Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2024 Annual Report.
Overview (dollars in thousands, except per share amounts and per room hotel data)
We are a REIT organized under the laws of the State of Maryland. As of June 30, 2025, we owned 942 properties in 46 states, the District of Columbia, Canada and Puerto Rico.
Consumer confidence, corporate travel and lodging demand will continue to be affected by economic and market conditions, inflationary pressures, uncertainties surrounding interest rates, unemployment levels, work from home policies, use of technologies and broader economic trends. Increased labor costs and other price inflation may continue to negatively impact our hotel operations and the operations of our tenants. Further, recent announcements regarding tariffs on a wide variety of imports could impact the cost of products our operators use, such as furniture, equipment, materials and supplies sourced from outside the United States. An economic recession or continued or intensified disruptions in the financial markets could adversely affect our financial condition, operations at our hotels, our tenants and their ability or willingness to renew our leases or pay rent to us, may restrict our ability to obtain new or replacement financing, would likely increase our cost of capital, and may cause the values of our properties to decline.
We previously identified 122 hotels managed by Sonesta with a total of 15,931 keys for disposition. As of August 1, 2025, we sold eight of these hotels with a total of 1,006 keys for a combined sales price of $45,600, excluding closing costs, and entered into agreements to sell the remaining 114 hotels with a total of 14,925 keys for a combined sales price of $919,952, excluding closing costs. We and Sonesta have agreed to amend and restate our existing management agreements for the 59 retained hotels managed by Sonesta and waive any termination fees under the existing Sonesta agreements associated with the sale of the 122 hotels. Among other things, the changes to the agreements between us and Sonesta are as follows:
• Each retained hotel will have its own individual management agreement, performance under which shall not be subject to pooling, cross-default, or similar contractual ties across more than one hotel,
• The initial term of each management agreement will be for a period of 15 years and may be renewed for two additional terms of ten years each,
• Fees payable by us will be modified to provide better alignment with market terms, which modifications are not expected to result in any material cost impact to us, and
• Performance provisions will be aligned with individual hotel measurement for both termination rights and incentive fees, both based on current estimated value rather than historical cost.
Our current strategy is focused on reducing debt, growing our net lease portfolio and improving the performance of the hotels we expect to retain after completing the sale of our previously announced dispositions.
Management Agreements and Leases . At June 30, 2025, we owned 200 hotels operated under four agreements. We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At June 30, 2025, we also owned 742 service-focused retail properties leased to 174 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. Our condensed consolidated statements of comprehensive income (loss) include hotel operating revenues and hotel operating expenses of our managed hotels and rental income and net lease operating expenses from our net lease properties.
Hotel Portfolio. As of June 30, 2025, we owned 200 hotels. During the three and six months ended June 30, 2025, the U.S. hotel industry generally realized increases in average daily rate, or ADR, and decreases in revenue per available room, or RevPAR, compared to the corresponding 2024 periods. Our hotels produced increases in ADR and RevPAR, which we believe is partially a result of renovation disruption in the 2024 period.
The following table provides a summary for all of our hotels with these revenue metrics for the periods presented, which we believe are key indicators of performance at our hotels.
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Three Months Ended June 30,
Six Months Ended June 30,
2025 2024 Change 2025 2024 Change
Retained Hotels
No. of hotels 84 84 — 84 84 —
No. of rooms or suites 19,942 19,942 — 19,942 19,942 —
Occupancy 69.0 % 68.2 % 0.8 pts 62.9 % 61.8 % 1.1 pts
ADR $ 175.89 $ 175.21 0.4 % $ 175.02 $ 173.59 0.8 %
RevPAR $ 121.30 $ 119.51 1.5 % $ 110.15 $ 107.21 2.7 %
Exit Hotels
No. of hotels 116 136 (20) 116 136 (20)
No. of rooms or suites 15,159 17,755 (2,596) 15,159 17,755 (2,596)
Occupancy 69.5 % 68.2 % 1.3 pts 63.6 % 62.8 % 0.8 pts
ADR $ 107.75 $ 106.71 1.0 % $ 145.67 $ 106.10 37.3 %
RevPAR $ 74.94 $ 72.74 3.0 % $ 92.63 $ 66.60 39.1 %
All Hotels
No. of hotels 200 220 (20) 200 220 (20)
No. of rooms or suites 35,101 37,697 (2,596) 35,101 37,697 (2,596)
Occupancy 69.2 % 68.2 % 1.0 pts 63.6 % 62.2 % 1.4 pts
ADR $ 146.32 $ 142.99 2.3 % $ 145.67 $ 141.56 2.9 %
RevPAR $ 101.27 $ 97.50 3.9 % $ 92.63 $ 88.10 5.1 %
Comparable Hotels Data. We present occupancy, ADR and RevPAR for the periods presented on a comparable basis to facilitate comparisons between periods. We define comparable hotels as those that were owned by us and were open and operating for the entirety of the periods being compared. The following table provides a summary of these revenue metrics for the periods presented.
Three Months Ended June 30,
Six Months Ended June 30,
2025 2024 Change 2025 2024 Change
Retained Hotels
No. of hotels 84 84 — 84 84 —
No. of rooms or suites 19,942 19,942 — 19,942 19,942 —
Occupancy 69.0 % 68.2 % 0.8 pts 62.9 % 61.8 % 1.1 pts
ADR $ 175.89 $ 175.21 0.4 % $ 175.02 $ 173.59 0.8 %
RevPAR $ 121.30 $ 119.51 1.5 % $ 110.15 $ 107.21 2.7 %
Exit Hotels
No. of hotels 116 116 — 116 116 —
No. of rooms or suites 15,159 15,159 — 15,159 15,159 —
Occupancy 69.5 % 70.2 % (0.7) pts 64.4 % 64.9 % (0.5) pts
ADR $ 107.75 $ 108.72 (0.9) % $ 107.97 $ 108.40 (0.4) %
RevPAR $ 74.94 $ 76.32 (1.8) % $ 69.59 $ 70.33 (1.1) %
Comparable Hotels
No. of hotels 200 200 — 200 200 —
No. of rooms or suites 35,101 35,101 — 35,101 35,101 —
Occupancy 69.2 % 69.1 % 0.1 pts 63.6 % 63.1 % 0.5 pts
ADR $ 146.32 $ 146.02 0.2 % $ 145.67 $ 144.64 0.7 %
RevPAR $ 101.27 $ 100.85 0.4 % $ 92.63 $ 91.28 1.5 %
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Net Lease Portfolio . As of June 30, 2025, we owned 742 service-focused retail net lease properties with an aggregate of 13,162,020 square feet leased to 174 tenants subject to “triple net” leases (where the tenants are responsible for payments of operating expenses and capital expenditures) requiring annual minimum rents of $386,521. Our net lease properties were 97.3% occupied as of June 30, 2025 with a weighted (by annual minimum rent) average lease term of 7.6 years, operating under 136 brands in 21 distinct industries. TA is our largest tenant and as of June 30, 2025, leased 175 of our travel centers under five master leases that expire in 2033 and require annual minimum rents of $264,262. In addition, TA receives an annual credit of $25,000 as a result of prepaid rent. BP Corporation North America Inc. guarantees payment under the TA leases, subject to a cap.
