SVC

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 10:00 a.m. ET Senior Director of Investor Relations - Kevin Barry President and Chief Executive Officer - Christopher J. Bilotto Vice President - Jesse Abair Treasurer and Chief Financial Officer - Brian E. Donley Operator: Good day, and welcome to the Service Properties Trust Second Quarter 26 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask. Please note this event is being recorded. I would now like to hand the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead. Kevin Barry: Good morning. Thank you for joining us today. With me on the call are Christopher J. Bilotto, President and Chief Executive Officer Jesse Abair, Vice President and Brian E. Donley, Treasurer and Chief Financial Officer. In just a moment, they will provide details about our business and our performance for the second quarter 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 2000 and other securities laws. Forward looking statements are based on SVC's beliefs and expectations as of today, August 6, 2026, 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 and 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, 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 Christopher. Christopher J. Bilotto: Thank you, Kevin. Good morning, everyone, and thank you for joining the call today. I will begin today's call with an update on our strategic priorities, and highlights from our hotel portfolio performance during the second quarter. Jesse will then discuss our net lease business, and Brian will conclude with a review of our financial results, balance sheet and outlook. Last night, we reported second quarter results that reflect continued momentum advancing SVC's strategic priorities strengthening the company's financial profile. Our net lease portfolio delivered steady NOI growth, providing a highly predictable cash flow stream that anchors our portfolio And within our hotel segment, RevPAR outperformed the industry benchmark for the seventh consecutive quarter. Overall, normalized FFO per share of $0.43 was in line with consensus expectations, and we are maintaining our full year earnings guidance. Starting with our strategic priorities. We remain focused on enhancing our net lease portfolio, improving the cash flows and operating performance of our retained hotel portfolio and further enhancing our balance sheet through disciplined capital allocation. Since the beginning of the second quarter, we have sold 20 properties for approximately $32 million including 19 net lease assets and 1 hotel. A portion of these proceeds combined with over $540 million of net proceeds from SVC's successful equity offering in April was used to redeem $550 million of unsecured debt reducing our leverage profile and decreasing annual interest expense. While providing the company with enhanced flexibility to focus on operational execution and cash flow growth. Turning to hotel performance. Our retained hotel portfolio, excluding the 15 sales hotels, delivered another quarter of improved operating results. RevPAR increased 6.6% year over year with balanced growth in occupancy and ADR. And relative strength in full service and upper upscale hotels. RevPAR growth was partially offset by expected displacement related to our active redevelopment and renovation projects most notably, the Nautilus South Beach. Excluding the Nautilus short term disruption, underlying RevPAR growth across the balance of the portfolio was meaningfully stronger at 9% reinforcing our confidence in the improved fundamentals in our portfolio. The portfolio continued to benefit from completed renovations a 22% lift in contract segment revenue as well as rate driven demand related to World Cup and select host cities. Importantly, this positive momentum has carried into the third quarter with preliminary July RevPAR for our retained hotel portfolio of 7.1% year over year. Retained hotel EBITDA increased 4.2% this quarter, with notable strength at the Sonesta properties in Hilton Head and Miami Airport as well as Radisson in Salt Lake City. To put this performance into context, our retained hotel portfolio generated a quarterly adjusted hotel EBITDA margin of approximately 19.4%. By comparison, the 15 hotels we are exiting operated at a negative EBITDA margin over that same period. This gap is the core economic logic behind our capital recycling strategy. Rather than continuing to dedicate capital and management attention to a cohort of assets, with structurally negative returns, we are redirecting those resources toward a retained portfolio that is already demonstrating clear trajectory of margin improvement. Building on this, we see significant additional opportunities for improved profitability across our retained hotel portfolio. Our asset management group continues to work with our operators on several opportunities to expand hotel EBITDA margins both at Sonesta and our other operators. These efforts are initially centered on 3 primary pillars. The first pillar relates to revenue optimization, targeting customer acquisition costs by driving more business to the direct and most profitable channels like brand.com and therefore reliance on higher cost OTAs. This also includes a continued focus on driving contract and group base, along with ancillary revenue streams such as food and beverage and parking. Second, in support of improved labor efficiency, our operators are implementing a leaner and more dynamic labor model to better align staffing with demand and reduce reliance on costly contract labor. Within the quarter, we are already seeing the benefits of this with Senesler, Radisson and IHG all improving labor productivity year over year. The third pillar relates to capitalizing on operating leverage with anticipated savings from benefits plans property insurance, and diligent controls over energy and utility costs As our renovated hotels stabilize and occupancy grows, this will provide enhanced pricing power and position the property to capture additional event driven which in turn will absorb fixed costs more effectively, ultimately driving profitability. While early in the process, initial benefits are starting to materialize, including the positive trend with labor productivity a recent 20% reduction in property insurance cost for our portfolio, which noted a 22% lift from contract revenue. Largely from new airline crew business and the adoption of certain technologies and processes that will drive margin improvement. As these initiatives progress, we provide further updates on targeted revenue and expense benefits. Beyond these initiatives, SBC is positioned to capture meaningful performance upside from the elimination of approximately $15 million of negative EBITDA drag from our exit hotels. The gradual burn off of displacement and corresponding performance growth from our hotel renovations most notably the ongoing redevelopment of the Nautilus in Miami Beach. While these benefits will be realized over time, they provide a road map for improvement in hotel EBITDA and cash flow generation complementing our top line initiatives focused on driving market share across the portfolio. Turning to our hotel dispositions. We remain on track to sell the previously disclosed 15 hotels which included the sale of a 133-key hotel in July for $18.4 million. To date, we are under a purchase and sale agreement or letter of intent with 13 hotels and are marketing 1 hotel. We expect the majority of the remaining dispositions to be mostly completed over the balance of 2026 with proceeds continuing to support debt reduction to further improve our financial flexibility. As part of this process, we also intend to bring to market our remaining IHG managed full service hotel of 495-key property located in the Atlanta perimeter submarket. As some may recall, we removed this asset from the marketing process last year while we evaluated varying strategies with the in place agreement and capital outlook. This followed a comprehensive hold versus sell analyses undertaken as the hotel's management agreement approached its scheduled expiration. While the property has performed well operationally, we believe a sale represents the more attractive path to unlocking value for shareholders relative to continuing to own and reinvest in the asset. We expect marketing to commence in Q3 and look forward to providing future updates. Before I conclude, I would also like to briefly touch on corporate governance. As we previously announced, our Board continues to actively evaluate candidates for an additional independent trustee. The search remains focused on identifying an individual with meaningful hospitality industry experience, who can further complement the board's experience and support SBC's ongoing strategic evolution. Looking ahead, our priorities remain clear. Translate the operating momentum in our retained portfolio into sustained margin and cash flow improvement, while completing the exit of our non core hotels to further strengthen SVC's financial profile. With a stronger balance sheet and the initiatives we have underway to further enhance performance, we believe SVC is well positioned to unlock value across the portfolio to drive long-term shareholder returns. I will now turn it over to Jesse to discuss the net lease portfolio in more detail. Jesse Abair: Thank you, and good morning. Our net lease assets continue to serve as a dependable source of cash flow for us with minimal capital requirements, long-duration leases and a diversified tenant base. The portfolio exhibited strong performance in the second quarter, led by meaningful NOI growth, sustained leasing momentum and continued improvement in the performance of our travel centers. Highlights from the quarter include an increase of 2.2% in cash basis NOI quarter over quarter as a result of contributions from recent acquisitions, contractual rent growth from our existing leases and