Service Properties Trust · SERVICE PROPERTIES TRUST (Nasdaq: SVC) | June 2020 3 Retail Net Lease...

Service Properties TrustInvestor Presentation

June 2020

2SERVICE PROPERTIES TRUST (Nasdaq: SVC) | June 2020

Warning Concerning Forward-Looking Statements

This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation ReformAct of 1995 and other securities laws. Also, whenever we use words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “will,”“may” and negatives or derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statementsare based upon our present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur.Forward-looking statements in this presentation relate to various aspects of our business, including the duration and severity of the economicimpact resulting from the COVID‐19 pandemic and its impact on us and our hotel operators and net lease tenants, the likelihood and extent towhich our hotel operators and net lease tenants will be negatively impacted by the COVID‐19 pandemic and its aftermath and be able and willingto pay us the contractual amounts of returns or rents due to us, our sales and acquisitions of properties, our ability to compete for acquisitionseffectively, our policies and plans regarding investments, financings and dispositions, our ability to pay distributions to our shareholders and toincrease the amount of such distributions, our ability to raise debt or equity capital, our ability to appropriately balance our use of debt and equitycapital, our intent to make improvements to certain of our properties and the success of our renovations, our ability to engage and retain qualifiedhotel operators and net lease tenants on satisfactory terms, the future availability of borrowings under our revolving credit facility, our ability to payinterest on and principal of our debt, our ability to maintain sufficient liquidity during the duration of the COVID-19 pandemic and resultingeconomic downturn, our credit ratings, our expectation that we benefit from our relationships with The RMR Group, Inc., or RMR, our qualificationfor taxation as a REIT, changes in federal or state tax laws, and other matters.

Our actual results may differ materially from those contained in or implied by our forward-looking statements as a result of various factors, such asthe impact of conditions in the economy, including the COVID-19 pandemic and its aftermath, and the capital markets on us and our hoteloperators and net lease tenants, competition within the real estate, hotel, transportation, travel center and other industries in which our hoteloperators and net lease tenants operate, particularly in those markets in which our properties are located, compliance with, and changes toapplicable laws, regulations, rules and similar matters, limitations imposed on our business and our ability to satisfy complex rules in order for usto maintain our qualification for taxation as a REIT for U.S. federal income tax purposes, acts of terrorism, outbreaks of pandemics, including theCOVID-19 pandemic, or other man-made or natural disasters beyond our control and actual and potential conflicts of interest with our relatedparties. Our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2020 and our other filings with the Securities and Exchange Commission (SEC) identify other important factors that could causedifferences from our forward-looking statements. Our filings with the SEC are available on the SEC’s website at www.SEC.gov. You should notplace undue reliance upon our forward-looking statements. Except as required by law, we do not intend to update or change any forward-lookingstatements as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

This presentation contains Non-GAAP financial measures including, among others, “EBITDA” and “Adjusted EBITDA” in the exhibits section.

Reconciliations for those metrics to the most directly comparable financial measure calculated in accordance with U.S generally accepted

accounting principles (GAAP) are included herein.

Unless otherwise noted, all data presented is as of and for the three months ended March 31, 2020.

Please refer to page 20 for certain definitions of terms used throughout this presentation.


Retail Net Lease

Assets Provide

Reliable Income

Business and Portfolio Characteristics.

National

Scale

• $12.3 billion invested in a diversified portfolio.

• 1,142 properties.

• 329 hotels with 51,358 hotel keys / 14.5 million square feet in 813 net lease service retail properties.

• SVC invests in two asset categories, hotels and retail service-focused net lease properties, to provide

diversification to SVC’s cash flows.

• Properties operated in 23 industries with over 148 brands.

• Geographically diverse portfolio located across 47 states, Washington, DC, Puerto Rico and Canada.

• Well-laddered debt maturities for senior unsecured notes.

• $500 million of availability on SVC’s billion dollar revolver as of May 7, 2020.