Additional details of our hotel operating agreements and our net lease agreements are set forth in Note 6 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Results of Operations (amounts in thousands, except per share data)
Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024
Three Months Ended June 30,
2025 2024 $ Change % Change
Revenues:
Hotel operating revenues $ 404,405 $ 412,486 $ (8,081) (2.0) %
Rental income 99,031 100,462 (1,431) (1.4) %
Total revenues 503,436 512,948 (9,512) (1.9) %
Expenses:
Hotel operating expenses 328,913 328,247 666 0.2 %
Net lease operating expenses 5,439 4,958 481 9.7 %
Depreciation and amortization - hotels 38,454 55,389 (16,935) (30.6) %
Depreciation and amortization - net lease properties 36,576 40,285 (3,709) (9.2) %
Total depreciation and amortization 75,030 95,674 (20,644) (21.6) %
General and administrative 10,218 10,681 (463) (4.3) %
Transaction related costs 1,345 — 1,345 n/m
Loss on asset impairment 17,654 34,887 (17,233) (49.4) %
Total expenses 438,599 474,447 (35,848) (7.6) %
Loss on sale of real estate, net (156) (32) (124) n/m
Interest income 822 819 3 0.4 %
Interest expense (102,679) (93,850) (8,829) 9.4 %
Loss on early extinguishment of debt, net — (16,048) 16,048 n/m
Loss before income tax expense and equity in losses of an investee (37,176) (70,610) 33,434 (47.4) %
Income tax expense (457) (524) 67 (12.8) %
Equity in losses of an investee (526) (2,716) 2,190 (80.6) %
Net loss $ (38,159) $ (73,850) $ 35,691 (48.3) %
Weighted average common shares outstanding (basic and diluted) 165,743 165,198 545 0.3 %
Net loss per common share (basic and diluted) $ (0.23) $ (0.45) $ 0.22 (48.9) %
References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.
Hotel operating revenues. The decrease in hotel operating revenues is primarily a result of our sales of certain hotels since April 1, 2024 ($11,654), partially offset by increases in occupancy and average rates at certain hotels during the 2025 period ($3,573). Additional operating statistics of our hotels are included in the tables beginning on page 38.
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Rental income. The decrease in rental income is primarily a result of lower rental income recognized in the 2025 period ($1,423) and the sale of certain net lease properties since April 1, 2024 ($271), partially offset by our acquisitions of certain net lease properties since April 1, 2024 ($263).
Hotel operating expenses. The increase in hotel operating expenses is primarily a result of increases in wages and benefits ($8,496) and other operating expenses ($3,954) in the 2025 period, partially offset by our sales of certain hotels since April 1, 2024 ($11,784).
Net lease operating expenses. The increase in net lease operating expenses is primarily the result of increased property management fees ($609), partially offset by decreases in other operating expenses ($128) in the 2025 period.
Depreciation and amortization - hotels. The decrease in depreciation and amortization - hotels is primarily a result of certain of our hotels classified as held for sale ($16,935) in the 2025 period.
Depreciation and amortization - net lease properties. The decrease in depreciation and amortization - net lease properties is primarily a result of certain of our depreciable assets becoming fully depreciated since April 1, 2024 ($3,308) and our sale of certain net lease properties since April 1, 2024 ($401).
General and administrative. The decrease in general and administrative costs is primarily due to decreases in business management fees ($540), partially offset by an increase in other professional fees ($77) in the 2025 period.
Transaction related costs . Transaction related costs for the 2025 period primarily consisted of costs related to the renovation of certain hotels.
Loss on asset impairment. We recorded a $17,654 loss on asset impairment during the 2025 period to reduce the carrying value of 17 hotels and two net lease properties to their estimated fair value less costs to sell. We recorded a $34,887 loss on asset impairment during the 2024 period to reduce the carrying value of eight hotels and three net lease properties to their estimated fair value less costs to sell.
Loss on sale of real estate, net. We recorded a $156 loss on sale of real estate during the 2025 period in connection with the sales of two hotels and four net lease properties. We recorded a $32 net loss on sale of real estate during the 2024 period in connection with the sale of one hotel.
Interest income. Interest income was relatively unchanged during the 2025 period compared to the 2024 period.
Interest expense. The increase in interest expense is primarily due to higher weighted average interest rates during the 2025 period compared to the 2024 period.
Loss on early extinguishment of debt, net. We recorded a $16,048 loss on early extinguishment of debt, net in the 2024 period as a result of the redemption and purchase of certain senior notes in the 2024 period.
Income tax expense. The decrease in income tax expense is primarily due to a decrease in foreign tax expense ($126), partially offset by an increase in state tax expense ($59) during the 2025 period.
Equity in losses of an investee. Equity in losses of an investee represents our proportionate share of the losses of Sonesta.
Net loss. Our net loss and net loss per common share (basic and diluted) each decreased in the 2025 period compared to the 2024 period primarily due to the revenue and expense changes discussed above.
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Six Months Ended June 30, 2025, Compared to the Six Months Ended June 30, 2024
Six Months Ended June 30,
2025 2024 $ Change % Change
Revenues:
Hotel operating revenues $ 739,368 $ 748,722 $ (9,354) (1.2) %
Rental income 199,247 200,476 (1,229) (0.6) %
Total revenues 938,615 949,198 (10,583) (1.1) %
Expenses:
Hotel operating expenses 634,753 633,333 1,420 0.2 %
Net lease operating expenses 11,067 9,681 1,386 14.3 %
Depreciation and amortization - hotels 92,197 110,475 (18,278) (16.5) %
Depreciation and amortization - net lease properties 71,933 78,306 (6,373) (8.1) %
Total depreciation and amortization 164,130 188,781 (24,651) (13.1) %
General and administrative 19,774 21,187 (1,413) (6.7) %
Transaction related costs 1,456 — 1,456 n/m
Loss on asset impairment 54,721 37,338 17,383 46.6 %
Total expenses 885,901 890,320 (4,419) (0.5) %
Gain (loss) on sale of real estate, net 590 (2,995) 3,585 (119.7) %
Interest income 2,071 2,781 (710) (25.5) %
Interest expense (204,196) (185,264) (18,932) 10.2 %
Loss on early extinguishment of debt, net — (16,048) 16,048 n/m
Loss before income tax expense and equity in losses of an investee (148,821) (142,648) (6,173) 4.3 %
Income tax expense (1,300) (1,531) 231 (15.1) %
Equity in losses of an investee (4,473) (8,054) 3,581 (44.5) %
Net loss $ (154,594) $ (152,233) $ (2,361) 1.6 %
Weighted average common shares outstanding (basic and diluted) 165,679 165,178 501 0.3 %
Net loss per common share (basic and diluted) $ (0.93) $ (0.92) $ (0.01) 1.1 %
References to changes in the income and expense categories below relate to the comparison of consolidated results for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.
Hotel operating revenues. The decrease in hotel operating revenues is primarily a result of our sales of certain hotels since January 1, 2024 ($19,524), partially offset by increases in occupancy and average rates at certain hotels during the 2025 period ($10,170). Additional operating statistics of our hotels are included in the tables beginning on page 38.
Rental income. The decrease in rental income is primarily a result of our sales of certain net lease properties since January 1, 2024 ($726) and lower rental income recognized during the 2025 period ($503).
Hotel operating expenses. The increase in hotel operating expenses is primarily a result of increases in wages and benefits ($15,387) and other operating expenses ($6,843) in the 2025 period, partially offset by our sales of certain hotels since January 1, 2024 ($20,810).
Net lease operating expenses. The increase in net lease operating expenses is primarily the result of increased property management fees ($1,208) and other operating expenses at certain net lease properties ($178) in the 2025 period.
Depreciation and amortization - hotels. The decrease in depreciation and amortization - hotels is primarily a result of certain of our hotels classified as held for sale ($18,278) in the 2025 period.
Depreciation and amortization - net lease properties. The decrease in depreciation and amortization - net lease properties is primarily a result of our sale of certain net lease properties since January 1, 2024 ($5,437) and certain of our depreciable assets becoming fully depreciated since January 1, 2024 ($936).
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General and administrative. The decrease in general and administrative costs is primarily due to decreases in business management fees ($1,367) and other professional fees ($46) in the 2025 period.
Transaction related cos ts. Transaction related costs for the 2025 period primarily consisted of costs related to the renovation of certain hotels, partially offset by the recovery of a working capital reserve related to our former agreement with Marriott International, Inc. previously deemed uncollectable and expensed in 2021.
Loss on asset impairment. We recorded a $54,721 loss on asset impairment during the 2025 period to reduce the carrying value of 17 hotels and two net lease properties to their estimated fair value less costs to sell. We recorded a $37,338 net loss on asset impairment during the 2024 period to reduce the carrying value of eight hotels and six net lease properties to their estimated fair value less costs to sell.
Gain (loss) on sale of real estate, net. We recorded a $590 net gain on sale of real estate during the 2025 period in connection with the sale of six hotels and seven net lease properties. We recorded a $2,995 loss on sale of real estate during the 2024 period in connection with the sale of one hotel and three net lease properties.
Interest income. The decrease in interest income is due to lower average cash balances invested and lower interest rates during the 2025 period compared to the 2024 period.
Interest expense. The increase in interest expense is primarily due to higher weighted average interest rates during the 2025 period compared to the 2024 period.
Loss on early extinguishment of debt, net. We recorded a $16,048 loss on early extinguishment of debt, net in the 2024 period as a result of the redemption and purchase of certain senior notes in the 2024 period.
Income tax expense. The decrease in income tax expense is primarily due to decreases in our state income tax expense ($209) and foreign tax expense ($22) during the 2025 period.
Equity in losses of an investee. Equity in losses of an investee represents our proportionate share of the losses of Sonesta.
Net loss. Our net loss and net loss per common share (basic and diluted) each increased in the 2025 period compared to the 2024 period primarily due to the revenue and expense changes discussed above.
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Liquidity and Capital Resources (dollars in thousands, except per share amounts)
Our Managers and Tenants
As of June 30, 2025, all 200 of our hotels were managed by four hotel operating companies. Our 742 service-focused retail net lease properties were leased to 174 tenants. 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 these parties themselves fund our owner’s priority returns and rents, from their separate resources. As of June 30, 2025, Sonesta is our largest hotel manager (175 hotels) and TA is our largest tenant (175 travel centers).
We recorded reserves for uncollectable amounts and reduced rental income by $1,142 and $1,377 for the three and six months ended June 30, 2025, respectively, based on our assessment of the collectability of rents. We recorded reserves for uncollectable amounts and reduced rental income by $377 and $1,042 for the three and six months ended June 30, 2024, respectively, based on our assessment of the collectability of rents. We had reserves for uncollectable rents of $6,016 and $5,058 as of June 30, 2025 and December 31, 2024, respectively, included in other assets, net in our condensed consolidated balance sheets.
We define net lease rent 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. Tenants with no minimum rent required under the lease are excluded. EBITDAR amounts used to determine rent coverage are generally for the latest twelve-month period, based on the most recent operating information, if any, furnished by our tenants. Operating statements furnished by our tenants often are unaudited and, in certain cases, may not have been prepared in accordance with GAAP and are not independently verified by us. In instances where we do not have tenant financial information, we calculate an implied coverage ratio for the period based on other tenants with available financial statements operating the same brand or within the same industry. As a result, we believe using this implied coverage metric provides a more reasonable estimated representation of recent operating results and the financial condition for those tenants. Our net lease properties generated rent coverage of 2.04x and 2.25x as of June 30, 2025 and 2024, respectively.
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 returns generated from our hotels, rents from our net lease portfolio and borrowings under our revolving credit facility and VFN. We receive hotel 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 these sources of funds will be sufficient to meet our operating expenses and capital expenditures, pay debt service obligations and make distributions to our shareholders for the next twelve months and for the foreseeable future thereafter. However, as a result of economic conditions, including if the U.S. enters an economic recession, or otherwise, our managers and tenants may become unable or unwilling to pay returns and rents to us when due, and, as a result, our cash flows and net income would decline. As of June 30, 2025, we did not meet the 1.50x consolidated income available for debt service to debt service ratio level necessary under our senior notes indentures to incur additional debt, and as a result, we will not be able to incur additional debt while the ratio is below this requirement. We may sell additional properties, access equity markets, refinance our debt with unsecured and/or secured debt, or seek other sources of capital if favorable conditions exist for us in order to enhance our liquidity, reduce debt and fund cash needs.
The following is a summary of our sources and uses of cash flows for the periods presented:
Six Months Ended June 30,
2025 2024
Cash and cash equivalents and restricted cash at the beginning of the period $ 157,386 $ 197,830
Net cash provided by (used in):
Operating activities 38,193 42,893
Investing activities (94,307) (142,799)
Financing activities (15,241) (68,468)
Cash and cash equivalents and restricted cash at the end of the period $ 86,031 $ 29,456
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The decrease in cash flow provided by operating activities in the 2025 period is primarily due to lower returns from our hotel portfolio in the 2025 period. The decrease in cash flow used in investing activities in the 2025 period is primarily due to higher proceeds from the sale of real estate in the 2025 period and decreased real estate improvements, partially offset by real estate acquisitions during the 2025 period. The decrease in cash flow used in financing activities in the 2025 period is primarily due to lower distributions to common shareholders during the 2025 period.