a reduction in our credit reserves. Occupancy was unchanged from the prior quarter at 96.6% although we expect to see incremental growth in occupancy throughout the remainder of the year given the current state of our leasing pipeline, and our asset management team's dedicated efforts to efficiently dispose of vacant properties and cycle in new brands. Optimizing our portfolio and developing new operator relationships will be an ongoing focus for our team as we continue to transition SBC towards the net lease side of the business. The aggregate rent coverage of our portfolio improved to 2.09x on a trailing 12-month basis. The improvement was driven primarily by our 10 basis points to 1.34x. This is the second straight quarter of coverage growth for TA and represents a 12% increase since the fourth quarter of last year. For the balance of the portfolio, rent coverage again came in north of 3.5x as tenant credit quality and operating performance remained stable. On the leasing front, our asset management team executed deals totaling 210 thousand square feet with a weighted average lease term of roughly 7 years. With just 1% of annualized base rent scheduled to expire through year end, and 3.8% rolling through the end of 27 our near term expiration schedule remains very manageable, our asset management team has been proactively engaging with tenants that have upcoming expirations to negotiate renewals. Turning to capital recycling. We continue to execute our measured growth strategy. On the acquisition side, year to date, we have invested approximately $9 million across 4 properties operating in the QSR and automotive services industries. These acquisitions were completed at weighted average cash and GAAP cap rates of 7.9% and 8.8% respectively. And carried weighted average lease terms of approximately 15 years. We are under agreement on another 5 properties, a mix of dollar stores and casual dining concepts, for a total of $14.2 million which we expect to close in the third quarter. These transactions funded through capital recycling put us well ahead of schedule for our target of $25 million of annual acquisition activity. Since the beginning of the year, we have sold 21 properties for $15 million and we expect a similar level of dispositions during the second half of 2026. The net lease portfolio now consists of 745 properties with annualized base rent of nearly $400 million and a tenant roster that includes 185 businesses, operating in our more than 140 brands, across a diverse range of industries led by travel centers, quick service restaurants, fitness centers, and grocery stores. More than 95% of our annualized base rent is derived from leases that contain contractual rent increases or percentage rent provisions. Providing embedded NOI growth and inflation protection over time. As we work to reposition SBC toward a more net lease oriented company, our focus will be on enhancing portfolio quality, maintaining strong occupancy and credit metrics, extending our WALT and generating durable cash flow growth. We believe our disciplined asset management and capital allocation strategies will ensure SVC's measured transition to a primarily net lease platform. And with that, I will turn the call over to Brian to discuss our financial results. Brian E. Donley: Thank you, Jesse, and good morning. As we previously announced, SVC affected a 1-for-5 reverse share split in early July and all share information on our earnings report and 10 Q have been retroactively adjusted. Additionally, given SVC's recent equity issuance comparing per share data to prior period is not meaningful. Starting with our consolidated financial results for the second quarter of 2026, normalized FFO was $55 million, down $2.6 million or 4.5% compared to the prior-year quarter. Normalized FFO this quarter as compared to the prior quarter were primarily impacted by a $20 million decline in hotel results largely from our hotel disposition activity partially offset by a $15 million decline in interest expense and a $2.3 million increase in performance from our retained hotels and a $1.3 million increase in NOI from the net lease portfolio. Turning to our hotel portfolio performance. For our 93 comparable hotels this quarter, RevPAR increased by 6.5%, gross operating profit margin percentage declined by 60 basis points to 28.7%. Below the GOP line costs at our comparable hotels increased by $3.5 million from the prior year driven primarily by higher insurance costs. Our 93 comparable hotels generated adjusted hotel EBITDA of $55 million during the quarter. Which was relatively flat compared to the prior-year quarter. The 78 hotels in our retained portfolio generated RevPAR of $135 an increase of 6.6% year-over-year. Adjusted hotel EBITDA of $57 million during the quarter representing an increase of 4.2% year-over-year. Excluding the 3 hotels under renovation, hotel EBITDA increased $6.5 million or 13.4%. The Sonesta exit hotels, which we sold are continuing to market for sale produced losses of $1.9 million during this quarter. A decline in profitability of $2.2 million year-over-year. NOI from our net lease portfolio increased $1.3 million over the year over the prior year as a result of our acquisition and leasing activity partially offset by vacancies and credit losses. Turning to the balance sheet. We have been active in the capital markets and took steps to further strengthen our balance sheet, improve our debt maturity profile and our cash flow. During the quarter, we raised net proceeds of $542 million from our 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 2027. This activity resulted in additional annual cash interest savings of $30 million. We currently have $4.7 billion of debt with a weighted average interest rate of 5.66%. As of today, there are no amounts outstanding on our $650 million revolving credit facility. This credit facility matures in June 2027, and we have a 1-year extension option available to us. Our $580 million of zero coupons senior secured notes mature in September 2027 and they are supported by strong net lease collateral, which we believe provides refinancing optionality. Turning to our capital expenditure activity. During the second quarter, we reinvested $30.5 million in capital improvements continue to be driven by the renovation of the Nautilus in Miami as well as projects at the Royal Sonestas in Boston, New Orleans and Columbus. Turning to our annual guidance. We are reaffirming our full year outlook for hotel EBITDA, net lease NOI and consolidated adjusted EBITDA. We are maintaining our normalized FFO range of $124 million to $144 million or $1.20 to $1.35 per share. The per share amounts assume a weighted average share count of 105 million shares. This full year guidance assumes midpoint expense of $360 million and G&A expense of $40 million. This guidance does not reflect the impact of completing the remaining Sonesta hotels planned for disposition and it continues to assume $25 million of capital recycling on our net lease portfolio. We continue to expect total CapEx for the year of $120 million to $140 million Cash flow available for distribution was $42.5 million for the quarter and we continue to expect to generate positive CAD for the full year 2026. Operator, that concludes our prepared remarks. We are ready to open the line for questions. Operator: We will now begin the question and answer session. And our first question will come from Tyler Batory of Oppenheimer. Please go ahead. Tyler Anton Batory: Hey, good morning. Thanks for taking my questions. A few on the hotel portfolio first, and I am really focused on the retained hotels. Talk a little bit more about the renovation activity that, I believe, was impacting margin in Q2. And you talked about a number of initiatives to improve the margin performance at the retained hotels? Just talk through a little bit in terms of the time line on when some of those initiatives might start to show up? In the performance of the margin side of things? And then just remind us again where you would like to go in terms of moving margin in the retained hotel portfolio? Brian E. Donley: Hey, good morning, Tyler. This is Brian. I will start and Christopher will jump in with some of the more forward looking stuff. Yes, for the 3 hotels, we earmarked as under renovation. I mean those hotels I mean the biggest 1 is obviously the South Beach property. We have been talking about. But those hotels, you know, generated $1 million of revenue this quarter, but it was a $3.3 million decline year-over-year. 1 of the 3 is an exit property, so it is a little bit of noise on both fronts. But Nautilus is projected to be completed by the end of October and early November. With some phased completions with rooms and public space. that is our biggest project for the year. it is got a lot of financial impacts on both the RevPAR top line and bottom line. And this Q1, Q2 is the high season for Miami. So that was a particular drag in our results. But as we look forward to Q4, we should see a positive uplift from that property amongst others. Some of the other properties under renovation or that recently completed renovation have also started ramping up Simply Suites in Las Vegas, for example, You know, we are doing Royal Sonesta Market Cambridge, I mentioned, in New Orleans. there is still a bit of noise and moving pieces. Yeah. Operator: I would just add, and kind of to the back half of your question, you know, with respect to kind of some of the initiatives. Christopher J. Bilotto: Look, it is iterative. Right? This is a broader strategy, kind of in line with we have talked about coming into the year and over, you know, even into Q1, I think, you know, some of kind of the small wins, you know, we have you know, reduced our property insurance by 20%, effective 7/1. So that is a fiscal year. And there is also some benefits that come with that with reduced deductible, and so we would