Marriott Failed to Meet the Termination Threshold of 80% of Owner’s Priority Return through August. Failure to Pay the Shortfall Will Trigger SVC Termination Rights
NEWTON, Mass. – Service Properties Trust (Nasdaq: SVC), or SVC, today sent a letter to Marriott International, Inc. (NYSE: MAR), or MAR, requesting MAR advance $11.0 million to cover the shortfall between the payments SVC has received to date from MAR and 80% of the priority returns due to SVC for the eight months ended August 2020. MAR has 10 days from receipt of the letter to make the payment, or SVC will have the right to terminate its agreement with MAR.
SVC’s agreement with MAR covering 122 hotels (2 Marriott®, 2 Springhill Suites®, 12 TownePlace Suites®, 35 Residence Inns®, 71 Courtyards®) in 31 states currently requires annual minimum returns of $194.6 million and currently expires in 2035. Both the security deposit that SVC previously held to secure the minimum return payments under this agreement and the $30 million guarantee provided by MAR have been fully utilized.
If MAR does not make the requested payment and SVC terminates the agreement, SVC currently plans to transition management and branding of these 122 hotels from MAR to Sonesta International Hotels Corporation, or Sonesta. SVC owns approximately 34% of Sonesta and would share in the benefit of this new management agreement and in the hotels’ performance to the extent they ramp up in the post-pandemic recovery.