• Over $12 billion of diverse assets with no mortgage debt.

Strong

Balance Sheet

Differentiated Hotel

Management

Agreements

• Unique management agreements with minimum returns, subordinated management fees, security

deposits and guarantees and all-or-none renewal options intended to ensure operators' commitment.

• 77% of SVC’s minimum hotel returns secured by security deposits or corporate guarantees.

• As a strong capital partner for major hotel brands, SVC receives attractive returns for capex

contributions (typically 8% of amounts funded).

• Non-payment of minimum returns is a default, SVC can rebrand the hotels.

• Necessity-based retail assets with strong rent coverage of 2.28x.

• Low capex requirements under the triple net lease structure.

• Weighted average remaining lease term of 11.1 years.

• Diverse portfolio 98% leased to 187 different tenants.

Diversification


(1) Based on annualized minimum base returns and rents.

Portfolio Highlights.

($ in millions) HotelsNet Lease

AssetsTotal

Properties 329 813 1,142

Keys / Square Feet 51,358 15 msf51,358/ 15msf

States 40 44 47

Investments $7.0bn $5.3bn $12.3bn

Annual Minimum Return / Rent

$587mn $380mn $967mn

Annual Minimum Returns and Rents Coverage Ratio

0.73x 2.28x 1.34x

Portfolio by Property Type (1)

Tenants by Industry (1)


SVC: Recent Developments.

• Only 19 of SVC’s 329 hotels have suspended operations; substantially all have significantly reduced operations.

• Asset Management is working with hotel operators to mitigate operating costs.

• Extended stay portfolio is performing better than limited and full service hotels.

• TravelCenters of America, an essential service business to the U.S. supply chain, represents 25% of SVC’s total

minimum rents and returns and is current on all its rent obligations.

• As of May 7, SVC has deferred $8.6 million of rent, or less than 1% of total annual minimum rents and returns, to

help its retail tenants manage through the crisis.

• Strong balance sheet.

◦ $500 million of availability on credit facility as of May 7, 2020.

◦ No debt maturities until February 2021.

◦ Well-laddered maturities for senior unsecured notes.

• Reduced quarterly distribution to $0.01 per share, expected savings of $262 million for remainder of 2021.

• Limited capital expenditures to maintenance capital, projects underway and contractual obligations.

• Amended $1 billion credit line to obtain waivers on certain covenants through March 31, 2021.

◦ Maintained full revolver access.

◦ Proceeds from asset sales or capital raises must repay revolver or term loan only during waiver period.

◦ Temporary equity pledges on certain subsidiaries owning properties with up to $3.2 billion of

unencumbered gross asset value as of March 31, 2020 ($1.8 billion initially).

◦ Pledges released at the end of the waiver period or earlier if bank debt is repaid.

Summary of COVID-19 Impact

Corporate Actions to Mitigate Effects of the Pandemic; Liquidity



• $130 million of available security deposits and corporate

guarantees supporting SVC’s minimum returns as of March 31,

2020.

• Certain hotel operators required to fund minimum returns if credit

features are depleted.

• SVC has agreed to suspend contributions to its FF&E reserves

under certain of its agreements to improve cash flows available to

pay its minimum returns.

• During April 2020, SVC advanced $70.7 million of working capital

to its hotel operators to cover projected operating losses. Under

certain agreements, these advances are reimbursable to SVC

from a share of future cash flow.

• SVC Asset Management continues to work closely with hotel

operators to reduce operating expenses.

• Despite weak demand, SVC’s extended stay hotels have

outperformed select service hotels and urban full service hotels,

which have been hardest hit.

Portfolio Updates-Hotels


• TravelCenters of America (TA)

◦ Annual minimum rents of $246 million, tenant represents

approximately 25% of SVC's minimum rents and returns.

◦ TA's travel centers have been designated as an “essential

service” critical to the supply chain, allowing it to remain open.

◦ TA is current on all of its lease payments due to SVC.

◦ LTM rent coverage of 1.87x.

