Service Properties Trust

Good morning and welcome to the Service Properties Trust third quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead.

Good morning. Thank you for joining us today. With me on the call are Chris Bellotto, President and Chief Executive Officer, Jesse Hebert, Vice President, and Brian Donley, Treasurer and Chief Financial Officer. In just a moment, they will provide details about our business and our performance for the third quarter of 2025, 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 1995 and other securities laws. These forward-looking statements are based on SVC's beliefs and expectations as of today, November 6, 2025, and 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 svcreep.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 EBITDA RE. A reconciliation of these non-GAAP figures to net income is available in SDC's earnings release presentation that we issued last night, which can be found on our website. And finally, we are providing guidance on this call, including adjusted hotel EBITDA. We are not providing a reconciliation of this non-GAAP measure as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all. With that, I will turn the call over to Chris.

Thank you, Kevin. Good morning, everyone, and thank you for joining the call today. Last night, we announced our third quarter earnings results, which reflect continued momentum on our strategic objectives. I will begin today's call with a brief update on our key initiatives and share operating highlights from both our hotel and net lease businesses. Jesse will provide further details on our net lease platform and recent acquisitions. Brian will then discuss our financial performance, balance sheet, and quarterly guidance. Starting with our strategic priorities. We had another productive quarter, completing previously announced hotel sales, advancing our capital recycling initiatives, and taking decisive steps to strengthen SVC's balance sheet. Since our last earnings call, we have been active in the capital markets, raising over $850 million in proceeds, including $295 million from asset sales during the quarter, $67 million in asset sales in the months of October and November, and approximately $490 million from the issuance of our new zero coupon bonds. The proceeds were used to fully repay our evolving credit facility and retire all of our 2026 senior notes. Each of these steps further improved SVC's debt maturity profile, enhanced our financial flexibility, and strengthened our covenant position. Turning to current dispositions, earlier this year, we committed to exiting 121 hotels, totaling nearly 16,000 keys for gross proceeds of $959 million. We remain on track to complete the balance of these sales, including six hotels that sold in October for $66.5 million and 69 hotel sales expected to close in November and December for $567.5 million. Proceeds from these remaining sales will primarily be used to initiate the repayment of our February 2027 Senior Entrepreneur Notes. With respect to acquisitions, we continue to advance modest growth supporting our net lease portfolio, which Jesse will expand upon. This is intended to improve our net lease portfolio fundamentals, provide optionality with financing sources, and support our business model transitioning toward a net lease company. Turning to our hotel performance. At the macro level, the U.S. travel market continues to face headwinds with demand trends remaining uneven amid persistent economic uncertainty. Domestic leisure travel has declined to its lowest point in several years, reflecting heightened price sensitivity and a shift towards shorter booking windows. These behaviors suggest a more cautious consumer mindset in the current environment. SV's portfolio continues to deliver steady top-line growth, with RevPAR increasing 20 basis points year-over-year, outpacing the broader industry by 160 basis points, and representing the fourth consecutive quarter of outperformance. This growth was primarily driven by occupancy gains, while AVR declined modestly. Excluding the hotels we are exiting, our remaining 84 hotels delivered stronger third quarter performance with REVPAR increasing 60 basis points year over year, driven by occupancy gains of 140 basis points. Across the broader portfolio, contract business, particularly airline-related demand, remained a key growth driver and was partially offset by softer group and a decline in government bookings. Transient revenues were flat year over year, reflecting stable but subdued discretionary travel activity. Hotel EBITDA declined compared to last year, primarily reflecting elevated labor costs, insurance deductibles, and broader expense pressures. The scale and timing of hotel dispositions during the quarter introduced operational disruption that weighed on performance, which we view as largely transitional. As the disposition pipeline normalizes, we expect this shift will support stability and market improvement as we move into 2026. In recent years, we have also made significant capital investments to elevate the quality and performance of our hotels, having undergone major renovations that close to 45% of our retained hotel portfolio. We see positive indications of increasing performance, and we expect these renovated hotels to deliver incremental growth over the next year as they capture additional market share. Within the retained hotel portfolio, approximately 15 hotels generated a combined EBITDA loss of over $20 million over the trailing 12 months. While several of these assets are in the midst of a performance ramp-up following the noted renovations or undergoing operational turnarounds, others are identified candidates for disposition. The reduction in cash drag combined with proceeds with these 2,026 hotel sales serves as a meaningful catalyst for further deleveraging. These actions enhance our financial flexibility and support our long-term strategic objectives. We expect to provide additional detail on these disposition plans in future updates as execution progresses. Turning to our triple net lease segment, our portfolio continues to deliver steady performance, highlighted by rent growth over 2%, stable rent coverage, and occupancy over 97%. the triple net lease market continues to demonstrate resilience and growth driven by supported consumer behavior. Operators are capitalizing on consumer preferences for convenience, affordability, and accessibility, driving continued demand for QSRs, express car washes, and discount stores, industries in which SVC currently maintains or is increasing its exposure. Following the balance sheet initiatives executed during the quarter, we believe SVC is well positioned to advance both its hotel and net lease strategies. These efforts are expected to support sustained cash flow growth and enhance long-term value creation for shareholders. I will now turn it over to Jesse to discuss the NetLease portfolio.

