# Service Properties Trust (SVC) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Service Properties Trust's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/945394/000094539423000015/svc-20221231.htm
Accession: 0000945394-23-000015
Filing date: 2023-02-28
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/SVC/
All MD&A years: /company/SVC/mda/
Previous year: /company/SVC/mda/fy2021/ (FY 2021)
Next year: /company/SVC/mda/fy2023/ (FY 2023)

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, 2022, we owned 1,003 properties in 46 states, the District of Columbia, Canada and Puerto Rico.

Business Environment and Outlook. As a result of the COVID-19 pandemic, and the market practices that arose or increased in response to the pandemic, the impacts they have had on travel and the broader economy throughout the U.S. since March 2020, our hotels have experienced significant declines in occupancy, which have had a significant negative effect on our operating results and cash flow. While occupancy has since recovered significantly, there remains uncertainty as to when and if operations at our hotels will return to pre-pandemic levels. We currently expect that the recovery with respect to business transient and group business will be gradual and likely inconsistent. We also currently expect the recovery of the U.S. hospitality industry to be a multi-year process. In addition, consumer confidence, corporate travel and lodging demand will continue to be affected by economic and market conditions, unemployment levels, perceptions of the safety of returning to normal activities, the continued use of video conferencing technologies rather than in person meetings and broader macroeconomic trends and conditions. These trends, together with increasing labor costs and shortages and commodity and other price inflation and supply chain challenges, may continue to negatively impact our hotel operations, the operations of our tenants and our financial results.

In response to inflationary pressures, the U.S. Federal Reserve has significantly increased the federal funds rate since the beginning of 2022 and has signaled that further increases are likely to occur. These inflationary pressures and rising interest rates in the United States and globally have given rise to increasing concerns that the U.S. economy may soon enter an economic recession and they have caused disruptions in the financial markets. 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 and of our securities to decline.

Liquidity and Financing Transactions. In April 2022, we and the lenders amended our credit agreement to among other things, obtain additional covenant relief, we repaid $200,000 of the outstanding balance, and reduced the size of the facility from $1,000,000 to $800,000. In October 2022, we and the lenders further amended our credit agreement and exercised our remaining six month option to extend the maturity date to July 15, 2023. On June 15, 2022, we redeemed at par all of our outstanding 5.00% senior notes due 2022 for a redemption price equal to the principal amount of $500,000, plus accrued and unpaid interest with cash on hand, including proceeds from the property dispositions discussed below. As of February 24, 2023, we have no amounts outstanding under our credit facility and $616,867 of cash or cash equivalents.

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In February 2023, one of our subsidiaries issued $610,200 in aggregate principal amount of net lease mortgage notes. The notes were issued in three classes, as summarized below:

[[GREPCENT_TABLE]]
[["Note Class","","S&P Rating","","Amount","","Coupon Rate","","Term","","Maturity"],["Class A","","AAA","","$","305,000","","","5.15%","","5 years","","February 2028"],["Class B","","AA","","173,000","","","5.70%","","5 years","","February 2028"],["Class C","","A","","132,200","","","6.70%","","5 years","","February 2028"],["Total / weighted average","","$","610,200","","","5.50%"]]
[[/GREPCENT_TABLE]]

The notes are non-recourse and are secured by the assets of the subsidiary, which include 308 net lease retail properties with annual minimum rents of $65,273 and a gross book value of $754,841 as of December 31, 2022. The net proceeds from the issuance of the notes were approximately $555,000, after initial purchaser discounts and offering costs. Simultaneously with the pricing of the notes, we announced the early redemption of our outstanding 4.50% senior notes due 2023 at a redemption price equal to the principal amount of $500,000, plus accrued and unpaid interest to, but excluding the date of redemption. This redemption is expected to occur on or about March 8, 2023 and we currently expect to fund this redemption with the proceeds from the issuance of the net lease mortgage notes described above.

Disposition Activities. During the year ended December 31, 2022, we sold 65 hotels with 8,296 rooms for an aggregate sales price of $543,413, excluding closing costs. Also during the year ended December 31, 2022, we sold 21 net lease properties with an aggregate of 138,638 rentable square feet for an aggregate sales price of $16,435, excluding closing costs. From January 1, 2023 through February 24, 2023, we sold eight hotels with 1,097 rooms and a carrying value of $47,517 for a sale price of $53,268. As of February 24, 2023, we have entered into agreements to sell nine Marriott branded hotels with an aggregate of 1,210 rooms for an aggregate sales price of $88,476, one additional hotel with 219 keys for a sale price of $14,580 and two net lease properties with an aggregate of 2,384 square feet for an aggregate sales price of $670. We expect the majority of these pending sales to be completed by the end of the first quarter of 2023. We continue to market two net lease properties with an aggregate of 7,283 square feet for sale.

For further discussion of our property sales and debt, see Notes 4, 5 and 7 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.

Management Agreements and Leases. At December 31, 2022, we owned 238 hotels operated under six agreements. We leased all of these hotels to our wholly owned TRSs that are managed by hotel operating companies as of that date. At December 31, 2022, we owned 765 service-oriented properties with 180 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. 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. On January 7, 2022, we and Sonesta amended and restated our management agreements effective January 1, 2022. As of December 31, 2022, we owned 196 hotels that are managed by Sonesta. In January 2023, we sold one of these hotels and one additional hotel is under agreement to be sold. We expect this sale to be completed in March 2023.

For further discussion of our hotel agreements with Sonesta, see Note 5 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.

Hotel Portfolio. As of December 31, 2022, we owned 238 hotels. In 2022, the U.S. hotel industry generally realized increases in ADR, revenue per available room, or RevPAR, and occupancy compared to the corresponding 2021 periods. The following table provides a summary for all our hotels of these revenue metrics for the periods presented which we believe are key indicators of performance at our hotels.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","2021","","Change"],["All Hotels"],["No. of hotels","","238","","","303","","","(65)"],["No. of rooms or suites","","40,053","","","48,346","","","(8,293)"],["Occupancy","","61.3","%","","53.0","%","","8.3","pts"],["ADR","","$","134.47","","","$","105.36","","","$","29.11"],["RevPAR","","$","82.43","","","$","55.84","","","$","26.59"]]
[[/GREPCENT_TABLE]]

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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, 2022 and 2021, SVC’s comparable results exclude three hotels that had suspended operations during part of the periods presented. The following table provides a summary of these revenue metrics for the periods presented.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","2021","","Change"],["Comparable Hotels"],["No. of hotels","","235","","","235","","","\u2014"],["No. of rooms or suites","","39,364","","","39,364","","","\u2014"],["Occupancy","","61.4","%","","52.5","%","","8.9","pts"],["ADR","","$","133.72","","","$","110.39","","","$","23.33"],["RevPAR","","$","82.10","","","$","57.95","","","$","24.15"]]
[[/GREPCENT_TABLE]]

We believe these results are primarily due to the improved lodging fundamentals in the current year periods and disruption and displacement at certain of our hotels as a result of the COVID-19 pandemic and market practices that arose or increased since the beginning of the pandemic that negatively affected results more in 2021.

Net Lease Portfolio. As of December 31, 2022, we owned 765 service-oriented retail properties with 13,374,325 square feet and annual minimum rent of $372,418, and 180 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 97.6% occupied as of December 31, 2022 with a weighted (by annual minimum rent) lease term of 9.6 years, operating under 138 brands in 21 distinct industries. TA is our largest tenant. As of December 31, 2022, we leased 177 of our travel centers to TA under five leases that expire between 2029 and 2035 and require annual minimum rents of $246,110.

As disclosed elsewhere in this Annual Report on Form 10-K, in connection with the BP Acquisition we entered into the Consent Agreement, pursuant to which, among other things, agreed to amend and restate our existing TA lease and guaranty agreements, effective at the time of the Merger.

Additional details of our hotel operating agreements and net lease agreements are set forth in Notes 5, 9 and 15 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.

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Results of Operations (amounts in thousands, except per share amounts)

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

[[GREPCENT_TABLE]]
[["","For the Year Ended December 31,"],["","","","","","Increase (Decrease)","","% Increase (Decrease)"],["","2022","","2021"],["Revenues:"],["Hotel operating revenues","$","1,467,344","","","$","1,104,678","","","$","362,666","","","32.8","%"],["Rental income","395,667","","","390,902","","","4,765","","","1.2","%"],["Total revenues","1,863,011","","","1,495,580","","","367,431","","","24.6","%"],["Expenses:"],["Hotel operating expenses","1,227,357","","","1,010,737","","","216,620","","","21.4","%"],["Other operating expenses","13,176","","","15,658","","","(2,482)","","","(15.9)","%"],["Depreciation and amortization - hotels","221,416","","","266,641","","","(45,225)","","","(17.0)","%"],["Depreciation and amortization - net lease portfolio","179,692","","","219,324","","","(39,632)","","","(18.1)","%"],["Total depreciation and amortization","401,108","","","485,965","","","(84,857)","","","(17.5)","%"],["General and administrative","44,404","","","53,439","","","(9,035)","","","(16.9)","%"],["Transaction related costs","1,920","","","64,764","","","(62,844)","","","n/m"],["Loss on asset impairment, net","10,989","","","78,620","","","(67,631)","","","(86.0)","%"],["Total expenses","1,698,954","","","1,709,183","","","(10,229)","","","(0.6)","%"],["Gain on sale of real estate, net","47,818","","","11,522","","","36,296","","","315.0","%"],["Unrealized (losses) gains on equity securities, net","(8,104)","","","22,535","","","(30,639)","","","(136.0)","%"],["Interest income","3,379","","","664","","","2,715","","","408.9","%"],["Interest expense","(341,795)","","","(365,721)","","","23,926","","","(6.5)","%"],["Loss on early extinguishment of debt","(791)","","","\u2014","","","(791)","","","n/m"],["Loss before income taxes and equity losses of an investee","(135,436)","","","(544,603)","","","409,167","","","n/m"],["Income tax (expense) benefit","199","","","941","","","(742)","","","n/m"],["Equity in earnings (losses) of an investee","2,856","","","(941)","","","3,797","","","n/m"],["Net loss","$","(132,381)","","","$","(544,603)","","","$","412,222","","","n/m"],["Weighted average shares outstanding (basic and diluted)","164,738","","","164,566","","","172","","","0.1","%"],["Net loss per common share: (basic and diluted)","$","(0.80)","","","$","(3.31)","","","$","2.51","","","n/m"]]
[[/GREPCENT_TABLE]]

References to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended December 31, 2022, compared to the year ended December 31, 2021. For a comparison of consolidated results for the year ended December 31, 2021 compared to the year ended December 31, 2020 please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Hotel operating revenues. The increase in hotel operating revenues is primarily a result of higher occupancies and higher average rates at certain of our hotels in the 2022 period and the greater negative impact the COVID-19 pandemic had on our hotels in the 2021 period ($441,676), partially offset by the sale of certain of our hotels since January 1, 2021 ($79,010). Additional operating statistics of our hotels are included in the tables on page 68.

Rental income. The increase in rental income is primarily the result of increases in rental rates and percentage rent recognized at certain of our properties in the 2022 period as compared to the 2021 period ($5,473), partially offset by the impact of properties sold and vacancies at certain of our properties ($708).

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Hotel operating expenses. The increase in hotel operating expenses is primarily the result of an increase in occupancy at certain managed hotels resulting in an increase in wages and benefits ($127,784), an increase in rooms, food and beverage, marketing and sales, management fees and other operating expenses ($153,392), partially offset by a decrease in real estate taxes and the sale of certain hotels since January 1, 2021 ($64,556).

Other operating expenses. The decrease in other operating expenses is primarily the result of the sale of certain vacant net lease properties since January 1, 2021.

Depreciation and amortization - hotels. The decrease in depreciation and amortization - hotels is primarily the result of the sale of certain hotels and certain hotels classified as held for sale ($46,432) and certain of our depreciable assets becoming fully depreciated ($50), partially offset by depreciation and amortization related to capital additions since January 1, 2021 ($1,257).

Depreciation and amortization - net lease portfolio. The decrease in depreciation and amortization - net lease portfolio is a result of certain of our depreciable assets becoming fully depreciated since January 1, 2021 ($13,725) and the result of the sale of certain properties since January 1, 2021 ($26,307).

General and administrative. The decrease in general and administrative costs is primarily due to a decrease in business management fees as a result of a decrease in our market capitalization ($6,642), and lower professional service expenses ($282) in the 2022 period.

Transaction related costs. Transaction related costs for the year ended December 31, 2022 included $1,920 of costs related to our exploration of possible financing transactions. Transaction related costs for the year ended December 31, 2021 included $38,446 of working capital advances we previously funded under our agreements with Marriott, IHG and Hyatt that we expensed as a result of the amounts no longer expected to be recoverable, $19,920 of hotel manager transition related costs resulting from the rebranding of 94 hotels during the period, and $6,398 of legal costs related to our arbitration proceeding with Marriott.

Loss on asset impairment, net. We recorded a $10,989 loss on asset impairment during the 2022 period to reduce the carrying value of 26 hotels and five net lease properties to their estimated fair value less costs to sell. We recorded a $78,620 loss on asset impairment during the 2021 period to reduce the carrying value of 35 hotels and 26 net lease properties to their estimated fair value less costs to sell.

Gain on sale of real estate, net. We recorded a $47,818 net gain on sale of real estate in 2022 in connection with the sales of 65 hotels and 21 net lease properties and a $11,522 net gain on sale of real estate in 2021 in connection with the sales of seven hotels and eleven net lease properties.

Unrealized (losses) gains on equity securities, net. Unrealized (losses) gains on equity securities, net represent the adjustment required to adjust the carrying value of our investment in shares of TA common stock to its fair value as of December 31, 2022 and 2021.

Interest income. The increase in interest income is due to higher interest rates during the 2022 period.

Interest expense. The decrease in interest expense is due to lower average outstanding borrowings, partially offset by higher weighted average interest rates on borrowings under our revolving credit facility during the 2022 period.

Loss on early extinguishment of debt. We recorded a $791 loss on early extinguishment of debt in the 2022 period related to the write off of deferred financing costs and unamortized discounts relating to the amendment of our revolving credit facility and the repayment of $500,000 of unsecured senior notes.

Income tax (expense) benefit. The change in income tax (expense) benefit is primarily due to a deferred foreign tax benefit in the 2021 period ($1,972) and a decrease in state tax expenses in the 2022 period ($239).

Equity in earnings (losses) of an investee. Equity in earnings (losses) of an investee represents our proportionate share of the earnings of Sonesta.

Net loss. Our net loss and our net loss per common share (basic and diluted) each decreased in 2022 compared to 2021 primarily due to the revenue and expense changes discussed above.

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Liquidity and Capital Resources (dollar amounts in thousands, except share amounts)

Our Managers and Tenants

The COVID-19 pandemic has had a material and adverse effect on the lodging and service industries and on our hotel managers’ and tenants’ businesses, and the market practices that arose or increased in response to the pandemic have had adverse impacts on some of those industries and businesses. As a result, the ability or willingness of our hotel managers and tenants to pay us our owner's priority returns and rents may decline, the likelihood that they will default in paying us returns and rent may increase and the value of our properties that they operate may decline. We continue to carefully monitor the effects of the market practices that arose or increased since the beginning of the COVID-19 pandemic and economic and market conditions on our operators and our other stakeholders.

As of December 31, 2022, all 238 of our hotels were managed by five hotel operating companies. Our 765 net lease properties were leased to 180 tenants as of December 31, 2022. 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 owner's priority returns and rents, from their separate resources. As of December 31, 2022, our hotel managers included Sonesta (196 hotels), Hyatt (17 hotels), Radisson (eight hotels), Marriott (16 hotels) and IHG (one hotel). TA is our largest tenant (177 travel centers).

On January 7, 2022, we and Sonesta amended and restated our management agreements effective January 1, 2022. As of that date, we owned 261 hotels managed by Sonesta, including the 67 hotels we expected to sell, or the Sale Hotels. Among other terms, the changes to the agreements between us and Sonesta for 194 hotels we did not expect to sell, or the Retained Hotels, were as follows:

•The term for the Retained Hotels expires on January 31, 2037 and includes two 15-year renewal options.

•All Retained Hotels are subject to a pooling agreement that combines the management agreements for the Retained Hotels for purposes of calculating gross revenues, hotel operating expenses, fees and distributions and the owner’s priority return due to us.

•The owner’s priority return for the Retained Hotels was initially set at $325,200 annually. We have the right to terminate Sonesta’s management of specific hotels that we own if minimum performance thresholds are not met starting in 2023.

•We will renovate the Retained Hotels to comply with agreed upon brand standards. As we advance such funding or fund other capital expenditures, the aggregate annual owner’s priority return due to us will increase by 6% of the amounts funded.

•Trade area restrictions by hotel brand have been added to define boundaries to protect our owned hotels in response to Sonesta increasing its franchising and third-party management activities.

As of December 31, 2022, we owned 196 hotels that are managed by Sonesta. In January 2023, we sold one of these hotels and one additional hotel is under agreement to be sold. We expect this sale to be completed by the end of the first quarter of 2023.

For the Sale Hotels, the term was extended to the earlier of December 31, 2022 (or until the applicable hotel has been sold) and the FF&E reserve funding requirement was removed. Effective December 31, 2022, the terms of the management agreements for the remaining two Sale Hotels were extended to January 31, 2023 and automatically renew for successive one month periods until the applicable hotel is sold or the agreement is terminated. Our owner’s priority return will be reduced by the current owner’s priority return for a Sale Hotel once sold. The total owner’s priority return for these two remaining Sale Hotels was $7,238 as of December 31, 2022.

See Notes 5 and 10 to our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information on these agreements.

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We recorded reserves for uncollectable amounts of $320 and reduced our reserves for uncollectable amounts by $9 for the years ended December 31, 2022 and 2021, respectively, based on our assessment of collectability and cash received from certain tenants. We had reserves for uncollectable rents of $7,697 and $15,519 as of December 31, 2022 and December 31, 2021, respectively, included in other assets in our consolidated balance sheets.

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, 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. 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 coverage of 3.00x and 2.58x as of December 31, 2022 and 2021, 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 owner's priority returns from our hotels, rents from our net lease portfolio and borrowings under our revolving credit facility. We receive owner's priority 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 that 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 owner’s priority returns and rents to us when due, and, as a result, our cash flows and net income would decline and we may need to reduce the amount of, or even eliminate, our distributions to common shareholders. Also, our revolving credit facility matures on July 15, 2023 and we have no remaining extension options. Although we currently expect to enter into a new facility prior to its maturity or obtain alternative financing, there can be no assurance we will be successful in doing so.

The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","2021"],["Cash and cash equivalents and restricted cash at the beginning of the period","","$","947,418","","","$","91,456"],["Net cash provided by (used in):"],["Operating activities","","243,127","","","49,904"],["Investing activities","","397,253","","","(101,310)"],["Financing activities","","(1,542,378)","","","907,368"],["Cash and cash equivalents and restricted cash at the end of the period","","$","45,420","","","$","947,418"]]
[[/GREPCENT_TABLE]]

The increase in cash provided by operating activities for the year ended December 31, 2022 as compared to the prior year is primarily due to higher returns and rents earned from our hotel and net lease portfolios and lower interest expense in 2022. The change from cash used in investing activities in 2021 to cash provided by investing activities in 2022 is primarily due to an increase in real estate dispositions in the 2022 period, partially offset by an increase in investments in Sonesta in the 2022 period. The change from cash provided by financing activities in 2021 to cash used in financing activities in 2022 is primarily due to our repayment of debt in 2022 compared to a drawdown of the then remaining capacity on our revolving credit facility in 2021.

We maintain our qualification for taxation as a REIT under the IRC by meeting certain requirements. We lease 238 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

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, 2022, we funded $115,927 for capital improvements in excess of FF&E reserve fundings available from hotel operations to our hotels. We currently expect to fund $250,000 during 2023 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 year ended December 31, 2022, certain of our hotel managers deposited $9,268 to these accounts and spent $4,756 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of December 31, 2022, there was $6,940 on deposit in these escrow accounts, which was held directly by us and is reflected in our consolidated balance sheets as restricted cash.

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 did not fund any capital improvements to our properties that we leased to TA during the year ended December 31, 2022. Tenants are not obligated to request and we are not obligated to purchase any such improvements. During the year ended December 31, 2022, we funded $6,230 for capital improvements to our other net lease properties. As of December 31, 2022, we had $2,627 of unspent leasing-related obligations related to certain net lease tenants. As disclosed elsewhere in this Annual Report on Form 10-K, in connection with the BP Acquisition we entered into the Consent Agreement, pursuant to which, among other things, agreed to amend and restate our existing TA lease and guaranty agreements, effective at the time of the Merger.

During the year ended December 31, 2022, we sold 65 hotels with 8,296 rooms for an aggregate sales price of $543,413, excluding closing costs, and 21 net lease properties with 138,638 square feet for an aggregate sales price of $16,435, excluding closing costs. We used the net proceeds from these sales for the repayment of debt and for general business purposes. From January 1, 2023 through February 24, 2023, we sold eight hotels with 1,097 rooms and a carrying value of $47,517 for a sale price of $53,268. As of February 24, 2023, we have entered into agreements to sell nine Marriott branded hotels with an aggregate of 1,210 rooms for an aggregate sales price of $88,476, one additional hotel with 219 keys for a sale price of $14,580 and two net lease properties with an aggregate of 2,384 square feet for an aggregate sales price of $670. We expect the majority of these pending sales to be completed by the end of the first quarter of 2023. We continue to market two net lease properties with an aggregate of 7,283 square feet for sale. We expect to use the proceeds from these asset sales for general business purposes, which may include the repayment of debt.

During the year ended December 31, 2022, we funded $45,470 of capital contributions to Sonesta related to Sonesta’s acquisition of a portfolio of four hotels located in New York, NY using cash on hand.

During the year ended December 31, 2022, we declared and paid regular quarterly distributions to our common shareholders using cash on hand as follows:

[[GREPCENT_TABLE]]
[["Declaration Date","","Record Date","","Paid Date","","Dividend Per Common Share","","Total Distributions"],["January 13, 2022","","January 24, 2022","","February 17, 2022","","$","0.01","","","$","1,651"],["April 14, 2022","","April 25, 2022","","May 19, 2022","","0.01","","","1,651"],["July 14, 2022","","July 25, 2022","","August 18, 2022","","0.01","","","1,651"],["October 13, 2022","","October 24, 2022","","November 17, 2022","","0.20","","","33,091"],["","","","","","","$","0.23","","","$","38,044"]]
[[/GREPCENT_TABLE]]

On January 12, 2023, we declared a regular quarterly distribution to common shareholders of record on January 23, 2023 of $0.20 per share, or $33,091. We paid this amount on February 16, 2023 using cash on hand.

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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 an $800,000 revolving credit facility which is governed by our credit agreement. The maturity date of our revolving credit facility is July 15, 2023. We are required to pay interest at the rate of LIBOR plus a premium, which was 250 basis points per annum, subject to a LIBOR floor of 0.50% at December 31, 2022, 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, 2022. 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, 2022, the annual interest rate payable on borrowings under our revolving credit facility was 6.79%.

We and our lenders amended our credit agreement in 2020. Among other things, the amendment waived all of the then existing financial covenants through the end of the then existing agreement term, or July 15, 2022. As a result of the amendment, among other things:

•we pledged certain equity interests of subsidiaries owning properties and provided first mortgage liens on 74 properties owned by the pledged subsidiaries;

•we had 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;

•we agreed to certain covenants and restrictions on distributions to common shareholders, share repurchases, incurring indebtedness, and acquiring real property (in each case subject to various exceptions);

•we agreed to maintain minimum liquidity of $125,000;

•we were generally required to apply the net cash proceeds from the disposition of assets, capital markets transactions and debt refinancings to repay outstanding amounts under the credit agreement, and then to other debt maturities;

•in order to exercise the first six month extension option under the credit agreement, we would have needed to be in compliance with the financial covenants under the agreement calculated using pro forma projections as defined in the agreement for the quarter ending June 30, 2022, annualized, and have repaid or refinanced our $500,000 of 5.00% senior notes due in August 2022; and

•we were not able to utilize the feature in our credit agreement pursuant to which maximum aggregate borrowings may be increased to up to $2,300,000 on a combined basis in certain circumstances until we demonstrated compliance with certain covenants.

On April 14, 2022, we and the lenders further amended our credit agreement and exercised our first of two options to extend the maturity date of our revolving credit facility by six months to January 15, 2023. Pursuant to the amendment:

•we repaid $200,000 of the outstanding balance and reduced the size of the revolving credit facility from $1,000,000 to $800,000;

•we became permitted to acquire up to an aggregate of $300,000 of real property through the waiver period, which was extended pursuant to the amendment to December 31, 2022;

•certain of the financial covenants in our credit agreement became tested and in full force and effect beginning with the quarter ended September 30, 2022 and were modified to lower the required fixed charge coverage ratio from 1.5x to 1.0x through December 31, 2022, increase the required leverage ratio limit from 60% to 70% and increase the minimum liquidity requirement from $125,000 to $150,000 (which amount is subject to an additional increase as noted below);

•we were able to fund through the waiver period, which ended on December 31, 2022, an aggregate of $100,000 of capital contributions requested by Sonesta for business activities and to acquire additional shares of common stock of TA to retain our pro rata ownership of TA, an increase from the previous aggregate limit of $50,000;

•the interest rate premium payable on borrowings under our revolving credit facility was increased from 235 basis points per annum to 250 basis points per annum, with the facility fee remaining unchanged at 30 basis points per annum on the total amount of lending commitments under the facility. The interest rate premiums and the facility fee continued to be subject to adjustment based upon changes to our credit ratings and, pursuant to the amendment, the interest rate premium will increase by an additional 25 basis points if we do not satisfy certain financial covenants; and

•we became required to maintain minimum liquidity of at least $150,000.

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On June 15, 2022, we redeemed at par all of our outstanding 5.00% senior notes due 2022 for a redemption price equal to the principal amount of $500,000, plus accrued and unpaid interest using cash on hand.

On October 4, 2022, we and the lenders further amended the credit agreement and exercised our remaining option to extend the maturity date of our revolving credit facility by six months to July 15, 2023. Pursuant to the amendment:

•we agreed to maintain minimum liquidity of $600,000 until we repay or refinance our $500,000 of 4.5% senior notes due in June 2023 and maintain at least $150,000 of liquidity thereafter; and

•restrictions on paying common dividends and issuing secured debt previously agreed to during the existing waiver period were removed, subject to certain conditions.

As of December 31, 2022, we have met the conditions to exit the waiver period, and as a result, the restrictions on capital expenditures and other investments, including acquisitions, have expired.

Our revolving credit facility continues to be secured by 73 properties with an undepreciated book value of $1,562,869 as of December 31, 2022 to secure our obligations under the credit agreement.

As of December 31, 2022, we had no borrowings outstanding under our revolving credit facility.

Our term debt maturities (other than our revolving credit facility) as of December 31, 2022 were as follows:

[[GREPCENT_TABLE]]
[["Year","","Maturity"],["2023","","$","500,000"],["2024","","1,175,000"],["2025","","1,150,000"],["2026","","800,000"],["2027","","850,000"],["2028","","400,000"],["2029","","425,000"],["2030","","400,000"],["","","$","5,700,000"]]
[[/GREPCENT_TABLE]]

None of our unsecured debt obligations require principal or sinking fund payments prior to their maturity dates.

In February 2023, one of our subsidiaries issued $610,200 in aggregate principal amount of net lease mortgage notes. The notes were issued in three classes, as summarized below:

[[GREPCENT_TABLE]]
[["Note Class","","S&P Rating","","Amount","","Coupon Rate","","Term","","Maturity"],["Class A","","AAA","","$","305,000","","","5.15%","","5 years","","February 2028"],["Class B","","AA","","173,000","","","5.70%","","5 years","","February 2028"],["Class C","","A","","132,200","","","6.70%","","5 years","","February 2028"],["Total / weighted average","","$","610,200","","","5.50%"]]
[[/GREPCENT_TABLE]]

The notes are non-recourse and secured by the assets of the subsidiary, which includes 308 net lease properties with annual minimum rents of $65,273 and a gross book carrying value of $754,841 as of December 31, 2022. The net proceeds from this issuance were approximately $555,000 after initial purchaser discounts and offering costs. We simultaneously announced the early redemption of our outstanding 4.50% Senior Notes due 2023 at a redemption price equal to the principal amount of $500,000, plus accrued and unpaid interest to, but excluding the date of redemption. This redemption is expected to occur on or about March 8, 2023 and we currently expect to fund this redemption by using the proceeds from the net lease mortgage notes described above.

We currently expect to use cash on hand, the cash flows from our operations, borrowings under our revolving credit facility, net proceeds from any asset sales and net proceeds of offerings of equity or debt securities, 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

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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.

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.

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 duration and severity of the COVID-19 pandemic, and the market practices that arose or increase in response to the pandemic, and its impact on economic conditions, as well as the impacts of the current, and possibly future, inflationary conditions, increasing interest rates and a possible 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 December 31, 2022 consisted of $5,700,000 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. 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 ceasing to act as our business manager. As of December 31, 2022, we believe we were in compliance with all of the covenants under our indentures and their supplements and our credit agreement.

Senior Notes Indenture Covenants

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, 2022:

[[GREPCENT_TABLE]]
[["","","","Actual Results","","Covenant Requirement"],["Total debt / adjusted total assets","","","53.6%","","Maximum of 60%"],["Secured debt / adjusted total assets","","","\u2014%","","Maximum of 40%"],["Consolidated income available for debt service / debt service","","","1.85x","","Minimum of 1.50x"],["Total unencumbered assets / unsecured debt","","","159.1%","","Minimum 150%"]]
[[/GREPCENT_TABLE]]

Our ability to incur additional debt is subject to meeting the required covenant levels and subject to the provisions of our credit facility and senior notes indentures.

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.

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Supplemental Guarantor Information

Our $800,000 of 7.50% unsecured senior notes due 2025, or the 2025 Notes, and our $450,000 of 5.50% unsecured senior notes due 2027, or the 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 $4,450,000 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 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 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 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 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.

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:

[[GREPCENT_TABLE]]
[["","","As of December 31, 2022"],["Real estate properties, net(1)","","$","5,316,318"],["Intercompany balances(2)","","580,684"],["Other assets, net","","723,092"],["Indebtedness, net","","$","5,655,530"],["Other liabilities","","366,936"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2022"],["Revenues","","$","1,722,397"],["Expenses","","1,989,711"],["Net loss","","$","(267,314)"]]
[[/GREPCENT_TABLE]]

(1)Real estate properties, net as of December 31, 2022 includes $191,662 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, 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, 9 and 10 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 2023 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, 2022. 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,” “Business” in Part I, Item 1 and “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.

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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.

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.

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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 our 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.

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 2019 through 2022 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.

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Property and Operating Statistics (dollar amounts in thousands)

As of December 31, 2022, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 149 distinct brands across 22 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.

[[GREPCENT_TABLE]]
[["Comparable Hotels*","","No. of Hotels","","No. of Rooms or Suites","","Occupancy","","ADR","","RevPAR"],["","","Service Level","","","","Year Ended December 31,","","Year Ended December 31,","","Year Ended December 31,"],["Brand","","","","","2022","2021","Change","","2022","2021","Change","","2022","2021","Change"],["Sonesta (1)","","Full Service","","22","","7,149","","","60.4","%","47.4","%","13.0 pts","","$","150.40","","$","132.07","","13.9","%","","$","90.84","","$","62.60","","45.1","%"],["Royal Sonesta (1)","","Full Service","","16","","","5,291","","","52.2","%","36.3","%","15.9 pts","","236.67","","190.05","","24.5","%","","123.54","","68.99","","79.1","%"],["Radisson Hotel","","Full Service","","5","","","1,149","","","64.1","%","50.4","%","13.7 pts","","133.59","","105.23","","27.0","%","","85.63","","53.04","","61.4","%"],["Crowne Plaza","","Full Service","","1","","","495","","","54.4","%","46.6","%","7.8 pts","","132.27","","111.83","","18.3","%","","71.95","","52.11","","38.1","%"],["Country Inn and Suites","","Full Service","","3","","","430","","","62.8","%","50.0","%","12.8 pts","","136.92","","109.10","","25.5","%","","85.99","","54.55","","57.6","%"],["Full Service Total/Average","","47","","14,514","","57.5","%","43.7","%","13.8 pts","","176.67","","145.40","","21.5","%","","101.59","","63.54","","59.9","%"],["Sonesta Select (1)","","Select Service","","45","","","6,579","","","51.1","%","37.0","%","14.1 pts","","117.49","","105.56","","11.3","%","","60.04","","39.06","","53.7","%"],["Hyatt Place","","Select Service","","17","","2,107","","","67.4","%","60.7","%","6.7 pts","","119.00","","101.76","","16.9","%","","80.21","","61.77","","29.9","%"],["Courtyard","","Select Service","","13","","1,813","","","55.5","%","50.7","%","4.8 pts","","119.01","","103.14","","15.4","%","","66.05","","52.29","","26.3","%"],["Select Service Total/Average","","75","","10,499","","55.1","%","44.1","%","11.0 pts","","118.13","","104.03","","13.6","%","","65.09","","45.88","","41.9","%"],["Sonesta ES Suites (1)","","Extended Stay","","60","","","7,643","","","69.3","%","66.7","%","2.6 pts","","124.90","","105.72","","18.1","%","","86.56","","70.52","","22.7","%"],["Sonesta Simply Suites (1)","","Extended Stay","","50","","","6,366","","","71.2","%","68.8","%","2.4 pts","","86.18","","72.37","","19.1","%","","61.36","","49.79","","23.2","%"],["Residence Inn","","Extended Stay","","3","","","342","","","64.0","%","57.2","%","6.8 pts","","120.25","","110.01","","9.3","%","","76.96","","62.93","","22.3","%"],["Extended Stay Total/Average","","113","","14,351","","70.0","%","67.4","%","2.6 pts","","107.49","","90.81","","18.4","%","","75.24","","61.21","","22.9","%"],["Comparable Hotels Total/Average","","235","","","39,364","","","61.4","%","52.5","%","8.9 pts","","$","133.72","","$","110.39","","21.1","%","","$","82.10","","$","57.95","","41.7","%"]]
[[/GREPCENT_TABLE]]

*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, 2022 and 2021, our comparable results excluded three hotels that had suspended operations during part of the periods presented.

