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Item 7. Management’s Discussion and Analysis

2021-03-01 compared with 2020-03-02 · 537 added, 464 removed, 238 unchanged (81% of the section changed)

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We are a REIT organized under the laws of the State of Maryland.

As of December 31, 2019 , we owned 1,145 properties in 47 states, the District of Columbia, Canada and Puerto Rico.

On September 20, 2019, we completed the SMTA Transaction as a result of which, we acquired 767 properties with 12.4 million rentable square feet for an aggregate transaction value of $ 2,482,382 .

The portfolio consisted of 767 service-oriented retail properties net leased to tenants in 23 distinct industries and 163 brands including quick service and casual dining restaurants, movie theaters, health and fitness, automotive parts and services and other service-oriented and necessity-based industries across 45 states.

On December 31, 2019 , we entered into agreements with Marriott, which combined our three then-existing Marriott operating agreements, historically referred to as the Marriott Nos.

1, 234 and 5 agreements, into a single portfolio for a 16-year term commencing on January 1, 2020.

Additional details of this agreement are set forth in Note 5 to our consolidated financial statements in Item 15 of this Annual Report on Form 10-K, which disclosure is incorporated herein by reference.

On February 27, 2020, we entered into a transaction agreement with Sonesta pursuant to which we and Sonesta modified our existing business arrangements.

Additional details regarding this transaction are set forth in Note 5 to our consolidated financial statements in Item 15 of this Annual Report on Form 10-K, which disclosure is incorporated herein by reference.

As of December 31, 2020, we owned 1,109 properties in 47 states, Washington D.C., Canada and Puerto Rico.

Business Environment and Outlook.

The COVID-19 pandemic has severely impacted the industries in which our operators conduct business.

Our business is focused on lodging and service retail properties, which have been some of the industries most severely and negatively impacted by the effects of the pandemic.

These conditions have materially and adversely impacted our business, operations, financial results and liquidity.

In particular, a variety of factors related to the COVID-19 pandemic have caused, and are expected to continue to cause, a decline in the lodging industry.

Although there were positive economic trends seen during the second and third quarters of 2020, due to recent surges in COVID-19 cases, a slow rollout of vaccinations and the uncertainty surrounding the public’s acceptance of such vaccinations, we currently expect the eventual recovery in the lodging and other industries our tenants operate will not likely occur until the second half of 2021, and will most likely be gradual and the impact on specific markets and industries will be uneven.

We believe the lodging industry outlook will continue to be weighed down by the slow return of corporate and group travel, as businesses likely will remain cautious.

In addition, consumer confidence and leisure demand will continue to be affected by unemployment, perceptions of the safety of returning to normal activities and leisure travel and broader macroeconomic trends.

We believe that our current financial resources and our expectations as to the future performance of the lodging industry and the industries in which our net lease retail tenants operate will enable us to withstand the COVID-19 pandemic and its aftermath.

As of February 26, 2021, we have:

• received waivers of compliance with the then-existing financial covenants under our credit agreement to ensure we had access to undrawn amounts under our revolving credit facility, subject to minimum liquidity requirements;

• reduced our quarterly cash distributions on our common shares to $0.01 per share, a savings of approximately $87,220 per quarter compared to prior distribution levels;

• raised $1,229,950 of net proceeds from the issuance of new senior notes;

• repaid our $400,000 term loan;

• repaid our $400,000 of 4.25% senior notes due 2021;

• raised $167,542 in net proceeds from asset sales and have entered agreements to sell additional properties for an aggregate sales price of $24,313, excluding closing costs;

• borrowed the remaining $972,793 of capacity under our revolving credit facility in January 2021 as a precautionary measure to preserve financial flexibility;

• been in regular, frequent contact with our hotel managers to implement cost savings measures to minimize losses and preserve liquidity, including agreeing to temporary closures of certain hotels, the reduction of hotel operating staff and certain other measures;

• communicated with many of our net lease retail tenants regarding their operation of our properties in the current challenging economic conditions, and provided rent deferrals to certain tenants that are generally payable in installments beginning in the third quarter of 2020 and, in some cases, we have restructured our tenants’ leases.

We have no debt maturities during the remainder of 2021 and our next debt maturity is in August 2022.

For further discussion of and the risks relating to the COVID-19 pandemic on us and our business, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements,” Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.”

Management agreements and leases .

At February 26, 2020 , we owned 329 hotels operated under six agreements.

We leased 328 of these hotels to our wholly owned TRSs that are managed by hotel operating companies and one is leased to a hotel operating company.

We own 816 service-oriented properties with 194 tenants subject to “triple net” leases, where the tenants are generally responsible for payment of operating expenses and capital expenditures.

Our consolidated statements of comprehensive income include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and other operating expenses from our leased hotels and net lease properties.

Many of our operating agreements contain security features, such as guarantees and security deposits, which are intended to protect minimum returns and rents due to us in accordance with our agreements regardless of property performance.

However, the effectiveness of various security features to provide us uninterrupted receipt of minimum returns and rents is not assured, especially if economic conditions generally decline for a prolonged period.

Also, certain of the guarantees that we hold are limited in amount and duration and do not provide for payment of the entire amount of the applicable minimum returns.

At December 31, 2020, we owned 310 hotels operated under seven agreements.

We leased 305 of these hotels to our wholly owned TRSs that are managed by hotel operating companies.

We have entered an agreement to sell five additional hotels and we have entered into a short term lease with the buyer for these hotels.

Our consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and other operating expenses from our leased hotels and net lease properties.

Hotel agreements.

We terminated our agreement with IHG due to IHG’s failure to pay minimum returns and rents due to us, and transferred the branding and management of 102 of the 103 hotels managed by IHG to Sonesta during the fourth quarter of 2020.

We sent notices to Marriott terminating our agreement for its failure to cover the cumulative shortfalls between the payments we received and 80% of the cumulative priority returns due during 2020.

We are in dispute with Marriott and have submitted various claims for arbitration, including regarding the timing and characterization of certain minimum return advances made to us and the validity of the timing of the termination of the Marriott agreements.

Despite the arbitration claims, we and Marriott agreed to an orderly transition and we transferred the branding and management of nine hotels managed by Marriott to Sonesta in December 2020 and 78 hotels managed by Marriott to Sonesta in February 2021.

We expect to transfer 10 additional Marriott hotels to Sonesta in March 2021.

For further discussion of the arbitration matters, see Part 1, Item 3, “Legal Proceedings” and “Risk Factors—Risks Related to Our Business— We are a party to arbitration proceedings, which could adversely affect our financial results and/or distract our management ” and Note 5 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.

In January 2021, we received a notice of termination from Hyatt with respect to our management agreement with it for 22 hotels as a result of the guarantee being exhausted.

We are currently in discussions regarding possible changes to the management agreement that may result in some or all of the hotels remaining Hyatt managed.

However, if such discussions do not result in a mutually acceptable agreement, we expect to transition management of the 22 hotels to Sonesta in April 2021.

Hotel portfolio .

Comparable hotels data .

We present RevPAR, average daily rate, or ADR, and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods.

We generally define comparable hotels as those that were owned by us and were open and operating for the entire periods being compared.

For the years ended December 31, 2019 and 2018 , we excluded 10 hotels from our comparable results.

Six of these hotels were not owned for the entire periods and four were closed for major renovations during part of the periods presented.

Hotel operations.

As of December 31, 2020, we owned 310 hotels.

In 2020, the U.S.

hotel industry generally realized increases in ADR and RevPAR and no change in occupancy compared to 2018 .

hotel industry generally realized decreases in ADR, revenue per available room, or RevPAR, and occupancy compared to 2019.

During the year ended December 31, 2020, our 285 comparable hotels that we owned continuously since January 1, 2019 produced aggregate year over year decreases in ADR and RevPAR and a decline in occupancy.

We believe these results are, in part, due to the disruption and displacement at certain of our hotels undergoing renovations, increased competition from new hotel room supply in certain markets and decreased business activity in areas where some of our hotels are located.

We believe these results are primarily due to the disruption and displacement at certain of our hotels as a result of the COVID-19 pandemic, including significant decreases in business and leisure activity in areas where some of our hotels are located, partially offset by increased demand from first responders, medical personnel and people seeking safe locations for quarantine or to remain socially distanced, particularly in our long-term or extended stay properties.

For the year ended December 31, 2020 compared to the year ended December 31, 2019 for our 285 comparable hotels that we owned continuously since January 1, 2019, ADR decreased 20.6% to $96.18, occupancy decreased 28.7 percentage points to 44.8% and RevPAR decreased 51.6% to $43.09.

For the year ended December 31, 2020 compared to the year ended December 31, 2019 for all our 310 hotels, ADR decreased 23.0% to $100.77, occupancy decreased 31.0 percentage points to 42.0% and RevPAR decreased 55.7% to $42.32.

Comparable hotels data .

We present RevPAR, ADR and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods.

We generally define comparable hotels as those that were owned by us and were open and operating for the entire periods being compared.

For the years ended December 31, 2020 and 2019, we excluded 25 hotels from our comparable results.

Three of these hotels were not owned for the entire periods, three were closed for major renovations and 19 suspended operations as a result of the COVID-19 pandemic during part of the periods presented.

Net Lease Portfolio.

As of December 31, 2019 , we owned 816 net lease service-oriented retail properties with 14.9 million square feet and annual minimum rent of $ 381,679 , which represented approximately 38% of our total annual minimum returns and rents.

Our net lease portfolio was 98% occupied as of December 31, 2019 by 194 tenants with a weighted (by annual minimum rent) lease term of 11.4 years, operating under 131 brands in 23 distinct industries.

As of December 31, 2020, we owned 799 service-oriented retail properties with 13,455,405 square feet and annual minimum rent of $369,593, and 170 tenants subject to “triple net” leases, where the tenants are generally responsible for payment of operating expenses and capital expenditures.

Our net lease portfolio was 98.7% occupied as of December 31, 2020 with a weighted (by annual minimum rent) lease term of 10.9 years, operating under 127 brands in 22 distinct industries.

TA is our largest tenant.

As of December 31, 2019 , we leased 179 of our travel centers to TA under five leases that expire between 2029 and 2035 and require annual minimum rents of $246,088 , which represents 24.6% of our consolidated annual minimum rents and returns.

Additional details of our hotel operating agreements and net lease agreements are set forth in Notes 5 and 9 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K and in the table and notes thereto on pages 74 through 76 below.

Results of Operations (dollar amounts in thousands, except share amounts)

As of December 31, 2020, we leased 179 of our travel centers to TA under five leases that expire between 2029 and 2035 and require annual minimum rents of $246,110.

Acquisition Activities.

On September 20, 2019, as part of the SMTA Transaction, we acquired 767 properties with 12.4 million rentable square feet for an aggregate transaction value of $2,482,382.

The portfolio consisted of 767 service-oriented retail properties net leased to tenants in 23 distinct industries and 163 brands including quick service and casual dining restaurants, movie theaters, health and fitness, grocery stores, automotive parts and services and other service-oriented and necessity-based industries across 45 states.

On March 12, 2020, we acquired three net lease properties with an aggregate of 6,696 square feet for a purchase price of $7,071 excluding closing costs in a single transaction.

Disposition Activities.

During the year ended December 31, 2019, we sold 130 net lease properties that we acquired in the SMTA Transaction in 28 states with 2,773,241 square feet for an aggregate sales price of $513,012, excluding closing costs.

During the year ended December 31, 2020, we sold 18 hotels with 2,046 rooms for an aggregate sales price of $85,787, excluding closing costs.

Also during the year ended December 31, 2020, we sold 21 net lease properties with an aggregate of 1,375,483 rentable square feet for an aggregate sales price of $88,385, excluding closing costs, in 21 separate transactions.

We have entered into agreements to sell five hotels with 430 rooms in four states for an aggregate sales price of $22,263, excluding closing costs, and three net lease properties with an aggregate of 38,942 rentable square feet in two states for an aggregate sales price of $2,050, excluding closing costs.

We currently expect the sales of these properties to be completed by the end of the second quarter of 2021.

We expect to use the net sales proceeds from any properties sold to repay outstanding indebtedness.

Results of Operations (amounts in thousands, except per share amounts)

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

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General and administrative 50,668 54,639 (3,971) (7.3) %

Acquisition and transaction related costs

Transaction related costs — 1,795 (1,795) (100.0) %

Loss on asset impairment 55,756 39,296 16,460 41.9 %

Gain on sale of real estate

Gain on sale of real estate, net 2,261 159,535 (157,274) (98.6) %

Dividend income — 1,752 (1,752) (100.0) %

Unrealized losses on equity securities

Gain on insurance settlement 62,386 — 62,386 n/m

Unrealized gains (losses) on equity securities, net 19,882 (40,461) 60,343 n/m

Interest income 284 2,215 (1,931) (87.2) %

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Loss on early extinguishment of debt (9,394) (8,451) (943) 11.2 %

Income before income taxes and equity earnings of an investee

Income tax expense

Equity in earnings of an investee

Income (loss) before income taxes and equity earnings (losses) of an investee (284,261) 262,150 (546,411) n/m

Income tax expense (17,211) (2,793) (14,418) n/m

Equity in earnings (losses) of an investee (9,910) 393 (10,303) n/m

Net income (loss) $ (311,382) $ 259,750 $ (571,132) n/m

Weighted average shares outstanding (basic) 164,422 164,312 110 0.1 %

Weighted average shares outstanding (diluted)

Net income per common share:

basic and diluted

Weighted average shares outstanding (diluted) 164,422 164,340 82 n/m

Net income (loss) per common share:

(basic and diluted) $ (1.89) $ 1.58 $ (3.47) n/m

References to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended December 31, 2020, compared to the year ended December 31, 2019.

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Hotel operating revenues.

The increase in hotel operating revenues is a result of our hotel acquisitions since January 1, 2018 ($53,364), increased revenues at certain of our managed hotels due to increases in ADR and higher occupancies ($49,888) and the conversion of one hotel from a leased to managed property during 2018 ($4,427), partially offset by decreased revenues at certain of our managed hotels primarily as a result of lower occupancies ($44,167) and decreased revenues at certain of our other managed hotels undergoing renovations during all or part of 2019 resulting primarily from lower occupancies ($32,937).

Additional operating statistics of our hotels are included in the table on page 76 .

The decrease in hotel operating revenues is a result of decreased revenues at certain of our managed hotels primarily as a result of lower occupancies and lower ADR resulting from the COVID-19 pandemic ($1,110,859) and our hotel dispositions in 2020 ($18,142), partially offset by the conversion of one hotel from a leased to managed property ($14,926).

Additional operating statistics of our hotels are included in the tables on page 81.

Rental income - hotels.

