As of December 31, 2024, all 206 of our hotels were managed by subsidiaries of the following companies: Sonesta (181 hotels), Hyatt (17 hotels), Radisson (seven hotels) and IHG (one hotel). As of December 31, 2024, our 742 service-focused retail net lease properties were leased by 177 tenants, including 175 travel centers leased to TA, our largest tenant.

Sonesta Agreement. As of December 31, 2024, Sonesta managed 39 of our full service hotels, 100 of our extended stay hotels and 42 of our select service hotels pursuant to management agreements for all of the hotels, which we collectively refer to as our Sonesta agreement. The hotels Sonesta managed for us comprised approximately 50.0% of our total historical real estate investments.

Our Sonesta agreement, which expires on January 31, 2037 and includes two 15-year renewal options, provides that we are paid an annual owner’s priority return if gross revenues of the hotels, after payment of hotel operating expenses and management and related fees (other than Sonesta’s incentive fee, if applicable), are sufficient to do so. The Sonesta agreement further provides that we are paid an additional return equal to 80% of the operating profits, as defined therein, after paying the owner’s priority return, reimbursing owner or manager advances, funding FF&E reserves and paying Sonesta’s incentive fee, if applicable. We do not have any security deposits or guarantees for our Sonesta hotels. We realized returns under our Sonesta agreement of $189,386, $226,181 and $196,721 during the years ended December 31, 2024, 2023 and 2022, respectively.

Our Sonesta agreement requires us to fund capital expenditures made at our hotels. We made capital expenditures for hotels included in our Sonesta agreement in an aggregate amount of $258,337 and $172,028 during the years ended December 31, 2024 and 2023, respectively, which resulted in increases in our contractual annual owner’s priority returns of $15,488 and $10,321, respectively. Our annual priority return under our Sonesta agreement as of December 31, 2024 was $356,172. We owed Sonesta $18,199 and $13,300 for capital expenditures and other reimbursements as of December 31, 2024 and 2023, respectively. Sonesta owed us $3,911 and $6,376 in owner’s priority returns and other amounts as of December 31, 2024 and 2023, respectively. Amounts due from Sonesta are included in due from related persons and amounts owed to Sonesta are included in due to related persons in our consolidated balance sheets. Our Sonesta agreement requires that 5% of the hotel gross revenues be escrowed for future capital expenditures as FF&E reserves, subject to available cash flows after payment of the owner’s priority returns due to us. No FF&E escrow deposits were required during any of the years ended December 31, 2024, 2023 or 2022.

Pursuant to our Sonesta agreement, we incurred management, reservation and system fees and reimbursement costs for certain guest loyalty, marketing programs and third-party reservation transmission fees of $119,628, $118,146 and $114,563 for the years ended December 31, 2024, 2023 and 2022, respectively. These fees and costs are included in hotel operating expenses in our consolidated statements of comprehensive income (loss). In addition, we incurred procurement and construction supervision fees payable to Sonesta of $2,877 and $1,791 for the years ended December 31, 2024 and 2023, respectively, which amounts have been capitalized in our consolidated balance sheets and are depreciated over the estimated useful lives of the related capital assets.

We are required to maintain working capital for each of our hotels managed by Sonesta and have advanced a fixed amount based on the number of rooms in each hotel to meet the cash needs for hotel operations. As of December 31, 2024 and 2023, we had advanced $46,466 and $48,490, respectively, of initial working capital to Sonesta net of any working capital returned to us on termination of the applicable management agreements in connection with hotels we have sold. These amounts are included in other assets, net in our consolidated balance sheets. Any remaining working capital would be returned to us upon termination in accordance with the terms of our Sonesta agreement.

In general, we and Sonesta may terminate the management agreement for events of default, casualty and condemnation events, although Sonesta may not terminate for certain events of default. We also have the right to terminate the management agreement if minimum performance thresholds are not met for any three of four applicable consecutive years beginning with the 2023 calendar year. Pursuant to our Sonesta agreement, we or Sonesta may be obligated to pay the other party damages if the terminating party terminates a management agreement due to the other party’s event of default.

