Service Properties cuts quarterly dividend to 1c per share, to sell 114 hotels

Service Properties Trust announced that SVC‘s board of trustees has reduced SVC’s regular quarterly cash distribution on its common shares from 20c per common share to 1c per common share. The dividend reduction will result in $127M of annual savings. SVC also announced that it has plans to sell 114 focused service hotels managed by Sonesta International, or collectively with its parent and subsidiaries, Sonesta, with an aggregate of 14,925 keys and an aggregate net carrying value of $850M. SVC expects to sell these hotels in 2025 and use the net sales proceeds to repay debt. Additionally, SVC expects the sales of these hotels will result in savings of approximately $725M in capital expenditures, which was forecasted to be spent on these hotels over a six-year period. SVC currently owns 187 hotels that are managed by Sonesta under five brands, including 14 hotels that SVC is currently in the process of selling and the 114 being announced for sale. Upon completion of the disposition plan in 2025, SVC expects that Sonesta will continue to manage 39 full-service hotels, 14 extended stay hotels and six select service hotels owned by SVC. SVC will continue to own 34% of Sonesta. Todd Hargreaves, president and chief investment officer of SVC, made the following statement: “Given the slow recovery of our hotel portfolio in combination with our hotel capital improvement and renovation program and our deteriorating leverage metrics, we believe it is prudent to reduce the distribution to increase SVC’s liquidity and enhance our financial flexibility. The reduction in the distribution from the previous level will preserve approximately $127 million of SVC’s liquidity annually. We are also planning to sell 114 hotels to generate additional liquidity and concentrate the Sonesta portfolio on full service hotels and certain higher performing focused service hotels. We expect these sales will also result in reduced capital expenditure and leverage, improve portfolio performance and better position SVC’s hotel portfolio for the long term.”