Good morning, and welcome to the Service Properties Trust Fourth Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Kevin Barry, Senior Director of Investor Relations. Please go ahead.

Good morning. Thank you for joining us today. With me on the call are Chris Bilotto, President and Chief Executive Officer; Jesse Abair, Vice President; and Brian Donley, Treasurer and Chief Financial Officer. In just a moment, they will provide details about our business and our performance for the fourth quarter of 2025, 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, February 26, 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 EBITDAre. 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 and adjusted EBITDAre. We are not providing 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. Yesterday, we reported fourth quarter results that highlight our continued progress optimizing SVC's portfolio, strengthening our financial profile and repositioning the company for long-term growth and value creation. I will begin today's call with a brief update on our key strategic and financial initiatives and share operating highlights from our hotel portfolio. Jesse will provide an update on our net lease platform and recent acquisitions. Brian will then discuss our financial results and balance sheet, along with the introduction of annual guidance for 2026. Starting with our strategic priorities. We had a productive quarter, completing previously announced hotel sales and taking action to reduce leverage and strengthen SVC's balance sheet. During the quarter, we sold 66 hotels totaling nearly 8,300 keys for $534 million. This activity increased our total dispositions for the year to 112 hotels, totaling approximately 14,600 keys for nearly $860 million. We used the proceeds and cash on hand to proactively redeem all $800 million of our 2026 debt maturities and $300 million of our February 2027 notes. Building on this momentum, in 2026, we remain focused on selling additional hotels and executing further strategies to improve SVC's cash flows, debt maturity profile and overall cost of capital. Consistent with these objectives, in January, we sold the Simply Suites for $7.1 million with 133 keys and launched the remarketing of 9 focused service hotels that we initially brought to market in 2025. These hotels benefit from stable occupancy and positive cash flow, providing an opportunity to cater to a wider buyer pool, which is supported by the current interest level we are seeing with the marketing process. Also in January, we initiated the marketing of 7 full-service Sonesta-managed hotels with 2,010 keys with locations across the Southeast, Midwest and Pacific Northwest. Given their current cash drag, the sale of these 7 properties is expected to increase annual EBITDA by approximately $13 million and improve our leverage metrics. We believe these assets offer an attractive opportunity for investors seeking value-add lodging real estate with repositioning potential through targeted capital investment. In terms of timing, our current plan is to formalize offers and select buyers over the next several months, and we are targeting staggered closings during the back half of 2026. We estimate total proceeds of $175 million to $200 million, which will be used for debt reduction. Complementing these efforts, earlier this week, we announced further actions to strengthen our debt maturity profile. We priced $745 million of new 5-year mortgage financing secured by our existing net lease master trust. To support this financing, SVC contributed to the Trust an additional 158 retail properties, which included legacy properties where we renewed tenants or re-tenanted the property, one of our travel center master leases and assets we acquired over the past year. In total, the contributed properties had an appraised value of approximately $1.1 billion. The transaction proceeds will be used to redeem all $700 million of our 8.375% notes due in 2029 at a significantly lower interest rate. Based on the weighted average coupon of 5.96%, we expect this transaction to result in annual cash savings of approximately $14 million or $0.08 per share. With the completion of this new financing in 2026, we will continue to focus our efforts on improving performance within our hotel portfolio, along with capital preservation, which includes reduced net lease acquisition activity to roughly $25 million funded through sales of select net lease assets, along with a reduction to our overall capital spend across our hotel portfolio, which Brian will speak to momentarily. Turning to hotel performance. During the fourth quarter, the U.S. lodging industry remained soft amid uneven demand trends with RevPAR declining 1.1% year-over-year. Performance continued to be bifurcated as the luxury and upper upscale segments were the only segments to post growth, supported by higher-income leisure travelers and premium experiences. The business transient segment remained muted, reflecting the impact of the prolonged government shutdown and value-conscious customers remain sensitive to broader macroeconomic conditions pressuring lower-tier segments. SVC's portfolio continued to deliver steady top-line growth as RevPAR increased 70 basis points year-over-year, outpacing the broader industry by 180 basis points and representing the fifth consecutive quarter of outperformance. We have invested significantly in hotel renovations in recent years, upgrading nearly half of our retained portfolio, and these assets are delivering stronger top-line performance. We expect this momentum to continue as our renovated hotels capture market share. Excluding the hotels we are exiting, our remaining 77 hotels delivered relatively stronger fourth quarter performance with RevPAR up 170 basis points year-over-year, driven by occupancy gains of 140 basis points. Contract business, particularly airline-related demand, remained a key growth driver, partially offset by a decline in government bookings and softer transient revenues. Hotel EBITDA declined year-over-year due to elevated labor costs and broader operating expense pressures. Additionally, the scale and timing of hotel dispositions during the quarter created temporary operational disruption that weighed on performance, which we view as largely transitional. As the volume and pace of dispositions conclude, we expect this disruption to taper, allowing performance to normalize. Further complementing our efforts to support performance improvement across our hotels, Sonesta, which manages the majority of SVC's owned hotels and is 34% owned by SVC, recently announced the appointment of Keith Pierce and Jeff Leer as Co-CEOs effective April 1. We believe their leadership and experience will be instrumental in further optimizing Sonesta RevPAR market share performance while driving operational discipline and efficiencies across the SVC-owned portfolio. Looking ahead to 2026, we are cautiously optimistic that lodging market conditions will improve and that demand will stabilize as the year progresses. More specifically, our hotel footprint is well positioned to benefit from large events throughout the year, including the World Cup, with 75 matches taking place in SVC markets, representing over 40% of our retained hotel rooms. Across our net lease portfolio, we are forecasting continued improvement with ongoing leasing, sales of noncore assets and benefits from the full year NOI contribution from our acquisitions in 2025. I will now turn it over to Jesse to discuss the net lease portfolio in more detail.