◦ Full-service restaurants have temporarily closed; all other service

operating.

• Retail Net Lease Portfolio

◦ Represents 14% of SVC’s minimum rents and returns.

◦ LTM rent coverage of 3.06x.

◦ SVC collected 45% of April rents from its other net lease tenants.

◦ As of May 7, SVC has deferred an aggregate of $8.6 million of rent

for April, May and June.

◦ Generally, these rent deferrals are for one to three months of rent

and will be repaid by the tenants over a 12-month period

beginning in September 2020.


Portfolio Updates-Net Lease


SVC’s assets are located in 47 states, Washington DC, Puerto Rico, and Canada.

Portfolio Highlights: Geographically Diverse.

Annual Minimum Returns and Rents

Total Property Count

Hotel Count

Net Lease Count

Total ($000s) % of Total

Hotel ($000s)

Hotel % of Total

Net Lease ($000s)

Net Lease % of Total

1 California 58 36 22 $ 109,619 11 % $ 86,308 15 % $ 23,311 6 %

2 Texas 94 36 58 79,263 8 % 47,478 8 % 31,785 8 %

3 Georgia 97 23 74 62,958 7 % 43,425 7 % 19,533 5 %

4 Illinois 77 17 60 62,917 7 % 36,819 6 % 26,098 7 %

5 Ohio 54 11 43 40,754 4 % 14,731 3 % 26,023 7 %

6 Florida 62 14 48 38,084 4 % 22,296 4 % 15,788 4 %

7 Arizona 41 15 26 35,611 4 % 18,636 3 % 16,975 4 %

8 Massachusetts 15 14 1 33,476 3 % 28,255 5 % 5,221 1 %

9 Pennsylvania 42 10 32 32,656 3 % 17,293 3 % 15,363 4 %

10 New Jersey 18 15 3 31,921 3 % 26,275 4 % 5,646 1 %

Top 10 558 191 367 $ 527,259 54 % $ 341,516 58 % $ 185,743 47 %

Other 584 138 446 439,732 46 % 245,972 42 % 193,760 53 %

Total 1,142 329 813 $ 966,991 100 % $ 587,488 100 % $ 379,503 100 %

• SVC has invested $12.3 billion in its real estate portfolio.

• SVC’s investments are located in various markets near demand generators.

• We believe geographic diversity mitigates market risk.


Hotel Portfolio: Operated under a Diverse Group of Nationally Recognized Brands.

• SVC’s 329 hotels are operated under six

long-term agreements directly with brand

owners.

• 20 different hotel brands, predominantly

upper upscale and upscale.

• Primarily extended stay and select service

hotels typically in near-urban locations.

• Diversified hotel portfolio located in 40

states, Washington, D.C., Puerto Rico and

Canada.

• 77% of minimum hotel returns and rents

secured by security deposits or corporate

guarantees.


Hotel Portfolio: SVC’s Agreements are Unique within the Hotel Industry.

SVC Agreement Structure (1)

1. Property combination agreements with brand owners

that provide diversification within each contract.

2. SVC’S agreements provide for payment of minimum

returns (“owner’s priority”) to SVC regardless of hotel

cash flow and before base management fees are paid.

3. SVC’s agreements contain security features to protect

SVC's income and cash flows, including some or all of:

cross default provisions, fee subordination, all or none

renewal options, cash security deposits and full or

limited guarantees.

4. SVC’s returns set to cover SVC's capital costs, including

debt service, equity cost and capex reserves.

5. SVC’s management agreements include “all or none”

property renewal options to improve likelihood of

renewal.

6. Greater operator incentives above SVC’s annual returns.

Other Hospitality REITs

1. Individual agreements are negotiated for each hotel

property. Management is often by franchisees.

2. Owner’s returns are generally subordinated to all

property level operating expenses, including

management and franchise fees.

3. Limited or no security features.

4. Investment underwriting often done based upon

projected results assuming capital investments by the

owner without any assured rent/return coverage. Capex

funding is often deferred during periods of stress.

