of our outstanding 5.5% senior guaranteed unsecured notes due 2027, and the remaining $100 million of outstanding 4.95% senior unsecured notes due in February 2027, resulting in additional annual cash savings of $29.7 million. we also raised net proceeds of $542.3 million from our recent equity offering and redeemed all $450 million of our outstanding 5.5% senior guaranteed unsecured notes due 2027 and the remaining $100 million of outstanding 4.95% senior unsecured notes due in february 2027 resulting in additional annual cash savings of $29.7 million Following these capital market transactions, we currently have $4.7 billion of debt outstanding with a weighted average interest rate of 5.65%. following these capital market transactions we currently have $4.7 billion of debt outstanding with a weighted average interest rate of 5.65% We have no unsecured debt maturities until 2028, and our 2027 and 2028 secured debt maturities have substantial refinance optionality, supported by strong net lease collateral. we have no unsecured debt maturities until 2028 and our 2027 and 2028 secured debt maturities have substantial refinance optionality supported by strong net lease collateral Further, SVC was recognized last week by Moody's, which upgraded its SVC corporate family rating, underscoring the clear progress we are making in strengthening our financial profile. Turning to our capital expenditure activity. During the Q1, we invested $21.5 million in capital improvements. Q1 activity was largely driven by the renovation of the Nautilus in Miami, as well as projects at the Royal Sonesta in Boston, Washington, D.C., and Austin, Texas. Turning to our annual guidance. We are reaffirming our full year outlook for hotel EBITDA, net lease NOI, and consolidated Adjusted EBITDA. Q1 Normalized FFO results were in line with our expectations and reflect the anticipated seasonality of our hotel portfolio and the planned renovation displacement embedded in our initial guidance. Further, SVC was recognized last week by Moody's, which upgraded its SVC corporate family rating, underscoring the clear progress we are making in strengthening our financial profile. further svc was recognized last week by moody's which upgraded its svc corporate family rating underscoring the clear progress we are making in strengthening our financial profile Turning to our capital expenditure activity. turning to our capital expenditure activity During the Q1, we invested $21.5 million in capital improvements. during the q1 we invested $21.5 million in capital improvements Q1 activity was largely driven by the renovation of the Nautilus in Miami, as well as projects at the Royal Sonesta in Boston, Washington, D.C., and Austin, Texas. q1 activity was largely driven by the renovation of the nautilus in miami as well as projects at the royal sonesta in boston washington d.c and austin texas Turning to our annual guidance. turning to our annual guidance We are reaffirming our full year outlook for hotel EBITDA, net lease NOI, and consolidated Adjusted EBITDA. we are reaffirming our full year outlook for hotel ebitda net lease noi and consolidated adjusted ebitda Q1 Normalized FFO results were in line with our expectations and reflect the anticipated seasonality of our hotel portfolio and the planned renovation displacement embedded in our initial guidance. q1 normalized ffo results were in line with our expectations and reflect the anticipated seasonality of our hotel portfolio and the planned renovation displacement embedded in our initial guidance We are increasing our Normalized FFO range as a result of our debt repayments to $124 million-$144 million, or $0.24-$0.27 per share. The per share amounts assume the weighted average share count of 526 million shares. This full year guidance assumes midpoint interest expense of $360 million and G&A expense of $40 million. This guidance does not reflect the impact of completing any of the 15 Sonesta hotel dispositions and continues to assume $25 million of capital recycling in our net lease portfolio. We continue to expect total CapEx for the year of $120 million-$140 million. To conclude, our Q1 results demonstrate continued momentum repositioning SVC and strengthening the company's cash flows, supported by our strategic capital market transactions. We are increasing our Normalized FFO range as a result of our debt repayments to $124 million-$144 million, or $0.24-$0.27 per share. we are increasing our normalized ffo range as a result of our debt repayments to $124 million-$144 million or $0.24-$0.27 per share The per share amounts assume the weighted average share count of 526 million shares. the per share amounts assume the weighted average share count of 526 million shares This full year guidance assumes midpoint interest expense of $360 million and G&A expense of $40 million. this full year guidance assumes midpoint interest expense of $360 million and g&a expense of $40 million This guidance does not reflect the impact of completing any of the 15 Sonesta hotel dispositions and continues to assume $25 million of capital recycling in our net lease portfolio. this guidance does not reflect the impact of completing any of the 15 sonesta hotel dispositions and continues to assume $25 million of capital recycling in our net lease portfolio We continue to expect total CapEx for the year of $120 million-$140 million. we continue to expect total capex for the year of $120 million-$140 million To conclude, our Q1 results demonstrate continued momentum repositioning SVC and strengthening the company's cash flows, supported by our strategic capital market transactions. to conclude our q1 results demonstrate continued momentum repositioning svc and strengthening the company's cash flows supported by our strategic capital market transactions As we move forward, we remain focused on growing EBITDA and further optimizing SVC's portfolio to drive sustained value for our shareholders. That concludes our prepared remarks. We are ready to open the line for questions. As we move forward, we remain focused on growing EBITDA and further optimizing SVC's portfolio to drive sustained value for our shareholders. as we move forward we remain focused on growing ebitda and further optimizing svc's portfolio to drive sustained value for our shareholders That concludes our prepared remarks. that concludes our prepared remarks We are ready to open the line for questions. we are ready to open the line for questions

Speaker 7: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. We will now begin the question and answer session. we will now begin the question and answer session To ask a question, you may press star then one on your telephone keypad. to ask a question you may press star then one on your telephone keypad If you are using a speakerphone, please pick up your handset before pressing the keys. if you are using a speakerphone please pick up your handset before pressing the keys If at any time your question has been addressed and you would like to withdraw your question, please press star then two. if at any time your question has been addressed and you would like to withdraw your question please press star then two At this time, we will pause momentarily to assemble our roster. at this time we will pause momentarily to assemble our roster The first question today comes from Jack Armstrong with Wells Fargo. Please go ahead. The first question today comes from Jack Armstrong with Wells Fargo. the first question today comes from jack armstrong with wells fargo Please go ahead. please go ahead

Speaker 3: Hey, good morning. Thanks for taking the question. First one for me on the net lease operating expenses, you know, up roughly $2 million, both sequentially and year-over-year, which by our math drove the majority of the miss versus our estimates. Can you talk a little bit about the moving pieces there and how we should be thinking about the run rate for the rest of the year? Hey, good morning. hey good morning Thanks for taking the question. thanks for taking the question First one for me on the net lease operating expenses, you know, up roughly $2 million, both sequentially and year-over-year, which by our math drove the majority of the miss versus our estimates. first one for me on the net lease operating expenses you know up roughly $2 million both sequentially and year-over-year which by our math drove the majority of the miss versus our estimates Can you talk a little bit about the moving pieces there and how we should be thinking about the run rate for the rest of the year? can you talk a little bit about the moving pieces there and how we should be thinking about the run rate for the rest of the year

Speaker 4: Sure, Jack. This is Jesse. I'll take it. As I mentioned, we, you know, we booked about $2 million in credit losses. A portion of that was expenditures related to those assets, and the bulk of that was property taxes. What happened there really is we have two franchisees that filed for bankruptcy. We're essentially covering their property taxes in the meantime. On a go-forward rate, this, in our opinion, is a one-time, a one-time hit. With respect to all these assets, they're all really good performers for us. The expectation would be ultimately that they would come out of bankruptcy and get transitioned either to new franchisees or back to corporate and get back to kind of a rent and OpEx paying state. Sure, Jack. sure jack This is Jesse. this is jesse I'll take it. i'll take it As I mentioned, we, you know, we booked about $2 million in credit losses. as i mentioned we you know we booked about $2 million in credit losses A portion of that was expenditures related to those assets, and the bulk of that was property taxes. a portion of that was expenditures related to those assets and the bulk of that was property taxes What happened there really is we have two franchisees that filed for bankruptcy. what happened there really is we have two franchisees that filed for bankruptcy We're essentially covering their property taxes in the meantime. we're essentially covering their property taxes in the meantime On a go-forward rate, this, in our opinion, is a one-time, a one-time hit. on a go-forward rate this in our opinion is a one-time a one-time hit With respect to all these assets, they're all really good performers for us. with respect to all these assets they're all really good performers for us The expectation would be ultimately that they would come out of bankruptcy and get transitioned either to new franchisees or back to corporate and get back to kind of a rent and OpEx paying state. the expectation would be ultimately that they would come out of bankruptcy and get transitioned either to new franchisees or back to corporate and get back to kind of a rent and opex paying state

Speaker 3: Okay. Then just on rent coverage in the rest of the portfolio, can you talk a little bit about what drove the expansion in coverage for the TA portfolio? How do you expect that to develop over the remainder of the year? Then also walk us through any changes on your tenant watch list. We noticed you've got a couple that are well below one times coverage with both down significantly from Q4. Okay. okay Then just on rent coverage in the rest of the portfolio, can you talk a little bit about what drove the expansion in coverage for the TA portfolio? then just on rent coverage in the rest of the portfolio can you talk a little bit about what drove the expansion in coverage for the ta portfolio How do you expect that to develop over the remainder of the year? how do you expect that to develop over the remainder of the year Then also walk us through any changes on your tenant watch list. then also walk us through any changes on your tenant watch list We noticed you've got a couple that are well below one times coverage with both down significantly from Q4. we noticed you've got a couple that are well below one times coverage with both down significantly from q4

Speaker 4: With respect to TA, our perception of that is kind of twofold. On the one hand, TA has historically benefited from kind of a pricing volatility, which certainly we're seeing as a function of the geopolitical situation in the Middle East. You know, typically there's kind of a lag between wholesale and retail pricing, TA has been able to take advantage of that. That coupled with what we saw from our freight operators, nationally, which was actually an increase in freight demand, a function of some regulatory changes that removed some excess capacity off the roads, which helped freight pricing. Industrial demand was up, I think largely a function of data center construction and related activities. With respect to TA, our perception of that is kind of twofold. with respect to ta our perception of that is kind of twofold On the one hand, TA has historically benefited from kind of a pricing volatility, which certainly we're seeing as a function of the geopolitical situation in the Middle East. on the one hand ta has historically benefited from kind of a pricing volatility which certainly we're seeing as a function of the geopolitical situation in the middle east You know, typically there's kind of a lag between wholesale and retail pricing, TA has been able to take advantage of that. you know typically there's kind of a lag between wholesale and retail pricing ta has been able to take advantage of that That coupled with what we saw from our freight operators, nationally, which was actually an increase in freight demand, a function of some regulatory changes that removed some excess capacity off the roads, which helped freight pricing. that coupled with what we saw from our freight operators nationally which was actually an increase in freight demand a function of some regulatory changes that removed some excess capacity off the roads which helped freight pricing Industrial demand was up, I think largely a function of data center construction and related activities. industrial demand was up i think largely a function of data center construction and related activities On the TA side, I think the expectation would be some of that is likely transitory, you know, related to the Middle East situation. Some of that from the freight demand side is hopefully gonna be more persistent. And in either event, you know, there's an opportunity there for that to provide something of a bridge for us, as TA themselves with the new leadership kind of enacts their business improvement plan and hopefully can put in some more structural changes to kind of drive a bit of growth going forward. On a tenant watch list, I mean, I would say that, you know, there are things We have a small exposure to drugstores and movie theaters. You know, we're watching those. On the TA side, I think the expectation would be some of that is likely transitory, you know, related to the Middle East situation. on the ta side i think the expectation would be some of that is likely transitory you know related to the middle east situation Some of that from the freight demand side is hopefully gonna be more persistent. some of that from the freight demand side is hopefully gonna be more persistent And in either event, you know, there's an opportunity there for that to provide something of a bridge for us, as TA themselves with the new leadership kind of enacts their business improvement plan and hopefully can put in some more structural changes to kind of drive a bit of growth going forward. and in either event you know there's an opportunity there for that to provide something of a bridge for us as ta themselves with the new leadership kind of enacts their business improvement plan and hopefully can put in some more structural changes to kind of drive a bit of growth going forward On a tenant watch list, I mean, I would say that, you know, there are things We have a small exposure to drugstores and movie theaters. on a tenant watch list i mean i would say that you know there are things we have a small exposure to drugstores and movie theaters You know, we're watching those. you know we're watching those Then the bulk of it would be with respect to those 2 franchise, those 2 franchises that I mentioned earlier. Other than that, it's been pretty consistent performance across the portfolio. Then the bulk of it would be with respect to those 2 franchise, those 2 franchises that I mentioned earlier. then the bulk of it would be with respect to those 2 franchise those 2 franchises that i mentioned earlier Other than that, it's been pretty consistent performance across the portfolio. other than that it's been pretty consistent performance across the portfolio

Speaker 3: Okay. Then jumping over to the hospitality side of things, you know, pretty strong RevPAR in the quarter and even stronger in the Sonesta portfolio, but margins are still down 10 basis points. Can you talk about what happened there on the expense side and any expectations you may have for improvement over the course of the year? Okay. okay Then jumping over to the hospitality side of things, you know, pretty strong RevPAR in the quarter and even stronger in the Sonesta portfolio, but margins are still down 10 basis points. then jumping over to the hospitality side of things you know pretty strong revpar in the quarter and even stronger in the sonesta portfolio but margins are still down 10 basis points Can you talk about what happened there on the expense side and any expectations you may have for improvement over the course of the year? can you talk about what happened there on the expense side and any expectations you may have for improvement over the course of the year

Speaker 1: Sure, Jack Armstrong. Good morning. This is Brian. One of the big impacts we had this quarter was rising insurance costs. We had some premium increases on the liability side that hurt margins. We had some deductibles that recorded for different incidents across the portfolio, which is more, you know, some of those recur here and there, but the premiums were the bigger driver. You know, labor wasn't really an outsized impact. I think overall labor costs were up 3% year-over-year. It's still something we're trying to, you know, monitor closely and work with our operators on the, core, staffing models of the hotels. You know, I think as we move forward, I mean, you know, Q1 is typically seasonally weaker. Sure, Jack Armstrong. sure jack armstrong Good morning. good morning This is Brian . this is brian One of the big impacts we had this quarter was rising insurance costs. one of the big impacts we had this quarter was rising insurance costs We had some premium increases on the liability side that hurt margins. we had some premium increases on the liability side that hurt margins We had some deductibles that recorded for different incidents across the portfolio, which is more, you know, some of those recur here and there, but the premiums were the bigger driver. we had some deductibles that recorded for different incidents across the portfolio which is more you know some of those recur here and there but the premiums were the bigger driver You know, labor wasn't really an outsized impact. you know labor wasn't really an outsized impact I think overall labor costs were up 3% year-over-year. i think overall labor costs were up 3% year-over-year It's still something we're trying to, you know, monitor closely and work with our operators on the, core, staffing models of the hotels. it's still something we're trying to you know monitor closely and work with our operators on the core staffing models of the hotels You know, I think as we move forward, I mean, you know, Q1 is typically seasonally weaker. you know i think as we move forward i mean you know q1 is typically seasonally weaker You know, Q2 will as we go into, you know, the stronger summer season, you know, will hopefully drive more margin through the portfolio and, you know, expense management and labor modeling is on the forefront to try to mitigate and improve our flow through. You know, Q2 will as we go into, you know, the stronger summer season, you know, will hopefully drive more margin through the portfolio and, you know, expense management and labor modeling is on the forefront to try to mitigate and improve our flow through. you know q2 will as we go into you know the stronger summer season you know will hopefully drive more margin through the portfolio and you know expense management and labor modeling is on the forefront to try to mitigate and improve our flow through

Speaker 3: Okay. kind of with that in mind, you know, what's giving you confidence in the unchanged hotel EBITDA, you know, annual guidance there with, you know, booking trends into the rest of Q2? Okay. kind of with that in mind, you know, what's giving you confidence in the unchanged hotel EBITDA, you know, annual guidance there with, you know, booking trends into the rest of Q2? okay kind of with that in mind you know what's giving you confidence in the unchanged hotel ebitda you know annual guidance there with you know booking trends into the rest of q2

Speaker 1: Yeah, a lot of the things we talked about what impacted Q1, you know, we had factored in our guidance range. You know, there's still more to play out in the broader economy, you know, impacts from, you know, citywide events, including World Cup and things of that nature that, you know, I don't think anybody has clear visibility on what the total impact's going to be. You know, we, you know, we feel like there's, you know, pretty good trends continuing into the spring and into early summer. You know, our RevPAR growth into April was comparable to what we saw on Q1. I think, you know, those patterns have continued. Yeah, a lot of the things we talked about what impacted Q1, you know, we had factored in our guidance range. yeah a lot of the things we talked about what impacted q1 you know we had factored in our guidance range You know, there's still more to play out in the broader economy, you know, impacts from, you know, citywide events, including World Cup and things of that nature that, you know, I don't think anybody has clear visibility on what the total impact's going to be. you know there's still more to play out in the broader economy you know impacts from you know citywide events including world cup and things of that nature that you know i don't think anybody has clear visibility on what the total impact's going to be You know, we, you know, we feel like there's, you know, pretty good trends continuing into the spring and into early summer. you know we you know we feel like there's you know pretty good trends continuing into the spring and into early summer You know, our RevPAR growth into April was comparable to what we saw on Q1. you know our revpar growth into april was comparable to what we saw on q1 I think, you know, those patterns have continued. i think you know those patterns have continued We haven't seen any signs of sort of slowdown and, you know, there's still some things to play out as the summer rolls through across our portfolio. You know, we're gonna continue to see uplift from hotels that we completed last year. We're still building back group business and contract business from those hotels that were displaced last year. There's still more opportunities hopefully ahead. We haven't seen any signs of sort of slowdown and, you know, there's still some things to play out as the summer rolls through across our portfolio. we haven't seen any signs of sort of slowdown and you know there's still some things to play out as the summer rolls through across our portfolio You know, we're gonna continue to see uplift from hotels that we completed last year. you know we're gonna continue to see uplift from hotels that we completed last year We're still building back group business and contract business from those hotels that were displaced last year. we're still building back group business and contract business from those hotels that were displaced last year There's still more opportunities hopefully ahead. there's still more opportunities hopefully ahead

Speaker 3: No, really helpful. Last one for me, just at the corporate level. Could you maybe provide an update on the changes you're planning to make to the board as well as the new leadership at Sonesta, and how you expect both of those to impact your strategy as we go to the back half of the year? Also, if you're considering waiving your bylaw limiting individual holders to 5%. No, really helpful. no really helpful Last one for me, just at the corporate level. last one for me just at the corporate level Could you maybe provide an update on the changes you're planning to make to the board as well as the new leadership at Sonesta, and how you expect both of those to impact your strategy as we go to the back half of the year? could you maybe provide an update on the changes you're planning to make to the board as well as the new leadership at sonesta and how you expect both of those to impact your strategy as we go to the back half of the year Also, if you're considering waiving your bylaw limiting individual holders to 5%. also if you're considering waiving your bylaw limiting individual holders to 5%

Speaker 2: Yeah, I guess I'll take it in a couple parts. With respect to the question on the board, I think as communicated, in kind of some of our public announcements, you know, we will be working towards bringing on a new board member, more specifically, with lodging experience and kind of that process will continue to play out. Nothing to report, you know, with respect to that today, but something that continues to kind of advance. We think that'll be generally constructive, and kind of a positive for kind of the company and governance, accordingly. Yeah, I guess I'll take it in a couple parts. yeah i guess i'll take it in a couple parts With respect to the question on the board, I think as communicated, in kind of some of our public announcements, you know, we will be working towards bringing on a new board member, more specifically, with lodging experience and kind of that process will continue to play out. with respect to the question on the board i think as communicated in kind of some of our public announcements you know we will be working towards bringing on a new board member more specifically with lodging experience and kind of that process will continue to play out Nothing to report, you know, with respect to that today, but something that continues to kind of advance. nothing to report you know with respect to that today but something that continues to kind of advance We think that'll be generally constructive, and kind of a positive for kind of the company and governance, accordingly. we think that'll be generally constructive and kind of a positive for kind of the company and governance accordingly I think, more specifically, on the Sonesta piece with respect to the new management team, as we talked about historically, you had a new management team that came on board effective in April. I mean, we're, you know, just over 30 days into that now, and the team is, you know, off to a strong start, really kind of trying to identify and unpack changes at Holdco and then ultimately kind of how that'll inform the hotel performance. Look, I think generally speaking, I mean, we feel pretty optimistic about, you know, a lot of the things that we're collectively talking about, you know, between our company and theirs and some of the changes they're making. I mean, some of it is not new. I think, more specifically, on the Sonesta piece with respect to the new management team, as we talked about historically, you had a new management team that came on board effective in April. i think more specifically on the sonesta piece with respect to the new management team as we talked about historically you had a new management team that came on board effective in april I mean, we're, you know, just over 30 days into that now, and the team is, you know, off to a strong start, really kind of trying to identify and unpack changes at Holdco and then ultimately kind of how that'll inform the hotel performance. i mean we're you know just over 30 days into that now and the team is you know off to a strong start really kind of trying to identify and unpack changes at holdco and then ultimately kind of how that'll inform the hotel performance Look, I think generally speaking, I mean, we feel pretty optimistic about, you know, a lot of the things that we're collectively talking about, you know, between our company and theirs and some of the changes they're making. look i think generally speaking i mean we feel pretty optimistic about you know a lot of the things that we're collectively talking about you know between our company and theirs and some of the changes they're making I mean, some of it is not new. i mean some of it is not new You know, we've continued to target kind of revenue mix being a top priority in how we drive additional business through group and contracts. Some of that's gonna be changes that they make on their end, and some of that's gonna be deployment of new tools across all the operators, such as utilizing AI for better lead generation or better competitive set insights. There's just a mix of fundamentals that we would expect to occur on that side of the business. I think more specifically for Sonesta, as we think about the expense load and margins, you know, we're having a lot of dialogue about reevaluating the offerings across the properties and then kind of how that impacts the overall labor component, including contract labor, which we anticipate to see continued reductions. You know, we've continued to target kind of revenue mix being a top priority in how we drive additional business through group and contracts. you know we've continued to target kind of revenue mix being a top priority in how we drive additional business through group and contracts Some of that's gonna be changes that they make on their end, and some of that's gonna be deployment of new tools across all the operators, such as utilizing AI for better lead generation or better competitive set insights. some of that's gonna be changes that they make on their end and some of that's gonna be deployment of new tools across all the operators such as utilizing ai for better lead generation or better competitive set insights There's just a mix of fundamentals that we would expect to occur on that side of the business. there's just a mix of fundamentals that we would expect to occur on that side of the business I think more specifically for Sonesta, as we think about the expense load and margins, you know, we're having a lot of dialogue about reevaluating the offerings across the properties and then kind of how that impacts the overall labor component, including contract labor, which we anticipate to see continued reductions. i think more specifically for sonesta as we think about the expense load and margins you know we're having a lot of dialogue about reevaluating the offerings across the properties and then kind of how that impacts the overall labor component including contract labor which we anticipate to see continued reductions You know, one of the other things is, you know, with respect to kind of the global sales teams, there's an effort to expand that group to kind of provide more benefits for a lot of the work we've been doing on the renovations and kind of having being better positioned in the markets, and we think that'll ultimately continue to drive group and contract business. Then, you know, naturally, I think the last thing with respect to Sonesta is continuing to kind of give credence and time to the loyalty program and expanding that business. You know, one of the other things is, you know, with respect to kind of the global sales teams, there's an effort to expand that group to kind of provide more benefits for a lot of the work we've been doing on the renovations and kind of having being better positioned in the markets, and we think that'll ultimately continue to drive group and contract business. you know one of the other things is you know with respect to kind of the global sales teams there's an effort to expand that group to kind of provide more benefits for a lot of the work we've been doing on the renovations and kind of having being better positioned in the markets and we think that'll ultimately continue to drive group and contract business Then, you know, naturally, I think the last thing with respect to Sonesta is continuing to kind of give credence and time to the loyalty program and expanding that business. then you know naturally i think the last thing with respect to sonesta is continuing to kind of give credence and time to the loyalty program and expanding that business You know, certainly with all of these operators, you know, the benefit of the loyalty programs or kind of direct business through brand.com and other initiatives, of, you know, kind of reducing kind of more expensive acquisitions costs, tied to the OTA. Your last question on the 5%, for ownership stake in the shares. You know, I think, you know, if you look closely at the equity offering we did in April, we did provide waivers to certain groups that own more than 5%. You know, it's not something we're gonna change formally because it's put in place to protect certain tax attributes of the company as a REIT, but it's something that, you know, we consider on one-off cases. Really helpful all around. Thanks for the time. You know, certainly with all of these operators, you know, the benefit of the loyalty programs or kind of direct business through brand.com and other initiatives, of, you know, kind of reducing kind of more expensive acquisitions costs, tied to the OTA. you know certainly with all of these operators you know the benefit of the loyalty programs or kind of direct business through brand.com and other initiatives of you know kind of reducing kind of more expensive acquisitions costs tied to the ota Your last question on the 5%, for ownership stake in the shares. your last question on the 5% for ownership stake in the shares You know, I think, you know, if you look closely at the equity offering we did in April, we did provide waivers to certain groups that own more than 5%. you know i think you know if you look closely at the equity offering we did in april we did provide waivers to certain groups that own more than 5% You know, it's not something we're gonna change formally because it's put in place to protect certain tax attributes of the company as a REIT, but it's something that, you know, we consider on one-off cases. you know it's not something we're gonna change formally because it's put in place to protect certain tax attributes of the company as a reit but it's something that you know we consider on one-off cases Really helpful all around. really helpful all around Thanks for the time. thanks for the time

Speaker 7: Again, if you have a question, please press star then one. Your next question comes from Tyler Batory with Oppenheimer. Please go ahead. Again, if you have a question, please press star then one. again if you have a question please press star then one Your next question comes from Tyler Batory with Oppenheimer. your next question comes from tyler batory with oppenheimer Please go ahead. please go ahead

Speaker 8: Hey, good morning. Thanks for taking my questions. A couple from me here. First, wanted to follow up on the asset sales on the hotel side of things and that process, the 15 you have in the market right now. Any help on the timeline for those? Then the seven full service hotels, can you give us some more, maybe some guideposts on potential pricing for those assets? I'm also just curious why the performance at those properties has been so challenged. Hey, good morning. hey good morning Thanks for taking my questions. thanks for taking my questions A couple from me here. a couple from me here First, wanted to follow up on the asset sales on the hotel side of things and that process, the 15 you have in the market right now. first wanted to follow up on the asset sales on the hotel side of things and that process the 15 you have in the market right now Any help on the timeline for those? any help on the timeline for those Then the seven full service hotels, can you give us some more, maybe some guideposts on potential pricing for those assets? then the seven full service hotels can you give us some more maybe some guideposts on potential pricing for those assets I'm also just curious why the performance at those properties has been so challenged. i'm also just curious why the performance at those properties has been so challenged

Speaker 2: Yeah. I think on the first question, look, given where we are, you know, other than one hotel, you know, we've kind of identified or have signed term sheets with buyers in support of that, and kind of there's a range. Some are groups we've worked with historically and others are kind of new relationships. The process varies. I would say more than half the portfolio, deposits will go hard with no real diligence. Then there's kind of a, on the low end, a 90-day period to close. Then kind of the balance is more traditional, you know, process whereby there's a diligence piece and then a period for close. Yeah. yeah I think on the first question, look, given where we are, you know, other than one hotel, you know, we've kind of identified or have signed term sheets with buyers in support of that, and kind of there's a range. i think on the first question look given where we are you know other than one hotel you know we've kind of identified or have signed term sheets with buyers in support of that and kind of there's a range Some are groups we've worked with historically and others are kind of new relationships. some are groups we've worked with historically and others are kind of new relationships The process varies. the process varies I would say more than half the portfolio, deposits will go hard with no real diligence. i would say more than half the portfolio deposits will go hard with no real diligence Then there's kind of a, on the low end, a 90-day period to close. then there's kind of a on the low end a 90-day period to close Then kind of the balance is more traditional, you know, process whereby there's a diligence piece and then a period for close. then kind of the balance is more traditional you know process whereby there's a diligence piece and then a period for close We've talked about, you know, these sales transacting in the back half of the year, and I think that's still kind of the right bogey. I think hopefully over time, maybe we'll take down incremental pieces of them, you know, over the course of Q3 and Q4 versus necessarily being all backloaded at the end of the year. That's how I would think about it from a respective timing. I think for performance on the hotels, I mean, look, we're selling these hotels, you know, just because, you know, around conviction in the markets, and the capital that is needed. I think that the performance decrease is just a byproduct of where those sit in certain markets. We've talked about, you know, these sales transacting in the back half of the year, and I think that's still kind of the right bogey. we've talked about you know these sales transacting in the back half of the year and i think that's still kind of the right bogey I think hopefully over time, maybe we'll take down incremental pieces of them, you know, over the course of Q3 and Q4 versus necessarily being all backloaded at the end of the year. i think hopefully over time maybe we'll take down incremental pieces of them you know over the course of q3 and q4 versus necessarily being all backloaded at the end of the year That's how I would think about it from a respective timing. that's how i would think about it from a respective timing I think for performance on the hotels, I mean, look, we're selling these hotels, you know, just because, you know, around conviction in the markets, and the capital that is needed. i think for performance on the hotels i mean look we're selling these hotels you know just because you know around conviction in the markets and the capital that is needed I think that the performance decrease is just a byproduct of where those sit in certain markets. i think that the performance decrease is just a byproduct of where those sit in certain markets Our performance is not inconsistent with the broader trends that are occurring in those markets. You're also gonna have some level of disruption as you go through a sale process. Again, all the reasons why we have more conviction on wanting to exit these and kind of reduce cash drag for the company. Our performance is not inconsistent with the broader trends that are occurring in those markets. our performance is not inconsistent with the broader trends that are occurring in those markets You're also gonna have some level of disruption as you go through a sale process. you're also gonna have some level of disruption as you go through a sale process Again, all the reasons why we have more conviction on wanting to exit these and kind of reduce cash drag for the company. again all the reasons why we have more conviction on wanting to exit these and kind of reduce cash drag for the company

Speaker 8: Okay. Appreciate that. Post equity raise, where are you in terms of your covenants? Just talk about some of the additional flexibility that you have post doing that equity transaction. Okay. okay Appreciate that. appreciate that Post equity raise, where are you in terms of your covenants? post equity raise where are you in terms of your covenants Just talk about some of the additional flexibility that you have post doing that equity transaction. just talk about some of the additional flexibility that you have post doing that equity transaction

Speaker 1: Sure. As of Q1, Tyler, you know, we were able to pay down the debt with the equity offering, the $550 million of '27 notes, which gave us significant cushion on both our leverage ratio and our interest coverage. You know, we took down, you know, debt to assets, you know, the 60% test from 59% down to 53%. The interest coverage, you know, was at 1.75 times. There's a good amount of cushion there. You know, we were very strategic as far as the sizing of that equity offering to get us, you know, through the maturities, also make sure we have enough operating flexibility within these covenants to, you know, refinance future debt maturities. Sure. sure As of Q1, Tyler, you know, we were able to pay down the debt with the equity offering, the $550 million of '27 notes, which gave us significant cushion on both our leverage ratio and our interest coverage. as of q1 tyler you know we were able to pay down the debt with the equity offering the $550 million of '27 notes which gave us significant cushion on both our leverage ratio and our interest coverage You know, we took down, you know, debt to assets, you know, the 60% test from 59% down to 53%. you know we took down you know debt to assets you know the 60% test from 59% down to 53% The interest coverage, you know, was at 1.75 times. the interest coverage you know was at 1.75 times There's a good amount of cushion there. there's a good amount of cushion there You know, we were very strategic as far as the sizing of that equity offering to get us, you know, through the maturities, also make sure we have enough operating flexibility within these covenants to, you know, refinance future debt maturities. you know we were very strategic as far as the sizing of that equity offering to get us you know through the maturities also make sure we have enough operating flexibility within these covenants to you know refinance future debt maturities You know, the way we're looking at the next debt maturity, which is the zero coupons, you know, we'll have different options. You know, we'll, we'll potentially pay down some of the balance with asset proceeds that, you know, Chris talked about. Those, those notes are also backed by one of the travel center leases, giving us, you know, increased flexibility as far as what we might do with those. The covenant shouldn't necessarily be an issue going forward in the near future. You know, the way we're looking at the next debt maturity, which is the zero coupons, you know, we'll have different options. you know the way we're looking at the next debt maturity which is the zero coupons you know we'll have different options You know, we'll, we'll potentially pay down some of the balance with asset proceeds that, you know, Chris talked about. you know we'll we'll potentially pay down some of the balance with asset proceeds that you know chris talked about Those, those notes are also backed by one of the travel center leases, giving us, you know, increased flexibility as far as what we might do with those. those those notes are also backed by one of the travel center leases giving us you know increased flexibility as far as what we might do with those The covenant shouldn't necessarily be an issue going forward in the near future. the covenant shouldn't necessarily be an issue going forward in the near future

Speaker 8: Okay. Last question for me, maybe a little bit of a clarification too. In terms of the debt that you have upcoming, the 2027 senior secured notes, obviously there's an extension option there. Just talk about the conditions that allow you to extend that, and sounds like the base case, we should just assume that that's just gonna get pushed to 2028. Okay. okay Last question for me, maybe a little bit of a clarification too. last question for me maybe a little bit of a clarification too In terms of the debt that you have upcoming, the 2027 senior secured notes, obviously there's an extension option there. in terms of the debt that you have upcoming the 2027 senior secured notes obviously there's an extension option there Just talk about the conditions that allow you to extend that, and sounds like the base case, we should just assume that that's just gonna get pushed to 2028. just talk about the conditions that allow you to extend that and sounds like the base case we should just assume that that's just gonna get pushed to 2028

Speaker 1: Yeah, that's to be determined. I mean, we do have a one-year option. It becomes a cash pay instrument at that point if we do, and it has a increasing scale of coupon the longer those notes are out for that extension period. I think the more likely scenarios, we'll refi those out in some fashion. It's just a little early to talk about it, you know, given when, you know, September of 2027. Yeah, that's to be determined. yeah that's to be determined I mean, we do have a one-year option. i mean we do have a one-year option It becomes a cash pay instrument at that point if we do, and it has a increasing scale of coupon the longer those notes are out for that extension period. it becomes a cash pay instrument at that point if we do and it has a increasing scale of coupon the longer those notes are out for that extension period I think the more likely scenarios, we'll refi those out in some fashion. i think the more likely scenarios we'll refi those out in some fashion It's just a little early to talk about it, you know, given when, you know, September of 2027. it's just a little early to talk about it you know given when you know september of 2027

Speaker 8: Okay. That's all for me. Thank you. Okay. okay That's all for me. that's all for me Thank you. thank you

Speaker 1: Thank you. Thank you. thank you

Speaker 7: Your next question comes from John Massocca with B. Riley Securities. Please go ahead. Your next question comes from John Massocca with B. your next question comes from john massocca with b Riley Securities. riley securities Please go ahead. please go ahead

Speaker 5: Good morning. Maybe sticking with Tyler's line of questioning. If you think about the proceeds from upcoming hotel sales, would those have to be used towards paying down the zero coupon? Is that, you know, when you talk about using asset sale proceeds to pay down the zero coupon, would it be assets that are currently collateralizing that piece of debt? Good morning. good morning Maybe sticking with Tyler's line of questioning. maybe sticking with tyler's line of questioning If you think about the proceeds from upcoming hotel sales, would those have to be used towards paying down the zero coupon? if you think about the proceeds from upcoming hotel sales would those have to be used towards paying down the zero coupon Is that, you know, when you talk about using asset sale proceeds to pay down the zero coupon, would it be assets that are currently collateralizing that piece of debt? is that you know when you talk about using asset sale proceeds to pay down the zero coupon would it be assets that are currently collateralizing that piece of debt

Speaker 1: I think, you know, we're gonna be thoughtful around that. The way those zero coupons work, we took discounted proceeds and essentially, you know, are paying the interest or amortizing it over time. If we pay them off early, you know, we're extinguishing that early. We're taking a hit on the discounted value. We have some options. We have a small variable funding note of $45 million. We could also pay out. That matures in early '27. We could sit on the cash and wait for, you know, closer maturities and figure out where we're at from a strategic standpoint and what we do in the refinancing market. I think, you know, we're gonna be thoughtful around that. i think you know we're gonna be thoughtful around that The way those zero coupons work, we took discounted proceeds and essentially, you know, are paying the interest or amortizing it over time. the way those zero coupons work we took discounted proceeds and essentially you know are paying the interest or amortizing it over time If we pay them off early, you know, we're extinguishing that early. if we pay them off early you know we're extinguishing that early We're taking a hit on the discounted value. we're taking a hit on the discounted value We have some options. we have some options We have a small variable funding note of $45 million. we have a small variable funding note of $45 million We could also pay out. we could also pay out That matures in early '27. that matures in early '27 We could sit on the cash and wait for, you know, closer maturities and figure out where we're at from a strategic standpoint and what we do in the refinancing market. we could sit on the cash and wait for you know closer maturities and figure out where we're at from a strategic standpoint and what we do in the refinancing market You know, there's some pieces to be determined as we move through these asset sales and what we do with the cash. You know, there's some pieces to be determined as we move through these asset sales and what we do with the cash. you know there's some pieces to be determined as we move through these asset sales and what we do with the cash

Speaker 2: Yeah. It's not required, John. Yeah. yeah It's not required, John. it's not required john

Speaker 1: Yeah. Yeah. yeah

Speaker 2: We have that flexibility. We have that flexibility. we have that flexibility

Speaker 1: Yeah. Yeah. yeah

Speaker 5: Okay. I guess of the kind of pool of full-service assets you're looking to sell this year, how much of kind of the original estimate you put out was in the one asset that you pulled out of the selling bucket? You know, just kind of curious, right? You're going from $90 million-$110 million estimated at the end of last year to $55 million, and I'm just wondering how much of that is the removal of that one asset and how much of that is just a decline in what you're seeing in the market for the remaining assets. Okay. okay I guess of the kind of pool of full-service assets you're looking to sell this year, how much of kind of the original estimate you put out was in the one asset that you pulled out of the selling bucket? i guess of the kind of pool of full-service assets you're looking to sell this year how much of kind of the original estimate you put out was in the one asset that you pulled out of the selling bucket You know, just kind of curious, right? you know just kind of curious right You're going from $90 million-$110 million estimated at the end of last year to $55 million, and I'm just wondering how much of that is the removal of that one asset and how much of that is just a decline in what you're seeing in the market for the remaining assets. you're going from $90 million-$110 million estimated at the end of last year to $55 million and i'm just wondering how much of that is the removal of that one asset and how much of that is just a decline in what you're seeing in the market for the remaining assets

Speaker 2: I think the combined awarded bids that we talked about was about $116 million. The removal of the one asset was give or take $5 million. We have another property where it's still in the market and we're expecting pricing kind of in Q2 in the near term, which will be another catalyst to increase overall proceeds. I think the combined awarded bids that we talked about was about $116 million. i think the combined awarded bids that we talked about was about $116 million The removal of the one asset was give or take $5 million. the removal of the one asset was give or take $5 million We have another property where it's still in the market and we're expecting pricing kind of in Q2 in the near term, which will be another catalyst to increase overall proceeds. we have another property where it's still in the market and we're expecting pricing kind of in q2 in the near term which will be another catalyst to increase overall proceeds

Speaker 5: Okay. There's still one additional asset that is not in that $55 million bucket. Okay. okay There's still one additional asset that is not in that $55 million bucket. there's still one additional asset that is not in that $55 million bucket

Speaker 2: Correct. There's one large full service asset that's not in those numbers. Correct. correct There's one large full service asset that's not in those numbers. there's one large full service asset that's not in those numbers

Speaker 5: Okay. In terms of the extended stay and kind of, select service assets you're selling, are those under contract right now? I guess what is timing for those dispositions in your mind today? Okay. okay In terms of the extended stay and kind of, select service assets you're selling, are those under contract right now? in terms of the extended stay and kind of select service assets you're selling are those under contract right now I guess what is timing for those dispositions in your mind today? i guess what is timing for those dispositions in your mind today

Speaker 2: Yeah. Everything is been awarded or under LOI. Most of those, you know, I think the earliest they could close would be over a 90-day period. You know, I think kind of a good bogey is, you know, kind of mid-Q2, mid-Q3 is kind of a fair timeline on the, on the early end. We'll just kinda see how it plays out, you know, between now and then. Yeah. yeah Everything is been awarded or under LOI. everything is been awarded or under loi Most of those, you know, I think the earliest they could close would be over a 90-day period. most of those you know i think the earliest they could close would be over a 90-day period You know, I think kind of a good bogey is, you know, kind of mid-Q2, mid-Q3 is kind of a fair timeline on the, on the early end. you know i think kind of a good bogey is you know kind of mid-q2 mid-q3 is kind of a fair timeline on the on the early end We'll just kinda see how it plays out, you know, between now and then. we'll just kinda see how it plays out you know between now and then

Speaker 5: Just to clarify, is pricing on those kind of going as expected? Just to clarify, is pricing on those kind of going as expected? just to clarify is pricing on those kind of going as expected

Speaker 2: Yeah. We know pricing came in light on those as well, but I think generally speaking, consistent with where we saw kind of the per key valuations for last year. Yeah. yeah We know pricing came in light on those as well, but I think generally speaking, consistent with where we saw kind of the per key valuations for last year. we know pricing came in light on those as well but i think generally speaking consistent with where we saw kind of the per key valuations for last year You know, that's kind of where it stands. You know, that's kind of where it stands. you know that's kind of where it stands

Speaker 5: Yeah. Then switching over to the net lease portfolio. I guess, how should we think about the near-term impact of the tenant credit issues on the financials, like next couple quarters as the bankruptcy process plays out? I mean, was there anything in 1 Q that was particularly one time in nature, either for accounting reasons or something else and could kind of bounce back immediately? When we talk about this, you know, not being typical of run rate, is that more so that'll play out as you get those assets kind of re-tenanted and back to fully paying rent? Yeah. yeah Then switching over to the net lease portfolio. then switching over to the net lease portfolio I guess, how should we think about the near-term impact of the tenant credit issues on the financials, like next couple quarters as the bankruptcy process plays out? i guess how should we think about the near-term impact of the tenant credit issues on the financials like next couple quarters as the bankruptcy process plays out I mean, was there anything in 1 Q that was particularly one time in nature, either for accounting reasons or something else and could kind of bounce back immediately? i mean was there anything in 1 q that was particularly one time in nature either for accounting reasons or something else and could kind of bounce back immediately When we talk about this, you know, not being typical of run rate, is that more so that'll play out as you get those assets kind of re-tenanted and back to fully paying rent? when we talk about this you know not being typical of run rate is that more so that'll play out as you get those assets kind of re-tenanted and back to fully paying rent

Speaker 4: Yeah. These are two franchisees that we've been kind of in talks with and in front of for a while. We knew this was gonna hit. It just so happened that the bankruptcy filings happened this quarter, we don't think this is thematic in any real sense. I think the way we anticipate playing out is they'll go through the process, they'll negotiate some kind of outcome. Like I said, these are all strong assets for us. These assets themselves got wrapped up into much broader portfolio bankruptcies. We expect that at the end of the day, we'll probably emerge with a better credit profile, you know, either with respect to the new franchisee or going back to corporate. Yeah. yeah These are two franchisees that we've been kind of in talks with and in front of for a while. these are two franchisees that we've been kind of in talks with and in front of for a while We knew this was gonna hit. we knew this was gonna hit It just so happened that the bankruptcy filings happened this quarter, we don't think this is thematic in any real sense. it just so happened that the bankruptcy filings happened this quarter we don't think this is thematic in any real sense I think the way we anticipate playing out is they'll go through the process, they'll negotiate some kind of outcome. i think the way we anticipate playing out is they'll go through the process they'll negotiate some kind of outcome Like I said, these are all strong assets for us. like i said these are all strong assets for us These assets themselves got wrapped up into much broader portfolio bankruptcies. these assets themselves got wrapped up into much broader portfolio bankruptcies We expect that at the end of the day, we'll probably emerge with a better credit profile, you know, either with respect to the new franchisee or going back to corporate. we expect that at the end of the day we'll probably emerge with a better credit profile you know either with respect to the new franchisee or going back to corporate We'll get back to a rent-paying status and there's even the potential for some recovery of back rent and back OpEx. You know, that remains to be seen. Again, the point here is it just is a timing function. We don't think this is anything that will be persistent on a go-forward basis. Certainly nothing thematic in terms of the portfolio. I mean, these are both just so happen to be in our QSR space, which actually otherwise is performing really well for us. We'll get back to a rent-paying status and there's even the potential for some recovery of back rent and back OpEx. we'll get back to a rent-paying status and there's even the potential for some recovery of back rent and back opex You know, that remains to be seen. you know that remains to be seen Again, the point here is it just is a timing function. again the point here is it just is a timing function We don't think this is anything that will be persistent on a go-forward basis. we don't think this is anything that will be persistent on a go-forward basis Certainly nothing thematic in terms of the portfolio. certainly nothing thematic in terms of the portfolio I mean, these are both just so happen to be in our QSR space, which actually otherwise is performing really well for us. i mean these are both just so happen to be in our qsr space which actually otherwise is performing really well for us

Speaker 5: I guess just given the nature of bankruptcy declaration, I mean, would you expect some of the metrics, either on the operating expense side or the top line re-rent side to bounce back as soon as 2Q? Or is that something that will bounce back once the bankruptcy process or re-tenanting process kind of plays out? I guess just given the nature of bankruptcy declaration, I mean, would you expect some of the metrics, either on the operating expense side or the top line re-rent side to bounce back as soon as 2Q? i guess just given the nature of bankruptcy declaration i mean would you expect some of the metrics either on the operating expense side or the top line re-rent side to bounce back as soon as 2q Or is that something that will bounce back once the bankruptcy process or re-tenanting process kind of plays out? or is that something that will bounce back once the bankruptcy process or re-tenanting process kind of plays out

Speaker 4: Yeah. I think it's just gonna depend on the vagaries of those bankruptcy proceedings, which are a little bit can be inconsistent from a timing standpoint. You know, could be Q2, could be Q3, but somewhere within that timeframe. Yeah. yeah I think it's just gonna depend on the vagaries of those bankruptcy proceedings, which are a little bit can be inconsistent from a timing standpoint. i think it's just gonna depend on the vagaries of those bankruptcy proceedings which are a little bit can be inconsistent from a timing standpoint You know, could be Q2, could be Q3, but somewhere within that timeframe. you know could be q2 could be q3 but somewhere within that timeframe

Speaker 5: Okay. All right. Just maybe one last one. It seems like there's in guidance from the equity raise, there was about $17 million of interest expense savings, but only $14 million of kind of additional uplift on Normalized FFO. Just curious what was kind of driving the delta there. Okay. okay All right. all right Just maybe one last one. just maybe one last one It seems like there's in guidance from the equity raise, there was about $17 million of interest expense savings, but only $14 million of kind of additional uplift on Normalized FFO. it seems like there's in guidance from the equity raise there was about $17 million of interest expense savings but only $14 million of kind of additional uplift on normalized ffo Just curious what was kind of driving the delta there. just curious what was kind of driving the delta there

Speaker 1: Yeah. It really comes down to the net lease credit losses we just talked about, Jack. That's really the delta. You know, I'm not gonna try to say we're gonna pick back up on the net lease piece. You know, we're turning towards, you know, the lower end on the net lease guidance, which offsets some of that interest expense. You know, that's really the driver. Yeah. yeah It really comes down to the net lease credit losses we just talked about, Jack. it really comes down to the net lease credit losses we just talked about jack That's really the delta. that's really the delta You know, I'm not gonna try to say we're gonna pick back up on the net lease piece. you know i'm not gonna try to say we're gonna pick back up on the net lease piece You know, we're turning towards, you know, the lower end on the net lease guidance, which offsets some of that interest expense. you know we're turning towards you know the lower end on the net lease guidance which offsets some of that interest expense You know, that's really the driver. you know that's really the driver

Speaker 5: Great. That makes sense. That's it for me. Thank you very much. Great. great That makes sense. that makes sense That's it for me. that's it for me Thank you very much. thank you very much

Speaker 7: This concludes our question and answer session. I would like to turn the conference back over to Chris Bilotto, President and Chief Executive Officer, for any closing remarks. This concludes our question and answer session. this concludes our question and answer session I would like to turn the conference back over to Chris Bilotto, President and Chief Executive Officer, for any closing remarks. i would like to turn the conference back over to chris bilotto president and chief executive officer for any closing remarks

Speaker 2: Thank you for joining our call today. We look forward to meeting and seeing many of you at the upcoming industry conferences, including Nareit, in June. Thank you for joining our call today. thank you for joining our call today We look forward to meeting and seeing many of you at the upcoming industry conferences, including Nareit, in June. we look forward to meeting and seeing many of you at the upcoming industry conferences including nareit in june

Speaker 7: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. The conference has now concluded. the conference has now concluded Thank you for attending today's presentation. thank you for attending today's presentation You may now disconnect. you may now disconnect