Service Properties Trust (SVC) Q3 2024 earnings summary

Executive summary

• Third quarter 2024 results showed mixed performance in the lodging portfolio due to ongoing hotel renovations, while the net lease portfolio continued to generate stable cash flow.

• Reported a net loss of $46.9 million for Q3 2024 and $199.1 million for the nine months ended September 30, 2024, compared to net losses of $4.1 million and net income of $10.5 million for the same periods in 2023.

• Announced reduction of the regular quarterly common dividend from $0.20 to $0.01 per share, saving $127 million annually to enhance liquidity and accelerate deleveraging.

• Plans to sell 114 focused service hotels in the Sonesta portfolio, targeting $1 billion in proceeds and $725 million in avoided capital expenditures over six years.

• Owns 214 hotels with over 36,000 guest rooms and 745 service-focused retail net lease properties as of September 30, 2024.

Financial highlights

• Normalized FFO for Q3 2024 was $52.9 million or $0.32 per share, down from $0.56 per share year-over-year.

• Adjusted EBITDAre declined 11.6% year-over-year to $155 million.

• Q3 2024 total revenues were $491.2 million, down 1.1% year-over-year; hotel operating revenues fell 1.2% and rental income decreased 1.0%.

• Q3 2024 hotel operating expenses increased 3.4% year-over-year, while net lease operating expenses were flat.

• Interest expense rose 20.5% year-over-year in Q3 2024 to $99.1 million.

Outlook and guidance

• Q4 2024 guidance projects RevPAR of $82–$85 and hotel EBITDA of $34–$39 million.

• Full-year 2024 capital expenditure expected to be around $300 million.

• CapEx spend for 2025 is expected to be lower than 2024, with more details to be provided in the next quarter.

• Proceeds from planned hotel sales in 2025 will be used to repay debt and improve liquidity.

• Capital expenditure savings of $725 million expected from hotel sales over six years.