8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 6, 2019 (September 20, 2019)

SERVICE PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)

Maryland

(State or Other Jurisdiction of Incorporation)

1-11527	04-3262075
(Commission File Number)	(IRS Employer Identification No.)

Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634

(Address of Principal Executive Offices) (Zip Code)

617-964-8389

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐                                   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐                                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐                                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐                                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of each Exchange on which Registered
Common Shares of Beneficial Interest	SVC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

In this Current Report on Form 8-K/A, the terms "we", "us", "our" and "SVC" refer to Service Properties Trust (formerly known as Hospitality Properties Trust) and its consolidated subsidiaries, unless the context indicates otherwise.

Explanatory Note

We are filing this Current Report on Form 8-K/A, or this Amendment, to amend and supplement the Current Report on Form 8-K dated September 20, 2019, or the September Current Report.

On June 2, 2019, we reported (i) that we had entered into an equity purchase agreement dated as of June 2, 2019, or the SMTA Agreement, by and among SVC, Spirit MTA REIT, a Maryland real estate investment trust, or SMTA, SMTA Financing JV, LLC, a Delaware limited liability company, or Seller, and Banner NewCo LLC, a Delaware limited liability company, or Newco. Pursuant to the SMTA Agreement, we agreed to acquire all of the limited liability company interests of Newco, to which, at the closing of the SMTA Acquisition (as defined below), (i) Seller transferred all of the limited liability company interests of each of (1) Spirit Master Funding, LLC, a Delaware limited liability company, (2) Spirit Master Funding II, LLC, a Delaware limited liability company, (3) Spirit Master Funding III, LLC, a Delaware limited liability company, (4) Spirit Master Funding VI, LLC, a Delaware limited liability company, and (5) Spirit Master Funding VIII, LLC, a Delaware limited liability company, or collectively, the Acquired Companies, and (ii) SMTA transferred certain current liabilities to us, or collectively, the SMTA Acquisition, for a purchase price of aggregate cash consideration of $2.4 billion, subject to customary adjustments and prorations, plus certain debt prepayment penalties we agreed to pay that were associated with the redemption of notes issued by the Acquired Companies under its asset-backed securitization platform.

As previously reported in the September Current Report, we completed the SMTA Acquisition on September 20, 2019.

We are amending and supplementing the September Current Report to provide the historical financial statements required by Item 9.01(a) of Form 8-K within the time period required by Item 9.01(a)(4) and Item 9.01(b)(2) of Form 8-K. This Amendment should be read in conjunction with the September Current Report.

Item 9.01. Financial Statements and Exhibits.

This Amendment includes (i) the combined statement of revenues and certain expenses of the Acquired Companies for the year ended December 31, 2018 and six months ended June 30, 2019, which are pursuant to the requirements of Rule 3-14 of Regulation S-X, and (ii) unaudited pro forma financial data for us which give effect to (a) our acquisitions of the Acquired Companies, (b) our issuance of $1.7 billion of unsecured senior notes completed in September 2019, the proceeds of which were used to fund a portion of the SMTA Acquisition, and (c) our disposition of certain assets acquired as part of the SMTA Acquisition as if these transactions occurred on January 1, 2018.

The pro forma financial information is not necessarily indicative of the expected financial position or results of operations for any future period. Differences could result from numerous factors, including future changes in our portfolio of investments, changes in interest rates, changes in our capital structure, changes in property level operating expenses, changes in property level revenues, including rents expected to be received pursuant to our existing leases or leases we may enter into after June 30, 2019, and for other reasons. Actual future results are likely to be different than amounts presented in the unaudited pro forma consolidated financial statements and such differences may be significant.

Neither we nor our affiliates are related to the Seller. The historical financial statements listed in Item 9.01(a) present the results of operations of the Acquired Companies during periods prior to the acquisitions by us and exclude, as permitted by Rule 3-14 of Regulation S-X, items of revenue and expense which we expect may not be comparable to our expected future operations. In deciding to purchase the Acquired Companies, we considered their revenue sources, including those that have been affected, and are expected to be affected in the future, by factors including, but not limited to, demand, supply and competitive factors present in the local and national markets for retail-oriented properties and the ability of the tenants of the properties to make rent payments when due and to pay the properties' expenses, including, but not limited to, utility costs, real estate taxes and other expenses, and the portion of such expenses which may be paid by us and recovered from the tenants. Changes in these factors or other factors described in the notes to the pro forma data provided below or otherwise will cause future operating results to differ from the historical and pro forma operating results presented, but cannot be predicted at this time; however, after reasonable inquiry, we are not currently aware of any other material factors relating to the properties that would cause the financial information reported herein not to be indicative of future operating results.

(a) Financial Statements of Businesses Acquired.

The following financial statements of the Acquired Companies are attached hereto as Exhibit 99.1 and incorporated by reference herein:

• Report of independent auditors

• Combined statement of revenues and certain expenses for the year ended December 31, 2018 and six months ended June 30, 2019

• Notes to the combined statement of revenues and certain expenses

(b) Pro Forma Financial Information.

The following pro forma financial information for SVC is attached as Exhibit 99.2 and incorporated by reference herein:

• Introduction to unaudited pro forma combined financial statements

• Unaudited pro forma combined balance sheet as of June 30, 2019

• Unaudited pro forma combined statement of income for the year ended December 31, 2018 and six months ended June 30, 2019

• Notes to unaudited pro forma combined financial statements

(c) Exhibits.

Exhibit No.	Description
23.1	Consent of Ernst & Young LLP
99.1	Combined statement of revenues and certain expenses of SMTA Properties for the year ended December 31, 2018 and six months ended June 20, 2019
99.2	Unaudited pro forma combined financial statements
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 

		Service Properties Trust
		By:	/s/ Brian E. Donley
		Name:	Brian E. Donley
		Title:	Chief Financial Officer and Treasurer
Dated:	November 6, 2019

EX-23.1

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-226944) of Service Properties Trust and the Registration Statement (Form S-8 No. 333-191096) pertaining to the 2012 Equity Compensation Plan of Service Properties Trust of our report dated November 6, 2019, with respect to the Combined Statement of Revenues and Certain Expenses of SMTA Properties for the year ended December 31, 2018 included in this Current Report on Form 8-K/A.

/s/ Ernst & Young LLP

Dallas, Texas

November 6, 2019

EX-99.1

Exhibit 99.1

Report of Independent Auditors

To the Trustees and Shareholders of Service Properties Trust  

We have audited the accompanying Combined Statement of Revenues and Certain Expenses of the SMTA Properties for the year ended December 31, 2018, and the related notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the Combined Statement of Revenues and Certain Expenses in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the Combined Statement of Revenues and Certain Expenses that is free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Combined Statement of Revenues and Certain Expenses based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Combined Statement of Revenues and Certain Expenses is free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Combined Statement of Revenues and Certain Expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Combined Statement of Revenues and Certain Expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Combined Statement of Revenues and Certain Expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Combined Statement of Revenues and Certain Expenses.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 

Opinion

In our opinion, the Combined Statement of Revenues and Certain Expenses referred to above presents fairly, in all material respects, the revenue and certain expenses described in Note 1 of the SMTA Properties for the year ended December 31, 2018, in conformity with U.S. generally accepted accounting principles. 

Basis of Accounting

As described in Note 1 to the combined financial statement, the Combined Statement of Revenues and Certain Expenses has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K/A of Service Properties Trust, and is not intended to be a complete presentation of SMTA Properties’ revenues and expenses. Our opinion is not modified with respect to this matter. 

/s/ Ernst & Young LLP

Dallas, Texas

November 6, 2019

F-1

SMTA Properties

Combined Statements of Revenues and Certain Expenses

Year Ended December 31, 2018 and Six Months Ended June 30, 2019 (Unaudited)

(dollars in thousands)

	Six Months Ended June 30, 2019 (Unaudited)		Year Ended December 31, 2018
Revenues:
Rental income	$	89,492	$	184,453
Tenant reimbursements and other income	1,342		1,851
Total revenues	90,834		186,304
Certain Expenses:
Real estate taxes	1,461		1,355
Other operating expenses	728		1,402
Total certain expenses	2,189		2,757
Revenues in excess of certain expenses	$	88,645	$	183,547

The accompanying notes are an integral part of the Combined Statements of Revenues and Certain Expenses.