Thanks, Chris. In support of SEC's strategic shift toward the NetLease space, during the quarter we continued to focus on portfolio growth and curation, driven largely by our acquisition platform. Although they will remain relatively modest in the near term, our acquisitions are intended to scale our net lease business, optimize portfolio composition, and unlock value through accretive financing opportunities. Our investment thesis continues to revolve around necessity-based, e-commerce-resistant retail assets that offer strong rent coverage and require minimal capital investment. During the third quarter, we acquired 13 net lease properties for a total of $24.8 million. Accounting for closings, subsequent to quarter end, year-to-date investments total $70.6 million. These deals have been funded with a combination of cash on hand and proceeds from net lease dispositions. Our 2025 transactions to date have a weighted average lease term of 14.2 years, average rent coverage of 2.6 times, and an average going-in cash cap rate of 7.4%. Consistent with our investment criteria, the acquisitions include a balanced mix of quick service and casual dining restaurants, automotive services, fitness, and value retailers. At quarter end, SBC's net lease portfolio consisted of 752 properties with annual minimum rents of $389 million. The portfolio was more than 97% leased with a weighted average lease term of 7.5 years. We have 178 tenants operating under 139 brands across 21 distinct industries. Aggregate rent coverage was just over two times for the trailing 12 months unchanged compared to the prior quarter. From a credit quality perspective, two-thirds of our annual minimum rents come from TA travel centers backed by investment grade rated BP. Rent coverage at these assets was also stable compared to the prior quarter. Annualized base rent increased 2.3%, and NOI increased 50 basis points year over year, largely a function of our recent acquisition activity. Our asset management team executed 10 leases this quarter, totaling 187,000 square feet and averaging over 10 years of term. Looking ahead, we have a robust pipeline of investment opportunities aimed at further enhancing portfolio metrics with respect to tenant and geographic diversity, weighted average lease term, and coverage ratios. To that end, we are currently under agreement to acquire five additional properties totaling $25 million, which we expect to close in the fourth quarter. Incremental, disciplined growth will continue to be the focus for the net lease side of the business, generating reliable cash flows designed to endure throughout economic cycles. And with that, I'll turn it over to Brian to discuss our financial results.

Thank you, Jesse. Good morning. Starting with our consolidated financial results for the third quarter of 2025, normalized FFO was $33.9 million, or 20 cents per share, versus 32 cents per share in the prior year quarter. Adjusted EBITDA RE decreased $10 million year-over-year to $145 million. Overall financial results this quarter as compared to the prior year quarter were primarily impacted by a $13.1 million decline in adjusted hotel EBITDA and an $8.7 million increase in interest expense. For our 160 comparable hotels this quarter, rent power increased by 20 basis points, gross operating profit margin percentage declined by 330 basis points to 24.4%. Below the GOP line costs at our comparable hotels increased 7.6% from the prior year, driven by insurance claims at certain hotels. Our hotel portfolio generated adjusted hotel leave up to $44.3 million, a decline of 18.9% from the prior year, as a result of softer demand and expense pressures. These results came in below the low end of our hotel leave of the guidance range by $9.7 million, primarily due to a $6.6 million impact from hotels sold prior to September 30th and a $2.9 million impact from fire-related disruption at two full-service hotels. The 76 Senesta exit hotels not yet sold as of quarter end generated a red bar of $72, a decline of 1%, an adjusted hotel EBITDA of $8.3 million, a decline of $3.2 million year-over-year. The 84 hotels in our retained portfolio generated a REVPAR of $114, an increase of 60 basis points year-over-year, an adjusted hotel EBITDA of $36 million during the quarter, a decrease of $7 million year-over-year. Most of those declined year-over-year in the retained portfolios related to elevated labor costs, repairs, and insurance expenses. Turning to our expectations for Q4, we are currently projecting fourth quarter rep bar of $86 to $89 in adjusted hotel leave in the $20 to $25 million range. This guidance considers a sequential decline due to seasonality in the fourth quarter, as well as recent headwinds in the travel and lodging industries. This guidance does not include the impact of completing any of the remaining 76 and at the hotel dispositions expected to close in Q4. Turning to the balance sheet, we currently have $5.5 billion of debt outstanding with a weighted average interest rate of 5.9%. As discussed last quarter, we fully drew down on our $650 million revolving credit facility in July to protect liquidity as our 1.5 times debt service coverage covenant was projected to be below the minimum requirement when we filed our second quarter earnings. Since then, we have taken several actions to strengthen SEC's balance sheet and improve our credit metrics. Using the proceeds from asset sales and our new $580 million of zero coupon senior secured notes, we have repaid all $700 million of senior notes that were scheduled to mature in 2026. I'm pleased to report we have also repaid all amounts outstanding on our $650 million revolving credit facility and are currently in compliance with all of our debt covenants. We currently project interest expense for the fourth quarter will be approximately $102 million It includes approximately $84 million of cash interest expense and $18 million of non-cash amortization of discounts and financing fees. Our next debt maturity is $400 million of 4.95% unsecured senior dollars due February of 2027, which we currently expect to redeem from the proceeds of the remaining hotel asset sales we expect to close this quarter. Turning to our capital expenditure activity, During the third quarter, we invested $47 million in capital improvements. Notable activity this quarter includes projects at our Sonesta Atlanta Airport Hotel, preliminary project expenses for the Nautilus in South Beach, and our Sonesta ES Suites in Anaheim. As it relates to our capital spending, we are updating our full year 2025 guidance to reflect a shift in the pace of deployment and the timing of our plan renovation and brand transition at the Nautilus Hotel. We originally planned to begin this project in the fourth quarter of this year, but we have deferred the project to commence during the first quarter of 2026, with completion expected next fall. For the full year 2025, we're lowering our full year CapEx projection from $250 million to approximately $200 million. Last quarter, we provided an initial 2026 CapEx guidance at $150 million for the year. and expect the deferral of the Nautilus project will result in $20 to $30 million of capex shifting to 2026. In closing, our third quarter results reflect continued progress in transforming SVC and strengthening its financial position, highlighted by successful capital markets activity and strategic asset sales. Looking ahead, our focus remains on driving EBITDA growth and optimizing our portfolio to enhance long-term shareholder value. That concludes our prepared remarks. We're ready to open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jack Armstrong of Wells Fargo. Go ahead, please.

Hey, good morning, guys. Thanks for taking the question. We're coming up on the halfway point in Q4, and there's still 69 hotels left to get done by year end. How realistic is it that all these are going to close in time? Based on our prior conversations, the operators that are picking them up can only handle so much at a time from an operational perspective there. So curious your thoughts on the actual execution there.

Yeah. Hey, thanks for the questions, Chris. You know, I think, you know, as we've talked about historically, you know, with respect to these sales, there was a phase negotiation or a rolling close with an outside date in December, meaning kind of the last close would occur across all the assets in December. And so I think the best way to look at it is right now with based on information we have, we're tracking to close 40 to 50% of the remaining balance in November. And then the rest will be in December, no later than the outside closing date. So, everything planned for 2025. Okay.

And if they don't close by the closing date, what's the procedure there? What should we expect?

Well, contractually, they're obligated to close. And so, if for some reason they don't close, then there's deposits and other remedies at risk. Again, I think that at this stage, just given where we are and the work we've done, I think that I would view that as highly unlikely.

Okay. And then you took a $27 million impairment in the quarter. Can you talk about what that was in relation to and the likelihood of further impairments as we get through the rest of these sales?

Hey, Jack. This is Brian. That was more shifting of the purchase price allocations amongst the portfolios. I wouldn't read too much into it. Overall, we're still on track to produce a significant book gain on these sales. Most of it, all of the rest of it will be a gain in the fourth quarter. Again, a lot of these contracts and the way that the sales were phased in, whether the individual purchase prices and how those are allocated amongst the portfolio ended up resulting in that impairment. But it's, again, I think it's more noise than anything.

Okay. And then last one for me, you know, price coverage continues to decline in the Travel Center portfolio. Do you have an expectation of when or if that might improve? And at what level of coverage would you say it's concerning to you, you know, acknowledging that it's guaranteed by BP?

Yeah, Jack, this is Jesse. I'll take that. I mean, certainly we're seeing, you know, a couple of sequential quarters of degradation in the TA coverage. I think some of that is just kind of we're rolling off that kind of post-COVID high with respect to the freight demand driving a lot of their business. It does seem to be moderating that decline and kind of flattening out, particularly within the last couple quarters. So, Given the BP credit backing of those leases, I don't think we're particularly concerned at this point. You know, we're in regular contact with TA. We continue to see them invest in the sites and continue to make them more competitive. So I think it's something we're watching, but I don't think, you know, to anything above one, it doesn't drive us towards any particular degree of concern at this point.

Okay. Really helpful. Thanks for the time, guys.

Thank you.

Again, if you have a question, please press star, then one. The next question comes from Tyler Batori of Oppenheimer. Go ahead, please.

Hey, good morning. Thanks for taking my questions. A couple on the hotel portfolio first, and I'm just trying to evaluate the performance during Q3. I know lots of moving pieces with asset sales and whatnot, so just talk about how the EBITDA specifically came in versus your expectations internally. I know it was a little bit below the guidance, but I'm not sure perhaps how much of that was driven by asset sales and some of the other moving pieces you have going on right now.

Hey Tyler, it's Brian. Thanks for the question. I think from the disposition standpoint, the timing of those sales and when they closed was the biggest driver. When we provide guidance and the guidance I provided today for the fourth quarter doesn't assume asset sales. So we can't always predict the exact timing and how much earnings will come off the plate. So above, let's call it $7 million, I think is the number for sales from what we had guided for Q3. There were some other one-time impacts in the quarter. You know, we had a couple of insuranceable events, fires at a couple of properties in New Orleans. There was an electrical fire that caused significant disruption. We also had a fire on Silicon Valley, same story. It just, you know, took room. The hotel was closed for days, and then there's just been general disruption from reopening. in some other, you know, renovation disruptions, some softness in Cambridge, for example, was a big driver this quarter at our Road Sonesta. So there's different stories within the story. But, you know, I think to Chris's point and his remarks, you know, there is definitely a softness in the industry and the travel industry in general. We continue to see cost pressures. So putting all of that together is where we landed.

Okay. And then just to follow up that in terms of the guide, for Q4, you know, helpful to hear that it doesn't assume any asset sales. But when I just look at the sequential progression, Q4 versus Q3, you know, the seasonality is a little bit worse than normal if I'm doing my math right. It applies about a high single digit EBITDA margin there. Just talk a little bit about kind of what's going on in Q4 and just what you're seeing in terms of travel trends, costs, et cetera, moving into the fourth quarter that's informing that guide.

Yeah, I mean, I think at a very high level from the travel trends, you know, things have generally moderated quite a bit. Where we are seeing kind of some pockets are with respect to kind of the group pace. I think overall we expect that to be up 3% for the year, give or take $5 million. And then we're also starting to kind of see some opportunities with contract business, more specifically at a lot of the renovated hotels, and so that's providing additional lift. But I think, you know, a lot of our business comes from the OTA market. That market, too, is getting a little bit more competitive, which is putting pressure on rates just given, you know, as travel demand has lessened more broadly. There's just a lot more brands, you know, exercising that market. So there's, you know, there's disruption on that front, let alone just kind of with the broader industry. And again, with the bright spots being progress we're seeing from the renovated hotels and then more specifically on group and contract business. And then on the EBITDA side, Brian, I don't know if you want to add any more color there.

No, I mean, I think it's really the combination of what we've been seeing last few quarters with, you know, continued cost pressures lower demands, the seasonality in Q4. We're also taking out our focus service hotels, which had much more of a smoother trend, if you will, across all four quarters. It's a little more steeper bell curve for our full service hotels coming into Q4. That's the typical pattern for our portfolio as we sell these hotels. And then the impact of the rest of the dispositions you know, as we talked about, as Chris mentioned, that most of these properties are going to close in November and December. So how much EBITDA we retain versus leaving the system still remains to be determined based on timing. But there will be a similar impact to Q4's EBITDA removing hotels and raising those proceeds for us.

Okay, great. And moving on, can you talk a little bit more about some of the recent movements on the debt side, just the rationale behind doing the zero coupon bond. And I know it's a little while until you have upcoming maturities, but it's always something that people are focused on. So just kind of talk about how you're thinking about strategically handling those in the future.

Sure, Tyler. The zero coupon bond, the primary goal there was to give us some headroom with our covenants, specifically the one and a half times interest coverage, the minimum coverage. So, we get the benefit of having zero coupon interest to that covenant. So, we got an immediate lift. And, you know, we drew down the revolver in July to protect liquidity because, you know, if we were below that one and a half times, we can't use the revolver. It's an incurrence test, an incurrence of debt, including borrowing from a line of credit. So, we had drawn down the line defensively in July. We started, you know, working through the strategies, you know, as we saw Hotel Ibiza slipping further as the quarter moved on. executed on the zero coupon transaction. We've repaid our 26 notes and brought ourselves back into check. So those are the primary drivers. The zero coupon bond basically gives us two years of runway on our debt maturities, our next debt maturity. Once we complete the rest of these asset sales, we're paying off the early 27 notes that are coming due in February 27th. So our next debt maturity will be those zero coupons in September of 2027. Okay.

Appreciate the detail. That's all from me. Thank you.

The next question comes from John Masaka of B. Reilly Securities. Go ahead, please.

Good morning. Maybe just a quick clarifying question on the guidance. Does that include the impact of post-health sales closed quarter to date?

No. We just – the projection is based on the portfolio as of September 30th. So the few hotels shouldn't make a big difference, the ones we've closed so far, but it just assumes all 76 that haven't sold are still in those numbers.

Okay. Okay. And then as we think of kind of, you know, the pro rata impact of sales in 4Q and maybe even the final impact coming into 2026, is the overall amount of hotel EBITDA you expect to kind of lose in these sales still at the $53 million or so mark you laid out in August?

Roughly. I mean, yeah, I mean, it's hard to predict what those would have done without the sales process impacting those properties. But generally speaking, around $50 million is the right number for the whole portfolio.

And then in terms of hotel sales, you know, it seems like everything is expected to be wrapped up by the end of this year. What's the outlook for potential further dispositions in 2026? particularly given you're not going to have debt repayment needs until 27. Could we expect another strategic process? Maybe as you look at the zero coupon bonds, I know they're secured by net lease assets, but just kind of serious as to the opportunity set for more hotel dispositions, could it be structural like it was this year or is it going to be more opportunistic going forward?

Yeah, so the short answer is we are planning to continue with dispositions in 2026. As I mentioned kind of in my prepared remarks, you know, we have a quantum of hotels that are negative EBITDA drags, and these are on the full service side. And our initial plan is to focus on a portion of those for launch of a sale earlier in the year. And we're going to kind of take a more incremental approach to kind of how we think about layering in the sales. You know, I think it's important just to know, I mean, selling negative EBITDA hotels in itself, you know, takes time, you know, and given kind of the overall backdrop of where the hotel kind of performance is going, more kind of sector related. you know, we just want to strike the right balance of timing to be focused on transactions. So, it'll be very much incremental in next year, but with the caveat that we will be selling hotels. And our plan is to really provide more definitive information as we, you know, round out the year, likely with our NAERI presentation update on kind of, you know, the hotels themselves, you know, how much in proceeds we expect, you know, how much negative EBITDA in the cases for the initial round we expect to, you know, see come off the books when these transact and other details supporting that initiative.

Okay. I appreciate that detail. And then one last kind of one on the hotel front, purely the hotel front. The margin decline kind of, you know, quarter over quarter, obviously, but even year over year, was that just driven by some of the fire disruption and insurance issues you talked about earlier on the call, or were there other kind of factors going into that?

Yeah, that's part of it. I think labor continues to be a big headline number for us and for every hotel company, frankly. Continued growth in wages and benefit costs, market impacts, the availability of labor has a bigger outsized recurring impact

And then on the CapEx guidance, I appreciate all the detail. It still feels like, you know, the 2025 CapEx guidance is falling for a pretty significant ramp in 4Q versus what you've done in the last three quarters. Is there something driving that, particularly now that the Nautilus renovations are going to move to 2026 purely?

Yeah, there's a significant amount of stuff that we have in the pipeline at various hotels that will have an outsized impact, including one of our large royal semesters in Cambridge. We're starting a renovation project there that will carry through into next year. Same thing down in New Orleans. The Nautilus, the biggest part and the actual swinging of hammers and doing the rooms and the public space will happen next year, but there's still a significant amount of dollars going out the door in fourth quarter by FF&E releases and that sort of thing, as well as other, you know, maintenance type capital that we're working through across the portfolio. So, yes, it is outsized compared to the trend and, you know, but that's part of the rationale why we brought the guidance way down.

So, diversely kind of on a two-year stack, I think the way guidance is going to change is calling for overall CapEx to decline. Is that just a product of hotel sales or is there something else, you know, going on there where you're thinking you need less CapEx spend?

I would, you know, certainly having less hotels, there'll be less overall capital. But I think generally speaking, we have less kind of renovations plans during the year and just bringing down kind of the overall capital spend. So I think net-net, it's focused on just trying to kind of be more strategic about the deployment of capital going into the year. So, you know, this is, you know, Ryan kind of alluded to the numbers going into 2026. And we'll continue to evaluate that with the goal that we can kind of see further reductions in our years as well.

Okay. And just to be clear, the CAPEX spend guidance does take into account the asset sales, correct?

Correct. We're not projecting anything related to the sale hotels.

No, no. I meant to say, I guess the number for 2026 includes assets that are planned to be sold, or is that? Are you factoring in the fact that you're going to sell these assets before you need to spend capex on them?

Yeah.

Yeah, correct. Yeah. So it's for, I guess we'll answer it in two parts. For the 25 dispositions and the capital guidance, that's all factored in. There's no capital with, you know, specifically tied to what we're selling at this stage, just given where we are in the process. The capital guide for 2026, It's going to have some capital for the hotels we're selling. I mean, by the time we transact on those hotels, you know, we're going to have to continue to make sure we're taking care of any mission critical work. So, you know, there's going to be some numbers in there, but as we dial into the timing of the sales, then we would kind of right-size that number. But I wouldn't view that as kind of an outsized amount that would fall off given some of those initial sales.

And then maybe as we think about 26, a bigger picture, is there a leverage target you kind of have in mind post some of these continued hotel dispositions?

Yeah, I think with the – Completion of 113, so that's the sales, you know, we've been quoting one full turn off of leverage when the dust settles and that's still where we expect things to shake out on the flip side. As you've seen in these numbers, EBITDA has eroded a little bit and really depends on where we come in next year short of any other sales. So from a leverage target standpoint, when we get more specific as far as what we might sell in 26 and some of the full-service hotels and what the impact is to the portfolio, we'll have more clarity on that. But at this time, the full turn of leverage from what we've done this year is sort of the benchmark in the short term.

I appreciate the answer. I appreciate you answering all my questions. Thank you very much.

This concludes our question and answer session. I would like to turn the conference back over to Chris Bellotto, President and Chief Executive Officer, for any closing remarks.

Thank you, everybody, for joining the call today. We look forward to seeing many of you at May, December. Please reach out to our investor relations team if you're interested in meeting with SBC. That concludes our call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.