5. Property by property renewal options virtually assure

some future losses.

These agreements are designed to provide stable cash flows to shareholders and incentives to the

operators to outperform.

(1) Terms vary amongst each of SVC’s agreements.


Net Lease Portfolio: High-Quality Service & Necessity Based Assets.

Net Lease Portfolio Statistics

813 $380mm

Properties Annual Contractual Rent

14.5mm 11.1 Years

Rentable Square Feet Weighted Average Lease Term

98% 2.28x

Occupancy W.A. FCCR

Diverse Geographical Footprint (1)

(1) By annual minimum rent.

8.5%

22 Industries | 128 Brands

% of Annual Minimum Rent<1% >8.5%


Net Lease Portfolio: Diversified Tenants & Industries Mitigate Risk.

(1) By annual minimum rent.

(2) Property under contract to sell for $51 million dollars, expected to close in May 2020.

Tenants by Brand (1)Tenants by Industry (1)

Brand

% of Annualized

Minimum Rent Coverage

TravelCenters of America 44.3% 1.98x

Petro Stopping Centers 20.6% 1.61x

AMC Theatres 2.8% 1.33x

The Great Escape 1.9% 4.13x

Life Time Fitness 1.4% 3.56x

Casual Male (2) 1.4% 1.22x

Buehler's Fresh Foods 1.4% 2.09x

Heartland Dental 1.2% 3.67x

Pizza Hut 1.1% 1.36x

Regal Cinemas 1.0% 1.84x

Other 22.9% 3.40x

100% 2.28x

Well-Laddered Lease Expirations (1)


Balance Sheet Overview as of March 31, 2020.

Well Laddered Debt Maturities

Book Capitalization

Leverage/Coverage Ratios

Net Debt / Total Gross Assets 50.4%

Net Debt / Gross Book Value of Real Estate Assets 52.0%

Adjusted EBITDAre / Interest Expense 2.7x

Net Debt / LTM EBITDAre (1) 7.3x

Strong Balance Sheet

Unsecured Floating Rate Debt 10%

Unsecured Fixed Rate Debt 62%

Shareholder’s Equity 28%

• No secured debt.

• Unsecured senior notes: $5.4 billion.

• Unsecured term loan: $400 million, July 2023 maturity.

• Revolving credit facility:

◦ $1 billion ($457 million outstanding).

◦ July 2022 maturity plus two six-month extensions.

• No derivatives, off-balance sheet liabilities, or material

adverse change clauses or ratings triggers.

(1) Represents the twelve months ended March 31, 2020. EBITDA only includes two full quarters of SMTA transaction completed in September 2019.


Public Debt Covenants.

Metric Covenant March 31, 2020

Total Debt / Adjusted Total Assets Allowable Maximum: 60.0% 50.0%

Secured Debt / Adjusted Total Assets Allowable Maximum: 40.0% —%

Consolidated Income Available for Debt Service / Debt Service

Required Minimum: 1.50x 2.5x

Total Unencumbered Assets / Unsecured Debt Required Minimum: 150% 202.0%


Financial Services:

Real Estate Services:

Business Services:

AccountingAcquisitions/ Dispositions

Administration

Capital MarketsAsset

ManagementHuman Resources

Compliance/ AuditConstruction/Development

Information Technology (IT)

Finance/ Planning Engineering Investor Relations

Treasury Leasing Marketing

TaxProperty

ManagementLegal/

Risk Management

~$32 Billion in AUM

Approximately 600

CRE Professionals

More than 30 Offices

Throughout the U.S.More than

50,000 Employees

Over 2,100

Properties

$12 Billion in

Annual Revenues

Combined RMR

Managed Companies:

SVC IS MANAGED BY THE RMR GROUP, AN ALTERNATIVE ASSET MANAGER

Strong Management Platform and Affiliate Advantages.

15

National Multi-Sector Investment Platform

Office Industrial Government Medical Office Life Science Senior Housing Hotels Retail


RMR base management fee tied to SVC share

price performance.

RMR incentive fees contingent on total shareholder

return(1) outperformance.

• Equal to 12% of value generated by SVC in excess of the

benchmark index total returns (SNL US Hotel REIT Index) per

share over a three year period, subject to a cap (1.5% of

equity market cap).

• Absolute dollar outperformance must be positive to receive an

incentive fee: it can’t be negative but better than the index.

• Shareholders keep 100% of benchmark returns and 88% of

returns in excess of the benchmark.

Alignment of Interests

If SVC’s stock price goes up and its total market cap exceeds its historical cost of real estate, RMR base management fee is capped at 50 bps of historical cost of real estate.

If total market cap is less than historical cost of real estate, base fee fluctuates with share price.

Incentive fee structure keeps RMR focused on increasing total shareholder return.

Members of RMR senior management and RMR are holders of SVC stock, RMR is subject to long term lock up agreements.

SVC shareholders have visibility into RMR, a publicly traded company.

SVC benefits from RMR’s national footprint and economies of scale of $32 billion platform.

SVC and RMR continue to take action to improve corporate governance.

(1) To determine final share price in SVC’s Total Return calculation, the business management agreement requires that the highest ten day share price average within the last 30 trading days of the

measurement period be used. In the past, this and other less significant factors have resulted in differences between SNL’s calculation of SVC’s total return percentage and the total return percentage

computed under the agreement.

The RMR Group LLC and Shareholder Alignment.

16

Corporate Governance.

• Proxy access adopted in 2019.

• Added two independent trustees in February 2020.

• Announced destaggering of Board.

• Consists of an annual fee equal to generally 50 bps multiplied

by the lower of: (1) SVC's historical cost of real estate, or

(2) SVC's total market capitalization.

• There is no incentive fee for RMR to complete any transaction

that could reduce share price.

SERVICE PROPERTIES TRUST (Nasdaq: SVC) | May 2020

Appendix


Calculation of EBITDA, EBITDAre and Adjusted EBITDAre.

(in thousands)

For the Three Months Ended

3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019

Net income (loss) $ (33,650) $ (14,893) $ 40,074 $ 8,782 $ 225,787

Add (Less): Interest expense 71,075 73,384 52,375 49,601 49,766

Income tax expense (benefit) 342 1,527 467 (260) 1,059

Depreciation and amortization 127,926 126,727 103,160 99,196 99,365

EBITDA 165,693 186,745 196,076 157,319 375,977

Add (Less): (Gain) / loss on sale of real estate (1) 6,911 — — — (159,535)

Loss on asset impairment (2) 16,740 39,296 — — —

EBITDAre 189,344 226,041 196,076 157,319 216,442

Add (Less): General and administrative expense paid in common shares (3) 590 480 1,068 865 436

Estimated business management incentive fee (4) — — — — —

Acquisition and transaction related costs (5) — 1,795 — — —

Loss on early extinguishment of debt (6) — — 8,451 — —

Unrealized gains and losses on equity securities, net (7) 5,045 (3,300) 3,950 60,788 (20,977)

Loss contingency (8) — 1,997 — — —

Adjustments to reflect the entity's share of EBITDA attributable to an investee (9) 158 — — — —

Adjusted EBITDAre $ 195,137 $ 227,013 $ 209,545 $ 218,972 $ 195,901

(1) We recorded a net loss on sale of real estate of $6,911 during the three months ended March 31, 2020 in connection with the sale of six net lease properties and a $159,535 gain on sale of real estate during the three

months ended March 31, 2019, in connection with the sales of 20 travel centers.

(2) We recorded a $16,740 loss on asset impairment during the three months ended March 31, 2020 to reduce the cost of two net lease properties to their estimated fair value and $39,296 loss on asset impairment during the

three months ended December 31, 2019 to reduce the carrying value of 19 net lease properties to their estimated fair value less costs to sell and two hotels to their estimated fair value.

(3) Amounts represent the equity compensation awarded to our Trustees, our officers and certain other employees of RMR LLC.

(4) Incentive fees under our business management agreement with RMR LLC are payable after the end of each calendar year, are calculated based on common share total return, as defined, and are included in general and

administrative expense in our consolidated statements of income. In calculating net income (loss) in accordance with GAAP, we recognize estimated business management incentive fee expense, if any, in the first, second

and third quarters. Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating net income (loss), we do not include these amounts in the calculation of Adjusted EBITDAre

until the fourth quarter, which is when the business management incentive fee expense amount for the year, if any, is determined. No business management incentive fee expense was recorded for the periods presented.

(5) Acquisition and transaction related costs represents costs related to our exploration of possible financing transactions.

(6) We recorded a loss of $8,451 on early extinguishment of debt in the three months ended September 30, 2019 related to the termination of a term loan commitment we arranged in connection with the acquisition of a net

lease portfolio.

(7) Unrealized gains and (losses) on equity securities, net represent the adjustment required to adjust the carrying value of our former investment in RMR Inc. and our investment in TA common shares to their fair value. We

sold our RMR Inc. shares in July 2019.

(8) We recorded a $1,997 loss contingency during the three months ended December 31, 2019 for an expected settlement of a historical pension withdrawal liability for a hotel we rebranded.

(9) Represents adjustments to reflect our proportionate share of EBITDA related to our equity investment in Sonesta Holdco Corporation.


Calculation of Funds From Operations (FFO) and Normalized FFO.

(amounts in thousands, except share data)

For the Three Months Ended

03/31/2020 12/31/2019 9/30/2019 6/30/2019 03/31/2019

Net income (loss) $ (33,650) $ (14,893) $ 40,074 $ 8,782 $ 225,787

Add (Less): Depreciation and amortization 127,926 126,727 103,160 99,196 99,365

(Gain) / loss on sale of real estate (1) 6,911 — — — (159,535)

Loss on asset impairment (2) 16,740 39,296 — — —

Unrealized gains and losses on equity securities, net (3) 5,045 (3,300) 3,950 60,788 (20,977)

Adjustments to reflect the entity's share of FFO attributable to an investee (4) 112 — — — —

FFO 123,084 147,830 147,184 168,766 144,640

Add (Less): Acquisition and transaction related costs (5) — 1,795 — — —

Loss on early extinguishment of debt (6) — — 8,451 — —

Loss contingency (7) — 1,997 — — —

Normalized FFO $ 123,084 $ 151,622 $ 155,635 $ 168,766 $ 144,640

Weighted average shares outstanding (basic) 164,370 164,364 164,321 164,284 164,278

Weighted average shares outstanding (diluted) 164,370 164,364 164,348 164,326 164,322

Basic and diluted per share common share amounts:

Net income (loss) $ (0.20) $ (0.09) $ 0.24 $ 0.05 $ 1.37

FFO $ 0.75 $ 0.90 $ 0.90 $ 1.03 $ 0.88

Normalized FFO $ 0.75 $ 0.92 $ 0.95 $ 1.03 $ 0.88

(1) We recorded a net loss on sale of real estate of $6,911 during the three months ended March 31, 2020 in connection with the sale of six net lease properties and a $159,535 gain on sale of real estate during the three

months ended March 31, 2019, in connection with the sales of 20 travel centers.

(2) We recorded a $16,740 loss on asset impairment during the three months ended March 31, 2020 to reduce the cost of two net lease properties to their estimated fair value and $39,296 loss on asset impairment during the

three months ended December 31, 2019 to reduce the carrying value of 19 net lease properties to their estimated fair value less costs to sell and two hotels to their estimated fair value.

(3) Unrealized gains and (losses) on equity securities, net represent the adjustment required to adjust the carrying value of our former investment in RMR Inc. and our investment in TA common shares to their fair value. We

sold our RMR Inc. shares in July 2019.