F-2

SMTA Properties

Notes to the Combined Statements of Revenues and Certain Expenses

Year Ended December 31, 2018 and Six Months Ended June 30, 2019 (Unaudited)

(dollars in thousands)

Note 1. Organization and Summary of Significant Accounting Policies

On June 2, 2019, Service Properties Trust (formerly Hospitality Properties Trust), or SVC, entered an Equity Purchase Agreement, or the SMTA Agreement, with SMTA REIT and certain of its subsidiaries, or collectively, SMTA, pursuant to which SVC agreed to acquire from SMTA all the equity interests in entities that owned 767 net lease service-oriented retail properties, or collectively, the SMTA Properties, with approximately 12 million rentable square feet net leased to tenants in 23 different industries located in 43 states for total consideration of $2,482,382, including $2,384,577 in cash consideration, $82,069 of prepayment penalties in order to extinguish the existing mortgage debt on the portfolio and $15,736 of other capitalized acquisition costs. SVC completed the acquisition of the SMTA Properties on September 20, 2019.

The accompanying Combined Statements of Revenues and Certain Expenses of SMTA Properties has been prepared in accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the statements are not representative of the actual operations for the periods presented as they exclude certain historical expenses, such as depreciation and amortization, management fees, interest expense, amortization of above and below market leases and other costs not directly related to the future operations of the SMTA Properties.

Use of estimates — Preparation of these financial statements in conformity with U.S. generally accepted accounting principles requires SVC's management to make estimates and assumptions that may affect the amounts reported in this financial statement and accompanying notes. Actual results could differ from those estimates.

Rental income — The leases are accounted for as operating leases. Rental income is recognized on a straight-line basis over the terms of the leases. Straight-line rent adjustments included in the statement of revenues and certain expenses totaled $1,847 for the six months ended June 30, 2019 and $3,918 for the year ended December 31, 2018.

Tenant Reimbursements and Other Income — Reimbursements from tenants of real estate taxes and other operating expenses are recognized when the expenses are incurred. Tenant reimbursements are recorded on a gross basis in instances when our tenants reimburse us for property costs which we incur.

Note 2. Operating Leases

Lease information (as lessor).The leases at the SMTA Properties have current remaining terms ranging between three months and 31 years (expiring between 2019 and 2050). Certain of the leases provide for real estate tax and other operating expense reimbursement. Future minimum rents due under non-cancelable leases in effect at June 30, 2019, excluding tenant reimbursements, are as follows:

Year	Future Minimum Rents
2019	$	89,110
2020	175,211
2021	168,958
2022	158,366
2023	151,933
Thereafter	910,548
	$	1,654,126

Note 3. Subsequent Events

SVC's management has evaluated subsequent events through November 6, 2019, the date the Combined Statements of Revenues and Certain Expenses were available to be issued. There were no subsequent events that have occurred that would require disclosure in the Combined Statements of Revenues and Certain Expenses.

F-3

EX-99.2

Exhibit 99.2

SERVICE PROPERTIES TRUST

Introduction to Unaudited Pro Forma CombinedFinancial Statements

(dollars in thousands)

On June 2, 2019, Service Properties Trust (formerly Hospitality Properties Trust), or SVC, we, us, or our, entered an Equity Purchase Agreement, or the SMTA Agreement, with SMTA REIT and certain of its subsidiaries, or collectively, SMTA, pursuant to which we agreed to acquire from SMTA all the equity interests in 767 net lease service-oriented retail properties, or collectively, the SMTA Properties, with approximately 12 million rentable square feet net leased to tenants in 23 different industries in 43 states for total consideration of $2,482,382, including $2,384,577 in cash consideration, $82,069 of prepayment penalties in order to extinguish the existing mortgage debt on the portfolio and $15,736 of other capitalized acquisition costs. We completed the acquisition of the SMTA Properties on September 20, 2019.

