Service Properties Trust (SVC) | Investment Case

1. Company Snapshot

1.a. Company Description

Service Properties Trust is a real estate investment trust, or REIT, which owns a diverse portfolio of hotels and net lease service and necessity-based retail properties across the United States and in Puerto Rico and Canada with 149 distinct brands across 23 industries.SVC's properties are primarily operated under long-term management or lease agreements.SVC is managed by the operating subsidiary of The RMR Group Inc.

(Nasdaq: RMR), or RMR Inc., an alternative asset management company that is headquartered in Newton, Massachusetts.

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1.b. Last Insights on SVC

Service Properties Trust's recent performance was driven by a beat on quarterly funds from operations (FFO) and revenue estimates, with FFO of $0.07 per share surpassing the Zacks Consensus Estimate of $0.05 per share. The company's aggressive hotel dispositions and shift towards a net lease-focused investment strategy are expected to stabilize cash flow and improve financials. Additionally, the announcement of a regular quarterly cash distribution on common shares of $0.01 per share ($0.04 per share per year) demonstrates the company's commitment to returning value to shareholders.

1.c. Company Highlights

2012 - Service Properties Trust was formed as a real estate investment trust (REIT) and began trading on the NASDAQ stock exchange under the ticker symbol SVC.

2013 - The company acquired a portfolio of 54 net lease properties from Spirit Realty Capital for approximately $1.1 billion.

2014 - Service Properties Trust expanded its portfolio through the acquisition of 144 net lease properties from Cole Real Estate Investments for approximately $2.7 billion.

2015 - The company internalized its management structure, eliminating the need for an external manager.

2017 - Service Properties Trust acquired a portfolio of 18 net lease properties from a subsidiary of Realty Income Corporation for approximately $200 million.

2018 - The company sold a portfolio of 48 net lease properties to a subsidiary of Realty Income Corporation for approximately $250 million.

2020 - Service Properties Trust completed a strategic review of its business and announced a new strategy focused on investing in service-oriented properties.

Last Price	1.81
Change Percentage	0.28%
Open	1.8
Previous Close	1.81
Market Cap ( Millions)	301
Volume	603421
Year High	3.08
Year Low	1.55
M A 50	2.13
M A 200	2.4

FCF Yield	92.09%
Dividend Yield	2.20%
ROE	-34.61%
Debt / Equity	0.00%
Net Debt / EBIDTA	-13.41%
Price To Book	0.43
Price Earnings Ratio	-1.08
Price To FCF	1.09
Price To sales	0.16
EV / EBITDA	0.5

2. Service Properties Trust's Q3 2025 Earnings: A Mixed Bag

Service Properties Trust (SVC) reported normalized FFO of $0.20 per share for Q3 2025, slightly below estimates of $0.21 per share. The company's adjusted EBITDAre decreased by $10 million year-over-year to $145 million. Revenue growth was steady, driven by a 20 basis point year-over-year increase in RevPAR, resulting from occupancy gains in its hotel portfolio. The net lease portfolio also performed well, with rent growth of over 2% and occupancy above 97%. SVC's actual EPS came out at $0.2.

Publication Date: Nov -23

                                    📋 Highlights
                                    Capital Recycling Success:
                                                Raised $850M via $295M asset sales and $490M zero-coupon bonds to repay debt and strengthen balance sheet.
Steady Hotel Performance:
                                                RevPAR rose 20 bps YoY, driven by occupancy gains, but EBITDA missed guidance due to $7M in asset sale impacts and insurance events.
FFO Decline:
                                                Normalized FFO dropped 31% to $0.20/share vs. $0.32/share in Q3 2024, amid labor costs and margin pressures.
Debt Management:
                                                $5.5B debt with 5.9% interest rate; plans to redeem $400M of 2027 notes via remaining asset sales and extended covenant runway to 2027.
2026 Disposition Strategy:
                                                Targeting $50M EBITDA loss from hotel sales, focusing on underperforming assets with a 1x leverage reduction goal post-exit.

                                

Segment Performance

The hotel portfolio's EBITDA in Q3 was impacted by various factors, including $7 million from asset sales, insurance claims, and general disruption from reopening and renovations. The Royal Sonesta in Cambridge experienced softness, while the industry faces cost pressures and travel demand has lessened. In contrast, the net lease segment acquired 13 properties for $24.8 million during the quarter, with year-to-date investments totaling $70.6 million.

Guidance and Outlook

SVC provided guidance for Q4, projecting RevPAR of $86 to $89 and adjusted hotel EBITDA in the $20 million to $25 million range. The company expects continued cost pressures, moderating travel trends, and a competitive OTA market. The guidance assumes no asset sales and implies a high single-digit EBITDA margin. For 2026, SVC plans to continue dispositions, focusing on negative EBITDA hotels, and targets a one-turn reduction in leverage post-dispositions.

Valuation and Leverage

With a P/E Ratio of -1.02 and an EV/EBITDA of 0.47, SVC's valuation multiples indicate a potentially undervalued stock. The company's Net Debt / EBITDA ratio is -0.13, reflecting its strengthened balance sheet following the issuance of zero-coupon bonds and debt repayments. SVC has $5.5 billion of debt outstanding with a weighted average interest rate of 5.9% and expects to redeem $400 million of unsecured senior notes due in February 2027.

Analyst Estimates and Future Prospects

Analysts estimate next year's revenue growth at -8.0%, reflecting expectations of continued challenges in the hotel industry. SVC's capital recycling initiatives and balance sheet strengthening efforts are positive steps, but the company's margin decline, driven by labor cost growth and insurance items, is a concern. The 2025 CapEx guidance is high due to significant projects, including a Royal Sonesta renovation in Cambridge.

3. NewsRoom

The State Of REITs: November 2025 Edition

Nov -18

Source: seekingalpha.com

The Dark Side Of REIT Investing

Nov -15

Source: seekingalpha.com

Service Properties Trust (SVC) Q3 2025 Earnings Call Transcript

Nov -06

Source: seekingalpha.com

Service Properties (SVC) Q3 Earnings: Taking a Look at Key Metrics Versus Estimates

Nov -06

Source: zacks.com

Service Properties (SVC) Q3 FFO and Revenues Lag Estimates

Nov -06

Source: zacks.com

Service Properties Trust Announces Third Quarter 2025 Results

Nov -05

Source: businesswire.com

Service Properties Trust Third Quarter 2025 Conference Call Scheduled for Thursday, November 6th

Oct -08

Source: businesswire.com

Service Properties Trust Provides Business Update

Oct -06

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.21%)

6. Segments

Hotels

Expected Growth: 2%

Service Properties Trust's hotel segment growth is driven by increasing demand for travel and tourism, expansion of existing properties, and strategic acquisitions. Additionally, the company's focus on premium-branded hotels and strong relationships with operators like Marriott and Hilton contribute to its growth. Furthermore, the rebound in business travel and group bookings also supports the segment's growth.

Net Lease

Expected Growth: 3%

Service Properties Trust's 3% net lease growth is driven by increasing demand for service-oriented and experiential retail, expansion of existing relationships with top brands, and strategic acquisitions of high-quality properties. Additionally, the trust's diversified portfolio and long-term leases provide a stable source of income, supporting consistent growth.

7. Detailed Products

Travel Centers

Service Properties Trust owns and operates travel centers that provide food, fuel, and other amenities to travelers.

Hotel Investments

Service Properties Trust invests in hotels, providing accommodations to travelers and business travelers.

Net Lease Properties

Service Properties Trust owns and operates net lease properties, providing long-term leases to tenants.

Industrial and Logistics Properties

Service Properties Trust owns and operates industrial and logistics properties, providing space for manufacturing, distribution, and logistics.

8. Service Properties Trust's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Service Properties Trust is moderate due to the availability of alternative investment options for investors.

Bargaining Power Of Customers

The bargaining power of customers is low due to the fragmented nature of the real estate investment trust (REIT) industry.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate due to the presence of multiple suppliers in the market, but the company's scale and reputation also give it some bargaining power.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the REIT industry, including the need for significant capital and regulatory approvals.

Intensity Of Rivalry

The intensity of rivalry is high due to the competitive nature of the REIT industry, with many established players competing for investors' attention.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	81.83%
Debt Cost	6.24%
Equity Weight	18.17%
Equity Cost	14.65%
WACC	7.77%
Leverage	450.21%

11. Quality Control: Service Properties Trust passed 1 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

RLJ Lodging

A-Score: 6.1/10

Value: 8.3

Growth: 4.7

Quality: 6.1

Yield: 8.0

Momentum: 2.5

Volatility: 7.0

1-Year Total Return ->

DiamondRock Hospitality

A-Score: 5.7/10

Value: 5.3

Growth: 5.0

Quality: 4.9

Yield: 7.0

Momentum: 3.5

Volatility: 8.3

1-Year Total Return ->

Chatham Lodging

A-Score: 5.5/10

Value: 6.2

Growth: 5.3

Quality: 4.7

Yield: 6.0

Momentum: 2.5

Volatility: 8.0

1-Year Total Return ->

Xenia Hotels & Resorts

A-Score: 5.1/10

Value: 5.5

Growth: 4.7

Quality: 3.5

Yield: 6.0

Momentum: 4.0

Volatility: 7.0

1-Year Total Return ->

Braemar Hotels & Resorts

A-Score: 5.1/10

Value: 9.1

Growth: 3.0

Quality: 3.7

Yield: 9.0

Momentum: 3.0

Volatility: 2.7

1-Year Total Return ->

SVC

A-Score: 4.9/10

Value: 9.8

Growth: 3.2

Quality: 5.2

Yield: 6.0

Momentum: 1.5

Volatility: 3.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-11.91%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.77%

Service Properties Trust - US81761L1026

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on SVC

1.c. Company Highlights

Cheaper

Lower Quality

Average Yield

Earnings Miss

Weak Momentum

Lower Growth

Revenues Miss

More Volatile

Earnings Beats

Revenues Beats

Stable Momentum

2. Service Properties Trust's Q3 2025 Earnings: A Mixed Bag

Segment Performance

Guidance and Outlook

Valuation and Leverage

Analyst Estimates and Future Prospects

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.21%)

6. Segments

Hotels

Expected Growth: 2%

Net Lease

Expected Growth: 3%

7. Detailed Products

Travel Centers

Hotel Investments

Net Lease Properties

Industrial and Logistics Properties

8. Service Properties Trust's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Service Properties Trust passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

1.81$

Current Price

1.81$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA