Almost all of the 68 Sonesta-branded hotels Service Properties Trust officials have identified for sale have either been sold or are under contract, according to executives with the real estate investment trust.
Speaking during the company's second-quarter earnings call, President and CEO Todd Hargreaves said the company has closed on the sale of 60 hotels for a combined $518 million and expects to soon have $24 million more for four more hotels currently under contract. Of the four remaining properties not sold or under contract, two currently have signed letters of intent.
"We believe we have effectively navigated the volatile transactions markets and remain on track to achieve the pricing expectations we set last year," he said.
Hargreaves said his company was successful in selling "a large percentage of these hotels encumbered of long-term Sonesta franchise agreements," which is meaningful because Service Properties owns a 34% ownership stake in Sonesta International. The rest of the company is owned by The RMR Group, which externally manages Service Properties.
The 68-hotel Sonesta portfolio the company is selling includes 46 extended-stay hotels, 19 select-service hotels and three full-service hotels.
The REIT also committed $45.5 million to help Sonesta fund the acquisition of four hotels in New York.
The company has also seen a "strong level of interest from a wide range of investors" from their portfolio of 16 Marriott-branded hotels, which it is selling unencumbered by brand.
Hargreaves noted all the assets Service Properties is selling are among the slowest-growing in its portfolio, which includes roughly $12 billion in assets split between hotels and net lease properties.
"We believe our disposition initiative has and will allow SVC and its operators to focus on a more profitable, higher-quality lodging portfolio," he said.
Second-Quarter Results
For the quarter, Service Properties reported comparable revenue per available room hit $91.76, which was 65.4% higher than the same quarter in 2021. The company noted RevPAR in June was just 13.9% below pre-pandemic levels.
The company recorded $11.4 million in net income for the quarter, compared to a $91.1 million loss in the second quarter of 2021.
As of press time, Service Properties' stock was trading at $7.37 a share, down 16% year to date. The Nasdaq Composite was down 19.3% for the same period.