We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements. We lease 200 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.
Our Investment and Financing Liquidity and Capital Resources
Our hotel operating agreements generally provide that, if necessary, we may provide our managers 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 six months ended June 30, 2025, we funded $82,838 for capital improvements in excess of FF&E reserves available to our hotels. We currently expect to fund $170,000 during the last six months of 2025 and $150,000 in 2026 for capital improvements to certain hotels using cash on hand.
Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements. We own all the FF&E escrows for our hotels. During the six months ended June 30, 2025, certain of our hotel managers deposited $2,710 to these accounts and spent $2,064 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of June 30, 2025, there was $6,089 on deposit in these escrow accounts, which was held directly by us and is reflected in our condensed consolidated balance sheets as restricted cash.
Our net lease portfolio leases do not require FF&E escrow deposits and tenants under these leases are generally required to maintain the leased properties, including structural and non-structural components. We may provide tenant improvement allowances to tenants in certain cases or may develop sites with the intent to lease them. During the six months ended June 30, 2025, we funded $982 for capital improvements to our net lease properties. As of June 30, 2025, we had $3,433 of unspent leasing-related obligations related to certain of our net lease tenants.
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During the six months ended June 30, 2025, we sold 13 properties for a combined sales price of $49,296, excluding closing costs. From July 1, 2025 through August 1, 2025, we sold two hotels with a total of 234 keys for a combined sales price of $13,100, excluding closing costs, and one net lease property with 33,106 square feet for a sales price of $850, excluding closing costs. We have also entered into agreements to sell 114 hotels with a total of 14,925 keys for a combined sales price of $919,952, excluding closing costs, and two net lease properties with 10,301 square feet for a combined sales price of $1,395, excluding closing costs. These pending sales are subject to conditions; accordingly, we cannot be sure that we will complete these sales, that these sales will not be delayed or that the terms will not change. We are at various stages of selling six net lease properties with a total of 80,249 square feet. We believe it is probable that the sales of the hotel properties will be completed in the second half of 2025 and the sales of the remainder of these properties will be completed within one year. We expect to use the net sales proceeds from these sales for general business purposes, including to repay debt.
During the six months ended June 30, 2025, we acquired seven net lease properties with a total of 83,436 square feet for a combined purchase price of $29,923, excluding closing costs, using cash on hand. From July 1, 2025 through August 1, 2025, we acquired seven net lease properties with a total of 54,141 square feet for a combined purchase price of $14,524, excluding closing costs, using cash on hand. We have also entered into agreements to acquire six net lease properties with a total of 13,250 square feet for a combined purchase price of $10,254, excluding closing costs. We currently expect to fund these acquisitions using cash on hand. These pending acquisitions are subject to conditions; accordingly, we cannot be sure that we will complete these acquisitions, that these acquisitions will not be delayed or that the terms will not change.
During the six months ended June 30, 2025, we declared and paid a regular quarterly distribution to common shareholders using cash on hand as follows:
Declaration Date Record Date Paid Date Dividend Per Common Share Total Distributions
January 16, 2025 January 27, 2025 February 20, 2025 $ 0.01 $ 1,666
April 10, 2025 April 22, 2025 May 15, 2025 0.01 1,667
$ 0.02 $ 3,333
On July 10, 2025, we declared a regular quarterly distribution to common shareholders of record as of July 21, 2025 of $0.01 per common share, or approximately $1,669. We expect to pay this distribution on or about August 14, 2025 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 $650,000 secured revolving credit facility which is governed by a credit agreement. We can borrow, subject to meeting certain financial covenants, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayments are due until maturity. Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the collateral properties, satisfying certain financial covenants and other credit facility conditions. The maturity date of our revolving credit facility is June 29, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date of the facility by two additional six-month periods.
Interest payable on drawings under our revolving credit facility is based on SOFR plus a margin ranging from 1.50% to 3.00% based on our leverage ratio, as defined in our credit agreement, which was 2.50% as of June 30, 2025. We also pay unused commitment fees of 20 to 30 basis points per annum on the total amount of lending commitments under our revolving credit facility based on amounts outstanding. As of June 30, 2025 and 2024, the annual interest rate payable on borrowings under our revolving credit facility was 6.89% and 7.83%, respectively. As of June 30, 2025, we had $100,000 outstanding under our revolving credit facility and $550,000 available for borrowings. On July 1, 2025, we borrowed the remaining $550,000 available under our revolving credit facility as a precautionary measure to preserve financial flexibility. As of August 1, 2025, we remain fully drawn under our revolving credit facility.
As collateral for all loans and other obligations under our revolving credit facility, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on certain properties, as discussed below.
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In February 2025, we and our lenders amended the agreement governing our revolving credit facility to reduce the minimum fixed charge coverage ratio covenant from 1.50x to 1.30x effective with respect to the fourth quarter of 2024 and continuing through the end of the loan term. In order to exercise the first extension option, we are required to maintain a 1.50x minimum fixed charge coverage ratio level as of and for the duration of the extension period. We also agreed to change the required collateral property debt yield to 10% effective with respect to the first quarter of 2025 and continuing through the end of the loan term and to swap collateral properties as follows: 47 hotels with an aggregate of 7,981 keys were released from the collateral pool and 35 travel centers leased to TA, which we refer to as TA Lease No. 5, were added as collateral to our revolving credit facility. Our disposition plan includes 36 hotels with an aggregate of 4,862 keys and an aggregate undepreciated book value of $650,093 that were released from the collateral pool. The collateral swap was completed in May 2025. As of June 30, 2025, our revolving credit facility was secured by 55 properties, including 17 hotels and 38 net lease properties, with an aggregate undepreciated book value of $900,148.
Redemption of Senior Unsecured Notes
On August 5, 2025, we announced the early redemption of our $350,000 5.25% senior unsecured notes due 2026 at par, plus accrued and unpaid interest to, but excluding the date of redemption. We expect to fund this redemption on or about September 4, 2025, using cash on hand.
Net Lease Mortgage Notes
On January 27, 2025, the Issuer issued the VFN secured by the 314 net lease properties that secure our existing $605,632 of net lease mortgage notes. The VFN permits borrowings on a revolving basis up to $45,000 and the Issuer can borrow, repay and reborrow funds available until maturity. The maturity date of the VFN is January 27, 2027, and, subject to the payment of an extension fee and meeting certain other conditions, can be extended by one year at the Issuer’s option. The VFN requires interest payments only on drawings under the VFN based on SOFR plus a margin of 1.75%, and an unused commitment fee of 50 basis points per annum paid on undrawn amounts. As of June 30, 2025, the annual interest rate payable on borrowings under the VFN was 6.04%. The weighted average annual interest rate for borrowings under the VFN was 6.05% for the three and six months ended June 30, 2025, respectively. As of both June 30, 2025 and August 1, 2025, $45,000 was outstanding under the VFN.
Our debt maturities (other than our revolving credit facility and VFN) as of June 30, 2025 were as follows:
Year Debt Maturities
2025 $ 979
2026 801,958
2027 851,958
2028 1,000,737
2029 1,125,000
Thereafter 1,900,000
$ 5,680,632
None of our senior note debt obligations require principal or sinking fund payments prior to their maturity dates. Our mortgage notes require monthly principal payments as described in Part I, Item 3 of this Quarterly Report on Form 10-Q.
We currently expect to use cash on hand, the cash flows from our operations, borrowings available under our revolving credit facility, if any, or VFN, net proceeds from any asset sales and net proceeds of offerings of equity or the incurrence of debt to fund our operations, capital expenditures, investments, future debt maturities, distributions to our shareholders and other general business purposes.
When significant amounts are outstanding for an extended period of time under our revolving credit facility, or the maturities of our indebtedness approach, we currently expect to explore refinancing alternatives. Such alternatives may include incurring additional debt, issuing new equity securities and the sale of properties. We have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. We may also seek to participate in joint ventures or other arrangements that may provide us additional sources of financing. We may also assume mortgage debt on properties we may acquire or obtain mortgage financing on our existing properties.
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While we believe we will generally 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 pursuant to our debt agreements and are not permitted under our debt agreements to incur any debt while below the 1.50x consolidated income available for debt service to debt service ratio requirement under our public debt covenants as described below.
Our ability to complete, and the costs associated with, future debt transactions depend 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 Quarterly Report on Form 10-Q, the impacts of the current, and possibly future, inflationary conditions, uncertainties surrounding interest rates and a possible economic recession 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 June 30, 2025 consisted of $100,000 of borrowings outstanding under our $650,000 revolving credit facility, $5,075,000 aggregate principal amounts of senior notes, $605,632 aggregate principal amounts of net lease mortgage notes and $45,000 of borrowings outstanding under the VFN. For further information regarding our indebtedness, see Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Our publicly and privately issued senior notes are 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 debt, including debt secured by mortgages on our properties, in excess of calculated amounts, and require us to maintain various financial ratios. Our credit agreement, net lease mortgage notes, secured senior notes and 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 ceasing to act as our business manager. As of June 30, 2025, we believe we were in compliance with all of the covenants under our indentures and their supplements, net lease mortgage notes and our credit agreement, except as noted above and below.
Senior Notes Indenture Covenants
The following table summarizes the results of the financial tests required by the indentures and related supplements for our senior secured and unsecured notes as of June 30, 2025:
Actual Results Covenant Requirement
Total debt / adjusted total assets 55.9% Maximum of 60%
Secured debt / adjusted total assets 16.8% Maximum of 40%
Consolidated income available for debt service / debt service 1.49x Minimum of 1.50x
Total unencumbered assets / unsecured debt 190.0% Minimum 150%
Total unencumbered assets in guarantor subsidiaries / senior guaranteed unsecured debt
4.51x Minimum of 2.20x
The above consolidated income available for debt service to debt service ratio was 1.49x on a pro forma basis as of June 30, 2025, which was below the required level that would permit us to incur additional debt. We are not permitted under our debt agreements to incur additional debt while we remain below the required covenant level.
As of June 30, 2025, adjusted total assets for covenant purposes as defined in our senior notes indentures were $10,414,487 and assets encumbered under our revolving credit facility, serving as collateral for our net lease mortgage notes or secured senior notes represented $2,670,993 of adjusted total assets, as defined in our senior notes indentures. Our unencumbered hotels, travel centers, other net lease properties and other corporate assets represent $5,802,780, $916,092, $833,832 and $190,790 of adjusted total assets, respectively.
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The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP:
Total assets $ 6,932,512
Plus: accumulated depreciation (1)
3,265,709
Plus: impairment and other adjustments to reflect original cost of real estate assets 455,394
Less: accounts receivable and intangibles (239,128)
Adjusted total assets $ 10,414,487
(1) Includes $865,039 of accumulated depreciation on assets of properties held for sale.
Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our debt agreements.
Acceleration and Cross-Default
Our indentures and their supplements contain cross default provisions to any other debt of $50,000 or more. 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. 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.
Supplemental Guarantor Information
Our 5.50% Senior Notes due 2027, or the 2027 Notes, our 8.375% Senior Guaranteed Unsecured Notes due 2029, or the 2029 Notes, and our 8.875% Senior Guaranteed Unsecured Notes due 2032, or the 2032 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 and our net lease mortgage notes. 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 $2,425,000 of senior unsecured notes do not have the benefit of any guarantees.
A subsidiary guarantor’s guarantee of the 2027 Notes, the 2029 Notes and the 2032 Notes and all other obligations of such subsidiary guarantor under the indentures governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and such 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 Investor Services, or Moody’s, and BBB (or the equivalent) by Standard & Poor’s Ratings Services, or 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 therefor, 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 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 of our subsidiaries that do not guarantee these notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
The following table presents summarized financial information for us and the subsidiary guarantors, on a combined basis, after elimination of (i) intercompany transactions and balances among us and the subsidiary guarantors, and (ii) equity in earnings from, and any investments in, any of our non-guarantor subsidiaries:
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As of June 30, 2025 As of December 31, 2024
Real estate properties, net (1)
$ 4,441,857 $ 4,167,260
Other assets, net 450,135 507,507
Indebtedness, net $ 5,100,871 $ 5,142,420
Intercompany balances (2)
1,227,399 751,637
Other liabilities 313,184 358,778
Six Months Ended June 30, 2025
Revenues
$ 773,292
Expenses
931,651
Net loss
$ (158,359)
(1) Real estate properties, net as of June 30, 2025 includes $133,061 of properties owned directly by us and not included in the assets of the subsidiary guarantors.
(2) Intercompany balances represent payables to non-guarantor subsidiaries.
Related Person Transactions
We have relationships and historical and continuing transactions with RMR, RMR Inc. and Sonesta and others related to them. For further information about these and other such relationships and related person transactions, see Notes 6, 10 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2024 Annual Report, our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders and our other filings with the Securities and Exchange Commission, or SEC. In addition, see the section captioned “Risk Factors” in our 2024 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.
Critical Accounting Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include consolidation of VIEs, purchase price allocations, the determination of useful lives of fixed assets, classification of leases, and the assessment of the book values and impairment of real estate intangible assets and equity investments.
A discussion of our critical accounting estimates is included in our 2024 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2024.
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Property and Operating Statistics (dollars in thousands, except hotel statistics)
As of June 30, 2025, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 145 distinct brands across 22 industries.
Hotel Portfolio
The following tables summarize the operating statistics, including occupancy, ADR and RevPAR reported to us by our hotel managers by hotel brand for the periods indicated. All operating data presented are based upon the operating results provided by our hotel managers for the indicated periods. We have not independently verified our managers’ operating data.
All Hotels*
No. of Rooms or Suites Occupancy ADR RevPAR
Service Level No. of Hotels Three Months Ended
June 30, Three Months Ended
June 30, Three Months Ended
June 30,
Brand 2025 2024 Change 2025 2024 Change 2025 2024 Change
Retained Hotels:
Royal Sonesta Hotels® Full Service 17 5,663 68.2 % 67.5 % 0.7 pts $238.10 $239.45 (0.6) % $ 162.31 $ 161.70 0.4 %
Sonesta Hotels & Resorts® Full Service 22 7,207 66.2 % 65.0 % 1.2 pts 166.86 164.16 1.6 % 110.49 106.65 3.6 %
Radisson® Hotels & Resorts Full Service 5 1,149 64.8 % 71.3 % (6.5) pts 153.03 146.39 4.5 % 99.22 104.33 (4.9) %
Country Inn & Suites® by Radisson Full Service 2 346 70.1 % 74.6 % (4.5) pts 144.57 152.57 (5.2) % 101.29 113.89 (11.1) %
Crowne Plaza® Full Service 1 495 67.8 % 69.4 % (1.6) pts 133.49 144.36 (7.5) % 90.45 100.25 (9.8) %
Full Service Total/Average 47 14,860 67.0 % 66.8 % 0.2 pts 191.77 190.70 0.6 % 128.48 127.40 0.8 %
Sonesta ES Suites® Extended Stay 7 958 80.3 % 74.2 % 6.1 pts 149.90 154.83 (3.2) % 120.40 114.94 4.7 %
Sonesta Select® Select Service 6 873 71.8 % 68.8 % 3.0 pts 140.89 143.26 (1.7) % 101.17 98.58 2.6 %
Sonesta Simply Suites® Extended Stay 7 1,144 73.1 % 76.1 % (3.0) pts 129.80 124.86 4.0 % 94.87 94.96 (0.1) %
Hyatt Place® Select Service 17 2,107 74.3 % 70.9 % 3.4 pts 126.28 124.16 1.7 % 93.78 88.00 6.6 %
Focused Service Total/Average 37 5,082 74.7 % 72.3 % 2.4 pts 134.25 133.38 0.7 % 100.31 96.46 4.0 %
Retained Hotels Total/Average 84 19,942 69.0 % 68.2 % 0.8 pts $175.89 $175.21 0.4 % $ 121.30 $ 119.51 1.5 %
Exit Hotels:
Sonesta ES Suites® Extended Stay 45 5,731 74.5 % 73.5 % 1.0 pts $124.18 $124.91 (0.6) % $ 92.57 $ 91.82 0.8 %
Sonesta Select® Select Service 32 4,678 61.1 % 62.5 % (1.4) pts 111.96 114.22 (2.0) % 68.38 71.40 (4.2) %
Sonesta Simply Suites® Extended Stay 39 4,750 71.9 % 73.8 % (1.9) pts 83.67 84.65 (1.2) % 60.12 62.45 (3.7) %
Exit Hotels Total/Average 116 15,159 69.5 % 70.2 % (0.7) pts 107.75 108.72 (0.9) % 74.94 76.32 (1.8) %
All Hotels Total/Average 200 35,101 69.2 % 69.1 % 0.1 pts $146.32 $146.02 0.2 % $ 101.27 $ 100.85 0.4 %
* Includes results of all hotels owned as of June 30, 2025. Excludes the results of hotels sold during the periods presented. Retained Hotels represents 59 hotels managed by Sonesta, 17 hotels managed by Hyatt, seven hotels managed by Radisson, and one hotel managed by IHG that we will continue to own after the Exit Hotels are sold. Exit Hotels represent 116 hotels managed by Sonesta that we plan to sell. We are no longer marketing our Crowne Plaza hotel for sale.
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All Hotels*
No. of Rooms or Suites Occupancy ADR RevPAR
Service Level No. of Hotels Six Months Ended
June 30, Six Months Ended
June 30, Six Months Ended
June 30,
Brand 2025 2024 Change 2025 2024 Change 2025 2024 Change
Retained Hotels:
Royal Sonesta Hotels® Full Service 17 5,663 59.7 % 59.1 % 0.6 pts $241.53 $238.28 1.4 % $ 144.23 $ 140.90 2.4 %
Sonesta Hotels & Resorts® Full Service 22 7,207 60.3 % 60.6 % (0.3) pts 167.37 164.18 1.9 % 100.90 99.52 1.4 %
Radisson® Hotels & Resorts Full Service 5 1,149 62.2 % 65.9 % (3.7) pts 153.53 148.54 3.4 % 95.44 97.87 (2.5) %
Country Inn & Suites® by Radisson Full Service 2 346 62.9 % 67.5 % (4.6) pts 138.62 144.66 (4.2) % 87.14 97.59 (10.7) %
Crowne Plaza® Full Service 1 495 70.6 % 67.0 % 3.6 pts 141.95 146.59 (3.2) % 100.16 98.21 2.0 %
Full Service Total/Average 47 14,860 60.6 % 60.8 % (0.2) pts 192.42 189.16 1.7 % 116.64 115.07 1.4 %
Sonesta ES Suites® Extended Stay 7 958 74.3 % 71.3 % 3.0 pts 151.29 154.75 (2.2) % 112.38 110.41 1.8 %
Sonesta Select® Select Service 6 873 66.8 % 63.1 % 3.7 pts 131.65 133.84 (1.6) % 87.89 84.39 4.1 %
Sonesta Simply Suites® Extended Stay 7 1,144 70.4 % 69.6 % 0.8 pts 122.75 120.57 1.8 % 86.44 83.89 3.0 %
Hyatt Place® Select Service 17 2,107 68.5 % 59.2 % 9.3 pts 124.82 122.44 1.9 % 85.46 72.46 18.0 %
Focused Service Total/Average 37 5,082 69.7 % 64.5 % 5.2 pts 130.79 130.64 0.1 % 91.17 84.23 8.2 %
Retained Hotels Total/Average 84 19,942 62.9 % 61.8 % 1.1 pts $175.02 $173.59 0.8 % $ 110.15 $ 107.21 2.7 %
Exit Hotels:
Sonesta ES Suites® Extended Stay 45 5,731 69.5 % 69.2 % 0.3 pts $123.80 $123.40 0.3 % $ 86.05 $ 85.41 0.8 %
Sonesta Select® Select Service 32 4,678 57.0 % 57.0 % — pts 113.41 115.28 (1.6) % 64.65 65.67 (1.6) %
Sonesta Simply Suites® Extended Stay 39 4,750 65.7 % 67.5 % (1.8) pts 83.11 84.10 (1.2) % 54.59 56.73 (3.8) %
Exit Hotels Total/Average 116 15,159 64.4 % 64.9 % (0.5) pts 107.97 108.40 (0.4) % 69.59 70.33 (1.1) %
All Hotels Total/Average 200 35,101 63.6 % 63.1 % 0.5 pts $145.67 $144.64 0.7 % $ 92.63 $ 91.28 1.5 %
* Includes results of all hotels owned as of June 30, 2025. Excludes the results of hotels sold during the periods presented. Retained Hotels represents 59 hotels managed by Sonesta, 17 hotels managed by Hyatt, seven hotels managed by Radisson, and one hotel managed by IHG that we will continue to own after the Exit Hotels are sold. Exit Hotels represent 116 hotels managed by Sonesta that we plan to sell.
