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Item 7. Management’s Discussion and Analysis

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included in Part IV, Item 15 of this Annual Report on Form 10-K. 
 
 Overview (dollar amounts in thousands, except share amounts and per room hotel data) 
 We are a REIT organized under the laws of the State of Maryland. 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; and 
 • 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.” 
 
 
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 Management agreements and leases . 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 . As of December 31, 2020, we owned 310 hotels. In 2020, the U.S. 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 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, 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, 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. 
 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. 
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 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. 
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 Results of Operations (amounts in thousands, except per share amounts) 
 Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 
 
 For the Year Ended December 31, 
 Increase 
 (Decrease) 
 % Increase 
 (Decrease) 
 
 2020 2019 
 Revenues: 
 Hotel operating revenues $ 875,098 $ 1,989,173 $ (1,114,075) (56.0) % 
 Rental income - hotels 2,271 20,985 (18,714) (89.2) % 
 Rental income - net lease portfolio 387,684 301,251 86,433 28.7 % 
 Total rental income 389,955 322,236 67,719 21.0 % 
 FF&E reserve income 201 4,739 (4,538) (95.8) % 
 
 Expenses: 
 Hotel operating expenses 697,904 1,410,927 (713,023) (50.5) % 
 Other operating expenses 15,208 8,357 6,851 82.0 % 
 Depreciation and amortization - hotels 263,673 268,088 (4,415) (1.6) % 
 Depreciation and amortization - net lease portfolio 235,235 160,360 74,875 46.7 % 
 Total depreciation and amortization 498,908 428,448 70,460 16.4 % 
 General and administrative 50,668 54,639 (3,971) (7.3) % 
 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, net 2,261 159,535 (157,274) (98.6) % 
 Dividend income — 1,752 (1,752) (100.0) % 
 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) % 
 Interest expense (306,490) (225,126) (81,364) 36.1 % 
 Loss on early extinguishment of debt (9,394) (8,451) (943) 11.2 % 
 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) 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. For a comparison of consolidated results for the year ended December 31, 2019 compared to the year ended December 31, 2018 please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. 
 Hotel operating revenues. 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. 
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 Rental income - hotels. 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 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. 
 FF&E Reserve income. FF&E reserve income represents amounts paid by certain of our hotel tenants into restricted accounts owned by us to accumulate funds for future capital expenditures. The terms of our hotel leases require these amounts to be calculated as a percentage of total sales at our hotels. 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 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 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 (loss) as an increase to hotel operating expenses. 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 (loss) as a decrease to hotel operating expenses. 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 being reflected for a full year in 2020 compared to the partial year in 2019. 
 Depreciation and amortization - hotels. 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 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 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. 
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 Loss on asset impairment. 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. 
 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 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 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. 
 Income tax expense. 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 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. 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 
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 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; and 
 • 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. (NYSE: 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. 
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 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 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. 
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 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 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 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; however, the income realized by our TRSs in excess of the rent they pay to us is subject to U.S. federal income tax at corporate income tax rates. In addition, the income we receive from our hotels in Canada and Puerto Rico is subject to taxes in those jurisdictions and we are subject to taxes in certain states where we have properties despite our qualification for taxation as a REIT. 
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 Our Investment and Financing Liquidity and Capital Resources 
 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, 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. 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 leases. 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. 
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 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, 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. 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; 
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 • 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; and 
 • 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; and 
 • 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 
 2021 $ — 
 2022 500,000 
 2023 500,000 
 2024 1,175,000 
 2025 1,150,000 
 2026 800,000 
 2027 850,000 
 2028 400,000 
 2029 425,000 
 2030 400,000 
 $ 6,200,000 

 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 (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 
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 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. Although we have not historically done so, we may also assume mortgage debt on properties we may acquire or obtain mortgage financing on our existing properties. 
 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. 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. Our credit ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities. 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, 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 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, 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 
 

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 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 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. 
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 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) 
 $ 5,871,790 
 Intercompany balances (2) 
 800,198 
 Other assets, net 677,408 
 
 
 Indebtedness, net $ 6,208,590 
 Other liabilities 341,907 
 
 

 
 Year Ended December 31, 2020 
 
 Revenues 
 $ 1,102,784 
 Expenses 
 1,504,816 
 Net loss 
 (402,032) 

 (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 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.” 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. We believe that our judgments and estimates have been and will be consistently applied and produce financial information that fairly presents our results of operations. Our most critical accounting policies involve our investments in real property. These policies affect our: 
 • variable interest entities, or VIEs; 
 • allocation of purchase prices between various asset categories and the related impact on the recognition of depreciation and amortization expenses; 
 • assessment of the carrying values and impairments of real estate, intangible assets and equity investments; 
 • classification of leases and the related impact to our financial statements; and 
 • income taxes. 
 We have determined that each of our wholly owned TRSs is a VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification™, or the Codification. We have concluded that we must consolidate each of our wholly owned TRSs because we are the entity with the power to direct the activities that most significantly impact such VIE’s performance and we have the obligation to absorb the majority of the potential variability in gains and losses of each VIE, with the primary focus on losses, and are therefore the primary beneficiary of each VIE. 
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 We allocate the acquisition cost of each property investment to various property components such as land, buildings and equipment and intangibles based on their relative fair values and each component generally has a different useful life. For acquired real estate, we record building, land, furniture, fixtures and equipment, and, if applicable, the value of acquired in-place leases, the fair market value of above or below market leases and customer relationships at fair value. For transactions that qualify as business combinations we allocate the excess, if any, of the consideration over the fair value of assets acquired to goodwill. We base purchase price allocations and the determination of useful lives on our estimates and, under some circumstances, studies from independent real estate appraisers to provide market information and evaluations that are relevant to our purchase price allocations and determinations of useful lives; however, our management is ultimately responsible for the purchase price allocations and determination of useful lives. 
 We compute depreciation expense using the straight line method over estimated useful lives of up to 40 years for buildings and improvements, and up to 12 years for personal property. We amortize the value of intangible assets over the shorter of their estimated useful lives, or the term of the respective lease or the affected contract. We do not depreciate the allocated cost of land. Purchase price allocations and estimates of useful lives require us to make certain assumptions and estimates. Incorrect assumptions and estimates may result in inaccurate depreciation and amortization charges over future periods. 
 We periodically evaluate our real estate and other assets for possible impairment indicators. These indicators may include weak or declining operating profitability, cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life or market or industry changes that could permanently reduce the value of our investments. If indicators of impairment are present, we evaluate the carrying value of the related investment by comparing it to the expected future undiscounted cash flows to be generated from that investment. 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 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. An impairment charge is recorded if the fair value is determined to be lower than the carrying value. 
 We periodically evaluate our equity method investments for possible indicators of other than temporary impairment whenever events or changes in circumstances indicate the carrying amount of the investment might not be recoverable. These indicators may include the length of time and degree to which the market value of our investment is below our cost basis, the financial condition of the issuer, our intent and ability to be a long term holder of the investment and other considerations. If the decline in fair value is judged to be other than temporary, we may record an impairment charge to adjust the basis of the investment to its fair value. 
 We determine the fair value for our long lived assets and indefinite lived intangible assets by evaluating recent financial performance and projecting discounted cash flows using standard industry valuation techniques. These analyses require us to judge whether indicators of impairment exist and to estimate likely future cash flows. If we misjudge or estimate incorrectly or if future operating profitability, market or industry factors differ from our expectations, we may record an impairment charge which is inappropriate, fail to record a charge when we should have done so or the amount of such charges may be inaccurate. 
 Certain of our properties are leased on a triple net basis, pursuant to non-cancelable, fixed term, operating leases. Each time we enter a new lease or materially modify an existing lease we evaluate its classification as either a finance or operating lease. The classification of a lease as finance, sales-type, direct financing or operating affects the carrying value of a property, as well as our recognition of rental payments as revenue. These evaluations require us to make estimates of, among other things, the remaining useful life and market value of a leased property, appropriate present value discount rates and future cash flows. Incorrect assumptions or estimates may result in misclassification of our leases. See Note 2 to consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K for further discussion on the impact to our accounting for leases due to recent accounting pronouncements. 
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 We account for income taxes in accordance with the Income Taxes Topic of the Codification. Under this Topic, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. We establish valuation allowances to reduce deferred tax assets to the amounts that are expected to be realized when necessary. We have elected to be taxed as a REIT under the IRC and are generally not subject to federal and state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. Despite our qualification for taxation as a REIT, we are subject to income tax in Canada, Puerto Rico and in certain states. Further, we lease our managed hotels to our wholly owned TRSs that, unlike most of our subsidiaries, file a separate consolidated tax return and are subject to federal, state and foreign income tax. Our consolidated income tax provision (or benefit) includes the income tax provision (or benefit) related to the operations of the TRSs and state and foreign income taxes incurred by us despite our qualification for taxation as a REIT. The Income Taxes Topic also prescribes how we should recognize, measure and present in our financial statements uncertain tax positions that have been taken or are expected to be taken in a tax return. Tax benefits are recognized only to the extent that it is “more likely than not” that a particular tax position will be sustained upon examination or audit. To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that has a greater than 50% likelihood of being realized upon settlement. Tax returns filed for the 2017 through 2020 tax years are subject to examination by taxing authorities. We classify interest and penalties related to uncertain tax positions, if any, in our financial statements as a component of general and administrative expense. 
 These accounting policies involve significant judgments made based upon our experience and the experience of our management and our Board of Trustees, including judgments about current valuations, ultimate realizable value, estimated useful lives, salvage or residual value, the ability and willingness of our tenants and operators to perform their obligations to us, and the current and likely future operating and competitive environments in which our properties operate. 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. 
 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 
 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. 
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 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 
 Sonesta (1) 
 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) % 
 Other (2) 
 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 
 Sonesta (1) 
 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) % 
 Other (2) 
 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. 
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 Net Lease Portfolio 
 As of December 31, 2020, our net lease properties were 98.7% occupied and we had 18 properties available for lease. 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. 
 
 
 
 Brand No. of Buildings (1) 
 Square Feet Investment (2) 
 Percent of Total Investment Annualized 
 Minimum Rent (3) 
 Percent of Total Annualized
Minimum Rent Coverage (4) 
 
 1. TravelCenters of America 134 3,720,693 $ 2,281,589 44.2 % $ 168,011 45.5 % 1.95x 
 2. Petro Stopping Centers 45 1,470,004 1,021,226 19.8 % 78,099 21.1 % 1.55x 
 3. AMC Theatres 11 575,967 102,580 2.0 % 6,750 1.8 % 0.46x 
 4. The Great Escape 14 542,666 98,242 1.9 % 7,140 1.9 % 1.70x 
 5. Life Time Fitness 3 420,335 92,617 1.8 % 5,770 1.6 % 1.08x 
 6. Buehler's Fresh Foods 5 502,727 76,536 1.5 % 5,657 1.5 % 4.79x 
 7. Heartland Dental 59 234,274 61,120 1.2 % 4,493 1.2 % 3.24x 
 8. Pizza Hut 58 189,609 58,312 1.1 % 3,954 1.1 % 1.42x 
 9. Express Oil Change 23 83,825 49,724 1.0 % 3,379 0.9 % 4.03x 
 10. Flying J Travel Plaza 3 48,069 41,681 0.8 % 3,151 0.9 % 3.75x 
 11. Other (5) 
 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. 
 (3) Each of the leases in our net lease portfolio provides for payment to us of minimum rent. Certain of these minimum payment amounts are secured by full or limited guarantees. 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. 
 (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. 
 (5) Consists of 117 distinct brands with an average investment of $10,863 and average annual minimum rent of $705. 
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 As of December 31, 2020, our top ten net lease tenants based on annualized minimum rent are listed below. 
 
 Tenant Brand Affiliation No. of Buildings (1) 
 Square Feet Investment (2) 
 Percent of Total Investment Annualized 
 Minimum Rent (3) 
 Percent of Total Annualized
Minimum Rent Coverage (4) 
 
 1. 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) 
 
 2. American Multi-Cinema, Inc. AMC Theatres 11 575,967 102,580 2.0 % 6,750 1.8 % 0.35x 
 3. Universal Pool Co., Inc. The Great Escape 14 542,666 98,242 1.9 % 7,140 1.9 % 1.70x (5) 
 
 4. Healthy Way of Life II, LLC Life Time Fitness 3 420,335 92,617 1.8 % 5,770 1.6 % 1.08x 
 5. Styx Acquisition, LLC Buehler's Fresh Foods 5 502,727 76,536 1.5 % 5,657 1.5 % 4.79x (5) 
 
 6. Professional Resource Development, Inc. Heartland Dental 59 234,274 61,120 1.2 % 4,493 1.2 % 3.24x 
 7. Express Oil Change, L.L.C. Express Oil Change 23 83,825 49,724 1.0 % 3,379 0.9 % 3.50x 
 8. Regal Cinemas, Inc. Regal Cinemas 6 266,546 44,476 0.9 % 3,658 1.0 % 0.85x 
 9. Pilot Travel Centers LLC Flying J Travel Plaza 3 48,069 41,681 0.8 % 3,151 0.9 % 3.50x 
 10. 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 
 11. Other (7) 
 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. 
 (3) Each of the leases in our net lease portfolio provides for payment to us of minimum rent. Certain of these minimum payment amounts are secured by full or limited guarantees. 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. 
 (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. 
 (5) Leases subject to full or partial corporate guarantee. 
 (6) TA is our largest tenant. We lease 179 travel centers (134 under the TravelCenters of America brand and 45 under the Petro Stopping Centers brand) to a subsidiary of TA under master leases that expire in 2029, 2031, 2032, 2033 and 2035, respectively. TA has two renewal options for 15 years each for all of the travel centers. 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). 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. 
 (7) Consists of 160 tenants with an average investment of $7,867 and average annual minimum rent of $503. 
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 As of December 31, 2020, our net lease tenants operated across 22 distinct industries within the service-oriented retail sector of the U.S. economy. 
 
 Industry No. of Buildings (1) 
 Square Feet Investment (2) 
 Percent of Total Investment Annualized Minimum 
 Rent (3) 
 Percent of Total Annualized
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 
 Other (2) 
 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. 
 (3) Each of the leases in our net lease portfolio provides for payment to us of minimum rent, respectively. Certain of these minimum payment amounts are secured by full or limited guarantees. 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. 
 (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. 
 (5) Others includes properties with an average investment of $4,685 per building. 
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 As of December 31, 2020, lease expirations at our net lease properties by year are as follows. 
 
 Percent of Total Cumulative % of 
 Square Annualized Minimum Annualized Minimum Total Minimum 
 Year (1) 
 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. 
 (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 
 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% 
 Other (1) 
 6,503,619 166,859 45.3% 
 Total 13,455,405 $ 369,593 100.0% 

 (1) Includes properties located in 32 states. 
 Seasonality 
 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 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. 
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 Impact of Climate Change 
 Concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns. These and other laws may cause energy or other costs at our properties to increase. We do not expect the direct impact of these increases to be material to our results of operations, because the increased costs either would be the responsibility of our tenants or managers directly or in the longer term, passed through and paid by customers of our properties. Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make some of our buildings obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our tenants or managers and their ability to pay rent or returns to us. 
 We are environmentally conscious and aware of the impact our properties have on the environment. 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 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. We or our tenants or managers have also installed car battery charging stations at some of the properties in our portfolio to accommodate environmentally aware customers. 
 In an effort to reduce the effects of any increased energy costs in the future, we continuously study ways to improve the energy efficiency at all of our properties. Our property manager, RMR LLC, is a member of the Energy Star program, a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy that is focused on promoting energy efficiency at commercial properties through its “Energy Star” partner program, and a member of the U.S. Green Building Council, a nonprofit organization focused on promoting energy efficiency at commercial properties through its Leadership in Energy and Environmental Design, or LEED ® , green building program. 
 Some observers believe severe weather in different parts of the world over the last few years is evidence of global climate change. Severe weather may have an adverse effect on certain properties we own. Rising sea levels could cause flooding at some of our properties, which may have an adverse effect on individual properties we own. We mitigate these risks by procuring, or requiring our managers or tenants to procure, insurance coverage we believe adequate to protect us from material damages and losses resulting from the consequences of losses caused by climate change. However, we cannot be sure that our mitigation efforts will be sufficient or that future storms, rising sea levels or other changes that may occur due to future climate change could not have a material adverse effect on our financial results. 
 Non-GAAP Financial Measures 
 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 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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 Funds From Operations and Normalized Funds From Operations 
 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 (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 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. 
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 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, 
 2020 2019 2018 
 Net income (loss) $ (311,382) $ 259,750 $ 185,734 
 Add (Less): Depreciation and amortization expense 498,908 428,448 403,077 
 Gain on sale of real estate, net (1) 
 (2,261) (159,535) — 
 Loss on asset impairment (2) 
 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) 
 (61) — — 
 FFO 221,078 608,420 605,548 
 Add (Less): Transaction related costs (5) 
 — 1,795 — 
 Loss on early extinguishment of debt (6) 
 9,394 8,451 160 
 Loss contingency (7) 
 3,962 1,997 — 
 Gain on insurance settlement, net of tax (8) 
 (48,536) — — 
 Hotel manager transition related costs (9) 
 15,100 — — 
 Adjustments to reflect our share of Normalized FFO attributable to an investee (4) 
 964 — — 
 
 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 (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. 
 (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. We sold our shares of RMR Inc. on July 1, 2019. 
 (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. 
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 (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. 
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Service Properties Trust 10-K

Item 7. Management’s Discussion and Analysis