Thank you, and good morning. As Chris mentioned, over the past year, we successfully executed our acquisition strategy aimed at growing annual base rent and improving the metrics of our net lease platform. Accounting for 3 closings subsequent to year-end, investments over the past year totaled $101 million, which were funded with a combination of cash on hand and proceeds from net lease dispositions. The acquisitions included a balanced mix of quick service and casual dining restaurants, automotive services, fitness and value retailers. In total, the acquisitions had a weighted average lease term of 14.3 years, average rent coverage of 2.7x and an average going-in cash cap rate of 7.5% and an average GAAP cap rate of 8.3%. Moving forward, our disciplined investment criteria will remain unchanged with a focus on service-based brands that demonstrate resilience even in uncertain macro environments and remain largely insulated from e-commerce disruption. However, the pace of acquisitions will be mostly limited to capital recycling within our portfolio. For the full year 2026, we project total net lease deal volume of approximately $25 million. With the tenant roster augmented by our recent acquisitions, we will be actively looking for ways to leverage our new and established brand relationships for additional growth opportunities in the form of sale leasebacks and off-market deals. With respect to our net lease results for the fourth quarter, at year-end, SVC's portfolio consisted of 760 properties across 42 states with annual base rents of $390 million. The portfolio was approximately 97% leased with a weighted average lease term of 7.4 years. We have over 180 tenants operating under 140 brands across 21 distinct industries. Annualized base rent increased 2.4%, largely a function of our recent acquisition activity. Our asset management team had a particularly strong quarter, executing leases totaling 536,000 square feet, averaging over 9 years of term and a cash rent roll-up of 15%. Portfolio lease expirations remain well laddered with just over 5% of annualized rents expiring through the end of 2027. Approximately two-thirds of our annual base rents are generated by our TA travel centers, backed by BP's investment-grade credit profile. 34 of our travel center assets leased to TA served as collateral for our recent ABS financing. We are pleased with the strong investment-grade ratings and robust investor demand that these notes received, which we believe reflects confidence in the stability of cash flows from these assets for years to come. And with that, I'll turn the call over to Brian to discuss our financial results.

Thanks, Jesse. Good morning. Starting with our consolidated financial results for the fourth quarter of 2025. Normalized FFO was $27.5 million or $0.17 per share, flat compared to the prior year quarter. Adjusted EBITDAre decreased $5 million year-over-year to $125.6 million. Overall, financial results this quarter as compared to the prior year quarter were primarily impacted by an $11.8 million or $0.07 per share decline in hotel EBITDA, partially offset by a $6 million or $0.04 per share one-time tax benefit related to our hotel in San Juan and $5 million or $0.03 per share related to our 34% share of Sonesta International's results. For our 94 comparable hotels this quarter, RevPAR increased by 70 basis points and gross operating profit margin percentage declined by 370 basis points to 20.5%. Below the GOP line costs at our comparable hotels improved 1.5% from the prior year, driven by lower property taxes at certain hotels. Our hotel portfolio generated adjusted hotel EBITDA of $21.3 million, a decline of 35% from the prior year as a result of elevated labor costs, higher hotel overhead costs and the impact of nonrepeat business interruption insurance recognized in the prior year. 77 hotels in our retained portfolio generated RevPAR of $106, an increase of 170 basis points year-over-year and adjusted hotel EBITDA of $25 million during the quarter, a decrease of $8 million year-over-year. Turning to the balance sheet. We currently have $5.2 billion of debt outstanding with a weighted average interest rate of 5.95%. Using the proceeds from asset sales in January, we partially repaid $300 million of SVC's aggregate $400 million senior notes scheduled to mature in February 2027. On Monday, we announced our second securitization of net lease assets. This new 5-year financing totaled $745 million in principal at a weighted average coupon of 5.96% and a maturity of March 2031. SVC is contributing 158 net lease properties with a total appraised value of $1.1 billion. We're using the proceeds to fully redeem SVC's $700 million of 8.375% senior guaranteed unsecured notes with a June 2029 maturity to maximize cash flow savings and improve our debt covenants, specifically coverage of interest expense. This refinancing will result in annual cash interest savings of approximately $14 million or $0.08 per share. Our next debt maturities consist of $100 million remaining of our 4.95% unsecured senior notes due February 2027, which we plan to address with proceeds from asset sales, followed by our $580 million zero-coupon notes due September 2027, which are secured by one of our TA leases and have a 1-year extension option. Turning to our capital expenditure activity. During the fourth quarter, we invested $106 million in capital improvements, bringing our full year spend to $238 million. Fourth quarter CapEx included commencement of our redevelopment of the Nautilus in Miami, major projects at the Royal Sonesta in New Orleans and Cambridge, the Sonesta in Denver and ongoing renovations at the Sonesta ES Suites in Anaheim and the Simply Suites Las Vegas. Turning to our financial outlook. We introduced full year 2026 guidance on our earnings presentation issued last night. For the full year 2026, we're currently projecting the following: for the 94 hotels owned as of year-end, we expect total RevPAR of $108 to $113 and hotel EBITDA of $124 million to $144 million. Within our net lease portfolio, we expect net operating income of $380 million to $386 million; for our consolidated metrics, we're projecting adjusted EBITDA of $500 million to $520 million and normalized FFO per share of $0.65 to $0.77. This full year guidance assumes midpoint interest expense of $378 million with cash interest of $300 million and noncash amortization of interest of $78 million. We're also assuming G&A expense of $40 million and a weighted average share count of 169 million shares. This guidance does not reflect the impact of completing 17 Sonesta hotel dispositions, and it assumes $25 million of capital recycling in our net lease portfolio. We expect total CapEx for the year of $120 million to $140 million. Collectively, our financial guidance projects SVC to generate free cash flow after CapEx in 2026. This marks an important milestone following 3 years of elevated capital investments to enhance our retained hotel portfolio. To conclude, our fourth quarter results demonstrate continued momentum in repositioning SVC and strengthening the company's cash flows, supported by our capital market transactions and execution on asset sales. As we move forward, we remain focused on growing EBITDA and further optimizing SVC's portfolio to drive sustained value for our shareholders. That concludes our prepared remarks. We are ready to open the line for questions.

