Service Properties Trust to Transfer 103 Hotels to Sonesta from IHG
IHG Failed to Pay Owner’s Priority Returns to SVC for July and August
SVC’s management agreements with IHG cover 103 hotels (three InterContinental®, five Kimpton® Hotels & Restaurants,
“SVC and IHG have had a long relationship which began in 2003, but we were unable to reach a mutually agreeable resolution to the defaults by IHG under our management agreements with them. Therefore, after a period of negotiation with IHG, we determined to terminate IHG and rebrand these hotels with Sonesta. Based on historical experience, we believe the current portfolio of 103 hotels may perform as well, or better, as Sonesta hotels post-conversion and once stabilized in their respective markets.
Sonesta currently manages 16 hotels for us that were rebranded from IHG in 2012, and total annual revenue and hotel EBITDA at these 16 hotels improved 14.4% and 10.3%, respectively, post-conversion and once stabilized. In addition to Sonesta possibly having a positive impact on these hotels’ performance in the future, we own approximately 34% of Sonesta and we will therefore indirectly share in any benefit of these new management agreements by Sonesta in the future. We also believe having these 103 hotels operated by Sonesta provides us with greater flexibility in managing our business through the current challenging market conditions. For example, we expect that some of the transitioned hotels may be repurposed to an alternative use or sold in the future.”
Following the utilization of the remaining
Warning Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever SVC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, SVC is making forward-looking statements. These forward-looking statements are based upon SVC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by SVC’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond SVC’s control. For example:
- This press release states that SVC plans to transition management and branding of 103 hotels to Sonesta from IHG. In addition, this press release states that SVC has an approximate 34% ownership interest in Sonesta and that SVC would therefore indirectly share in the benefit from these new management agreements and in the hotels’ performance to the extent they ramp up in the post-pandemic recovery. However, Sonesta may not operate these hotels profitably and SVC may not receive the benefit it would expect to receive. Further, it is not known how long the Covid-19 pandemic will last or how severe it will be, including its continued impact on the hotel industry. Moreover, it is not known how long it will take the economy to recover following the pandemic or what adverse changes on the hotel industry may be realized, such as if business and leisure travel are significantly reduced on a long-term or permanent basis. These and other factors may adversely affect the performance of these hotels, regardless of which operator is managing them.
Mr. Murraybelieves the current portfolio of 103 hotels may perform as well, or better, as Sonesta hotels post-conversion and once stabilized in their respective markets. Rebranding IHG hotels to Sonesta may not produce similar results as past experiences of rebranding. Further, rebranding hotels requires additional capital investments and causes operating disruptions. There is no assurance these 103 hotels will perform as well or better, or how long it will take to stabilize these hotels once rebranded.
- This press release also states that some of these hotels may be repurposed to an alternative use or sold. However, these outcomes may not occur.
This press release also states that SVC currently plans to transfer the branding and management of these hotels to Sonesta on the effective date of the termination, which is
November 30, 2020. However, as SVC has the right to keep the hotels branded and managed by IHG for up to one year following the termination date, some of the hotels may be transferred on a different date than November 30, 2020.
The information contained in SVC’s filings with the
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.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
Kristin Brown, Director, Investor Relations