Service Properties Trust

Good morning and welcome to the Service Properties Trust First Quarter 2026 Earnings Conference Call. 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 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 call over to Kevin Berry, 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 Dombic, Treasurer and Chief Financial Officer. In just a moment, they will provide details about our business and our performance for the first quarter of 2026, 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, May 7th, 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 svcreit.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, net operating income, or NOI, and adjusted EBITDA RE. We are not providing a 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. Last night, we reported first quarter 2026 results, which reflect measurable progress advancing SDC strategic initiatives. We materially strengthen our financial position with roughly $1.5 billion in capital markets activity, enhancing our overall leverage profile and debt maturity schedule. We continue to advance our capital recycling program and remain focused on active asset management across both our hotel and net lease properties. These initiatives serve as a catalyst toward driving performance for the company and improving cash flow. I will begin today's call with an update on our strategic priorities followed by highlights from our hotel portfolio performance during the first quarter. Jesse will then discuss our net lease business, and Brian will conclude with a review of our financial results, balance sheet, and financial outlook, starting with our strategic priorities. Since the start of the year, we executed a capital plan that significantly strengthened our balance sheet and strategic positioning. In March, we closed $745 million of accretive ABS financing secured in part by 34 of our travel centers leased to TA, reinforcing the attractiveness of these assets. In April, we completed a $575 million underwritten equity offering that was intentionally sized to deliver and improve our credit metrics. Importantly, RMR Group, our manager, invested $50 million alongside shareholders, underscoring strong alignment and confidence in our strategy. Taken together, along with cash on hand, we retired $1.6 billion of debt resulting in annualized cash interest savings of $59 million. We enter the remainder of 2026 with a stronger financial foundation and greater flexibility to execute our repositioning strategy and operational plans within our hotel portfolio focused on driving EBITDA improvement and value creation. Turning to hotel performance, during the first quarter, Rev Park across our 93 hotels increased 6.7% year-over-year, primarily driven by broad-based occupancy gains across all service levels, with notable strength in the full service segment. Hotel EBITDA across the portfolio decreased 9.2% year-over-year to $18.4 million, though this reduction was partially impacted by a $2.4 million decrease tied to the 15 properties currently being marketed for sale. As a reminder, our full-year guidance contemplates the expected losses related to these marketed hotels. More importantly, the underlying performance of our 78th hotel retained portfolio was even stronger. Excluding the assets marketed for sale, REVPAR grew 7.5% year-over-year. Hotel EBITDA increased 2.1% to $26.2 million. And this was achieved despite the known revenue displacement from our ongoing redevelopment of the Nautilus in South Beach. The south performance is driven by our strategic concentration and higher STR chain scales, our footprint in premier resort destinations, including Kauai, San Juan, and Hilton Head, and the uplift we are seeing from completed renovations. Our focus remains squarely on capturing the margin flow we believe this portfolio is capable of generating as it ramps up over the next few years. Following several years of significant capital investment to reposition these assets, SBC is well positioned to drive revenue uplifts and outsize EBITDA growth. Over the last four years, approximately half of our retained hotels completed or are currently undergoing major renovations. To ensure we capture the performance improvements and margin flow through anticipated over the coming years, our asset managers are actively engaging with our operators to refine operational synergies and streamline property-level execution. While we acknowledge the broader macro headwinds, including geopolitical uncertainty, elevated fuel costs, and lagging international and government travel, we remain confident that this active asset management approach will uncover varying opportunities to improve efficiencies and deliver stronger results. Turning to hotel dispositions. During the quarter, we advanced our capital recycling initiatives selling a 133-key focused service hotel for $7.1 million and progressed the marketing of 15 Senespa managed hotels, totaling approximately 3,000 keys. We removed one Senespa select property from the process to reassess its positioning, however, retain an active and engaged roster of buyers for the remaining properties. Across the broader marketed hotels, pricing has come in softer than our initial outlook, This dynamic only reinforces our strategic commitment to exit these hotels and reallocate capital. Buyer demand for the eight focus service properties was strong, resulting in nearly 30 bids from more than a dozen unique buyers. Pricing was generally consistent with the average per key valuation we achieved on focus service hotels over the past year. Specific to these eight hotels, we have signed letters of intent with four buyers for total proceeds of approximately $61.2 million which we intend to use to repay debt. For the seven full-service hotels, bids for this operationally challenged subportfolio have fallen below initial targets. Despite this, we are prioritizing the exit of these properties with six of the seven hotels awarded to buyers for expected proceeds of $55.3 million. We anticipate an update on the final property in the coming quarter, which will increase our total proceeds. From a strategic standpoint, holding these assets is not aligned with our long-term goals. Together, these marketed hotels represented a $7.8 million of losses in the first quarter while carrying material future capital requirements. Exiting them now, regardless of the softer pricing environment, eliminates a significant drag on our earnings and preserves capital. More importantly, it allows us to pivot our full attention and resources toward our retained core portfolio driving growth in markets and properties where we have the greatest opportunity for margin expansion. In summary, SVC's portfolio transformation is well underway. Supported by our recently improved capital structure and the operational upside within our hotel assets, we are focused on our initiative supporting SVC's continued shift towards an increasingly net lease-oriented portfolio. Ultimately, we believe this combination of selling assets and operational improvement will drive durable cash flow and create attractive long-term value for our shareholders. I will now turn it over to Jesse.