The decrease in rental income - hotels is primarily the result of a previously deferred gain from a historical lease default becoming fully amortized in 2018 ($3,631), the conversion of one hotel from a leased to managed property during 2018 ($2,812) and amending the lease terms for 48 vacation units we lease at one hotel during 2019 ($1,265), partially offset by contractual rent increases under certain of our hotel leases ($49).

We reduced rental income by $985 in the 2019 period and increased rental income by $382 in the 2018 period to record rent on a straight line basis.

Rental income for 2018 includes $147 of percentage rental income.

No percentage rent was earned under our hotel leases in 2019 .

The decrease in rental income - hotels is primarily a result of the conversion of one hotel from a leased to managed property during the 2019 period ($11,934), the termination of the lease for 48 vacation units at one hotel during 2020 ($4,144) and IHG’s default on the lease covering one hotel in San Juan, Puerto Rico ($2,636).

Rental income - hotels for the 2020 and 2019 periods include $1,897 and $985, respectively, of adjustments to record rent on a straight-line basis.

Rental income - net lease portfolio.

The decrease in rental income - net lease portfolio is a result of the sale of 20 travel centers to TA and our lease amendments with TA in January 2019 ($47,628), partially offset by rents related to properties acquired pursuant to the SMTA Transaction ($46,717).

See Notes 4 and 5 to our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding these transactions.

We reduced rental income by $9,734 in the 2019 period and increased rental income by $12,127 in the 2018 period to record scheduled rent increases under certain leases, the deferred rent obligations payable to us under our TA leases and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks on a straight line basis.

The increase in rental income - net lease portfolio is primarily a result of rents from properties we acquired pursuant to the SMTA Transaction ($86,433).

We increased rental income by $1,183 and reduced rental income by $9,734 for the 2020 and 2019 periods, respectively, to record scheduled rent increases under certain leases, the deferred rent obligations payable to us under our TA leases and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks on a straight line basis.

Rental income for 2020 and 2019 includes $3,277 and $4,238, respectively, of percentage rental income.

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We do not report the amounts, if any, which are escrowed as FF&E reserves for our managed hotels as FF&E reserve income.

The decrease in FF&E reserve income is the result of decreased sales at certain of our leased hotels in 2019 .

The decrease in FF&E reserve income is the result of our conversion of one hotel from leased to managed, decreased sales at one leased hotel in 2020 and the suspension of FF&E reserves for part of 2020.

Hotel operating expenses.

The increase in hotel operating expenses is a result of our hotel acquisitions since January 1, 2018 ($53,738), an increase in wage and benefit costs, sales and marketing expenses and other operating costs at certain of our managed hotels resulting primarily from higher occupancies and general expense increases ($31,216), the conversion of one hotel from a leased to managed property during 2018 ($4,642) and an increase in real estate taxes at certain of our hotels ($1,988), partially offset by operating expense decreases at certain managed hotels undergoing renovations during all or part of 2019 resulting primarily from lower occupancies ($33,382), an increase in the amount of guaranty and security deposit utilization under certain of our hotel operating agreements ($24,331) and a decrease in the amount of guaranty and security deposit replenishment under certain of our hotel operating agreements ($10,009).

The decrease in hotel operating expenses is a result of a decrease in wage and benefit costs, sales and marketing expenses and other operating costs at certain of our managed hotels ($316,294), a decrease in occupancy at certain managed hotels primarily driven by the COVID-19 pandemic ($205,899), an increase in the amount of guaranty and security deposit utilization under certain of our hotel management agreements ($203,119), our hotel dispositions in 2020 ($14,863), a decrease in real estate taxes at certain of our hotels ($2,875), and a decrease in the amount of guaranty and security deposit replenishments under certain of our hotel management agreements ($734), partially offset by the conversion of one hotel from a leased to managed property during the 2020 period ($15,661) and for hotel manager transition related costs resulting from the rebranding of 115 hotels during the 2020 period ($15,100).

Certain guarantees and security deposits which have been applied to past payment deficits may be replenished from a share of subsequent cash flows from the applicable hotel operations pursuant to the terms of the respective operating agreements.

When our guarantees and our security deposits are replenished by cash flows from hotel operations, we reflect such replenishments in our consolidated statements of comprehensive income as an increase to hotel operating expenses.

Hotel operating expenses were increased by $734 and $10,743 in 2019 and 2018 , respectively, as a result of such replenishments.

When our guarantees and security deposits are utilized to cover shortfalls of hotels’ cash flows from the minimum payments due to us, we reflect such utilizations in our consolidated statements of comprehensive income as a decrease to hotel operating expenses.

Hotel operating expenses were decreased by $29,897 and $5,569 in 2019 and 2018 , respectively, as a result of such utilization.

The net decrease to hotel operating expenses was $235,522 and $29,162 in 2020 and 2019, respectively, as a result of such utilization.

See “Impact of COVID-19” included in Part I, Item 1 of this Annual Report on Form 10-K for a discussion of the current status of our security deposits and guarantees.

Other operating expenses.

The increase in other operating expenses is a result of operating expenses we pay at certain properties we acquired as part of the SMTA Transaction in 2019.

The increase in other operating expenses is a result of operating expenses we pay at certain properties we acquired as part of the SMTA Transaction in 2019 being reflected for a full year in 2020 compared to the partial year in 2019.

Depreciation and amortization - hotels.

The increase in depreciation and amortization - hotels is a result of the depreciation and amortization of improvements acquired with funds from our FF&E reserves or directly funded by us since January 1, 2018 ($24,072) and our hotel acquisitions since January 1, 2018 ($5,778), partially offset by certain of our depreciable assets becoming fully depreciated since January 1, 2018 ($17,521).

The decrease in depreciation and amortization - hotels is a result of our depreciable assets becoming fully depreciated since January 1, 2019 ($21,267), partially offset by depreciation and amortization of improvements acquired with funds from our FF&E reserves or directly funded by us since January 1, 2019 ($15,803) and our hotel acquisitions since January 1, 2019 ($1,049).

Depreciation and amortization - net lease portfolio.

The increase in depreciation and amortization - net lease portfolio is a result of the net lease properties we acquired as part of the SMTA Transaction ($32,023) and the depreciation and amortization of travel center improvements we purchased since January 1, 2018 ($438), partially offset by our travel center dispositions since January 1, 2018 ($11,175) and certain of our depreciable assets becoming fully depreciated since January 1, 2018 ($8,244).

The increase in depreciation and amortization - net lease portfolio is primarily a result of the depreciation and amortization of properties we acquired as part of the SMTA Transaction ($76,557), partially offset by certain of our depreciable assets becoming fully depreciated since January 1, 2019.

General and administrative.

The decrease in general and administrative costs is primarily due to a decrease in business management incentive fee expense ($53,635), partially offset by a loss contingency ($1,997) and increased business management fees ($1,665) in 2019 .

Acquisition and transaction related costs.

Acquisition and transaction related costs represent costs related to our exploration of possible financing transactions.

The decrease in general and administrative costs is primarily due to a decrease in business management fees ($4,776) as a result of a decrease in our share price, partially offset by an increase in professional service expense ($805).

Transaction related costs.

Transaction related costs represent costs related to our exploration of possible financing transactions.

Loss on asset impairment.

We recorded a $39,296 loss on asset impairment during 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.

Gain on sale of real estate.

We recorded a $159,535 gain on sale of real estate in 2019 in connection with the sales of 20 travel centers.

We recorded a $55,756 loss on asset impairment during 2020 to reduce the carrying value of 18 hotels and 13 net lease properties to their estimated fair value less costs to sell.

We recorded a $39,296 loss on asset impairment during 2019 to reduce the carrying value of two hotels and 19 net lease properties to their estimated fair value less costs to sell.

Gain on sale of real estate, net.

We recorded a $2,261 net gain on sale of real estate in 2020 in connection with the sales of 18 hotels and 21 net lease properties and a $159,535 gain on sale of real estate in 2019 in connection with the sales of 20 travel centers.

Dividend income.

Dividend income represents the dividends we received from our former investment in RMR Inc.

Unrealized losses on equity securities.

Unrealized losses on equity securities represent the adjustment required to adjust the carrying value of our investments in RMR Inc., which we sold in July 2019, and TA common shares to their fair value as of December 31, 2019 and 2018 .

Gain on insurance settlement.

We recorded a $62,386 gain on insurance settlement in 2020 as a result of insurance proceeds received for our leased hotel in San Juan, PR related to Hurricane Maria.

Under GAAP, we were required to increase the building basis of our San Juan hotel for the amount of the insurance proceeds.

Unrealized gains (losses) on equity securities, net.

Unrealized gains (losses) on equity securities, net represent the adjustments required to adjust the carrying value of our investments in RMR Inc., which we sold in July 2019, and TA common shares to their fair values during the applicable periods.

Interest income.

The increase in interest income is due to higher average cash and restricted cash balances during 2019 .

The decrease in interest income is due to lower interest rates and restricted cash balances in 2020.

Interest expense.

The increase in interest expense is due to higher average outstanding borrowings, primarily as a result of our financing of the SMTA Transaction, and a higher weighted average interest rate in 2019 .

The increase in interest expense is due to higher average outstanding borrowings and a higher average interest rate in 2020.

Loss on early extinguishment of debt .

We recorded a loss of $9,394 on early extinguishment of debt, net of unamortized discounts and debt issuance costs in 2020 related to our repayment of certain debt.

We recorded a loss of $8,451 on early extinguishment of debt in 2019 resulting from the termination of a term loan commitment we arranged in connection with the SMTA Transaction.

We recorded a loss of $160 on early extinguishment of debt in 2018 in connection with the amendment of our revolving credit facility and term loan.

Income tax expense.

We recognized higher state taxes during the 2019 period primarily due to an increase in the amount of state sourced income subject to income taxes.

Equity in earnings of an investee.

Equity in earnings of an investee represents our proportionate share of the earnings of Affiliates Insurance Company, or AIC.

Our net income, net income per common share (basic and diluted) each increased in 2019 compared to 2018 primarily due to the revenue and expense changes discussed above.

We recorded a $13,850 deferred tax liability as a result of the book value tax basis difference related to the accounting of an insurance settlement in 2020.

See Note 4 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K for further information regarding this insurance settlement.

Equity in earnings (losses) of an investee.

Equity in earnings (losses) of an investee represents our proportionate share of the earnings or losses of Sonesta and Affiliates Insurance Company.

Net income (loss).

Our net income (loss), net income (loss) per common share (basic and diluted) each decreased in 2020 compared to 2019 primarily due to the revenue and expense changes discussed above.

Liquidity and Capital Resources (dollar amounts in thousands, except share amounts)

Our Managers and Tenants

As of February 26, 2020 , 329 of our hotels (including one leased hotel) are included in six combination portfolio agreements and all 329 hotels were managed by or leased to hotel operating companies.

Our 816 net lease properties are leased to 194 tenants as of December 31, 2019 .

As of December 31, 2020, 305 of our hotels were included in one of six hotel agreements and were managed by hotel operating companies.

We have entered into an agreement to sell five hotels and we have entered into a short term lease with the buyer of the hotels until the sale date.

Our 799 net lease properties were leased to 170 tenants as of December 31, 2020.

The costs of operating and maintaining our properties are generally paid by the hotel managers as agents for us or by our tenants for their own account.

Our hotel managers and tenants derive their funding for property operating expenses and for returns and rents due to us generally from property operating revenues and, to the extent that these parties themselves fund our minimum returns and rents, from their separate resources.

Our hotel managers and tenants include Marriott, IHG, Sonesta, Wyndham, Hyatt and Radisson.

TA is our largest net lease tenant.

No other net lease tenant represents more than 1% of our total annualized minimum returns or rents.

We define coverage for each of our hotel management agreements or leases as total hotel property level revenues minus all hotel property level expenses and FF&E reserve escrows which are not subordinated to the hotel minimum returns or rents due to us divided by the hotel minimum returns or rents due to us.

More detail regarding coverage, guarantees and other features of our hotel operating agreements is presented in the tables and related notes on pages 74 through 76 .

For the year ended December 31, 2019 , five of our six hotel operating agreements, representing 42.5% of our total annual minimum returns and minimum rents, generated coverage of less than 1.0x (with a range of 0.50x to 0.93x).

As of December 31, 2020, our hotel managers included Sonesta (168 hotels), Marriott (105 hotels), Hyatt (22 hotels), Radisson (nine hotels) and IHG (one hotel).

TA is our largest tenant (179 travel centers).

The COVID-19 pandemic has had a material and adverse effect on the lodging and service industries and our hotel managers’ and tenants’ businesses.

Certain of our tenants’ businesses have been materially and adversely impacted by the COVID-19 pandemic, which may reduce their ability or willingness to pay us our minimum returns and rents, increase the likelihood they will default in paying us returns and rent and reduce the value of those properties.

We continue to carefully monitor the developments of the COVID-19 pandemic and its impact on our operators and tenants and our other stakeholders.

As a result of the depressed activity at our hotels and expected losses, several of our hotel operators

requested working capital advances from us to pay operating expenses.

During the year ended December 31, 2020, we advanced $123,475 of working capital to certain of our hotel operators to cover projected operating losses.

We advanced $44,859 to Sonesta, $37,000 to IHG, $30,000 to Marriott, $7,916 to Wyndham and $3,700 to Hyatt.

We may receive requests for working capital advances in 2021 if lodging activity continues to be depressed.

Generally, funding of operating losses or working capital advances are reimbursable to us from a share of future cash flows from the applicable hotel operations in excess of the minimum returns due to us and certain fees to the manager pursuant to the terms of the respective agreements.

On February 27, 2020, we entered into a transaction agreement with Sonesta pursuant to which we and Sonesta restructured our business arrangements with respect to our hotels then managed by Sonesta as follows:

• we and Sonesta had agreed to sell, rebrand or repurpose our 39 extended stay hotels then managed by Sonesta.

We have since decided not to pursue the sale of these 39 hotels based on market conditions and the improved relative performance of these hotels during the pandemic;

• the annual minimum returns due for the 14 full-service hotels that Sonesta then managed and continues to manage were reduced from $99,013 to $69,013 as of that date;

• Sonesta issued to us a number of its shares of common stock representing approximately (but not more than) 34% of its outstanding shares of common stock (post-issuance) and we entered into a stockholders agreement with Sonesta, Adam Portnoy and the other stockholder of Sonesta, and a registration rights agreement with Sonesta;

• we and Sonesta modified our then existing management agreements and pooling agreement so that up to 5% of the hotel gross revenues of each of our 14 full-service hotels then managed, and which continue to be managed, by Sonesta will be escrowed for future capital expenditures as FF&E reserves, subject to available cash flows after payment of the annual minimum returns due to us under the management agreements;

• we and Sonesta modified the termination provisions of our then existing management agreements and pooling agreement and removed the provisions in our pooling agreement that allowed either us or Sonesta to require the marketing for sale of non-economic hotels;

• we and Sonesta extended the initial expiration date of the then existing management agreements for our full-service hotels managed by Sonesta located in Chicago, IL and Irvine, CA to January 2037 to align with the initial expiration date for our other full-service hotels then managed by Sonesta.

