Service Properties Trust Receives Termination Notice from Hyatt Covering 22 Hotels

Rhea-AI Summary

Service Properties Trust (Nasdaq: SVC) announced the termination of a management agreement with Hyatt for 22 Hyatt Place hotels. Hyatt's obligations under this agreement included a minimum return of $22 million annually, backed by a $50 million guaranty, which has now been exhausted. The termination is effective April 8, 2021. Discussions are ongoing for a possible amended agreement with Hyatt; if unsuccessful, management will transfer to Sonesta International Hotels. SVC owns 34% of Sonesta, indicating potential strategic alignment.

Positive

• Ongoing discussions may allow some hotels to remain managed by Hyatt.
• SVC has a 34% ownership stake in Sonesta, providing a fallback option.

Negative

• Hyatt has terminated management for 22 hotels, impacting SVC's revenue.
• The loss of the $50 million guaranty limits Hyatt's financial support.

Service Properties Trust (Nasdaq: SVC), or SVC, today announced that it has received a notice of termination from a subsidiary of Hyatt Hotels Corporation, or Hyatt, with respect to the management agreement for 22 Hyatt Place hotels owned by subsidiaries of SVC. Hyatt’s obligations under the management agreement, which requires minimum returns of $22.0 million annually, is supported by a $50.0 million limited guaranty. While Hyatt is current on its payments to SVC at this time, it recently exhausted this $50.0 million guaranty and under the terms of the management agreement, Hyatt may terminate the agreement upon 90 days’ notice once the guaranty has been fully utilized. The effective date of the termination pursuant to Hyatt’s notice is April 8, 2021.

SVC and Hyatt are currently in discussions regarding possible changes to the management agreement which may enable some or all of the hotels to remain Hyatt Place hotels managed by Hyatt. However, if such discussions do not result in a mutually acceptable agreement, SVC expects to transition management of the 22 hotels to Sonesta International Hotels Corporation, or Sonesta, on April 8, 2021 under the Sonesta Select brand. SVC also owns 34% of Sonesta.

About Service Properties Trust

Service Properties Trust is a real estate investment trust which owns a diverse portfolio of hotels and net lease service and necessity-based retail properties across the United States and in Puerto Rico and Canada. SVC is managed by the majority owned operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative asset management company that is headquartered in Newton, Massachusetts.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever SVC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, SVC is making forward-looking statements. These forward-looking statements are based upon SVC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by SVC’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond SVC’s control. For example:

• Although SVC intends to pursue negotiations with Hyatt, there can be no assurance that any agreement will be reached.

The information contained in SVC’s filings with the Securities and Exchange Commission, or SEC, including under the caption “Risk Factors” in SVC’s periodic reports, or incorporated therein, identifies other important factors that could cause differences from SVC’s forward-looking statements. SVC’s filings with the SEC are available on the SEC's website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, SVC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.

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FAQ

What did Service Properties Trust announce regarding Hyatt on April 8, 2021?

Service Properties Trust announced the termination of the management agreement with Hyatt for 22 hotels, effective April 8, 2021.

How much annual return was Hyatt obligated to provide under the management agreement?

Hyatt was obligated to provide a minimum return of $22 million annually under the management agreement.

What happens if discussions with Hyatt do not lead to a new agreement?

If discussions fail, management of the 22 hotels will transition to Sonesta International Hotels Corporation.

What percentage of Sonesta does Service Properties Trust own?

Service Properties Trust owns 34% of Sonesta.

What financial support has Hyatt exhausted according to the press release?

Hyatt has exhausted a $50 million limited guaranty that supported its obligations under the management agreement.