The first question comes from Jack Armstrong with Wells Fargo.

Can you share with us how RevPAR has trended in the first quarter to date? And what's driving the width of your RevPAR growth guidance? It's about 250 basis points wider than we've seen from your peers who have given guidance so far.

As far as what we're seeing so far in the early part of Q1, we're tracking in line, if not exceeding our projections for the full year guidance. We have January's actuals in the books, and we see RevPAR through mid-February. So all is trending well so far. As far as the range, given some of the volatility in our portfolio with disruption and displacement, we put the range in, which we think is appropriate for the activity in our hotels and some of the uplift in some of the citywide events and whether or not some of that activity pans out could have an impact on either side of our guidance range at our midpoint.

Okay. Helpful there. And then on your net lease acquisition guidance, it's a meaningful step down from 2025 levels. Can you walk through the strategy shift there and how you're thinking about deploying capital in the net lease business now?

Yes. I think from kind of an overall strategy, I think more specifically, we're looking at just overall capital deployment holistically for the company, which includes decreasing capital spend at the hotels accordingly and then also kind of thinking about just our overall acquisition trajectory. And we've got the opportunity to kind of flex up or down as needed. But ultimately, the $25 million guidance will be supported by sales of net lease properties, so kind of net zero in that standpoint. And we think that's kind of a healthy outlook just based on where our performance guidance is for 2026.

Okay. Great. And then could you provide some color on what your guidance assumes for expense growth at the midpoint and maybe break out some of the components like labor, insurance and anything else that we should be focused on?

Sure. Overall, to the midpoint, just top line is a little over 4% expectation on growth. The bottom line, we're seeing around 6% and a big part of that is labor. Base labor and wages is roughly 3% to 3.5%, but we're seeing increased pressure on the benefit side, which continues to hamper margins. The midpoint guidance assumes margins relatively flat if we hit those numbers.

Okay. And then do you have a sense of how any of the changes coming at Sonesta with the new management team may impact SVC? Is there any benefit included from that in your 2026 guidance?

No. The 2026 guidance is based on budgeted forecasted hotel performance and the items we've touched on. Certainly, with this management team coming in, I think there's a legacy track record of experience from each of them and what they've done historically. Net-net, we view it as a positive, and we embrace any opportunity for change to drive performance, and I think they'll do just that. So I think anything they bring to the table will be incrementally beneficial.

I was going to say the 34% share of Sonesta's earnings — we're not projecting much growth there in the guidance.

The next question comes from Tyler Batory with Oppenheimer.

I want to start on the hotel portfolio and the guidance. And Brian, I think you had mentioned 4% top line growth. Just help us think about how much of your RevPAR in 2026 and the performance on an apples-to-apples basis versus 2025, you think is being driven by a higher quality portfolio, maybe progress on Sonesta brand recognition versus market factors and things like the World Cup, et cetera.

Yes. The guidance and the growth trajectory, the midpoint RevPAR is around $110, which is a 3% RevPAR growth, 4% on gross revenues. That is apples-to-apples. So again, we have higher RevPAR based on the weighting of full-service hotels. A lot of the growth we're expecting is coming from lift from some of the low benchmarks we had in '25 because of renovations and displacement. We'll see some displacement still in 2026, and we've put that number out in our earnings presentation, and that's part of the Nautilus and some other bigger projects. But I think market factors — Chris mentioned the World Cup and America 250 and other citywide events — should provide some benefit. So it's a little bit of everything there.

Okay. And then in terms of the margin outlook, you mentioned flat year-over-year, so low teens, 12%. I guess any help — I mean, how much displacement is still in that number? How much disruption is still in that margin number? And just any help thinking about a normalized EBITDA margin for the portfolio or kind of where you'd like to see EBITDA margin for the portfolio move over the medium term?