We acquired the SMTA Properties with cash on hand primarily from the proceeds from $1,700,000 aggregate principal amount of senior notes we issued in underwritten public offerings on September 18, 2019 and borrowings under our revolving credit facility, or the Related Financings.

In addition, at acquisition, we classified 148 of the SMTA Properties that we expect to sell, or the SMTA Dispositions, as held for sale.

The following unaudited pro forma combined balance sheet as of June 30, 2019 reflects our financial position, as if the acquisitions of the SMTA Properties, the Related Financings and the SMTA Dispositions, or the Transactions, were completed on June 30, 2019. The unaudited pro forma combined statements of income for the year ended December 31, 2018 and the six months ended June 30, 2019 present our results of operations as if the Transactions were completed on January 1, 2018 and January 1, 2019, respectively. These unaudited pro forma combined financial statements should be read in conjunction with (i) our unaudited condensed financial statements and related notes thereto as of and for the three and six months ended June 30, 2019, which are included in our Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission, or the SEC, on August 9, 2019, (ii) the combined statement of revenues and certain expenses of the SMTA Properties included as Exhibit 99.1 in Item 9.01(a) of this Current Report on Form 8-K/A, and (iii) our audited consolidated financial statements for the year ended December 31, 2018 and the notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 27, 2019.

These unaudited pro forma combined financial statements are provided for informational purposes only. Our results of operations may be significantly different than what is presented in these unaudited pro forma combined financial statements. In the opinion of SVC's management, all adjustments necessary to reflect in all material respects the effects of the Transactions have been included.

The allocation of the purchase price of the acquisitions of the SMTA Properties, including those properties included in the SMTA Dispositions, reflected in the unaudited pro forma combined financial statements is based upon preliminary estimates of the fair values of the assets acquired and liabilities assumed. Consequently, amounts preliminarily allocated to these assets acquired and liabilities assumed could change significantly from those reflected in the unaudited pro forma combined financial statements.

These unaudited pro forma combined financial statements are not necessarily indicative of our expected financial position or results of operations for any future period. Differences could result from numerous factors, including future changes in our portfolio of investments, changes in interest rates, changes in our capital structure, changes in property level operating expenses, changes in property level revenues, including rents expected to be received pursuant to our existing leases or leases we may enter into during and after June 30, 2019 and for other reasons. Actual future results are likely to be different from amounts presented in these unaudited pro forma combined financial statements and such differences may be significant.

F-1

SERVICE PROPERTIES TRUST

Unaudited Pro Forma Combined Balance Sheet

As of June 30, 2019

(dollars in thousands, except per share data)

	Historical			Unsecured Debt Financing (A)			Acquisition of SMTA Properties (B)			Disposal of SMTA Assets Held for Sale (C)			Pro Forma
ASSETS
Real estate properties:
Land	$	1,674,653		$	—		$	388,057		$	—		$	2,062,710
Buildings, improvements and equipment	8,002,833			—			1,201,922			—			9,204,755
Total real estate properties, gross	9,677,486			—			1,589,979			—			11,267,465
Accumulated depreciation	(3,026,473		)	—			—			—			(3,026,473		)
Total real estate properties, net	6,651,013			—			1,589,979			—			8,240,992
Cash and cash equivalents	15,688			2,482,382			(2,482,382		)	—			15,688
Assets held for sale	—			—			604,989			(604,989		)	—
Restricted cash	37,792			—			—			—			37,792
Due from related persons	75,939			—			—			—			75,939
Other assets, net	397,314			—			291,434			—			688,748
Total assets	$	7,177,746		$	2,482,382		$	4,020		$	(604,989	)	$	9,059,159
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility	$	90,000		$	810,372		$	—		(604,989		)	$	295,383
Unsecured term loan, net	397,591			—			—			—			397,591
Senior unsecured notes, net	3,602,333			1,680,461			—			—			5,282,794
Security deposits	123,637			—			—			—			123,637
Accounts payable and other liabilities	298,625			—			4,020			—			302,645
Due to related persons	8,118			—			—			—			8,118
Total liabilities	4,520,304			2,490,833			4,020			(604,989		)	6,410,168
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 164,454,537 shares issued and outstanding	1,645			—			—			—			1,645
Additional paid in capital	4,546,737			—			—			—			4,546,737
Cumulative other comprehensive loss	(129		)	—			—			—			(129		)
Cumulative net income available for common shareholders	3,466,464			(8,451		)	—			—			3,458,013
Cumulative common distributions	(5,357,275		)	—			—			—			(5,357,275		)
Total shareholders’ equity	2,657,442			(8,451		)	—			—			2,648,991
Total liabilities and shareholders’ equity	$	7,177,746		$	2,482,382		$	4,020		$	(604,989	)	$	9,059,159

