Service Properties Trust (SVC) priced a $745 million asset‑backed securitization of its net lease mortgage notes on February 23 2026. The securitization is backed by 158 service‑focused retail net lease properties that generate $84 million in annual minimum rents and have an appraised value of roughly $1.1 billion. The transaction is exempt from registration under the Securities Act and will be sold to qualified institutional buyers under Rule 144A.
Proceeds from the securitization will be used to redeem $700 million of SVC’s 8.375% Senior Guaranteed Unsecured Notes due June 2029, scheduled for redemption around March 7 2026. The refinancing is expected to deliver annual cash interest savings of about $14 million, or $0.08 per share, by replacing higher‑cost unsecured debt with secured, non‑recourse ABS funding at lower stated coupons.
The deal is part of SVC’s broader portfolio transformation strategy, which aims to shift more than 70 % of its pro‑forma adjusted EBITDA toward net‑lease assets. As of June 30 2025, the company owned 200 hotels and 742 net‑lease properties; the securitization’s backing properties represent a significant portion of the net‑lease portfolio. By reducing reliance on unsecured debt, SVC is improving its balance‑sheet flexibility and positioning itself for a more predictable income stream.
SVC’s financial health has been under pressure, with a net loss of $46.9 million and an EPS of –$0.28 in Q3 2025. The company’s debt‑to‑equity ratio stood at 8.9 and its interest coverage ratio at 0.53. Despite these challenges, the recent financing and asset sales demonstrate proactive deleveraging and a focus on strengthening the company’s capital structure.
CFO Brian Donley said, "We are pleased to announce our second securitization of net lease assets. This financing provides meaningful annual cash interest savings of approximately $14 million, or $.08 per share, and underscores SVC's continued access to efficient sources of capital and proactive approach to balance sheet management." The comment highlights SVC’s confidence in its liquidity position and its commitment to executing its net‑lease‑focused strategy.
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