Service Properties Trust (SVC) announced on Wednesday its intention to divest 114 service-focused hotels administered by Sonesta International Hotels Corp. These properties, encompassing 14,925 rooms, currently hold a net carrying value of $850 million.
Additionally, the Board has adjusted the regular quarterly cash distribution per share from $0.20 to $0.01, reducing the annual distribution per share from $0.80 to $0.04. This strategic move is expected to yield an annual savings of $127 million.
SVC anticipates the sale of these hotels will circumvent approximately $725 million in capital expenditures projected for these properties over the next six years. The company plans to complete these transactions by 2025 and intends to apply the proceeds from the sales towards debt reduction.
Presently, SVC owns 187 hotels managed by Sonesta across five brands. This includes 14 hotels currently in the process of being sold, in addition to the 114 hotels proposed for sale.
Following the anticipated completion of these sales in 2025, SVC expects Sonesta to continue managing 39 full-service hotels, 14 extended-stay hotels, and six select-service hotels under SVC's ownership.
Moreover, SVC will maintain its 34% ownership stake in Sonesta.
At the time of reporting, SVC's shares were trading down by 15.75%, at $4.01 on the Nasdaq.
