Service Properties Trust Q4 2019 Investor Presentation
Warning Concerning Forward-Looking Statements This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act 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 statements are 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 performance of our operator or tenants and their ability to pay the contractual amounts of returns or rents due to us, our sales and acquisitions of properties, our ability to compete for acquisitions effectively, our policies and plans regarding investments, financings and dispositions, our ability to pay distributions to our shareholders and to sustain the amount of such distributions, our ability to raise debt or equity capital, our ability to appropriately balance our use of debt and equity capital, our intent to make improvements to certain of our properties and the success of our renovations, our ability to engage and retain qualified managers and tenants for our hotels and net lease properties on satisfactory terms, the future availability of borrowings under our revolving credit facility, our ability to pay interest on and principal of our debt, our credit ratings, our expectation that we benefit from our relationships with The RMR Group, Inc., or RMR, our qualification for 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 as the impact of conditions in the economy and the capital markets on us and our managers and tenants, competition within the real estate, hotel, transportation, travel center and other industries in which our tenants operate, particularly in those markets in which our properties are located, compliance with, and changes to applicable laws, regulations, rules and similar matters, limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes, acts of terrorism, outbreaks of so called pandemics or other manmade or natural disasters beyond our control and actual and potential conflicts of interest with our related parties. Our annual report on form 10-K for the year ended December 31, 2019 and our other filings with the Securities and Exchange Commission (SEC) identify other important factors that could cause differences from our forward-looking statements. Our filings with the SEC are available on the SEC’s website at www.SEC.gov. You should not place undue reliance upon our forward-looking statements. Except as required by law, we do not intend to update or change any forward-looking statements 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. Reconciliation 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 twelve months ended December 31, 2019. Please refer to page 21 for certain definitions of terms used throughout this presentation. SERVICE PROPERTIES TRUST (Nasdaq: SVC) | Investor Presentation Q4 2019 2
SVC at a Glance: Portfolio Overview. Recent Developments Key Metrics • Closed on the sale of 130 net lease properties Total Properties 1,145 for total proceeds of approximately $500mn. • Combined and extended SVC's three existing • Hotels 329 agreements with Marriott through 2035, received additional credit support. • Net Lease Service Retail 816 • Restructured business agreement with Sonesta to exit 39 underperforming extended stay hotels. Investment Value $12.3bn • SVC is in the process of selling 20 hotels managed by Wyndham and 33 hotels managed Normalized FFO Payout Ratio 58.7% by Marriott to complete its targeted disposition and deleveraging plan. SERVICE PROPERTIES TRUST (Nasdaq: SVC) | Investor Presentation Q4 2019 3
Reasons to Own Service Properties Trust. • $12.3 billion invested in a diversified portfolio that provides many avenues for growth. National • 1,145 properties. Scale • 51,349 hotel keys / 15 million square feet of net lease service retail properties. • SVC invests in two asset categories, hotels and retail-focused net lease properties, to provide diversification to SVC’s cash flows. Diversification • Properties operated in 24 industries with over 150 brands. • Geographically diverse portfolio located across 47 states, Washington, DC, Puerto Rico and Canada. • Unique structure designed to withstand renovation disruption and economic downturns. Differentiated Hotel • 73% of SVC’s minimum hotel returns secured by security deposits or corporate guarantees. Management • As a strong capital partner for major hotel brands, SVC receives attractive returns for capex Agreements contributions (typically 8% of amounts funded). Secure and Stable • Necessity-based retail assets provide reliable income, with coverage of 2.32x in 2019. Income from Net • Low capex requirements under the triple net lease structure. Lease Assets • Weighted average remaining lease term of 11.4 years. • Portfolio unencumbered by secured debt. Investment Grade • Well-laddered debt maturities for senior unsecured notes. Balance Sheet • Ample liquidity, with billion dollar revolver to fund growth. • Dividend of $0.54 per share per quarter ($2.16 per share per year). Strong Dividend • Dividend is well covered with a normalized FFO payout ratio of 58.7% in 2019. Position • Very attractive dividend yield. SERVICE PROPERTIES TRUST (Nasdaq: SVC) | Investor Presentation Q4 2019 4 4
Strategy for Achieving Results. STRONG MANAGEMENT CAPACITY TO OPPORTUNITIES PLATFORM SUPPORT FOR AND AFFILIATE SECURITY OF CASH FLOW GROWTH GROWTH ADVANTAGES « Acquisitions The RMR Group Large, Hotel management Investment grade Downside Asset Recycling … Diverse agreements with alignment balance sheet Cashflow Reinvesting through TA Portfolio of interests Protection Billion dollar revolving renovations & capital … improvements credit facility Triple net lease structure Sonesta provides steady income Asset management Historically strong … drives operational stream access to capital improvement Focus on corporate markets governance SERVICE PROPERTIES TRUST (Nasdaq: SVC) | Investor Presentation Q4 2019 5
Portfolio Highlights. Portfolio by Property Type (1) Net Lease Hotels Total ($ in millions) Assets Properties 329 816 1,145 Hotels 62% 51,349/ Keys / Square Feet 51,349 15 msf 15msf Net Lease 38% States 40 44 47 Tenants by Industry (1) Investments $7.0bn $5.3bn $12.3bn Other, 4% Grocery, 1% Annual Minimum $617mn $382mn $999mn Miscellaneous Retail, 1% Return / Rent Medical/Dental Office, 1% Hotels Health and Fitness, 1% 62% Annual Minimum Restaurants-Casual Dining, 1% Returns and Rents 0.86x 2.32x 1.42x Movie Theaters, 2% Coverage Ratio Restaurants-Quick Service, 2% Travel Centers 25% (1) Based on annualized minimum base returns and rents. SERVICE PROPERTIES TRUST (Nasdaq: SVC) | Investor Presentation Q4 2019 6
Portfolio Highlights: Geographically Diverse. SVC’s assets are located in 47 states, Washington DC, Puerto Rico, and Canada. • 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. Annual Minimum Returns and Rents Total Property Hotel Net Lease Total Hotel Hotel % Net Lease Net Lease Count Count Count ($000s) % of Total ($000s) of Total ($000s) % of Total 1 California 58 36 22 $ 116,844 11.7 % $ 93,614 15.2 % $ 23,230 6.1 % 2 Texas 94 36 58 82,444 8.3 % 51,406 8.3 % 31,038 8.1 % 3 Illinois 78 17 61 66,689 6.7 % 40,617 6.6 % 26,072 6.8 % 4 Georgia 97 23 74 63,144 6.3 % 43,320 7.0 % 19,824 5.2 % 5 Florida 62 14 48 40,749 4.1 % 25,066 4.1 % 15,683 4.1 % 6 Ohio 52 11 41 38,645 3.9 % 14,719 2.4 % 23,926 6.3 % 7 Arizona 41 15 26 36,964 3.7 % 20,009 3.2 % 16,955 4.4 % 8 Massachusetts 15 14 1 33,810 3.4 % 28,589 4.6 % 5,221 1.4 % 9 Pennsylvania 42 10 32 33,341 3.3 % 17,900 2.9 % 15,441 4.0 % 10 New Jersey 18 15 3 32,045 3.2 % 26,399 4.3 % 5,646 1.5 % Top 10 557 191 366 $ 544,675 54.6 % $ 361,639 58.6 % $ 183,036 47.9 % Other 588 138 450 454,162 45.4 % 255,519 41.4 % 198,643 52.1 % Total 1,145 329 816 $ 998,837 100.0 % $ 617,158 100.0 % $ 381,679 100.0 % SERVICE PROPERTIES TRUST (Nasdaq: SVC) | Investor Presentation Q4 2019 7
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