We refer to the amended and restated management agreements in effect as of February 27, 2020, as the legacy management agreements and we refer to the amended and restated pooling agreement that includes those legacy management agreements as the legacy pooling agreement.

We previously leased 48 vacation units to Wyndham Destinations, Inc.

WYND) at our full-service hotel located in Chicago, IL, which Sonesta began managing in November 2019 and which had previously been managed by Wyndham.

Effective March 1, 2020, Sonesta commenced managing those units and those units were added to our legacy management agreement with respect to that Chicago hotel.

We exhausted the security deposits that secured payments of our minimum rent held under our agreement with IHG in 2020.

We terminated our agreement with IHG for failure to pay minimum returns and rents due to us and transferred the branding and management of 102 of the 103 IHG hotels to Sonesta in December 2020.

We exhausted both the security deposit and the limited guaranty under the Marriott agreement in 2020.

Under the Marriott agreement, once the security deposit and guaranty have been depleted, Marriott was required to fund shortfalls up to 80% of the minimum returns due to us to avoid termination.

We sent notices to Marriott terminating our agreement for its failure to cover the cumulative shortfall between the payments we have received to date and 80% of the cumulative priority returns due to us for the year ended December 31, 2020.

Between September 18, 2020 and February 26, 2021, we transferred the branding and management of 193 hotels previously managed by IHG, Marriott and Wyndham to Sonesta.

We expect to transition the branding and management of 10 additional Marriott hotels to Sonesta in March 2021.

We entered into management agreements with Sonesta with respect to these hotels on terms substantially consistent with our legacy management agreements, except that the management agreements for these transitioned hotels expire on December 31, 2021 and automatically renew for successive one-year terms unless terminated earlier.

We also entered into a separate pooling agreement with Sonesta with respect to the conversion hotel management agreements.

See Notes 5 and 9 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information on these agreements.

In January 2021, we received a notice of termination from Hyatt with respect to our agreement for 22 hotels as a result of Hyatt’s guaranty being exhausted.

We and Hyatt are currently in discussions regarding possible changes to the management agreement that may enable some or all of the hotels to continue to be managed by Hyatt.

However, if such discussions do not result in a mutually acceptable agreement, we expect to transition management of these 22 hotels to Sonesta in April 2021.

TA, our largest tenant, is current on all its rent obligations to us as of February 26, 2021.

During the year ended December 31, 2020, we collected 94.0% of rents due to us from our net lease tenants.

During January 2021, we collected 89.3% of rents due to us from our net lease tenants.

We have entered into rent deferral agreements with 46 net lease retail tenants with leases requiring an aggregate of $46,370 of annual minimum rents.

Generally, these rent deferrals are for one to four months of rent and will be payable by the tenants over a 12 to 24 month period beginning in September 2020.

As of February 26, 2021, we have deferred an aggregate of $12,115 of rent.

We may receive additional similar requests in the future, and we may determine to grant additional relief in the future, which may vary from the type of relief we have granted to date, and could include more substantial relief, if we determine it prudent or appropriate to do so.

In addition, if any of our tenants are unable to continue as going concerns as a result of the current economic conditions or otherwise, we will experience a reduction in rents received and we may be unable to find suitable replacement tenants for an extended period or at all and the terms of our leases with those replacement tenants may not be as favorable to us as the terms of our agreements with our existing tenants.

Further, we do not know whether any of our tenants have qualified for, or will receive assistance from, the CARES Act or other government programs and, if they do, whether that assistance will be sufficient to enable them to pay rent to us.

As a result of these uncertainties surrounding the COVID-19 pandemic and the duration and extent of the resulting economic downturn, we are unable to determine what the ultimate impact will be on our tenants and their ability and willingness to pay us rent and any additional impact this pandemic will have on our future cash flows.

During 2020 and 2019, we recorded reserves for uncollectible rents of $9,892 and $5,981, respectively, based on our assessment of whether amounts due under certain tenants’ leases are probable of collection.

We define net lease coverage as 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.

EBITDAR amounts used to determine rent coverage are generally for the latest twelve month period based on the most recent operating information, if any, furnished by the tenant.

Operating information 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 for which tenants do not report operating information are excluded from the coverage calculations.

EBITDAR amounts used to determine rent coverage are generally for the latest twelve month period reported based on the most recent operating information, 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.

Tenants that do not report operating information are excluded from the coverage calculations.

Coverage amounts include data for certain properties for periods prior to when we acquired them.

In instances where we do not have financial information for our portion of the measurement period from our tenants, we have calculated an implied EBITDAR for 2020 using industry benchmark data to more accurately reflect the impact of COVID-19 on our tenants’ operations.

We believe using only financial information from the earlier periods could be misleading as it would not reflect the negative impact those tenants experienced as a result of the COVID-19 pandemic.

As a result, we believe using this industry benchmark data provides a more accurate estimated representation of recent operating results and coverage for those tenants.

As of December 31, 2020, our net lease properties generated coverage of 2.14x.

Certain of our management arrangements or leases are subject to full or limited guarantees or are secured by a security deposit which we control.

These guarantees may provide us with continued payments if the property level cash flows fail to equal or exceed guaranteed amounts due to us.

Some of our managers and tenants, or their affiliates, may also supplement cash flows from our properties in order to make payments to us and preserve their rights to continue operating our properties even if they are not required to do so by guarantees or security deposits.

Guarantee payments, security deposit applications or supplemental payments to us, if any, made under any of our management agreements or leases do not subject us to repayment obligations, but, under some of our agreements, the manager or tenant may recover these guarantee or supplemental payments and the security deposits may be replenished from subsequent cash flows from our properties after our future minimum returns and rents are paid.

When cash flows from our hotels under certain of our agreements are less than the minimum returns or rents contractually due to us, we have utilized the applicable security features in our agreements to cover some of these shortfalls.

However, several of the guarantees and all the security deposits we hold are for limited amounts, are for limited durations and may be exhausted or expire, especially if our hotel renovation and rebranding activities do not result in improved operating results at these hotels.

Accordingly, the effectiveness of our various security features to provide uninterrupted payments to us is not assured.

If any of our hotel managers, tenants or guarantors default in their payment obligations to us, our cash flows will decline and we may become unable to continue to pay distributions to our shareholders or the amount of the distributions may decline.

On December 31, 2019, we entered into agreements with Marriott which combined our three then-existing Marriott operating agreements, which we historically referred to as our Marriott Nos.

1, 234 and 5 agreements, into a single portfolio for a 16-year term commencing January 1, 2020, or the Marriott Agreement.

The Marriott Nos.

1, 234 and 5 agreements included 122 hotels, provided for aggregate annual minimum returns and rents due to us of $192,774 and were scheduled to expire on December 31, 2024, 2025 and 2019, respectively.

The previously available guarantee under the Marriott No.

234 agreement of $30,672 expired on December 31, 2019.

The then existing security deposit held by us for the Marriott No.

234 agreement ( $33,445 as of December 31, 2019 ) will continue to secure payment of the aggregate annual minimum returns due to us under the Marriott Agreement and may be replenished up to the security deposit cap of $64,700 from 60% of the cash flows realized from operations of the 122 hotels after payment of the aggregate annual minimum returns due to us, Marriott’s base management fees and certain other advances by us or Marriott, if any.

Marriott provided a new $30.0 million limited guaranty for 85% of the aggregate annual minimum returns due to us through 2026 under the Marriott Agreement if the security deposit is exhausted.

Under the Marriott Agreement, we agreed to fund approximately $400,000 for capital improvements at certain hotels over a four year period.

On February 27, 2020, we entered into a transaction agreement with Sonesta and Holdco pursuant to which we and Sonesta restructured our existing business arrangements, as follows:

We amended and restated our existing management agreements with Sonesta for each of our hotels currently managed by Sonesta, which we refer to collectively as our Sonesta agreement, and our existing pooling agreement with Sonesta, which combines our management agreements with Sonesta for purposes of calculating gross revenues, payment of hotel operating expenses, payment of fees and distributions and minimum returns due to us, as further described below;

We and Sonesta agreed to sell, rebrand or repurpose our 39 extended stay hotels currently managed by Sonesta, with an aggregate carrying value of $480,547 and which currently require aggregate minimum returns of $49,467 .

As the hotels are sold, rebranded or repurposed, the management agreement for the applicable hotel(s) will terminate without our being required to pay Sonesta a termination fee and the annual minimum returns due to us under our Sonesta agreement will decrease by the amount allocated to the applicable hotel(s);

Sonesta will continue to manage 14 of our full-service hotels and the aggregate annual minimum returns due for these hotels was reduced from $99,013 to $69,013 ;

Holdco issued to us a number of its shares of common stock representing approximately (but not more than) 34% of its outstanding shares of common stock (post-issuance);

We modified our Sonesta agreement and pooling agreement so that up to 5% of the gross revenues of each of our 14 full-service hotels managed by Sonesta will be escrowed for future capital expenditures as “FF&E reserves,” subject to available cash flow after payment of the annual minimum returns due to us under our Sonesta agreement;

We modified our Sonesta agreement and pooling agreement so that (1) our termination rights under those agreements for our 14 full-service hotels managed by Sonesta are generally limited to performance and for “cause”, casualty and condemnation events, (2) a portfolio wide performance test now applies for determining whether the management agreement for any of our full service hotels managed by Sonesta may be terminated for performance reasons, and (3) the provisions included in our historical pooling agreement that allowed either us or Sonesta to require the marketing for sale of non-economic hotels were removed;

We extended the initial expiration date of the management agreements for our full-service hotels located in Chicago, IL and Irvine, CA that are managed by Sonesta to expire in January 2037 to align with the initial expiration date for our other full-service hotels managed by Sonesta.

Except as described above, the economic terms of our amended and restated Sonesta agreement and amended and restated pooling agreement are consistent with the historical Sonesta agreement and pooling agreement.

Additional details of this agreement are set forth in Item 9B.

Other information and Note 5 to our consolidated financial statements in Item 15 of this Annual Report on Form 10-K, which disclosure is incorporated herein by reference.

We are exiting our relationship with Wyndham.

On November 1, 2019, we rebranded two full-service hotels previously managed by Wyndham in Chicago, IL and Irvine, CA to the Sonesta brands.

We also lease 48 vacation units in the Chicago, IL Sonesta hotel to a subsidiary of Wyndham Destinations, Inc.

WYND), or Destinations, which requires annual minimum rent of $1,537 .

We amended this lease so the term of the lease expires on March 31, 2020, at which time Destinations will vacate the leased space.

We amended our agreement with Wyndham in 2019 whereby the term of the management agreement will expire on September 30, 2020 unless sooner terminated with respect to any of our Wyndham hotels that are sold or rebranded.

We expect to sell the remaining 20 hotels currently managed by Wyndham by that expiration date.

Wyndham was previously paying us 85% of the annual minimum returns due under the management agreement.

Under the amendment, Wyndham will pay to us all available cash flows of the hotels after payment of hotel operating expenses.

Wyndham will not be entitled to any base management fees for the remainder of the agreement term.

Our Operating Liquidity and Capital Resources

Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are minimum returns from our managed hotels, minimum rents from our leased hotel and net lease portfolio and borrowings under our revolving credit facility.

Our principal sources of funds to meet operating and capital expenses, debt service obligations and distributions to our shareholders are minimum returns and rents from our hotels and net lease portfolio and borrowings under our revolving credit facility.

We receive minimum returns and rents from our managers and tenants monthly.

We may receive additional returns, percentage rents and our share of the operating profits of our managed hotels after payment of management fees and other deductions, if any, either monthly or quarterly, and these amounts are usually subject to annual reconciliations.

We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next twelve months and for the foreseeable future thereafter.

However, as a result of economic conditions or otherwise, our managers and tenants may become unable or unwilling to pay minimum returns and rents to us when due, and, as a result, our cash flows and net income would decline and we may need to reduce the amount of, or even eliminate, our distributions to common shareholders.

Changes in our cash flows for the year ended December 31, 2019 compared to the year ended December 31, 2018 were as follows:

(1) cash flows provided by operating activities increased from $596,953 in 2018 to $617,722 in 2019 ;

(2) cash used in investing activities increased from $427,742 in 2018 to $2,130,044 in 2019 ;

and (3) cash flows from financing activities changed from $190,704 of cash used by financing activities in 2018 to $1,517,578 of cash provided in financing activities in 2019 .

The increase in cash flows provided by operating activities for the year ended December 31, 2019 as compared to the prior year is due primarily to a decrease in incentive business management fees paid to RMR LLC in 2019 with respect to 2018, and an increase in the minimum returns and rents paid to us as a result of our acquisitions and funding of improvements to certain properties since January 1, 2018 , partially offset by a decrease in security deposits received or replenished in 2019 and higher interest payments in 2019.

The increase in cash used in investing activities for the year ended December 31, 2019 as compared to the prior year is primarily due to our higher real estate acquisition activity in 2019 and an increase in our capital improvement fundings, partially offset by proceeds from asset sales and a decrease in our hotel managers’ purchases with FF&E reserves in 2018.

The change to cash flows provided by financing activities in 2019 from cash used in financing activities in 2018 is primarily due to an increase in our net borrowings in 2019 .

We believe we have sufficient liquidity to withstand the current decline in operating cash flow, fund our capital expenditures, pay debt service obligations and make distributions to our shareholders for the next twelve months and for the foreseeable future thereafter.

However, our managers and tenants may become further or increasingly unable or unwilling to pay minimum returns and rents to us when due as a result of current economic conditions and, as a result, our revenue, cash flow, and net income could decline.

Under the current challenging operating environment posed by the COVID-19 pandemic and the slowdown in U.S.

economic activity and lodging demand, we have taken steps to preserve liquidity by reducing our quarterly distribution to our shareholders beginning in the second quarter of 2020 to $0.01 per share and we expect our quarterly distribution to continue at that rate for the foreseeable future, subject to applicable REIT tax requirements, by reducing expected capital expenditures, and by working with our hotel operators to reduce hotel operating expenses.

We intend to use available cash in the near term predominantly to fund operating losses at our hotels, to pay corporate expenses, including debt service, fund capital expenditures, and to pay distributions to our shareholders.

As discussed below, we expect the interest coverage ratio level necessary to incur additional debt under our senior notes indentures could fall below the 1.5x requirement as of the end of the first quarter of 2021 and we will not be able to incur additional debt while the ratio is below this requirement.

We may access equity markets or seek other sources of capital if favorable conditions exist for us in order to enhance our liquidity and to fund cash needs.

As of February 26, 2021, we have fully drawn our $1,000,000 revolving credit facility.

The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands):

Year Ended December 31,

2020 2019 2018

Cash and cash equivalents and restricted cash at the beginning of the period $ 81,259 $ 76,003 $ 97,496

Net cash provided by (used in):

Operating activities 37,604 617,722 596,953

Investing activities (51,807) (2,130,044) (427,742)

Financing activities 24,400 1,517,578 (190,704)

Cash and cash equivalents and restricted cash at the end of the period $ 91,456 $ 81,259 $ 76,003

The decrease in cash flows provided by operating activities for the year ended December 31, 2020 as compared to the prior year period is primarily due to an increase in security deposit utilization in the 2020 period, lower returns earned from our hotel portfolio and higher interest expense in the 2020 period.

The decrease in cash flows used in investing activities in the 2020 period is primarily due to a decrease in real estate acquisition and disposition activity in the 2020 period.

The decrease in cash provided by financing activities for the year ended December 31, 2020 as compared to the prior year period is primarily due to a decrease in proceeds from the issuance of senior unsecured notes, our repayment of $400,000 aggregate principal amount of senior unsecured notes and lower common share distributions compared to the 2019 period, partially offset by greater net repayments under our revolving credit facility.

We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements.

We lease 305 hotels to our wholly owned TRSs that are managed by hotel operating companies.

As a REIT, we do not expect to pay federal income taxes on the majority of our income;

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Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements.

During the year ended December 31, 2019 , our hotel managers and tenants deposited $73,189 into these accounts and spent $208,241 from the FF&E reserve escrow accounts to renovate and refurbish our hotels.

During the year ended December 31, 2020, our hotel managers and tenants deposited $40,323 to these accounts and spent $153,626 from the FF&E reserve escrow accounts to renovate and refurbish our hotels.

As of December 31, 2020, there was $18,124 on deposit in these escrow accounts, which was held directly by us and is reflected in our consolidated balance sheets as restricted cash.

As a result of the COVID-19 pandemic and the adverse impact on the lodging industry and our properties, we and certain of our hotel operators agreed to temporarily suspend the required contribution to our FF&E reserves under certain of our agreements through December 31, 2020.

For more information, see Note 5 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.

As a result, less cash will be available to us to fund future capital improvements and we may be required to provide additional fundings that may have otherwise been available in escrowed FF&E reserves.

Such fundings are unlikely to materially increase in the near term above what we currently expect, as reduced occupancies are resulting in less usage and less wear and tear of our properties.

Our hotel operating agreements generally provide that, if necessary, we may provide our managers and tenants with funding for capital improvements to our hotels in excess of amounts otherwise available in escrowed FF&E reserves or when no FF&E reserves are available.

To the extent we make such additional fundings, our annual minimum returns or rents generally increase by a percentage of the amount we fund.

During the year ended December 31, 2019 , we funded $242,571 for capital improvements in excess of FF&E reserve fundings available from hotel operations to our hotels as follows:

During the year ended December 31, 2019 , we funded $51,056 for capital improvements to certain hotels under our then-existing Marriott agreements using cash on hand and borrowings under our revolving credit facility.

Under the Marriott Agreement, we agreed to fund approximately $400,000 for capital improvements at certain hotels over a four year period.

We currently expect to fund approximately $80,000 of this amount during 2020 using cash on hand or borrowings under our revolving credit facility.

As we fund these improvements, the contractual minimum returns payable to us increase.

During the year ended December 31, 2019 , we funded $55,359 for capital improvements to certain hotels under our IHG agreement using cash on hand and borrowings under our revolving credit facility.

We currently expect to fund approximately $15,000 for capital improvements under this agreement during 2020 using cash on hand or borrowings under our revolving credit facility.

As we fund these improvements, the contractual minimum returns payable to us increase.

Previously, our Sonesta agreement did not require FF&E escrow deposits.

During the year ended December 31, 2019 , we funded $114,082 for capital improvements to certain hotels included in our Sonesta agreement using cash on hand and borrowings under our revolving credit facility.

Under our amended agreement with Sonesta, FF&E deposits are required only if there are excess cash flows after payment of our minimum returns.

We currently expect to fund approximately $30,000 during 2020 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility.

As we fund these improvements, the contractual minimum returns payable to us increase.

During the year ended December 31, 2019 , we funded $19,034 for capital improvements to certain hotels under our Radisson agreement using cash on hand or borrowings under our revolving credit facility.

We currently do not expect to fund any capital improvements under this agreement in 2020.

As we fund improvements in the future, the contractual minimum returns payable to us will increase.

During the year ended December 31, 2019 , we did not fund capital improvements to any hotels operating under our Hyatt agreement.

We currently expect to fund approximately $20,000 during 2020 for capital improvements to certain hotels under this agreement using cash on hand or borrowings under our revolving credit facility.

As we fund these improvements, the contractual minimum returns payable to us increase.

Previously, our Wyndham agreement required FF&E escrow deposits only if there are excess cash flows after payment of our minimum returns.

No FF&E escrow deposits were required during the year ended December 31, 2019 .

During the year ended December 31, 2019 , we funded $3,040 for capital improvements to certain hotels included in our Wyndham agreement using cash on hand and borrowings under our revolving credit facility.

We currently expect to fund approximately $5,000 during 2020 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility.

During the year ended December 31, 2020, we funded $136,127 for capital improvements in excess of FF&E reserve fundings available from hotel operations to our hotels.

We currently expect to fund $192,000 during 2021 for capital improvements to certain hotels using cash on hand.

Our net lease portfolio leases do not require FF&E escrow deposits.

However, tenants under these leases are required to maintain the leased properties, including structural and non-structural components.

Tenants under certain of our net lease portfolio leases, including TA, may request that we purchase qualifying capital improvements to the leased facilities in return for minimum rent increases or we may agree to provide allowances for tenant improvements upon execution of new leases or when renewing our existing tenants.

We funded $2,295 of capital improvements at certain of our net lease properties during the year ended December 31, 2019 .

We currently expect to fund approximately $5,000 of capital improvements under these leases during 2020 using cash on hand or borrowings under our revolving credit facility.

Certain tenants are not obligated to request and we are not obligated to purchase any such improvements.

As of December 31, 2019 , we had $5,346 of unspent leasing-related obligations under our net lease portfolio.

During the year ended December 31, 2019, we paid quarterly cash distributions to our shareholders totaling $353,619 using existing cash balances and borrowings under our revolving credit facility.

On January 16, 2020, we declared a regular quarterly distribution of $0.54 per common share, or approximately $88,864 , to shareholders of record on January 27, 2020.

We paid this distribution on February 20, 2020 using cash on hand and borrowings under our revolving credit facility.

For more information regarding our distributions, see Note 7 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

In January 2019 , in a series of transactions, we sold 20 travel centers in 15 states to TA for $ 308,200 .

We used a portion of the proceeds from these sales to repay borrowings under our revolving credit facility and for general business purposes, including hotel acquisitions.

On July 1, 2019 , we sold all the shares of class A common stock of RMR Inc.

that we owned in an underwritten public offering at a price to the public of $40.00 per share pursuant to an underwriting agreement among us, RMR Inc., certain other REITs managed by RMR LLC that also sold their class A common stock of RMR Inc.

in the offering and the underwriters named therein.

We received net proceeds of $93,892 from this sale, after deducting the underwriting discounts and commissions and after other offering expenses, which we used to repay borrowings under our revolving credit facility.

For more information regarding the sale of our shares of class A common stock of RMR Inc., see Note 9 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

On September 18, 2019, we issued $825,000 aggregate principal amount of our 4.350% unsecured senior notes due 2024 , $450,000 aggregate principal amount of our 4.750% unsecured senior notes due 2026 and $425,000 aggregate principal amount of our 4.950% unsecured senior notes due 2029 .

We used the aggregate net proceeds from these offerings of $1,680,461 , after underwriting discounts and other offering expenses, to finance a portion of the SMTA Transaction.

On September 20, 2019, we completed the SMTA Transaction as a result of which, we acquired 767 net lease service-oriented retail properties with 12.4 million rentable square feet.

The aggregate transaction value of the SMTA Transaction was $2,482,382 , including $2,384,577 in cash consideration, $82,069 of prepayment penalties to extinguish mortgage debt on the portfolio and $15,736 of other capitalized acquisition costs.

The properties included in the portfolio are net leased to tenants in 23 distinct industries and 163 brands that include quick service and casual dining restaurants, movie theaters, health and fitness, automotive parts and services and other service-oriented and necessity-based industries across 45 states.

We financed the SMTA Transaction with borrowings under our revolving credit facility and with cash on hand, including net proceeds from our public offerings of senior unsecured notes, as further described above.

During 2019, we acquired three hotels with 794 rooms for an aggregate purchase price of $226,450 , excluding capitalized acquisition costs of $3,087 using proceeds from certain dispositions, cash on hand or outstanding borrowings under our revolving credit facility.

Additional details of these transactions are set forth in Note 4 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K, which disclosure is incorporated herein by reference.

During 2019, we sold 130 net lease properties with 2.8 million square feet for aggregate proceeds of $513,012 , excluding closing costs of $3,402 .

We used the proceeds from these sales to reduce borrowings under our revolving credit facility and for general business purposes.

As of December 31, 2019 , we had 19 net lease properties with a carrying value of $87,493 classified as held for sale.

In February 2020, we entered an agreement to acquire three net lease properties with approximately 6,696 square feet in two states with leases requiring an aggregate of $387 of annual minimum rents for an aggregate sales price of $7,000 , excluding closing costs, using existing cash balances.

Since January 1, 2020, we sold four vacant net lease properties with approximately 160,434 square feet in three states for an aggregate sales price of $5,010 , excluding closing costs.

We have also commenced marketing certain hotels as part of our previously announced plan to sell approximately $300,000 of hotels to reduce our financial leverage.

We expect to sell the 20 hotels currently managed by Wyndham and have agreed to sell or rebrand 33 hotels as part of the Marriott Agreement.

We also expect to sell, rebrand or repurpose 39 hotels currently managed by Sonesta.

We expect to use the proceeds from any sales of these hotels to repay debt or for general business purposes.

We currently intend to continue to expand our investments by primarily acquiring additional hotels and other single tenant, net lease properties and we expect to use the extensive nationwide resources of RMR LLC to locate, acquire and manage such properties.

One of our goals in acquiring single tenant, net lease properties is to further diversify our sources of rents and returns with the intention of improving the security of our cash flows.

Another of our goals is to purchase properties that produce rents, less property operating expenses, that are greater than our capital costs to acquire the properties and, accordingly, allow us to increase distributions to our shareholders over time.

We expect that most of our acquisition efforts will focus on hotel and net lease properties;

however, we may consider acquiring other types of properties.

In order to fund acquisitions and to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses, we maintain a $1,000,000 revolving credit facility and $400,000 term loan which are governed by a credit agreement with a syndicate of institutional lenders.

The maturity date of our revolving credit facility is July 15, 2022 , and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to extend the maturity date of this facility for two additional six month periods.

We are required to pay interest at the rate of LIBOR plus a premium, which was 120 basis points per annum at December 31, 2019 , on the amount outstanding under our revolving credit facility.

We also have to pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 25 basis points per annum at December 31, 2019 .

We funded $4,623 of capital improvements to properties under these lease provisions during the year ended December 31, 2020.

Tenants are not obligated to request and we are not obligated to purchase any such improvements.

As of December 31, 2020, we had $4,399 of unspent leasing-related obligations related to certain net lease tenants.

During the year ended December 31, 2020, we acquired three net lease properties with approximately 6,696 square feet in two states for an aggregate purchase price of $7,071, including acquisition related costs of $71, using cash on hand.

During the year ended December 31, 2020, we sold 18 hotels with 2,046 rooms for aggregate net proceeds of $81,981.

We used the net proceeds from these sales to repay amounts outstanding under our revolving credit facility.

During the year ended December 31, 2020, we sold 21 net lease properties with an aggregate of 1,375,483 rentable square feet for aggregate net proceeds of $85,561 in 21 separate transactions.

We used the net proceeds from the sales to repay amounts outstanding under our revolving credit facility.

We have entered into an agreement to sell five hotels with 430 rooms in four states with an aggregate carrying value of $10,699 for an aggregate sales price of $22,263, excluding closing costs.

We have also entered into agreements to sell three net lease properties with an aggregate of approximately 38,942 square feet with an aggregate carrying value of $1,746 for an aggregate sale price of $2,050, excluding closing costs.

The sales of these properties are subject to conditions;

accordingly, we cannot provide any assurance that we will sell any of these properties and the terms of any of these properties we may sell may change.

We terminated an agreement we entered to sell 16 Marriott brand hotels with 2,155 rooms for a sales price of $107,800.

In June 2020, we issued $800,000 aggregate principal amount of our 7.50% unsecured senior notes due 2025.

The aggregate net proceeds from this offering were $787,718, after underwriting discounts and other offering expenses and were used to repay amounts outstanding under our revolving credit facility.

In June 2020, we repurchased $350,000 principal amount of our $400,000 of senior notes due 2021 for $355,971, excluding accrued interest, pursuant to a cash tender offer using borrowings under our revolving credit facility.

In July 2020, we participated in an underwritten public equity offering by TA pursuant to which we purchased 500,797 shares of TA common stock at the public offering price of $14.00 per share for $7,011, using cash on hand.

In November 2020, we issued $450,000 principal amount of our 5.50% unsecured senior notes due 2027.

The aggregate net proceeds from this offering were $442,232, after underwriting discounts and other offering expenses and were used to repay amounts outstanding under our revolving credit facility.

In December 2020, we redeemed the remaining $50,000 of our 4.25% senior notes due 2021 for a redemption price equal to the principal amount, plus accrued and unpaid interest using cash on hand.

In January 2021, the landlord for one of our hotels subject to a ground lease exercised its purchase option to acquire our leasehold interest for our net book value, which was $9,753 as of December 31, 2020.

We expect this transaction to close in April 2021 and we expect to use the proceeds from this sale to repay amounts outstanding under our revolving credit facility.

In January 2021, we entered into an agreement to acquire a property adjacent to one of our travel centers in Nashville, TN for $7,600, excluding closing costs.

We expect to complete this transaction in the first quarter of 2021 using cash on hand.

During the year ended December 31, 2020, we declared and paid quarterly distributions to common shareholders using cash on hand or borrowings under our revolving credit facility as follows:

Declaration Date Record Date Paid Date Dividend Per Common Share Total Distributions

January 16, 2020 January 27, 2020 February 20, 2020 $ 0.54 $ 88,863

March 30, 2020 April 21, 2020 May 21, 2020 0.01 1,646

July 16, 2020 July 27, 2020 August 20, 2020 0.01 1,646

October 15, 2020 October 26, 2020 November 19, 2020 0.01 1,649

$ 0.57 $ 93,804

On January 14, 2021, we declared a quarterly distribution to common shareholders of record on January 25, 2021 of $0.01 per share, or $1,648.

We paid this amount on February 18, 2021 using cash on hand.

In order to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses, we maintain a $1,000,000 revolving credit facility and, until it was repaid without penalty on November 5, 2020, a $400,000 term loan which are governed by a credit agreement with a syndicate of institutional lenders.

The maturity date of our revolving credit facility is July 15, 2022, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to extend the maturity date of this facility by two additional six-month periods.

We are required to pay interest at the rate of LIBOR plus a premium, which was 235 basis points per annum, subject to a LIBOR floor of 0.50% at December 31, 2020, on the amount outstanding under our revolving credit facility.

We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 30 basis points per annum at December 31, 2020.

Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings.

We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity.

We can borrow, subject to meeting certain financial covenants, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity.

As of December 31, 2020, the annual interest rate payable on borrowings under our revolving credit facility was 2.85%.

As of December 31, 2020, we had $78,424 outstanding and $921,576 available to borrow under our revolving credit facility.

As of February 27, 2020 , we had $437,000 outstanding and $563,000 available to borrow under our revolving credit facility.

Our $400,000 term loan, which matures on July 15, 2023 , is prepayable without penalty at any time.

We are required to pay interest on the amount outstanding under our term loan at the rate of LIBOR plus a premium, which was 135 basis points per annum at December 31, 2019 .

The interest rate premium is subject to adjustment based upon changes to our credit ratings.

As of December 31, 2019 , the annual interest rate for the amount outstanding under our term loan was 3.04% .

Our credit agreement also includes a feature under which the maximum borrowing availability may be increased to up to $2,300,000 on a combined basis in certain circumstances.

Our term debt maturities (other than our revolving credit facility and term loan) as of December 31, 2019 were as follows:

On January 19, 2021, we borrowed $972,793 under our revolving credit facility as a precautionary measure to preserve financial flexibility.

As of February 26, 2021, we have fully drawn our $1,000,000 revolving credit facility.

We and our lenders amended our credit agreement governing our $1,000,000 revolving credit facility and $400,000 term loan on May 8, 2020 and we amended our credit agreement governing our $1,000,000 revolving credit facility again on November 5, 2020.

The May 2020 amendment provided a waiver of certain of the financial covenants under our credit agreement through March 31, 2021, or the Waiver Period, during which, subject to certain conditions, we continued to have access to undrawn amounts under the credit facility.

During the Waiver Period, and continuing thereafter until such time as we had demonstrated compliance with certain of our financial covenants as of June 30, 2021:

• we were required to maintain unrestricted liquidity (unrestricted cash or undrawn availability under our $1,000,000 revolving credit facility) of not less than $125,000;

• our interest rate premium over LIBOR under our revolving credit facility and term loan was increased by 50 basis points;

• our ability to pay distributions on our common shares was limited to amounts required to maintain our qualification for taxation as a REIT and to avoid the payment of certain income and excise taxes, and to pay a cash dividend of $0.01 per common share per quarter;

• we were subject to certain additional covenants, including additional restrictions on our ability to incur indebtedness (with exceptions for borrowings under our revolving credit facility and certain other categories of secured and unsecured indebtedness), and to acquire real property or make other investments (with exceptions for, among other things, certain categories of capital expenditures and costs, and certain share purchases);

• we were generally required to apply the net cash proceeds from the disposition of assets, capital markets transactions, debt refinancings or COVID-19 pandemic-related government stimulus programs to the repayment of outstanding loans under the credit agreement;

• we pledged equity interests in certain of our property owning subsidiaries to secure our obligations under the credit agreement.

These subsidiaries owned properties with $1,027,334 of undepreciated book value as of December 31, 2020.

As a result of the November 2020 amendment:

• all existing financial covenants have been waived through the New Waiver Period;

• we repaid our $400,000 term loan on November 5, 2020 using undrawn amounts under our revolving credit facility;

• we pledged certain additional equity interests of subsidiaries owning properties and we are providing first mortgage liens on 74 properties owned by the pledging subsidiaries with an undepreciated book value of $1,834,748 as of December 31, 2020 to secure our obligations under the credit agreement;

• we have the ability to fund up to $250,000 of capital expenditures per year and up to $50,000 of certain other investments per year as defined in the credit agreement;

• the interest rate premium over LIBOR under our revolving credit facility increased by 30 basis points;

• certain covenants and restrictions on distributions to common shareholders, share repurchases, incurring indebtedness, and acquiring real property (in each case subject to various exceptions), and the minimum liquidity requirement of $125,000 will remain in place during the New Waiver Period;

• we are generally required to apply the net cash proceeds from the disposition of assets, capital markets transactions and debt refinancings to the repayment of outstanding loans under the credit agreement, and then to other debt maturities.

Our term debt maturities (other than our revolving credit facility) as of December 31, 2020 were as follows:

Year Maturity

2024 1,175,000

2025 1,150,000

None of our unsecured debt obligations require principal or sinking fund payments prior to their maturity dates.

We currently expect to use cash on hand, the cash flows from our operations, borrowings under our revolving credit facility, net proceeds from any asset sales and net proceeds of offerings of equity or debt securities to fund our future debt maturities, operations, capital expenditures, distributions to our shareholders, property acquisitions and other general business purposes.

We currently expect to use cash on hand, the cash flows from our operations, borrowings under our revolving credit facility (when available), net proceeds from any asset sales and net proceeds of offerings of equity or debt securities, as allowed by our existing credit agreement, to fund our future debt maturities, operations, capital expenditures, distributions to our shareholders and other general business purposes.

When significant amounts are outstanding for an extended period of time under our revolving credit facility, or the maturities of our indebtedness approach, we currently expect to explore refinancing alternatives.

Such alternatives may include incurring additional debt, issuing new equity securities and the sale of properties.

We have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities.

We have an effective shelf registration

statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities.

We may also seek to participate in joint ventures or other arrangements that may provide us additional sources of financing.

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While we believe we will have access to various types of financings, including debt or equity, to fund our future acquisitions and to pay our debts and other obligations, we cannot be sure that we will be able to complete any debt or equity offerings or other types of financings or that our cost of any future public or private financings will not increase.

Our ability to complete, and the costs associated with, future debt transactions depends primarily upon credit market conditions and our then creditworthiness.

Also, as noted above, we are limited in our ability to incur additional debt during the New Waiver Period pursuant to our credit agreement and will not be able to incur any debt if we fall below the 1.5x interest coverage ratio level necessary under our senior notes indentures as described below.

Our ability to complete, and the costs associated with, future debt transactions depends primarily upon credit market conditions and our then perceived creditworthiness.

We have no control over market conditions.

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We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities.

As of December 31, 2019 , our contractual obligations were as follows (dollars in thousands):

Payment due by period

Contractual Obligations

Long-term debt obligations

Ground lease obligations (1)

Security deposits (2)

Capital improvements (3)

Projected interest expense (4)

14 of our hotels and 17 of our net lease properties are on land leased partially or in its entirety.

In each case the ground lessors are unrelated to us.

Pursuant to the terms of our management agreements and leases, payments of ground lease obligations are generally made by our managers or tenants.

However, if a manager or tenant fails to perform obligations under a ground lease or elects not to 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 hotel or travel center.

We have included the future rent expense under these ground leases in the table above.

Represents the security deposit balance as of December 31, 2019 .

We may draw upon security deposits to cover any rent or return shortfalls thereby decreasing the potential obligation to repay some of these deposits.

Represents amounts we expect to fund for capital improvements to our hotels in excess of amounts available in FF&E reserves and to our net lease properties as of December 31, 2019 .

Projected interest expense is interest attributable to only debt obligations listed above at existing rates as of December 31, 2019 and is not intended to project future interest costs which may result from debt prepayments, additional borrowings under our revolving credit facility, new debt issuances or changes in interest rates.

Off Balance Sheet Arrangements

As of December 31, 2019 , we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

However, as discussed elsewhere in this Annual Report on Form 10-K, the continued duration and severity of the current economic downturn resulting from the COVID-19 pandemic are uncertain and may have various negative consequences on us and our operations including a decline in financing availability and increased costs for financing.

Further, such conditions could also disrupt the capital markets generally and limit our access to financing from public sources or on favorable terms, particularly if the global financial markets experience significant disruptions.

Debt Covenants

Our debt obligations at December 31, 2019 consisted of outstanding borrowings under our $1,000,000 revolving credit facility, our $400,000 term loan and $5,350,000 of publicly issued term debt.

Our debt obligations at December 31, 2020 consisted of outstanding borrowings under our $1,000,000 revolving credit facility and $6,200,000 of publicly issued term debt.

Our publicly issued term debt is governed by our indentures and related supplements.

These indentures and related supplements and our credit agreement contain covenants that generally restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios and our credit agreement restricts our ability to make distributions under certain circumstances.

These indentures and related supplements and our credit agreement contain covenants that generally restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios and our credit agreement currently restricts our ability to make certain investments and limits our distributions under certain circumstances.

Our credit agreement and our unsecured senior notes, indentures and their supplements 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 LLC ceasing to act as our business manager.

As of December 31, 2019 , we believe we were in compliance with all of the covenants under our indentures and their supplements and our credit agreement.

As of December 31, 2020, we believe we were in compliance with all of the covenants under our indentures and their supplements and our credit agreement, subject to the waivers described above.

As noted above, in response to the current market conditions, we and our lenders amended our credit agreement to provide waivers of certain covenants.

Senior Notes Indenture Covenants

As of December 31, 2020, we are in compliance with all of the financial covenants applicable to our senior unsecured notes.

The following table summarizes the results of the financial tests required by the indentures and related supplements for our senior unsecured notes as of December 31, 2020:

Actual Results Covenant Requirement

Maintenance Covenant:

Total unencumbered assets / unsecured debt 167.3% Minimum 150%

Incurrence Covenants:

Total debt / adjusted total assets 51.3% Maximum of 60%

Secured debt / adjusted total assets 0.6% Maximum of 40%

Consolidated income available for debt service / debt service 1.56x Minimum of 1.50x

The above consolidated income available for debt service to debt service coverage ratio as of December 31, 2020 is based on results for the year ended December 31, 2020.

This ratio was 2.86x as of year-end 2019, and, as noted above, was 1.56x as of December 31, 2020.

We expect this ratio to continue to decline in 2021 as more quarters of historically weak operations resulting from the COVID-19 pandemic are reflected in the calculation.

We expect the ratio could fall below the 1.5x requirement as of the end of the first quarter of 2021 and we will not be able to incur additional debt while the ratio is below this requirement.

Acceleration and Cross-Default

Neither our indentures and their supplements nor our credit agreement contain provisions for acceleration which could be triggered by a change in our debt ratings.

However, under our credit agreement, our highest senior debt rating is used to determine the fees and interest rates we pay.

Accordingly, if that debt rating is downgraded, our interest expense and related costs under our revolving credit facility and term loan would increase.

Accordingly, if that debt rating is downgraded, our interest expense and related costs under our revolving credit facility would increase.

Our public debt indentures and their supplements contain cross default provisions to any other debt of $20,000 or more ($50,000 or more in the case of our indenture entered into in February 2016 and its supplements).

Similarly, our credit agreement has cross default provisions to other indebtedness that is recourse of $25,000 or more and indebtedness that is non-recourse of $75,000 or more.

Supplemental Guarantor Information

In March 2020, the SEC approved Release No.

33-10762, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, or Release 33-10762.

Release 33-10762 amends the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rules 3-10 and 3-16, permitting registrants to provide certain alternative financial disclosures and non-financial disclosures in lieu of separate consolidating financial statements for subsidiary issuers and guarantors of registered debt securities if certain conditions are met.

The amendments in Release 33-10762 are generally effective for filings on or after January 4, 2021, with early application permitted.

We adopted the new disclosure requirements permitted under Release 33-10762 effective for the quarter ended March 31, 2020.

Our 2025 Notes and 2027 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 certain excluded subsidiaries, including our foreign subsidiaries and our subsidiaries pledged under our credit agreement.

The notes and the guarantees will be effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and will be structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes.

Our remaining $4,950,000 of senior unsecured notes do not have the benefit of any guarantees.

A subsidiary guarantor's guarantee of the 2025 Notes and 2027 Notes and all other obligations of such subsidiary guarantor under the indenture governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and the indenture under certain circumstances, including on or after the date on which (a) the notes have received a rating equal to or higher than Baa2 (or the equivalent) by Moody’s, or BBB (or the equivalent) by S&P, or if Moody’s or S&P ceases to rate the notes for reasons outside of our control, the equivalent investment grade rating from any other rating agency and (b) no default or event of default has occurred and is continuing under the indenture.

Our non-guarantor subsidiaries are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any amounts due on these notes or the guarantees, or to make any funds available therefore, whether by dividend, distribution, loan or other payments.

The rights of holders of these notes to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries' creditors and any preferred equity holders.

As a result, these notes and the related guarantees will be structurally subordinated to all indebtedness, guarantees and other liabilities of our subsidiaries that do not guarantee these notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.

The following table presents summarized financial information for us and the subsidiary guarantors, on a combined basis after elimination of (i) intercompany transactions and balances among us and the subsidiary guarantors and (ii) equity in earnings from, and any investments in, any of our non-guarantor subsidiaries:

As of December 31, 2020

Real estate properties, net (1)

Intercompany balances (2)

Other assets, net 677,408

Indebtedness, net $ 6,208,590

Other liabilities 341,907

Year Ended December 31, 2020

(1) Real estate properties, net as of December 31, 2020 includes $236,533 of properties owned directly by us and not included in the assets of the subsidiary guarantors.

(2) Intercompany balances represent receivables from non-guarantor subsidiaries.

Related Person Transactions

We have relationships and historical and continuing transactions with RMR LLC, RMR Inc., TA and Sonesta and others related to them.

we have no employees and the personnel and various services we require to operate our business are provided to us by RMR LLC pursuant to our business and property management agreements with RMR LLC;

is the managing member of RMR LLC;

Adam Portnoy, the Chair of our Board of Trustees and one of our Managing Trustees, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., a managing director, president and chief executive officer of RMR Inc., an officer and employee of RMR LLC, the chair of the board of directors and a managing director of TA, and, together with certain of his affiliates, a majority owner and director of Sonesta;

John Murray, our other Managing Trustee and our President and Chief Executive Officer, also serves as an executive officer of RMR LLC and a director of Sonesta;

and, until July 1, 2019, we owned shares of class A common stock of RMR Inc.

We also have relationships and historical and continuing transactions with other companies to which RMR LLC or its subsidiaries provide management services and which may have trustees, directors and officers who are also trustees, directors or officers of us, RMR LLC or RMR Inc., including:

TA, which is our former subsidiary and largest tenant and of which we are the largest shareholder;

and Sonesta, which is one of our hotel managers and is owned in part by Adam Portnoy and of which we own an approximately 34% equity interest.

We have relationships and historical and continuing transactions with RMR LLC, RMR Inc., TA and Sonesta and others affiliated with them.

For further information about these and other such relationships and related person transactions, see Notes 4, 5, 8 and 9 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference and our other filings with the SEC, including our definitive Proxy Statement for our 2021 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2020.

For further information about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements,” Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.” Our filings with the SEC and copies of certain of our agreements with these related persons, including our business and property management agreements with RMR LLC and our various agreements with TA and Sonesta, are available as exhibits to our public filings with the SEC and accessible at the SEC’s website, www.sec.gov.

We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.

Critical Accounting Policies

For further information about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements,” Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.” We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.

Critical Accounting Estimates

Our critical accounting policies are those that will have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates.

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If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.

We test our indefinite lived intangible assets and goodwill for impairment on an annual basis and on an interim basis if events or changes in circumstances between annual tests indicate that the asset might be impaired.

We test our indefinite lived intangible assets for impairment on an annual basis and on an interim basis if events or changes in circumstances between annual tests indicate that the asset might be impaired.

The impairment test requires us to determine the estimated fair value of the intangible asset.

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In the future, we may need to revise our carrying value assessments to incorporate information which is not now known, and such revisions could increase or decrease our depreciation expense related to properties we own, result in the classification of our leases as other than operating leases or decrease the carrying values of our assets.

Management Agreements, Leases and Operating Statistics (dollar amounts in thousands)

As of December 31, 2019 , we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 151 brands across 24 industries.

Property and Operating Statistics (dollar amounts in thousands)

As of December 31, 2020, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 142 distinct brands across 23 industries.

Hotel Portfolio

As of January 1, 2020, 329 of our hotels (including one leased hotel) were included in six portfolio agreements and managed by or leased to separate affiliates of IHG, Marriott, Sonesta, Hyatt, Radisson and Wyndham.

The table and related notes below through page 76 summarize significant terms of our hotel lease and management agreements as of December 31, 2019 .

These tables also include statistics reported to us or derived from information reported to us by our hotel managers and tenant.

These statistics include coverage of our minimum returns or minimum rents and occupancy, ADR and RevPAR for our hotel properties.

We consider these statistics and the management agreement or lease security features also presented in the tables and related notes on the following pages to be important measures of our managers’ and tenant’s success in operating our hotel properties and their ability to continue to pay us.

However, this third party reported information is not a direct measure of our financial performance and we have not independently verified the operating data.

Return/Rent (2)

Rent / Return Coverage (3),

Year Ended December 31,

Operating Agreement

Reference Name

Investment (1)

Subtotal / Average Hotels

Represents the historical cost of our hotel properties plus capital improvements funded by us less impairment write-downs, if any, and excludes capital improvements made from FF&E reserves funded from hotel operations that do not result in increases in hotel minimum returns or rents.

Each of our hotel management agreements or lease provides for payment to us of an annual minimum return or rent, respectively.

Certain of these minimum payment amounts are secured by full or limited guarantees or security deposits as more fully described below.

In addition, certain of our hotel management agreements provide for payment to us of additional amounts to the extent of available cash flows as defined in the management agreement.

Payments of these additional amounts are not guaranteed or secured by deposits.

Annualized minimum rent amounts represent cash rent amounts due to us and exclude adjustments necessary to record rent on a straight line basis.

We define hotel coverage as combined total hotel property level revenues minus all hotel property level expenses and FF&E reserve escrows which are not subordinated to hotel minimum returns or rents due to us (which data is provided to us by our managers or tenant), divided by the minimum returns or rents due to us.

Coverage amounts for our IHG, Sonesta and Radisson agreements include data for periods prior to our ownership of certain hotel properties.

Coverage amounts for our Sonesta agreement include data for three hotels prior to when these hotels were managed by Sonesta.

We lease 102 IHG branded hotels ( 20 Staybridge Suites ® , 61 Candlewood Suites ® , two InterContinental ® , 11 Crowne Plaza ® , three Holiday Inn ® and five Kimpton ® Hotels & Restaurants) in 30 states in the U.S., the District of Columbia and Ontario, Canada to one of our TRSs.

These 102 hotels are managed by subsidiaries of IHG under a combination management agreement.

We lease one additional InterContinental ® branded hotel in Puerto Rico to a subsidiary of IHG.

The annual minimum return amount presented in the table on page 74 includes $7,908 of minimum rent related to the leased Puerto Rico hotel.

The management agreement and the lease expire in 2036;

IHG has two renewal options for 15 years each for all, but not less than all, of the hotels.

As of December 31, 2019 , we held a security deposit of $75,717 under this agreement to cover payment shortfalls of our minimum return.

This security deposit, if utilized, may be replenished and increased up to $100,000 from the hotels’ available cash flows in excess of our minimum return and certain management fees.

Under this agreement, IHG is required to maintain a minimum security deposit of $37,000 .

In addition to our minimum return, this management agreement provides for an annual additional return payment to us of $12,067 from the hotels’ available cash flows after payment of hotel operating expenses, funding of the required FF&E reserve, if any, payment of our minimum return, payment of certain management fees and replenishment and expansion of the security deposit.

In addition, the agreement provides for payment to us of 50% of the hotels’ available cash flows after payment to us of the annual additional return amount.

These additional return amounts are not guaranteed or secured by the security deposit we hold.

On December 31, 2019, we entered into agreements with Marriott which combined our three then-existing Marriott operating agreements, historically referred to as our Marriott Nos.

1, 234 and 5 agreements, into a single portfolio for a 16-year term commencing January 1, 2020.

The Marriott Nos.

As of January 1, 2020, we leased our 122 Marriott branded hotels (two full service Marriott ® , 35 Residence Inn by Marriott ® , 71 Courtyard by Marriott ® , 12 TownePlace Suites by Marriott ® and two SpringHill Suites by Marriott ® hotels) in 31 states to one of our TRSs.

The hotels under the Marriott agreement are managed by subsidiaries of Marriott and require aggregate annual minimum returns of $190,573.

The Marriott Agreement is scheduled to expire in 2035 and Marriott has two renewal options for 10 years each for all, but not less than all, of the hotels.

We originally held a security deposit of $64,700 under this agreement to cover payment shortfalls of our minimum return.

As of December 31, 2019 , the available balance of this security deposit was $33,445 .

This security deposit may be replenished from a share of the hotels’ available cash flows in excess of our minimum return and certain management fees.

Marriott has also provided us with a $30,000 limited guaranty to cover payment shortfalls up to 85% of our minimum return after the available security deposit balance has been depleted.

This limited guaranty expires in 2026.

In addition to our minimum return, this agreement provides for payment to us of 60% of the hotels’ available cash flows after payment of hotel operating expenses, funding of the required FF&E reserve, payment of our minimum return, payment of certain management fees and replenishment of the security deposit.

This additional return amount is not guaranteed or secured by the security deposit.

As of December 31, 2019 , we leased our 53 Sonesta branded hotels (seven Royal Sonesta ® Hotels, seven Sonesta Hotels & Resorts ® and 39 Sonesta ES Suites ® hotels) in 26 states to one of our TRSs.

The management agreements for two hotels expire on December 31, 2020 and includes automatic one year renewals.

The management agreement for the remaining 51 hotels expires in 2037.

Sonesta has two renewal options for 15 years each for all, but not less than all, of these 51 hotels.

As of December 31, 2019 , we e have no security deposit or guaranty from Sonesta.

Accordingly, payment by Sonesta of the minimum return due to us under this management agreement is limited to the hotels’ available cash flows after the payment of operating expenses, including certain management fees, and we are financially responsible for operating cash flows deficits, if any.

In addition to our minimum return, this management agreement provides for payment to us of 80% of the hotels’ available cash flows after payment of hotel operating expenses, management fees to Sonesta, our minimum return, an imputed FF&E reserve to us and reimbursement of operating loss or working capital advances, if any.

We lease 48 vacation units in one of our Sonesta hotels to Destinations, under a lease that expires in on March 31, 2020 at which time Destinations will vacate the leased space.

On February 27, 2020, we entered into a transaction agreement with Sonesta and Holdco pursuant to which we and Sonesta restructured our business arrangements, as follows:

W e and Sonesta agreed to sell, rebrand or repurpose our 39 extended stay hotels currently managed by Sonesta with an aggregate carrying value of $480,547 and which currently require aggregate annual minimum returns of $49,467 .

As the hotels are sold, rebranded or repurposed, the management agreement for the applicable hotel(s) will terminate without our being required to pay Sonesta a termination fee and our annual minimum returns due to us under our Sonesta agreement will decrease by the amount allocated to the applicable hotel(s);

Sonesta will continue to manage 14 of our full-service hotels and the annual minimum returns due for these hotels will be reduced from $99,013 to $69,013 ;

Holdco issued to us a number of its shares of common stock representing approximately (but not more than) 34% of its outstanding share of common stock (post-issuance);

We modified our Sonesta agreement and pooling agreement so that (1) our termination rights under those agreements for our 14 full service hotels managed by Sonesta are generally limited to performance and for “cause,” casualty and condemnation events, (2) a portfolio wide performance test now applies for determining whether the management agreement for any of our full-service hotels managed by Sonesta may be terminated for performance reasons, and (3) the provisions included in our historical pooling agreement that allowed either us or Sonesta to require the marketing for sale of non-economic hotels were removed;

We lease our 22 Hyatt Place ® branded hotels in 14 states to one of our TRSs.

The hotels are managed by a subsidiary of Hyatt under a combination management agreement that expires in 2030;

Hyatt has two renewal options for 15 years each for all, but not less than all, of the hotels.

We have a limited guaranty of $50,000 under this agreement to cover payment shortfalls of our minimum return.

As of December 31, 2019 , the available Hyatt guaranty was $19,655 .

The guaranty is limited in amount but does not expire in time and may be replenished from a share of the hotels’ available cash flows in excess of our minimum return.

In addition to our minimum return, this management agreement provides for payment to us of 50% of the hotels’ available cash flows after payment of operating expenses, funding the required FF&E reserve, payment of our minimum return and reimbursement to Hyatt of working capital and guaranty advances, if any.

This additional return is not guaranteed.

We lease our nine Radisson branded hotels (four Radisson ® Hotels & Resorts, four Country Inns & Suites ® by Radisson and one Radisson Blu ® hotel) in six states to one of our TRSs and these hotels are managed by a subsidiary of Radisson under a combination management agreement which expires in 2035 and Radisson has two 15 year renewal options for all, but not less than all, of the hotels.

We have a limited guaranty of $47,523 under this agreement to cover payment shortfalls of our minimum return.

As of December 31, 2019 , the available Radisson guaranty was $41,216 .

The guaranty is limited in amount but does not expire in time and may be replenished from a share of the hotels’ available cash flows in excess of our minimum return.

In addition to our minimum return, this management agreement provides for payment to us of 50% of the hotels’ available cash flows after payment of operating expenses, funding the required FF&E reserve, payment of our minimum return and reimbursement to Radisson of working capital and guaranty advances, if any.

This additional return is not guaranteed.

We lease our 20 Wyndham branded hotels (four Wyndham Hotels and Resorts ® and 16 Hawthorn Suites ® hotels) in 13 states to one of our TRSs.

The hotels are managed by a subsidiary of Wyndham under a combination management agreement which expires on September 30, 2020.

We have no guarantee or security deposit from Wyndham.

Payment by Wyndham is limited to the available cash flows after payment of operating expenses.

Wyndham is not entitled to any base management fees for the remainder of the agreement.

The following tables summarize the operating statistics, including ADR, occupancy and RevPAR reported to us by our hotel managers or tenants by management agreement or lease for the periods indicated.

The following tables summarize the operating statistics, including ADR, occupancy and RevPAR reported to us by our hotel managers or tenants by hotel brand for the periods indicated.

All operating data presented are based upon the operating results provided by our hotel managers and tenants for the indicated periods.

We have not independently verified our managers’ or tenants’ operating data.

Year Ended December 31,

Sonesta (1) (2)

All Hotels Total / Average

Sonesta (1) (2)

All Hotels Total / Average

Sonesta (1) (2)

All Hotels Total / Average

Operating data includes data for certain hotels for periods prior to when we acquired them.

Operating data includes data for three hotels prior to when these hotels were managed by Sonesta.