(4) Represents adjustments to reflect our proportionate share of FFO related to our equity investment in Sonesta.

(5) Acquisition and transaction related costs represents costs related to our exploration of possible financing transactions.

(6) We recorded a loss of $8,451 on early extinguishment of debt in the three months ended September 30, 2019 related to the termination of a term loan commitment we arranged in connection with our acquisition of a net

lease portfolio.

(7) We recorded a $1,997 loss contingency during the three months ended December 31, 2019 for an expected settlement of a historical pension withdrawal liability for a hotel we rebranded.


Non-GAAP Financial Measures Definitions.

20

Non-GAAP Financial Measures: We present certain “non-GAAP financial measures” within the meaning of applicable Securities and Exchange Commission, or SEC, rules,

including EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Normalized FFO. These measures do not represent cash generated by operating activities in accordance with GAAP and

should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction

with net income (loss) as presented in our condensed consolidated statements of income. We consider these non-GAAP measures to be appropriate supplemental measures of operating

performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts,

such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs.

EBITDA, EBITDAre and Adjusted EBITDAre: We calculate earnings before interest, taxes, depreciation and amortization, or EBITDA, EBITDA for real estate, or EBITDAre, and

Adjusted EBITDAre as shown on page 18. EBITDAre is calculated on the basis defined by The National Association of Real Estate Investment Trusts, or Nareit, which is EBITDA,

excluding gains and losses on the sale of real estate, loss on impairment of real estate assets, if any, as well as certain other adjustments currently not applicable to us. In calculating

Adjusted EBITDAre, we adjust for the items shown on page 18 and include business management incentive fees only in the fourth quarter versus the quarter when they are recognized as

expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business

management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. Other real estate companies and REITs may

calculate EBITDA, EBITDAre and Adjusted EBITDAre differently than we do.

FFO and Normalized FFO: We calculate funds from operations, or FFO, and Normalized FFO as shown on page 19. FFO is calculated on the basis defined by Nareit, which is net

income (loss), calculated in accordance with GAAP, excluding any gain or loss on sale of properties and loss on impairment of real estate assets, if any, plus real estate depreciation and

amortization, less any unrealized gains and losses on equity securities, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO, we adjust for the

item shown on page 19 and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with

GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees

will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO and Normalized FFO are among the factors considered by our Board of

Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT,

limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our distribution rate as a percentage of the trading price of our common

shares, or dividend yield, and to the dividend yield of other REITs, our expectation of our future capital requirements and operating performance and our expected needs for and

availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.

Coverage: We define hotel coverage as total hotel revenues minus all hotel expenses and FF&E reserve escrows which are not subordinated to minimum returns due to SVC divided

by the minimum returns or rents due to SVC.

We define net lease coverage as annual property level adjusted earnings before interest, taxes, depreciation, amortization and rent, or EBITDAR, divided by the annual minimum rent due

to us weighted by the minimum rent of the property to total minimum rents of the net lease portfolio. The annual property level adjusted EBITDAR is determined based on the most recent

operating statements, if any, furnished by the tenant. Operating statements furnished by the tenant often are unaudited and, in certain cases, may not have been prepared in accordance

with GAAP and are not independently verified by us. Properties that do not report operating information are excluded from the coverage calculations

Investment: Represents historical cost of properties plus capital improvements funded by SVC less impairment writedowns, if any, and excludes capital improvements made from

FF&E reserves funded from hotel operations which do not result in increases in minimum returns or rents.

Net Debt: Represents total debt less cash and cash equivalents as of the date reported.

Service Properties TrustInvestor Presentation

June 2020

Service Properties Trust · SERVICE PROPERTIES TRUST (Nasdaq: SVC) | June 2020 3 Retail Net Lease...

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Transcript of Service Properties Trust · SERVICE PROPERTIES TRUST (Nasdaq: SVC) | June 2020 3 Retail Net Lease...