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

F-2

SERVICE PROPERTIES TRUST

Unaudited Pro Forma Combined Statement of Income

For the Year Ended December 31, 2018

(amounts in thousands, except per share data)

	Historical			Acquisition of SMTA Properties (D)		Disposal of SMTA Assets Held for Sale (E)			Pro Forma Adjustments				Pro Forma
Revenues:
Hotel operating revenues	$	1,960,958		$	—	$	—		$	—			$	1,960,958
Rental income	328,446			186,304		(48,417		)	(4,429		)	(H)	461,904
FF&E reserve income	5,132			—		—			—				5,132
Total revenues	2,294,536			186,304		(48,417		)	(4,429		)		2,427,994
Expenses:
Hotel operating expenses	1,392,355			—		—			—				1,392,355
Other operating expenses	—			2,757		(1,075		)	6,026			(I)	7,708
Depreciation and amortization	403,077			—		—			109,693			(J)	512,770
General and administrative	104,862			—		—			9,527			(K)	114,389
Total expenses	1,900,294			2,757		(1,075		)	125,246				2,027,222
Dividend income	2,754			—		—			—				2,754
Unrealized losses on equity securities	(16,737		)	—		—			—				(16,737		)
Interest income	1,528			—		—			—				1,528
Interest expense	(195,213		)	—		—			(87,076		)	(L)	(282,289		)
Loss on early extinguishment of debt	(160		)	—		—			—				(160		)
Income before income taxes and equity in earnings of an investee	186,414			183,547		(47,342		)	(216,751		)		105,868
Income tax expense	(1,195		)	—		—			—				(1,195		)
Equity in earnings of an investee	515			—		—			—				515
Net income	$	185,734		$	183,547	$	(47,342	)	$	(216,751	)		$	105,188
Weighted average common shares outstanding (basic)	164,229												164,229
Weighted average common shares outstanding (diluted)	164,258												164,258
Net income per common share (basic and diluted)	$	1.13											$	0.64

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

F-3

SERVICE PROPERTIES TRUST

Unaudited Pro Forma Combined Statement of Income

For the Six Months Ended June 30, 2019

(amounts in thousands, except per share data)

	Historical			Acquisition of SMTA Properties (F)		Disposal of SMTA Assets Held for Sale (G)			Pro Forma Adjustments				Pro Forma
Revenues:
Hotel operating revenues	$	997,053		$	—	$	—		$	—			$	997,053
Rental income	135,915			90,834		(23,246		)	(2,215		)	(H)	201,288
FF&E reserve income	2,502			—		—			—				2,502
Total revenues	1,135,470			90,834		(23,246		)	(2,215		)		1,200,843
Expenses:
Hotel operating expenses	700,828			—		—			—				700,828
Other operating expenses	—			2,189		(1,002		)	2,972			(I)	4,159
Depreciation and amortization	198,561			—		—			54,846			(J)	253,407
General and administrative	24,442			—		—			4,764			(K)	29,206
Total expenses	923,831			2,189		(1,002		)	62,582				987,600
Gain on sale of real estate	159,535			—		—			—				159,535
Dividend income	1,752			—		—			—				1,752
Unrealized losses on equity securities	(39,811		)	—		—			—				(39,811		)
Interest income	1,086			—		—			—				1,086
Interest expense	(99,367		)	—		—			(43,538		)	(L)	(142,905		)
Income before income taxes and equity in earnings of an investee	234,834			88,645		(22,244		)	(108,335		)		192,900
Income tax expense	(799		)	—		—			—				(799		)
Equity in earnings of an investee	534			—		—			—				534
Net income	$	234,569		$	88,645	$	(22,244	)	$	(108,335	)		$	192,635
Weighted average common shares outstanding (basic)	164,281												164,281
Weighted average common shares outstanding (diluted)	164,324												164,324
Net income per common share (basic and diluted)	$	1.43											$	1.17