Yes. In the '26 guidance, we've noted about $12 million in displacement from renovations. It's going to vary year-to-year depending on the renovations that we do specifically. With the Nautilus, it will have an outsized impact to displacement. So I wouldn't view that as a run rate. I think it would be less than that, generally speaking, probably consistent with what we saw in 2025. Again, as we think about capital deployment, it's another factor. We're being mindful of how we deploy capital, which will dictate the types of renovations and which hotels we address. So it will really be case-by-case as we think about the go-forward scenario.

Okay. Great. So a good segue to my next question just in terms of CapEx in '26 versus '25, meaningful step down there. Just remind us what's being planned for 2026? How much is the Nautilus? And then any reminders in terms of what you're thinking about a normalized CapEx for the hotel portfolio going forward?

Sure. The $120 million to $140 million is a big step for us. The pace of large significant renovations are winding down for us. We're going to be more spacing projects out. The Nautilus is definitely the biggest piece of this year. We had about $12 million of CapEx activity in Q4 of '25 related to the Nautilus, which is mostly exterior work. The rooms renovation is kicking off next month. I think it's roughly $30 million to $35 million we're projecting in the first half of '26 related to that project alone. We're also working on the Cambridge Royal Sonesta — there are two towers in that hotel and we're doing one of those — plus a property in D.C. and some other hotels scattered across the country that we're renovating. But again, the pace, the volume and the size will continue to wind down. So that $120 million-ish is currently what we're thinking for next year and probably for future years as well at this stage.

Okay. So switching gears to the debt side of things and now that you've done the $745 million of securitized notes. I guess how much more room do you have in terms of whether it's just covenants or just overall capacity in terms of utilizing some of those assets to fund some of the debt maturities that are coming up in the next couple of years?

Yes. That was a well-executed transaction for us. It did bring our secured debt to total asset capacity down. The covenant went from the low-20s percent to 33% out of a max of 40% under our covenant. So not a lot of headroom for a large transaction, but the way we're thinking about debt maturities: the zero-coupons are already secured by assets. So we can refinance those with the existing collateral or in another manner. We have some unsecured notes that we need to clean up by early '27. Our focus is largely on the unsecured notes due at the end of '27, which between asset sales and potential other transactions, we'll look to refinance those out.

Okay. And then last question for me, just to tie together all the commentary on the debt side of things and lots of moving pieces. I know you got asset sales and you made a lot of adjustments in terms of what you're doing with your cash. But just kind of level set what you have coming due 2027 and 2028 as well? And just like in an ideal scenario, how are you thinking about handling all of those maturities?

Sure. In my prepared remarks, we talked about the $100 million that's currently due in February, which the asset sales, we think we'll be able to use those proceeds to clean those up. I mentioned the zero-coupons is the next bigger maturity, and there is an extension option. Those are backed by TA assets. We feel very good. We'll be able to either refinance those or extend those followed by the December '27 pieces; the asset sales that are in flight will knock out a piece of those. Then behind that is February '28 unsecured notes, which we're very focused on — whether it be asset sales, further asset sales or refinancing. It's a little early to talk about specifics on how exactly we're going to execute. But we feel confident given what we just did, it will give us some breathing room for covenant purposes and then allow us to evaluate our options in the market and potentially bring more properties for sale to help mitigate those maturities.

The next question comes from John Massocca with B. Riley.

Maybe focusing on the hotel dispositions that you kind of have out there in 2026. Do those largely or entirely reflect the assets you called out in December as being marketed for sale and then also the assets that needed to be remarketed that kind of slipped out of the 2025 dispositions?

Yes, that's correct. So the 9 focused service that are part of the 16 we're in the market with are the carryover from 2025. Those reflect the remarketing. And then the 7 full-service hotels, which we launched in January, reflect those hotels that we articulated that we had identified to sell. These are the cash-drag hotels more specifically as part of that endeavor. So yes, these 16 reflect those that we previously communicated.

