Business
Service Properties Trust Announces Restructuring of Business Arrangements with Sonesta
Includes the Exit of All 39 Extended Stay Hotels Managed by Sonesta SVC Received a 34% Ownership of Sonesta NEWTON, Mass.--(BUSINESS WIRE)-- Service
About this update from Service Properties Trust - Shares Of Beneficial Interest
[{"type":"text","content":"\nIncludes the Exit of All 39 Extended Stay Hotels Managed by Sonesta\n\n\nSVC Received a 34% Ownership of Sonesta\n\n NEWTON, Mass.--(BUSINESS WIRE)--\nService Properties Trust (Nasdaq: SVC) today announced it has entered into a transaction agreement with Sonesta International Hotels Corporation and its newly formed parent company, Sonesta Holdco Corporation, or Sonesta, pursuant to which SVC and Sonesta agreed to modify their existing business arrangements. SVC currently owns 53 hotels that are managed by Sonesta pursuant to which SVC is due annual returns of $148.5 million. The changes to the arrangements between SVC and Sonesta are as follows:\n\n\n\nSVC and Sonesta have agreed to exit all 39 extended stay hotels managed by Sonesta, which currently require aggregate annual minimum returns of $49.5 million. As the hotels are sold, rebranded or repurposed, SVC’s annual minimum returns due from Sonesta will decrease by the amount allocated to each hotel;\n\n\nSonesta will continue to manage 14 full-service hotels owned by SVC and the annual minimum returns due for these hotels will be reduced from $99.0 million to $69.0 million;\n\n\nSVC received an approximately 34% equity interest in Sonesta;\n\n\nThe amended management agreements require that 5% of hotel gross revenue be escrowed for future capital expenditures as “FF&E Reserves,” subject to available cash flow after payment of SVC’s minimum returns;\n\n\nThe performance termination provisions under the agreements were modified to a portfolio wide performance test for determining whether the management agreement for any of SVC’s full-service hotels managed by Sonesta may be terminated for performance reasons and the non-economic provisions that previously allowed SVC to terminate an individual management agreement were removed; and\n\n\nThe initial expiration dates of the management agreements for SVC’s full-service hotels located in Chicago, IL and Irvine, CA and managed by Sonesta were amended to align with the remainder of the Sonesta portfolio and now expire in January 2037.\n\n\n\nExcept as described above, the economic terms of SVC’s agreements with Sonesta are consistent with the historical agreements between SVC and Sonesta.\n\n\nJohn Murray, President and Chief Executive Officer of SVC, made the following statement:\n\n\n“Today’s restructuring announcement is a stra...
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