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

F-4

SERVICE PROPERTIES TRUST

Notes to Unaudited Pro Forma CombinedFinancial Statements

(dollars in thousands)

Unaudited Pro Forma Combined Balance Sheet Adjustments

(A) On September 18, 2019, we issued $1,700,000 aggregate principal amount of senior notes in public offerings, or the Offerings, which included $825,000 aggregate principal amount of 4.35% senior notes due 2024, $450,000 aggregate principal amount of 4.75% senior notes due 2026 and $425,000 aggregate principal amount of 4.95% senior notes due 2029. Net proceeds from these Offerings were $1,680,461 after discounts and expenses and were used to fund a portion of the acquisition of the SMTA Properties described below in Note B. We financed the remaining portion of the SMTA purchase price with borrowings under our revolving credit facility.

In connection the SMTA Transaction, a syndicate of lenders committed to provide us with a one year unsecured term loan facility, under which we would be able to borrow up to $2,000,000. We terminated these commitments in September 2019 and recorded a loss on early extinguishment of debt of $8,451 to write off unamortized issuance costs.

(B) The adjustments represent the effects of the acquisition of the SMTA Properties on September 20, 2019 for total consideration of $2,482,382, including $2,384,577 in cash consideration, $82,069 of prepayment penalties in order to extinguish the existing mortgage debt on the portfolio and $15,736 of other capitalized acquisition costs. We funded this acquisition with cash on hand primarily from the proceeds from the Offerings described above in Note A and borrowings under our revolving credit facility. This acquisition will be accounted as an asset acquisition. The allocation of the purchase price is based on estimates of the fair values of the assets acquired and liabilities assumed and could change significantly from those reflected in the unaudited pro forma combined financial statements.

Land	$	388,057
Buildings, improvements and equipment	1,201,922
Acquired real estate leases (1)	291,434
Real estate, cost	1,881,413
Assets held for sale	604,989
Below market leases	(4,020		)
Total purchase price, net	$	2,482,382

(1) Acquired real estate leases includes capitalized above market leases of $9,705, acquired in place real estate leases of

$247,015 and capitalized leasing commission costs of $34,714.

(C) Upon closing of the SMTA Transaction, we classified 148 of the SMTA Properties we plan to sell with 3.3 million square feet as held for sale. We expect to complete the SMTA Dispositions in less than one year, and have recorded these properties at their estimated fair value less costs to sell. The net proceeds from the sale of these properties are expected to be used to repay amounts outstanding under our revolving credit facility. The estimates of fair value of the assets to be sold less costs to sell of $2,648 to sell could change significantly from those reflected in the unaudited pro forma combined financial statements.

Unaudited Pro Forma Combined Statement of Income Adjustments

(D) The adjustments represent the historical revenues and certain expenses of the SMTA Properties for the year ended December 31, 2018.

(E) The adjustments represent the historical revenues and certain expenses of the SMTA Dispositions for the year ended December 31, 2018.

(F) The adjustments represent the historical revenues and certain expenses of the SMTA Properties for the six months ended June 30, 2019.

(G) The adjustments represent the historical revenues and certain expenses of the SMTA Dispositions for the six months ended June 30, 2019.

F-5

(H) The adjustments represent estimated non-cash adjustments recorded as a reduction to revenue related to the leases acquired in the acquisition of the SMTA Properties. The reduction to rental income is as follows:

	Year Ended December 31, 2018			Six Months Ended June 30, 2019
Non-cash adjustments to lease revenue	$	(4,429	)	$	(2,215	)

(I) The adjustments represent the effect on other operating expenses for the Transactions of $6,026 and $2,972 for the periods ended December 31, 2018 and June 30, 2019, respectively, based on our contractual obligation to pay property management fees and other reimbursable expenses under our property management agreement with our manager, The RMR Group LLC, or RMR LLC.

(J) The adjustments represent estimated depreciation and amortization expenses of $109,693 and $54,846 for the SMTA Properties (excluding the SMTA Dispositions) based on the estimated fair values of the acquired assets for the periods ended December 31, 2018 and June 30, 2019, respectively. Real estate investments are depreciated on a straight line basis over estimated useful lives ranging up to 40 years. Capitalized acquired in place leases, exclusive of the value of acquired above market and below market lease values, are amortized on a straight line basis over a weighted average remaining lease term of 9.2 years.

(K) The adjustments represent the effect on general and administrative expenses related to the Transactions. General and administrative expenses adjustments of $9,527 and $4,764 for the periods ended December 31, 2018 and June 30, 2019, respectively, are based on our contractual obligation to pay business management fees under our business management agreement with RMR LLC.

(L) The adjustments to interest expense represent (i) interest expense related to the Offerings described above in Note A and (ii) borrowings under our unsecured revolving credit facility aggregating $810,372 to complete the acquisition of the SMTA Properties less the estimated proceeds from the SMTA Dispositions of $604,989 as if all of these transactions occurred as of January 1, 2018 and January 1, 2019, respectively. The components of the interest expense adjustments are as follows:

	Year Ended December 31, 2018			Six Months Ended June 30, 2019
$825,000 Senior Notes due 2024
Borrowings for SMTA Properties acquisition	$	825,000		$	825,000
Interest rate	4.35		%	4.35		%
Cash interest	35,888			17,944
Amortization of debt issuance costs and debt discounts	1,352			676
	37,240			18,620
$450,000 Senior Notes due 2026
Borrowings for SMTA Properties acquisition	450,000			450,000
Interest rate	4.75		%	4.75		%
Cash interest	21,375			10,688
Amortization of debt issuance costs and debt discounts	621			310
	21,996			10,998
$425,000 Senior Notes due 2029
Borrowings for SMTA Properties acquisition	425,000			425,000
Interest rate	4.95		%	4.95		%
Cash interest	21,038			10,519
Amortization of debt issuance costs and debt discounts	805			402
	21,843			10,921
Net Acquisition Borrowings under Revolving Credit Facility:
Estimated net borrowings for SMTA Properties acquisition	205,383			205,383
Interest rate (1)	2.92		%	2.92		%
	5,997			2,999
Total interest expense adjustments	$	87,076		$	43,538

F-6

(1) As of September 30, 2019, the annual interest rate payable on borrowings under our revolving credit facility was 2.92%. A change in the interest rate by plus or minus one-eighth of one percentage point would increase or decrease, respectively, pro forma annual interest expense by approximately $257 and $128 for the periods ended December 31, 2018 and June 30, 2019, respectively.

F-7

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Cover Page	Nov. 06, 2019
Cover page.
Entity Central Index Key	0000945394
Title of 12(b) Security	Common Shares of Beneficial Interest
Entity File Number	1-11527
Document Type	8-K/A
Document Period End Date	Nov. 06, 2019
Entity Registrant Name	SERVICE PROPERTIES TRUST
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	Two Newton Place
Entity Address, Address Line Two	255 Washington Street
Entity Address, Address Line Three	Suite 300
Entity Address, City or Town	Newton
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02458-1634
City Area Code	617
Local Phone Number	964-8389
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Tax Identification Number	04-3262075
Trading Symbol	SVC
Security Exchange Name	NASDAQ
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	true
Amendment Description	We are filing this Current Report on Form 8-K/A, or this Amendment, to amend and supplement (i) the Current Report on Form 8-K dated June 2, 2019, or the June Current Report, and (ii) the Current Report on Form 8-K dated September 20, 2019, or the September Current Report.