[[GREPCENT_TABLE]]
[["All Hotels*","","No. of Hotels","","No. of Rooms or Suites","","Occupancy","","ADR","","RevPAR"],["","","Service Level","","","","Year Ended December 31,","","Year Ended December 31,","","Year Ended December 31,"],["Brand","","","","","2022","2021","Change","","2022","2021","Change","","2022","2021","Change"],["Sonesta (1)","","Full Service","","23","","","7,368","","","60.4","%","47.4","%","13.0 pts","","$","150.40","","$","132.07","","13.9","%","","$","90.84","","$","62.60","","45.1","%"],["Royal Sonesta (1)","","Full Service","","17","","","5,663","","","52.2","%","35.7","%","16.5 pts","","236.07","","190.02","","24.2","%","","123.23","","67.84","","81.6","%"],["Radisson Hotel","","Full Service","","5","","","1,149","","","64.1","%","50.4","%","13.7 pts","","133.59","","105.23","","27.0","%","","85.63","","53.04","","61.4","%"],["Crowne Plaza","","Full Service","","1","","","495","","","54.4","%","46.6","%","7.8 pts","","132.27","","111.83","","18.3","%","","71.95","","52.11","","38.1","%"],["Country Inn and Suites","","Full Service","","3","","430","","","62.8","%","50.0","%","12.8","pts","","136.92","","109.10","","25.5","%","","$","85.99","","$","54.55","","57.6","%"],["Full Service Total/Average","","49","","15,105","","57.4","%","43.4","%","14.0 pts","","177.85","","145.78","","22.0","%","","102.09","","63.27","","61.4","%"],["Sonesta Select (1)","","Select Service","","45","","","6,579","","","51.1","%","37.0","%","14.1 pts","","117.49","","105.56","","11.3","%","","60.04","","39.06","","53.7","%"],["Hyatt Place","","Select Service","","17","","2,107","","","67.4","%","60.7","%","6.7 pts","","119.00","","101.76","","16.9","%","","80.21","","61.77","","29.9","%"],["Courtyard","","Select Service","","13","","1,813","","","55.5","%","50.7","%","4.8 pts","","119.01","","103.14","","15.4","%","","66.05","","52.29","","26.3","%"],["Select Service Total/Average","","75","","10,499","","55.1","%","44.1","%","11.0 pts","","118.13","","104.03","","13.6","%","","65.09","","45.88","","41.9","%"],["Sonesta ES Suites (1)","","Extended Stay","","60","","","7,643","","","69.3","%","66.7","%","2.6 pts","","124.90","","105.72","","18.1","%","","86.56","","70.52","","22.7","%"],["Sonesta Simply Suites (1)","","Extended Stay","","51","","","6,464","","","70.4","%","68.6","%","1.8 pts","","86.18","","72.25","","19.3","%","","60.67","","49.56","","22.4","%"],["Residence Inn","","Extended Stay","","3","","","342","","","64.0","%","57.2","%","6.8 pts","","120.25","","110.01","","9.3","%","","76.96","","62.93","","22.3","%"],["Extended Stay Total/Average","","114","","14,449","","69.7","%","67.3","%","2.4 pts","","107.49","","90.66","","18.6","%","","74.92","","61.01","","22.8","%"],["All Hotels Total/Average","","238","","","40,053","","","61.3","%","52.3","%","9.0 pts","","$","134.47","","$","110.47","","21.7","%","","$","82.43","","$","57.78","","42.7","%"]]
[[/GREPCENT_TABLE]]

* Results of all hotels owned as of December 31, 2022. Excludes the results of hotels sold during the periods presented.

(1)Includes operator data for periods prior to when certain hotels were managed by Sonesta.

68

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Net Lease Portfolio

As of December 31, 2022, our net lease properties were 97.6% occupied and we had 23 properties available for lease. During the year ended December 31, 2022, we entered into lease renewals for 159,818 rentable square feet (15 properties) at weighted (by rentable square feet) average rents that were 4.9% above prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 6.3 years. Also, during the year ended December 31, 2022, we entered into new leases for an aggregate of 224,127 rentable square feet (eight properties) at weighted (by rentable square feet) average rents that were 3.3% above prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 13.8 years.

As of December 31, 2022, our net lease tenants operated across more than 138 brands. The following table identifies the top ten brands based on annualized minimum rent.

[[GREPCENT_TABLE]]
[["","Brand","","No. of Properties","","","","Investment (1)","","Percent of Total Investment","","AnnualizedMinimum Rent (2)","","Percent of Total AnnualizedMinimum Rent (2)","","Coverage (3)"],["1.","TravelCenters of America","","133","","","","$","2,289,189","","","44.8","%","","$","168,012","","","45.1","%","","2.86x"],["2.","Petro Stopping Centers","","44","","","","1,021,226","","","20.0","%","","78,099","","","21.0","%","","2.47x"],["3.","The Great Escape","","14","","","","98,242","","","1.9","%","","7,711","","","2.1","%","","7.19x"],["4.","Life Time Fitness","","3","","","","92,617","","","1.8","%","","5,770","","","1.5","%","","1.79x"],["5.","AMC Theatres","","9","","","","82,488","","","1.6","%","","6,716","","","1.8","%","","1.73x"],["6.","Buehler's Fresh Foods","","5","","","","76,469","","","1.5","%","","5,657","","","1.5","%","","3.48x"],["7.","Heartland Dental","","59","","","","61,120","","","1.2","%","","4,629","","","1.2","%","","4.09x"],["8.","Norms","","10","","","","53,673","","","1.1","%","","3,628","","","1.0","%","","2.11x"],["9.","Express Oil Change","","23","","","","49,724","","","1.0","%","","3,717","","","1.0","%","","4.32x"],["10.","Pizza Hut","","40","","","","45,285","","","0.9","%","","3,401","","","0.9","%","","2.21x"],["11.","Other (4)","","425","","","","1,237,795","","","24.2","%","","85,078","","","22.9","%","","3.49x"],["","Total","","765","","","","$","5,107,828","","","100.0","%","","$","372,418","","","100.0","%","","3.00x"]]
[[/GREPCENT_TABLE]]

(1)Represents historical cost of our properties plus capital improvements funded by us less impairment write-downs, if any.

(2)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.

(3)See page 60 for our definition of coverage.

(4)Consists of 128 distinct brands with an average investment of $9,670 and average annual minimum rent of $665.

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As of December 31, 2022, our top ten net lease tenants based on our investments are listed below.