expect there to be kinda just less overall cost. Just the insurance premium alone is a couple million dollars. For the for the fiscal year. You know, we are starting to kind of see the inflow of, you know, other types of ancillary alongside contract business. So those are all kinda near term initiatives. I think kind of the bigger piece is much more of the work being done with our operators and so that is just a big piece of that. You know, as you recall, there is a new management team that started there effective August 1. And I think it goes without saying, kinda giving them room and runway to really kinda dig in and unpacked opportunities in the portfolio is something that they have been focused on in many of strategies are kinda tied to. And so we would for more of that to flow through towards the end of the year. And predominantly like some of the bigger things, like benefits, in Q1 of next year. And I think the idea is that we will provide kind of more specific numbers tied to these levers after we have given them kind of the needed time to vet through that. So, you know, potentially as early as this next Q3. Other thing I would highlight, which I think kind of goes without saying is, selling these assets, you get rid of negative $15 million of EBITDA drag, that is the addition by subtraction. In our guidance, we have $12 million of this displacement occurring with these renovations. And so getting that money back gets you to zero, let alone the uplift that is gonna come when performance turns around and so when you start to add up, you know, these numbers, they become very material. And I think all those will just kind of continue to fold in and ramp up specifically as we get into 2027. Tyler Anton Batory: Okay. Great. And to follow-up on the RevPAR, side of things, we thought Q2 was really strong. strong, but you kept the full year guidance range. So just talk about the outlook for the rest of the year. I am not sure if that is renovation activity or anything else is impacting that outlook. But curious if there is any extra conservatism in terms of what you are providing for what is implied for the second half of the year? Brian E. Donley: Sure, Tyler. Thank you. And I think from our standpoint, Q2 was definitely strong We have seen our preliminary July results, which gives us some optimism going into the third quarter. But if you look at our portfolio and the seasonality of it, we do expect a slowdown in the back half of August and then into Q4. it is just the way our portfolio trends in some of our geographies. But we feel comfortable with the guidance range as we sit here today. And there is a lot of different things and moving pieces in motion as we look to the back half of the year. As Chris outlined, and throwing some of the disposition activity and the potential timing of some of that could affect our numbers and hopefully to the upside. Tyler Anton Batory: Okay. And then last question from me on the asset sales. Remind us of the time line there, I think, prepared remarks, you said by the end of 2026, but any sort of execution risk in terms of getting those completed? And then a bigger picture, question, just talk a little bit about the market overall for asset sales and help us think through any updated thoughts in terms of future assets that might be on the market for sale. I know you are now marketing that asset in Atlanta. I am not sure if there is anything in the portfolio that might make sense. Down the road here. Christopher J. Bilotto: Yeah. So I think first and foremost, you know, with respect to the 15 properties that we been active with, you know, given where we are with those groups, again, mostly under contract. it is really kind of a Q3, Q4-type of execution. I would say, you know, of the quantum, which is just shy of $100 million representing kind of that bucket of under contract. You know, maybe between $20 million and $30 million might transact in Q3 with the balance in Q4. there is 1 that we are marketing that might you know, might find its way into kind of the early part of 2027. And then certainly, I think with respect to the Atlanta perimeter just given where we are in the process, I think it is fair to say that, you know, an early 2027 is a reasonable expectation, depending on where pricing comes in. And so, you know, to your to your broader question, look, you know, our plan, has been and continues to be to really kinda dig into each hotel and figure out where we can optimize for performance. And we have contemplated and communicated that is a multi-year journey. I think what we are selling this year and then even the introduction of this hotel in Atlanta is a testament to how we think about, you know, when the timing is right. We are ready to come to market, but I think, you know, more importantly, would set the expectation that, driving performance to drive value is a big part of our business, and that is something that we will adhere to I think that the last question you had about the broader market is, it is mixed. I think for focused service hotels, I think we have continued to see some level of strength just kind of given where that price point is. And then for more luxury hotels, there seems to be capital chasing, you know, those types of concepts. And then in between, depending on that price point, you know, the $50 to $100 million price point, it is a little bit softer. And so it does not mean that there is not an ability to transact, but I think most of the transactions are coming from more kind of stabilized hotels versus kind of the journey where we are on is kind of turning around performance to kind of get us to that point. Tyler Anton Batory: Great. Very helpful. that is all for me. Thank you. Operator: The next question Our next question will come from Jack Armstrong of Wells Fargo. Please go ahead. Jackson Armstrong: Hey, good morning and thanks for taking the question. Can you provide us with your updated thoughts on the ramp for the Nautilus When you expect it to open? What the EBITDA drag is in the third and fourth quarters? And then where you expect the asset to stabilize and the pathway to get there? Brian E. Donley: Sure, Jack. The Nautilus project is underway today. We expect delivery by November. Just ahead of where the season starts ramping up for that market. I think from a cash drag standpoint, for the full year, it is around $4.5 million for that property. Yes. So it is a significant swing in our expectations going forward as it ramps up. You know, we will obviously give more color we get into next year's guidance. But know, the property did around $5 million or $6 million before renovation on an annual run rate. We expect that to significantly increase going forward. Between that property and some of the others that are still ramping, we are we are optimistic we will continue to see the right results. Jackson Armstrong: Helpful color there. Can you touch on what percentage of your bookings were through the OTAs in Q2 and then maybe where that is been historically and then what the goal is there going forward, that being some of the initiatives you talked about? Christopher J. Bilotto: Yeah. I mean, you know, the bookings across the OTA have kind of hovered in the mid-20 percent. You know, where that bogey needs to be, I think it is still TBD. I mean, certainly, we want that to come down closer to 20%. But I think that is a there is a lot of work that needs to go in to do that. So between 20 and 25 is probably kind of a healthy expectation in the medium term. And then, again, I think that is gonna come through the things that I referenced with respect to kind of just changing some of the channels, you know, kind of allocating more resources to growing kind of loyalty programs and driving business to loyalty programs. And I think as we bolster other areas within the business, whether it is group or contract business, let alone transient, that in itself will kind of just truncate, you know, where that percentage comes from. But to answer your question, it is kind of getting closer down to that 20% mark. Jackson Armstrong: And then maybe 1 on the net lease. Side. Can you give us your updated thoughts on credit losses in the back half of the year? Maybe provide an update on where the 2 franchisee bankruptcies stand and any changes to your kind of watch list in the first quarter? Jesse Abair: Yes, Jack. This is Jesse. I will take that 1. With respect to the 2 bankruptcies we announced last quarter, think good news on both of those fronts. The Popeyes franchisee will be emerging from bankruptcy in Q3. We have got a deal in place to assign those assets back to corporate, so there will be a credit bump there. All remaining economics of those existing master lease will stay the same. So they are already back to a rent paying status. So probably net, that is a good story, a positive story. And then with respect to the other franchisee that you get, it was just another QSR. We similar story; we expect all of those to remain open and get assigned to corporate, so we will see that credit bump as well. Still negotiating the deal terms. With respect to exactly how it is going to play out in terms of the rent going forward. I would say that the big story on the net lease side of things for us relates to the TA coverage piece and this is now the second straight quarter. We have seen a pretty meaningful bump. You know, as best as we can tell, we think that is probably a function of a few things. You know, we are seeing double digit growth both in terms of freight pricing as well as diesel margins. Right? Those are 2 pretty big indicators of how that business is going to go. The diesel margins being a little more transitory and related to the Middle East conflict, but I think they are thinking across the board in the freight industry is that increase in demand is probably something that we expect to be persistent throughout 2026. So again, a really good indicator