Hyatt Agreement. As of December 31, 2024, Hyatt managed 17 of our select service hotels pursuant to a portfolio management agreement that expires on March 31, 2031, or our Hyatt agreement, and provides that, as of December 31, 2024, we are to be paid an annual owner’s priority return of $17,455. Any returns we receive from Hyatt are currently limited to the hotels’ available cash flows, if any, after payment of operating expenses. Hyatt has provided us with a $30,000 limited guarantee for 75% of the aggregate annual owner’s priority returns due to us that will become effective upon substantial completion of planned renovations of the hotels, which occurred in January 2025. We realized returns under our Hyatt agreement of $5,860, $9,371 and $12,281 during the years ended December 31, 2024, 2023 and 2022, respectively. In February 2024, we funded $2,300 of additional working capital to Hyatt. We may recover this amount in the future, if cash flows are sufficient to pay our owner’s priority return and other amounts in accordance with our Hyatt agreement. During the years ended December 31, 2024 and 2023, we incurred capital expenditures for certain hotels included in our Hyatt agreement of $31,665 and $46,679, respectively, which resulted in an aggregate increase in our contractual annual owner’s priority returns of $1,900 and $2,801, respectively.

Radisson Agreement. As of December 31, 2024, Radisson managed seven of our full service hotels pursuant to a portfolio management agreement that expires on July 31, 2031, or our Radisson agreement, and provides that we are to be paid an annual owner’s priority return of $10,913. Radisson has provided us with a $22,000 limited guarantee for 75% of the aggregate annual owner’s priority returns due to us that became effective on January 1, 2023, subject to adjustment for planned renovations of certain hotels, which were completed in December 2024. We realized returns under our Radisson agreement of $6,518, $6,266 and $6,387 for the years ended December 31, 2024, 2023 and 2022, respectively. During the year ended December 31, 2024, the hotels under this agreement generated cash flows that exceeded the guaranteed owner’s priority level due to us for the period. During the year ended December 31, 2023, the hotels under this agreement generated cash flows that were less than the guaranteed owner’s priority level due to us for the period, and Radisson made $650 of guaranty payments to cover the shortfall. The available balance of the guaranty was $21,350 as of December 31, 2024. During the years ended December 31, 2024 and 2023, we incurred capital expenditures of $778 and $7,660, respectively, for the hotels included in our Radisson agreement, which resulted in an aggregate increase in our contractual owner’s priority returns of $47 and $460, respectively.

Marriott Agreement. As of December 31, 2023, we sold all 16 hotels previously managed by Marriott International, Inc., or Marriott. We realized a net operating loss under our management agreement with Marriott of $2,762 during the year ended December 31, 2023 and a return of $8,942 during the year ended December 31, 2022. We did not incur capital expenditures for any of the hotels included in our management agreement with Marriott during either of the years ended December 31, 2023 or 2022.

IHG Agreement. Our management agreement with IHG for one hotel expires on January 31, 2026. We realized returns under our management agreement with IHG of $5,051, $4,800 and $3,561 for the years ended December 31, 2024, 2023 and 2022, respectively. Any returns we receive from IHG are limited to the hotel’s available cash flows, if any, after payment of operating expenses. During the year ended December 31, 2023, we recovered $5,797 of working capital that we previously funded under our IHG agreement and expensed in 2021 to transaction related costs when the amount was not expected to be recovered. The amount recovered is included in transaction related costs in our consolidated statements of comprehensive income (loss). During the years ended December 31, 2024 and 2023, we incurred capital expenditures for our hotel in our IHG agreement of $1,124 and $542, respectively.

As of December 31, 2024, we owned 742 service-focused retail net lease properties with an aggregate of 13,292,519 square feet with leases requiring annual minimum rents of $380,863 with a weighted (by annual minimum rents) average remaining lease term of 8.0 years. Our net lease properties were 97.6% occupied and leased by 177 tenants operating under 136 brands in 21 distinct industries.

TA Leases. As of December 31, 2024, TA is our largest tenant, representing 28.7% of our total historical real estate investments. We lease to TA a total of 175 travel centers under five master leases that expire in 2033, or our TA leases, subject to TA’s right to extend those leases, and require annual minimum rents of $259,080 as of December 31, 2024. TA receives a monthly rent credit totaling $25,000 per year over the ten-year initial term of the TA leases as a result of rent it prepaid. On February 28, 2024, TA acquired the leasehold interest of one of our travel centers from a third party landlord. The aggregate minimum rent due to us under our leases with TA for the remaining 175 travel centers was unchanged as a result of TA’s acquisition of this leasehold interest.