Net Lease Portfolio
As of June 30, 2025, our net lease properties were 97.3% occupied and we had 20 properties available for lease. During the six months ended June 30, 2025, we entered into lease renewals for 383,743 rentable square feet (14 properties) at weighted (by rentable square feet) average rents that were 10.8% above the prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 12.6 years. We also entered into new leases for 7,893 rentable square feet (two properties) at rent that was 9.9% above the prior rent for the same space. The weighted (by rentable square feet) average lease term for these leases was 12.7 years.
Generally, lease agreements with our net lease tenants require payment of minimum rent to us. Certain of these minimum rent payment amounts are secured by full or limited guarantees. Annualized minimum rent represents cash amounts and excludes adjustments, if any, necessary to record scheduled rent changes on a straight line basis or any expense reimbursement. Annualized minimum rent excludes the impact of rents prepaid by TA.
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As of June 30, 2025, our net lease tenants operated across 136 brands. The following table identifies the top ten brands based on annualized minimum rent:
Brand No. of Properties Investment (1)
Percent of Total Investment Annualized Minimum Rent Percent of Total Annualized
Minimum Rent
Rent Coverage (2)
1. TravelCenters of America Inc. 131 $ 2,254,950 44.8 % $ 180,329 46.7 % 1.31 x (3)
2. Petro Stopping Centers 44 1,015,156 20.1 % 83,933 21.7 % 1.31 x (3)
3. The Great Escape 14 98,242 1.9 % 7,711 2.0 % 4.75 x
4. Life Time Fitness 3 92,617 1.8 % 5,770 1.5 % 2.84 x
5. Buehler's Fresh Foods 5 76,469 1.5 % 5,657 1.5 % 2.72 x
6. Heartland Dental 59 61,120 1.2 % 4,841 1.3 % 4.71 x
7. Norms 10 53,673 1.1 % 3,826 1.0 % 3.36 x
8. Express Oil Change 23 49,724 1.0 % 3,717 1.0 % 5.77 x
9. AMC Theatres 5 57,385 1.1 % 3,564 0.9 % 1.68 x
10. Pizza Hut 40 45,285 0.9 % 3,552 0.9 % 2.14 x
Other (4)
408 1,233,750 24.6 % 83,621 21.5 % 3.65 x
Total 742 $ 5,038,371 100.0 % $ 386,521 100.0 % 2.04 x
(1) Represents the historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any.
(2) See page 31 for our definition of rent coverage.
(3) Rent coverage information provided by tenant is for all 175 sites on a consolidated basis and is as of June 30, 2025.
(4) Consists of 126 distinct brands with an average investment of $3,024 per property and average annual minimum rent of $205 per property.
As of June 30, 2025, our top ten net lease tenants based on our annualized minimum rent are listed below:
Tenant Brand Affiliation No. of Properties Investment (1)
Percent of Total Investment Annualized
Minimum Rent Percent of Total Annualized
Minimum Rent Rent Coverage (2)
1. TravelCenters of America Inc. (3)
TravelCenters of America / Petro Stopping Centers 175 $ 3,270,106 64.9 % $ 264,262 68.4 % 1.31x
2. Universal Pool Co., Inc. The Great Escape 14 98,242 1.9 % 7,711 2.0 % 4.75x
3. Healthy Way of Life II, LLC Life Time Fitness 3 92,617 1.8 % 5,770 1.5 % 2.84x
4. Styx Acquisition, LLC Buehler's Fresh Foods 5 76,469 1.5 % 5,657 1.5 % 2.72x
5. Professional Resource Development, Inc. Heartland Dental 59 61,120 1.2 % 4,841 1.3 % 4.71x
6. Norms Restaurants, LLC Norms 10 53,673 1.1 % 3,826 1.0 % 3.36x
7. Express Oil Change, L.L.C. Express Oil Change 23 49,724 1.0 % 3,717 1.0 % 5.77x
8. Pilot Travel Centers LLC Flying J Travel Plaza 3 41,681 0.8 % 3,312 0.9 % 3.14x
9. Automotive Remarketing Group, Inc. America's Auto Auction 6 38,314 0.8 % 3,216 0.8 % 9.08x
10. Fleet Farm Group LLC Fleet Farm 1 37,802 0.8 % 2,837 0.7 % 2.15x
Subtotal, top 10 299 3,819,748 75.8 % 305,149 79.1 % 1.69x
11. Other (4)
Various 443 1,218,623 24.2 % 81,372 20.9 % 3.35x
Total 742 $ 5,038,371 100.0 % $ 386,521 100.0 % 2.04x
(1) Represents the historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.
(2) See page 31 for our definition of rent coverage.
(3) TA is our largest tenant. As of June 30, 2025, we leased 175 travel centers (131 under the TravelCenters of America brand and 44 under the Petro Stopping Centers brand) to a subsidiary of TA under five master leases that expire in 2033. TA has five renewal options for 10 years each for all of the travel centers under each lease. BP Corporation North America Inc. guarantees payment under each of the five master leases. The aggregate guaranty as of June 30, 2025 was $3,037,475. Annualized minimum rent excludes the impact of rents prepaid by TA. Rent coverage was 1.37x, 1.37x, 1.41x, 1.38x and 1.09x for our TA leases no. 1, no. 2, no. 3, no. 4 and no. 5, respectively. Rent coverage is as of June 30, 2025.
(4) Consists of 164 tenants with an average investment of $2,751 per property and an average annual minimum rent of $184 per property.
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As of June 30, 2025, our net lease tenants operated across 21 distinct industries within the service-focused retail sector of the U.S. economy.
