Service Properties Trust Terminates Agreements with Marriott for 122 Hotels

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[{"type":"text","content":"\nSVC Terminated Marriott Agreements for Failure to Meet 80% Termination Threshold for Cumulative Owner’s Priority Returns to SVC through August\n\nSVC Plans to Transfer the Management of 98 of the 122 Hotels to Sonesta\n\nSVC has Entered Agreements to Sell 24 of the 122 Hotels for $153 million\n\n NEWTON, Mass.--(BUSINESS WIRE)--\nService Properties Trust (Nasdaq: SVC), or SVC, today announced that it has terminated the management agreements for 122 hotels with Marriott International, Inc. (NYSE: MAR), or MAR. As previously announced, SVC sent a letter requesting MAR advance $11.0 million to cover the cumulative shortfall between the payments SVC had received to date and 80% of the cumulative priority returns due to SVC for the eight months ended August 2020. MAR had until October 5, 2020 to avoid termination by making payment to SVC. SVC did not receive any payment from MAR, and based on discussions with MAR, SVC does not expect MAR to pay the cumulative shortfall for the balance of 2020. Accordingly, on October 6, 2020, SVC sent MAR a letter exercising its termination right. The effective date of the termination is January 31, 2021 and SVC currently plans to transfer the branding and management of 98 of these hotels to Sonesta.\n\nSVC’s agreements with MAR cover 122 hotels (2 Marriott®, 2 Springhill Suites®, 12 TownePlace Suites®, 35 Residence Inns®, 71 Courtyards®) in 31 states, currently require annual minimum returns of $194.6 million and currently expire in 2035.\n\nPursuant to its existing agreement with MAR, SVC is proceeding with the sale of 24 of the 122 Marriott branded hotels. SVC has entered agreements to sell a portfolio of eight TownePlace Suites® hotels with 834 rooms in four states for an aggregate sales price of $45.3 million and a portfolio of 16 hotels with 2,155 rooms in nine states (13 Courtyard hotels with 1,813 rooms and three Residence Inn hotels with 342 rooms) for an aggregate sales price of $107.8 million. SVC expects these sales to be completed by year end. Separate from selling these 24 hotels, SVC has been unable to sell nine additional Marriott branded hotels pursuant to its existing agreement with MAR, and the management of these nine hotels will be transitioned to Sonesta on December 15, 2020. The balance of the MAR portfolio, or 89 hotels, will be transitioned to Sonesta on January 31, 2021.\n...

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