Our TA leases are “triple net” leases that require TA to pay all costs incurred in the operation of the leased travel centers, including personnel, utility, inventory, customer service and insurance expenses, real estate and personal property taxes, environmental related expenses, underground storage tank maintenance costs and ground lease payments at those travel centers at which we lease the property and sublease it to TA. Our TA leases generally require TA to indemnify us for certain environmental matters and for liabilities that arise during the terms of the leases from ownership or operation of the leased travel centers. Our TA leases do not require FF&E escrow deposits. However, TA is required to maintain the leased travel centers, including structural and non-structural components. BP Corporation North America Inc., a subsidiary of BP p.l.c., guarantees payment under each of the TA leases, limited to an aggregate cap which was $3,037,475 as of December 31, 2024.

We recognized rental income from our TA leases of $271,334, $266,263 and $259,093 for the years ended December 31, 2024, 2023 and 2022, respectively. Rental income increased by $14,272 and $7,932 for the years ended December 31, 2024 and 2023, respectively, and decreased by $13,143 for the year ended December 31, 2022, to record the scheduled rent changes on a straight line basis. TA was required to pay us previously deferred rent obligations in quarterly installments of $4,404 through January 31, 2023. TA paid us the final quarterly installment owed to us in January 2023. As of December 31, 2024 and 2023, we had receivables for current rent amounts owed to us by TA and straight line rent adjustments of $40,097 and $19,816, respectively, included in other assets, net in our consolidated balance sheets.

Until May 15, 2023, our TA leases required TA to pay us percentage rent based upon increases in certain sales. We recognized percentage rent due under our TA leases as rental income when all contingencies were met. We recognized percentage rent of $3,507 and $10,578 during the years ended December 31, 2023 and 2022, respectively, under our TA leases.

Our other net lease agreements generally provide for minimum rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight-line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. We recognized rental income from our net lease properties (excluding TA) of $128,889, $129,566 and $135,522 for the years ended December 31, 2024, 2023 and 2022, respectively, which included $4,269, $5,233 and $5,367, respectively, of adjustments to record scheduled rent changes under certain of our leases on a straight line basis.

We continually review receivables related to rent, straight-line rent and property operating expense reimbursements and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. The review includes an assessment of whether substantially all of the amounts due under a tenant’s lease are probable of collection. For leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For leases that are deemed not probable of collection, revenue is recorded as cash is received. We recognize all changes in the collectability assessment for an operating lease as an adjustment to rental income. We recorded reserves for uncollectable amounts and reduced rental income by $2,158 and $4,927 during the years ended December 31, 2024 and 2023, respectively, and reduced our reserves for uncollectable amounts and increased rental income by $320 during the year ended December 31, 2022, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $5,058 and $3,436 as of December 31, 2024 and 2023, respectively, included in other assets, net in our consolidated balance sheets.

Additional lease information (as lessee). As of December 31, 2024, eight of our hotels were subject to ground leases where we are the lessee. In addition, our hotel operators enter various leases on our behalf in the normal course of business at our hotels, or our hotel operating leases. We calculated right of use assets and lease liabilities as the present value of the remaining lease payment obligations for our operating leases, which include the ground leases and hotel operating leases, over the remaining lease term using our estimated incremental borrowing rate. The right of use assets and related lease liabilities are included within other assets, net and accounts payable and other liabilities, respectively, in our consolidated balance sheets.

At December 31, 2024 and 2023, our right of use assets and related lease liabilities each totaled $150,846 and $157,127, respectively, which represented our future obligations under our operating leases and are included in other assets, net and accounts payable and other liabilities, respectively, in our consolidated balance sheets. Our operating leases require minimum fixed rent payments, percentage rent payments based on a percentage of hotel revenues in excess of certain thresholds and rent payments equal to the greater of a minimum fixed rent or percentage rent. Rental expense related to our hotel operating leases of $9,476, $9,618 and $11,148 for the years ended December 31, 2024, 2023 and 2022, respectively, is included in hotel operating expenses within our consolidated statements of comprehensive income (loss). For operating leases related to our net lease properties, our tenants are required to pay the rental expense. As of December 31, 2024, our operating leases provide for contractual minimum rent payments to third parties during the remaining lease terms, as follows:

(1) The weighted average discount rate used to calculate the lease liability and the weighted average remaining term for our ground leases (assuming all extension options) and our hotel operating leases are approximately 5.4% and 19 years (range of three months to 63 years) and 5.7% and 34 years (range of three months to 49 years), respectively.

Generally, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant did not perform obligations under a ground lease or did not renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected property.