Industry No. of Properties Investment (1)
Percent of Total Investment Annualized
Minimum Rent Percent of Total Annualized
Minimum Rent Rent Coverage (2)
1. Travel Centers 178 $ 3,311,787 65.7% $ 267,574 69.2 % 1.33 x
(3)
2. Restaurants - Quick Service 204 280,787 5.6% 19,632 5.1 % 2.99 x
3. Restaurants - Casual Dining 54 193,351 3.8% 12,051 3.1 % 2.94 x
4. Health and Fitness 14 196,084 3.9% 11,790 3.1 % 2.23 x
5. Grocery Stores 19 129,152 2.6% 9,317 2.4 % 3.22 x
6. Medical, Dental Office 70 104,042 2.1% 8,342 2.2 % 3.51 x
7. Movie Theaters 14 134,413 2.7% 8,242 2.1 % 1.79 x
8. Automotive Equipment and Services 64 107,054 2.1% 7,826 2.1 % 5.01 x
9. Home Goods and Leisure 14 98,242 1.9% 7,711 2.0 % 4.75 x
10. Automotive Dealers 8 62,656 1.2% 4,982 1.3 % 7.35 x
11. General Merchandise Stores 4 55,457 1.1% 3,997 1.0 % 2.89 x
12. Entertainment 3 51,473 1.0% 3,947 1.0 % 1.29 x
13. Educational Services 7 44,820 0.9% 3,572 0.9 % 1.90 x
14. Building Materials 29 34,006 0.7% 3,258 0.8 % 8.47 x
15. Car Washes 7 36,125 0.7% 2,840 0.7 % 4.96 x
16. Miscellaneous Manufacturing 5 24,355 0.5% 1,728 0.5 % 13.54 x
17. Sporting Goods 3 18,548 0.4% 1,106 0.3 % 4.05 x
18. Legal Services 5 11,362 0.2% 1,097 0.3 % 3.32 x
19. Drug Stores and Pharmacies 6 17,111 0.3% 957 0.2 % 1.07 x
20. Dollar Stores 3 2,971 0.1% 190 0.1 % 2.10 x
21. Other (4)
11 66,027 1.3% 6,362 1.6 % 4.50 x
22. Vacant 20 58,548 1.2% — — % — x
Total 742 $ 5,038,371 100.0% $ 386,521 100.0% 2.04 x
(1) Represents the historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.
(2) See page 31 for our definition of rent coverage.
(3) Rent coverage for TA is as of June 30, 2025.
(4) Consists of miscellaneous businesses with an average investment of $6,002 per property.
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As of June 30, 2025, lease expirations at our net lease properties by year are as follows:
Year (1)
Number of Properties Square Feet Annualized Minimum Rent Expiring Percent of Total Annualized Minimum Rent Expiring Cumulative Percent of Total Annualized Minimum Rent Expiring
2025 20 320,729 $ 6,379 1.7% 1.7%
2026 103 1,007,554 11,584 3.0% 4.7%
2027 35 962,837 12,768 3.3% 8.0%
2028 22 594,268 9,613 2.5% 10.5%
2029 76 628,549 10,512 2.7% 13.2%
2030 34 286,491 6,343 1.6% 14.8%
2031 28 397,390 5,195 1.3% 16.1%
2032 35 137,154 2,902 0.8% 16.9%
2033 213 5,371,427 270,515 69.9% 86.8%
2034 22 289,885 5,726 1.6% 88.4%
2035 46 1,159,583 19,393 5.0% 93.4%
2036 15 350,190 6,050 1.6% 95.0%
2037 11 318,609 3,244 0.8% 95.8%
2038 6 44,484 1,201 0.3% 96.1%
2039 10 141,443 3,686 1.0% 97.1%
2040 18 115,142 2,419 0.6% 97.7%
2041 8 227,381 2,626 0.7% 98.4%
2042 — — — —% 98.4%
2043 7 127,440 2,096 0.5% 98.9%
2044 2 93,010 278 0.1% 99.0%
2045 11 154,966 3,991 1.0% 100.0%
Total 722 12,728,532 $ 386,521 100.0%
(1) The year of lease expiration is pursuant to contract terms.
As of June 30, 2025, 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 annualized minimum rents.
State Number of Properties Square Feet Annualized Minimum Rent Percent of Total Annualized Minimum Rent
Texas 54 1,132,614 $ 33,156 8.6%
Illinois 52 971,207 27,706 7.2%
Ohio 40 1,325,511 27,542 7.1%
California 22 399,045 26,375 6.8%
Georgia 70 580,553 20,736 5.4%
Florida 48 587,816 18,242 4.7%
Arizona 25 476,651 16,931 4.4%
Indiana 39 519,353 16,265 4.2%
Pennsylvania 28 544,003 16,020 4.1%
New Mexico 16 246,478 12,014 3.1%
Other 348 6,378,789 171,534 44.4%
Total 742 13,162,020 $ 386,521 100.0%
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Non-GAAP Financial Measures
We present certain “non-GAAP financial measures” within the meaning of the applicable SEC rules, including funds from operations, or FFO, and normalized funds from operations, or Normalized FFO. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our condensed consolidated statements of 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.
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), calculated in accordance with GAAP, excluding any gain or loss on sale of real estate and loss on impairment of real estate assets, if any, plus real estate depreciation and amortization, 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 items shown below. 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 debt agreements, the availability to us of debt and equity capital, our distribution rate as a percentage of the trading price of our common shares, or dividend yield, and our dividend yield compared to the dividend yields of other REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.
Our calculations of FFO and Normalized FFO for the three and six months ended June 30, 2025 and 2024 and reconciliations of net loss, the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to those amounts appear in the following table (amounts in thousands, except per share amounts):
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 2025 2024
Net loss $ (38,159) $ (73,850) $ (154,594) $ (152,233)
Add (less): Depreciation and amortization 75,030 95,674 164,130 188,781
Loss on asset impairment 17,654 34,887 54,721 37,338
Loss (gain) on sale of real estate, net 156 32 (590) 2,995
Adjustments to reflect our share of FFO attributable to an investee 1,182 1,021 2,382 1,987
FFO 55,863 57,764 66,049 78,868
Add (less): Loss on early extinguishment of debt, net — 16,048 — 16,048
Transaction related costs 1,345 — 1,456 —
Adjustments to reflect our share of Normalized FFO attributable to an investee 395 (2) 934 —
Normalized FFO $ 57,603 $ 73,810 $ 68,439 $ 94,916
Weighted average common shares outstanding (basic and diluted) 165,743 165,198 165,679 165,178
Basic and diluted per common share amounts:
Net loss $ (0.23) $ (0.45) $ (0.93) $ (0.92)
FFO $ 0.34 $ 0.35 $ 0.40 $ 0.48
Normalized FFO $ 0.35 $ 0.45 $ 0.41 $ 0.57
Distributions declared per share $ 0.01 $ 0.20 $ 0.02 $ 0.40
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