[[GREPCENT_TABLE]]
[["","Tenant","","Brand Affiliation","","No. of Properties","","","","Investment (1)","","Percent of Total Investment","","AnnualizedMinimum Rent (2)","","Percent of Total AnnualizedMinimum Rent (2)","","Coverage (3)"],["1.","TravelCenters of America","","TravelCenters of America / Petro Stopping Centers","","177","","","","$","3,310,415","","","64.8","%","","$","246,110","","","66.1","%","","2.74","x","(4)"],["2.","Universal Pool Co., Inc.","","The Great Escape","","14","","","","98,242","","","1.9","%","","7,711","","","2.1","%","","7.19","x"],["3.","Healthy Way of Life II, LLC","","Life Time Fitness","","3","","","","92,617","","","1.8","%","","5,770","","","1.5","%","","1.79","x"],["4.","American Multi-Cinema, Inc.","","AMC Theatres","","9","","","","82,488","","","1.6","%","","6,716","","","1.8","%","","1.73","x"],["5.","Styx Acquisition, LLC","","Buehler's Fresh Foods","","5","","","","76,469","","","1.5","%","","5,657","","","1.5","%","","3.48","x"],["6.","Professional Resource Development, Inc.","","Heartland Dental","","59","","","","61,120","","","1.2","%","","4,629","","","1.2","%","","4.09","x"],["7.","Norms Restaurants, LLC","","Norms","","10","","","","53,673","","","1.1","%","","3,628","","","1.0","%","","2.11","x"],["8.","Express Oil Change, L.L.C.","","Express Oil Change","","23","","","","49,724","","","1.0","%","","3,717","","","1.0","%","","4.32","x"],["9.","Pilot Travel Centers LLC","","Flying J Travel Plaza","","3","","","","41,681","","","0.8","%","","3,215","","","0.9","%","","5.80","x"],["10.","Automotive Remarketing Group, Inc.","","America's Auto Auction","","6","","","","38,314","","","0.8","%","","3,216","","","0.9","%","","5.88","x"],["","Subtotal, top 10","","","","309","","","","3,904,743","","","76.4","%","","290,369","","","78.0","%","","2.93","x"],["11.","Other (5)","","Various","","456","","","","1,203,085","","","23.6","%","","82,049","","","22.0","%","","3.24","x"],["","Total","","","","765","","","","$","5,107,828","","","100.0","%","","$","372,418","","","100.0","%","","3.00","x"]]
[[/GREPCENT_TABLE]]

(1)Represents historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.

(2)Each of our leases 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.

(3)See page 60 for our definition of coverage.

(4)TA is our largest tenant. We lease 177 travel centers (133 under the TravelCenters of America brand and 44 under the Petro Stopping Centers brand) to a subsidiary of TA under master leases that expire in 2029, 2031, 2032, 2033 and 2035, respectively. During 2022, we assigned the leasehold interest of two travel centers to TA. 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 $4,404 as of December 31, 2022 was paid in January 2023. As disclosed elsewhere in this Annual Report on Form 10-K, in connection with the BP Acquisition we entered into the Consent Agreement, pursuant to which, among other things, agreed to amend and restate our existing TA lease and guaranty agreements, effective at the time of the Merger.

(5)Consists of 170 tenants with an average investment of $7,077 and average annual minimum rent of $482.

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As of December 31, 2022, our net lease tenants operated across 21 distinct industries within the service-oriented retail sector of the U.S. economy.

[[GREPCENT_TABLE]]
[["","Industry","","No. of Properties","","","","Investment (1)","","Percent of Total Investment","","Annualized MinimumRent (2)","","Percent of Total AnnualizedMinimum Rent (2)","","Coverage (3)"],["","Travel Centers","","180","","","","$","3,352,096","","","65.6","%","","$","249,325","","","66.9","%","","2.78x"],["","Restaurants-Quick Service","","216","","","","294,153","","","5.8","%","","19,908","","","5.3","%","","3.20x"],["","Restaurants-Casual Dining","","53","","","","192,199","","","3.8","%","","11,945","","","3.2","%","","2.50x"],["","Health and Fitness","","13","","","","186,365","","","3.6","%","","11,011","","","3.0","%","","1.66x"],["","Movie Theaters","","19","","","","164,809","","","3.2","%","","13,163","","","3.5","%","","1.42x"],["","Grocery Stores","","19","","","","129,152","","","2.5","%","","9,212","","","2.5","%","","4.05x"],["","Home Goods and Leisure","","20","","","","120,702","","","2.4","%","","9,674","","","2.6","%","","0.06x"],["","Medical, Dental Office","","71","","","","109,232","","","2.1","%","","8,759","","","2.4","%","","2.35x"],["","Automotive Equipment & Services","","64","","","","107,054","","","2.1","%","","7,665","","","2.1","%","","4.06x"],["","Automotive Dealers","","8","","","","62,550","","","1.2","%","","4,956","","","1.3","%","","5.65x"],["","Entertainment","","4","","","","61,436","","","1.2","%","","4,301","","","1.2","%","","3.12x"],["","Educational Services","","9","","","","55,319","","","1.1","%","","4,451","","","1.2","%","","1.78x"],["","General Merchandise Stores","","4","","","","55,112","","","1.1","%","","3,874","","","1.0","%","","2.86x"],["","Building Materials","","29","","","","33,280","","","0.7","%","","2,783","","","0.7","%","","0.07x"],["","Car Washes","","5","","","","28,658","","","0.6","%","","2,170","","","0.6","%","","3.45x"],["","Miscellaneous Manufacturing","","5","","","","24,148","","","0.5","%","","1,689","","","0.4","%","","16.46x"],["","Drug Stores and Pharmacies","","7","","","","19,251","","","0.4","%","","1,258","","","0.3","%","","0.59x"],["","Sporting Goods","","3","","","","17,742","","","0.3","%","","1,090","","","0.3","%","","4.99x"],["","Legal Services","","5","","","","11,362","","","0.2","%","","1,054","","","0.3","%","","1.89x"],["","Dollar Stores","","3","","","","2,971","","","0.1","%","","189","","","0.1","%","","2.69x"],["","Other","","5","","","","27,243","","","0.5","%","","3,941","","","1.1","%","","4.76x"],["","Vacant","","23","","","","52,994","","","1.0","%","","\u2014","","","\u2014","%","","\u2014x"],["","Total","","765","","","","$","5,107,828","","","100.0","%","","$","372,418","","","100.0","%","","3.00x"]]
[[/GREPCENT_TABLE]]

(1)Represents historical cost of our net lease properties plus capital improvements funded by us less impairment write-downs, if any.

(2)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.

(3)See page 60 for our definition of coverage.

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As of December 31, 2022, lease expirations at our net lease properties by year are as follows.

[[GREPCENT_TABLE]]
[["","","","","","","","Percent of Total","","Cumulative % of"],["","","","Square","","Annualized Minimum","","Annualized Minimum","","Total Minimum"],["Year(1)","","","Feet","","Rent Expiring","","Rent Expiring","","Rent Expiring"],["2023","","","271,062","","","$","2,207","","","0.6%","","0.6%"],["2024","","","769,082","","","11,200","","","3.0%","","3.6%"],["2025","","","436,524","","","8,974","","","2.4%","","6.0%"],["2026","","","1,080,336","","","12,215","","","3.3%","","9.3%"],["2027","","","1,071,904","","","14,164","","","3.8%","","13.1%"],["2028","","","555,218","","","9,475","","","2.5%","","15.6%"],["2029","","","1,266,197","","","48,494","","","13.0%","","28.6%"],["2030","","","138,590","","","4,216","","","1.1%","","29.7%"],["2031","","","1,321,160","","","48,848","","","13.1%","","42.8%"],["2032","","","1,292,177","","","53,756","","","14.4%","","57.2%"],["2033","","","1,153,360","","","52,516","","","14.1%","","71.3%"],["2034","","","144,247","","","4,479","","","1.2%","","72.5%"],["2035","","","2,212,712","","","80,368","","","21.7%","","94.2%"],["2036","","","558,374","","","8,069","","","2.2%","","96.4%"],["2037","","","35,103","","","465","","","0.1%","","96.5%"],["2038","","","66,700","","","1,153","","","0.3%","","96.8%"],["2039","","","134,901","","","3,214","","","0.9%","","97.7%"],["2040","","","115,142","","","2,406","","","0.6%","","98.3%"],["2041","","","223,043","","","2,291","","","0.6%","","98.9%"],["2042","","","\u2014","","","\u2014","","","0.0%","","98.9%"],["2043","","","141,134","","","280","","","0.1%","","99.0%"],["2044","","","\u2014","","","\u2014","","","0.0%","","99.0%"],["2045","","","63,490","","","3,628","","","1.0%","","100.0%"],["Total","","","13,050,456","","","$","372,418","","","100.0%"]]
[[/GREPCENT_TABLE]]

(1)The year of lease expiration is pursuant to contract terms.

As of December 31, 2022, 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.

[[GREPCENT_TABLE]]
[["","","","","","","","Percent of Total"],["","","","Square","","Annualized Minimum","","Annualized Minimum"],["State","","","Feet","","Rent","","Rent"],["Texas","","","1,176,854","","","$","32,168","","","8.6%"],["Illinois","","","1,010,047","","","26,581","","","7.1%"],["Ohio","","","1,302,273","","","26,105","","","7.0%"],["California","","","399,045","","","23,902","","","6.4%"],["Georgia","","","597,248","","","20,312","","","5.5%"],["Arizona","","","476,651","","","17,552","","","4.7%"],["Indiana","","","637,239","","","16,421","","","4.4%"],["Florida","","","538,130","","","16,183","","","4.3%"],["Pennsylvania","","","543,959","","","15,575","","","4.2%"],["New Mexico","","","246,478","","","11,014","","","3.0%"],["Other","","","6,122,532","","","166,605","","","44.8%"],["Total","","","13,050,456","","","$","372,418","","","100.0%"]]
[[/GREPCENT_TABLE]]

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. 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.

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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, 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 the 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 (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 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 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 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, 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 to 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, 2022, 2021 and 2020 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).

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,"],["","","2022","","2021","","2020"],["Net loss","$","(132,381)","","","$","(544,603)","","","$","(311,382)"],["Add (Less):","Depreciation and amortization expense","401,108","","","485,965","","","498,908"],["","Gain on sale of real estate, net (1)","(47,818)","","","(11,522)","","","(2,261)"],["","Loss on asset impairment (2)","10,989","","","78,620","","","55,756"],["","Unrealized losses (gains) on equity securities, net (3)","8,104","","","(22,535)","","","(19,882)"],["","Adjustments to reflect our share of FFO attributable to an investee (4)","3,723","","","2,605","","","(61)"],["FFO","243,725","","","(11,470)","","","221,078"],["Add (Less):","Transaction related costs (5)","1,920","","","64,764","","","15,100"],["","Loss on early extinguishment of debt (6)","791","","","\u2014","","","9,394"],["","Loss contingency (7)","\u2014","","","\u2014","","","3,962"],["","Gain on insurance settlement, net of tax (8)","\u2014","","","\u2014","","","(48,536)"],["","Adjustments to reflect our share of Normalized FFO attributable to an investee (4)","1,037","","","2,270","","","964"],["Normalized FFO","$","247,473","","","$","55,564","","","$","201,962"],["Weighted average shares outstanding (basic)","164,738","","","164,566","","","$","164,422"],["Weighted average shares outstanding (diluted) (9)","164,738","","","164,566","","","$","164,422"],["Basic and diluted per common share amounts:"],["Net loss","$","(0.80)","","","$","(3.31)","","","$","(1.89)"],["FFO","$","1.48","","","$","(0.07)","","","$","1.34"],["Normalized FFO","$","1.50","","","$","0.34","","","$","1.23"],["","Distributions declared per share","$","0.23","","","$","0.04","","","$","0.57"]]
[[/GREPCENT_TABLE]]

(1)We recorded a $47,818 net gain on sales of 65 hotels and 21 net lease properties during the year ended December 31, 2022. We recorded a $11,522 net gain on sales of seven hotels and eleven net lease properties during the year ended December 31, 2021. We recorded a $2,261 net gain on sales of 18 hotels and 21 net lease properties during the year ended December 31, 2020.

(2)We recorded a $10,989 loss on asset impairment during the year ended December 31, 2022 to reduce the carrying value of 26 hotels and 5 net lease properties to their estimated fair value. We recorded a $78,620 loss on asset impairment during the year ended December 31, 2021 to reduce the carrying value of 35 hotels and 26 net lease properties to their estimated fair value. 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.

(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.

(4)Represents our proportionate share of our equity investment in Sonesta during the years ended December 31, 2022, 2021 and 2020.

(5)Transaction related costs for the year ended December 31, 2022 primarily consisted of costs related to our exploration of possible financing transactions. Transaction related costs for the year ended December 31, 2021 included $38,446 of working capital advances we previously funded under our agreements with Marriott, IHG and Hyatt that we expensed as a result of the amounts no longer expected to be recoverable, $19,920 of hotel manager transition related costs resulting from the rebranding of 94 hotels to Sonesta during the period, and $6,398 of legal costs related to our arbitration proceeding with Marriott. Transaction costs for the year ended December 31, 2020 included $15,100 of hotel manager transition related costs resulting from the rebranding of 115 hotels to Sonesta during the periods.

(6)We recorded a $791 loss on early extinguishment of debt in the 2022 period related to the write off of deferred financing costs and unamortized discounts relating to our amendment to our credit agreement and the repayment of

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$500,000 of unsecured notes. We recorded a loss of $9,394 on early extinguishment of debt, net of unamortized discount and deferred financing costs, relating to the repurchase of certain of our senior notes during the year ended December 31, 2020.

(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.

(8)We recorded a $62,386 gain on insurance settlement during the year ended December 31, 2020 for insurance proceeds received for our then 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)Represents weighted average common shares adjusted to reflect the potential dilution of unvested share awards.

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