Are the 9 kind of remarketed hotels EBITDA positive? And if so, how much kind of offset would that be to what you've already stated in terms of the EBITDA drag from the 7 larger hotels you're marketing?

Yes, those are EBITDA positive. They ended the full year with roughly $3 million in positive EBITDA for those 9. Net-net, if you look at 2025, the total drag would be about $10 million of what we would be saving.

Okay. And if you think about potential gross proceeds from those sales, I think if I took what they're originally being marketed for plus the range you're giving for the new hotel sales you're expecting in 2026, it would be somewhere kind of, I think, roughly like $190 million. Is that still kind of what you're seeing? Or has there been some change in pricing given some of these assets are being remarketed?

We talked about $175 million to $200 million as a range. Activity is strong. We've been out in the market since early January with these different portfolios and there's good activity. Call for offers is going to start in the next couple of weeks and then it will be staggered across three different portfolios that we're marketing. So the staggered results will indicate where we land within that range. We feel good about the execution and the demand, and we'll have more to talk about in the next couple of months.

Okay. And then pro forma for those sales, do you still expect kind of run-rate EBITDA mix to be around 70% net lease, 30% hotel at the end of 2026?

Yes, that's about right. Obviously, we'll get a lift from removing negative drag, but it's still right around that range.

Okay. And I guess, where does that roughly stand today just pro forma for all the transaction activity in 4Q?

I think it's not too far off from high-60s to low-30s from an EBITDA mix perspective.

Maybe switching gears to net lease. Post the transaction in February, I guess, how much in the way of non-hotel assets kind of remain that are unencumbered by debt, either in terms of total property number or just kind of brackets around value?

If there was something we thought we could have used in the debt transactions, we would have contributed more assets and taken more proceeds. The properties that sit outside the securitization have roughly $27 million of rents — it's not a big portfolio. The weighted average lease term is under 5 years and there's work to do on leasing; there are movie theaters mixed in. I don't think we view that portion as something we'll necessarily use for financing unless we can secure more lease term and growth on those assets. For the most part, all five TA assets are now part of some sort of collateral package in our bonds or debt structure. The hotel portfolio is completely unencumbered, including the San Juan Hyatt portfolio that backs the revolver. So there is capacity on the hotel side. The way we're thinking about our refinancings going forward will be a mix of potential bonds or guaranteed bonds or other forms of instruments.

And I would add that on the retail properties that are remaining, some of those are candidates for sale as well. Some of the remaining retail properties fit within what we would consider selling to raise proceeds. So there's flexibility in that remaining subset.

Okay. And then anything specific on the net lease side to call out? It's not a huge move quarter-over-quarter, but coverage did drop below 2x. I don't know if that's just the impact of lease escalators taking effect or if there was something you're seeing in a specific individual tenant or tenant industry that maybe is driving a little bit of weakness quarter-over-quarter on coverage?

John, I would say the coverage drop is largely a function of TA coverage dropping seven basis points quarter-over-quarter. If you take out the TA assets, coverage remains well north of 3.5x. With respect to the TA piece, there's a lot of components that go into that business, but broadly speaking, we're seeing BP spending a lot of time and effort with that portfolio. Towards the end of last year, they brought on a new leadership team and implemented a business plan for TA specifically aimed at increasing free cash flow through 2027. We continue to see them invest in these sites, particularly EV charging at scale. Our sense is it will take a little bit of time for that coverage to get back up to prior levels from one to two years ago. In the meantime, those leases are backed by BP credit, and we feel pretty good about that. There's a lot of inherent value in those sites — the overall network, the sites themselves and the long-term fundamentals for trucking — so overall we feel comfortable with that sub-portfolio.

This concludes our question-and-answer session. I would like to turn the conference back over to Chris Bilotto, President and Chief Executive Officer, for any closing remarks.

Thank you for joining today's call. We look forward to meeting with many of you at upcoming industry conferences this spring. Operator, that concludes our call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.