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- **Capital Recycling Success**: SVC executed $850 million in asset sales and debt repayments, retiring all 2026 senior notes and issuing zero-coupon bonds to extend maturity. 
- **Hotel Portfolio Resilience**: RevPAR grew 20 bps YoY, with retained hotels showing 60 bps RevPAR improvement despite industry challenges. 
- **Net Lease Growth**: $24.8 million in Q3 acquisitions focused on necessity-based retail, with 2.6x rent coverage and 7.4% cap rate. 
- **Cost Management**: 2025 CapEx reduced to $200 million, with $20-30 million deferred to 2026 due to delayed renovations.

**【Management Opening Remarks】**
- SVC reported third-quarter 2025 results, highlighting strategic initiatives including $850 million in capital recycling through asset sales and debt repayments. The company emphasized financial flexibility and balance sheet strength, with all 2026 senior notes retired and $580 million zero-coupon bonds issued to support debt maturity extension.

**【CEO Commentary】**
- CEO Chris Bilotto detailed progress on 121 hotel sales ($959 million gross proceeds), with 69 remaining transactions expected to close by year-end. These sales aim to reduce leverage and support transition to a net lease-focused business. Hotel performance showed RevPAR growth of 20 basis points YoY, driven by occupancy gains, despite cost pressures. The net lease portfolio expanded with $24.8 million in Q3 acquisitions, targeting necessity-based retail and QSRs.

**【CFO Financial Commentary】**
- CFO Brian Donley reported normalized FFO of $33.9 million ($0.20 per share) and adjusted EBITDAre of $145 million, down 10% YoY due to higher expenses and softer demand. Hotel EBITDA declined 19% YoY, impacted by elevated labor costs and insurance claims. The company repaid $700 million in senior notes and fully drew down its $650 million revolver, now repaid with asset sales proceeds. 2025 CapEx guidance was revised to $200 million from $250 million, with $20-30 million deferred to 2026 due to delayed hotel renovations.

**【Q&A Highlights】**
- **Hotel Sales Execution**: Management confident in closing 69 remaining hotels by year-end, with 40-50% expected in November. Impairments ($27 million) were due to purchase price allocations, not indicative of portfolio health. 
- **Net Lease Portfolio**: Rent coverage stable at 2x, with QSR and convenience retail assets driving resilience. TA TravelCenters' credit strength supports coverage despite industry headwinds.
- **EBITDA Outlook**: Q4 EBITDA guidance ($20-25 million) reflects seasonal trends and cost pressures, with 2026 plans to sell negative EBITDA hotels to improve margins.
- **Debt Strategy**: Zero-coupon bonds provide covenant relief, with next maturity in 2027. Management aims to reduce leverage by $50 million through 2026 hotel sales.

Service Properties Trust (SVC) Q3 2025 Earnings Call Transcript

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