for that business. And again, maybe the third piece to that is we may be seeing some early fruits of the business improvement plan that BP has implemented with respect to those TA assets. So they have now had several quarters of new management and the opportunity to execute on that plan. So multifactorial certainly, but I think the big news in terms of how we think of the net lease portfolio was driven by the increased performance in TA. Jackson Armstrong: Really helpful. that is it for me. Thanks. Operator: The next question comes from Floris Van Dijkum of Ladenburg Thalmann. Please go ahead. Analyst: Hey, good morning. it is it is [Inaudible] on for Floris. Thank you for taking the questions. Can you walk us through your current thinking on addressing the remaining 2020 debt maturities, especially around the timing for debt? Thanks. Brian E. Donley: Sure. From our standpoint, we have got $45 million in that lease mortgage notes, a variable funding note coming up in January. We expect to take that out with asset sale proceeds. I mentioned the revolver is up in June. We do have a 1-year extension option. So we are planning and thinking around that in the coming months, what to do there. And then the zero coupon senior secured notes mature in September of 2027. Again, back half of this year, early next year is probably when we will consider transacting, depending on market conditions. Those notes are back by 2 of our travel center lease pools, so very strong collateral. So we think we have flexibility in refinancing those notes. Then whether or not we pay some of it down with asset proceeds remains to be seen. Depending on the quantum But that is our shorter term thinking as far as what is upcoming on the balance sheet. Analyst: Thank you. Thank you. Operator: The next question comes from John Massocca of B. Riley. Please go ahead. John James Massocca: Good morning. Maybe sticking with the balance sheet question and the zero coupon bonds in particular, I mean, you think where you sit today after the equity raise you are in a good enough position from a covenant perspective to refinance those with a more kind of traditional secured debt? Or would you still need to probably for covenant related reasons, go with a more unique angle like you did with the last debt raising? Brian E. Donley: John, thanks for the question and good morning. Our current thinking is that it probably most likely be a regular way type debt instrument. The zero coupon was sort of a temporary need from a covenant standpoint, as you outlined. Pre equity raise. I think we do as we sit here today and how those bonds have traded, I think we will be in pretty good position to be able to do that. And absorb the cash interest that would be expected with such a refinancing. Yes. Again, those bonds in the market have traded very well. The collateral is very strong, and I think that sets us up in a good spot. John James Massocca: Okay. And then on the hotel front, with the 2 assets that you are kind of marketing but do not have pricing agreed to or under contract on, are there kind of brackets proceeds you are looking for? I know it might be a little bit specific given it is only 2 assets, just kind of curious if there is like a range of proceeds we might expect from those dispositions. Christopher J. Bilotto: Yeah. We will provide more color as time progresses. I think where we stand, we want to let the process play out a little bit, let that guide kind of overall expectations. John James Massocca: Okay. And then with the asset in Atlanta, you would kind of previously marketed it Was it the kind of operational position of the property that made it attractive to take it back for sale? Or I mean, it seems like it did pretty well last quarter. Has there been kind of a change in overall performance that now might make it more attractive to buyers? Just kind of curious why that specific asset, why take that back into the market today? Christopher J. Bilotto: Yeah. Last year, when we took it to market, you know, there was a couple different factors. 1 was just on kind of unpacking a little bit more around the kind of the capital needs and the overall with the with the brand. That, you know, I think where we were seeing offers with the fact as part of that as we wanted to rethink it. As we sit here today, what is attractive about where we are at with that asset is you know, that agreement expires at the beginning of next year. And so, it provides optionality with the buyer pool whether or not they wanna purchase that with or without the brand. And again, just gives general flexibility on kind of execution of whatever business plan is associated with their capital needs. And so I think from a, you know, from a timing standpoint and kind of timing the market relative to just kind of some of those time frames. It just our view, is a is a much more attractive candidate for a buyer. John James Massocca: Okay. And then, like, bigger picture as we look into 2027, should we kind of expect hotel sales to be 1-off-ish in nature You know, I know it is early days, but any outlook for that versus maybe a more kind of portfolio driven or kind of more structured disposition program next year? Christopher J. Bilotto: it is early days, John. I think, as I have you know, the real focus is around performance improvement. You know, that is a that is a journey that we have kinda talked about. We will let that guide, how we think about dispositions. And so you know, as we kind of get through the year and more specifically into 2027, I think we will have more color on what that could look like. John James Massocca: Okay. And then 1 last 1 on the hotel front. Just a quick clarification. The 7.1% July RevPAR growth, that for the total portfolio or just the retained assets? Brian E. Donley: That was just the retained assets. Okay. John James Massocca: Then lastly, 1 on the net lease side. How should we think about lease expirations here over the remainder of the year? Is the outlook that those are strong candidates for renewal? Or how are you kind of thinking about those assets? Typically? Jesse Abair: Yes. We do not have a ton of expirations in the back half of the year. We have got our arms around most of them. We expect to be reviewing the vast majority of them; there may be 1 or 2 that go dark, but, you know, even that would be somewhat of a surprise for us. So I think we are in good shape for the balance of 2026 and now we are kind of trying to get ahead of the 2027 as well at this point with the team. John James Massocca: Okay. that is it for me. You very much. Operator: This concludes our question and answer session. I would like turn the call over to Christopher J. Bilotto, President and Chief Executive Officer for any closing any closing remarks. Christopher J. Bilotto: Thank you for joining today's call. Please reach out to our Investor Relations if you are interested in scheduling a meeting with SBC. Operator: That concludes our call. The conference has now concluded. Thank you for attending today's presentation and you may now disconnect. Before you buy stock in Service Properties Trust, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Service Properties Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $403,337!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,334,946!* Now, it’s worth noting Stock Advisor’s total average return is 958% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 12, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Service Properties Trust (SVC) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Service Properties Trust? Here are five stocks we like better. Normalized FFO reached $55 million, or $0.43 per share, in Q2, in line with consensus, while SVC reaffirmed its 2026 outlook of $1.20 to $1.35 per share. Retained hotel RevPAR increased 6.6% year over year, despite renovation disruption at the Nautilus South Beach; SVC remains on track to sell 15 underperforming hotels and expects to eliminate about $15 million in negative EBITDA drag over time. SVC raised $542 million in equity and used the proceeds plus asset-sale cash to redeem $550 million of 2027 notes, a move expected to reduce annual interest expense by $30 million. Its net lease portfolio also delivered 2.2% sequential cash NOI growth with 96.6% occupancy. Silvaco Stock: Consider Early Investment in New Semiconductor Service Properties Trust (NASDAQ:SVC) reported second-quarter results that management said reflected continued progress on its strategic priorities, including strengthening its balance sheet, improving hotel operations and shifting the portfolio toward net lease assets. Normalized funds from operations totaled $55 million, or $0.43 per share, during the quarter. The company said the per-share result was in line with consensus expectations and reaffirmed its full-year 2026 outlook for normalized FFO of $124 million to $144 million, or $1.20 to $1.35 per share. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth 5 Best REIT Alternatives for Passive Real Estate Income President and Chief Executive Officer Chris Bilotto said the company’s net lease portfolio continued to provide predictable cash flow, while its hotel portfolio outperformed the industry benchmark on revenue per available room, or RevPAR, for a seventh consecutive quarter. For its retained hotel portfolio, excluding 15 hotels designated for sale, SVC reported a 6.6% year-over-year increase in RevPAR during the second quarter. Growth was supported by occupancy and average daily rate gains, with particular strength among full-service and upper-upscale hotels. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Hotel Stocks - Best Hotel Stocks Invest In Bilotto said RevPAR growth was partly offset by renovation-related disruption, especially at the Nautilus South Beach in Miami Beach. Excluding the Nautilus disruption, underlying RevPAR growth for the remaining portfolio was 9%, he said. Preliminary July RevPAR for retained hotels rose 7.1% from a year earlier. Retained hotel adjusted EBITDA increased 4.2% year over year to $57 million. The portfolio generated an adjusted hotel EBITDA margin of about 19.4%, compared with negative EBITDA margins at the 15 hotels being sold, according to Bilotto. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling “This gap is the core economic logic behind our capital recycling strategy,” Bilotto said, describing the company’s effort to redirect capital away from assets with negative returns and toward hotels with improving margins. Chief Financial Officer Brian Donley said the company’s 93 comparable hotels generated adjusted hotel EBITDA of $55 million, roughly flat from the year-ago quarter, as higher insurance costs and renovation activity weighed on results. Gross operating profit margin declined 60 basis points to 28.7%. The Nautilus redevelopment is expected to be completed around the end of October or in early November, with phased room and public-space completions. Bilotto said the property is expected to represent approximately $4.5 million of cash drag for the full year. Before its renovation, the hotel generated roughly $5 million to $6 million on an annual run-rate basis, and management expects performance to increase after the project is completed. SVC outlined several initiatives intended to improve hotel profitability, including increasing direct bookings through brand websites and loyalty programs, growing group and contract business, expanding ancillary revenue and improving labor productivity. The company said contract-segment revenue increased 22%, largely due to new airline crew business. It also cited a 20% reduction in property insurance costs across the portfolio, effective July 1, and productivity improvements at Sonesta, Radisson and IHG-operated properties. Bilotto said some benefits should emerge during the second half of 2026, while larger initiatives, including changes to benefit plans, are expected to have a greater impact in the first quarter of 2027. The company also expects to eliminate about $15 million of negative EBITDA drag over time through the sale of its exit hotels. SVC remains on track to sell the previously identified 15 hotels. It sold a 133-key hotel in July for $18.4 million and said it had purchase-and-sale agreements or letters of intent for 13 hotels, while one property remained on the market. Management expects most remaining sales to close during the second half of 2026, although one could extend into early 2027. The company also plans to market its remaining IHG-managed full-service hotel, a 495-key property in Atlanta’s Perimeter submarket, during the third quarter. Bilotto said the management agreement expires early next year, providing potential buyers flexibility regarding branding and future capital plans. The net lease business produced a 2.2% sequential increase in cash-basis net operating income, driven by contributions from recent acquisitions, contractual rent increases and lower credit reserves. Occupancy remained at 96.6%. Vice President Jesse Abair said aggregate portfolio rent coverage improved to 2.09 times on a trailing 12-month basis. TravelCenters of America rent coverage increased 10 basis points to 1.34 times, marking a second consecutive quarter of improvement and a 12% increase since the fourth quarter of 2025. The company executed leases totaling 210,000 square feet during the quarter, with a weighted average lease term of approximately seven years. Only 1% of annualized base rent is scheduled to expire through year-end, with 3.8% expiring through the end of 2027. Year-to-date acquisitions totaled about $9 million across four quick-service restaurant and automotive-service properties. Those acquisitions carried weighted average cash and GAAP capitalization rates of 7.9% and 8.8%, respectively. SVC is under agreement to acquire five additional properties for $14.2 million, expected to close in the third quarter. The net lease portfolio includes 745 properties and nearly $400 million of annualized base rent. Abair said more than 95% of annualized base rent comes from leases with contractual rent increases or percentage-rent provisions. SVC raised net proceeds of $542 million through an equity offering during the quarter and used proceeds, along with asset-sale proceeds, to redeem $550 million of unsecured notes due in 2027. The redemptions are expected to reduce annual cash interest expense by $30 million. The company had $4.7 billion of debt outstanding at a weighted average interest rate of 5.66%, with no borrowings outstanding on its $650 million revolving credit facility. The revolver matures in June 2027 and includes a one-year extension option. Donley said SVC expects to address a $45 million net lease mortgage note maturing in January with asset-sale proceeds. Its $580 million zero-coupon senior secured notes mature in September 2027 and are backed by travel-center lease pools. Management said it believes the collateral provides refinancing flexibility and indicated that a more traditional debt refinancing is likely following the equity raise. Second-quarter capital improvements totaled $30.5 million, primarily for the Nautilus redevelopment and projects at Royal Sonesta hotels in Boston, New Orleans and Columbus. SVC maintained its expectation for total 2026 capital expenditures of $120 million to $140 million and said it expects positive cash flow available for distribution for the full year. Service Properties Trust (NASDAQ: SVC) is a real estate investment trust (REIT) specializing in the acquisition, ownership and leasing of service-oriented properties, with a primary focus on the lodging sector. The company structures long-term, triple-net leases with established hotel operators under franchise agreements with leading global brands. By partnering with recognized hotel companies, Service Properties Trust seeks to generate a stable income stream through rent payments, while offering operators the capital and balance-sheet flexibility to grow their portfolios. Since its formation in 2010, Service Properties Trust has grown its portfolio through strategic sale-leaseback transactions, targeted property acquisitions and selective dispositions. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Service Properties Trust Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. RevPAR for the retained hotel portfolio outperformed industry benchmarks for the seventh consecutive quarter, driven by balanced growth in occupancy and ADR. Management is executing a 'addition by subtraction' strategy, exiting 15 hotels that operated at negative EBITDA margins to eliminate a $15 million annual drag. Hotel performance attribution was bolstered by a 22% lift in contract segment revenue, specifically from new airline crew business and event-driven demand in host cities. Operational efficiency initiatives are centered on three pillars: revenue optimization via direct booking channels, leaner labor models to reduce contract labor reliance, and capturing operating leverage through reduced insurance and utility costs. The net lease portfolio provides a predictable cash flow anchor, with rent coverage improving to 2.09x, largely driven by a 12% increase in TravelCenters of America (TA) coverage since Q4 2025. Strategic capital allocation included a $540 million equity offering used to redeem $550 million of unsecured debt, reducing annual interest expense by $30 million. Full-year 2026 normalized FFO guidance is maintained at $1.20 to $1.35 per share, assuming a weighted average share count of 105 million. Management expects the majority of remaining hotel dispositions to be completed by the end of 2026, with proceeds earmarked for further debt reduction. The redevelopment of the Nautilus South Beach is scheduled for completion by November 2026, which is expected to reverse a $4.5 million annual EBITDA drag and capture high-season demand. Guidance assumes $120 million to $140 million in total CapEx for the year, with a focus on stabilizing renovated properties to enhance pricing power and absorb fixed costs. The company plans to transition toward a more net lease-oriented platform, targeting $25 million in annual acquisition activity to extend lease terms and generate durable cash flow. A 1-for-5 reverse share split was effected in July 2026, making year-over-year per-share data comparisons less meaningful. The company is bringing a 495-key IHG managed hotel in Atlanta to market, citing the upcoming management agreement expiration as an opportunity to unlock value through a sale. Property insurance costs were reduced by 20% effective July 1, 2026, which is expected to save several million dollars in the upcoming fiscal year. Active renovations at the Nautilus and other properties caused an expected $12 million in displacement drag, which management views as a temporary headwind to RevPAR and EBITDA. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expects initial benefits from labor productivity and insurance savings to materialize in late 2026, with more significant impacts like benefit plan changes occurring in Q1 2027. The elimination of the $15 million negative EBITDA drag from exit hotels is a primary driver for near-term margin expansion. Two QSR franchisees in bankruptcy are expected to emerge in Q3, with leases being assigned back to corporate entities, resulting in a 'credit bump' while maintaining existing economics. TA coverage growth is attributed to double-digit increases in freight pricing and diesel margins, alongside BP's business improvement plans. Management intends to use 'regular way' debt instruments to refinance the 2027 zero-coupon notes, noting that the previous unique structure was a temporary necessity due to pre-equity raise covenants. The strong collateral of the travel center lease pools is expected to provide significant refinancing optionality as market conditions evolve.