Comparable Hotels No.

of Rooms or Suites Occupancy ADR RevPAR

Service Level No.

of Hotels Year Ended December 31, Year Ended December 31, Year Ended December 31,

Brand 2020 2019 Change 2020 2019 Change 2020 2019 Change

Full Service 15 5,223 35.9 % 76.4 % (40.5) pts $ 114.12 $ 132.51 (13.9) % $ 40.97 $ 101.24 (59.5) %

Royal Sonesta (1)

Full Service 5 1,406 28.2 % 69.2 % (41.0) pts 146.94 181.69 (19.1) % 41.44 125.73 (67.0) %

Radisson Hotel Full Service 4 969 34.9 % 72.9 % (38.0) pts 102.80 122.61 (16.2) % 35.88 89.38 (59.9) %

Crowne Plaza Full Service 1 495 29.6 % 42.3 % (12.7) pts 111.50 141.56 (21.2) % 33.00 59.88 (44.9) %

Marriott Hotel Full Service 1 392 36.9 % 81.8 % (44.9) pts 133.42 161.57 (17.4) % 49.23 132.16 (62.7) %

Radisson Blu Full Service 1 360 22.9 % 78.2 % (55.3) pts 108.76 149.96 (27.5) % 24.91 117.27 (78.8) %

Country Inn and Suites Full Service 1 84 40.0 % 72.1 % (32.1) pts 83.33 91.32 (8.7) % 33.33 65.84 (49.4) %

Full Service Total/Average 28 8,929 33.8 % 73.3 % (39.5) pts 117.46 140.80 (16.6) % 39.70 103.21 (61.5) %

Courtyard Select Service 62 9,115 31.4 % 69.2 % (37.8) pts 112.60 137.16 (17.9) % 35.36 94.91 (62.7) %

Hyatt Place Select Service 22 2,724 44.7 % 77.3 % (32.6) pts 90.96 108.11 (15.9) % 40.66 83.57 (51.3) %

Sonesta Select (1)

Select Service 9 1,150 26.9 % 64.2 % (37.3) pts 88.09 106.26 (17.1) % 23.70 68.22 (65.3) %

Springhill Suites (1)

Select Service 2 263 25.9 % 73.2 % (47.3) pts 102.16 139.95 (27.0) % 26.46 102.44 (74.2) %

Select Service Total/Average 95 13,252 33.6 % 70.5 % (36.9) pts 104.83 128.23 (18.2) % 35.22 90.40 (61.0) %

Simply Suites (1)

Extended Stay 59 7,309 64.2 % 78.1 % (13.9) pts 67.67 82.07 (17.5) % 43.44 64.10 (32.2) %

Sonesta ES Suites (1)

Extended Stay 59 7,180 57.4 % 73.2 % (15.8) pts 93.85 119.95 (21.8) % 53.87 87.80 (38.6) %

Residence Inn Extended Stay 35 4,488 47.1 % 75.1 % (28.0) pts 117.87 135.75 (13.2) % 55.52 101.95 (45.5) %

TownePlace Suites Extended Stay 4 487 42.0 % 73.2 % (31.2) pts 108.66 122.24 (11.1) % 45.64 89.48 (49.0) %

Extended Stay 5 430 55.4 % 78.5 % (23.1) pts 63.64 71.76 (11.3) % 35.26 56.33 (37.4) %

Extended Stay Total/Average 162 19,894 57.2 % 75.5 % (18.3) pts 87.13 108.06 (19.4) % 49.84 81.59 (38.9) %

Comparable Hotels Total/Average 285 42,075 44.8 % 73.5 % (28.7) pts $ 96.18 $ 121.09 (20.6) % $ 43.09 $ 89.00 (51.6) %

All Hotels No.

of Rooms or Suites Occupancy ADR RevPAR

Service Level No.

of Hotels Year Ended December 31, Year Ended December 31, Year Ended December 31,

Brand 2020 2019 Change 2020 2019 Change 2020 2019 Change

Full Service 23 7,349 33.0 % 74.2 % (41.2)Pts $ 119.83 $ 138.62 (13.6) % $ 39.54 $ 102.86 (61.6) %

Royal Sonesta (1)

Full Service 15 4,947 23.8 % 70.0 % (46.2)Pts 164.13 206.63 (20.6) % 39.06 144.64 (73.0) %

Radisson Hotel Full Service 5 1,149 32.1 % 71.1 % (39.0)Pts 108.73 132.27 (17.8) % 34.90 94.04 (62.9) %

Marriott Hotel Full Service 2 748 30.8 % 84.4 % (53.6)Pts 198.28 231.62 (14.4) % 61.07 195.49 (68.8) %

Crowne Plaza Full Service 1 495 29.6 % 42.3 % (12.7)Pts 111.50 141.56 (21.2) % 33.00 59.88 (44.9) %

Country Inn and Suites Full Service 3 430 25.9 % 67.8 % (41.9)Pts 99.25 121.88 (18.6) % 25.71 82.63 (68.9) %

Radisson Blu Full Service 1 360 22.9 % 78.2 % (55.3)Pts 108.76 149.96 (27.5) % 24.91 117.27 (78.8) %

Full Service Total/Average 50 15,478 29.5 % 72.0 % (42.5)Pts 132.62 164.30 (19.3) % 39.12 118.30 (66.9) %

Courtyard Select Service 62 9,115 31.4 % 69.2 % (37.8)Pts 112.60 137.16 (17.9) % 35.36 94.91 (62.7) %

Hyatt Place Select Service 22 2,724 44.7 % 77.3 % (32.6)Pts 90.96 108.11 (15.9) % 40.66 83.57 (51.3) %

Sonesta Select (1)

Select Service 9 1,150 26.9 % 64.2 % (37.3)Pts 88.09 106.26 (17.1) % 23.70 68.22 (65.3) %

SpringHill Suites Select Service 2 263 25.9 % 73.2 % (47.3)Pts 102.16 139.95 (27.0) % 26.46 102.44 (74.2) %

Select Service Total/Average 95 13,252 33.6 % 70.5 % (36.9)Pts 104.83 128.23 (18.2) % 35.22 90.40 (61.0) %

Simply Suites (1)

Extended Stay 61 7,553 63.5 % 77.3 % (13.8)Pts 67.42 81.68 (17.5) % 42.81 63.14 (32.2) %

Sonesta ES Suites (1)

Extended Stay 60 7,326 56.8 % 73.4 % (16.6)Pts 94.09 120.70 (22.0) % 53.44 88.59 (39.7) %

Residence Inn Extended Stay 35 4,488 47.1 % 75.1 % (28.0)Pts 117.87 135.75 (13.2) % 55.52 101.95 (45.5) %

TownePlace Suites Extended Stay 4 487 42.0 % 73.2 % (31.2)Pts 108.66 122.24 (11.1) % 45.64 89.48 (49.0) %

Extended Stay 5 430 55.4 % 78.5 % (23.1)Pts 63.64 71.76 (11.3) % 35.26 56.33 (37.4) %

Extended Stay Total/Average 165 20,284 56.8 % 75.3 % (18.5)Pts 86.97 108.06 (19.5) % 49.40 81.37 (39.3) %

All Hotels Total/Average 310 49,014 42.0 % 73.0 % (31.0)Pts $ 100.77 $ 130.82 (23.0) % $ 42.32 $ 95.50 (55.7) %

(1) Includes operator data for periods prior to when certain hotels were managed by Sonesta.

(2) We have entered into an agreement to sell five hotels and we have entered into a short term lease with the buyer in anticipation of the sale.

Net Lease Portfolio

As of December 31, 2019 , our 816 net lease properties located in 44 states were leased to 194 tenants.

These tenants operate in 23 distinct industries including travel centers, casual dining and quick service restaurants, movie theaters, health and fitness, automobile service and others.

TA is our largest tenant and leases 179 travel centers under five lease agreements that expire between 2029 and 2035 and require annual minimum rents of $246,088 , which represents approximately 24.6% of our total minimum returns and rent as of December 31, 2019 .

As of December 31, 2020, our net lease properties were 98.7% occupied and we had 18 properties available for lease.

During 2019 we entered into lease renewals for 217,807 rentable square feet at weighted (by rentable square feet) average rents that were 0.75% below prior rents for the same space.

The weighted (by rentable square feet) average lease term for these leases was 8.1 years and leasing concessions and capital commitments for these leases were $551, or $0.31 per square foot, per lease year.

As of December 31, 2019 , our net lease tenants operated across more than 131 brands.

During the year ended December 31, 2020, we entered into lease renewals for 1,412,063 rentable square feet at weighted (by rentable square feet) average rents that were 7.9% below prior rents for the same space.

The weighted (by rentable square feet) average lease term for these leases was 11.0 years and leasing concessions and capital commitments were $12,571, or $8.90 per square foot.

Also during the year ended December 31, 2020, we entered into new leases for an aggregate of 92,285 rentable square feet at weighted (by rentable square feet) average rents that were 45.2% below prior rents for the same space.

The weighted (by rentable square feet) average lease term for these leases was 8.8 years and leasing concessions and capital commitments were $1,302, or $14.11 per square foot.

As of December 31, 2020, our net lease tenants operated across more than 127 brand concepts.

The following table identifies the top ten brands based on annualized minimum rent.

Investment (1) (2)

Percent of Total Investment

of Buildings (1)

Square Feet Investment (2)

Percent of Total Investment Annualized

Minimum Rent (3)

Percent of Total Annualized

Minimum Rent (2)

TravelCenters of America

Petro Stopping Centers

The Great Escape

Life Time Fitness

Buehler's Fresh Foods

Heartland Dental

Regal Cinemas

Minimum Rent Coverage (4)

TravelCenters of America 134 3,720,693 $ 2,281,589 44.2 % $ 168,011 45.5 % 1.95x

Petro Stopping Centers 45 1,470,004 1,021,226 19.8 % 78,099 21.1 % 1.55x

AMC Theatres 11 575,967 102,580 2.0 % 6,750 1.8 % 0.46x

The Great Escape 14 542,666 98,242 1.9 % 7,140 1.9 % 1.70x

Life Time Fitness 3 420,335 92,617 1.8 % 5,770 1.6 % 1.08x

Buehler's Fresh Foods 5 502,727 76,536 1.5 % 5,657 1.5 % 4.79x

Heartland Dental 59 234,274 61,120 1.2 % 4,493 1.2 % 3.24x

Pizza Hut 58 189,609 58,312 1.1 % 3,954 1.1 % 1.42x

Express Oil Change 23 83,825 49,724 1.0 % 3,379 0.9 % 4.03x

Flying J Travel Plaza 3 48,069 41,681 0.8 % 3,151 0.9 % 3.75x

444 5,667,236 1,273,799 24.7 % 83,189 22.5 % 3.11x

Total 799 13,455,405 $ 5,157,426 100.0 % $ 369,593 100.0 % 2.14x

(1) As of December 31, 2020, we have six net lease properties with a carrying value of $2,844 classified as held for sale.

(2) Represents historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any.

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Annualized minimum rent amounts represent cash rent amounts due to us and exclude adjustments, if any, to record scheduled rent changes under certain of our leases, the deferred rent obligations payable to us under our leases with TA, and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks at our travel centers on a straight line basis, or any reimbursement of expenses paid by us.

As of December 31, 2019 , we have 19 net lease properties with a carrying value of $87,493 and annual minimum rent of $5,625 classified as held for sale.

EBITDAR amounts used to determine rent coverage are generally for the latest twelve months period reported based on the most recent operating information, if any, furnished by the tenant.

Operating information 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 for which tenants do not report operating information are excluded from the coverage calculations.

(4) See page 71 for our definition of coverage.

Coverage amounts include data for certain properties for periods prior to when we assumed ownership of them.

Other includes 119 distinct brands with an average investment of $11,119 and average annual minimum rent of $734 .

(5) Consists of 117 distinct brands with an average investment of $10,863 and average annual minimum rent of $705.

As of December 31, 2020, our top ten net lease tenants based on annualized minimum rent are listed below.

Brand Affiliation

Investment (1) (2)

Percent of Total Investment

Tenant Brand Affiliation No.

of Buildings (1)

Square Feet Investment (2)

Percent of Total Investment Annualized

Minimum Rent (3)

Percent of Total Annualized

TravelCenters of America Inc.

TravelCenters

Minimum Rent Coverage (4)

TravelCenters of America TravelCenters of America/ Petro Shopping Centers 179 5,190,696 $ 3,302,815 64.0 % $ 246,110 66.6 % 1.83x (5) (6)

American Multi-Cinema, Inc.

AMC Theatres 11 575,967 102,580 2.0 % 6,750 1.8 % 0.35x

Universal Pool Co., Inc.

The Great Escape

Healthy Way of Life II, LLC

Life Time Fitness

Destination XL Group, Inc.

Styx Acquisition, LLC

Buehler's Fresh Foods

The Great Escape 14 542,666 98,242 1.9 % 7,140 1.9 % 1.70x (5)

Healthy Way of Life II, LLC Life Time Fitness 3 420,335 92,617 1.8 % 5,770 1.6 % 1.08x

Styx Acquisition, LLC Buehler's Fresh Foods 5 502,727 76,536 1.5 % 5,657 1.5 % 4.79x (5)

Professional Resource Development, Inc.

Heartland Dental

Carmike Cinemas LLC

Heartland Dental 59 234,274 61,120 1.2 % 4,493 1.2 % 3.24x

Express Oil Change, L.L.C.

Express Oil Change 23 83,825 49,724 1.0 % 3,379 0.9 % 3.50x

Regal Cinemas, Inc.

Regal Cinemas

Eastwynn Theaters, Inc.

Express Oil Change, LLC

Express Oil Change

Subtotal, top 10

Regal Cinemas 6 266,546 44,476 0.9 % 3,658 1.0 % 0.85x

Pilot Travel Centers LLC Flying J Travel Plaza 3 48,069 41,681 0.8 % 3,151 0.9 % 3.50x

Automotive Remarketing Group, Inc.

Automotive Remarketing Group 6 72,338 34,314 0.7 % 2,992 0.8 % 4.85x

Subtotal, top 10 309 7,937,443 3,904,105 75.8 % 289,100 78.2 % 1.91x

Various 490 5,517,962 1,253,321 24.2 % 80,493 21.8 % 2.98x

Total 799 13,455,405 $ 5,157,426 100.0 % $ 369,593 100.0 % 2.14x

(1) As of December 31, 2020, we have six net lease properties with a carrying value of $2,844 classified as held for sale.

(2) Represents historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.

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As of December 31, 2019 , we have 19 net lease properties with a carrying value of $87,493 and annual minimum rent of $5,625 classified as held for sale.

(4) See page 71 for our definition of coverage.

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In addition to the payment of our minimum rent, the TA leases provide for payment to us of percentage rent based on increases in total non-fuel revenues over base levels (3.5% of non-fuel revenues above threshold amounts defined in the agreements).

Commencing in 2020, these leases provide for payment of an additional half percent (0.5%) of non-fuel revenues above 2019 non-fuel base revenues.

TA’s remaining deferred rent obligation of $39,632 as of December 31, 2020 is being paid in quarterly installments of $4,404 through January 31, 2023.

This property is held for sale as of December 31, 2019 .

Other includes 184 tenants with an average investment of $7,558 and average annual minimum rent of $509 .

(7) Consists of 160 tenants with an average investment of $7,867 and average annual minimum rent of $503.

As of December 31, 2020, our net lease tenants operated across 22 distinct industries within the service-oriented retail sector of the U.S.

Investment (1) (2)

Percent of Total Investment

Annualized Minimum

of Buildings (1)

Square Feet Investment (2)

Percent of Total Investment Annualized Minimum

Percent of Total Annualized

Travel Centers

Restaurants-Quick Service

Movie Theaters

Restaurants-Casual Dining

Health and Fitness

Medical/Dental Office

Miscellaneous Retail

Automotive Parts and Service

Automotive Dealers

Entertainment

Educational Services

Sporting Goods

Miscellaneous Manufacturing

Building Materials

Drug Stores and Pharmacies

Home Furnishings

Legal Services

General Merchandise

Dollar Stores

Minimum Rent Coverage (4)

Travel Centers 182 5,238,765 $ 3,344,496 65.0% $ 249,261 67.5 % 1.85x

Restaurants-Quick Service 239 743,933 319,335 6.2% 20,724 5.6 % 2.43x

Restaurants-Casual Dining 56 391,163 198,932 3.9% 10,982 3.0 % 1.66x

Health and Fitness 14 870,841 189,215 3.7% 11,541 3.1 % 1.06x

Movie Theaters 20 1,047,804 168,970 3.3% 13,008 3.5 % 0.52x

Grocery 19 1,020,819 129,219 2.5% 9,112 2.5 % 4.64x

Medical/Dental Office 72 409,706 118,098 2.3% 9,247 2.5 % 3.42x

Miscellaneous Retail 19 598,731 114,433 2.2% 8,892 2.4 % 1.99x

Automotive Parts and Service 63 210,152 96,496 1.9% 6,583 1.8 % 3.22x

Automotive Dealers 9 172,251 64,756 1.3% 5,125 1.4 % 4.99x

Entertainment 4 199,853 61,436 1.2% 2,435 0.7 % 1.41x

Sporting Goods 3 331,864 52,022 1.0% 3,549 1.0 % 3.15x

Educational Services 8 169,074 41,012 0.8% 4,303 1.2 % 2.01x

Miscellaneous Manufacturing 6 758,146 31,824 0.6% 2,253 0.6 % 16.04x

Building Materials 27 430,164 30,036 0.6% 2,515 0.7 % 5.64x

Car Washes 5 41,456 28,658 0.6% 2,086 0.6 % 4.88x

Drug Stores and Pharmacies 8 82,543 23,970 0.5% 1,576 0.4 % 1.41x

Home Furnishings 3 96,388 12,946 0.3% 1,686 0.5 % 1.11x

Legal Services 5 25,429 11,362 0.2% 1,039 0.3 % 2.06x

Apparel 1 89,305 11,027 0.2% 670 0.2 % 3.14x

General Merchandise 3 99,233 7,492 0.1% 541 0.1 % 3.48x

Dollar Stores 3 27,593 2,971 0.1% 186 0.1 % 3.09x

12 252,834 56,217 0.7% 2,279 0.3 % 4.33x

Vacant 18 147,358 42,503 0.8% — — % —

Total 799 13,455,405 $ 5,157,426 100.0% $ 369,593 100.0 % 2.14x

(1) As of December 31, 2020, we have six net lease properties with a carrying value of $2,844 classified as held for sale.

(2) Represents historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.

As of December 31, 2019 , we have 19 net lease properties with a carrying value of $87,493 and annual minimum rent of $5,625 classified as held for sale.

(3) Each of the leases in our net lease portfolio provides for payment to us of minimum rent, respectively.

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Coverage amounts include data for certain properties for periods prior to when we assumed ownership of them.

(5) Others includes properties with an average investment of $4,685 per building.

As of December 31, 2020, lease expirations at our net lease properties by year are as follows.

Percent of Total

Cumulative % of

Annualized Minimum

Total Minimum

Rent Expiring (2)

Rent Expiring

Percent of Total Cumulative % of

Square Annualized Minimum Annualized Minimum Total Minimum

Feet Rent Expiring (2)

Rent Expiring Rent Expiring

2021 352,091 $ 4,059 1.1% 1.1%

2022 440,333 5,502 1.5% 2.6%

2023 320,538 3,511 0.9% 3.5%

2024 779,868 10,040 2.7% 6.2%

2025 431,461 8,980 2.4% 8.6%

2026 872,759 9,967 2.7% 11.3%

2027 954,731 13,372 3.6% 14.9%

2028 552,913 9,420 2.5% 17.4%

2029 1,321,924 47,699 12.9% 30.3%

2030 216,663 4,290 1.2% 31.5%

2031 1,469,746 50,022 13.5% 45.0%

2032 1,233,445 51,866 14.1% 59.1%

2033 1,105,889 53,301 14.5% 73.6%

2034 135,978 4,557 1.2% 74.8%

2035 2,577,853 83,802 22.8% 97.6%

2036 320,792 5,357 1.4% 99.0%

2037 — — 0.0% 99.0%

2038 10,183 416 0.1% 99.1%

2039 185,437 3,278 0.9% 100.0%

2040 1,739 154 0.0% 100.0%

Total 13,284,343 $ 369,593 100.0%

(1) The year of lease expiration is pursuant to contract terms.

As of December 31, 2019 , we have 19 net lease properties with a carrying value of $87,493 and annual minimum rent of $5,625 classified as held for sale.

As of December 31, 2019 , shown below is the list of our top ten states where our net lease properties were located.

(2) As of December 31, 2020, we have six net lease properties with a carrying value of $2,844 classified as held for sale.

As of December 31, 2020, shown below is the list of our top ten states where our net lease properties are located.

No other state represents more than 3% of our net lease annual minimum rents.

Percent of Total

Annualized Minimum

Square Annualized Minimum Annualized Minimum

State Feet Rent Rent

Texas 1,205,393 $ 32,174 8.7%

Illinois 1,302,273 26,304 7.1%

Ohio 1,019,885 26,260 7.1%

California 399,045 21,778 5.9%

Georgia 597,248 19,379 5.2%

Indiana 637,239 17,240 4.7%

Pennsylvania 529,444 16,801 4.5%

Arizona 476,651 16,287 4.4%

Florida 538,130 16,026 4.3%

New Mexico 246,478 10,485 2.8%

6,503,619 166,859 45.3%

Total 13,455,405 $ 369,593 100.0%

(1) Includes properties located in 32 states.

Impact of Inflation

Inflation in the past several years in the United States has been modest but recently there have been indications of inflation in the U.S.

economy and elsewhere and some market forecasts indicate an expectation of increased inflation in the near to intermediate term.

Future inflation might have both positive and negative impacts on our business.

Inflation might cause the value of our assets to increase.

In periods of rapid U.S.

inflation, our managers’ and tenants’ operating expenses may increase faster than their revenues, which may have an adverse impact upon us if the operating income from our properties becomes insufficient to pay our returns or rents and the security features, such as security deposits or guarantees of our returns or rents are exhausted.

To mitigate the adverse impact of any increased cost of debt capital in the event of material inflation, we may enter into interest rate hedge arrangements in the future.

The decision to enter into these agreements will be based on various factors, including the amount of our floating rate debt outstanding, our belief that material interest rate increases are likely to occur, the costs of, and our expected benefit from, these agreements and upon possible requirements of our borrowing arrangements.

Generally, we do not expect inflation to have a material adverse impact on our financial results for the next 12 months or for the currently foreseeable future thereafter.

Our hotels and travel centers have historically experienced seasonal differences typical of their industries with higher revenues in the second and third quarters of calendar years compared with the first and fourth quarters.

Most of our management agreements and leases require our managers and tenants to make the substantial portion of our return and rent payments to us in equal amounts throughout the year.

So long as guarantees and security deposits are available to supplement earnings shortfalls at our properties, seasonality is not expected to cause material fluctuations in our income or cash flows from these properties.

If and as guarantees and security deposits which secure the minimum returns and rents due to us are exhausted or expire, our financial results may begin to reflect more of the seasonality of the industries in which our tenants and managers operate.

Most of our leases require our tenants to make the substantial portion of our rent payments to us in equal amounts throughout the year.

However, our financial results are expected to reflect more of the seasonality of the lodging industry given historical guarantees and security deposits that have historically supplemented our earnings have been mostly exhausted.

The return payments to us under certain of our management agreements depend exclusively upon earnings at these properties and, accordingly, our income and cash flows from these properties reflect the seasonality of the hotel industry.

The COVID-19 pandemic and current economic conditions have, and may in the future, significantly alter the seasonal aspects of our business, including negatively affecting the historical increased business we typically experienced in the second and third quarters.

Impact of Climate Change

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We and our tenants and managers have implemented numerous initiatives to encourage recycling of plastics, paper and metal or glass containers;

we have programs to encourage reduced water and energy use at a hotel guest’s option by not laundering towels and linens every day.

we have programs to encourage reduced water and energy use at a hotel guest’s option by not laundering towels and linens every day and monitoring lights and thermostats when rooms are not in use.

When we renovate our hotels we generally use energy efficient products including but not limited to lighting, windows and HVAC equipment and many of the appliances in our extended stay hotels are Energy Star rated.

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Non-GAAP Financial Measures

We present certain “non-GAAP financial measures” within the meaning of applicable SEC rules, including funds from operations, or FFO, and normalized funds from operations, or Normalized FFO.

We present certain “non-GAAP financial measures” within the meaning of applicable SEC rules, including 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 as indicators of our operating performance or as measures of our liquidity.

These measures should be considered in conjunction with net income as presented in our 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.

These measures should be considered in conjunction with net income as presented in our consolidated statements of comprehensive income (loss).

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.

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We calculate FFO and Normalized FFO as shown below.

FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income, 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.

FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss) available for common shareholders, 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 adjustments to reflect our share of FFO attributable to an investee and certain other adjustments currently not applicable to us.

In calculating Normalized FFO, we adjust for the item shown below 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 dividend yield and 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 factors include, but are not limited to, requirements to satisfy our REIT distribution requirements, limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our dividend yield and 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.

Our calculations of FFO available for common shareholders and Normalized FFO available for common shareholders for the years ended December 31, 2019 , 2018 and 2017 and reconciliations of net income available for common shareholders, the most directly comparable financial measure under GAAP reported in our consolidated financial statements, to those amounts appear in the following table (amounts in thousands, except per share amounts).

Our calculations of FFO and Normalized FFO for the years ended December 31, 2020, 2019 and 2018 and reconciliations of net income (loss) available for common shareholders, the most directly comparable financial measure under GAAP reported in our consolidated financial statements, to those amounts appear in the following table (amounts in thousands, except per share amounts).

For the Year Ended December 31,

Net income available for common shareholders

2020 2019 2018

Net income (loss) $ (311,382) $ 259,750 $ 185,734

Depreciation and amortization expense 498,908 428,448 403,077

Gain on sale of real estate (1)

Gain on sale of real estate, net (1)

(2,261) (159,535) —

Loss on asset impairment (2)

Unrealized losses on equity securities (3)

FFO available for common shareholders

Acquisition and transaction related costs (4)

55,756 39,296 —

Unrealized (gains) losses on equity securities, net (3)

(19,882) 40,461 16,737

Adjustments to reflect our share of FFO attributable to an investee (4)

FFO 221,078 608,420 605,548

Transaction related costs (5)

Loss on early extinguishment of debt (6)

9,394 8,451 160

Loss contingency (7)

Excess of liquidation preference over carrying value of preferred shares redeemed (7)

Deferred tax benefit (8)

Normalized FFO available for common shareholders

3,962 1,997 —

Gain on insurance settlement, net of tax (8)

Hotel manager transition related costs (9)

Adjustments to reflect our share of Normalized FFO attributable to an investee (4)

Normalized FFO $ 201,962 $ 620,663 $ 605,708

Weighted average shares outstanding (basic) 164,422 164,312 164,229

Weighted average shares outstanding (diluted) (10)

164,422 164,340 164,258

Basic and diluted per common share amounts:

Net income available for common shareholders

FFO available for common shareholders

Normalized FFO available for common shareholders

Net income (loss) $ (1.89) $ 1.58 $ 1.13

FFO $ 1.34 $ 3.70 $ 3.69

Normalized FFO $ 1.23 $ 3.78 $ 3.69

Distributions declared per share $ 0.57 $ 2.15 $ 2.11

(1) We recorded a $2,261 net gain on sales of 18 hotels and 21 net lease properties during the year ended December 31, 2020.

We recorded a $159,535 gain on sale of real estate during the year ended December 31, 2019 in connection with the sales of 20 travel centers.

We recorded a $9,348 gain on sale of real estate during the year ended December 31, 2017 in connection with the sales of three hotels.

We recorded a $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.

Unrealized gains and losses on equity securities, net represent the adjustment required to adjust the carrying value of our investments in RMR Inc.

(2) We recorded a $55,756 loss on asset impairment during the year ended December 31, 2020 to reduce the carrying value of 18 hotels and 13 net lease properties to their estimated fair value.

We recorded a $39,296 loss on asset impairment during the year 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 investments in TA common shares to their fair value as of December 31, 2020 and the adjustment required to adjust the carrying value of our investments in RMR Inc.

and TA common shares to their fair value as of December 31, 2019 and 2018, respectively.

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on July 1, 2019.

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

We recorded a loss of $8,451 on early extinguishment of debt during the year ended December 31, 2019 related to the termination of a term loan commitment we arranged in connection with the SMTA Transaction.

We recorded losses of $160 on early extinguishment of debt during the year ended December 31, 2018 in connection with the amendment of our revolving credit facility and term loan and $146 on early extinguishment of debt during the year ended December 31, 2017 in connection with the redemption of certain senior unsecured notes.

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.

In February 2017, we redeemed all 11,600,000 of our outstanding 7.125% Series D cumulative redeemable preferred shares at the stated liquidation preference of $25.00 per share plus accrued and unpaid distributions to the date of redemption (an aggregate of $291,435).

The liquidation preference of the redeemed shares exceeded the carrying amount for the redeemed shares as of the date of redemption by$9,893 and we reduced net income available for common shareholders in the year ended December 31, 2017 by that excess amount.

We realized a $5,431 tax benefit in the year ended December 31, 2017 related to the enactment of the Tax Cuts and Jobs Act.

(4) Represents our proportionate share of our equity investment in Sonesta during the year ended December 31, 2020 and Affiliates Insurance Company during the years ended December 31, 2019 and 2018.

(5) Transaction related costs represents costs related to our exploration of possible financing transactions during the year ended December 31, 2019.

(6) We recorded a loss of $9,394 during the year ended December 31, 2020, on extinguishment of debt relating to our repayment of our $400,000 term loan and certain unsecured senior notes.

We recorded a $8,451 loss on early extinguishment of debt in the year ended December 31, 2019 related to the termination of a term loan commitment we arranged in connection with the acquisition of a net lease portfolio and $160 on early extinguishment of debt during the year ended December 31, 2018 in connection with an amendment to our credit agreement.

(7) Hotel operating expenses for the year ended December 31, 2020 include a $3,962 loss contingency related to a litigation matter at certain hotels.

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

(8) We recorded a $62,386 gain on insurance settlement during the year ended December 31, 2020 for insurance proceeds received for our leased hotel in San Juan, PR related to Hurricane Maria.

Under GAAP, we were required to increase the building basis of our San Juan hotel for the amount of the insurance proceeds.

We also recorded a $13,850 deferred tax liability as a result of the book value to tax basis difference related to this accounting during the year ended December 31, 2020.

(9) Hotel operating expenses for the year ended December 31, 2020 include $15,100 of hotel manager transition related costs resulting from the rebranding of 115 hotels during the periods.

(10) Represents weighted average common shares adjusted to reflect the potential dilution of unvested share awards.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis