Indebtedness

12 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Indebtedness

Indebtedness

Our principal debt obligations at December 31, 2024 were: (1) $150,000 of outstanding borrowings under our $650,000 revolving credit facility; (2) $4,075,000 aggregate outstanding principal amount of senior unsecured notes; (3) $1,000,000 aggregate outstanding principal amount of senior secured notes; and (4) $606,611 aggregate outstanding principal amount of net lease mortgage notes.

Revolving Credit Facility

Our $650,000 secured revolving credit facility is available for general business purposes, including acquisitions. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayments are due until maturity. Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions. The maturity date of our revolving credit facility is June 29, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date of the facility by two additional six-month periods.

Interest payable on drawings under our revolving credit facility is based on the secured overnight financing rate, or SOFR, plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of December 31, 2024. As collateral for all loans and other obligations under the facility, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 69 properties, including 66 hotels and three net lease properties, with an aggregate undepreciated carrying value of $1,717,254 as of December 31, 2024. During the year ended December 31, 2024, we sold three hotels that served as collateral under our revolving credit facility. In connection with the sales of these hotels, the hotels were released from the collateral pool in accordance with the terms of our revolving credit facility. We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of December 31, 2024 and 2023, the annual interest rate payable on borrowings under our revolving credit facility was 6.99% and 7.88%, respectively. The weighted average interest rate for borrowings under our revolving credit facility was 7.43% for the year ended December 31, 2024. We had no borrowings outstanding under our revolving credit facility during the year ended December 31, 2023. As of December 31, 2024 and February 24, 2025, we had $150,000 and $50,000, respectively, outstanding under our revolving credit facility and $500,000 and $600,000, respectively, available for borrowing.

Availability under our revolving credit facility is partially based on the performance of the properties serving as collateral under the facility. Based on expectations of performance of certain of the collateral properties, we and our lenders amended the credit facility in October 2024 to temporarily reduce the required collateral property debt yield from 12% to 8.5% from September 30, 2024 through December 31, 2024, and increase the required collateral property debt yield to 9.5% for the quarter ending March 31, 2025; 10% for the quarter ending June 30, 2025; 11% for the quarter ending September 30, 2025; and 12% for the quarter ending December 31, 2025 and thereafter. Subject to meeting these revised collateral property debt yield levels and meeting other conditions, we will continue to have full access to undrawn amounts under our revolving credit facility.

In February 2025, we and our lenders further amended our revolving credit facility to reduce the required debt service coverage ratio covenant from 1.50 times to 1.30 times effective with respect to the fourth quarter of 2024 and continuing through the end of the loan term. In order to exercise the first extension option, we would be required to maintain 1.50 times debt service coverage level as of and for the duration of the extension period. We also agreed to change the required collateral property debt yield to 10% effective with respect to the first quarter of 2025 and continuing through the end of the loan term and to swap collateral properties as follows: 49 hotels with an aggregate of 8,197 keys and an aggregate undepreciated carrying value of $1,402,307 will be released from the collateral pool and 35 travel centers leased to TA, which travel centers we refer to as our TA No. 5 lease, with an aggregate undepreciated carrying value of $601,684, will be added as collateral to our revolving credit facility. Of the hotels being released from the collateral pool, 38 hotels with an aggregate of 5,078 keys and an aggregate undepreciated carrying value of $689,592 are part of our hotel disposition plan. The corresponding equity pledges will be swapped as well. We expect to complete this collateral swap by the end of the second quarter of 2025.

Our debt agreements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes RMR ceasing to act as our business manager. Our debt agreements also contain covenants, including those that restrict our ability to incur debts or to make distributions under certain circumstances and generally require us to maintain certain financial ratios. Borrowings under our revolving credit facility are subject to meeting ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions. We believe we were in compliance with the terms and conditions of our debt agreements as of December 31, 2024.