NEWTON, Mass., July 09, 2026--(BUSINESS WIRE)--Service Properties Trust (Nasdaq: SVC) today announced a regular quarterly cash distribution on its common shares of $0.05 per share ($0.20 per share per year), which is unchanged from previous distribution levels after giving effect to the recent five-for-one reverse share split. This distribution will be paid to SVC’s common shareholders of record as of the close of business on July 20, 2026 and distributed on or about August 13, 2026. About Service Properties Trust Service Properties Trust is a real estate investment trust with over $10 billion invested in two asset categories: service-focused retail net lease properties and hotels. As of March 31, 2026, SVC owned 761 service-focused retail net lease properties with over 13.6 million square feet throughout the United States, and 93 hotels with over 21,000 guest rooms throughout the United States, including Puerto Rico, and Canada. SVC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with over $37 billion in assets under management as of March 31, 2026, and 40 years of institutional experience in buying, selling, financing and operating commercial real estate. SVC is headquartered in Newton, MA. WARNING CONCERNING FORWARD-LOOKING STATEMENTS This press release 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 upon SVC’s present intent, beliefs and expectations, but these statements and the implications of these statements are not guaranteed to occur and may not occur for various reasons, some of which are beyond SVC’s control. For example, this press release states that SVC’s regular quarterly cash distribution rate is expected to remain at a rate of $0.05 per share per quarter or $0.20 per share per year. A possible implication of this statement is that SVC will continue to pay quarterly distributions of $0.05 per share per quarter or $0.20 per share per year in the future. SVC’s distribution rate may be set and reset from time to time by SVC’s Board of Trustees. SVC’s Board of Trustees considers many factors when setting or resetting SVC’s distribution rate, including SVC’s funds from operations and normalized funds from operations, cash available for distribution, requirements to maintain SVC’s qualification for taxation as a REIT, the then current and expected needs and availability of cash to pay SVC’s obligations and fund its investments, limitations in SVC’s debt agreements, the availability to SVC of debt and equity capital, SVC’s dividend yield and its dividend yield compared to the dividend yields of other REITs, SVC’s expectation of its future capital requirements and operating performance, SVC’s expected needs for and availability of cash to pay its obligations and other factors deemed relevant by SVC’s Board of Trustees in its discretion. Accordingly, future distributions to SVC’s shareholders may be increased or decreased and SVC cannot be sure as to the rate at which future distributions will be paid. You should not place undue reliance upon forward-looking statements. Except as required by law, SVC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise. A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust. View source version on businesswire.com: https://www.businesswire.com/news/home/20260708378306/en/ Contacts Kevin Barry, Senior Director, Investor Relations(617) 796-8232

NEWTON, Mass., July 08, 2026--(BUSINESS WIRE)--Service Properties Trust (Nasdaq: SVC) today announced that it will issue a press release containing its second quarter 2026 results after the Nasdaq closes on Wednesday, August 5, 2026. On Thursday, August 6, 2026 at 10:00 a.m. Eastern Time, President and Chief Executive Officer Chris Bilotto, Chief Financial Officer and Treasurer Brian Donley and Vice President Jesse Abair will host a conference call to discuss these results. The conference call telephone number is (877) 329-3720. Participants calling from outside the United States and Canada should dial (412) 317-5434. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through Thursday, August 13, 2026. To hear the replay, dial (855) 669-9658. The replay pass code is 6161970. A live audio webcast of the conference call will also be available in a listen-only mode on the company’s website, which is located at www.svcreit.com. Participants wanting to access the webcast should visit the company’s website about five minutes before the call. The archived webcast will be available for replay on the company’s website after the call. About Service Properties Trust SVC is a real estate investment trust with $9.9 billion invested in two asset categories: service-focused retail net lease properties and hotels. As of March 31, 2026, SVC owned 761 service-focused retail net lease properties with over 13.6 million square feet throughout the United States and 93 hotels with over 21,000 guest rooms throughout the United States, including Puerto Rico, and Canada. SVC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with over $37 billion in assets under management as of March 31, 2026, and 40 years of institutional experience in buying, selling, financing and operating commercial real estate. SVC is headquartered in Newton, MA. For more information, visit www.svcreit.com. A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust. View source version on businesswire.com: https://www.businesswire.com/news/home/20260708899849/en/ Contacts Kevin Barry, Senior Director, Investor Relations(617) 796-8232

Never miss an important update on your stock portfolio and cut through the noise. Over 7 million investors trust Simply Wall St to stay informed where it matters for FREE. Service Properties Trust (SVC) has come under focus after reporting first quarter 2026 results that showed lower revenue of US$364.45 million and a wider net loss of US$151.18 million compared with a year earlier. See our latest analysis for Service Properties Trust. The 1-month share price return of 21.26% contrasts with a 90-day share price return of 30% and a 1-year total shareholder return of a 20.69% decline, suggesting recent momentum has picked up after a tougher stretch for long term holders. If weak recent results have you reassessing this stock, it can help to see what else is moving and compare with 18 top founder-led companies With the stock at US$1.54 and recent returns lagging over 1 and 3 years, but trading at a discount to analyst price targets and some intrinsic estimates, is this a reset level for markets or a real opportunity that reflects expectations for future growth? With Service Properties Trust trading at $1.54 against a widely followed fair value estimate of $2.00, the current setup focuses squarely on liquidity and balance sheet flexibility as the key swing factors behind that gap. Read the complete narrative. The narrative rests on a tight set of moving parts. Revenue drifting lower, losses still in play, yet margins and valuation multiples doing the heavy lifting in the model. Want to see which earnings and cash flow assumptions have to line up to get to that $2.00 figure, and how much compression is built into the projected future multiple? Result: Fair Value of $2.00 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, there are still clear pressure points, including rising labor and renovation costs in the hotel portfolio and relatively high leverage that limits financial flexibility. Find out about the key risks to this Service Properties Trust narrative. With sentiment clearly mixed, you do not have to sit on the sidelines. Review the full picture now, including the 3 key rewards and 3 important warning signs. If this stock has sharpened your thinking, do not stop here. The biggest opportunities often sit just outside your current watchlist, so broaden your search now. Spot potential income anchors for your portfolio by checking out 12 dividend fortresses before the next round of payouts passes you by. Hunt for quality at a discount with 51 high quality undervalued stocks and see which stocks currently sit below their estimated worth. Secure a steadier core for your holdings using the 71 resilient stocks with low risk scores and avoid missing companies with more resilient profiles. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include SVC. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Interested in The RMR Group Inc.? Here are five stocks we like better. The RMR Group said fiscal Q2 2026 results came in at or above the high end of guidance, with distributable earnings of $0.44 per share and Adjusted EBITDA of $18.5 million. Management also said the company earned $23.6 million in incentive fees for 2025 and expects more incentive fees this year. RMR highlighted progress at its managed REITs, including stronger operating trends at Diversified Healthcare Trust, a major deleveraging move at Service Properties Trust, and better-than-expected results and refinancing at Industrial Logistics Properties Trust. Office Properties Income Trust also received court approval for its reorganization plan and is expected to emerge from bankruptcy by the end of the quarter. The company said its private capital platform has grown to nearly $12 billion in assets under management, even as fundraising remains challenged by geopolitical uncertainty. RMR also entered the Greenwich multifamily market with a roughly $350 million acquisition, and management guided for Q3 distributable earnings of $0.48 to $0.50 per share. The RMR Group (NASDAQ:RMR) reported fiscal second-quarter 2026 results at or above the high end of its outlook, as management highlighted incentive fees from managed REITs, ongoing private capital fundraising efforts and recent balance sheet investments. President and CEO Adam Portnoy said RMR generated distributable earnings of $0.44 per share and Adjusted EBITDA of $18.5 million for the quarter. He said the results came “despite operating in what remains an unsettled economic environment,” citing market volatility and geopolitical uncertainty. → Insider Sales: Top AST SpaceMobile Insider Cuts Postion Over 30% RMR earned $23.6 million of incentive fees for 2025, and Portnoy said the company is on track to earn incentive fees again this year, with both Diversified Healthcare Trust and Industrial Logistics Properties Trust accruing incentive fees during the quarter. Portnoy reviewed several developments across RMR’s managed REITs, saying the company has been active in executing clients’ strategic initiatives. → Light Speed Returns: Corning Cashes In on NVIDIA Growth At Diversified Healthcare Trust, or DHC, Portnoy said the company has focused on improving senior housing operating performance after transitioning 116 senior living communities to new operators in the second half of 2025. DHC generated first-quarter Normalized FFO of $33 million, or $0.14 per share, and Adjusted EBITDA of $74 million, both above analyst consensus estimates, according to Portnoy. Same-property NOI in the senior housing operating portfolio rose 13.5% year over year, while occupancy increased 110 basis points. DHC also sold 13 unencumbered non-core communities in March for gross proceeds of approximately $23 million. Portnoy said asset sales are expected to slow in 2026 after DHC completed about $605 million of sales in 2025, with management now focused on improving NOI in the retained portfolio. He also noted that Moody’s upgraded DHC’s debt ratings in April and revised its outlook to positive from stable. → Years in the Making, AMD’s Upside Movement Has Just Begun At Service Properties Trust, or SVC, Portnoy said RMR helped complete a $575 million equity offering that accelerated deleveraging, eliminated near-term refinancing risk and provided flexibility to improve hotel performance and pursue additional asset sales. RMR participated in the offering with a $50 million anchor investment. Portnoy said the proceeds allowed SVC to eliminate all unsecured debt maturities until 2028. For Industrial Logistics Properties Trust, or ILPT, Portnoy said first-quarter Normalized FFO of $0.33 per share and Adjusted EBITDA of $87 million exceeded the high end of management’s guidance. ILPT completed about 862,000 square feet of leasing during the quarter at rental rates 26% above prior rents. RMR also assisted ILPT with the refinancing of $1.6 billion of debt for its consolidated Mountain Joint Venture, replacing floating-rate and amortizing debt with interest-only fixed-rate debt at a 5.7% rate. Seven Hills Realty Trust originated three loans totaling $67.5 million during the quarter and generated distributable earnings of $0.24 per share, Portnoy said. Total loan commitments reached approximately $776 million, a record high for the portfolio. Portnoy also said Office Properties Income Trust, or OPI, received court approval for its plan of reorganization and is expected to emerge from bankruptcy by the end of the fiscal second quarter. He said RMR expects to continue managing OPI under previously disclosed terms, including a five-year term and a flat business management fee of $14 million per year for the first two years, while property management economics remain unchanged. Chief Operating Officer Matt Jordan said RMR’s private capital business has grown from “essentially zero” assets under management in 2020 to nearly $12 billion today. He said RMR is building brand awareness with global investors and has met with nearly 200 global investors representing almost $7 trillion in assets under management. Jordan said fundraising has been disrupted by the ongoing conflict in the Middle East, with global fundraising in the first quarter of 2026 down 50% from the prior year. However, he said North American real estate still attracted 65% of all dollars raised, and value-add strategies accounted for 56% of fundraising. RMR’s residential business now represents more than $4.7 billion in value-add residential real estate across 18,500 owned and managed units, Jordan said. In April, RMR closed on the acquisition of a multifamily portfolio in Greenwich, Connecticut, for almost $350 million. The transaction was sourced off-market and marks RMR’s entry into what Jordan described as one of the country’s most supply-constrained and affluent housing markets. RMR Residential will manage the properties and pursue a multiyear strategy to modernize communities, enhance the resident experience and improve efficiencies. The acquisition was completed through a joint venture in which RMR is a co-general partner and invested $6 million for a 5% ownership interest. Jordan said the remaining approximately $120 million of equity was raised from two institutional partners. RMR expects to recognize $600,000 of revenue from the transaction in fiscal Q3 and earn ongoing operating fees of about $750,000 annually. Jordan said the venture is expected to generate annual cash-on-cash returns of approximately 7.5% over the longer term, with potential carried interest as investment hurdles are met. Chief Financial Officer Matt Brown said recurring service revenues were $42 million in the quarter, down about $1 million sequentially, primarily due to hotel sales, lower enterprise values at SVC and DHC as those companies paid down debt, and the wind-down of AlerisLife’s business. Brown said RMR expects recurring service revenues to rise to about $44 million next quarter, driven by revenue from the Greenwich acquisition, higher construction management fees and enterprise value improvements at certain managed REITs. Recurring cash compensation was $37.7 million, up modestly from the prior quarter due to payroll tax and benefit resets, and is expected to remain consistent in fiscal Q3. Recurring general and administrative expense was $10.1 million, excluding $600,000 in annual director share grants, and is expected to remain around that level for the rest of the fiscal year. For fiscal Q3, Brown guided for Adjusted EBITDA of approximately $19 million to $21 million and distributable earnings of $0.48 to $0.50 per share. He said RMR will no longer provide guidance for adjusted net income because investments in leveraged real estate have reduced the metric’s usefulness due to depreciation and interest expense. Brown said RMR’s current liquidity is approximately $133 million, including $75 million of capacity on its revolving credit facility, after the $50 million SVC investment and the $6 million Greenwich joint venture investment. The SVC investment is expected to generate about $420,000 of incremental quarterly dividends. During the question-and-answer session, Portnoy said RMR’s multifamily investments are likely to remain private and continue to be structured through joint ventures and small portfolio investments. He said RMR is also trying to build a dedicated fund around the strategy, but he does not expect a transaction that would roll up the full $4.7 billion multifamily portfolio into a public vehicle. Portnoy said development and credit remain priorities, though development is difficult in the current market because of uncertainty and elevated required returns. He said Seven Hills has close to $500 million of capacity for new investments over the next year, supported by new capital and expected loan payoffs. Asked about RMR’s cash position, Portnoy said the company remains “all systems go” for the right opportunities, with more than $100 million of liquidity between cash and revolver capacity. He added that RMR is optimistic it could recover cash if it successfully syndicates its Enhanced Growth Venture tied to the multifamily strategy. Jordan said fundraising for equity remains challenging, with geopolitical volatility slowing conversations with investors. He said allocations to real estate remain in place over the long term, but fundraising cycles are taking longer. The RMR Group, Inc (NASDAQ: RMR) is a publicly traded asset management company that specializes in providing comprehensive real estate and investment management services to both public and private entities. Acting as an external manager, RMR offers a range of services encompassing property management, asset management, fund administration, accounting, investor relations and compliance oversight. Its client base includes real estate investment trusts (REITs), real estate operating companies (REOCs), closed-end real estate funds and institutional investors. Founded in 1986, RMR Group has built a business model centered on recurring fee revenue generated through long-term service agreements with its managed entities. The article "The RMR Group Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.

Interested in Service Properties Trust? Here are five stocks we like better. Service Properties Trust used roughly $1.5 billion in capital markets activity to retire $1.6 billion of debt, cutting annual cash interest expense by about $59 million and lifting normalized FFO guidance for 2026. Hotel performance was mixed: comparable-hotel RevPAR rose 6.7% year over year, but adjusted hotel EBITDA fell 9.2% as higher insurance and other costs pressured margins. The retained hotel portfolio performed better, while the 15 hotels being marketed for sale posted losses and weak RevPAR. SVC is continuing its asset-sale and portfolio repositioning strategy, advancing sales of 15 Sonesta-managed hotels and targeting a more measured pace of net lease acquisitions. Management says the company now has a stronger balance sheet, no unsecured debt maturities until 2028, and is shifting further toward net lease assets. Silvaco Stock: Consider Early Investment in New Semiconductor Service Properties Trust (NASDAQ:SVC) reported first-quarter 2026 results that management said reflected progress on a broader repositioning plan, including significant debt reduction, continued hotel asset sales and a more measured approach to net lease acquisitions. President and Chief Executive Officer Chris Bilotto said the company completed roughly $1.5 billion of capital markets activity early in the year, including a $745 million asset-backed securities financing in March and a $575 million underwritten equity offering in April. The proceeds, together with cash on hand, were used to retire $1.6 billion of debt, producing annualized cash interest savings of $59 million, he said. → Insider Sales: Top AST SpaceMobile Insider Cuts Postion Over 30% 5 Best REIT Alternatives for Passive Real Estate Income “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,” Bilotto said. SVC’s hotel portfolio posted higher revenue per available room in the quarter, though earnings were weighed down by properties the company is seeking to sell and by higher costs. → Light Speed Returns: Corning Cashes In on NVIDIA Growth Hotel Stocks - Best Hotel Stocks Invest In Across 93 comparable hotels, RevPAR rose 6.7% year over year, driven primarily by occupancy gains across service levels and strength in the full-service segment. Adjusted hotel EBITDA declined 9.2% to $18.4 million. Brian Donley, Treasurer and Chief Financial Officer, said gross operating profit margin fell 70 basis points to 20.4%, while below-the-line costs increased $5.4 million from the prior year, driven by higher insurance expenses. Performance was stronger in SVC’s retained hotel portfolio. Excluding 15 Sonesta-managed hotels currently being marketed for sale, RevPAR rose 7.5% year over year and hotel EBITDA increased 2.1% to $26.2 million. Bilotto said the improvement came despite revenue displacement from the redevelopment of The Nautilus in South Beach. → Years in the Making, AMD’s Upside Movement Has Just Begun The 15 hotels being marketed for sale generated RevPAR of $49, down 3%, and produced losses of $7.8 million in the quarter. Bilotto said those hotels also carry “material future capital requirements,” reinforcing the company’s decision to exit them. SVC continued its capital recycling effort during the quarter, selling a 133-key focused-service hotel for $7.1 million. The company also advanced the sale process for 15 Sonesta-managed hotels totaling about 3,000 keys, while removing one Sonesta Select property from the process to reassess its positioning. Bilotto said buyer demand was strong for eight focused-service properties, which attracted nearly 30 bids from more than 12 buyers. The company has signed letters of intent with four buyers for expected total proceeds of approximately $61.2 million, which it intends to use to repay debt. For seven full-service hotels, Bilotto said bids came in below initial targets. Six of the seven have been awarded to buyers for expected proceeds of $55.3 million, with an update on the final property expected in the coming quarter. During the question-and-answer session, Bilotto said the company still expects the sales to occur in the back half of the year, though some transactions could close during the third and fourth quarters. Vice President Jesse Abair said SVC’s net lease portfolio contained 761 properties in 42 states at quarter-end, with annual base rents of $392 million. The portfolio was approximately 97% leased, with a weighted average lease term of 7.3 years. It includes 185 tenants operating under 140 brands across 21 industries. Trailing 12-month rent coverage for the net lease portfolio was 2.01 times as of March 31, up slightly from the prior quarter. TravelCenters of America properties reported coverage of 1.24 times, up from 1.2 times in the fourth quarter. During the quarter, SVC executed 20 leases totaling 219,000 square feet, with an average term of more than six years and an 8.5% cash rent roll-up. Less than 5% of annualized rents expire through the end of 2027. Net lease NOI declined $2.2 million year over year, primarily due to credit loss reserves for certain leases and related operating expenditures. Abair said during the Q&A that about $2 million of credit losses were tied to two franchisees that filed for bankruptcy, with the company covering property taxes in the interim. He characterized the impact as a one-time item and said the underlying assets remain strong performers. SVC has shifted to a more measured pace of net lease acquisitions in 2026, targeting about $25 million of annual volume funded through capital recycling. Since the start of the year, it invested $9 million in four properties, primarily funded by proceeds from 13 net lease dispositions. Donley said normalized funds from operations were $7.4 million, or $0.04 per share, down $0.03 per share from the prior quarter. The decline was primarily driven by a $7.2 million decrease in hotel results, partly offset by lower interest expense from capital markets activity. The company repaid $300 million of its February 2027 4.95% unsecured senior notes with cash raised from asset sales. It also used proceeds from the $745 million ABS offering to redeem $700 million of 8.375% senior unsecured guaranteed notes due June 2029, producing annual cash interest savings of approximately $14 million. Following the equity offering, SVC redeemed $450 million of 5.5% senior guaranteed unsecured notes due 2027 and the remaining $100 million of 4.95% senior unsecured notes due February 2027, generating another $29.7 million of annual cash savings. After those transactions, SVC had $4.7 billion of debt outstanding at a weighted average interest rate of 5.65%. Donley said the company has no unsecured debt maturities until 2028 and that Moody’s upgraded SVC’s corporate family rating. SVC reaffirmed its full-year outlook for hotel EBITDA, net lease NOI and consolidated Adjusted EBITDA. It raised its normalized FFO guidance to $124 million to $144 million, or $0.24 to $0.27 per share, reflecting the benefit of debt repayments. The guidance assumes midpoint interest expense of $360 million, general and administrative expense of $40 million and weighted average shares of 526 million. It does not include the impact of completing the 15 Sonesta hotel dispositions. In response to analyst questions, Donley said higher insurance premiums were a major factor pressuring hotel margins in the quarter, while labor costs rose about 3% year over year. He said RevPAR growth in April was comparable to the first quarter and that the company had not seen signs of a slowdown entering spring and early summer. Bilotto also said SVC is working toward adding a board member with lodging experience. On Sonesta, he said a new management team began in April and is evaluating changes intended to improve hotel performance, including revenue mix, group and contract business, labor models, sales efforts and loyalty program growth. Bilotto said the company’s broader transformation remains focused on selling noncore assets, improving hotel operations and shifting toward an increasingly net lease-oriented portfolio. Service Properties Trust (NASDAQ: SVC) is a real estate investment trust (REIT) specializing in the acquisition, ownership and leasing of service-oriented properties, with a primary focus on the lodging sector. The company structures long-term, triple-net leases with established hotel operators under franchise agreements with leading global brands. By partnering with recognized hotel companies, Service Properties Trust seeks to generate a stable income stream through rent payments, while offering operators the capital and balance-sheet flexibility to grow their portfolios. Since its formation in 2010, Service Properties Trust has grown its portfolio through strategic sale-leaseback transactions, targeted property acquisitions and selective dispositions. The article "Service Properties Trust Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.