Service Properties Trust Q4 2024: Unpacking Contradictions in CapEx, Dividends, and Asset Sales

These are the key contradictions discussed in Service Properties Trust's latest 2024Q4 earnings call, specifically including: CapEx spending expectations and dividend sustainability, CapEx expectations and allocation, and Hotel Asset Sales Strategy:



Hotel Revenue and Performance:
- Service Properties Trust reported a 4.2% year-over-year growth in hotel RevPAR for Q4 2024, outpacing the industry by 60 basis points.
- The increase in RevPAR was driven by strong performance in full-service hotels and select-service properties, particularly in urban markets.

Asset Sales and Leverage Reduction:
- Service Properties Trust plans to sell 114 Sonesta hotels with a total of 14,925 keys, expecting at least $1 billion in sales proceeds, to reduce leverage.
- The sale of these hotels is part of the company's strategy to focus on hotel properties with higher upside potential and reduce its leverage.

Net Lease Portfolio and Growth:
- The net lease portfolio represents 44.2% of SVC's overall portfolio, with 97.6% of properties leased and a weighted average lease term of eight years.
- SVC is focusing on acquiring well-vetted and strategically located net lease assets to enhance tenant and geographic diversity, and potentially increase the portfolio's economic contributions.

Financial Performance and Capital Expenditures:
- Normalized FFO for Q4 2024 was $28.6 million or $0.17 per share, with adjusted EBITDAre declining 7.4% year-over-year to $130.6 million.
- Capital expenditures for 2025 are expected to be approximately $250 million, with approximately $110 to $130 million allocated for maintenance capital.