Senior Guaranteed Unsecured Notes Issuance

In June 2024, we issued $700,000 aggregate principal amount of 8.375% senior guaranteed unsecured notes due 2029 and $500,000 aggregate principal amount of 8.875% senior guaranteed unsecured notes due 2032 in underwritten public offerings. The aggregate net proceeds from these notes were $1,162,077, after underwriting discounts and other offering expenses. These notes are fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for our foreign subsidiaries and certain other excluded subsidiaries. Such other excluded subsidiaries include, but are not limited to, subsidiaries whose equity has been pledged to secure borrowings under our credit agreement and our 8.625% senior secured notes due 2031, and subsidiaries whose assets secure our net lease mortgage notes.

Repayment of 2025 Maturities

In June 2024, we redeemed all of our outstanding 7.50% senior unsecured notes due 2025 for a redemption price equal to the principal amount of $800,000, plus accrued and unpaid interest and a premium equal to a make whole amount. As a result of the redemption, we recorded a loss on early extinguishment of debt of $17,681 during the year ended December 31, 2024, which represented the make whole premium and the write-off of unamortized discounts and issuance costs related to these notes.

In June 2024, we repurchased $272,803 principal amount of our $350,000 4.50% senior unsecured notes due 2025 at a total cost of $270,396, excluding accrued interest, pursuant to a cash tender offer. Also in June 2024, we effected the satisfaction and discharge of the remaining $77,197 principal amount of our $350,000 4.50% senior unsecured notes due 2025 that were not purchased as part of the tender offer in accordance with their terms. As a result of these transactions, we recorded a gain on early extinguishment of debt of $1,500 during the year ended December 31, 2024, which represented the discount to par paid to repurchase the notes, net of the write-off of unamortized discounts and issuance costs related to these notes.

Net Lease Mortgage Notes

Our $610,200 in aggregate principal amount of net lease mortgage notes were issued on February 10, 2023 by our wholly owned, special purpose bankruptcy remote, indirect subsidiary, SVC ABS LLC, or the Issuer. The Issuer is a separate legal entity and is the sole owner of its assets and liabilities. The assets of the Issuer are not available to pay or otherwise satisfy obligations to the creditors of any owners or affiliates of the Issuer.

Our net lease mortgage notes are summarized below:

Note Class	Principal Outstanding as of December 31, 2024		Coupon Rate	Initial Term (in years)	Maturity
Class A	$	302,204	5.15%	5	February 2028
Class B	172,207		5.55%	5	February 2028
Class C	132,200		6.70%	5	February 2028
Total / weighted average	$	606,611	5.60%

The Class A notes and the Class B notes require monthly principal repayments at an annualized rate of 0.50% and 0.25% of the balance outstanding, respectively, and the Class C notes require interest payments only, with balloon payments due at maturity. The notes mature in February 2028 and may be redeemed without penalty 24 months prior to the scheduled maturity date beginning in February 2026. The notes are non-recourse and are secured by 315 net lease retail properties owned by the Issuer. As of December 31, 2024, the current leases relating to those properties required annual minimum rents of $66,632 and had an aggregate undepreciated carrying value of $760,033.

On January 27, 2025, the Issuer issued a variable funding note, or VFN, secured by the 315 net lease properties that also secure our existing $606,611 of net lease mortgage notes. The VFN permits borrowings on a revolving basis up to $45,000 and the Issuer can borrow, repay and reborrow funds available until maturity. The maturity date of the VFN is January 27, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, can be extended by one year at the Issuer’s option. The VFN requires interest payments only on drawings under the VFN based on SOFR plus a margin of 1.75%, and an unused commitment fee of 50 basis points per annum paid on undrawn amounts. We borrowed $45,000 for general business purposes under the VFN upon closing.

The required principal payments due during the next five years and thereafter under all our outstanding debt at December 31, 2024 were as follows:

Year	Amount
2025	$	1,958
2026	801,958
2027	1,001,958
2028	1,000,737
2029	1,125,000
Thereafter	1,900,000
Total	$	5,831,611