Service Properties Trust

Good morning and welcome to the Service Properties Trust fourth quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference 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 fourth 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, February 26, 2026, 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 SVC's earnings release presentation that we issued last night, which can be found on our website. Lastly, We will be providing guidance on this call, including estimated 2026 normalized FFO, hotel EBITDA, and adjusted EBITDA RE. We are not providing reconciliation of these non-GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all. I will now turn the call over to Chris.

Thank you, Kevin. Good morning, everyone, and thank you for joining the call today. Yesterday, we reported fourth quarter results that highlight our continued progress optimizing SBC's portfolio, strengthening our financial profile, and repositioning the company for long-term growth and value creation. I will begin today's call with a brief update on our key strategic and financial initiatives and share operating highlights from our hotel portfolio. Jesse will provide an update on our net lease platform and recent acquisitions. Brian will then discuss our financial results and balance sheet, along with the introduction of annual guidance for 2026. Starting with our strategic priorities, we had a productive quarter completing previously announced hotel sales and taking action to reduce leverage and strengthen SVC's balance sheet. During the quarter, we sold 66 hotels, totaling nearly 8,300 keys for $534 million. This activity increased our total dispositions for the year to 112 hotels, totaling approximately 14,600 keys for nearly $860 million. We used the proceeds and cash on hand to proactively redeem all $800 million of our 2026 debt maturities and $300 million of our February 2027 notes. Building on this momentum, in 2026, we'll remain focused on selling additional hotels and executing further strategies to improve SBC's cash flows, debt maturity profile, and overall cost of capital. Consistent with these objectives, in January, we sold the Simply Suites for $7.1 million with 133 keys and launched the remarketing of nine focused service hotels that we initially brought to market in 2025. These hotels benefit from stable occupancy and positive cash flow, providing an opportunity to cater to a wider buyer pool, which is supported by the current interest level we are seeing with the marketing process. Also in January, we initiated the marketing of seven full-service Senesta managed hotels with 2010 keys with locations across the Southeast, Midwest, and Pacific Northwest. Given their current cash drag, the sale of these seven properties is expected to increase annual EBITDA by approximately $13 million and improve our leverage metrics. We believe these assets offer an attractive opportunity for investors seeking value-add lodging real estate with repositioning potential through targeted capital investments. In terms of timing, our current plan is to formalize offers and select buyers over the next several months, and we are targeting staggered closing during the back half of 2026. We estimate total proceeds of $175 million to $200 million, which will be used for debt reduction. Complementing these efforts, earlier this week we announced further action to strengthen our debt maturity profile. We priced $745 million of new five-year mortgage financing, secured by our existing net lease master trust. To support this financing, SVC contributed to the trust an additional 158 retail properties, which included legacy properties where we renewed tenants or re-tenanted the property, one of our travel center master leases, and assets we acquired over the past year. In total, the contributed properties had an appraised value of approximately $1.1 billion. The transaction proceeds will be used to redeem all $700 million of our 8 and 3 eighths percent notes due in 2029 at significantly lower interest rates. Based on the weighted average coupon of 5.96%, we expect this transaction to result in annual cash savings of approximately $14 million, or 8 cents per share. With the completion of this new financing in 2026, we will continue to focus our efforts on improving performance within our hotel portfolio. along with capital preservation, which includes reduced net lease acquisition activity to roughly $25 million funded through sales of select net lease assets, along with a reduction to our overall capital spend across our hotel portfolio, which Brian will speak to momentarily. Turning to hotel performance, during the fourth quarter, the U.S. lodging industry remained soft amid uneven demand trends, with RevPar declining 1.1% year-over-year. Performance continued to be bifurcated as the luxury and upper upscale segments were the only segments of post-growth supported by higher income leisure travelers and premium experiences. The business transient segment remained muted, reflecting the impact of the prolonged government shutdown and value-conscious customers remained sensitive to broader macroeconomic conditions pressuring lower tier segments. SBC's portfolio continued to deliver steady top-line growth as RevPAR increased 70 basis points year-over-year, outpacing the broader industry by 180 basis points and representing the fifth consecutive quarter of outperformance. We have invested significantly in hotel renovations in recent years, upgrading nearly half of our retained portfolio, and these assets are delivering stronger top-line performance. We expect this momentum to continue as our renovated hotels capture market shares. Excluding the hotels we are exiting, our remaining 77 hotels delivered relatively stronger fourth quarter performance with rep par up 170 basis points year-over-year, driven by occupancy gains of 140 basis points. Contract business, particularly airline-related demand, remained a key growth driver, partially offset by a decline in government bookings and softer transient revenues. Hotel EBITDA declined year-over-year due to elevated labor costs and broader operating expense pressures. Additionally, the scale and timing of hotel dispositions during the quarter created temporary operational disruptions that weighed on performance, which we view as largely transitional. As the volume and pace of dispositions conclude, we expect this disruption to taper, allowing performance to normalize. Further complementing our efforts to support performance improvement across our hotels, Senesa, which manages the majority of SVC's owned hotels and is 34% owned by SVC, recently announced the appointment of Keith Pierce and Jeff Lear as co-CEOs affected April 1st. We believe their leadership and experience will be instrumental in further optimizing Sinestra's rep power and market share performance while driving operational discipline and efficiencies across the SVCO portfolio. Looking ahead to 2026, we are cautiously optimistic that lodging market conditions will improve and that demand will stabilize as the year progresses. More specifically, our hotel footprint is well positioned to benefit from large events throughout the year, including the World Cup, with 75 matches taking place in SBC markets, representing over 40% of our retained hotel rooms. Across our net lease portfolio, we are forecasting continued improvement with ongoing leasing, sales of non-core assets, and benefits from the full-year NOI contribution from our acquisitions in 2025. I will now turn it over to Jesse to discuss the net lease portfolio in more detail. Thank you and good morning.